Court Opinion

ID: 2718931
Source: CourtListenerOpinion
Date Created: 2014-08-19 19:00:46.373746+00
Date Added: 2024-06-11T12:39:28.746721
License: Public Domain

Case: 11-15145   Date Filed: 08/19/2014   Page: 1 of 8

                                                     [DO NOT PUBLISH]

             IN THE UNITED STATES COURT OF APPEALS

                     FOR THE ELEVENTH CIRCUIT
                       ________________________

                             No. 11-15145
                       ________________________

                   D.C. Docket No. 0:09-cv-61652-ASG

MDS (CANADA) INC., a Canadian corporation,
BEST THERATRONICS, LTD., a Canadian corporation,
BEST MEDICAL INTERNATIONAL, INC.,
a.k.a. Beast Medical International, Inc.,

                                  Plaintiffs - Counter Defendants - Appellants,

                                  versus

RAD SOURCE TECHNOLOGIES, INC.,
a Florida corporation,

                                     Defendant - Counter Claimant - Appellee.

                      ________________________

                Appeal from the United States District Court
                    for the Southern District of Florida
                      ________________________

                            (August 19, 2014)

Before PRYOR, ANDERSON and DUBINA, Circuit Judges.
               Case: 11-15145       Date Filed: 08/19/2014       Page: 2 of 8

PER CURIAM:

      On July 1, 2013, this Court certified the following question to the Supreme

Court of Florida:

      WHEN A LICENSEE ENTERS INTO A CONTRACT TO
      TRANSFER ALL OF ITS INTERESTS IN A LICENSE
      AGREEMENT FOR AN ENTIRE TERM OF A LICENSE
      AGREEMENT, SAVE ONE DAY, BUT REMAINS LIABLE TO
      THE LICENSOR UNDER THE LICENSE AGREEMENT, IS THE
      CONTRACT AN ASSIGNMENT OF THE LICENSE
      AGREEMENT, OR IS THE CONTRACT A SUBLICENSE?

MDS (Canada) Inc. v. Rad Source Techs., Inc., 720 F.3d 833 (11th Cir. 2013).

The Supreme Court of Florida rephrased the question:

      DOES FLORIDA RECOGNIZE A “BRIGHT–LINE RULE” TO
      DISTINGUISH AN ASSIGNMENT OF A LICENSE AGREEMENT
      FROM A SUBLICENSE?

MDS (Canada) Inc. v. Rad Source Techs., Inc., ___So.3d___, 2014 WL 3361896

(Fla. July 10, 2014). The Court rejected the use of a bright-line rule to determine

whether a license agreement was an assignment or a sublicense, held that cases

relied upon by the Appellants 1 which involved the transfer of interests in real

property did not readily translate to the instant case which involves a transfer of

rights in a patent license agreement, and instead concluded that cases construing

patents “are instructive in providing guiding principles for the type of interest at

the heart of this case.” Id. at 3. The Court provided comprehensive guidance on

      1
             Nordion and Best are referred to in this opinion as Appellants.
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what factors should be considered, but left the application of those factors and the

ultimate resolution of the issue to this court.

      Thus, in order to decide whether the transfer from Nordion to Best was an

assignment or a sublicense, we apply the factors set forth by the Supreme Court of

Florida. That Court held that “the key factor in distinguishing between an

assignment and a sublicense is the intention of the parties, as set forth in the

original license agreement.” ___ So.3d ___, M/S at 21. The original License

Agreement between Rad Source and Nordion required the consent of Rad Source

for Nordion to assign its interest, but did not require consent for Nordion to grant a

sublicense. In this case, Nordion transferred to Best all of its interests in the

License Agreement for the entire term thereof, save one day. Because the License

Agreement expired simultaneously with the expiration of the last patent subject to

the License Agreement, Nordion likewise transferred to Best the entirety of its

interests in the patents, again save only one day. Especially in light of the fact that

Nordion’s agreement with Best provided that it would leave the blood irradiation

business entirely, Nordion would lack the ability to use even the one retained day.

We conclude that the retention by Nordion of a single day at the end of the License

Agreement was an inconsequential term. The district court found as follows with

respect to the intent of the parties:

      [I]t is apparent that the parties did not intend that the sublicensing
      rights – in relation to the assignment clause – permit a situation where
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      the License Agreement could be assigned by a sublicense if a party
      reasonably withheld consent to the assignment. Elsewise, the right of
      consent to assignment would effectively be written out of the License
      Agreement.

MDS (Canada), 822 F. Supp. 2d 1263, 1310-11 (S.D. Fla. 2011). We agree with the

district court that Rad Source and Nordion, the parties to the original License

Agreement, never intended that Nordion could transfer its entire interests in the

License Agreement, saving only one day, and thus circumvent the contractual

requirement that required the consent of Rad Source to an assignment. We

conclude that the key factor of the intention of the parties points strongly to the

conclusion that the transfer by Nordion to Best was an assignment, not a sublicense.

      As noted above, the Supreme Court of Florida also held that the federal cases

construing patents are instructive on the issue at bar. The Court expressly

referenced Aspex Eyewear, Inc. v. Miracle Optics, Inc., 434 F.3d 1336 (Fed. Cir.

2006). In that case, the Federal Circuit held that:

      [A]n exclusive license may be tantamount to an assignment for
      purposes of creating standing if it conveys to the licensee all
      substantial rights to the patent at issue. Vaupel Textilmaschinen KG
      v. Meccanica Euro Italia S.P.A., 944 F.2d 870, 875 (Fed. Cir.1991);
      see also Waterman v. Mackenzie, 138 U.S. 252, 256, 11 S. Ct. 334, 34
L. Ed. 923 (1891) (“Whether a transfer of a particular right or interest
      under a patent is an assignment or a license does not depend upon the
      name by which it calls itself, but upon the legal effect of its
      provisions.”). To determine whether an agreement to transfer rights to
      a patent at issue amounts to an assignment or a license, we must
      ascertain the intention of the parties and examine the substance of
      what was granted. Vaupel, 944 F.2d at 874 (explaining that the court
      must examine whether the agreements transferred all substantial rights
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      to the patent at issue and whether the surrounding circumstances
      indicated an intent to do so).

Id. at 1340. As noted above, the last of the patents subject to the License Agreement

expired simultaneously with the expiration of the License Agreement. Thus,

Nordion transferred to Best the entirety of its interests in the patents, save only one

day. As noted above, that retention was inconsequential. Thus, we conclude that

Nordion transferred to Best all of its substantial rights to the patents. This factor

also points strongly to the conclusion that the transfer from Nordion to Best was an

assignment, not a sublicense.

      The Supreme Court of Florida also held that a significant factor in the

analysis was the substance of the transaction between Nordion and Best. The Court

embraced the reasoning of Waterman v. Mackenzie, 138 U.S. 252, 256, 11 S. Ct.
334, 34 L. Ed. 923 (1891), and noted that “the United States Supreme Court long ago

recognized in the patent context that ‘[w]hether a transfer of a particular right or

interest under a patent is an assignment or a license does not depend upon the name

by which it calls itself, but upon the legal effect of its provisions.’” ___ So.2d ___,

M/S at 17 (quoting Waterman, 138 U.S. at 256, 11 S.Ct. at 335). Thus, the Florida

Supreme Court held: “It is clear that this intent [of Rad Source and Nordion in the

original License Agreement] cannot be circumvented simply by labeling the transfer

a ‘sublicense agreement.’ The name of the agreement is not determinative under

Florida law.” Id. at ___, M/S at 23. Thus, under Florida law, we disregard the
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“sublicense” label affixed by Nordion and Best to their transaction. Rather, we look

to the substance thereof. As noted above, Nordion transferred to Best all of its

substantial interests in the License Agreement and all of its substantial interests in

the patents, saving only one day. That single day was inconsequential, and cannot

suffice to transform the character of the transaction from an assignment to a

sublicense. We conclude that the substance of the transfer from Nordion to Best

was an assignment, not a sublicense.

      The Supreme Court of Florida mentioned two factors which might, in other

cases, point toward characterization as a sublicense. First, it is true that Nordion

remained liable to Rad Source under to the License Agreement. However, as the

Supreme Court of Florida noted, Nordion had no legal ability to divest itself of that

liability in the absence of consent from Rad Source. Thus, as the Florida Supreme

Court noted, Nordion did the next best thing – i.e., it obtained a full indemnification

from Best. ___ So.2d at ___, M/S at 20-21. Also, the Florida Supreme Court noted

that Nordion may have retained the right to use the license technology after the

conclusion of the License Agreement. However, the patents expired

simultaneously with the expiration of the License Agreement, and thus any such

retention is inconsequential.

      Having applied the factors set forth by the Supreme Court of Florida, we

conclude that Nordion’s transfer to Best was an assignment, not a sublicense. Our

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previous opinion disposed of all of the arguments on appeal, save this certified

question. Thus, the certified question was dispositive. Specifically, we held that

Article 3.1 of the License Agreement was unambiguous but that Rad Source’s RS

3400 did not embody the licensed patents. Further, we held that Rad Source did

not unreasonably refuse to consent to the proposed assignment to Best, and that

Rad Source, while estopped from seeking damages even if Nordion committed the

first breach, would be excused from its breach of the covenant not to compete if

the Supreme Court of Florida held that the transfer was an assignment and thus

was the first breach. Because we have applied the law as the Supreme Court of

Florida defined it, and affirmed the district court’s finding that the transfer was an

assignment, no issues are left undecided and we affirm the district court’s decision.

      AFFIRMED.

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PRYOR, Circuit Judge, concurring in part and dissenting in part:

      I agree with the majority’s reading of the decision of the Supreme Court of

Florida, which answered our certified question, but for the reasons expressed in

section 2 of my earlier partial dissenting opinion, MDS (Canada), Inc. v. Rad

Source Techs., Inc., 720 F.3d 833, 859–63 (11th Cir. 2013) (Pryor, J., concurring

in part and dissenting in part), I would still reverse in part. In my view, the district

court erred when it ruled that Nordion lacked standing to seek damages for the

breach of the non-compete clause by Rad Source. I would remand to allow

Nordion an opportunity to prove its damages.

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