Property, intangible

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No Do-Overs

Scanner Technologies Corp., the defendant in the declaratory judgment action, was the owner of 13 patents in the same family. There were multiple suits between it and declaratory judgment plaintiff ICOS Vision Systems, Inc. over “ball grid inspection devices,” which inspect the electrical connections between a microchip and circuit board.

In 2008, ICOS filed a declaratory judgment action against Scanner Technologies for noninfringement and invalidity of eight patents in the family. To try to escape the suit, Scanner Technologies gave a covenant not to sue on the patents. It didn’t work though; the court didn’t dismiss the declaratory judgment action because the CNS didn’t cover future product; therefore ICOS was still in apprehension of suit on improvements to its existing products. That suit is still pending and now consolidated with the present dispute about the last patent in the family, the ‘237 Patent.

The ‘237 Patent issued after Scanner Technologies gave the CNS, so ICOS filed another declaratory judgment suit. The ‘237 Patent is broader than the eight patents in the CNS, thus practicing the eight other patents would still infringe the ‘237 Patent unless the infringement was excused by a license. ICOS tried to get Scanner Technologies to agree to give it a CNS for the ‘237 Patent, but, not only was it unsuccessful, Scanner Technologies revoked the earlier CNS, stating in an email:

Nevertheless if we are unable to achieve a satisfactory resolution, Scanner is reserving all its rights permitted by law on the entire portfolio. To that effect, Scanner has revoked the CNS agreements previously executed as per the attached revocations. Since Transcore, the authority upon which you are relying makes it clear that a CNS is a license, in the absence of a related settlement agreement as per Trancore with terms to the contrary, the CNS is a revocable license. Since Scanner was unable to defeat ICOS and NVIDIA’s claim of jurisidiction [sic], there is no benefit to Scanner to continue the license and thus has revoked them as per the attached revocations.

 ICOS thereafter filed a motion for summary judgment claiming a licensee estoppel defense.
The court described four ways that an implied license can arise: by acquiescence, by conduct, by equitable estoppel, or by legal estoppel. It was the last, legal estoppel, that the court considered.
The court agreed with Scanner Technologies that a legal estoppel defense arises only where there has been consideration for the license granted. The court also agreed that there was no consideration given for the covenant not to sue. But promissory estoppel can serve as a substitute for consideration, which is what happened here:

In reliance on the CNS, ICOS has expand its sales worldwide and has indemnified its customers against future suit. NVIDIA, in turn, has relied on the CNS for assurance that as ICOS’s customer, it is entitled to continue using ICOS’s ball grid array inspection devices that existed as of March 10, 2009 without risk that Scanner will bring suit against NVIDIA for infringement of the CNS Patents. Scanner presents no facts that show a genuine issue of material fact as to whether ICOS and its customers relied on the CNS. Accordingly, ICOS has demonstrated promissory estoppel and satisfies the element of consideration for the CNS. ICOS has therefore established that the CNS constitutes a valid license.

So the CNS was valid but there was one more hurdle: the ‘237 Patent wasn’t part of the CNS. However, Scanner Technologies had threatened ICOS with the ‘237 Patent and enforcing the ‘237 Patent would derogate ICOS’s right to practice the claims of the patents included in the CNS because the ‘237 Patent was broader. ICOS therefore must have the benefit of its bargain and be allowed to fully practice the eight patents in the CNS. To the extent it required a license to the ‘237 Patent to do so, ICOS has an implied license.
Further, because the ‘237 Patent was a continuation patent and, by definition, a continuation patent cannot claim a new invention not already supported in the earlier patents, the license to the eight patents in the CNS was also an implied license to the ‘237 Patent.  The case was dismissed.
ICOS Vision Sys. Corp. v. Scanner Tech. Corp., No. 10 Civ. 0604 (PAC) (S.D.N.Y. Feb. 15, 2012).
ICOS Vision Sys. Corp. v. Scanner Tech. Corp., No. 08 Civ. 8102 (DC) (S.D.N.Y. March 29, 2010).

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