Imation brought a declaratory judgment action seeking to have two of its subsidiaries declared to be licensed to a patent under its agreement with Philips. The license agreement, between Philips and what became Imation, granted a license to Imation and its subsidiaries. Imation acquired the two subsidiaries in question after the expiration date of the agreement. The issues were whether they qualified as subsidiaries under the agreement and whether the granting of the license was a present grant or an agreement to grant (additional) licenses in the future.
Applying Eighth Circuit procedural law and New York contract law, the Federal Circuit reversed the district court’s ruling that the two subsidiaries were not licensees under the agreement. First, it found that the agreement provided a “singular, present grant,” relying on the language “agrees to grant and does hereby grant” and prior cases. (p. 9-10, emphasis in original.) Therefore, the grant took place before the expiration date provided in the agreement. Second, it found that the definition of “Subsidiary” in the agreement included the two subsidiaries at issue even though they did not exist at the time of the grant. Just as a license may include a present grant of rights to future inventions, so that the pool of patents could grow, the court found that
“the ‘Subsidiary’ definition allows class membership to grow (or shrink) over time, and so the non-existence of GDM and Memorex at the time of the license grant did not prevent either entity from receiving the benefits of the fully vested licenses.” (p. 10.)
The opinion can be found here.