IP News

Background

In this case, AlexSam, Inc. (AlexSam) owned U.S. Patent Nos. 6,000,608 and 6,189,787 (collectively, the Licensed Patents), which covers pre-paid cards "that can be used with point-of sale devices." AlexSam later sued MasterCard International Incorporated (MasterCard) for breach of contract seeking unpaid royalties under a non-exclusive license agreement permitting MasterCard to process transactions using the Licensed Patents. MasterCard filed counterclaims seeking a declaratory judgment that the Licensed Patents were invalid, and alternatively argued that MasterCard did not infringe the Licensed Patents. In response, AlexSam moved to dismiss MasterCard's declaratory judgment counterclaims arguing that a covenant not to sue in the license agreement "stripped MasterCard of standing to sue for declaratory relief." The district court denied AlexSam's motion due to a question of fact of whether declaratory relief claims fell under the covenant not to sue in the license agreement. A few years later, MasterCard petitioned for a covered business method (CBM) review of the Licensed Patents, and AlexSam responded by arguing MasterCard did not meet the "sued for infringement" requirement under 37 C.F.R. §42.302(a). Specifically, AlexSam argued that AlexSam did not sue MasterCard for patent infringement or charged MasterCard with patent infringement, because the license agreement contained the covenant not to sue, which prevented AlexSam from doing so. Thus, AlexSam only sued MasterCard for breach of contract to seek unpaid royalties under the license agreement. The Patent Trial and Appeal Board (PTAB) agreed that AlexSam only sued under a breach of contract claim and held that the "sued for infringement" requirement did not encompass a breach of contract claim for unpaid royalties.