Federal Circuit Decision Enforces Covenant Not To Sue For Future Infringement

    1 April 2009

    On April 8, 2009, the Federal Circuit issued a decision reiterating that a covenant not to sue can be equivalent to a non-exclusive patent license.

    In TransCore, LP v. Electronic Transaction Consultants Corp., No. 2008-1430, TransCore owned patents relating to automated toll collection plaza systems (e.g., E-ZPass). TransCore had previously sued a competitor, Mark IV Industries for patent infringement. The case settled, with TransCore covenanting not to sue Mark IV for future infringement of any of the patents. Several years later, a third party, ETC, installed and tested a toll collection system purchased from Mark IV. TransCore sued ETC for patent infringement. ETC filed a motion for summary judgment, arguing, among other things, that its activities were permitted by the TransCore-Mark IV settlement agreement and the doctrine of patent exhaustion. The District Court agreed and granted ETC’s motion.

    The Federal Circuit affirmed. The Court relied on several prior cases finding that a non-exclusive patent license is equivalent to a covenant not to sue. Significantly, the TransCore-Mark IV settlement agreement expressly provided that the covenant not to sue would not to any future infringement by Mark IV of the patents-in-suit. Thus, the Court concluded that a future sale by Mark IV to a customer was allowed by the covenant not to sue and TransCore’s patent rights were exhausted.

    Click here to download a copy of the decision.

    Written by Richard J. Oparil