HIGH POINT SARL v. T-MOBILE USA INC.
OPINION. Signed by Judge Joseph E. Irenas on 10/15/2014. (drw)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
HIGH POINT SARL,
HONORABLE JOSEPH E. IRENAS
Civil No. 12-1453 (JEI/AMD)
T-MOBILE USA, INC.,
NOKIA SOLUTIONS AND NETWORKS
By: Thomas P. Lihan, Esq.
Robert D. Rhoad, Esq.
902 Carnegie Center
Princeton, NJ 08540-6532
Counsel for High Point SARL
SCHNADER HARRISON SEGAL & LEWIS LLP
By: Lisa J. Rodriguez, Esq.
Woodland Falls Corporate Park
220 Lake Drive East
Cherry Hill, NJ 08002-1165
Counsel for T-Mobile USA, Inc.
DENTONS US LLP
By: Marc S. Friedman, Esq.
1221 Avenue of the Americas
New York, NY 10020-1089
Counsel for T-Mobile USA, Inc.
GRAHAM CURTIN, PA
By: Thomas R. Curtin, Esq.
George C. Jones, Esq.
4 Headquarters Plaza
P.O. Box 1991
Morristown, NJ 07962-1991
Counsel for Alcatel-Lucent USA, Inc.
LERNER, DAVID, LITTENBERG, KRUMHOLZ & MENTLIK, ESQS.
By: Jonathan A. David, Esq.
Robert B. Hander, Esq.
Roy Henry Wepner, Esq.
William L. Mentlik, Esq.
600 South Avenue West
Westfield, NJ 07090
Counsel for Ericsson, Inc.
KING & SPALDING LLP
By: Allison Hoch Altersohn, Esq.
Chandan Sarkar, Esq.
Robert F. Perry, Esq.
1185 Avenue of the Americas
New York, NY 10036
Counsel for Nokia Solutions and Networks US, LLC
CONNELL FOLEY LLP
By: Liza M. Walsh, Esq.
Katelyn O’Reilly, Esq.
85 Livingston Avenue
Roseland, NJ 07068
Counsel for Nokia Solutions and Networks US, LLC
IRENAS, Senior United States District Judge:
This is a patent infringement suit brought by Plaintiff
High Point SARL 1, which currently owns the four patents-in-suit:
the ‘090 patent, the ‘308 patent, the ‘347 patent, and the ‘091
The patents disclose methods for designing and
implementing cellular telephone network infrastructure equipment
used in the receiving and transmitting of voice call traffic.
Defendant T-Mobile bought the networking equipment at issue from
at least three vendors: Intervenor-Defendants (1) Nokia
Solutions and Networks US, LLC (“NSN”), and (2) Ericsson, Inc.;
as well as non-parties (3) Alcatel USA Marketing, Inc. and
Alcatel-Lucent USA, Inc. (collectively “ALU”). 3
Presently before the Court are two Motions for Summary
Judgment on T-Mobile’s affirmative defense of patent exhaustion
filed by: (1) Ericsson; and (2) T-Mobile and NSN.
High Point is a non-practicing patent-assertion entity that
acquired the patents in 2008. All four patents expired in July,
U.S. Patent Numbers 5,195,090; 5,305,308; 5,184,347; and
T-Mobile’s Motion to Join ALU was administratively terminated
without prejudice prior to the reassignment of this case to the
For the reasons stated herein, both motions will be granted
in their entirety. 4
All four patents-in-suit were originally held by AT&T.
1988, AT&T entered into a cross-licensing agreement with
Siemens, whereby AT&T granted to Siemens nonexclusive and
nontransferable licenses to “make, have made, use, lease, sell
and import” the equipment embodying at least some of the
(Lauridsen Decl. Ex. 22).
Several years later, in January, 1996, AT&T entered into
another cross-license agreement, this time with Alcatel.
(Lauridsen Decl. Ex. 38)
The Alcatel agreement is substantially
similar to the Siemens agreement; AT&T granted to Alcatel
nonexclusive and nontransferable licenses to “make, have made,
use, lease, offer to sell, sell and import” the equipment
embodying at least some of the patents-in-suit.
Not long after the Alcatel agreement was signed, in March,
1996, AT&T spun-off Lucent and assigned to it at least some of
High Point also moves for leave to file a brief in sur-reply
to T-Mobile and NSN’s reply brief. (Docket # 158) While the
proposed sur-reply is less than five pages in length, the Court
does not find the brief particularly helpful. It cites no new
law and no new record evidence. Rather, it attempts to explain
and distinguish a Federal Circuit case, Rembrandt II, see infra,
which was cited and discussed in earlier briefs. The Court is
able to analyze the applicable case law without the assistance
of High Point’s sur-reply.
Thereafter, in November, 1996, Lucent
entered into a cross-licensing agreement with LME that is also
similar to the Siemens and Alcatel agreements.
(David Decl. Ex.
Lucent granted LME nonexclusive and nontransferable licenses
to “make, have made, use, lease, sell and import” the equipment
embodying at least some of the patents-in-suit. (Id.)
Thus, by 1996 at the latest, it appears that AT&T / Lucent
had granted licenses to sell equipment embodying all of the
Over the ensuing years, through various corporate
combinations and sublicensing agreements which are discussed
next, Ericsson, ALU, and NSN came to sell to T-Mobile the
equipment practicing the methods of the patents-in-suit. 6
In September 2000 Lucent assigned the patents-in-suit to Avaya.
Plaintiff High Point acquired the patents-in-suit from Avaya in
High Point contends that T-Mobile also purchased networking
equipment from Nokia in 2006 and 2007, prior to the creation of
NSN. However, T-Mobile clearly has moved for summary judgment as
to equipment it purchased from only three vendors: Ericsson,
NSN, and ALU. See Moving Brief p. 2 (“These three companies-Ericsson, NSN, and ALU-- sold T-Mobile nearly all the equipment
that High Point accuses of performing the alleged patented
invention, and all three are licensed.”)(emphasis added); Reply
Brief p. 11 (stating that T-Mobile does not include purchases
from Nokia in the present motion). Therefore, this opinion does
not address any equipment that T-Mobile purchased from Nokia.
In 2013-- i.e., after this suit was filed, and after the
patents had expired-- Ericsson’s parent, LME, granted Ericsson a
“nunc pro tunc” sublicense with an “effective date” of January
The single-page document (excluding signature pages)
states in relevant part,
Effective, nunc pro tunc, as of [January 1, 2002],
LME hereby grants to [Ericsson] . . . a worldwide,
non-exclusive, paid-up, royalty-free sublicense to
all of LME’s rights relating to [the patents-insuit] pursuant to . . . the Lucent Agreement.
(David Decl. Ex. 7)
“The Lucent Agreement” is the 1996 Cross-License Agreement
between Lucent and LME.
It provides in relevant part,
(a) The licenses granted herein are licenses to (i)
make, have made, use, lease, sell and import
LICENSED PRODUCTS, and (ii) convey to any direct or
indirect customer of the grantee, with respect to
any LICENSED PRODUCT which is sold or leased by
such grantee to such customer, rights to use,
import, and resell such LICENSED PRODUCT as sold or
leased by such grantee (whether or not as part of a
larger combination); provided, however, that no
rights may be conveyed to customers with respect to
combination of such LICENSED PRODUCT (sold or
leased) with any other product, (2) a method or
process which is other than the inherent use of
such LICENSED PRODUCT itself (as sold or leased);
or (3) a method or process involving the use of a
associated testing) any other product.
. . .
The grant of each license hereunder includes
the right to grant sublicenses within the scope of
such license to a party’s RELATED COMPANIES for so
long as they remain its RELATED COMPANIES.
such sublicense may be made effective retroactively
but not prior to the effective date hereof, nor
prior to the sublicensee’s becoming a RELATED
COMPANY of such party.
(David Decl. Ex. 6).
Alcatel-Lucent USA, Inc. (“ALU Inc.”) is a subsidiary of
Alcatel-Lucent was formed by the reverse
triangular merger of Alcatel and Lucent in 2006.
It appears undisputed that prior to the merger, ALU Inc.’s
predecessor in interest, Alcatel USA Marketing, Inc., a
subsidiary of Alcatel, sold the networking equipment to T-Mobile
pursuant to the AT&T-Alcatel cross-license agreement, which
automatically extended sublicenses to then-existing Alcatel
subsidiaries at the time the cross-license agreement was
(Lauridsen Ex. 38, 1.01(c)) (“The present respective
[subsidiaries] of the parties are deemed sublicensed, effective
as of the effective date of this Agreement.”).
After the 2006 merger, Alcatel USA Marketing continued to
sell the networking equipment to T-Mobile just as it did prior
to the merger.
Then, in 2008, Alcatel USA Marketing merged with another
Alcatel-Lucent subsidiary to form ALU Inc.
ALU Inc. sold the
networking equipment to T-Mobile purportedly pursuant to the
AT&T-Alcatel cross-license agreement which, in addition to
automatically extending sublicenses to existing subsidiaries,
automatically extends sublicenses to “future respective
[subsidiaries] of the parties . . . effective as of the date on
which any such company becomes a [subsidiary].”
In March 2009, Siemens granted Nokia Siemens Networks B.V.
“retroactively as of April 1, 2007, a sublicense within the
scope of Siemens’ own license under [its] License Agreement
[with AT&T]” which is “subject to all applicable restrictions,
exceptions, obligations, liabilities, termination provisions and
other provisions in the License Agreement.”
According to T-Mobile and NSN, this sublicense was
authorized under a 1995 letter amendment (also referred to as
the “Divestment Rider”) to the AT&T-Siemens cross-license
(Lauridsen Decl. Ex. 24)
The next year, in 2010, Nokia Siemens Networks B.V. and NSN
executed a “Confirmatory License Agreement” (Lauridsen Decl. Ex.
36) wherein, effective April 1, 2007, Nokia Siemens Networks
B.V. granted NSN a sublicense under the AT&T-Siemens crosslicense agreement.
The district court “shall grant summary judgment if the
movant shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a).
In deciding a motion for summary
judgment, the court must construe all facts and draw all
reasonable inferences in the light most favorable to the
nonmoving party. See Boyle v. Cnty. of Allegheny, 139 F.3d 386,
393 (3d Cir. 1998).
The moving party bears the burden of
establishing that no genuine issue of material fact remains. See
Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
is material only if it will affect the outcome of a lawsuit
under the applicable law, and a dispute of a material fact is
genuine if the evidence is such that a reasonable fact finder
could return a verdict for the nonmoving party. See Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
“The longstanding doctrine of patent exhaustion provides
that the initial authorized sale of a patented item terminates
all patent rights to that item.”
Quanta Computer Inc. v. LG
Electronics, Inc., 553 U.S. 617, 625 (2008).
respect to sales of component parts of a patented system, the
parts must “substantially embody the patents in suit” in order
to trigger exhaustion.
Id. at 621.
Each issue is addressed in turn.
A. “Authorized sale”
With respect to the authorized sale analysis, it is
important to correctly state the issue presented.
clearly states, “[e]xhaustion is triggered only by a sale
authorized by the patent holder.”
553 U.S. at 636 (citing
United States v. Univis Lens Co., 316 U.S. 241, 249
(1942))(emphasis added); see also Tessera, Inc. v. ITC, 646 F.3d
1357, 1369 (Fed. Cir. 2011) (“At issue here, as in Quanta, is
whether the patentee has authorized certain sales of products
embodying the asserted patent.”) (emphasis added).
In the simplest case, where only one license agreement
exists, the issue of whether the patent holder authorized a
sale, and whether the vendor was authorized to sell, are one-inthe-same; the patent exhaustion analysis focuses on the one
license agreement running directly between the patent holder and
the licensee who is simultaneously the vendor.
Both Quanta and Univis are such cases.
Thus, in Quanta,
the patent holder, LGE, entered into a cross-licensing agreement
with Intel, pursuant to which Intel sold to Quanta the equipment
practicing the patented methods.
553 U.S. at 623-24.
the direct licensee of the patent holder and simultaneously the
Likewise in Univis, the patent holder, Univis, entered into
licensing agreements with finishing retailers, prescription
retailers, and wholesalers who then sold the products
substantially embodying the patents.
316 U.S. at 244.
again, the direct licensee of the patent holder was also the
The facts of this case, however, are different.
ALU, and NSN are not parties to the AT&T or Lucent cross-license
Those vendors’ purported authority to sell the
equipment at issue comes from sublicenses rather than from the
original cross-license agreements.
Thus, answering the question
of whether the patent holders-- in this case AT&T and Lucent-authorized sales of the licensed products-- by Ericsson, ALU,
and NSN-- is a bit more complicated.
The inquiry must begin with whether the patent holder
authorized sales-- as opposed to whether the vendor was
authorized to sell under a separate agreement-- because the
doctrine of patent exhaustion serves to limit patent holders’
See Quanta, 553 U.S. at 621 (“For over 150 years this
Court has applied the doctrine of patent exhaustion to limit
patent rights that survive the initial authorized sale of a
As more fully explained in Univis,
the purpose of the patent law is fulfilled with
respect to any particular article when the patentee
has received his reward for the use of his
invention by the sale of the article, and that once
that purpose is realized the patent law affords no
basis for restraining the use and enjoyment of the
thing sold. In construing and applying the patent
law so as to give effect to the public policy which
limits the granted monopoly strictly to the terms
of the statutory grant, the particular form or
method by which the monopoly is sought to be
extended is immaterial. The first vending of any
article manufactured under a patent puts the
article beyond the reach of the monopoly which that
patent confers. Whether the licensee sells the
patented article in its completed form or sells it
before completion for the purpose of enabling the
buyer to finish and sell it, he has equally parted
with the article, and made it the vehicle for
invention with respect to that article. To that
extent he has parted with his patent monopoly in
either case, and has received in the purchase price
every benefit of that monopoly which the patent law
secures to him.
316 U.S. at 251-52 (internal citations omitted); see also
Keurig, Inc. v. Sturm Foods, Inc., 732 F.3d 1370, 1373 (Fed.
Cir. 2013) (“The rationale underlying the doctrine rests upon
the theory that an unconditional sale of a patented device
exhausts the patentee’s right to control the purchaser’s use of
that item because the patentee has bargained for and received
full value for the goods.”). 7
Thus, it logically follows that the patent exhaustion
analysis focuses on the agreement to which the patent holder is
Only that agreement reflects what the patent holder
has bargained for.
Only that agreement reflects the relevant
transaction pursuant to which the patent holder contemplated
sales of the patented items, whether through a direct licensee,
or through a subsequent sublicensee.
Upon the performance of
the initial contract only, where the patent holder grants an
unconditional license to sell the relevant equipment, does the
law presume that the patent holder received an amount equal to
See generally United States v. Masonite Corp., 316 U.S. 265,
277-78 (1942) (“There are strict limitations on the power of the
patentee to attach conditions to the use of the patented
article. As Chief Justice Taney said in Bloomer v. McQuewan, 14
How. 539, 549, when the patented product ‘passes to the hands of
the purchaser, it is no longer within the limits of the
monopoly. It passes outside of it, and is no longer under the
protection of the act of Congress.’ In applying that rule, this
Court has quite consistently refused to allow the form into
which the parties chose to cast the transaction to govern. The
test has been whether or not there has been such a disposition
of the article that it may fairly be said that the patentee has
received his reward for the use of the article.”); Motion
Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502,
516 (1917) (“[T]his court [has] . . . decided that the owner of
a patent is not authorized by either the letter or the purpose
of the law to fix, by notice, the price at which a patented
article must be sold after the first sale of it, declaring that
the right to vend is exhausted by a single, unconditional sale,
the article sold being thereby carried outside the monopoly of
the patent law and rendered free of every restriction which the
vendor may attempt to put upon it.”).
the full value of its patent monopoly. 8
sublicense is therefore only relevant to the extent the original
license agreement requires a sublicense.
With this understanding, the Court now turns to the
parties’ arguments concerning the licensing agreements between
the patent holders (Lucent and AT&T) and their direct licensees
(LME, Alcatel, and Siemens).
High Point asserts one argument as to all three vendors:
“T-Mobile’s assembly and use of its multi-vendor network is an
unauthorized combination excluded from all putative licenses.”
(High Point’s Opposition to T-Mobile’s Motion for Summary
Judgment, p. 28)
It is undisputed that all three licenses at
issue do exclude combinations.
However, the same argument was
considered and rejected as irrelevant by the Quanta court:
LGE argues that there was no authorized sale here
because the License Agreement does not permit
Intel to sell its products for use in combination
Indeed, after Quanta, some commentators have advised patent
holders to use care in drafting license agreements so as to
avoid “the risk that a license or covenant not to sue will be
interpreted broadly” and therefore trigger patent exhaustion.
Patent Exhaustion After Quanta and Transcore: Protecting Your
Right to Sue Third Parties, Pat. Trademark & Copyright J. (BNA)
No. 1930, at 518-520 (Aug. 21, 2009). In particular, patent
holders are advised that “if a component manufacturer is
licensed, the agreement should include express language that the
licensee fee is not for the entire patent right.” Id. at 520.
with non-Intel products to practice the LGE
Patents. It cites General Talking Pictures Corp.
v. Western Elec. Co., 304 U.S. 175, 58 S. Ct. 849,
82 L. Ed. 1273, 1938 Dec. Comm’r Pat. 831 (1938),
and General Talking Pictures Corp. v. Western
Elec. Co., 305 U.S. 124, 59 S. Ct. 116, 83 L. Ed.
81, 1938 Dec. Comm’r Pat. 841 (1938), in which the
commercial use, thereby breaching a license that
limited the buyer to selling the amplifiers for
private and home use. The Court held that
exhaustion did not apply because the manufacturer
had no authority to sell the amplifiers for
commercial use, and the manufacturer ‘could not
convey to petitioner what both knew it was not
authorized to sell.’ 304 U.S., at 181, 58 S. Ct.
849, 82 L. Ed. 1273, 1938 Dec. Comm’r Pat. 831 LGE
argues that the same principle applies here: Intel
could not convey to Quanta what both knew it was
not authorized to sell, i.e., the right to
practice the patents with non-Intel parts.
LGE overlooks important aspects of the structure
of the Intel-LGE transaction. Nothing in the
License Agreement restricts Intel’s right to sell
its microprocessors and chipsets to purchasers who
intend to combine them with non-Intel parts. It
broadly permits Intel to ‘make, use, [or] sell’
products free of LGE’s patent claims. . . .
specifically disclaimed any license to third
parties to practice the patents by combining
licensed products with other components. . . . But
implied licenses is irrelevant because Quanta
asserts its right to practice the patents based
not on implied license but on exhaustion. And
exhaustion turns only on Intel’s own license to
sell products practicing the LGE Patents.
Quanta, 553 U.S. at 636-37.
High Point makes no attempt to distinguish this case from
Quanta, and this Court discerns no material distinction.
Point’s combination argument fails.
As to Ericsson only, High Point expressly states in its
opposition brief that the 1996 Lucent-LME Cross-License
Agreement authorized the sale of the equipment at issue.
Moreover, the undisputed record evidence demonstrates that
Lucent authorized those sales when it granted LME the right “to
make, have made, use, lease, sell and import LICENSED PRODUCTS.”
(David Decl. Ex. 6)
It is also undisputed that: (1) the Lucent-LME CrossLicense Agreement authorized LME to grant sublicenses-- and
particularly relevant to this case, authorized retroactive
sublicenses-- to LME’s “related companies” as that term is
defined in the agreement (David Decl. Ex. 6); (2) that Ericsson
was a “related company” 9; and (3) LME did, in fact, grant
Ericsson a retroactive sublicense.
At oral argument on the instant motions, counsel for Ericsson
stated that LME has always been a holding company only, and
therefore it may be inferred that when Lucent entered into a
cross-license agreement with LME, Lucent contemplated that sales
would be accomplished through a sublicensee.
Thus, Ericsson and T-Mobile argue, Ericsson’s sales to TMobile were authorized because every requirement of the LucentLME Cross-License Agreement was satisfied.
High Point, however, argues that the retroactive sublicense
had no legal effect because it was executed in 2013, i.e., after
the cross-license agreement expired in 2011.
According to High
Point, LME’s authority to grant retroactive sublicenses expired
upon the expiration of the cross-license agreement’s term, which
was coextensive with the patents’ terms.
But High Point offers
no authority for why this should be so, nor any authority for
why it should matter in the patent exhaustion analysis.
The Cross-License Agreement places no limits on when
retroactive sublicenses may be granted, therefore the Court
holds that Lucent authorized the retroactive sublicense that LME
granted to Ericsson, and therefore authorized the sales Ericsson
made to T-Mobile.
As to ALU, T-Mobile’s argument in support of its Motion for
Summary Judgment is relatively simple:
Paragraph 1.01(c) of the
AT&T-Alcatel Cross-License Agreement (Lauridsen Ex. 38)
automatically grants sublicenses to sell the equipment
practicing the patented methods to all present and future
subsidiaries, which Alcatel USA Marketing, Inc. and Alcatel17
Lucent USA, Inc. (collectively “ALU”) undisputedly are.
T-Mobile concludes, the sales of equipment from ALU to T-Mobile
are authorized for patent exhaustion purposes.
High Point attacks T-Mobile’s position on three fronts,
arguing: (1) the patents-in-suit are not “licensed patents” as
that term is defined in the AT&T-Alcatel Cross-License
Agreement; (2) that issues of material fact exist as to whether
the specific equipment ALU sold T-Mobile-- the “media gateways”
(“MGWs”) 10-- were covered by the cross-license agreement; and (3)
the cross-license agreement “ceased to exist” following the
Alcatel/Lucent mergers in 2006 and 2008.
All three arguments
As to the first issue, the cross-license defines “LICENSED
PATENTS” as patents “for which a first application was filed . .
. prior to the termination of the THREE YEAR PERIOD” ending
December 31, 2006.
(Lauridsen Ex. 38)
High Point argues that
because the three year period is defined as “the period
commencing on January 1, 1994 and ending on December 31, 1996,”
(Id.) “only patents with a first filing date within” the three
year period are covered by the license.
Unlike Ericsson and NSN, who sold T-Mobile more than one type
of equipment (Erisson sold MGWs, RNCs, and Node Bs; NSN sold
Node Bs and RNCs), ALU only sold MGWs to T-Mobile. (See TMobile’s Moving Brief, p. 10)
It is undisputed that the relevant filing date for all
patents-in-suit is July 9, 1991, therefore, according to High
Point, the patents-in-suit are not licensed.
The Court agrees with T-Mobile that High Point’s proposed
interpretation of the cross-license conflicts with the plain
language of the agreement which only requires that an
application be filed prior to the end of the three year period,
i.e., prior to December 31, 1996.
High Point’s proffered
interpretation would change “prior to the termination of” the
three year period to “during” the three year period.
It is undisputed that the relevant filing date for the
patents-in-suit is prior to December 31, 1996, therefore the
patents-in-suit are covered by the cross-license agreement.
As to the second issue, the cross-license agreement grants
a license to sell “any or all products and services of the kinds
which are furnished or used by ALCATEL or any of its present
RELATED COMPANIES . . . on the effective date of this
(Lauridsen Ex. 38)
agreement is January 1, 1996.
The effective date of the
High Point relies on record evidence from which, it
asserts, a reasonable factfinder could conclude that Alcatel was
not furnishing or using MGWs as of 1996.
High Point correctly
notes that the only evidence in the record concerning ALU’s
sales of the MGWs at issue is an agreement dated 2004.
(Lauridsen Ex. 46)
Further, High Point argues that a factfinder
could reasonably infer that ALU was not selling MGWs prior to
2004 because the record demonstrates that in 2004 ALU acquired
the company that sold the MGWs (Spatial Communications
Technologies) to fill a hole in ALU’s product line.
Decl. Ex. G)
Thus, High Point reasons, a reasonable factfinder
could find that Alcatel was not furnishing or using the MGWs in
1996, and therefore could further conclude that ALU had no
license to sell the MGWs to T-Mobile.
High Point’s argument, however, misses the relevant legal
As T-Mobile observes, there can be no dispute that
Alcatel was not furnishing or using MGWs in 1996 because MGWs
did not exist in 1996.
Thus, the question cannot possibly be
whether, in 1996, AT&T granted Alcatel a license to sell MGWs.
Rather, the relevant question is whether Alcatel or any of its
related companies were furnishing or using “any . . . products .
. . of [a] kind” like MGWs in 1996.
(Lauridsen Ex. 38)
T-Mobile argues, and the Court agrees, that Rembrandt Data
Technologies, LP v. AOL, LLC et al., 641 F.3d 1331 (Fed. Cir.
2011)(“Rembrandt II”) informs this analysis.
In Rembrandt II
the Federal Circuit affirmed the district court’s interpretation
of a license agreement with language similar to the language at
The agreement provided that sublicences could be
granted to divested businesses, but only as “to products and
services sold by the future divested business prior to its
Id. at 1338.
The Federal Circuit observed that the relevant agreements
“specif[ied] product types using general, functional terms,” and
therefore concluded that a “broad interpretation of ‘products’,”
rather than a narrow interpretation which would limit the
license agreement to specific product models, was warranted.
Rembrandt II, 641 F.3d at 1338.
Since the relevant agreements
defined “‘licensed products’” as “‘data communication station
systems’” and “‘digital transmission systems,’” the Federal
Circuit agreed with the district court that “the term ‘products’
covers ‘modems generally, not the specific types of modems in
production at the time of the sublicense and/or divestiture.’”
Here, the language of the AT&T-Alcatel License Agreement is
even broader than the relevant language in Rembrandt II.
title page of the AT&T-Alcatel agreement reads, “Patent License
Agreement between [AT&T] and [Alcatel], effective as of January
1, 1996, Relating to the Products and Services of the Businesses
of the Parties.”
(Lauridsen Ex. 38) (emphasis added).
than limiting licensed products to certain kinds of
communication and transmission systems, as the agreements in
Rembrandt II did, the agreement here does not define a class of
It broadly states,
AT&T . . . grants to ALCATEL, . . . nonexclusive
and nontransferable licenses to make, have made,
use, lease, offer to sell, sell and import any or
all products and services of the kinds which are
furnished or used by ALCATEL or any of its
present RELATED COMPANIES in the operation of the
business in which ALCATEL or any such RELATED
COMPANY is engaged on the effective date of this
Indeed, it is difficult to hypothesize a broader grant
of a license.
Thus, in order to prevail on the authorization issue, TMobile must only produce evidence supporting a conclusion that
MGWs are of the kind of products that either Alcatel or one of
its related companies were furnishing or using in the operation
of their businesses on January 1, 1996.
It has satisfied its
burden in this regard because High Point does not dispute that
Alcatel sold “switching systems” in 1996, and that MGWs are a
type of switching system.
(See High Point’s Response to T-
Mobile / NSN’s Statement of Undisputed Facts ¶ 124; High Point’s
Opposition Brief, p. 33, 35-38).
Accordingly, a reasonable factfinder could only conclude
that AT&T authorized the sale of the MGWs that T-Mobile
purchased from ALU.
The Agreement expressly states that “no rights are granted to
ALCATEL for TELECOMMUNICATIONS SERVICES, SEMICONDUCTOR
APPARATUS, and DATA PROCESSING APPARATUS,” however, High Point
does not argue that MGWs or similar kinds of products fall
within this exception.
As to the third and last issue, High Point’s argument that
the mergers occurring in 2006 and 2008 terminated the crosslicense agreement is incorrect as a matter of law.
argues that the mergers triggered the non-assignability clause
in the cross-license agreement because the mergers resulted in
an unauthorized transfer of the license.
“[A] reverse triangular merger generally is not an
assignment by operation of law.”
Meso Scale Diagnostics, LLC v.
Rocher Diagnostics GMBH, 62 A.3d 62, 86 (Del. Ch. Ct. 2013); 12
see generally Revised Model Business Corporation Act § 11.07 (“A
merger is not a conveyance, transfer or assignment. It does not
give rise to claims for reverter or impairment of title based on
a prohibited conveyance, transfer, or assignment.
It does not
give rise to a claim that a contract with a party to the merger
is no longer in effect on the ground of nonassignability, unless
the contract specifically provides that it does not survive a
The mergers did not terminate the cross-license
In summary, as to ALU’s sales to T-Mobile, all of High
Point’s arguments fail.
The Court holds that AT&T authorized
It is undisputed that Delaware law governs this issue.
Lastly, as to NSN, T-Mobile and NSN argue that AT&T
authorized NSN’s sales of equipment to T-Mobile under the 1995
“Divestment Rider” to the AT&T-Siemens License (Lauridsen Ex.
The relevant portion of the Rider provides,
[I]n the future, if SIEMENS . . . divests a
portion of its present business, the licenses and
rights granted in the subject agreement may be
sublicensed to the divested business by the
Such sublicenses may be
granted and retained [a] only while the future
identifiable business and [b] only to the extent
applicable to products and services sold by the
future divested business prior to its divestiture.
(Lauridsen Decl. Ex. 24)(emphasis added)
It is undisputed that Siemens granted a sublicense to NSN
B.V., which later granted NSN an undisputedly valid retroactive
sublicense, pursuant to which NSN sold to T-Mobile the equipment
However, High Point argues that the sublicense from Siemens
to NSN B.V. was not authorized by AT&T because neither condition
[a] nor [b] were satisfied.
The Court disagrees.
High Point’s arguments implicitly turn on the fact that
Siemens’ “divested business”-- a term not defined by either the
rider or the cross-license agreement-- is a joint venture.
is undisputed that NSN B.V. was created by combining Siemens’
carrier division with Nokia’s infrastructure business.
High Point argues, the divested Siemens carrier division did not
operate as a “separately identifiable business” because it
undisputedly operated as one half of a joint venture.
to High Point, the Siemens carrier division “never operated the
divested Siemens business as a separately identifiable business
within NSN B.V.” because the whole point of the joint venture
was to integrate the Siemens carrier division with Nokia’s
(Opposition Brief, p. 16) (emphasis
This argument rests on an unsupported interpretation of the
term “separately identifiable.”
The plain language of the rider
indicates that the divested business need only operate
separately from Siemens.
The entire rider addresses what
happens in the event that Siemens “divests a portion of its
(Lauridsen Decl. Ex. 24)
It is undisputed that: (1)
Siemens did divest its carrier division, and (2) after the joint
venture transaction closed, the carrier division was no longer
part of Siemens, but rather, part of a new and separate entity,
Thus, Siemens’ carrier division did operate separately
from Siemens after the formation of the joint venture.
High Point’s argument as to rider condition [b] fails for
According to High Point’s argument, only some
equipment coming from NSN B.V. was licensed (i.e., equipment
that originated with Siemens prior to the joint venture) while
other equipment-- indeed, even the same type of equipment 13-- was
not, simply because it originated with Nokia prior to the joint
Not only does High Point’s argument make little practical
sense, it conflicts with the language of the rider, which speaks
of granting sublicenses “to the divested business.”
Decl. Ex. 24)
Indeed, Siemens granted a sublicense to NSN B.V.,
not to its carrier division. (See Lauridsen Decl. Ex. 28 –
sublicense agreement between Siemens and NSN B.V.)
The Court agrees with T-Mobile and NSN’s observation that
“High Point’s position boils down to saying ‘separately
identifiable business’ includes an unwritten, unstated
prohibition on joint ventures.”
(T-Mobile / NSN’s reply brief,
T-Mobile and NSN have introduced evidence that Siemens was
selling wireless infrastructure equipment (of which RNCs and
Node Bs are a later generation type) long before the divestment
of Siemens’ carrier division, and even before AT&T and Siemens
entered into the original cross-license agreement. (Zott Dep.
p. 155-157) Thus, contrary to High Point’s position, it does
not matter that, according to High Point, the specific NSN
models T-Mobile purchased were Nokia’s pre-joint venture
infrastructure models. So long as the equipment coming from NSN
was wireless infrastructure equipment, it does not matter
whether it originated with Siemens or Nokia.
The equipment was covered by the cross-license agreement,
as products “of the kinds which [were] furnished or used by
[Siemens] or any RELATED COMPANY . . . on the effective date of”
the cross-license agreement (Lauridsen Ex. 22)-- including new
products and services that “normally evolve from the existing
products and services (Lauridsen Ex. 23)-- which were also
products sold by Siemens prior to the divestment of its carrier
division into the joint venture. (Lauridsen Ex. 24) See
Rembrandt II, 641 F.3d at 1338.
High Point points to nothing in the record supporting an
inference that such result was intended by AT&T when it entered
into the Divestment Rider with Siemens.
High Point has failed raise a disputed issue of material
fact as to whether AT&T authorized Siemens’ sublicense to NSN
The Court holds that the sublicense was authorized under
the Divestment Rider; and therefore concludes that AT&T
authorized NSN’s sale of equipment to T-Mobile.
B. “Substantial embodiment”
As to the ‘090 patent, High Point concedes that if the
sales of Node Bs were authorized, claims 28, 29, and 31 are
exhausted: “[T]he accused Node Bs substantially embody the
claimed inventions of those claims, such that the licensed
sale of a Node B would exhaust High Point’s rights with respect
to those patent claims[.]”
(High Point’s Opposition to T-Mobile
/ NSN’s Motion for Summary Judgment, p. 33 n.14)
The parties dispute, however, the implications of this
High Point argues that exhaustion applies only to
claims 28, 29, and 31; “with respect to all of High Point’s
other asserted claims, High Point’s rights are not exhausted.”
(High Point’s Opposition to T-Mobile / NSN’s Motion for Summary
Judgment, p. 33 n.14)
T-Mobile takes the opposite position:
“High Point’s concession means that all claims of the ‘090
Patent are exhausted.”
(Reply brief, p. 12)
Keurig, Inc. v. Sturm Foods, Inc., 732 F.3d 1370 (Fed. Cir.
2013), conclusively forecloses High Point’s argument.
case the Federal Circuit expressly rejected the patent holder’s
“argument that patent exhaustion must be adjudicated on a claimby-claim basis.”
Id. at 1374.
The Court explained,
jurisprudence has focused on the exhaustion of
the patents at issue in their entirety, rather
than the exhaustion of the claims at issue on an
individual basis. . . . To permit a patentee to
reserve specific claims from exhaustion would
frustrate the purposes of the doctrine, one of
which is to provide an efficient framework for
Id. (internal citations to Quanta and Univis omitted).
Accordingly, High Point’s claim for infringement of the
‘090 patent is barred by the doctrine of patent exhaustion.
Likewise, High Point’s substantial embodiment argument as
to the ‘308, ‘347 and ‘091 patents also fails.
In an apparent
attempt to avoid its own infringement contentions, which
implicitly concede that the Node Bs, RNCs, and MGWs
substantially embody at least one claim of the patents, High
Point argues that exhaustion does not apply to combinations of
the Node Bs, RNCs, and MGWs that were purchased from different
According to High Point, exhaustion only applies if
each “individual component” of T-Mobile’s accused network
substantially embodies each patent claim at issue.
brief, p. 33-35)
T-Mobile correctly notes however, that High Point cites no
legal authority for its position, and that High Point’s position
would severely undercut, if not eviscerate, the doctrine of
To accept High Point’s argument would be to rule that TMobile could not use the equipment it purchased in an authorized
sale in the manner in which it chooses to use it-- for example,
that T-Mobile could not combine MGWs it purchased from ALU with
Node Bs and RNCs it purchased from NSN.
Once an authorized sale
of the equipment at issue had taken place, however, the patent
holder (i.e., High Point, as successor-in-interest to AT&T and
Lucent) lost all rights to control the purchaser’s (i.e., TMobile’s) post-sale use of that equipment.
Such is the
fundamental operation of the patent exhaustion doctrine.
Keurig, 732 F.3d at 1373 (“The rationale underlying the doctrine
rests upon the theory that an unconditional sale of a patented
device exhausts the patentee’s right to control the purchaser’s
use of that item.”).
Accordingly, the Court holds that the equipment at issue
substantially embodies all four patents-in-suit.
For the above-stated reasons, the Court holds that the
patent holders (AT&T and Lucent) authorized all three vendors’
(Ericsson, ALU, and NSN) sales of the equipment substantially
embodying the patents-in-suit, and therefore the doctrine of
patent exhaustion bars High Point’s infringement claims.
Accordingly, the Motions for Summary Judgment will be granted in
their entirety. 14
An appropriate Order accompanies this Opinion.
October 15, 2014
__s/ Joseph E. Irenas ____
JOSEPH E. IRENAS, S.U.S.D.J.
The Court notes that this Opinion and accompanying Order do
not dispose of the entire case; T-Mobile’s counterclaims for
non-infringement and invalidity remain, as well as Ericsson’s
numerous counterclaims. Apparently, the issue regarding TMobile’s use of Nokia equipment, see fn. 6 supra, also remains.
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