• Oct 17 2019
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  • Category: CAFC Updates

Fraunhofer sued Sirius alleging infringement of claims of four of Fraunhofer’s patents. Fraunhofer and a third party, WorldSpace International Network Inc., entered into an exclusive license agreement (“the Master Agreement”) related to Fraunhofer’s multicarrier modulation technology. Sirius sought to use Fraunhofer’s technology and because Fraunhofer had already granted an exclusive license to WorldSpace, Sirius entered into a Sublicense Agreement with WorldSpace.  WorldSpace thereafter ran into financial difficulties, filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code (which was converted to Chapter 7), and rejected the Master Agreement. Fraunhofer then sent a letter to WorldSpace claiming that the Master Agreement was terminated in the context of the rejection in bankruptcy, and declaring the Master Agreement terminated for cause under German law. The district court granted Sirius’s motion to dismiss for failure to state a claim on the ground that Sirius had a valid license to the patents-in-suit. After a choice of law discussion concluding that US (not German) law applies, the CAFC notes that the district court has not decided whether the Master Agreement was terminated and that this issue must be addressed upon remand. Assuming that the Master Agreement was terminated, the CAFC notes that the Master Agreement is ambiguous as to whether the sublicensee’s rights survive the termination, and that because this issue cannot be properly resolved on a motion to dismiss, remand is necessary to enable the parties to establish an appropriate record and for the district court to make necessary factual findings. With respect to the district court’s denial of Fraunhofer’s motion for leave to amend its complaint to included factual allegations as to the circumstances surrounding the Master Agreement and Sublicense Agreement, the CAFC finds that the district court erred by not considering extrinsic evidence of the parties’ intent and reverses the district court’s denial of Fraunhofer’s motion to Amend.

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