TransCore Case Has Important Implications For Patent Licensing Practices

On April 8, 2009, the U.S. Court of Appeals for the Federal Circuit issued a decision in TransCore, LP v. Electronic Transaction Consultants Corp. (No. 2008-1430) that will have a significant impact on how agreements relating to patents are interpreted. Patent owners must consider this decision when entering into agreements affecting their patent rights. The Federal Circuit held that (i) an unconditional covenant not to sue has the same effect as an unconditional license for purposes of patent exhaustion, and (ii) a covenant not to sue conveys an implied license, by virtue of legal estoppel, to later-issued patents that are necessary to practice the subject matter of patents to which rights were granted, even if the agreement includes express language that it does not convey rights to other patents.