District of Minnesota Orders Production of License Negotiation Documents and Sanctions

The District of Minnesota, in Luminara Worldwide, LLC v. Liown Electronics Co. Ltd. et al., Case No. 14-3103 (Magistrate Judge Noel) (May 18, 2016), granted Defendant's motion to compel documents related to Plaintiff's withheld patent license. Defendant served discovery seeking Plaintiff's license agreements related to the asserted patent. Plaintiff did not produce its Memorandum of Understanding or Waiver Agreement with Flipo which included Plaintiff's agreement to release Flipo and its customer from infringement liability and Plaintiff's waiver of its enforcement rights against Flipo. Subsequently, Defendant's CEO had a conversation with Flipo's CEO at a trade show in which Flipo's CEO said that Flipo had taken a license to Plaintiff's patent. After a specific request, Plaintiff produced the Memorandum of Understanding and the Waiver Agreement with Flipo, but refused to product all documents related to the those two agreements.

The Court concluded that the Memorandum of Understanding and the Waiver Agreement "were, for all intents and purposes, licenses." The Court noted:

The Federal Circuit has expressly held that "a non-exclusive patent license is equivalent to a covenant not to sue." TransCore, LP v. Elec. Transaction Consultants Corp., 563 F.3d 1271, 1275 (Fed. Cir. 2009); see also Spindelfabrik Suessen-Schurr Stahlecker & Grill GmbH v. Schubert & Salzer Maschinenfabrik Aktiengesellschaft, 829 F.2d 1075, 1081 (Fed. Cir. 1987)("[A] patent license agreement is in essence nothing more than a promise by the licensor not to sue the licensee."). Here, under the terms of the MOU and the Waiver Agreement, [Plaintiff] released

Flipo from any and all liability from selling certain flameless candles. See ECF No. 400, Exs. G and I. In other words, [Plaintiff] agreed that it would not sue Flipo for selling potentially infringing candles. The fact that [Plaintiff] did not characterize these agreements as "licenses" does not alter their purpose.

(Slip op. at 7).

The Court further concluded that Defendant should have produced the Memorandum of Understanding in discovery, as well as the negotiation documents that "constitute, discuss, refer, or relate to any grant of rights in or to the [asserted patent], including, without limitation, assignments, licenses, cross-licenses, joint development agreements, covenants, settlements, or releases in the [asserted patent]." (Slip op. at 7).

The Court awarded sanctions. The Court noted:

Nevertheless, it is clear that Luminara would never have produced the Flipo agreements if Defendants had not requested them after Yang's chance encounter with Flipo's CEO. Luminara must therefore reimburse Defendants for their costs and fees that were reasonably expended in having to investigate and request the Flipo agreements.

(Slip op. at 8).