Carnegie Mellon University v. LSI Corporation

Background

Carnegie Mellon University (CMU) holds United States Patent Nos. 6,201,839 and 6,438,180. The patents concern methods used in storage-device read channels to improve the accuracy of detecting data written to a storage medium. CMU alleged that LSI Corporation and Avago Technologies U.S. Inc., collectively referred to in the opinion as LSI, designed and supplied products that practiced those methods.

CMU sought damages for allegedly infringing sales between 2011 and 2018. The accused products included hard-disk-drive controller systems-on-a-chip, stand-alone read-channel chips, and simulators. LSI had contracts with Seagate Technology PLC and Hitachi Global Storage Technologies (HGST) to develop and supply data-storage products for those companies.

Seagate’s associates agreement with CMU granted Seagate and the other associates a worldwide, irrevocable, royalty-free license, including the right to “make, have made, use, sell or otherwise dispose of” the inventions. HGST received comparable rights under an agreement connected to an earlier IBM-CMU settlement. The parties did not dispute that CMU’s two patents were covered by those licenses.

LSI’s motion

LSI filed an early motion for partial summary judgment based on a “have made rights” defense. In patent law, a licensee’s right to have a product made by another company can operate as an implied license for the supplier when the supplier makes products for the licensee’s own needs. LSI argued that Seagate’s and HGST’s licenses barred CMU from seeking damages for approximately 90 percent of the damages it sought.

Under Federal Rule of Civil Procedure 56, summary judgment is appropriate when there is no genuine dispute about a material fact and the moving party is entitled to judgment under the law. The court may decide only part of a claim or defense. The court stated that the existence of an implied license is a legal question, and the party asserting that defense bears the burden of showing that the license exists.

Court’s analysis

The court began with the language of the Seagate and HGST agreements. It relied on Federal Circuit precedent holding that a licensee’s right to make, use, and sell a product ordinarily includes the right to have a third party make it, unless the contract clearly shows an intent to exclude that right. A supplier may exercise the implied license when fulfilling genuine orders from the licensee and may not exceed or circumvent the scope of the original license.

CMU acknowledged that the associates agreements expressly gave Seagate and HGST have-made rights. The undisputed evidence showed that LSI supplied products for Seagate’s and HGST’s own product needs. The court therefore concluded that the basis for an implied license to LSI was established.

The court rejected CMU’s argument that Seagate and HGST had to expressly state in their contracts with LSI that they were exercising have-made rights. The court explained that the right is inherent in the license and does not require formalities comparable to granting a sublicense. The court also rejected CMU’s argument that the products had to be customized, noting that the controlling precedent did not impose such a requirement.

The court further concluded that the supply agreements did not clearly disclaim or waive the have-made rights. It treated the referenced intellectual-property reservation clauses as ordinary provisions that did not show an intent to prevent LSI from making licensed products for Seagate or HGST. The court also found that CMU had not produced evidence creating a genuine factual dispute that LSI engaged in infringing conduct before the rights were exercised during the relevant 2011-to-2018 period.

Ruling and remaining issue

The court granted LSI summary judgment on the existence of have-made rights under the Seagate and HGST licenses. It held that LSI was entitled to judgment as a matter of law on the implied-license issue.

The ruling did not determine which particular accused products were covered by the implied license. The court directed the parties to meet and confer and file a joint list identifying the covered products. If they could not agree for a good reason, LSI could file a summary-judgment motion directed solely to that product-coverage question. The court ordered the joint stipulation or motion to be filed by December 7, 2020.