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Canon Inc. v. Tesseron Ltd.

United States District Court, S.D. New York

June 24, 2015

CANON INC. and CANON U.S.A., INC., Plaintiffs,
v.
TESSERON LTD., INDUSTRIAL PRINT TECHNOLOGIES L.L.C., and FORREST P. GAUTHIER, Defendants

For plaintiffs Canon Inc. and Canon U.S.A., Inc.: Joseph A. Calvaruso, Lisa T. Simpson, Richard F. Martinelli, ORRICK, HERRINGTON & SUTCLIFFE LLP, New York, NY.

For defendants Tesseron Ltd., Industrial Print Technologies L.L.C., and Forrest P. Gauthier: Steven C. Schroer, FITCH EVEN TABIN & FLANNERY LLP, Boulder, CO; Jared E. Hedman, FITCH EVEN TABIN & FLANNERY LLP, Chicago, IL; Cary Kappel, DAVIDSON, DAVIDSON & KAPPEL, LLC, New York, NY.

Page 392

OPINION & ORDER

DENISE COTE, District Judge:

The defendants in this action terminated a patent license agreement after its licensee's affiliates challenged the validity of the patents in court proceedings in Florida. Finding the termination wrongful under the principles established by Lear, Inc. v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610 (1969), this Opinion grants plaintiffs' motion for summary judgment for their breach of contract claim.

Plaintiffs Canon Inc. (" CINC" ) and Canon U.S.A., Inc. (" CUSA," collectively " plaintiffs" ) are suing defendants Tesserson Ltd. (" Tesseron" ), Industrial Print Technologies L.L.C. (" IPT" ), and Forrest P. Gauthier (" Gauthier," collectively " defendants" ) regarding a license agreement for the use of certain patented technologies (the " Agreement" ). Plaintiffs and defendants have cross-moved for summary judgment on the plaintiffs' breach of contract claim. For the following reasons, plaintiffs' motion for summary judgment is granted and defendants' motion is denied.

BACKGROUND

The following facts are undisputed.[1] Defendant Gauthier holds the patents to certain printer systems and technologies. Gauthier is founder and sole owner of Tesseron, which at the time relevant to the dispute was the assignee of all right, title, and interest in his patents. Tesseron first approached CINC to discuss a licensing arrangement for patents in 2002. The

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parties negotiated licensing terms throughout 2005, and they executed the Agreement at issue here, effective December 31, 2005. The two named parties to the Agreement are Tesseron and CINC.

To obtain the license, CINC made a single payment. Section 2.01 of the Agreement grants to CINC " a fully paid-up, non-exclusive license under the Licensed Patents to make, have made, use, exhibit, sell, offer for sale, import, lease and/or otherwise dispose of the Licensed Products." This grant is " [s]ubject to receipt of the payment" specified in Section 4.01, which is a " one-time, fully paid-up, non-refundable payment," as well as subject to " the terms and conditions set forth" in the Agreement.

The Agreement extends the CINC license to its affiliates who are not major competitors of the licensor. Section 2.02 grants CINC the right, " subject to compliance with the terms and conditions" of the Agreement, " to grant to any . . . Affiliates sublicenses under the licenses granted to it under this Agreement but without any right to sublicense further." " Affiliate" is defined in Section 1.01 as " any corporation, company, partnership or other entity (a) which is controlled by or is in common control with Canon directly or indirectly through one or more intermediaries as of the Effective Date" or " (b) which will be controlled by or under common control with Canon directly or indirectly through one or more intermediaries subsequent to the Effective Date and which as of the Effective Date is not a major competitor with respect to the [licensed patents]." (Emphasis added.) Section 2.02 further states that " Canon shall have no right to grant sublicenses to any person other than the Affiliates under this Agreement."

The Agreement also includes a provision permitting Tesseron to terminate the Agreement if CINC or its affiliates challenge or take steps to challenge the patents licensed under the Agreement. It is this provision that is at the core of the parties' cross-motions. Section 7.03 provides in pertinent part that

Tesseron shall have the right to immediately terminate this Agreement by written notice to Canon . . . [if] Canon or any of the Affiliates for itself or through any third party contests the validity of any of the Licensed Patents or assists any third party in contesting the validity of the Licensed Patents. The Parties acknowledge that this Subsection shall apply to the ...

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