Messy Aftermath: One Reason for a Plaintiff to Prefer Lump Sums over Running Royalties

February 5, 2020

Years ago, plaintiff Nomadix and defendant Guest-Tek, both providers of mobile network connectivity in hospitality settings (e.g., hotels or airports), entered into a set of agreements to end litigation over a set of Nomadix patents. The plaintiff alleges in a subsequent lawsuit (2:16-cv-08033), filed in the Central District of California before District Judge Andre Birotte Jr., that Guest-Tek stopped reporting sales and paying royalties under their license agreement. In its answer, Guest-Tek challenged the invalidity of the Nomadix patents and alleged patent misuse, among other defenses—to which Nomadix cried foul, eventually moving for partial summary judgment based on a “Covenant Not to Challenge Licensed Patents” clause in the agreement. Guest-Tek opposed the motion by pointing to the last sentence of that clause, which provides an escape hatch “in the event that Nomadix later asserts any of the [licensed patents]” against Guest-Tek. Would Judge Birotte find an issue of material fact as to whether the Nomadix lawsuit, brought to enforce the terms of the license agreement itself, amounts to Nomadix “later asserting” the licensed patents against Guest-Tek?

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