1st Circuit Vacates Award of Royalties, Fees to Patent Owner

Partner Craig Smith and Counsel Tom McNulty quoted in Massachusetts Lawyers Weekly

“The 1st U.S. Circuit Court of Appeals has held that a patent licensee’s unpaid royalty and sublicensing fee obligations were extinguished by a release the patent holder gave in exchange for a cut of the licensee’s settlement money from litigation with a sublicensee.”

Partner Craig R. Smith called the case a “cautionary tale” on the impact of using broad releases to resolve specific matters.

“These releases work well when the agreement resolves all issues and obligations between the parties,” he said. “Crafting a release is more complicated when there are continuing obligations by one or more parties. These more complex releases must be carefully drafted to avoid the unintended consequence of releasing more than the parties intended.”

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L&A Counsel Thomas P. McNulty suggested that this case illustrates the pitfalls of attorneys using overly “lawyerly” language.

“If there was, in fact, an agreement between the parties that [the release] wouldn’t involve past royalties, that should have been there expressly and clearly,” he said. “If you were to describe to a client what the agreement is going to do, you wouldn’t use the kind of terminology [the parties] used in this agreement. You’d say it clearly to them. So put it in the agreement that way too. Of course, this is assuming that the parties didn’t actually agree to the result that came out.”

This article was published in Massachusetts Lawyers Weekly.