Often in intellectual property cases, disputes are resolved
by the entry of a consent judgment setting forth the terms of the
parties' settlement. In drafting the consent judgment, the patent
holder undoubtedly will focus on including terms that will "lock up" the
accused infringer by requiring him to refrain from future acts of
infringement. Usually, these terms will extend to the accused
infringer's successors-in-interest, employees, its servants, and all
persons acting under, or in concert with him. Less thought, however, is
often given to securing important rights for the patent holder's
successors and assigns, such as the right to enforce the consent
judgment. Based upon a recent CAFC decision, it is clear that care must
be taken to expressly include language binding the patent holder's
successors and assigns to enable their enforcement of the consent
judgment. Mark Thatcher, et al. v. Kohl's Department Stores, Inc., et
al., 2005 WL 310875 (Fed. Cir. 2005).
Thatcher developed a footwear product known as the TEVA(r)
sandal and sued Kohl's for patent, copyright and trade dress
infringement based upon Kohl's sale of an imitation sandal. The
district court entered a consent judgment settling the dispute. A
paragraph discussing Kohl's obligation to avoid infringing activities
extended to Kohl's "agents, servants, employees, successors-in-interest,
subsidiaries and all persons acting under, in concert with, or for them
. . . ." Thatcher then sold his intellectual property rights in the
TEVA(r) sandal to Deckers who sued Kohl's for contempt of the consent
judgment alleging that Kohl's had resumed its sale of imitation sandals.
The consent judgment named Thatcher as an individual but made no mention
of Deckers or any other successors-in-interest. The consent judgment
was also devoid of any language assigning any of Thatcher's rights and
obligations. The district court found that Deckers lacked standing
because it was not a party to the consent judgment and the consent
judgment lacked a provision extending the judgment to Thatcher's
successors-in-interest as it did for Kohl's. Citing United States v.
Armour & Co., 402 U.S. 673 (1971).
On appeal, the CAFC affirmed. Finding that interpretation
of a settlement agreement is not a matter unique to patent law, the CAFC
applied the law of the regional circuit (7th circuit) to interpret the
consent judgment and applied rules of contract interpretation. The
court determined that there was nothing expressly set out in the consent
judgment between Thatcher and Kohl's extending Thatcher's rights to any
third-party, including any "successor-in-interest." According to the
court, "[t]his silence is the functional equivalent of the parties'
express intent to exclude language of assignment." The court found it
significant that the consent judgment specified successors and assigns
when listing Kohl's obligations but omitted such language when listing
Thatcher's obligations. The court also noted that at the time Thatcher
sued Kohls, he also sued Wal-Mart for allegedly infringing the same
trade dress. In settling that case, Thatcher and Wal-Mart both bound
their "successors and assigns." According to the court, Thatcher and
Deckers must live with the consequence for failing to include similar
language of assignability here.
To discuss this decision or its implications further, please
feel free to contact the author, Michael J. Berkowitz,
(firstname.lastname@example.org), (215) 567-2010 at Caesar, Rivise, Bernstein,
Cohen & Pokotilow, Ltd. in Philadelphia, PA, USA.
The information contained in this email is provided for informational purposes only and does not represent legal advice. Neither the APLF nor the author intends to create an attorney client relationship by providing this information to you through this message.
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