Supreme Court Set to Address Required Scope of Covenant Use for IP Owners

The Supreme Court is set to address in Already, LLC v. Nike, Inc., No. 11-982, what exactly a covenant not to sue must encompass in order to sufficiently divest a district court of the subject matter jurisdiction required to hear a case. The issue concerns a tactic commonly used by plaintiffs in trademark and patent cases to unilaterally end its pending lawsuit against a defendant’s wishes. The tactic is primarily employed when a patent or trademark owner fears a defendant (or declaratory judgment plaintiff) may successfully invalidate or cancel the patent or trademark at issue, respectively. This ensures that the patent or trademark owner may still pursue other infringers in separate lawsuits that, for one reason or another, may not mount a similarly threatening defense.

Case law requires that a covenant not to sue must address current and/or previous commercial activities. At issue is whether these covenants should also address future infringing modifications of the marks or products as well. In order to successfully divest a court of subject matter jurisdiction and thus unilaterally end a case pre-judgment, a party must prove that there is no longer a real and substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant further legal action. Until now, it’s been held that promising not to assert infringement claims against past and existing commercial activities satisfied this standard, but the Supreme Court has granted certiorari to further address the issue.

Does the residual possibility of a future suit preclude divestment of a court’s subject matter jurisdiction? If so, patent and trademark holders may find that maneuvering out of an unsuccessful attack may require full immunization of their opponent, even for future-developed infringing activities.

Source: http://www.patentlyo.com/patent/2012/06/supreme-court-grants-cert-in-already-v-nike.html

For more information on scope of covenant use, please visit our patent services page.

Klemchuk LLP is an Intellectual Property (IP), Technology, Internet, and Business law firm located in Dallas, TX.  The firm offers comprehensive legal services including litigation and enforcement of all forms of IP as well as registration and licensing of patents, trademarks, trade dress, and copyrights.  The firm also provides a wide range of technology, Internet, e-commerce, and business services including business planning, formation, and financing, mergers and acquisitions, business litigation, data privacy, and domain name dispute resolution.  Additional information about the IP law firm and its IP law attorneys may be found at www.klemchuk.com.

Klemchuk LLP hosts Culture Counts, a blog devoted to the discussion of law firm culture and corporate core values with frequent topics about positive work environment, conscious capitalism, entrepreneurial management, positive workplace culture, workplace productivity, and corporate core values.