79 F. Supp. 3d 643
E.D. Tex.2015Background
- JPMC and DataTreasury (DTC) executed a 2005 license (and related settlement agreements) granting JPMC a fully paid, lump‑sum license for $70 million; the License Agreement contains a Most Favored License (MFL) clause requiring DTC to notify JPMC within 30 days of any later license and to give JPMC the benefit of any "more favorable terms."
- DTC later licensed the same patents to numerous third parties, including a 2012 Cathay license with a $250,000 initial lump‑sum payment plus a formula for additional payments for any after‑acquired entities.
- JPMC sued (filed Nov. 29, 2012) claiming DTC breached the MFL clause by failing to notify JPMC of the Cathay license and by refusing to grant JPMC the more favorable price; JPMC seeks substitution of Cathay’s $250,000 price and a refund of ~$69.75M.
- DTC defended that the MFL clause is not self‑executing (requires a court “recognition” under §10.7), that notice occurred or JPMC had constructive/inquiry notice, and that the Cathay license is not comparable or must be applied only prospectively.
- The court found (a) DTC failed to provide the required notice as to the Cathay license and therefore breached the MFL clause, (b) the MFL clause is self‑executing and can require retroactive substitution for lump‑sum licenses, but (c) a genuine dispute of material fact exists as to damages because Cathay’s “total package” includes after‑acquired‑entity payments and there is insufficient evidence to compute the retroactive refund.
- The court granted JPMC summary judgment on DTC’s remaining affirmative defenses and counterclaims, denied JPMC’s request to substitute Cathay’s isolated $250,000 term for the $70M without further factfinding, and ordered limited additional discovery about JPMC’s after‑acquired entities and values for application of the Cathay formula.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the MFL clause self‑executing? | MFL is automatic; no declaratory action required. | Clause requires the provision be “recognized” under §10.7 (court action) before application. | MFL is self‑executing; §10.7 is choice‑of‑law/forum, not a precondition. |
| Did DTC provide required notice of the Cathay license? | No; DTC failed to give written/faxed/express notice within 30 days and first disclosed post‑suit. | JPMC had actual, inquiry, or constructive notice (e.g., via counsel or discovery productions). | DTC failed to provide the contractual notice as to Cathay; summary judgment for JPMC on breach. |
| Can JPMC obtain retroactive substitution of Cathay’s $250,000 lump sum and refund? | Yes; MFL should permit substitution of a more favorable lump‑sum term and refund prior payments. | MFL applies only prospectively; Cathay’s $250k cannot be considered in isolation—total package matters. | MFL can require retroactive substitution for lump‑sum deals, but JPMC cannot substitute Cathay’s isolated $250k because Cathay’s license includes additional payments for after‑acquired entities; genuine factual disputes on damages require further discovery. |
| Are DTC’s affirmative defenses and counterclaims viable? | N/A (seeks dismissal/summary judgment) | DTC raised waiver, laches, statute of limitations, estoppel, voluntary‑payment rule, latent ambiguity, failure to mitigate, and declaratory counterclaims. | JPMC entitled to summary judgment on these defenses and counterclaims (most lack merit or are moot); DTC’s partial summary judgment motions denied. |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burden framework)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (summary judgment "genuine issue" standard)
- Frost Nat'l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310 (Tex. 2005) (contract interpretation and business purpose)
- PG & E Gas Transmission v. City of Edinburg, 59 S.W.3d 225 (Tex. App. 2001) (construction of MFN clause and parties' intent)
- Bituminous Cas. Corp. v. Maxey, 110 S.W.3d 203 (Tex. App. 2003) (terms given plain and ordinary meaning)
- In re Raymond James & Assocs., Inc., 196 S.W.3d 311 (Tex. App. 2006) (incorporation by reference and contract interpretation)
- BMG Direct Mktg., Inc. v. Peake, 178 S.W.3d 763 (Tex. 2005) (voluntary payment rule not applied to contract claims)
- Hazeltine Corp. v. Zenith Radio Corp., 100 F.2d 10 (7th Cir. 1938) (lump‑sum license treated as royalty equivalent)
- Caldwell v. Barnes, 975 S.W.2d 535 (Tex. 1998) (elements of laches)