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Resolving U.S. Patent Disputes Outside of the U.S.

By Scott Kolassa
March 29, 2006

Patents, by their very nature, are territorial, granting a right to exclude in the country that issues them. Thus, a patentee seeking to enforce its U.S. Patent must do so in a federal district court or, if goods are being imported into the country, at the International Trade Commission ('ITC').

However, consider the following scenario: A Licensor and a Licensee enter an agreement whereby Licensor grants Licensee a license to intellectual property rights that include U.S. Patents. The agreement contains either 1) a forum selection clause selecting the courts of some country other than the United States or 2) an arbitration clause mandating the resolution of the dispute in foreign arbitration.

What happens when the Licensee fails to pay the royalties specified in the license and the Licensor sues for breach? Suppose the Licensee counters that it does not owe the royalties sought by the Licensor because none of its activities fall within the scope of claims. Further suppose that the Licensee claims that the patents are invalid. This typical breach of license agreement scenario may require the construction of the claims in the patent, an infringement assessment, and an invalidity assessment.

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