Lenore Chen
The Taiwan High Court rendered the 104-Shang-1279 Civil Decision (hereinafter, this “Decision”) of June 1, 2016, holding that the major obligation of patent licensors is to allow their licensees to exercise patent rights pursuant to the licensing agreement during the term of license, but they are not obligated to transfer patent rights to the licensees.
According to the facts underlying this Decision, the Appellee asserted as follows. The Appellee entered into the agreement at issue with the Appellant’s company to license it under all of the patents-in-suit to engage in production and sale in mainland China. The Appellant’s company should pay the Appellee royalties in the amount of $30 million by installment. However, except for the first check which was cashed, the rest of the checks could not be cashed upon maturity. Therefore, this lawsuit was brought.
According to the Decision, the major obligation of patent licensors is to allow their licensees to exercise patent rights pursuant to the licensing agreement during the term of license, but patent licensors are not obligated to transfer patent rights to the licensees. Therefore, if a licensee is allowed to exercise patent rights during the term of license pursuant to the patent licensing agreement, even though the patent rights are subsequently cancelled and cannot be exercised anymore since they are deemed to have never existed from the beginning as a result of invalidation, it is not true they are not a legitimate contractual payment subject matter in the beginning. Before the patent rights are finally cancelled, the licensing agreement between the parties should be valid. Therefore, the licensee should certainly pay royalties pursuant to the agreement during the term of the license.
It was further held in the Decision that the Appellee indeed transferred relevant technologies to InnValley Co. according to the acceptance inspection standard stipulated under the agreement at issue and the technologies were accepted upon confirmation and verification by the Appellant’s company. Therefore, the Appellant’s company was certainly obligated under the agreement at issue to pay royalties by the required installment. Since the Appellee’s assertion was upheld, the Appellant’s appeal was dismissed.