Royalty disputes under patent-license agreements often arise when there are multiple licensed entities in the supply chain. In particular, disputes often center on whether the manufacturer of a product or the ultimate seller should be responsible for paying the royalties due for a product. Resolving such disputes often requires analysis of whether the sale by the manufacturer-licensee prevents the patent holder from collecting royalties from the seller-licensee based on the doctrine of patent exhaustion. That doctrine generally provides that the first authorized sale of a patented product prevents the patent owner from controlling the further use and resale of that product. In a recent decision in MPEG LA, LLC v. Audiovox Electronics Corp., the trial court in Suffolk County, New York, explored this issue and determined that under the contract at issue the ultimate seller was responsible for paying royalties under the parties’ license.
March 20, 2012
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