High Point Sarl v. T-Mobile USA, Inc.

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
HIGH POINT SARL,
Plaintiff-Appellant
v.
T-MOBILE USA, INC., ERICSSON, INC., NOKIA
SOLUTIONS AND NETWORKS US LLC,
Defendants-Appellees
______________________
2015-1235
______________________
Appeal from the United States District Court for the
District of New Jersey in No. 1:12-cv-01453-JEI-AMD,
Judge Joseph E. Irenas.
______________________
Decided: February 18, 2016
______________________
MARTIN J. BLACK, Dechert LLP, Philadelphia, PA,
argued for plaintiff-appellant. Also represented by DEREK
J. BRADER; ROBERT RHOAD, Princeton, NJ.
ASIM BHANSALI, Keker & Van Nest, LLP, San Fran-
cisco, CA, argued for defendant-appellee T-Mobile USA,
Inc. Also represented by DAN L. BAGATELL, Perkins Coie
LLP, Phoenix, AZ; RYAN J. MCBRAYER, CHRISTINA JORDAN
MCCULLOUGH, Seattle, WA.
2 HIGH POINT SARL v. T-MOBILE USA, INC.
WILLIAM L. MENTLIK, Lerner, David, Littenberg,
Krumholz & Mentlik LLP, Westfield, NJ, argued for
defendant-appellee Ericsson, Inc. Also represented by
JONATHAN A. DAVID, ROBERT BENJAMIN HANDER, ROY
HENRY WEPNER.
ADAM CONRAD, King & Spalding LLP, Charlotte, NC,
argued for defendant-appellee Nokia Solutions and Net-
works US LLC. Also represented by DARYL JOSEFFER,
Washington, DC; ALLISON H. ALTERSOHN, CHRISTOPHER
CARNAVAL, ROBERT FRANCIS PERRY, New York, NY.
______________________
Before REYNA, MAYER, and CHEN, Circuit Judges.
PER CURIAM.
High Point SARL (“High Point”) appeals the final
judgment of the United States District Court for the
District of New Jersey holding that its patent rights were
exhausted by the authorized sales of telecommunications
infrastructure equipment substantially embodying the
asserted claims of U.S. Patent Nos. 5,195,090 (the “’090
patent”), 5,195,091 (the “’091 patent”), 5,305,308 (the
“’308 patent”), and 5,184,347 (the “’347 patent”). See High
Point SARL v. T-Mobile USA, Inc., 53 F. Supp. 3d 797(D.N.J. 2014) (“District Court Decision”). We affirm.
I. BACKGROUND
A. The Asserted Patents
The asserted patents relate to the transmission of
packetized cellular telephone traffic within the terrestrial
portion of a wireless telecommunications system. These
patents were originally owned by AT&T Corp. (“AT&T”),
but AT&T assigned them to its spin-off company, Lucent
Technologies Inc. (“Lucent”) in 1996. See id. at 800.
Avaya Technology Corporation (“Avaya”) acquired the
asserted patents from Lucent in 2000. High Point, a
HIGH POINT SARL v. T-MOBILE USA, INC. 3
Luxembourg-based entity, purchased these patents from
Avaya in 2008. Id. at 800 n.1. At issue in this appeal is
the scope of a series of licenses and sublicenses to make
and sell products practicing the claimed technology.
B. The Alcatel Cross-License
In 1996, AT&T granted a nonexclusive license to a
portfolio of patents—including the asserted patents—to
Alcatel Alsthom Compagnie Generale d’Electricite S.A.
(“Alcatel”). Joint Appendix (“J.A.”) 5394–5405. The
license agreement automatically extended sublicenses to
current and future subsidiaries of both AT&T and Alcatel.
J.A. 5396; see District Court Decision, 53 F. Supp. 3d at
801. The agreement only extended, however, to “products
and services of the kinds which [were] furnished or used”
by AT&T and Alcatel, or their related companies, on the
effective date of the agreement. J.A. 5395.
In 2006, following a reverse triangular merger, Lu-
cent and Alcatel combined to form Alcatel-Lucent, S.A.
(“Alcatel-Lucent”). Alcatel USA Marketing Inc. (“Alcatel
Marketing”) was a subsidiary of Alcatel. See District
Court Decision, 53 F. Supp. 3d at 801. In 2008, Alcatel
Marketing merged with an Alcatel-Lucent subsidiary to
form Alcatel-Lucent USA Inc. (“Alcatel U.S.”).
C. The Siemens Cross-License
In 1988, AT&T entered into a non-exclusive patent
cross-licensing agreement with Siemens AG (“Siemens”).
In 1995, AT&T announced that it was planning to under-
go a major corporate restructuring and that it would split
its business into three separate legal entities. J.A. 4881.
AT&T wanted to ensure that these three new entities—
and those entities’ own future divested businesses—would
have the same licenses and rights that AT&T itself pos-
sessed under its 1988 cross-license with Siemens. J.A.
4881. AT&T was willing to grant reciprocal rights to any
future businesses divested by Siemens. J.A. 4881. Ac-
4 HIGH POINT SARL v. T-MOBILE USA, INC.
cordingly, in November 1995 AT&T and Siemens executed
a divestment rider which provided that:
[I]n the future, if [Siemens] or any of the three
[AT&T divested] entities divest[] a portion of its
present business, the licenses and rights granted
in the [1988 cross-license between Siemens and
AT&T] may be sublicensed to the divested busi-
ness by the divesting company. Such sublicenses
may be granted and retained only while the future
divested business operates as a separately identi-
fiable business and only to the extent applicable to
products and services sold by the future divested
business prior to its divestiture. J.A. 4881.
On April 1, 2007, Siemens divested its carrier division
and formed a new joint venture entity, Nokia Siemens
Networks B.V., with a networks business divested from
Nokia Inc. (“Nokia”). J.A. 6231–33. Nokia Siemens
Networks B.V. “was a distinct operational group with its
own board of directors, governance, and organization.”
J.A. 6235. In 2009, Siemens granted Nokia Siemens
Networks B.V. a sublicense in the asserted patents. J.A.
5305–11. This sublicense was made retroactive to April 1,
2007. J.A. 5308. In 2011, Nokia Siemens Networks B.V.
granted a retroactive sublicense in the asserted patents to
its U.S. subsidiary, Nokia Siemens Networks US LLC
(“Nokia Siemens Networks U.S.”). 1 J.A. 5356–59.
D. The LM Ericsson Cross-License
In 1996, Lucent entered into a cross-licensing agree-
ment with Telefonaktiebolaget LM Ericsson (“LM Erics-
son”). That agreement, which covered the asserted
patents, afforded LM Ericsson the right to grant subli-
1 In August 2013, Nokia Siemens Networks U.S.
changed its name to Nokia Solutions and Networks US
LLC. J.A. 1096.
HIGH POINT SARL v. T-MOBILE USA, INC. 5
censes to its subsidiaries and other “related companies.”
J.A. 1781. It also specifically provided that such subli-
censes could “be made effective retroactively.” J.A. 1781.
In January 2013, LM Ericsson granted its U.S. sub-
sidiary, Ericsson Inc. (“Ericsson U.S.”), a nunc pro tunc
sublicense to the patents-in-suit. This sublicense was
made retroactive to January 1, 2002.
E. The District Court Litigation
On March 8, 2012, High Point filed an infringement
suit against T-Mobile USA, Inc. (“T-Mobile”), a wireless
network communications services provider. According to
High Point, T-Mobile used transmission technology dis-
closed in the ’090, ’091, ’308, and ’347 patents to transfer
voice packets within its network. In response, T-Mobile
sought declaratory judgments that High Point’s patents
were invalid and not infringed. J.A. 880–92. In May
2013, the district court permitted Nokia Siemens Net-
works U.S. and Ericsson U.S., two of T-Mobile’s suppliers,
to intervene in the suit as defendants. J.A. 451–56.
Before the district court, High Point asserted that T-
Mobile’s assembly and use of its third generation cellular
wireless network (the “3G network”) infringed claims of
each of the asserted patents. High Point’s infringement
contentions focused on three principal pieces of equipment
in T-Mobile’s 3G network: (1) the Node B (sometimes
referred to as a “radio base station”); (2) the radio network
controller (“RNC”); and (3) the media gateway (“MGW”).
As High Point explains, Node Bs “are used to convey
digital traffic ‘over the air’ to and from mobile users in a
geographic area near the Node B.” Br. of Plaintiff-
Appellant at 12; see J.A. 6298. Each Node B communi-
cates with—and is connected to—an RNC via transmis-
sion media and interconnect equipment. J.A. 6298. An
RNC controls and processes voice traffic sent to and
received from the Node Bs. J.A. 6298, 7125–26. MGWs
connect the cellular voice network to the conventional
6 HIGH POINT SARL v. T-MOBILE USA, INC.
Public Switched Telephone Network. J.A. 6074, 6296–98.
MGWs typically communicate with multiple Node Bs
through one or more RNCs. J.A. 2734–35, 6074.
T-Mobile purchased MGWs from Alcatel U.S. and its
predecessor, Alcatel Marketing (collectively “Alcatel
Marketing U.S.”). It purchased Node Bs and RNCs from
Nokia Siemens Networks U.S., and Node Bs, RNCs, and
MGWs from Ericsson U.S. See District Court Decision, 53
F. Supp. 3d at 805 n.10.
In February 2014, T-Mobile and Nokia Siemens Net-
works U.S. filed a combined motion for summary judg-
ment, arguing that “High Point’s patent rights [were]
exhausted by the sale of licensed articles that substantial-
ly embod[ied] the asserted claims of High Point’s asserted
patents.” J.A. 2721. Ericsson U.S. filed a separate sum-
mary judgment motion in which it contended that its
sales of equipment to T-Mobile were fully authorized by
the sublicense it obtained from LM Ericsson. J.A. 1178–
98. Ericsson U.S. further contended that any infringe-
ment claim against T-Mobile based on T-Mobile’s use of
equipment supplied by Ericsson U.S. was barred by
exhaustion. J.A. 1212.
On October 15, 2014, the district court granted both
summary judgment motions. In the court’s view, the
doctrine of patent exhaustion barred all of High Point’s
infringement claims because the accused products were
sold under valid licenses and sublicenses. See District
Court Decision, 53 F. Supp. 3d at 810. The court rejected
High Point’s argument that the 1996 cross-licensing
agreement between AT&T and Alcatel did not extend to
Alcatel Marketing U.S. Id. at 807. It further held that
the MGWs Alcatel Marketing U.S. sold to T-Mobile were
licensed products, explaining that MGWs were the same
“kind” of product that Alcatel sold at the time of its 1996
cross-licensing agreement with AT&T. Id. at 807.
HIGH POINT SARL v. T-MOBILE USA, INC. 7
The trial court also concluded that the sales of equip-
ment by Nokia Siemens Networks U.S. to T-Mobile were
authorized by the divestment rider which AT&T and
Siemens executed in November 1995. Id. at 808. Alt-
hough High Point argued that no license rights could be
conveyed to Nokia Siemens Networks B.V., the parent
company of Nokia Siemens Networks U.S., because it
never operated as a “separately identifiable business,” the
court rejected this contention, stating that “[t]he plain
language of the [1995 divestment] rider indicates that [a]
divested business need only operate separately from
Siemens.” Id. The court likewise found no merit in High
Point’s assertion that the 1988 cross-licensing agreement
between AT&T and Siemens only authorized the sale of
the particular product models that Siemens had sold prior
to the time it divested its carrier division. Id. at 808 n.13.
In addition, the district court held that Ericsson U.S.
had sold equipment to T-Mobile under a valid sublicense
from LM Ericsson. Id. at 804–05. In the court’s view, the
1996 cross-licensing agreement between Lucent and LM
Ericsson placed no time limits on when sublicenses could
be granted. Id. at 805. Finally, the district court held
that licensed equipment sold by T-Mobile’s suppliers
substantially embodied all of the asserted claims. Id. at
809–10. The court rejected High Point’s argument that
“exhaustion only applies if each ‘individual component’ of
T-Mobile’s accused network substantially embodie[d] each
patent claim at issue,” concluding that such an approach
“would severely undercut, if not eviscerate, the doctrine of
patent exhaustion.” Id. at 810.
After the parties stipulated to the entry of final judg-
ment, J.A. 36, High Point filed a timely appeal with this
court. We have jurisdiction under 28 U.S.C. § 1295(a)(1).
8 HIGH POINT SARL v. T-MOBILE USA, INC.
II. DISCUSSION
A. The Patent Exhaustion Doctrine
“The longstanding doctrine of patent exhaustion pro-
vides that the initial authorized sale of a patented item
terminates all patent rights to that item.” Quanta Com-
puter, Inc. v. LG Elecs., Inc., 553 U.S. 617, 625 (2008).
Exhaustion is a judicial construct grounded on “the theory
that an unconditional sale of a patented device exhausts
the patentee’s right to control the purchaser’s use of that
item thereafter because the patentee has bargained for
and received full value for the goods.” Keurig, Inc. v.
Sturm Foods, Inc., 732 F.3d 1370, 1373 (Fed. Cir. 2013);
see Adams v. Burke, 84 U.S. (17 Wall.) 453, 455 (1873)
(“We have repeatedly held that where a person had pur-
chased a patented machine of the patentee or his assign-
ee, this purchase carried with it the right to the use of
that machine so long as it was capable of use.”). It can be
invoked as an affirmative defense to an infringement
claim, “and like other issues in which there are no disput-
ed factual questions, may be properly decided by sum-
mary judgment.” Keurig, 732 F.3d at 1373.
On appeal, High Point challenges the district court’s
exhaustion determination on several fronts. It asserts
that sales of the accused infrastructure equipment were
unauthorized because: (1) the MGWs T-Mobile purchased
from Alcatel Marketing U.S. were not licensed because
they were not the same “kind” of product that Alcatel sold
when it entered into its 1996 cross-licensing agreement
with AT&T; (2) the Node Bs and RNCs T-Mobile pur-
chased from Nokia Siemens Networks U.S. were not
licensed products because the carrier division that Sie-
mens divested in 2007 did not remain a “separately
identifiable business”; and (3) LM Ericsson could not
convey a retroactive sublicense to Ericsson U.S. because
its right to grant sublicenses expired in 2011. High Point
further contends that exhaustion does not apply because
HIGH POINT SARL v. T-MOBILE USA, INC. 9
the articles sold under the purported licenses and subli-
censes did not “substantially embody each and every
invention claimed in the patents-in-suit.” Br. of Plaintiff-
Appellant at 44. We address each of these arguments in
turn.
B. Sales by Alcatel U.S.
The 1996 cross-licensing agreement between AT&T
and Alcatel covered “any or all products and services of
the kinds” which the parties used or sold on the effective
date of the agreement. J.A. 5395. In High Point’s view,
the MGWs sold by Alcatel Marketing U.S. to T-Mobile
were not licensed products because Alcatel was not “in the
business of selling MGWs in January 1996.” Br. of Plain-
tiff-Appellant at 41. In support, it argues that the MGWs
Alcatel Marketing U.S. sold to T-Mobile were not original
Alcatel products, but were instead manufactured by
Spatial Communications Technologies Inc., a company
acquired by Alcatel in 2004.
We do not find this argument convincing. The cross-
licensing agreement between AT&T and Alcatel speaks in
exceptionally broad terms, covering “any or all products
. . . of the kinds” sold by Alcatel in 1996. J.A. 5395. There
is no dispute that Alcatel sold switching systems in 1996.
Its 1996 Annual Report stated that it manufactured and
marketed “complete telecommunications systems,” and
that its global business included “public switching net-
works” and “mobile communications infrastructure.” J.A.
5433. That report further noted that Alcatel manufac-
tured “switching systems” compliant with worldwide
technical standards as well as with both current and
emerging U.S. technical standards. J.A. 5428. Because
Alcatel indisputably sold switching systems in 1996 and
MGWs are integral switching system components, they
are products “of the kind[]” that Alcatel sold on the effec-
10 HIGH POINT SARL v. T-MOBILE USA, INC.
tive date of its cross-licensing agreement with AT&T. 2
See District Court Decision, 53 F. Supp. 3d at 807 (“High
Point does not dispute that Alcatel sold ‘switching sys-
tems’ in 1996, and that MGWs are a type of switching
system.”). Indeed, before the district court High Point
argued that the accused MGWs met switching system
limitations in the patents-in-suit. See, e.g., J.A. 6310.
In Rembrandt Data Techs., LP v. AOL, LLC, 641 F.3d
1331, 1338 (Fed. Cir. 2011), we construed a licensing
provision very similar to the one at issue here. There the
license in question extended to “products and services sold
by [a] future divested business prior to its divestiture,”
and the patent holder argued that this language covered
only the specific product models that were sold by the
divested business before it was divested. Id. at 1338(citations and internal quotation marks omitted). We
rejected this argument, however, concluding that because
the licensing agreement “specif[ied] product types using
general, functional terms,” it was not limited to the par-
ticular products sold at the time of the divestiture. Id.We explained that the term “products” covered “modems
generally, not specifically the exact types of modems in
production at the time of the . . . divestiture.” Id. (cita-
tions and internal quotation marks omitted).
Here, the language of the licensing provision is even
broader—covering not only “products and services,” id.,but “any or all products and services of the kinds” sold on
2 In its infringement contentions, High Point identi-
fied MGWs as integral switching system components.
See, e.g., J.A. 5859 (“The T-Mobile Network includes a
plurality of switching systems . . . . T-Mobile’s switching
systems comprise one or more of the following compo-
nents, either alone or in combination with one or more
other such components: RNCs, MGWs, [Mobile Switching
Centers] and/or components thereof.”).
HIGH POINT SARL v. T-MOBILE USA, INC. 11
the date of the parties’ cross-licensing agreement, J.A.
5395 (emphasis added); see District Court Decision, 53 F.
Supp. 3d at 807 (stating that it was “difficult to hypothe-
size a broader grant of a license” than the 1996 license
AT&T granted to Alcatel). Although High Point argues
on appeal that the 1996 cross-licensing agreement was
intended to extend only to those future products which
had the “same features or functionality” as products sold
in 1996, Reply Br. of Plaintiff-Appellant at 15, it fails to
identify anything in the text of the agreement or in the
course of the parties’ licensing negotiations to support this
contention. To the contrary, given that the expansive
cross-licensing agreement between AT&T and Alcatel was
executed at a time of rapid technological evolution, we do
not think that the parties intended to protect only those
products that had the “same features or functionality” as
those sold in 1996. Instead, the provision in the cross-
licensing agreement identifying protected products uses
“general, functional terms,” Rembrandt, 641 F.3d at 1338,
to cover not just the particular components sold in 1996
but any products of the same type or “kind.”
C. Sales by Nokia Siemens Networks U.S.
In 1995, AT&T decided to split its business into three
separate legal entities: (1) an equipment company; (2) a
services company; and (3) a global information solutions
provider. J.A. 4881. AT&T wanted to ensure that its
existing patent rights were transferred to its three suc-
cessor businesses. See NXP Semiconductors USA, Inc. v.
LSI Corp., No. C08-00775 JW, 2009 WL 1507333, at *2
(N.D. Cal. May 27, 2009) (explaining that “AT&T at-
tempted to obtain consent from [its] licensors . . . to subli-
cense AT&T’s existing patent license rights to the three
new AT&T entities”). Accordingly, it drafted a divestment
rider to its 1988 cross-license with Siemens which provid-
ed that its three new businesses would retain the “licens-
es and rights” that AT&T itself possessed under that
cross-license. J.A. 4881. Siemens was granted a corre-
12 HIGH POINT SARL v. T-MOBILE USA, INC.
sponding right to “retain the licenses and rights” that it
possessed under the parties’ cross-license. J.A. 4881. In
addition, the divestment rider provided that if Siemens,
or any of the three new AT&T entities, divested any
“portion” of their businesses, the rights in the 1988 cross-
license could be sublicensed to the future divested busi-
ness. J.A. 4881. The divestment rider stipulated, howev-
er, that such sublicenses could “be granted and retained
only while the future divested business operate[d] as a
separately identifiable business and only to the extent
applicable to products and services sold by the future
divested business prior to its divestiture.” J.A. 4881.
High Point contends that Siemens could not subli-
cense Nokia Siemens Networks B.V. because it did not
qualify as a “separately identifiable business” under the
terms of the 1995 divestment rider. We disagree. Nokia
Siemens Networks B.V. was created in 2007 as a joint
venture between a carrier division divested from Siemens
and a networks business divested from Nokia. It was
incorporated in the Netherlands as a private limited
liability company. J.A. 5305. Nokia Siemens Networks
B.V. was a separately operating company with its own
board of directors and management structure. J.A. 6235.
According to public documents from the relevant period, it
began “independent operations” on April 1, 2007, and was
afforded “autonomy to carry on its business independent-
ly” of either Siemens or Nokia. Because Nokia Siemens
Networks B.V. operated as a legal entity separate from
any other company, including Siemens and Nokia, it
operated as a “separately identifiable business.”
High Point asserts that to qualify as a separately
identifiable business under the 1995 divestment rider, the
carrier division that Siemens divested in 2007 had to
operate separately not just from Nokia and Siemens, but
from any third-party entity as well. In effect, High Point
argues that the separately identifiable business limitation
includes an unwritten, implicit prohibition against a
HIGH POINT SARL v. T-MOBILE USA, INC. 13
divested division operating as part of a joint venture with
any third-party entity.
This argument fails for four reasons. First, AT&T
was a large and sophisticated conglomerate, and if it had
intended to prohibit a Siemens divested division from
entering into a joint venture relationship with a third-
party entity, it could have done so explicitly. Indeed, in
November 1995—the same month that it executed the
Siemens’ divestment rider—AT&T entered into a divesti-
ture agreement with N.V. Philips’ Gloeilampenfabrieken,
U.S. Philips Corporation, and North American Philips
Corporation (collectively “Philips”) which explicitly pre-
cluded a divested business from extending sublicense
rights to a third-party entity. That agreement provided
that the rights granted in the original license agreement
between AT&T and Philips could be sublicensed:
to any future divested present business of Philips
or of the three [AT&T] entities by the divesting
company. Such sublicenses may be granted and
retained only while the future divested business
operates as a separately identifiable business and
not for an existing or other acquired business of a
third party acquiring the future divested business
and only to the extent applicable to those products
and services sold by the future divested business
which are substantially similar to products and
services sold by it prior to its divestiture.
NXP Semiconductors, 2009 WL 1507333, at *2 (emphasis
added).
Thus, in its divestiture agreement with Philips, AT&T
explicitly provided that sublicenses could not be extended
or retained in situations in which a third-party entity
acquired a divested business. In marked contrast, howev-
er, AT&T included no such provision regarding third-
party entities in its divestiture agreement with Siemens.
Nor did AT&T include any provision specifying any par-
14 HIGH POINT SARL v. T-MOBILE USA, INC.
ticular corporate structure or form for a future divested
business or any prohibition precluding a divested division
from entering into a joint venture relationship. We de-
cline, therefore, to substantively redraft the divestiture
agreement between AT&T and Siemens to include such a
prohibition. 3 See Storage Tech. Corp. v. Custom Hard-
ware Eng’g & Consulting, Inc., 421 F.3d 1307, 1317 (Fed.
Cir. 2005) (concluding that license protection extended to
third parties where the licensor “could have drafted the
license agreement to explicitly disallow” third-party
rights but failed to do so).
Second, “[i]n the case of contracts, the avowed purpose
and primary function of the court is the ascertainment of
the intention of the parties.” Alvin Ltd. v. U.S. Postal
Serv., 816 F.2d 1562, 1565 (Fed. Cir. 1987) (citations and
internal quotation marks omitted); see United States v.
Winstar Corp., 518 U.S. 839, 911 (1996) (Breyer, J.,
concurring) (emphasizing that “[u]nder ordinary princi-
ples of contract law,” a court is bound to construe a con-
tract “in terms of the parties’ intent, as revealed by
language and circumstance”). Here, the circumstances
surrounding the drafting of the 1995 divestment rider
strongly suggest that it was intended to grant broad
license protection to the parties’ future divested business-
es. Significantly, the divestment rider was drafted by
AT&T in preparation for its planned “trivestiture” of
three separate businesses. See J.A. 4881. Given that
AT&T itself was planning major divestments at the time
it prepared and executed the 1995 divestment rider, it is
only logical to assume that the rider was intended to
3 At trial, counsel for T-Mobile explained that
AT&T “could have put additional restrictions” in the 1995
divestment rider, but likely chose not to do so because it
wanted to get the “reciprocal benefit[s]” from that divest-
ment rider. J.A. 7507.
HIGH POINT SARL v. T-MOBILE USA, INC. 15
facilitate, rather than to impede, AT&T’s complex restruc-
turing efforts and to broadly shelter its future divested
businesses from infringement liability going forward.
Nothing in the divestiture agreement explicitly precludes
a joint venture from receiving sublicense rights as a
divested business, and High Point is unable to point to
anything in the record indicating that the parties had any
desire or incentive to curtail the rights of future divested
businesses to enter into joint venture relationships with
third-party entities.
Furthermore, while High Point challenges the district
court’s interpretation of the “separately identifiable
business” limitation, it offers no reasonable alternative
interpretation of that provision. High Point argues,
without meaningful support, that the “self-evident pur-
pose of the ‘separately identifiable [business]’ provision
[was] to ensure that [a] divestment [did] not expand the
scope of the original license to cover the products of unli-
censed third parties.” Reply Br. of Plaintiff-Appellant at
5. Even under High Point’s proffered interpretation of the
“separately identifiable business” limitation, however,
“products of unlicensed third parties” are afforded license
protection. For example, Siemens could have divested its
carrier division and that division could have then ac-
quired Nokia’s infrastructure equipment product lines. 4
4 Significantly, there is nothing to suggest that the
joint venture between the divisions divested from Sie-
mens and Nokia was a sham—lacking economic substance
and entered into for the purpose of extending licensing
protections to Nokia products. To the contrary, as a 2007
press release makes clear, Nokia Siemens Networks B.V.
was a “50:50 joint venture” intended “to create an indus-
try leader that [would] meet the needs of customers in the
converging telecommunications industry.” J.A. 5333. The
new company was designed “to serve customers with a
16 HIGH POINT SARL v. T-MOBILE USA, INC.
In that scenario, the divested division would presumably
remain a “separately identifiable business” notwithstand-
ing the fact that it was selling Nokia product lines. We
see nothing in the record suggesting that an entity quali-
fies as a “separately identifiable business” only if it does
not sell third-party products. Indeed, it is highly unlikely
that AT&T would have advocated for a divestiture agree-
ment which imposed such restrictions on its own future
divested divisions by prohibiting them from selling third-
party product lines. Instead, while the 1995 divestment
rider contains a significant limitation on the products that
can be sold by a divested business—those products must
be of the same “kind” that the divested business sold prior
to its divestiture—it contains no preclusion of a divested
business selling third-party product lines. 5
Third, although High Point argues that Siemens could
not validly sublicense Nokia Siemens Networks B.V.
because it was not the “divested business,” this argument
proceeds from a misapprehension of the chronology of
events leading to the formation of Nokia Siemens Net-
works B.V. Significantly, Siemens divested its carrier
division directly into Nokia Siemens Networks B.V.
best-in-class portfolio” that “combined input of experts
from Nokia and Siemens” and “harmonize[d] platforms to
ensure cost-efficiency in ever-toughening markets.” J.A.
5333.
5 As the district court correctly concluded, the
equipment sold to T-Mobile by Nokia Siemens Networks
B.V. was the same “kind” of equipment that Siemens sold
prior to the divestiture of its carrier division. See District
Court Decision, 53 F. Supp. 3d at 809 n.13 (explaining
that “Siemens was selling wireless infrastructure equip-
ment (of which RNCs and Node Bs are a later generation
type) long before the divestment of Siemens’ carrier
division”).
HIGH POINT SARL v. T-MOBILE USA, INC. 17
Nokia Siemens Networks B.V. was thus created as the
intended consequence of the Siemens divestment. See
J.A. 6390–97. If Siemens wanted to provide licensing
protection to its divested carrier division, the only entity
that it could possibly sublicense was Nokia Siemens
Networks B.V. To conclude that Siemens had no authori-
ty to sublicense Nokia Siemens Networks B.V. would be to
eviscerate the provision in the 1995 divestment rider
providing Siemens with explicit authority to sublicense
any “portion” of its business it chose to divest. J.A. 4881.
Fourth, High Point provides no explanation as to why,
from a business perspective, it would have mattered to
AT&T whether the Siemens carrier division and the
Nokia networks business were joined together in a single
step rather than in multiple steps. Siemens could have
simply divested its carrier division as a stand-alone
business and then granted that business a sublicense. In
that situation, nothing in the 1995 divestment rider
suggests that the divested company would have forfeited
its sublicense rights if it subsequently purchased Nokia’s
networks business and adopted “Nokia Siemens Networks
B.V.” as its new name. High Point offers no plausible
basis for construing the “separately identifiable business”
limitation in the divestment rider to preclude Siemens
from sublicensing Nokia Siemens Networks B.V. simply
because the two divested divisions were combined at the
outset rather than sequentially.
Furthermore, while High Point complains that the
Siemens carrier division did not remain “separately
identifiable” within Nokia Siemens Networks B.V., it fails
to explain why this is dispositive. For example, suppose
the carrier division divested from Siemens had simply
acquired the networks division divested from Nokia and
then combined the two divisions’ assets and operations.
In that scenario, the resulting business would presumably
qualify as a “separately identifiable business,” notwith-
standing the fact that the former Siemens division was
18 HIGH POINT SARL v. T-MOBILE USA, INC.
integrated with the former Nokia division. Alternatively,
Siemens could have divested two of its own divisions into
a new stand-alone entity, merging the two divested divi-
sions’ assets and operations. In that situation, High
Point’s unsupported interpretation of the separately
identifiable business limitation would presumably mean
that neither divested division could be sublicensed under
the terms of the 1995 divestment rider because neither
division would be “separately identifiable” from the other
division.
D. Sales by Ericsson U.S.
High Point also contends that the sales of Node Bs,
RNCs, and MGWs to T-Mobile by Ericsson U.S. were
unauthorized. It does not dispute that section 1.03(c) of
the cross-licensing agreement between Lucent and LM
Ericsson granted both parties the right to convey subli-
censes to their subsidiaries. See J.A. 1781, 1793–94. Nor
does it dispute that such sublicenses could be granted
retroactively. See J.A. 1781. High Point contends, how-
ever, that the sublicense that LM Ericsson granted to its
subsidiary, Ericsson U.S., was invalid because it was
conveyed in January 2013, see J.A. 1797–99, and the
terms of the asserted patents expired in July 2011.
We do not find this argument persuasive. The 1996
cross-licensing agreement between Lucent and LM Erics-
son did not have a termination date. Furthermore, no
provision in that agreement imposed any timing con-
straint on when LM Ericsson could convey sublicenses to
its subsidiaries. To the contrary, section 1.03(c) of the
agreement specifically provides that any sublicense LM
Ericsson conveyed to a subsidiary could “be made effective
retroactively.” J.A. 1781.
In arguing that LM Ericsson had no right to grant
retroactive sublicenses to its subsidiaries after the assert-
ed patents expired in 2011, High Point relies primarily on
section 1.02 of the cross-license, which provides that “[a]ll
HIGH POINT SARL v. T-MOBILE USA, INC. 19
licenses granted herein under any patent shall . . . con-
tinue for the entire unexpired term of such patent.” J.A.
1781. Section 1.02, however, was plainly designed to
shield a licensee, offering it immunity from infringement
claims throughout the life of the licensed patents. High
Point’s proposed approach would twist section 1.02 like a
pretzel, turning a provision intended to protect a licensee
from infringement liability throughout the full terms of
the licensed patents into a restriction on the licensee’s
explicit right, granted by section 1.03(c), to grant retroac-
tive sublicenses to its subsidiaries. Contrary to High
Point’s assertions, there is nothing in section 1.02 to
suggest that its timing provisions have any applicability
to the sublicensing provisions of section 1.03(c). Indeed,
section 1.02 does not mention retroactive sublicensing
rights or refer in any way to section 1.03(c). See J.A.
1781.
Accepting High Point’s contention that LM Ericsson’s
ability to grant sublicenses to its subsidiaries expired in
July 2011 would lead to anomalous and inequitable
results. In High Point’s view, LM Ericsson had the right
to sublicense the asserted patents to Ericsson U.S. until
July 8, 2011, when the asserted patents expired, but
forfeited that right the very next day. Such an approach
would leave Ericsson U.S. vulnerable to infringement
liability for up to six years after the patents’ expiration
date for sales occurring prior to that date. See 35 U.S.C.
§ 286 (“[N]o recovery shall be had for any infringement
committed more than six years prior to the filing of the
complaint or counterclaim for infringement in the ac-
tion.”). We do not think that LM Ericsson would have
bargained for and obtained a cross-license which broadly
granted it the right to convey retroactive sublicenses to its
subsidiaries while at the same time agreeing to an implic-
it timing restriction which would have the effect of leav-
ing those subsidiaries vulnerable to infringement liability
for six years after the licensed patents expired. As T-
20 HIGH POINT SARL v. T-MOBILE USA, INC.
Mobile correctly notes, High Point’s interpretation of
section 1.03(c) “would have the perverse effect of encour-
aging delay in filing suit and providing more compensa-
tion [to the patent holder] after patent expiration than
before.” Br. of Defendants-Appellees at 47.
In Kimble v. Marvel Entertainment, LLC, the Su-
preme Court confirmed that a patent holder has no right
to exact royalties for sales occurring after a patent’s
expiration date. 6 135 S. Ct. 2401, 2407 (2015) (“[W]hen
the patent expires, the patentee’s prerogatives expire too,
and the right to make or use the article, free from all
restriction, passes to the public.”). Significantly, however,
the Court also made clear that although a patent holder is
barred from obtaining royalties for post-expiration sales,
this does not mean that all negotiated provisions in a
licensing agreement necessarily cease to be effective after
a licensed patent expires. Id. at 2408. As the Court
explained, a licensing agreement could, for example, be
structured in such a way that the licensor could continue
to receive “payments for pre-expiration use of a patent
into the post-expiration period.” Id. Likewise, “[a] licen-
see could agree . . . to pay the licensor a sum equal to 10%
of sales during the 20-year patent term, but to amortize
that amount over 40 years.” Id. We reject, therefore,
High Point’s argument that LM Ericsson’s contractual
right to grant retroactive sublicenses to its subsidiaries
was extinguished when the licensed patents expired in
July 2011.
We also reject High Point’s assertion that the equip-
ment sales by Ericsson U.S. were unauthorized because it
had not yet been granted a formal written sublicense from
6Here, although LM Ericsson did not provide Erics-
son U.S. with a written sublicense until 2013, the accused
equipment sales occurred prior to the July 2011 expira-
tion date of the asserted patents.
HIGH POINT SARL v. T-MOBILE USA, INC. 21
LM Ericsson at the time those sales occurred. 7 “[T]he
grant of a patent does not provide the patentee with an
affirmative right to practice the patent but merely the
right to exclude.” TransCore, LP v. Elec. Transaction
Consultants Corp., 563 F.3d 1271, 1275 (Fed. Cir. 2009).
Accordingly, “a patentee, by license or otherwise, cannot
convey an affirmative right to practice a patented inven-
tion,” but “can only convey a freedom from suit.” Id.; see
also U.S. Philips Corp. v. Int’l Trade Comm’n, 424 F.3d
1179, 1189 (Fed. Cir. 2005) (explaining that a license
“simply provides the licensee with a guarantee that it will
not be sued for engaging in conduct that would infringe
the patent in question”). A product sale is therefore
“authorized” when a patent holder surrenders his right to
exclude—via a license agreement or covenant not to sue—
and thereby immunizes the seller of that product from
infringement liability. See TransCore, 563 F.3d at 1275(emphasizing that for exhaustion purposes, “authoriza-
tion” turns not on how an agreement characterizes the
rights afforded to a seller, but on whether that agreement
ultimately shields the seller from an infringement claim);
see also Quanta, 553 U.S. at 636 (concluding that exhaus-
tion applied where the license agreement provided the
licensee with the right to make and sell products “free of
[the licensor’s] patent claims”). Here, Ericsson U.S. was
at all times authorized to sell the accused equipment to T-
Mobile because when the sales took place neither Lucent
nor any of its successor entities could have sustained an
infringement claim based on those sales. To the contrary,
if they had attempted to bring suit, LM Ericsson had the
unrestricted right, pursuant to section 1.03(c) of its cross-
7 Before the district court, Ericsson U.S. argued
that although LM Ericsson did not provide it with a
formal written sublicense until 2013, it was at all relevant
times operating under a valid oral sublicense from its
parent company. See J.A. 7530.
22 HIGH POINT SARL v. T-MOBILE USA, INC.
licensing agreement with Lucent, to immediately grant
Ericsson U.S. a sublicense, thereby immunizing Ericsson
U.S. from any potential infringement liability.
E. Substantial Embodiment
Finally, we conclude that the district court correctly
determined that licensed equipment substantially embod-
ied all purportedly inventive elements in the asserted
claims. See District Court Decision, 53 F. Supp. 3d at 810.
“[M]aking a product that substantially embodies a patent
is, for exhaustion purposes, no different from making the
patented article itself.” Quanta, 553 U.S. at 637; see also
United States v. Univis Lens Co., 316 U.S. 241, 251 (1942)
(emphasizing that the authorized sale of an article which
“embodies essential features of [a] patented invention”
terminates a patent holder’s rights in that article). When
a patent holder authorizes the sale of a product that
embodies a patent’s inventive elements, he forfeits the
right to exact royalties at subsequent points along the
product’s distribution chain. See, e.g., Univis, 316 U.S. at
251 (emphasizing that “the patentee has received his
reward for the use of his invention by the sale of the
article”).
Before the district court, High Point conceded that its
right to assert infringement of claims 28, 29, and 31 of the
’090 patent—which describe an individual “cell” within a
radio-telephone communications system––was exhausted
if the sales of Node Bs by Nokia Siemens Networks U.S.
and Ericsson U.S. were authorized. See District Court
Decision, 53 F. Supp. 3d at 809; see also J.A. 6194 n.14
(“High Point acknowledges that the accused Node Bs
substantially embody the claimed inventions of [claims
28, 29, and 31], such that the licensed sale of a Node B
would exhaust High Point’s rights with respect to those
patent claims.”). As to the remaining asserted claims, T-
Mobile persuasively established that, in view of High
Point’s own infringement contentions, the accused Node
HIGH POINT SARL v. T-MOBILE USA, INC. 23
Bs, RNCs, and MGWs substantially embodied every
purportedly inventive element of the claimed inventions.
J.A. 2724–814. Dr. Anthony Acampora, T-Mobile’s expert,
analyzed the asserted claims on a claim-by-claim basis,
see J.A. 6050–98, and demonstrated that, according to
High Point’s infringement allegations, the accused Node
Bs read on the cell-related elements in the asserted
claims, see, e.g., J.A. 1831, 1837, 1872–73, 1883, 1889–90,
and the accused RNCs and MGWs read on the switching
system elements of the asserted claims, see, e.g., J.A.
1821–29, 1891–92, 1914.
On appeal, High Point argues that additional discov-
ery might reveal that unlicensed routers and interconnect
equipment in T-Mobile’s system perform inventive fea-
tures of the asserted claims. High Point notes that some
asserted claims contain limitations that require transmit-
ting and receiving packets in statistically multiplexed
form, and argues that unlicensed routers and interconnect
equipment could potentially be used to perform a “novel
application of statistical multiplexing within a cellular
voice telephone system architecture.” Reply Br. of Plain-
tiff-Appellant at 26; see J.A. 6307 (declaration of High
Point’s expert, Richard A. Chandler).
In the Third Circuit, whose law governs our summary
judgment review, “[s]peculation and conclusory allega-
tions” are insufficient to defeat summary judgment.
Ridgewood Bd. of Educ. v. N.E. ex rel. M.E., 172 F.3d 238,
252 (3d Cir. 1999); see also Matsushita Elec. Indus. Co.,
Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)
(emphasizing that a party seeking to avoid summary
judgment “must do more than simply show that there is
some metaphysical doubt as to the material facts”); Fire-
man’s Ins. Co. v. DuFresne, 676 F.2d 965, 969 (3d Cir.
1982) (explaining that a party opposing a motion for
summary judgment may not “rely merely upon bare
assertions, conclusory allegations or suspicions”). Despite
being given ample opportunity to conduct discovery, High
24 HIGH POINT SARL v. T-MOBILE USA, INC.
Point failed to adduce any credible evidence that unli-
censed routers or interconnect equipment performed any
inventive feature of the asserted claims. “What is ‘in-
ventive’ about patent claims in the patent exhaustion
context is what distinguishes them from the prior art.”
LifeScan Scotland, Ltd. v. Shasta Techs., LLC, 734 F.3d
1361, 1369 (Fed. Cir. 2013); see also Quanta, 553 U.S. at
633 (explaining that licensed products will substantially
embody a patent when “the only step necessary to practice
the patent is the application of common processes or the
addition of standard parts”). Here, it is undisputed that
statistical multiplexing was well-known in the art at the
time of the claimed inventions, see, e.g., J.A. 6060-61,
6211–14, and there is nothing in the record to even argu-
ably suggest that unlicensed routers or interconnect
equipment were used in the performance of any novel
statistical multiplexing application.
III. CONCLUSION
Accordingly, the judgment of the United States Dis-
trict Court for the District of New Jersey is affirmed.
AFFIRMED