By Andrew Karpan Law360 (February 28, 2024, 5:53 PM EST)
The Federal Circuit ruled Wednesday that MasterCard will have to continue litigating against a patent litigation outfit that the credit card company has been fighting for almost a decade over language in a 2005 patent licensing agreement, with one judge pointing out that the case “illustrates the importance of carefully reviewing the language in a covenant not to sue.” The nonprecedential opinion, issued unanimously and penned by U.S. Circuit Judge Kara Stoll, marked the second time that the appeals court undid a win the credit card brand scored in New York federal court in its lengthy legal saga with a Texas-based patent business called AlexSam Inc.
This time, Judge Stoll wrote that Brooklyn’s U.S. District Judge Leo Glasser was mistaken when he decided in late 2022 that a “covenant not to sue” contained in a licensing agreement MasterCard inked with AlexSam in 2005 “on its face, bars Alexsam’s claim for allegedly unpaid royalties.”
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“We have been litigating this case for almost nine years, and this is the second time that we have prevailed on appeal,” AlexSam lawyer W. Lee Gresham III of Heninger Garrison Davis LLC wrote Law360 in an email, pointing out the longevity of the legal fight. “We look forward to going back to the district court and getting this case on track to litigate the main issue in the case— whether MasterCard breached the license agreement that it entered into with our client. … We look forward to moving the case toward trial,” Gresham said.
Representatives for MasterCard did not return a request for comment. Earlier in 2022, Judge Stoll told Judge Glasser that his court wrongly ended AlexSam’s suit by invoking “estoppel based on an erroneous fact finding unsupported by the record.” This time around, Judge Stoll wrote the matter “illustrates the importance of carefully reviewing the language in a covenant not to sue when entering a license agreement.”
Judge Glasser’s court had been rather pointed about the notion that the covenant precluded AlexSam’s lawsuit, calling the arguments otherwise from AlexSam’s lawyers “incomprehensible” and critiquing at length their “need to devote pages of citations to cases that advance interpretations of these simple words of the English language.” The appeals court heard oral arguments over this dispute back in December. After hearing the case, Judge Stoll wrote that the appeals court decided that Judge Glasser had missed at least one important part of this 2005 agreement.
“We think the most reasonable interpretation is that the entire covenant not to sue, including the language ‘at any time,’ expires with the expiration of the license agreement,” she wrote. “Stated differently, we interpret the language ‘at any time’ to not mean in perpetuity, but rather ‘at any time’ means at any time during the term of the license agreement,” she explained.
While the patents at the center of the suit from AlexSam expired in 2017, the company is accusing MasterCard of refusing to pay out the agreement MasterCard representatives once signed with Robert Dorf, who was once described by his erstwhile lawyers at Fitch Even Tabin & Flannery LLP as a “gift card pioneer.” Before Dorf’s patents expired, the AlexSam outfit swept through the retail sector, running lawsuits against brands like Home Depot, McDonald’s and the now-bankrupt Toys “R” Us. Some of those even went to trial, with wins and losses.
The MasterCard lawsuit is a relic of this, as the 2015 lawsuit from AlexSam accuses the credit card brand of systematically “under-report[ing]” the number of transactions that were covered by the 2005 deal, something that AlexSam’s lawyers say dates as far back as 2007 and was revealed during an unrelated lawsuit the company was persuing against a telecom called IDT Corp. The patents-at-issue are U.S. Patent Nos. 6,000,608 and 6,189,787. U.S. Circuit Judges Alan David Lourie, Raymond T. Chen and Kara Farnandez Stoll sat on the panel for the decision.
AlexSam is represented by Hunter T. Carter of ArentFox Schiff LLP, Jacqueline Knapp Burt, Timothy C. Davis and W. Lee Gresham III of Heninger Garrison Davis LLC and Steven Ritcheson of Insight PLC.
MasterCard is represented by Robert C. Scheinfeld, Michael Hawes, Emily Rose Pyclik, Jennifer Cozeolino Tempesta and Eliot Damon Williams of Baker Botts LLP.
The case is Alexsam Inc. v. MasterCard International Inc., case number 22-2046, in the U.S. Court of Appeals for the Federal Circuit.
— Additional reporting by Adam Lidgett.
Editing by Emily Kokoll.
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