Atmel, one of the defendants, argued that products it designed, which were then manufactured and sold to it by Sanyo, did not infringe Intel's patents. Because Sanyo, as an authorized licensee of Intel, manufactured and sold the products to Atmel, upon sale of the products, Intel’s patents were exhausted. The crux of the matter revolved around the interpretation of the licensing agreement, which granted Sanyo the right to make, use and sell “any Sanyo ... products” covered by Intel's patents.

Intel contended that its cross-licensing agreement explicitly limited Sanyo to manufacturing “Sanyo products,” and argued that by its clear language, this designation encompassed only products designed by Sanyo. Intel argued that products designed by, manufactured for, and sold to Atmel, were not “Sanyo products” and therefore not protected by the licensing agreement.

Analyzing the agreement holistically, the court determined that the term “Sanyo products” should be narrowly construed to cover exclusively Sanyo-designed items. The court highlighted the potential conflicts and ambiguities that would arise if the term included foundry rights. Consequently, the court ruled in favor of preserving the consistency of the agreement, clarifying that under the licensing agreement Sanyo lacked foundry rights and was solely authorized to sell products designed by Sanyo. As a result, sale of products to Atmel did not exhaust Intel’s patents.

This case was decided using classical contract interpretation rules. This case, and many like it, underscores the importance of precise language in cross-licensing agreements, particularly when foundry relationships are involved. 

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Saman Taherian

Lapin & Taherian

Attorneys At Law