## Facts

- Institut Pasteur owned patents covering methods for detecting HIV-2, including U.S. Patent Nos. 5,055,391 and 5,051,496.
- Genetic Systems Corporation held an exclusive U.S. license to exploit and license certain Pasteur HIV-2 patent rights.
- Cambridge Biotech Corporation (CBC) manufactured and sold HIV-2 diagnostic test kits and later became a Chapter 11 debtor-in-possession.
- In 1989, CBC entered a cross-license agreement with Diagnostic Pasteur (DP), under which DP agreed to use “best efforts to recover” certain HIV-2 patent rights and, if recovered, include them in DP’s license grant to CBC.
- At the time of the 1989 agreement, DP did not hold rights in the ’391 and ’496 patents, and those rights were instead within Pasteur’s licensing structure involving Genetic.
- Pasteur signed an “approval” of the DP–CBC cross-license agreement.
- After later corporate transactions, DP obtained ownership control over Genetic through stock acquisitions.
- CBC asserted that DP’s later control of Genetic constituted “recovery” of the HIV-2 patent rights, activating DP’s promised grant to CBC; CBC tendered royalties to DP.
- DP rejected the royalty payments, and Pasteur and Genetic asserted CBC had no license and was infringing.
- In an adversary proceeding in the bankruptcy case, the parties did not dispute patent validity or that CBC’s products practiced the claimed methods; the dispute centered on whether CBC had a license.

## Issues

1. Whether the 1989 DP–CBC cross-license agreement, combined with later corporate transactions involving DP and Genetic, granted CBC a license under Pasteur’s HIV-2 patents.
2. Whether Pasteur’s written “approval” of the DP–CBC cross-license bound Pasteur/Genetic to a sublicense or estopped them from denying CBC’s license claim.
3. If no license existed, whether CBC’s manufacture and sale of HIV-2 test kits infringed Pasteur’s patents.

## Decision

- The court held CBC had no license or sublicense under the Pasteur HIV-2 patents.
- The court concluded DP could not grant HIV-2 patent rights it did not have at the time of contracting; the “best efforts to recover” provision did not create a present license.
- The court held DP’s later acquisition of stock/control relating to Genetic did not itself assign or transfer Genetic’s patent license rights to DP or CBC.
- The court ruled Pasteur’s “approval” of the cross-license did not constitute consent to a sublicense and did not support equitable estoppel.
- Because validity and product coverage were undisputed, the court held CBC infringed the patents by making and selling the HIV-2 test kits without a license.

## Legal Principles

- A party cannot convey patent license rights it does not own or control; conditional language to seek or “recover” rights does not itself effect a transfer.
- Corporate stock ownership or control does not automatically transfer a corporation’s patent licenses or other contract rights; a valid assignment or sublicense requires an actual conveyance consistent with governing law and license terms.
- A licensor’s acknowledgment or “approval” of an agreement is construed narrowly; absent explicit authorization, it does not create sublicense rights or waive enforcement of an exclusive licensing structure.
- When patent validity and infringement by product coverage are conceded, the absence of a license is dispositive of liability for infringement.

## Conclusion

The bankruptcy court found that neither a cross-license premised on future “recovery” of patent rights nor a subsequent stock acquisition created a sublicense to CBC, and that Pasteur’s approval did not bind it to such a grant; with no license and conceded coverage, CBC was liable for patent infringement.


Institut Pasteur v. Cambridge Biotech Corp. (In re Cambridge Biotech Corp.), 186 B.R. 9 (Bankr. D. Mass. 1995)