## Facts

- PPG Industries, Inc. and Permaglass, Inc. developed competing glass-shaping methods using gas-hearth (air-float) technology.
- In 1964, PPG and Permaglass executed a cross-licensing agreement:
  - Permaglass granted PPG a worldwide exclusive license (with sublicensing rights) under Permaglass patent rights and technical data, subject to limited reserved rights retained by Permaglass.
  - PPG granted Permaglass a nonexclusive license under specified PPG patent rights (excluding Canada), expressly described as personal to Permaglass and nontransferable/nonassignable without PPG’s consent, with termination provisions tied to specified changes in ownership or control.
- In 1969, Permaglass merged into Guardian Industries Corporation, a glass manufacturer that intended to expand Permaglass’s business.
- PPG sued Guardian for infringement of multiple patents, including patents originating with PPG and with Permaglass.
- Guardian asserted a license defense, arguing it succeeded to Permaglass’s license rights through the statutory merger; the district court bifurcated and tried the license issues first and dismissed the infringement case on the ground that Guardian was a licensee.

## Issues

1. Whether patent license rights held by a constituent corporation pass to the surviving corporation in a statutory merger.
2. Whether a “personal,” nontransferable, nonassignable patent license can be used by the surviving merger entity absent the licensor’s consent.
3. Whether state merger statutes effecting succession “by operation of law” override federal patent policy and contractual nonassignment/termination provisions.

## Decision

- The Sixth Circuit reversed the district court’s dismissal and remanded for further proceedings.
- The court held that the patent license rights at issue did not pass to Guardian through the merger where the agreement made the licenses personal and nonassignable without consent.
- The court rejected the view that a merger involves no “assignment or transfer” for purposes of a nonassignment clause when the practical effect would shift the license’s benefit to a different corporate entity.
- On Guardian’s cross-appeal, the court affirmed the rejection of Guardian’s alternative equipment-license theory.

## Legal Principles

- Federal law governs the assignability of patent licenses; as a general rule, patent licenses are personal and nonassignable absent express authorization.
- Contract terms stating a patent license is “personal,” “nontransferable,” or “nonassignable” are enforced to prevent a licensee’s successor (including a merger survivor) from taking the license without the licensor’s consent.
- State merger statutes providing for general succession to assets and rights do not nullify contractual nonassignment restrictions or the federal policy limiting transfer of patent license rights.
- Change-of-control and termination provisions may confirm the parties’ intent to restrict who may enjoy the licensed patent rights, including restrictions against transfer to competitors.

## Conclusion

The Sixth Circuit held that Permaglass’s patent license rights were personal and nonassignable and therefore did not transfer to Guardian by statutory merger, reversing dismissal of PPG’s infringement suit and remanding for litigation on the remaining issues.


PPG Indus., Inc. v. Guardian Indus. Corp., 597 F.2d 1090 (6th Cir. 1979)