## Facts

- SGK, successor to Professor Karl Ziegler’s patent interests, licensed Ziegler-type polyolefin catalyst technology to Hercules under a 1954 “polyolefin contract.”
- The contract granted Hercules a nonexclusive license in the plastics field under SGK’s patent applications and patents as they issued.
- The contract included a most-favored-licensee (MFL) clause requiring SGK to notify Hercules of later licenses to others and, upon timely demand, entitling Hercules to the benefit of any lower royalty rates granted in the United States or Canada.
- SGK later entered licenses with other companies (including Montecatini) on terms more favorable than Hercules’s, including lower royalty rates and related economic concessions.
- SGK sued Hercules in 1986 for patent infringement in the District of Delaware based on Hercules’s polyolefin activities.
- Hercules counterclaimed that SGK breached the MFL clause by failing to provide Hercules the benefit of the more favorable license terms and argued that, absent the breach, it would have been licensed during the period at issue.
- After a bench trial, the district court found SGK breached the MFL clause and treated Hercules as effectively licensed for the relevant period, defeating SGK’s infringement damages claim.
- SGK appealed; the Federal Circuit affirmed and remanded only to address whether SGK was entitled to interest on a license fee.

## Issues

1. Whether the district court clearly erred or committed legal error in finding SGK breached the MFL clause by not extending to Hercules the benefit of more favorable terms granted to later licensees.
2. Whether the breach supported the conclusion that Hercules would have been licensed but for SGK’s breach, thereby barring SGK’s infringement recovery for the period in question.
3. Whether SGK was entitled to interest on a license fee notwithstanding the constructive-license determination.

## Decision

- The Federal Circuit affirmed the judgment for Hercules.
- The court held SGK did not show clear error in the district court’s factual findings or error of law in concluding SGK breached the MFL clause.
- The court upheld the district court’s acceptance of Hercules’s “but for the breach” theory that Hercules would have obtained a license, making infringement damages unavailable to SGK for the relevant period.
- The court remanded for the limited purpose of determining whether SGK was entitled to interest on a license fee.

## Legal Principles

- An MFL clause in a patent license can require a licensor, upon notice and a timely request, to provide the licensee the benefit of lower royalty rates granted to later licensees within the specified territory.
- A licensor’s breach of an MFL obligation can support a contractual defense that treats the accused user as licensed for the infringement period when the evidence supports that the user would have obtained the improved terms absent the breach.
- On appeal from a bench trial, factual determinations relevant to license terms, notice, and likely licensee conduct are reviewed for clear error; absent clear error, the appellate court will not disturb those findings.
- Contract-based licensing obligations can bar patent infringement damages without invalidating the patent, by establishing that the accused conduct should be treated as licensed.

## Conclusion

The Federal Circuit left intact a bench-trial judgment that SGK’s failure to provide Hercules the benefit of more favorable license terms breached an MFL clause and supported treating Hercules as licensed during the relevant period, defeating SGK’s infringement damages claim, and remanded only to decide whether SGK could recover interest on a license fee.


Studiengesellschaft Kohle m.b.H. v. Hercules Inc., 105 F.3d 629 (Fed. Cir. 1997)