## Facts

- Haworth, Inc. owned U.S. Patent No. 4,616,798 covering an articulating keyboard support mechanism.
- After earlier disputes, Haworth and Waterloo Furniture Components, Ltd. entered a patent license agreement on October 29, 1992.
- The Waterloo license term was tied to the life/expiration of the ’798 patent.
- The agreement included a “most favored licensee” provision requiring Haworth to extend to Waterloo any more favorable license terms later granted to another licensee under the ’798 patent.
- Haworth later litigated with a third party over alleged infringement of the same patent; the dispute ended in a settlement agreement that included a forward-looking license and a release or license for past infringement.
- Waterloo claimed the settlement agreement provided more favorable terms than its license and asserted entitlement to those terms under the most-favored clause.
- The district court ruled for Haworth, holding the Waterloo license terminated on October 14, 2003 and that the settlement agreement did not trigger the most-favored clause.
- Waterloo appealed.

## Issues

1. Whether the license agreement between Haworth and Waterloo terminated on October 14, 2003 based on the patent-life term.
2. Whether Haworth’s settlement/license agreement with the third party (including a release or license for past infringement) constituted a “more favorable” license triggering the most-favored licensee clause.

## Decision

- The Seventh Circuit affirmed judgment for Haworth.
- The court held the Haworth–Waterloo license terminated on October 14, 2003 under the agreement’s patent-life term.
- The court held the most-favored licensee clause was not triggered by Haworth’s settlement agreement with the third party, which materially functioned as a litigation settlement including treatment of past infringement.

## Legal Principles

- Patent license agreements with terms expressly tied to patent expiration are enforced according to their plain language, absent contractual ambiguity.
- A “most favored licensee” clause applies only within its defined contractual scope; courts examine whether the later agreement is the type of “license” contemplated and whether it is comparable in purpose and structure.
- Agreements resolving infringement litigation, especially those releasing or licensing past infringement, may be treated as materially different from ordinary prospective commercial licenses for purposes of most-favored provisions.
- A party asserting entitlement to “more favorable” terms must show comparability and cannot isolate individual economic features while ignoring the litigation context and risk allocation reflected in a settlement.

## Conclusion

The Seventh Circuit enforced the license’s patent-life termination date and rejected Waterloo’s breach claim, concluding that Haworth’s settlement-driven license resolving past infringement was not a comparable “more favorable” license that activated the most-favored licensee clause.


Waterloo Furniture Components, Ltd. v. Haworth, Inc., 467 F.3d 641 (7th Cir. 2006)