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Past a certain point, contracts are only words on paper

Many lawyers do not understand that merely writing words on a piece of paper does not guarantee that the things those words describe will ever come to pass. I'm referring, in this particular instance, to "contracts" in any of their myriad forms: covenants, licenses, royalty agreements, employment agreements, the void-ab-initio click-wrap agreements, etc. etc.

Parts of contracts are twisted, changed, re-interpreted, and completely voided by judges in this country on a daily basis, and any competent lawyer should know this -- and any good lawyer understands that such judicial reconstruction is not only required under the law, but necessary in any functioning, orderly, and just society.

To go into why this is so, for those of you who find this strange, is beyond the focus of this blog entry, but, for now, suffice it to say that if contracts were ever allowed absolute authority and sovereignty over all other interests or concerns of society, those who could buy the "best" (or at least the majority of the well-connected and/or well-considered) attorneys would simply control society itself. Some may say we're pretty close to that already, but we aren't, really, and for at least one very good reason: history. English common law NEVER granted such absolute sovereignty to contracts. Any system based on experience -- like the English common law -- would never allow such stupidity.

Regardless of whether one believes that contracts should be sacrosanct (rather than subject to the principles of fairness, decency, and plain old common sense before a court uses the full power of the gov't to ensure their performance), all IP lawyers have been reminded once again that they can't say to their clients that something is "locked", "certain," or otherwise "guaranteed" because of the wording on some piece of paper. On 10 July 2012, the 2nd Cir. affirmed Judge Denise Cote's (S.D.N.Y.) dismissal of Rates Technology's lawsuit against Speakeasy et al. ("Speakeasy") for breaching their agreement that Speakeasy would never help invalidate Rates Tech.'s patents (see case here).

Long ago, Rates Tech. accused Speakeasy of infringing its patents. Speakeasy decided to avoid a suit by paying Rates Tech. $475,000, and, as is standard (even if so OBVIOUSLY INEFFECTUAL), the Rates Tech. lawyers had the accompanying license agmt state that Speakeasy "acknowledged" the validity of Rates Tech.'s patents and further that Speakeasy agreed to never challenge, or to assist anyone in challenging, the validity of Rates Tech.'s patents. If Speakeasy dared to assist anyone challenge Rates Tech.'s patents, the contract said that Speakeasy would owe Rates Tech. $12M+ in "liquidated damages."

Years later, Speakeasy did assist others in a suit against Rates Tech.'s patents, so Rates Tech. sued Speakeasy in S.D.N.Y. for the $12M+ "guaranteed" by the words in their license agmt. Judge Cote threw it out.

Here's the deal: RT accused S for infringing RT's patents. Rather than wasting time or money in legal fees, S made the decision to pay RT $475K to go away and stop bothering S. Some weasly clerks stuck some words in a document that pretended this basic agmt to pay RT $475K to go away ALSO represented some "meeting of the minds" concerning the validity of RT's patents and that S should respect them. Bullshit. You threatened to sue me, I paid you to go away and never bother me again on this claim; let's not pretend that I agreed your patents are valid. All I really did--all I really agreed to, is admit that it was worth $475K to make you go away and stop bothering me. Your patents still suck because they do not protect real inventions.

Bad patents hurt all of us. Bad patents should die, and no contract should save them from their fate. For those of you who are more comfortable in NOT speaking directly and to the point, I'll make the same stmt in legalese:

... the equities of the licensor do not weigh very heavily when they are balanced against the important public interest in permitting full and free competition in the use of ideas which are in reality a part of the public domain. Licensees may often be the only individuals with enough economic incentive to challenge the patentability of an inventor’s discovery. If they are muzzled, the public may continually be required to pay tribute to would-be monopolists without need or justification. We think it plain that the technical requirements of contract doctrine must give way before the demands of the public interest in the typical situation involving the negotiation of a license after a patent has issued.
Lear, Inc. v. Adkins, 395 U.S. 653 (1969), 670-671

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