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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 11-15145
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D.C. Docket No. 0:09-cv-61652-ASG
MDS (CANADA) INC., a Canadian corporation,
BEST THERATRONICS, LTD., a Canadian corporation,
BEST MEDICAL INTERNATIONAL, INC.,
a.k.a. Beast Medical International, Inc.,
Plaintiffs - Counter Defendants - Appellants,
versus
RAD SOURCE TECHNOLOGIES, INC.,
a Florida corporation,
Defendant - Counter Claimant - Appellee.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(August 19, 2014)
Before PRYOR, ANDERSON and DUBINA, Circuit Judges.
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PER CURIAM:
On July 1, 2013, this Court certified the following question to the Supreme
Court of Florida:
WHEN A LICENSEE ENTERS INTO A CONTRACT TO
TRANSFER ALL OF ITS INTERESTS IN A LICENSE
AGREEMENT FOR AN ENTIRE TERM OF A LICENSE
AGREEMENT, SAVE ONE DAY, BUT REMAINS LIABLE TO
THE LICENSOR UNDER THE LICENSE AGREEMENT, IS THE
CONTRACT AN ASSIGNMENT OF THE LICENSE
AGREEMENT, OR IS THE CONTRACT A SUBLICENSE?
MDS (Canada) Inc. v. Rad Source Techs., Inc., 720 F.3d 833 (11th Cir. 2013).
The Supreme Court of Florida rephrased the question:
DOES FLORIDA RECOGNIZE A “BRIGHT–LINE RULE” TO
DISTINGUISH AN ASSIGNMENT OF A LICENSE AGREEMENT
FROM A SUBLICENSE?
MDS (Canada) Inc. v. Rad Source Techs., Inc., ___So.3d___, 2014 WL 3361896
(Fla. July 10, 2014). The Court rejected the use of a bright-line rule to determine
whether a license agreement was an assignment or a sublicense, held that cases
relied upon by the Appellants 1 which involved the transfer of interests in real
property did not readily translate to the instant case which involves a transfer of
rights in a patent license agreement, and instead concluded that cases construing
patents “are instructive in providing guiding principles for the type of interest at
the heart of this case.” Id. at 3. The Court provided comprehensive guidance on
1
Nordion and Best are referred to in this opinion as Appellants.
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what factors should be considered, but left the application of those factors and the
ultimate resolution of the issue to this court.
Thus, in order to decide whether the transfer from Nordion to Best was an
assignment or a sublicense, we apply the factors set forth by the Supreme Court of
Florida. That Court held that “the key factor in distinguishing between an
assignment and a sublicense is the intention of the parties, as set forth in the
original license agreement.” ___ So.3d ___, M/S at 21. The original License
Agreement between Rad Source and Nordion required the consent of Rad Source
for Nordion to assign its interest, but did not require consent for Nordion to grant a
sublicense. In this case, Nordion transferred to Best all of its interests in the
License Agreement for the entire term thereof, save one day. Because the License
Agreement expired simultaneously with the expiration of the last patent subject to
the License Agreement, Nordion likewise transferred to Best the entirety of its
interests in the patents, again save only one day. Especially in light of the fact that
Nordion’s agreement with Best provided that it would leave the blood irradiation
business entirely, Nordion would lack the ability to use even the one retained day.
We conclude that the retention by Nordion of a single day at the end of the License
Agreement was an inconsequential term. The district court found as follows with
respect to the intent of the parties:
[I]t is apparent that the parties did not intend that the sublicensing
rights – in relation to the assignment clause – permit a situation where
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the License Agreement could be assigned by a sublicense if a party
reasonably withheld consent to the assignment. Elsewise, the right of
consent to assignment would effectively be written out of the License
Agreement.
MDS (Canada), 822 F.Supp.2d 1263, 1310-11 (S.D. Fla. 2011). We agree with the
district court that Rad Source and Nordion, the parties to the original License
Agreement, never intended that Nordion could transfer its entire interests in the
License Agreement, saving only one day, and thus circumvent the contractual
requirement that required the consent of Rad Source to an assignment. We
conclude that the key factor of the intention of the parties points strongly to the
conclusion that the transfer by Nordion to Best was an assignment, not a sublicense.
As noted above, the Supreme Court of Florida also held that the federal cases
construing patents are instructive on the issue at bar. The Court expressly
referenced Aspex Eyewear, Inc. v. Miracle Optics, Inc., 434 F.3d 1336 (Fed. Cir.
2006). In that case, the Federal Circuit held that:
[A]n exclusive license may be tantamount to an assignment for
purposes of creating standing if it conveys to the licensee all
substantial rights to the patent at issue. Vaupel Textilmaschinen KG
v. Meccanica Euro Italia S.P.A., 944 F.2d 870, 875 (Fed. Cir.1991);
see also Waterman v. Mackenzie, 138 U.S. 252, 256, 11 S.Ct. 334, 34
L.Ed. 923 (1891) (“Whether a transfer of a particular right or interest
under a patent is an assignment or a license does not depend upon the
name by which it calls itself, but upon the legal effect of its
provisions.”). To determine whether an agreement to transfer rights to
a patent at issue amounts to an assignment or a license, we must
ascertain the intention of the parties and examine the substance of
what was granted. Vaupel, 944 F.2d at 874 (explaining that the court
must examine whether the agreements transferred all substantial rights
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to the patent at issue and whether the surrounding circumstances
indicated an intent to do so).
Id. at 1340. As noted above, the last of the patents subject to the License Agreement
expired simultaneously with the expiration of the License Agreement. Thus,
Nordion transferred to Best the entirety of its interests in the patents, save only one
day. As noted above, that retention was inconsequential. Thus, we conclude that
Nordion transferred to Best all of its substantial rights to the patents. This factor
also points strongly to the conclusion that the transfer from Nordion to Best was an
assignment, not a sublicense.
The Supreme Court of Florida also held that a significant factor in the
analysis was the substance of the transaction between Nordion and Best. The Court
embraced the reasoning of Waterman v. Mackenzie, 138 U.S. 252, 256, 11 S.Ct.
334, 34 L.Ed. 923 (1891), and noted that “the United States Supreme Court long ago
recognized in the patent context that ‘[w]hether a transfer of a particular right or
interest under a patent is an assignment or a license does not depend upon the name
by which it calls itself, but upon the legal effect of its provisions.’” ___ So.2d ___,
M/S at 17 (quoting Waterman, 138 U.S. at 256, 11 S.Ct. at 335). Thus, the Florida
Supreme Court held: “It is clear that this intent [of Rad Source and Nordion in the
original License Agreement] cannot be circumvented simply by labeling the transfer
a ‘sublicense agreement.’ The name of the agreement is not determinative under
Florida law.” Id. at ___, M/S at 23. Thus, under Florida law, we disregard the
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“sublicense” label affixed by Nordion and Best to their transaction. Rather, we look
to the substance thereof. As noted above, Nordion transferred to Best all of its
substantial interests in the License Agreement and all of its substantial interests in
the patents, saving only one day. That single day was inconsequential, and cannot
suffice to transform the character of the transaction from an assignment to a
sublicense. We conclude that the substance of the transfer from Nordion to Best
was an assignment, not a sublicense.
The Supreme Court of Florida mentioned two factors which might, in other
cases, point toward characterization as a sublicense. First, it is true that Nordion
remained liable to Rad Source under to the License Agreement. However, as the
Supreme Court of Florida noted, Nordion had no legal ability to divest itself of that
liability in the absence of consent from Rad Source. Thus, as the Florida Supreme
Court noted, Nordion did the next best thing – i.e., it obtained a full indemnification
from Best. ___ So.2d at ___, M/S at 20-21. Also, the Florida Supreme Court noted
that Nordion may have retained the right to use the license technology after the
conclusion of the License Agreement. However, the patents expired
simultaneously with the expiration of the License Agreement, and thus any such
retention is inconsequential.
Having applied the factors set forth by the Supreme Court of Florida, we
conclude that Nordion’s transfer to Best was an assignment, not a sublicense. Our
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previous opinion disposed of all of the arguments on appeal, save this certified
question. Thus, the certified question was dispositive. Specifically, we held that
Article 3.1 of the License Agreement was unambiguous but that Rad Source’s RS
3400 did not embody the licensed patents. Further, we held that Rad Source did
not unreasonably refuse to consent to the proposed assignment to Best, and that
Rad Source, while estopped from seeking damages even if Nordion committed the
first breach, would be excused from its breach of the covenant not to compete if
the Supreme Court of Florida held that the transfer was an assignment and thus
was the first breach. Because we have applied the law as the Supreme Court of
Florida defined it, and affirmed the district court’s finding that the transfer was an
assignment, no issues are left undecided and we affirm the district court’s decision.
AFFIRMED.
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PRYOR, Circuit Judge, concurring in part and dissenting in part:
I agree with the majority’s reading of the decision of the Supreme Court of
Florida, which answered our certified question, but for the reasons expressed in
section 2 of my earlier partial dissenting opinion, MDS (Canada), Inc. v. Rad
Source Techs., Inc., 720 F.3d 833, 859–63 (11th Cir. 2013) (Pryor, J., concurring
in part and dissenting in part), I would still reverse in part. In my view, the district
court erred when it ruled that Nordion lacked standing to seek damages for the
breach of the non-compete clause by Rad Source. I would remand to allow
Nordion an opportunity to prove its damages.
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