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Claire,
Thank you for the citation of law for the requirements of a third party beneficiary contract, and your comments. TI appreciates your independent representation and counsel of IEEE.
At the September meeting, there apparently was no question over whether a LoA was enforceable under some legal theory. No case law was cited and no facts were presented to question the enforceability of the LoA against the submitting patent holder.
The matter you mention from that meeting was a debate over legal theory whether the LoA was enforceable as a third party beneficiary contract or as a unilateral contract. There was no debate whether the LoAs were enforceable under some legal theory.
While some argument may be made that LoAs are not express third party beneficiary contracts because they are not signed by the IEEE, in all the patent licensing activity that has occurred in the past decades, no serious debate or case law has questioned that enforceability.
At the very least, the LoAs are apparently enforceable against the patent holder that signs the LoA, which under the Statute of Frauds is the party to be charged.
Aside from this philosophical legal debate over theories of contract law, there appear to be several good reasons why IEEE should not start signing these LoAs.
First, there is no evidence that the present legal framework for the LoAs to be signed only by the patent holder to be charged is not working as intended. There is no citation of any case law in which a party argued that the LoA was legally insufficient to obtain a patent license to implement an IEEE standard. Thus, no change to the present system is needed.
Second, under our legal system, a lawyer will make any argument he or she can to protect the interests of their client. By IEEE signing these LoAs, IEEE becomes a party to be charged and will be sued by someone believed to be aggrieved by the license offered by the patent holder providing the LoA. IEEE may ultimately not be liable, but that will be after the expense of defense. TI submits that IEEE is prudent by not signing these LoAs and not accepting exposure to becoming a party to a lawsuit.
Third, by becoming a party to be charged, IEEE may somehow in a case of unusual facts become liable for part or all of the cost of some patent license. TI submits that IEEE is prudent by not signing these LoAs and not accepting even this minimal exposure to that liability.
Lastly and most important, IEEE-SA is a technical standards body. IEEE-SA serves its individual members and member companies by asking for assurances that implementers will be able to implement the technical standards it adopts. IEEE-SA does so by posting public, due process notice that a LoA has been asked for, received, or both, and that the LoA received provides basic information on the license available and patent holder providing the LoA.
IEEE is not and should not become a licensing agent or arbiter of patent licenses for anyone. It is not incorporated for that purpose and it should not voluntarily assume that position. The cost and exposure for IEEE to place itself between patent holders and implementers is not prudent. By providing technical standards and a place for due process notice of the availability of patent licenses for implementers of those standards, IEEE fulfills its purpose.
As outside counsel to the IEEE-SA, I very much appreciate all of the feedback we have received on this listserve. We have been summarizing the comments and will be working with PatCom, the Standards Board and ultimately the Board of Governors who will approve any changes to make sure that all viewpoints are considered.
I did want to address one comments that several contributors have made regarding the proposal to add IEEE as a party to the LOA. In particular, both Richard Taffet and Qualcomm questioned the origin of the proposal and the lack of transparency about the proposal. In fact, Qualcomm stated, "Perhaps those advocating in favor of this position would also agree to indemnify IEEE and pay all legal expenses if this were to arise? ;>)"
I am the one who proposed adding IEEE as a party to the LOA. While there may be others who support such a proposal, they have not indicated so to me or to anyone else at IEEE.
I did so to respond to several attendees at the PatCom meeting in September 2005 who questioned whether the LOA was a binding contract or enforceable. IEEE has always operated under the assumption that the LOA was binding and enforceable (if it isn't, it is worthless) but given that several attorneys representing working group members questioned its binding nature at the September meeting, I thought we should be clear about it.
While IEEE does not intend to enforce the terms of the LOA for its own benefit, the LOA only has meaning if all users and implementers of the IEEE Standard have the right to enforce its terms which can be best achieved by making them third party beneficiaries of the LOA. Under NY state law (like most state laws), to succeed on a contract claim as a third-party beneficiary, a plaintiff must establish: (1) that the existence of a valid and binding contract between other parties; (2) that the contract was intended for plaintiff’s benefit; and (3) that the benefit is immediate, and not incidental, so as to indicate duty to compensate the plaintiff if the benefit is lost. Wainwright v. Matrix Assets Advisors, Inc., 2005 U.S. Dist. LEXIS 14928, 9 (D.N.Y. 2005). Thus, I wanted to make it clear that the LOA was a contract so that the users and implementers would have rights as third party beneficiaries.
I appreciate everyone's concern about IEEE being pulled into any litigation over the terms of the LOA and of course, would appreciate any ideas anyone has for ensuring that users and implementers of IEEE Standards have the right to enforce the terms of the LOA without making IEEE a party.
I look forward to the meeting on Monday.
Claire
Claire
Claire
H. Topp, Esq.
Dorsey & Whitney LLP
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