Wang Laboratories v. OKI Electric Industry

Wang Laboratories (Wang) (plaintiff) owned two patents related to single in-line memory modules. Wang sued OKI Electric Industry (OKI) (defendant), among others, for patent infringement. In settlement of the lawsuit, Wang and OKI entered into a licensing agreement under which OKI agreed to pay Wang a single lump-sum payment of $850,000 and running royalties. OKI and Wang’s agreement contained a most-favored-licensee (MFL) provision that required Wang to notify and grant the same terms to OKI if Wang provided more favorable running-royalty rates to another licensee. Subsequently, OKI believed that Wang’s patents did not cover OKI’s products, and OKI announced that it would stop paying royalties. Wang sued OKI to recover royalty payments under the licensing agreement. OKI defended its actions in part by alleging that Wang had breached the MFL provision. OKI asserted that on June 21, 1993, Wang had entered into a license agreement with Hyundai involving the same patents and that the terms granted to Hyundai were more favorable than OKI’s. Under Wang’s agreement with Hyundai (the June 21 agreement), Hyundai paid $750,000 for a “pre-paid running royalty,” that is, for the retroactive period from January 1 to June 21, and would pay running royalties until December 31, 1994. The royalty rates after June 21 were on the same terms as OKI, but the lump-sum payment appeared more favorable. Upon making the lump-sum payment, Hyundai obtained a “release” from Wang for any and all claims of past infringement. Wang moved for partial summary judgment on the issue of its entitlement to royalties.