Covenant not to sue

The non-assertion clause is the stipulation by which the holder of one or more patents undertakes not to sue a third party for infringement. The undertaking targets specified products and territories. Its effect is close to that of a licence, since the beneficiary exploits without fear. Yet it does not have the same nature. It confers no positive right of exploitation, and it is not transmitted without an express stipulation. It is often found in settlement agreements, cross licences and agreements between competitors.

The characteristics of the non-assertion clause

First, the clause defines its object. It identifies the patents concerned, through a list or by reference to a portfolio. It sometimes also includes future patents for a specified period. Second, it sets its scope: products, processes, territories and beneficiary entities. The question of the beneficiary’s customers, suppliers and subcontractors is sensitive, since they are covered only if expressly named. Third, the clause provides consideration: a payment, a reciprocal undertaking, a waiver of a nullity action or a mere element of an overall settlement. Its duration may be limited or cover the whole life of the patents.

Non-assertion clause and licence

The distinction has practical consequences. On one side, the licence is a contract that can be recorded in the register, is enforceable against third parties and is transferable under the agreed conditions. On the other, the non-assertion clause remains a personal undertaking. It binds only the parties and their designated successors. In the event of an assignment of the patents, the beneficiary must therefore ensure that the undertaking follows the titles, through a transmission clause and information of the assignee. Failing that, the new holder could sue.

In competition law, the authorities examine these agreements between competitors in the same way as licences. They may therefore constitute cartels where they serve to divide markets. The texts are available on the website of the European Commission.

Key points

In practice, the non-assertion clause is among the most used tools for exiting multi-jurisdictional litigation. Its drafting must therefore anticipate the assignment of the patents and the evolution of the products, and settle the position of the beneficiary’s partners. The firm negotiates and drafts these clauses in settlement agreements, as presented on the pages contracts and patent litigation.