Judge Jeffrey Alker Meyer of the District of Connecticut recently released an opinion that is significant to litigants on either side of a covenant not to sue. In a complex case with a host of claims and counterclaims asserted among the parties, the patentee’s grant of a covenant not to sue on the asserted patent effectively mooted many of the defendants’ counterclaims.

The patented technology, a WiFi technology system that drastically reduces the power absorbed by users of wireless communications devices, was invented by Mahin Tehrani, whose sons, Bijan and Saied Tadayon, were a patent agent and a patent attorney, respectively. After Bijan, the patent agent, helped Ms. Tehrani secure the patent, she assigned the patent to Bijan; Bijan and Saied proceeded to assert the patent against several bus companies, claiming that their onboard WiFi systems infringed the patent. The defendants in this case – DATTCO, a bus company, and Saucon, a provider of onboard WiFi services to DATTCO – lodged a number of counterclaims against the Tadayons and Tehrani, including counterclaims for invalidity, patent misuse, inequitable conduct, conspiracy to commit fraud, and a request for an exceptional case finding.

Subsequently, several claims of the asserted patent were rejected in reexamination. The Tadayon brothers then entered a broad covenant not to sue the defendants in this case, and sought to dismiss the defendants’ numerous counterclaims. The defendants opposed the motion and sought to press their numerous counterclaims against the Tadayons and Tehrani, covenant not to sue notwithstanding.

In considering the Tadayons’ motion, the Court focused heavily on the effect of the covenant not to sue on the potential remedies available to the defendants if they succeeded on their counterclaims. If the outcome of the counterclaim would be nothing more than a declaration that the patent was unenforceable, the Court reasoned, then the covenant not to sue rendered the counterclaim moot. Consequently, the counterclaims for patent invalidity, patent misuse, and inequitable conduct were mooted, because the defendants could no longer expect that this patent’s claims would be asserted against them. However, where the counterclaim would have resulted in damages – for example, the counterclaims for an exceptional case determination and for conspiracy to commit fraud – those counterclaims survived the covenant not to sue.

This case is important for defendants to keep in mind when considering the implications of a covenant not to sue. That covenant may have a broad scope and cover a significant number of potential counterclaims against a patent owner, particularly where the counterclaims do not grant a right to monetary relief.

The case is Saied Tadayon, Bijan Tadayon, and Mahin Tehrani v. Dattco Inc. and Saucon Techs., Inc., No. 3:12-cv-01610, in the District of Connecticut. A copy of the order can be found here.