Argument Recap

Last week the Federal Circuit heard oral arguments during its September sitting in Washington DC. Here is a short recap of Fraunhofer-Gesellschaft v. Sirius XM Radio Inc., one of the argued cases we’re following.

As previewed on this blog, David McPhie argued on behalf of Fraunhofer-Gesellschaft that the termination of a master license agreement also terminates the rights of a sublicense agreement. Judges Dyk, Linn, and Taranto heard the oral argument.

A primary issue addressed during oral arguments was whether German law applies to the licensing agreements at issue and, if so, how it applies. McPhie argued that the applicable law does not make a difference. Under German law, he argued, the “statute of protection” provides that if a master license is terminated, then the rights concerning a sublicense agreement are decided by the law of the country where the rights originated, which in the present case is the United States. Even if German law applies beyond the question of choice of law, moreover, he explained that German law differs between copyright law and patent law on the precise issue presented to the court here. While under German copyright law, termination of a master license would not terminate a sublicense, McPie argued that differences between the German copyright and patent statutes justify a different conclusion in the context of this case.

Mark Baghdassarian argued for Sirius XM Radio. He agreed that the choice of law question does not affect the outcome of the case, but predictably disagreed with McPhie on what conclusion the applicable law requires. Baghdassarian argued that under German case law, sublicense rights are not terminated. Similarly, Baghdassarian argued that applying New York law the sublicense is an exclusive irrevocable license in favor of Sirius XM that itself is not terminated by the termination of a master license agreement.