7th Circuit Has Jurisdiction Of Dispute Over Non-Compete Clause In Patent License

County Materials Corporation signed a licensing agreement that allowed it to manufacture and sell Allan Block’s patented concrete block. The license also contained a non-compete clause that prohibited County Materials from selling a competing product for 18 months after the license was terminated.

After Allan Block terminated the license, County Materials developed its own concrete block that competed with Allan Block’s product. Allan Block threatened to sue to prevent County Materials from selling its new concrete block. But County Materials won the race to the courthouse, and brought an action to have the license declared void because the non-compete clause constituted patent misuse. The district court ruled that there was no patent misuse, and granted summary judgment in favor of Allan Block.

County Materials appealed. Allan Block moved to dismiss the appeal, pointing to U.S. Supreme Court precedent that grants exclusive jurisdiction to the Federal Circuit Court of Appeals of cases in which “federal patent law created the cause of action or that the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims.”

The 7th Circuit Court of Appeals ruled that it did have jurisdiction. “… [I]t is apparent that federal patent law does not create the cause of action here. It is instead a claim about the enforceability of a contract or license agreement. Resolution of this appeal does not ‘necessarily require[] resolution of substantial question of federal patent law.’”

The 7th Circuit affirmed the district court’s summary judgment for Allan Block. Get the whole opinion, County Materials Corp. v. Allan Block Corp., No. 06-2857 (9/18/07), by clicking here.