Written by Jeff Aronson

The next time your client is asked to give a MFN, you may want to keep in mind a recently decided case in which a non-practicing entity (NPE) was required to refund $69 million of the $70 million patent license fee previously paid to it by a large bank. The reason for the refund? The MFN clause in the license agreement was triggered seven years later by a subsequent $1 million patent licensing deal with a small bank.

What could the NPE have done differently here? Ideas include the MFN could have simply been limited by time (i.e., for a period of two years…) or to similarly situated licensees in terms of size or contained other terms to distinguish the contracts (such as a cap on the number of banking transactions covered by the license.)

When it comes to MFNs, you don’t want to be the one responsible for a $69 million refund.

See JP Morgan Chase Bank, N.A. v. DataTreasury Corp., No. 15-4095 (5th Cir. May 19, 2016), affirming 79 F. Supp. 3d 643 (E.D. Tex 2015) (granting Chase’s motion for summary judgment).