Tacit License

A situation where a patent holder decides not to pursue an infringer, perhaps as a sleeping-dog license because:

  • litigation would damage commercial relationships not related to the infringing activity;
  • the patent holder lacks the resolution or funds to pursue litigation; or
  • the infringing activity is on too small a scale to justify the cost of pursuing the infringer.

The distinguishing feature of a tacit license is that no written or oral agreement exists and possibly there was no discussion between the parties.

A tacit license can be considered as acquiescence and after a sufficiently long period can allow the infringer to avail of defences such as laches and equitable estoppel. Some tacit licenses are in effect cross-licenses between major industry participants and patent holders, based on a recognition that, as each has substantial patent holdings relevant to the other’s commercial activities, litigation between them would be a pyrrhic activity with no real winner – or ‘mutually assured injunction‘ which leads to so called ‘sleeping-dog licenses.’

However, the recent sales of large patent portfolios by such industry participants to trolls and NPEs, and operating companies’ disposals of commercial activities while retaining related patents, have resulted in no-horse plaintiffs that lack the same reasons to avoid litigation gaining control of previously tacitly licensed patents; this trend perhaps, demonstrates the serious risks in relying on a tacit cross-license.