On January 15, 2014, the U.S. District Court for the Northern District of California decided in Powertech Tech. v. Tessera, Inc. that Powertech was not permitted to terminate a license agreement with Tessera for Tessera's breach because Powertech itself was in breach of the agreement by its failure to pay royalties to Tessera.  In reaching this decision, the court pointed to the license agreement's termination for breach provision:

 "Either party may terminate this Agreement due to the other party's breach of this Agreement...however, the non-breaching party may terminate this Agreement if such breach is not cured or sufficiently mitigated (to the non-breaching party's satisfaction) within sixty (60) days of notice thereof" (emphasis added).

Since Powertech had failed to pay royalties, the court decided that Powertech is not a "non-breaching party" and therefore had no right to terminate for Tessera's breach.

Agreement drafters should keep this decision in mind when writing a termination for breach provision in any type of agreement, as the reasoning does not appear to be limited to license agreements. 

Following is a link to the Powertech Tech. v. Tessera, Inc. decision (click here)

This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.

Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. The Duane Morris Institute provides training workshops for HR professionals, in-house counsel, benefits administrators and senior managers.