Contract – Broadband services – Sublicensing

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Where a plaintiff has alleged that the defendant breached an agreement under which the plaintiff granted access to a portion of their wireless communications spectrum, the plaintiff must be awarded summary judgment because there was no consent by the plaintiff to a sublicensing arrangement.

“Plaintiffs are non-profit entities that hold licenses from the Federal Communications Commission (FCC) to operate Educational Broadband Services (EBS) channels in certain geographic markets. The FCC permits EBS license holders like plaintiffs to grant access to a portion of their wireless communications spectrum to commercial wireless broadband providers. In 2006, plaintiffs granted this access to the defendants Clearwire Spectrum Holdings II, LLC and Clearwire Legacy, LLC (Clearwire) pursuant to certain written agreements. In 2013, the defendant Sprint Spectrum L.P. (Sprint), a shareholder in Clearwire’s parent, acquired all the remaining stock in the parent, and began to use for its own commercial purposes those portions of the spectrum that plaintiffs had licensed to Clearwire.

“On October 14, 2015, plaintiffs filed the instant action claiming that Clearwire had effectively sublicensed its use of the broadband spectrum to Sprint and that this was in breach of the agreements between Clearwire and plaintiffs, who had not given their written consent to such an arrangement as those agreements required. On November 9, 2015, this Court allowed plaintiffs’ Motion for a Preliminary Injunction. In concluding that plaintiffs had demonstrated a substantial likelihood of prevailing on the merits, this Court agreed with the plaintiffs that the relevant agreements did indeed require plaintiffs’ written consent and that such consent was not given. This case is now before the Court on plaintiffs’ Motion for Partial Summary Judgment, which focuses on this single issue of consent. Defendants not only oppose that motion but have themselves moved for summary judgment. For the reasons that follow, this Court concludes that the plaintiffs’ Motion must be Allowed and the defendants’ Motion must be Denied. …

“Section 10(b) of the [Individual Use Agreements (IUAs)] permits Clearwire to sublicense the use of Clearwire capacity only with the ‘advance written consent of Licensee’ — namely, the plaintiffs. … There are only two exceptions to this consent requirement, neither of which is applicable here. Under Section 10(c), Clearwire may ‘sell, assign, sublease, delegate or transfer [the IUA] or any of its rights or obligations’ to (1) ‘Clearwire Affiliates’ or (2) ‘any entity that acquires all or substantially all of the assets of the Clearwire subsidiaries that hold the U.S. operating companies’ if Clearwire provides prior notice. Neither exception applies here.

“Clearly, Sprint is not a Clearwire ‘Affiliate,’ a term defined in Section 6(c)(i) of the IUAs. Defendants instead rely on the second exception, asserting that Sprint acquired Clearwire assets. This is precisely the same argument that the defendants made in opposing plaintiffs’ request for injunctive relief and, for the same reasons, this Court concludes that it has no merit. Sprint purchased the equity in Clearwire so as to give it control over Clearwire’s assets; it did not acquire the assets themselves. Thus, the spectrum lease rights at issue are still owned by Clearwire entities. The FCC Order approving the transaction makes that perfectly clear.

“In an attempt to avoid this result, defendants argue that the spectrum usage agreements between Clearwire and Sprint are not sublicenses at all. Specifically, they contend that Clearwire leased the plaintiffs’ broadband capacity and that plaintiffs cannot therefore meet their burden of showing that the arrangement Clearwire has with Sprint to use this broadband capacity is a sublicense so as to trigger Section 10. But Section 8 of the IUAs expressly states that any rights of a ‘third party’ — which Sprint unquestionably is — to use plaintiffs’ channel capacity ‘are to be handled in accordance with the assignment or sublicensing provisions of this Agreement.’ Sprint clearly proposes to use plaintiffs’ channel capacity. There being no assignment, the arrangement is necessarily viewed as a sublicense under the IUAs. To interpret it as the defendants suggest would render all of these provisions essentially meaningless.”

Norther American Catholic Educational Programming Foundation, Inc., et al. v. Clearwire Spectrum Holdings II LLC, et al. (Lawyers Weekly No. 12-080-16) (7 pages) (Sanders, J.) (Suffolk Superior Court) (Civil Action No. 15-3118 BLS2) (June 24, 2016).

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