Cellport Systems, Inc. v. Peiker Acustic GMBH & Co. KG

Filing 219

ORDER. Defendant Peikers Motion for Further Ruling on Contract Interpretation as Matter of Law 202 is granted to the extent that, as requested, the Court has provided a further ruling on contract interpretation as a matter of law. However, the Court interprets the contract consistent with Cellports position regarding the territorial reach of the Agreement. By Judge R. Brooke Jackson on 7/6/2012.(sahsl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge R. Brooke Jackson
Civil Action No. 09-cv-01007-RBJ-MJW
CELLPORT SYSTEMS, INC.,
Plaintiff,
v.
PEIKER ACUSTIC GMBH & CO. KG,
Defendant.

ORDER
This order addresses “Defendant Peiker’s Motion for Further Ruling on Contract
Interpretation as Matter of Law” [#202]. It has been fully briefed, and neither party has
requested oral argument.
Facts
The Court set forth the basic facts in its order dated February 6, 2012 [#201]. Suffice it
to say that this dispute concerns Cellport’s technology that enables mobile phones to be
connected to the audio, power and antenna systems of vehicles on a hands-free basis. Peiker
develops and sells technology for the hands-free use of mobile phones. In 2004 Cellport and
Peiker entered into a “License Agreement” (the “Agreement”) whereunder Cellport permitted
Peiker to incorporate certain Cellport proprietary technology into “Licensed Products” in
exchange for royalty payments. Cellport claims that Peiker has not accurately accounted for and
paid royalties due on sales of Licensed Products. Peiker has counterclaimed for a declaration of
noninfringement of the Cellport patents.

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In its previous order the Court addressed a dispute concerning the scope of the
Agreement. Peiker argued that Cellport can only claim royalties on products that practice
Cellport’s patents. Cellport argued that it is entitled to royalties on the sale of “Licensed
Products,” and that infringement analysis is not necessary. The Court held that if a product falls
within the definition of the term “Universal Mobile Connectivity Product” in section 1.17 of the
Agreement, or if it is substantially similar to one of the products identified section 3.5 of the
Agreement, then it is rebuttably presumed to use Cellport’s patented technology and to be a
Licensed Product. However, Peiker may rebut the presumption by proving that a product does
not use Cellport’s patented technology. Id. at 11-12.
Peiker then filed another motion seeking interpretation of disputed terms in the
Agreement [#202]. This motion indicates (erroneously) that Cellport’s European patent
has been invalidated, and therefore, because only United States patents remain, Cellport’s
right to royalties are limited to products sold, distributed or delivered within the United
States.
Conclusions
In response to the motion Cellport notes that the invalidation of the European patent is
not final, because an appeal is pending. Cellport also suggests that Peiker has been playing
tactical games and should not be permitted to introduce this new argument now. I do not address
those arguments. One must remember that this is fundamentally a contract case. To resolve this
dispute I turn once again to the terms of the Agreement and conclude that its plain language
resolves the new dispute.
The parties agreed that royalties would be paid on the sale, distribution of Licensed
Products in the Licensed Territory. Agreement ¶3.1. The Licensed Territory, with one
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exception, is the entire world. Id. ¶1.10. The exception is that the Licensed Territory for
“Uniphones only” is the United States until a certain European patent is granted. Id. However,
Uniphones were never manufactured and are not at issue in this case. Peiker argues that the
exception nevertheless is a clue to the parties’ intent that only the European patent extended the
licensed territory beyond the United States. The Court need not try to find intent lurking in a
clue when the plain language of the Agreement provides the answer. If anything, the fact that
the Agreement tied the licensed territory to the United States for uniphones only emphasizes that
the licensed territory for other Licensed Products was intended to be, as the language states, the
world.
As Peiker indicates, section 3.1 of the Agreement provides that royalties are “in
consideration for the Licensee’s rights under the several patents included in Licensed Patents.”
However, the Licensee’s rights under the patents are the rights created by the Agreement,
including its territorial reach. I agree with Peiker that section 3.1, consistent with section 8.1,
ties the royalty obligation to the continued existence of at least one valid patent. However,
section 3.1’s royalty obligation continues, “without diminution,” so long as at least one valid
patent remains in effect. That is consistent with the world wide reach of the Agreement, not a
contraction of it.
Nor is this conclusion inconsistent with the Court’s prior order that permitted Peiker to
rebut the presumption that a product is a Licensed Product through its counterclaim of noninfringement. The order indicated that Peiker may choose “to attempt to rebut the presumption
by presenting evidence that a given product does not in fact use any technology covered by a
Licensed Patent and does not infringe a Licensed Patent.” February 6, 2012 Order [#201] at 12.
The key is the phrase “use any technology covered by a Licensed Patent.” If Peiker can prove

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that a product does not use Cellport’s patented technology, then it would not infringe Cellport’s
patents, nor would royalties be required. It does not follow that the converse is true. Even if a
product does not infringe a patent because of the territorial reach of a United States patent, the
sale, distribution or delivery of a product that uses Cellport’s patented technology anywhere in
the world generates royalties, not as a matter of patent law but as a matter of contract law.
This conclusion is consistent with other terms of the Agreement. For example, the
recitals emphasize that the Agreement is intended to make Cellport’s technology, as described in
the Licensed Patents, available to Peiker. Section 3.5 of the Agreement provides that the
manufacture, sale, distribution or delivery of “any” product that is substantially similar to the
three identified products would generate royalties. The parties could have negotiated a contract
that more precisely and clearly defined its limits and the parties’ intentions. However, the Court
interprets the Agreement as written as requiring the payment of royalties on any sale of products
utilizing Cellport’s patented technology, wherever the products were made, sold or used, so long
as any Licensed patent remains in effect.
Order
Motion #202 is granted to the extent that, as requested, the Court has provided a further
ruling on contract interpretation as a matter of law. However, the Court interprets the contract
consistent with Cellport’s position regarding the territorial reach of the Agreement.
DATED this 6th day of July, 2012.
BY THE COURT:

___________________________________
R. Brooke Jackson
United States District Judge

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