TQ Delta LLC v. ADTRAN Inc.

Filing 398

MEMORANDUM OPINION regarding the Motion for Summary Judgment on the License Issue. Signed by Judge Richard G. Andrews on 5/18/2018. Associated Cases: 1:14-cv-00954-RGA, 1:15-cv-00121-RGA(nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

TQ DELTA, LLC,
Plaintiff,
v.

Civil Action No. 1:14-cv-00954-RGA

ADTRAN, INC.,

Defendant.

ADTRAN, INC.,
Plaintiff,
Civil Action No. 1:15-cv-00121-RGA

v.
TQ DELTA, LLC,

Defendant.

MEMORANDUM OPINION
Brian E. Farnan, Esq., Michael J. Farnan, Esq., FARNAN LLP, Wilmington, DE; Peter J.
McAndrews, Esq., Timothy J. Malloy, Esq., Thomas J. Wimbiscus, Esq., Paul W. McAndrews,
Esq., Anna M. Targowska, Esq., James P. Murphy, Esq., MCANDREWS, HELD & MALLOY,
Chicago, IL.
Attorneys for TQ Delta.
Kenneth L. Dorsney, Esq., MORRIS JAMES LLP, Wilmington, DE; Paul M. Sykes, Esq., John
E. Goodman, Esq., David W. Holt, Esq., Benn C. Wilson, Esq., Jake M. Gipson, Esq.,
BRADLEY ARANT BOULT CUMMINGS LLP, Birmingham, AL.
Attorneys for Adtran.

Mayl.[, 2018

Presently before the Court are Defendant's Motion for Summary Judgment on the
License Issue (D.1. 231) and related briefing (D.I. 232, 255, 274). 1
For the reasons that follow, the Court will GRANT Defendant's Motion for Summary
Judgment on the License Issue, as to the twenty-eight Patents-in-Suit asserted against products
that comply with G.992.3 [ADSL2], G.992.5 [ADSL2+], and/or G.993.2 [VDSL2] standards,
and as to the other ten Patents-in-Suit (the "Disputed Patents"). 2 (D.1. 231).

I.

BACKGROUND
The Patents-in-Suit relate to Digital Subscriber Line ("DSL") technology. DSL

technology "uses digital encoding to provide high-speed data transmission over existing copper
wire telephone lines." (D.I. 232 at 3).
The Patents-in-Suit are subject to a license held by Lantiq Deutschland GmbH
("Lantiq"). (D.I. 233, Exh. 1, § 2, Schedule D). Between 1999 and 2009, Lantiq and its
predecessors paid A ware, Inc. ("Aware") to develop DSL technology for use in Lantiq DSL
chips. During that time, Lantiq obtained a license to any patents obtained by Aware covering the
DSL chips. (D.1. 232 at 1; D.I. 255 at 4-5). As Aware invented new DSL technologies, it
entered into new or amended licenses with Lantiq. (See, e.g., D.I. 233, Exh. 26, Amendments 17). This allowed the parties "to account for the additional value of the improved [and] different
inventions." (D.I. 255 at 7).

1

All citations to the docket are to No. 14-954. I refer to Adtran, Inc. as "Defendant," and TQ Delta, LLC
as "Plaintiff." However, TQ Delta is the plaintiff in its patent infringement action against Adtran (No. 14-954), and
Adtran is the plaintiff in its declaratory judgment action against TQ Delta (No. 15-121).
2 The parties refer to these ten patents as the "Disputed Patents," because they involve a dispute about
contract construction. I adopt this terminology. The Disputed Patents are U.S. Patent Nos. 7,453,881, 7,809,028,
7,978,706, 8,422,511, 7,796,705, 8,335,956, 8,407,546, 8,468,411, 8,645,784, and 8,598,577. (D.I. 232 at 6).

2

Lantiq purchased A ware's DSL business in 2009. In doing so, Lantiq "acquir[ed] a
number of Aware's DSL-related patents," and renewed "its license to all others" (the "Lantiq
License"). (D.I. 232 at 1).
In 2012, Plaintiff purchased the Patents-in-Suit from Aware, subject to the Lantiq
License. (D.I. 232 at 1; D.I. 255 at 5-6). In 2014, Plaintiff filed this patent infringement suit
against Defendant. (D.I. 1).
Defendant's accused products contain chips supplied by Lantiq. (D.l. 232 at 1).
Defendant contends that as a result, it holds a license to the Patents-in-Suit. (Id.). Plaintiff, on
the other hand, contends that Defendant does not hold a license to the Patents-in-Suit. (D.I. 255
at 1).
The parties agree that Defendant holds a license to the Patents-in-Suit under the Lantiq
License, unless the patents are covered by an exclusion in the Lantiq License (the "Carve-Out").
(D.I. 232 at 2; D.I. 255 at 6). The only issue before the Court is whether the Patents-in-Suit are
excluded from the Lantiq License by the Carve-Out. The license, including the Carve-Out, reads
as follows:
(i) Aware hereby grants to Lantiq and its affiliates a non-exclusive, non-transferable
(except as specified in Section 10 of the Agreement), perpetual, world wide,
royalty-bearing (as set forth in Section 6), irrevocable right and license to the NonPurchased Patents relating to the DSL Technology to use, have used, develop, have
developed, make, have made, provide services related to, market, sell or lease DSL
Products and/or Home Networking Products. In no event shall any right or licenses
granted by Aware in this Seeton 4.1.1 (i) hereunder extend to the use of any NonPurchased Patents in Wireless Applications. The license granted in this Section
4.1.1 (i) shall not include a license to patents of Aware solely used for or applicable
for products compliant with an xDSL standard other than ADSL.128, DSL.Lite,
Full Rate ADSL, ADSL2, or ADSL2+, VDSLl and VDSL2 (including all annexes,
appendices, optional features and Derivatives/Extensions).
(D.I. 233, Exh. 18, § 4.1.1). I refer to the final sentence as the Carve-Out. The license goes on
to state:
3

For clarity: the license[] includes a license to those patents of Aware for products
compliant with other standards provided that those patents are applicable to the
aforementioned standards.
(Id.) (italics in original). I refer to this as the Clarity Provision.

The "xDSL standard[ s]" referenced in the Carve-Out are promulgated by the
International Telecommunications Union ("ITU"). (D.I. 232 at 4). The ITU defines "xDSL" as
"[a]ny of the various types of Digital Subscriber Lines." (D.1. 233, Exh. 5 at 2).
The parties dispute whether Defendant's products are licensed to two different groups of
Patents-in-Suit.
First, the parties dispute whether Defendant's products are licensed to the ten Disputed
Patents. Plaintiff alleges that the ten Disputed Patents cover the functionality specified in three
particular ITU standards: ITU-T G.998.1 (entitled "ATM-based multi-pair bonding"), ITU-T
G.998.2 (entitled "Ethernet-based multi-pair bonding"), and ITU-T G .998.4 (entitled "Improved
impulse noise protection for digital subscriber line (DSL) transceivers"). (D.1. 255 at 15; D.I.
233, Exh. 24; D.I. 233, Exh. 7; D.I. 233, Exh. 8). ITU-T G.998.1 and ITU-T G.998.2 together
are called "G.bond," and ITU-T G.998.4 is called "G.inp." (D.I. 232 at 5).
Second, the parties dispute whether Defendant's products are licensed to twenty-eight
other patents. During discovery, Defendant served an interrogatory asking Plaintiff to "explain
in detail each and every basis for [its] contention that an [accused product] is not licensed" under
the Lantiq License. (D.1. 233, Exh. 2 at 4-6; D.I. 232 at 13). In response, Plaintiff stated:
[Defendant's] Accused Products that use a Lantiq DSL chipset and that
implement G.992.3 [ADSL2], G.992.5 [ADSL2+], and/or G.993.2 [VDSL2] are
licensed under the [twenty-eight] TQ Delta patents, but only to the extent of the
G.992.3, G.992.5, and/or G.993.2 functionality provided by such Lantiq chipset.
(D.I. 233, Exh. 2 at 5-6).

4

II.

LEGALSTANDARD
A. Summary Judgment

"The court shall grant summary judgment if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter oflaw." Fed.
R. Civ. P. 56(a). The moving party has the initial burden of proving the absence of a genuinely
disputed material fact relative to the claims in question. Celotex Corp. v. Catrett, 477 U.S. 317,
330 (1986). Material facts are those "that could affect the outcome" of the proceeding, and "a
dispute about a material fact is 'genuine' if the evidence is sufficient to permit a reasonable jury
to return a verdict for the nonmoving party." Lamont v. New Jersey, 637 F.3d 177, 181 (3d Cir.
2011) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). When determining
whether a genuine issue of material fact exists, the court must view the evidence in the light most
favorable to the non-moving party and draw all reasonable inferences in that party's favor. Scott
v. Harris, 550 U.S. 372, 380 (2007); Wishkin v. Potter, 476 F.3d 180, 184 (3d Cir. 2007).
B. Contract Interpretation
The Lantiq License contains a choice of law provision stating that the laws of
Switzerland govern the agreement. (D.I. 233, Exh. 15, § 12; D.I. 233, Exh. 18, § 12). However,
neither Plaintiff nor Defendant has asserted that Swiss law should apply to the resolution of their
dispute. I will therefore apply Delaware contract law. See Bel-Ray Co. v. Chemrite (Pty) Ltd.,
181F.3d435, 440-41 (3d Cir. 1999) ("The parties therefore generally carry both the burden of
raising the issue that foreign law may apply in an action, and the burden of adequately proving
foreign law to enable the court to apply it in a particular case. . . . Where parties fail to satisfy
either burden the court will ordinarily apply the forum's law.").

5

Under Delaware law, "the threshold inquiry when presented with a contract dispute on a
motion for summary judgment is whether the contract is ambiguous." United Rentals, Inc. v.
RAM Holdings, Inc. 937 A.2d 810, 830 (Del. Ch. 2007). "Delaware law adheres to the objective
theory of contracts," meaning that "a contract's construction should be that which would be
understood by an objective, reasonable third party." NBC Universal v. Paxson Commc 'ns Corp.,
2005 WL 1038997, at *5 (Del. Ch. Apr. 29, 2005). "An ambiguity exists only when a contract is
fairly susceptible to two or more reasonable interpretations." Unwired Planet, Inc. v. Microsoft
Corp., 193 F. Supp. 3d 336, 342 (D. Del. 2016) (citing Rossi v. Ricks, 2008 WL 3021033, at *2
(Del. Ch. Aug. 1, 2008)). "A contract is not rendered ambiguous simply because the parties do
not agree upon its proper construction." Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins.
Co., 616 A.2d 1192, 1195 (Del. 1992). "If a contract is unambiguous, extrinsic evidence may
not be used to interpret the intent of the parties, to vary the terms of the contract or to create
ambiguity." Unwired Planet, 193 F. Supp. 3d at 342 (quoting Eagle Indus., Inc. v. DeVilbiss
Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997)).

III.

DISCUSSION

The parties dispute whether Defendant's accused products are licensed to the
Disputed Patents, and to the twenty-eight other Patents. I will discuss each group in tum.
A. Disputed Patents

Defendant argues that the Carve-Out does not apply, and its accused products are
licensed to the Disputed Patents. (D.I. 232 at 3). Plaintiff disagrees. (D.I. 255 at 1).
The Carve-Out reads as follows:
The license granted in this Section 4.1.1 (i) shall not include a license to patents of
Aware solely used for or applicable for products compliant with an xDSL standard
other than ADSL.128, DSL.Lite, Full Rate ADSL, ADSL2, or ADSL2+, VDSLl

6

and VDSL2 (including all
Derivatives/Extensions).

annexes,

appendices,

optional features

and

(D.I. 233, Exh. 18, § 4.1.1). For ease of analysis, I remove language that does not add meaning
and substitute certain words with synonyms that improve readability. The provision would then
read:
The license does not include a license to patents solely used for or applicable for
products compliant with an unlisted xDSL standard. 3
Defendant asserts that A ware patents are licensed, so long as they are not "solely used for
or applicable for products compliant with unlisted xDSL standards." (D.I. 232 at 15-16).
Plaintiff does not disagree with Defendant's assertion. (D.I. 255 at 7). In fact, Plaintiff states,
"In non-contract-legalese, ... the Carve-Out simply means that if a patent is solely used for or
applicable for products compliant with [unlisted] xDSL standards, that patent is not licensed."
(Id.) (emphasis omitted)).

However, the parties disagree as to what the Carve-Out means.
Defendant argues that patents "used for or applicable for products compliant with" listed
xDSL standards are licensed. Defendant provides a Venn diagram explaining its position:

/

Licensed

~ensed

Patents Solely Used I
j for or Applicable for /I
Products Compliant I
\\
with listed xDSL \
Standards
\\
\
\
\
/

'~,

''-

'"'-~........

Patents Used for or
Applicable for Products
Compliant with Listed
xDSL Standards and
Unlisted xDSLStandards
'"'-,'- (e.g., SHDSL)

Unlicensed

\

Patents Solely Use-~\
for or Applicable for )'
Products Compliant
with Unlisted xDSL
Standards
{e.g., SHDSL}

J

'

----------~

3
"Listed" xDSL standards are ADSL.128, DSL.Lite, Full Rate ADSL, ADSL2, or ADSL2+, VDSLl and
VDSL2. "Unlisted" xDSL standards are all other xDSL standards.

7

(D.I. 232 at 16). Defendant represents that a patent that applies to listed xDSL standards is
licensed both as to products that comply only with listed xDSL standards and as to products that
comply with both listed and unlisted xDSL standards. (D.I. 232 at 15, 19).
Plaintiff, on the other hand, reads the Carve-Out to exclude more patents from the Lantiq
License. Plaintiff argues that a patent is not licensed if every product for which that patent is
"used" or "applicable" complies with an unlisted xDSL standard. (D.I. 255 at 6-10, 11-12). In
other words, Plaintiff argues that the only patents that are licensed are patents covering listed
xDSL standards, and no unlisted xDSL standards.
Plaintiff provides the following charts to "visualize the logic set out by the Carve-Out":
Patent Number

x.xxx.xxx

Patent Number

ysyy,yyy

Standards With Which
Product Is Compliant
Product I : VDSL2
Product 2: VDSL2 and G.lnp

ls Patem Used For or
Applicable For Product?
Yes
}"cs

ls Patent
Licensed9

Standards With Which
Product ls Compliant
Product I : VDSL2
Product 2: VDSL2 and G.lnp

ls Patent U'ied For or
Applicable For Product?
No
Yes

Js Patent
Licensed'?

YES

NO

(D.I. 255 at 9). In Plaintiff's charts, Patent No. y,yyy,yyy is only "used for or applicable for"
Product 2. Product 2 is compliant with one listed xDSL standard (VDSL2) and one unlisted
xDSL standard (G.inp). Therefore, argues Plaintiff, Patent No. y,yyy,yyy is "solely used for or
applicable for" a product (Product 2) that complies with an unlisted xDSL standard (G.inp). 4 •5

4

Plaintiff argues that the phrase "used for or applicable for" is synonymous with "infringed by." (D.I. 255
at 8). Defendant objects to this argument. (D.I. 274 at 3-6). However, I need not consider whether "used for or
applicable for" is synonymous with "infringed by." The Carve-Out and the Clarity Provision together are clear no
matter the correct interpretation of the "used for or applicable for."
5
For purposes of construing the Carve-Out, I assume arguendo that G.inp and G.bond are unlisted xDSL
standards. Defendant asserts that G.inp and G.bond are not xDSL standards at all. (D.1. 232 at 20). Accordingly,
Defendant asserts that the Disputed Patents are "used for or applicable for" products compliant with listed xDSL
standards only. If Defendant were correct, then both parties agree that the Disputed Patents would be licensed. (D.I.
232 at 20; D.I. 255 at 9, 15-16).

8

Plaintiff asserts that the Carve-Out applies, and Patent No. y,yyy,yyy is not licensed. (D.1. 255 at
9). But under Defendant's construction of the Carve-Out, Patent No. y,yyy,yyy would be
licensed, because Patent No. y,yyy,yyy is "used for or applicable for" a product (Product 2) that
complies with a listed xDSL standard (VDSL2), and therefore covers a listed xDSL standard.
Viewed in isolation, the language of the Carve-Out is less than clear. It can be read to
comport with each party's construction.
The language comports with Defendants' construction, because it can be read to provide
that the licensee does not receive a license to any patents "solely" applicable for products
compliant with unlisted xDSL standards. This language can be understood to provide the inverse
proposition that the licensee does receive a license to any patents applicable for products
compliant with listed xDSL standards.
The language also comports with Plaintiffs construction, because it can be read to
provide that a patent is not licensed if every product for which that patent is "used" or
"applicable" complies with an unlisted xDSL standard. Plaintiffs example demonstrates that
Patent No. y,yyy,yyy is "solely used for or applicable for" a product that complies with an
unlisted xDSL standard and thus can be understood to be unlicensed.
But read as a whole, the license agreement is unambiguous. The Carve-Out is followed
by the Clarity Provision, which reads:
For clarity: the license[] includes a license to those patents of Aware for products
compliant with other [unlisted xDSL] standards provided that those patents are
applicable to the aforementioned [listed xDSL] standards.
(D.I. 233, Exh. 18, § 4.1.1 ). In simpler terms, the Clarity Provision lists two rules. First, a patent
is licensed if it is applicable to listed xDSL standards. Second, that patent is licensed even for

9

products also compliant with unlisted xDSL standards. In other words, if a patent covers both
listed and unlisted standards, it is licensed.
The Clarity Provision comports with Defendant's construction that any patent that applies
to a listed xDSL standard is licensed. (D.I. 232 at 16-17). But it does not comport with
Plaintiffs construction. First, under the Clarity Provision, a patent that applies to a listed xDSL
standard is licensed. This runs counter to Plaintiffs construction that a patent that applies to a
listed xDSL standard would not be licensed if all products for which the patent applies also
comply with an unlisted xDSL standard. Second, the Clarity Provision permits a patent that
applies to a listed xDSL standard to be licensed to a product that is also compliant with an
unlisted xDSL standard, without indicating a limit on the number of products compliant with an
unlisted xDSL standard to which the patent can be licensed. Plaintiffs construction contradicts
this provision by limiting the number of unlisted xDSL standard-compliant products for which a
licensed patent can apply.
Accordingly, taken as a whole, the Carve-Out and the Clarity Provision are reasonably
subject only to Defendant's interpretation. In sum, any patent that applies to one of the seven
listed xDSL standards is licensed. Any patent that does not apply to one of the seven listed
xDSL standards is unlicensed. Any patent that applies to both listed and unlisted xDSL
standards is licensed.
Given my construction of the Carve-Out and the Clarity Provision, Defendant has shown
it holds a license to the Disputed Patents. 6 Plaintiff asserts that the Disputed Patents are "used
for or applicable for" the accused products, which practice a listed xDSL standard. (D.I. 232 at
12-13, 17-18; D.I. 233, Exh. 22 at 1). The license agreement unambiguously provides that

6

The language is clear. As a result, I do not consider extrinsic evidence, such as the parties' licensing
history, to interpret the Lantiq License. Unwired Planet, 193 F. Supp. 3d at 342.

10

patents "used for or applicable for" products compliant with listed xDSL standards are licensed.
Thus, regardless of whether G.bond and G.inp are unlisted xDSL standards, the Disputed Patents
are licensed to Defendant.
Accordingly, I will Grant Defendant's Motion for Summary Judgment on the License
Issue, as to the Disputed Patents. (D.I. 231 ).

B. The Other Twenty-Eight Patents
The parties dispute whether Defendant's accused products are licensed to the other
twenty-eight Patents-in-Suit. (D.I. 232 at 14; D.I. 255 at 19-20).
During discovery, Defendant served an interrogatory asking Plaintiff to "explain in detail
each and every basis for [its] contention that an [accused product] is not licensed" under the
Lantiq License. (D.I. 233, Exh. 2 at 5-7; D.I. 232 at 13). In response, Plaintiff stated:
[Defendant's] Accused Products that use a Lantiq DSL chipset and that
implement G.992.3 [ADSL2], G.992.5 [ADSL2+], and/or G.993.2 [VDSL2] are
licensed under the [twenty-eight] TQ Delta patents, but only to the extent of the
G.992.3, G.992.5, and/or G.993.2 functionality provided by such Lantiq chipset.
(D.I. 233, Exh. 2 at 6). 7 Furthermore, Plaintiff has stated to this Court, "[B]ecause the Lantiq
Chips[,] [Plaintiff] has always conceded are licensed for a certain portion of the TQ Delta
portfolio." (D.I. 233, Exh. 23 at 13:8-11). 8
In briefing, Plaintiff states that it "agrees that those other twenty-eight patents fall within
the scope of the license." (D.I. 255 at 19) (emphasis omitted). However, it argues that "there
remain other distinct issues that impact whether particular [Lantiq] DSL chipset products and

7

Originally, Plaintiff listed twenty-seven patents. (D.1. 233, Exh. 2 at 6-7). Later, Plaintiff identified a
twenty-eighth patent. (D.1. 233, Exh. 2 at 81 ).
8
In its opening brief, Defendant argued that this representation means, "[Plaintiff has admitted ... to this
Court that [Defendant's] accused products that use Lantiq DSL chips are licensed under twenty-eight of the thirtyeight Patents-in-Suit pursuant to the Lantiq License." (D.1. 232 at 14). Plaintiff did not respond to this argument in
its brief. (See generally D.I. 255).

11

particular Adtran DSL products ... that employ such chipsets are licensed." (Id.). Plaintiff
argues, "Whether a particular product is licensed depends on ... whether [Lantiq] paid the
requisite royalty for a particular chipset unit and whether the [Lantiq] chipset qualifies as a 'DSL
Product' as defined in§ 1.1 of the 2009 License Agreement." (Id. at 19-20; D.I. 233, Exh. 18 at
§ 1.1) (emphasis omitted).
However, Plaintiff's interrogatory response and admission to this Court amount to
Plaintiff's agreement that the accused products themselves are licensed to the twenty-eight
patents. 9
Accordingly, I will Grant Defendant's Motion for Summary Judgment on the License
Issue, as to the twenty-eight of the thirty-eight Patents-in-Suit asserted against products that
implement G.992.3 [ADSL2], G.992.5 [ADSL2+), and/or G.993.2 [VDSL2] standards. (D.I.
231).

IV.

CONCLUSION

A separate order will be entered.

9
Defendant notes, "[T]he Lantiq License provides that any failure to pay royalties (which has not occurred)
does not terminate the license." (D.l. 274 at 10; D.l. 233, Exh. 18 at§ 9.3). However, I need not assess Defendant's
argument, given Plaintiffs agreement in its interrogatory response.

12