TQ Delta LLC v. ADTRAN Inc.

Filing 674

MEMORANDUM OPINION. Signed by Judge Richard G. Andrews on 7/23/2019. 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,
Civil Action No . 14-954-RGA

V.

ADTRAN, INC. ,
Defendant.

ADTRAN, INC.,
Plaintiff and
Counterclaim Defendant,
Civil Action No. 15-121-RGA

V.

TQ DELTA, LLC,
Defendant and
Counterclaim Plaintiff.

MEMORANDUM OPINION
Brian E. Farnan and Michael J. Farnan, FARNAN LLP, Wilmington, DE; Peter J. McAndrews
(argued), Timothy J. Malloy, Thomas J. Wimbiscus, Sharon A. Hwang, Paul W. McAndrews,
and Anna M. Targowska, MCANDREWS, HELD & MALLOY, LTD., Chicago, IL, attorneys
for PlaintiffTQ Delta LLC.
Kenneth L. Dorsney, MORRIS JAMES LLP, Wilmington, DE; Garland Stephens (argued),
Melissa L. Hotze, Justin L. Constant and Rene E. Mai, WEIL, GOTSHAL & MANGES LLP,
Houston, TX, attorneys for Defendant Adtran, Inc.

July ~

, 2019

Currently pending before the Court are Plaintiffs Motion for Summary Judgment on
License of the Disputed Patents (D.I. 518) 1 and Defendant' s Cross-Motion for Summary Judgment
on the License Issue. (D.I. 526). The parties have fully briefed the issues. (D.1. 519, 527, 536,
546). I heard oral argument on June 14, 2019. (D.I. 617).

I.

BACKGROUND

The motions arise from an ongoing dispute between the parties as to ten of the Patents-InSuit (the "Disputed Patents"). 2 I summarized the relevant background in my May 21 , 2018
memorandum opinion on the license issue (D.I. 398 at 1-2) and incorporate that background here.
In my May 21 , 2018 memorandum opinion, I considered both parties' interpretation of the
License Agreement's provisions. "Defendant argue(d] that patents 'used for or applicable for
products compliant with' listed xDSL standards 3 are licensed." (D.I. 398 at 7). Defendant
provided the following Venn Diagram to illustrate its construction:

licensed

Licensed

Patents Solely Used
for or Applicable for
Products Compliant
w ith Listed xDSL

Patents Used for or
Applicable for Products
Compliant w ith listed
xDSL Standards and
Unlisted xOSL

Standards

Patents Solely Used

for or Applicable for
Products Compliant
with Unlisted xOSL

Standards

(e.g., SHDSL)

1

All docket item citations refer to C.A. No. 14-954 unless otherwise noted.
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).
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
2

2

(D.I. 232 at 16). In contrast, "Plaintiff argue[ d] 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. 398
at 8). Plaintiff provided the following charts to illustrate its construction:
Patent Number

x,xxx,xxx

Patent Number

y,yyy,yyy

Standards With Which
Product Is Compliant
Product I : VDSL2

Is Patent Used Fer or
Applicable For Product.
Yes
Yes

Product 2: VDSL2 and G.Inp

Standards With Which
Product 1 C mpliant
s
Product I : VDSL2
Product 2: VDSL2 and G.lnp

Is Patent Used For or
Applicable For Product?

Is Patent
Licensed?
YE

ls Patent
Licensed?

No
Yes

0

(D.I. 255 at 19). In my previous opinion, I determined that,
taken as a whole, the Carve-Out and Clarity Provision are reasonably subject to
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.
(D.I. 398 at 10). The parties agreed that my interpretation of the License Agreement is correct.
(D.I. 414 at 1; D.I. 528 at 12). However, Plaintiff filed a motion for reconsideration (D.I. 414),
which I granted because I believed I made an error of apprehension in the May 21, 2018
memorandum opinion. (D.I. 448 at 6). Defendant then filed a motion for reconsideration of my
July 5, 2018 order. (D.I. 455). I granted the motion as to the issue of whether the Disputed Patents
apply to a listed standard but maintained my construction of the License Agreement. (D.I. 496 at
3). I then ordered a new set of briefing on the remaining disputed issues. (Id.).
The most recent round of briefing has demonstrated that the parties continue to disagree on
the interpretation of the License Agreement as both parties continue to refer to their original
arguments to guide my analysis. (D.I. 519 at 6; D.I. 617 at 38:2-17). Plaintiff argues, "The Court' s
interpretation thus is that the test for determining whether a patent is licensed turns on whether the

3

patent applies, or not, to a listed xDSL standard," and the "applies to" language should be
interpreted to mean "infringed by." (D.I. 527 at 2, 4-6). In contrast, Defendant argues the disputed
patents "apply to" certain listed xDSL standards because the patents address alleged problems with
ADSL and VDSL. (D.I. 519 at 8).
The oral argument also demonstrated the parties' differing understandings of my
interpretation of the License Agreement. Plaintiff emphasized that the carve-out provision is a
patent carve-out. (D.I. 617 at 52:22-24). Plaintiff continued to assert, as it did in previous briefing,
that a patent can be carved out under the License Agreement even if it is used in a product that is
compliant with both Listed and Unlisted xDSL standards. (Id. at 35:5-7.). Defendant emphasizes
language from my previous opinion stating, "The license agreement unambiguously provides that
patents ' used for or applicable for ' products compliant with listed xDSL standards are licensed."

(Id. at 18:21-19:2; see D.I. 398 at 10-11). Defendant argues that the Carve-Out does not exclude
any patent for DSL Technology used in the implementations acquired by Lantiq from Aware.
Defendant's view is that the Carve-Out only excludes patents solely used for xDSL standards
Aware did not develop for Lantiq. (D.I. 617 at 4:23-5 :4; 61 :21-22; 62:5-15 ; 65 : 16-25).
The briefing and argument have further focused the issues motivating the parties ' ongoing
disagreement about the interpretation of the License Agreement. To avoid the need for further
briefing, this opinion will clarify my interpretation of the License Agreement. The parties will
have an opportunity to respond to the interpretation before I apply it to the Disputed Patents and
the G.bond and G.inp standards.

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. 520, Ex. 1, § 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. , 181 F.3d 435, 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. De Vilbiss Health Care, Inc. ,

702 A.2d 1228, 1232 (Del. 1997)).

III.

DISCUSSION
First, the License provides a positive grant of a license "to the Non-Purchased Patents

relating to the DSL Technology to use,[] , make,[], sell or leaseDSL Products." (D.I. 520, Ex. 1,
§ 4.1.l(i)). The License Agreement defines a "DSL Product" as:

an integrated circuit which 1) implements one or more xDSL Standard(s), 2) is
based upon or derived from DSL Technology and 3) is sold or distributed by Lantiq
and/or its Affiliates.
(Id. § 1.1). The Agreement also provides a definition of "Standard" as:

a communication standard defined and announced by ANSI, ATIS, ETSI, IEEE,
the ITU, or any other standardization body which defines DSL and/or Home
Networking standards and/or possible successor standards.

6

(Id. , § l. 15). The Agreement defines "DSL Technology" as:

any and all elements of Aware ' s ATechnology and ZTechnology (as defined in
[previous agreements]) delivered by Aware to Siemens and/or Infineon under [the
previous agreements], as further specified in Appendix A to this Agreement.
(Id. , § 1.21 ). The definition also makes clear that,

DSL Technology includes, as specified in Appendix A, Aware' s (i) DMT and DSLLite/G.992.2 Technology, (ii) ADSL.128 Technology, (iii) Matlab ADSL
Simulation Technology, (iv) Full Rate ADSL Technology, (v) G.bis Technology
and ADSL2+ Technology including Soft Macro Technology and (vi) VDSL
Technology....
(Id.). Thus, an expanded version of the positive license grant would read:

Aware hereby grants to Lantiq . . . a[n] . . . irrevocable right and license to the NonPurchased Patents relating to [Aware' s ATechnology and ZTechnology (as defined
in previous agreements), including Aware ' s DMT and DSL-Lite/G.992.2
Technology, ADSL.128 Technology, Matlab ADSL Simulation Technology, Full
Rate ADSL Technology, G.bis Technology and ADSL2+ Technology including
Soft Macro Technology and VDSL Technology] to use, [] , make, [] , sell or lease
[an integrated circuit which 1) implements one or more xDSL communication
standards defined and announced by the ITU, 2) is based upon or derived from
Aware ' s ATechnology or ZTechnology and 3) is sold or distributed by Lantiq
and/or its Affiliates].
This language makes clear that the License Agreement grants a license to patents related to
specified technology used in DSL Products. These patents may be related to an xDSL standard,
but do not need to be used in the xDSL standard itself. 4
Second, the License Agreement provides a Carve-Out provision. 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
and VDSL2 (including all annexes, appendices, optional features, and
Derivatives/Extensions).

4

See Appendix (comparing License Agreement 's definitions oflisted xDSL standards and corresponding technology).

7

(D.I. 520, Ex. 1, § 4.1.1 (i)). As I did in my previous opinion, I remove language that does not add
meaning and substitute certain words with synonyms that improve readability for ease of analysis.
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.
As I previously determined, the license agreement as a whole 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 standards provided that those patents are applicable to the
aforementioned [listed xDSL] standards.
(Id. , § 4.1.1 (ii)).

" [T]he 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 products also

compliant with unlisted xDSL standards. In other words, if a patent covers both listed and unlisted
standards, it is licensed." (D.I. 398 at 9-10). I then, however, misstated how the Clarity Provision
comported with the parties' constructions.
When determining whether the Clarity Provision comported with either party's
construction of the License Agreement, I misstated the parties' constructions. (Id. at 10). I
described Defendant' s construction as "any patent that applies to a listed xDSL standard is
licensed." (Id.). I then described Plaintiffs construction as requiring "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." (Id.) . However, after reviewing my previous opinions,
the current briefing, and the parties' arguments at the hearing, these descriptions of the parties'
positions do not appear to be accurate.
Defendant' s construction of the License Agreement is more accurately stated as follows:
"any patent used for or applicable for a product compliant with a listed xDSL standard is licensed."

8

(See D.I. 617 at 18:21-19:2; 19:14-21; D.I. 232 at 16; D.I. 519 at 6). Plaintiffs construction of the
License Agreement is more accurately stated as "a patent used for or applicable for a product that
complies with both listed and unlisted standards is only licensed if it is applicable to the listed
standard." (See D.I. 617 at 35:4-7, 37:1-20, 38:2-21; D.I. 255 at 12; D.I. 527 at 15-16).
The Clarity Provision does not comport with Defendant' s construction. Under the Clarity
Provision, any patent that is "applicable to a listed xDSL standard" is licensed for products
compliant with any standard, even a product that may only be compliant with an unlisted xDSL
standard. However, just because a patent is used for or applicable for a product compliant with a
listed xDSL standard does not mean that patent applies to the listed xDSL standard. For example,
a product that complies with both ADSL2+ (a listed standard) and SHDSL (an unlisted standard)
may include technology that is only applicable when the product is operated in a manner compliant
with SHDSL (the unlisted standard).
However, as I have done consistently, I reaffirm my original interpretation of the License:
"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." (D.I. 398 at 10).
The parties continue to disagree about the scope of the license, however, because they
dispute the meaning that should be ascribed to "applies to" in my interpretation of the license.
Defendant argues, "applies to one of the seven listed xDSL standards" is synonymous with "used
for or applicable for products compliant with listed xDSL standards." (D.I. 519 at 13). Further
argument by Defendant reveals that Defendant believes that "applies to" should mean
"implemented in conjunction with." (Id. at 14). Plaintiff argues that a patent only "applies to"
subject matter covered by a claim of the patent. (D.I. 527 at 4). In other words, Plaintiff believes

9

that "applies to" should be interpreted to mean "infringed by." (Id. at 6). Defendant argues that
the language of the Agreement does not support Plaintiffs interpretation because the drafters were
sophisticated parties and explicitly acknowledged infringement in other sections of the Agreement.
(D.I. 519 at 15-16). In Defendant' s view, the parties to the agreement would have said "infringed
by" had that been the intended meaning. (Id.) . While Plaintiff agrees that the parties to the
Agreement were sophisticated companies, it argues that "no sophisticated company would ever
say that a patent is applicable to a product unless that product had every element of at least one
claim." (D.I. 617 at 36:14-16 (referencing slide number six of Plaintiff's presentation)).
I agree with Defendant that "used for or applicable for" and "applies to" do not mean
"infringed by."

First, it is a principle of contract interpretation that courts "should avoid

interpreting contractual language in such a way as to render any term of the contract meaningless
or superfluous." In re Combustion Eng 'g , 366 F. Supp. 2d 224, 231 (D. Del. 2005). The CarveOut, in simplified language, states:
The license does not include patents solely used for or applicable for products
compliant with an unlisted xDSL standard.
"Used for" and "applicable for" must thus have different and separate meanings. While "used for"
is plausibly synonymous with "infringed by," the use of "applicable for" must thus be broader than
"infringed by."
Second, the Clarity provision also indicates that the terms "applicable for," "applicable to"
and "applies to" should not be read to mean "infringed by." If the parties had intended that the
license was limited to patents that would be infringed by the listed xDSL standards, they could
have used the language that Plaintiff would have me read into the Agreement. As Defendant points
out, the Agreement references infringement in other portions of the Agreement. (D.I. 520, Ex. 1,
§§ 1.25, 8.1-8.3). Additionally, I note that the differing language in the Clarity Provision-

10

"patents . .. for products" versus "applicable to ... standards"-also counsels against reading the
term "applicable to" to mean "infringed by" because it does not indicate that the patents are
actually used by or infringed by the standard.
Thus, I determine that the Agreement is unambiguous that "applicable" and "applies to"
are broader in scope than "infringed by." A broader interpretation comports with the positive
license grant, which clearly encompasses more technology than just the technology used in or
infringed by the listed xDSL standards. 5 The language of the Agreement indicates that the
"applicable for" / "applicable to" language should be read to mean "could be used in conjunction
with." This broader construction of the "applicable for" language ensures that neither the "used
for" or "applicable for" language is superfluous as the scope of "used for" and "used in conjunction
with" do not overlap. Thus, even assuming that Defendant only uses the patent for products
compliant with an unlisted xDSL standard, if the patent "applies to" or "is used for or could be
used in conjunction with" a listed xDSL standard and falls within the scope of the positive license
grant, it is licensed.
Thus, I will now clarify my construction of the License Agreement. In sum, any patent
that falls within the scope of the positive license grant that is used for or could be used in
conjunction with one of the seven listed xDSL standards is licensed. Any patent that cannot be
used for or in conjunction with one of the seven listed xDSL standards is unlicensed. Any patent
within the scope of the positive license grant that is used for or can be used in conjunction with
both listed and unlisted xDSL standards is licensed.
IV.

CONCLUSION
An accompanying order will be entered.

5

See Append ix.

11

Appendix: License Agreement's Definition of Standards and Corresponding Technology6
Standard

Technology

DSL.Lite or ITU-T G.922.2 ( 1.6)
medium speed symmetric and asymmetric DMT
based DSL technologies according to the
Standard known as "ADSL Lite" developed by
the ITU

asymmetric DSL Central Side or Remote Side technology
based on Aware's proprietary DMT and DSL technology and
modified to be standard compliant and work with DSL.Lite /
ITU-T G.992.2 as further specified in Appendix A.

ADSL.128 (1.8)

ADSL.128 Technology (1 .9)

asymmetric digital subscriber line technology
which is designed to work with Lantiq' s 128
kHz analog components

asymmetric digital subscriber line Central Side or Remote
Side technology based on Aware's proprietary DMT and DSL
technology, as further specified in Appendix A.

Full Rate ADSL or ITU-T G.992.1 (1 .17)

Full Rate ADSL Technology ( 1.18)

high speed symmetric and asymmetric DMT
based digital subscriber line technologies
according to the ANSI standard TlEl,4 T 413
or ITU G.992.1

the asymmetric digital subscriber line Central Side or Remote
Side technology based on Aware' s proprietary DMT and DSL
technology and modified to be standard compliant and work
with Full Rate ADSL, as further specified in Appendix A.

G.bis or ADSL2 or ITU-T G.992.3 (1.26)

G.bis technology or ADSL2 Technology (1.27)

high speed asymmetric DMT based digital
subscriber line technology standardized by the
ITU and referred to by the ITU as G.dmt.bis
(which is the successor to G.dmt, also known as
G.992.1) including G.handshake (also known as
ITU-T G.994.1), and G.lite.bis (also known as
ITU-T G.992.4).

the asymmetric digital subscriber line Central Side or Remote
Side technology based on Aware' s proprietary DMT and DSL
technology and modified to be standard compliant and work
with G.bis, including the Soft Macro Technology, as further
specified in Appendix A.

ADSL2+ (1.28)

ADSL2+ Technology (1.29)

higher data rate ADSL Standard standardized by
the ITU as a 3rd member of the ADSL2 family

6

DMT and DSL.Lite/G.992.2 Technology (1.7)

asymmetric digital subscriber line central side or remote side
technology based on Aware' s proprietary DMT and DSL
technology and modified to be standard compliant and work
with ADSL2+, including the Soft Macro technology, as
further specified in Appendix A.

D.I. 520, Ex. 1, §§ 1.6-1.9, 1.17, 1.18, 1.26-1.29, 1.32, 1.33 .

12

Appendix: License Agreement's Definition of Standards and Corresponding Technology
Standard

Technology

VDSLl or ITU-T G.993.1 (1.32)

VDSL Technology (1.31)

the ITU DMT VDSLl Standard and the ITU
VDSL 1 Standard and Derivatives/Extensions
thereof

the asymmetric digital subscriber line Central Side or Remote
Side technology based on Aware's proprietary DMT and DSL
technology and modified to be standard compliant and work
with VDSL 1 and VDSL2 as further specified in Appendix A.
VDSL Technology shall also include backwards capability to
Full Rate ADSL, ADSL2, ADSL2+.

13