Apeldyn Corporation v. Eidos, LLC
Filing
106
OPINION and ORDER - Apeldyn's motion for partial summary judgment 62 is GRANTED IN PART AND DENIED IN PART. Paragraph 11.1 of the Patent Agreement is unambiguous, and the Court finds both that the Patent Agreement expired on April 2 3, 2012, and that under the express terms of the Patent Agreement certain clauses remain in full force and effect even after expiration. Paragraph 11.5 of the Patent Agreement, however, is ambiguous. The Court cannot determine, as a matter of law, th at the expiration of the Patent Agreement extinguished all claims of Eidos against Apeldyn based on litigation that was pending before expiration. Eidos's cross motion for partial summary judgment 86 is DENIED. Apeldyn's Motion to Strike 99 is DENIED AS MOOT. Signed on 4/8/2013 by Judge Michael H. Simon. (mja)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
PORTLAND DIVISION
APELDYN CORPORATION,
Case No. 3:12-cv-00722-SI
Plaintiff,
OPINION AND ORDER
v.
EIDOS, LLC,
Defendant.
Don H. Marmaduke, Jon P. Stride, and Anna K. Sortun, Tonkon Torp LLP, 1600 Pioneer Tower,
888 S.W. Fifth Avenue, Portland, OR 97204. Attorneys for Plaintiff.
Frank V. Langfitt, Ater Wynne LLP, 1331 N.W. Lovejoy Street, Suite 900, Portland, OR 97209.
Attorneys for Defendant.
SIMON, District Judge.
Plaintiff Apeldyn Corporation has sued Defendant Eidos, LLC, seeking declaratory and
injunctive relief relating to the enforceability of the 2008 Patent Agreement (“Patent
Agreement”) entered into between the parties and alleging breach of contract relating to a
separate agreement between the parties. Dkt. 3. Eidos counterclaimed for breach of the Patent
Agreement and for fraud; Eidos also seeks declaratory and injunctive relief and the appointment
of a receiver. Dkt. 12. Apeldyn has moved for partial summary judgment, seeking a declaration
that: (1) the Patent Agreement expired on April 23, 2012, and for all purposes relevant to this
action has no force or effect after that date; and (2) the expiration of the Patent Agreement
extinguished all claims of Eidos against Apeldyn based on any potential settlements or
judgments that were not in effect as of April 23, 2012. Dkt. 62. Eidos has cross-moved for partial
summary judgment, seeking dismissal of Apeldyn’s claim for declaratory relief. Dkt. 86.
For the reasons discussed below, Apeldyn’s motion is granted in part and denied in part,
and Eidos’s motion is denied. The Court finds that: (1) Paragraph 11.1 (the “Expiration Clause”)
of the Patent Agreement is unambiguous and the Patent Agreement expired as of April 23, 2012;
and (2) Paragraph 11.5 (the “Preservation Clause”) of the Patent Agreement is ambiguous as to
whether Eidos has any “accrued rights” under the Patent Agreement that survive the expiration
of the Patent Agreement.
SUMMARY JUDGMENT STANDARD
A party is entitled to 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 of law.”
Fed. R. Civ. P. 56(a). The moving party has the burden of establishing the absence of a genuine
dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The court must view
the evidence in the light most favorable to the non-movant and draw all reasonable inferences in
the non-movant’s favor. Clicks Billiards Inc. v. Sixshooters Inc., 251 F.3d 1252, 1257 (9th Cir.
2001). Although “[c]redibility determinations, the weighing of the evidence, and the drawing of
legitimate inferences from the facts are jury functions, not those of a judge . . . ruling on a
motion for summary judgment,” the “mere existence of a scintilla of evidence in support of the
Page 2 – OPINION AND ORDER
plaintiff’s position [is] insufficient. . . . ” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 255
(1986). “Where the record taken as a whole could not lead a rational trier of fact to find for the
non-moving party, there is no genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986) (quotations and citation omitted).
BACKGROUND
Apeldyn is the owner of U.S. Patent No. 5,347,382 (“the Patent”). Apeldyn and Eidos are
parties to the Patent Agreement, under which, among other things, Eidos agreed to assist
Apeldyn in its enforcement efforts against potential infringers of the Patent and in licensing the
Patent’s technology, and Apeldyn agreed to compensate Eidos for its efforts and expenditures
through a share of any enforcement or licensing revenues generated under the Patent Agreement.
Pat. Agm. ¶¶ 1.5, 3.1, 6.2, 6.3. Under the Patent Agreement, Eidos further agreed to pay all
licensing and litigation costs and fees, with reimbursement being owed to Eidos from Apeldyn
only through licensing or litigation revenues generated under the Patent Agreement. Pat. Agm.
¶¶ 1.5, 3.3, 4.1, 6.4, 6.5.
The law firm of McKenna Long & Aldridge LLP (“MLA”) negotiated the Patent
Agreement on behalf of Eidos and drafted the Patent Agreement. After the Patent Agreement
was signed, MLA entered into the joint representation of both Eidos and Apeldyn in enforcing
the Patent. The parties designated MLA as “Licensing Counsel” under the Patent Agreement,
and MLA commenced enforcement actions against the alleged primary infringers of the Patent.
The disputed provisions of the Patent Agreement are the Expiration Clause and the
Preservation Clause. The Expiration Clause provides:
Unless earlier terminated as provided in Sections 11.2 or 11.6, or
as a result of arbitration under Part 12 of this Agreement, this
Agreement will remain in full force and effect until the last claim of
the Apeldyn Patent expires or is invalidated.
Page 3 – OPINION AND ORDER
Pat. Agm. ¶ 11.1 (emphasis added). It is the last part of the Expiration Clause that is in dispute in
this action. The Preservation Clause states:
The following Sections of this Agreement will survive termination
or expiration according to their terms: Sections 8 (Confidentiality),
12 (Arbitration or Disputes), 18 (Notice), 20 (Choice of Law) and
21 (Miscellaneous). Termination or expiration of this Agreement
will not extinguish a claim or right that has accrued prior to
termination or expiration.
Pat. Agm. ¶ 11.5 (emphasis added). It is the final sentence of the Preservation Clause that is in
dispute in this action. The parties further agreed that Oregon law shall govern the Patent
Agreement. Pat. Agm. ¶ 20.
DISCUSSION
A. Contract Interpretation Under Oregon Law
Under Oregon law, the objective in contract interpretation is to give effect to the parties’
agreed-upon intentions. See, e.g., Connall v. Felton, 201 P.3d 219, 224 (Or. Ct. App. 2009)
(“The goal [of contract interpretation] is always to give effect to the parties’ intentions.”).
Oregon courts have established a three-step process for interpreting the provisions of a contract.
First, the court determines whether, as a matter of law, the relevant provision is ambiguous.
McKay’s Mkt. of Coos Bay, Inc. v. Pickett, 157 P.3d 291, 294 (Or. Ct. App. 2007). In considering
whether a contractual provision is ambiguous, a court is limited to considering only the plain
meaning of the words used by the parties in their contract and any extrinsic evidence showing the
circumstances under which the contract was made. See Batzer Constr., Inc. v. Boyer, 129 P.3d
773, 777 (Or. Ct. App. 2006); Fogg v. Wart, No. CV-06-160-ST, 2006 WL 3716745, at *5-7 (D.
Or. Dec. 14, 2006); see also Or. Rev. Stat. § 42.220. “A contractual provision is ambiguous if its
wording can, in context, reasonably be given more than one plausible interpretation.” Williams v.
RJ Reynolds Tobacco Co., 271 P.3d 103, 109 (Or. 2011) (citation omitted). In addition, “[t]he
Page 4 – OPINION AND ORDER
court must, if possible, construe the contract so as to give effect to all of its provisions.” Id. If the
provision is unambiguous, the analysis ends. Id.
Where a contractual provision is ambiguous, however, the factfinder must look beyond
the four corners of the contract to discern, as a matter of fact, whether there is a mutual and
common intention. See Peace River Seed Co-op., Ltd. v. Proseeds Mktg., Inc., 293 P.3d 1058,
1070 (Or. Ct. App. 2012) (“If the provision in question is ambiguous, the trier of fact will
‘ascertain the intent of the parties and construe the contract term consistent with the intent of the
parties.’ … To resolve that question, the trial court may receive and consider extrinsic evidence
relating to intent.”) (quoting Yogman v. Parrott, 937 P.2d 1019, 1022 (Or. 1997)). Because
Oregon follows the objective theory of contracts, direct evidence at this stage may include
expressions of any such common understanding actually communicated among the parties. See
Holdner v. Holdner, 29 P.3d 1199, 1203 (Or. Ct. App. 2001) (quoting Real Estate Loan Fund
Or. Ltd. v. Hevner, 709 P.2d 727, 730-31 (Or. Ct. App. 1985)). Statements of a party’s subjective
intent that were not expressed or communicated at the time the contract was formed are not
permissible evidence of intent. See, e.g., Fogg, 2006 WL 3716745, at *9; c.f. Holdner, 29 P.3d at
1203.
In the absence of such direct evidence, the parties’ course of dealing or their performance
during the term of the contract may provide circumstantial, or inferential, evidence of their
mutual and common understanding, if any, concerning the ambiguous provision. See Yogman,
937 P.2d at 1022 (the parties’ “practical construction of an agreement may hint at their intention”
(citing Tarlow v. Arnston, 505 P.2d 338, 341-42 (Or. 1973) (“How the original parties and their
successors conducted themselves in relation to the agreement is instructive in our determination
of what must have been intended.”))); Goodman v. Cont’l Cas. Co., 918 P.2d 438, 443 (Or. Ct.
Page 5 – OPINION AND ORDER
App. 1996) (parties’ performance is persuasive evidence of meaning). In the absence of any such
direct or circumstantial evidence, or if the contract remains ambiguous after considering any
such evidence, the third step is to apply any relevant maxims of construction. See Yogman, 937
P.2d at 1022.
When a contractual provision is ambiguous, ascertaining its meaning at steps two and
three of the Yogman analysis is a question of fact generally not appropriate for summary
judgment. See Dial Temp. Help Serv., Inc. v. DLF Int’l Seeds, Inc., --- P.3d ---, 2013 WL
961906, at *1 (Or. Ct. App. Mar. 13, 2013) (the “general rule” is that the meaning of a contract
may be disposed of by way of summary judgment only if its terms are unambiguous); Madson v.
W. Or. Conference Ass’n of Seventh-Day Adventists, 149 P.3d 217, 222 (Or. Ct. App. 2006)
(“Because the contract is ambiguous, ascertaining its meaning is a question of fact, and the trial
court therefore erred in granting defendant’s motion for summary judgment.”).
B. The Expiration Clause (Paragraph 11.1) of the Patent Agreement
Based on the text and context of the Expiration Clause, and viewing the Patent
Agreement as a whole, the Court finds that the Expiration Clause is unambiguous. The
Expiration Clause establishes that there are two possible ways for the Patent Agreement to cease
being in full force and effect: (1) termination; or (2) expiration. The Expiration Clause expressly
acknowledges that the manner of termination of the Patent Agreement is set forth in Paragraphs
11.2, 11.6, and Part 12 of the Patent Agreement. The manner of expiration of the Patent
Agreement is established within the Expiration Clause itself, which states that the Patent
Agreement will remain in effect “until the last claim of the Apeldyn Patent expires or is
invalidated.” Pat. Agm. ¶ 11.1. It is this provision that establishes the manner of expiration that is
relevant to the pending motions for summary judgment.
Page 6 – OPINION AND ORDER
Apeldyn argues that the disputed provision is unambiguous and means that the Patent
Agreement expires on: (1) April 23, 2012, the date that the Patent expires, along with whatever
claims of the Patent were still valid as of the date of the Patent’s expiration; or (2) the date that
the last remaining claim of the Patent is invalidated, to the extent that all of the Patent’s claims
may be invalidated before the Patent itself expires. Eidos also argues that the disputed provision
is unambiguous, but asserts that the Patent Agreement expires only on the date that the last
Patent enforcement litigation claim is fully and finally resolved. For the reasons set forth below,
the Court agrees with Apeldyn’s interpretation of the disputed portion of the Expiration Clause
and concludes that this provision is unambiguous as Apeldyn asserts.
1. The text and context of the Expiration Clause
The heart of the dispute regarding the phrase “until the last claim of the Apeldyn Patent
expires or is invalidated” is what the word “claim” means. The plain meaning of the text of the
Expiration Clause supports Apeldyn’s interpretation of “claim” as meaning the claim of the
Patent and not a claim brought in any enforcement litigation, as argued by Eidos.
The Expiration Clause uses the term “claim of the Apeldyn Patent.” Claims of a patent
are a term of art in patent law. A patent must conclude with “one or more claims particularly
pointing out and distinctly claiming the subject matter which the inventor or a joint inventor
regards as the invention.” 35 U.S.C. § 112(b). Such claims may be independent or dependent.
35 U.S.C. § 112(c). Reference to “claims of a patent” generally refers to the alleged protected
part of the patent. See, e.g., Homedics, Inc. v. Valley Forge Ins. Co., 315 F.3d 1135, 1141 n.5
(9th Cir. 2003) (“Direct infringement consists of . . . offering to sell . . . [the] invention defined
by the claims of a patent, without the authority of the patent owner.” (quoting Hoechst-Roussel
Pharm. v. Lehman, 109 F.3d 756, 759 (Fed. Cir. 1997) (alterations in original) (internal
Page 7 – OPINION AND ORDER
quotation marks omitted))); Omark Indus., Inc. v. Textron, Inc., 688 F.2d 1242, 1246 (9th Cir.
1982) (“There is also no showing that the production version of the patent, the 91 saw chain,
falls outside the claims of the patent.”); see also 35 U.S.C. § 282(a) (referring to “each claim of a
patent…”).
Conversely, patent enforcement litigation claims are generally not “of” a patent, but
instead “under,” or “based on,” or “arising under” a patent. Patent enforcement litigation claims
“belong” to the patent holder, not to the patent itself. The patent claims required under patent
law, on the other hand, “belong” to the patent. The disputed text of the Expiration Clause
describes the claims as belonging to the Patent (“claim of the Apeldyn Patent”). In contrast,
Paragraph 2.5 of the Patent Agreement, when discussing patent enforcement litigation claims,
refers to such claims as “[Apeldyn’]s claims under the Apeldyn Patent.” Paragraph 2.5 describes
enforcement litigation claims as belonging to Apeldyn, not the Patent, and as arising “under” the
Patent, not “of” the Patent. This comports with how litigation claims are generally described and
is in contrast to how patent claims are generally referenced. Thus, the use of the phrase “claim of
the Apeldyn Patent” in the Expiration Clause, as compared to the use of “[Apeldyn’]s claims
under the Apeldyn Patent” in Paragraph 2.5 discussing enforcement litigation claims, supports
Apeldyn’s interpretation of the Expiration Clause.
“Invalidation” is also a well-known patent term. Under United States patent law:
Each claim of a patent (whether in independent, dependent, or
multiple dependent form) shall be presumed valid independently of
the validity of other claims; dependent or multiple dependent
claims shall be presumed valid even though dependent upon an
invalid claim. The burden of establishing invalidity of a patent or
any claim thereof shall rest on the party asserting such invalidity.
35 U.S.C. § 282(a). Some claims of a patent might be invalidated at different times, and some
claims of a patent might survive until the patent itself expires. This comports with the Expiration
Page 8 – OPINION AND ORDER
Clause’s use of the phrase “last claim of the Apeldyn Patent” being “invalidated” as a trigger for
the expiration of the Patent Agreement. It was possible that all of the claims of the Patent could
have been invalidated before the Patent itself expired, and the invalidation of the last such claim
thus would have triggered the expiration of the Patent Agreement.
Litigation claims, on the other hand, are not generally referred to as being “invalidated.”
Litigation claims are generally referred to as being asserted, resolved, enforced, settled, upheld,
lost, dismissed, or tried. The use of the word “invalidated,” therefore, further supports
interpreting the word “claim” in the Expiration Clause to mean the claim of a patent and not a
claim asserted in enforcement litigation.
The Expiration Clause also anticipates that the claims will “expire.” Although it is the
patent itself that is generally referred to as “expiring,” any claims of the patent that have not been
invalidated would necessarily “expire” when the patent itself expires. The Expiration Clause
might not be the most artfully drafted, thereby resulting in this litigation, but referencing the
invalidation or expiration of the patent claims as opposed to separately referencing the
invalidation of the patent claims and the expiration of the patent itself does not render the
Expiration Clause ambiguous.
2. Other clauses in the patent agreement
Reviewing the Patent Agreement as a whole provides further support for the conclusion
that the term “claim” in the Expiration Clause references patent claims and not patent
enforcement litigation claims.
a. References in the Patent Agreement to resolution of patent enforcement
litigation claims
Eidos argues that the Expiration Clause means that expiration of the Patent Agreement is
not triggered until the final resolution of the last patent enforcement litigation claim (i.e., when
Page 9 – OPINION AND ORDER
the last litigation claim is “expired” or “invalidated”). Other sections of the Patent Agreement,
however, reference resolution of enforcement litigation and such litigation resolution is not
referred to as “expired” or “invalidated.” For example, Paragraph 11.3, which establishes
Apeldyn’s option to continue working with Eidos on ongoing litigation after termination of the
Patent Agreement, states that Eidos will continue to support Apeldyn until that particular
litigation “terminates through settlement or judgment.” No reference to “expiration” or
“invalidation” is included.
Additionally, Paragraphs 2.5, 4.3, and 11.3 all refer to the final resolution of enforcement
litigation as “settle or otherwise resolve,” “settle, license or otherwise be resolved,” and
“licenses, settlements, judgments, or verdicts,” respectively. The parties thus knew how to
reference the resolution of a patent enforcement litigation claim in the Patent Agreement and did
so fairly consistently throughout the Patent Agreement. No such phrasing was used in the
Expiration Clause. The parties could easily have established in the Expiration Clause that the
Patent Agreement remained in full force and effect until the last litigation or enforcement effort
finally terminates through licenses, settlement, judgment, verdict, or other resolution. Such
wording would have been consistent with how the resolution of enforcement litigation was
referenced elsewhere in the Patent Agreement. But the parties did not use such wording in the
Expiration Clause.
Interpreting the phrase “expires or is invalidated” to mean final resolution of enforcement
litigation claims, as Eidos urges, is inconsistent with all of the other clauses referencing final
litigation resolution and is not a sensible or reasonable interpretation. Thus, Eidos’s proffered
interpretation is insufficient to create an ambiguity in the meaning of the Expiration Clause. See,
Page 10 – OPINION AND ORDER
e.g., Peace River, 293 P.3d at 1071 (term must be capable of more than one sensible and
reasonable interpretation to be ambiguous).
b. References in the Patent Agreement to enforcement litigation
In addition to using different wording in the Expiration Clause from the rest of the Patent
Agreement’s references to the resolution of enforcement litigation, the Expiration Clause also
uses different wording than what is used elsewhere in the Patent Agreement to reference
enforcement litigation itself. Numerous clauses reference enforcement litigation, including:
(1) Paragraph 1.5 “enforcement effort…based on the Apeldyn Patent;” (2) Paragraph 1.9 “legal
action for enforcement and defense;” (3) Paragraph 2.3(b) “patent infringement actions;”
(4) Paragraph 3.1(a) “legal actions against the Enforcement Targets;” (5) Paragraph 6.1 “filing of
any law suit to enforce and/or defend the Apeldyn Patent;” (6) Paragraph 6.2 “actions for
infringement of the Apeldyn Patent will be brought;” (7) Paragraph 6.3 “litigation to enforce
and/or defend the Apeldyn Patent” and “bring a patent infringement action to enforce the
Apeldyn Patent;” and (8) Paragraph 6.4 “bringing suit to enforce and to defend the Apeldyn
Patent.” The parties refer to enforcement actions in the Patent Agreement in terms of “litigation”
or “suit” or “infringement action” and usually include “enforcement” or “defense” of the Patent.
The parties do not use the word “claim” to reference patent enforcement litigation. Thus,
interpreting the word “claim” in the Expiration Clause to mean “a claim asserted in enforcement
litigation,” as Eidos proposes, is inconsistent with the way enforcement actions are referenced
throughout the Patent Agreement.
Eidos points out the Paragraph 12.1 uses the word “claim” to mean a litigation claim, but
that section establishes arbitration for “any and all disputes, controversies, differences, or claims
which may arise between the parties” and does not refer to patent enforcement litigation. It is
Page 11 – OPINION AND ORDER
generic, boilerplate language preserving as broadly as possible the types of disputes between the
parties that are governed by the arbitration clause. The numerous specific clauses in the Patent
Agreement referencing patent enforcement litigation without using “claim” provide clearer and
more persuasive evidence of the meaning of “claim” than does the boilerplate arbitration clause.
3. The Expiration Clause is unambiguous as Apeldyn Asserts and is reasonable
Based on the plain meaning of the Expiration Clause and considering the text and context
of the Patent Agreement, the Expiration Clause is unambiguous because there is only one
“sensible and reasonable” interpretation of the word “claim” as used in that clause: a claim “of
the patent.” See Peace River, 293 P.3d at 1071.
Eidos, however, urges the Court to adopt Eidos’s interpretation that “claim” means a
litigation claim, adding the argument that the adoption of Apeldyn’s interpretation would create a
commercially unreasonable, or even “absurd,” result in that Eidos would have invested millions
of dollars only to have all of its rights expire less than five years from the contract date. This
argument is unavailing for several reasons. First, because the interpretation of the Expiration
Clause is resolved based on its text and context, the analysis ends, and the Court does not
consider extrinsic evidence of intent or maxims of construction. Williams, 271 P.3d at 109 (“If
the meaning of the provision is clear from the text and context, then the analysis ends.”) (citation
omitted). Second, under Oregon law, “the law does not protect parties who enter into unwise
agreements that are otherwise enforceable.” Miller v. C.C. Meisel Co., 51 P.3d 650, 656 (Or. Ct.
App. 2002). But see XCO Int’l Inc. v. Pac. Scientific Co., 369 F.3d 998, 1005 (7th Cir. 2004)
(“Contract interpretations that produce commercially unreasonable results are disfavored, not as
a matter of policy but simply because they are implausible to impute to the parties.”)
(interpreting contract under Illinois law). Third, as discussed below, the Court finds the
Page 12 – OPINION AND ORDER
Preservation Clause to be ambiguous, and its ambiguity is centered on Eidos’s potential accrued
rights or claims for compensation or reimbursement. Although the Court cannot state as a matter
of law at this time that Eidos has such accrued rights or claims, it appears that there may be such
accrued rights or claims that would result in some reasonable compensation or reimbursement
potentially being owed to Eidos under the Patent Agreement if there are future judgments or
settlements, attributable, at least in part, to Eidos’s contributions to the patent enforcement effort.
Thus, the Court’s interpretation of the Patent Agreement, considering both the Expiration Clause
and the Preservation Clause, does not necessarily create a commercially “absurd” result as
argued by Eidos.
The word “claim” as used in the Expiration Clause means the claim of a patent, and
interpreting it to mean an enforcement litigation claim is neither sensible nor reasonable. Thus,
the Patent Agreement expired on April 23, 2012, the day that, as the parties agree, the Patent
(and all of its associated claims) expired.
C. The Preservation Clause (Paragraph 11.5) of the Patent Agreement
Although the Court interprets the Expiration Clause unambiguously to mean that the
Patent Agreement expired on April 23, 2012, that does not imply that none of the Patent
Agreement’s terms remain in effect. To the contrary, the Preservation Clause provides that
certain specific clauses shall remain in effect even after the expiration of the Patent Agreement
and, additionally, that “a claim or right that has accrued prior to . . . expiration” is not
extinguished by expiration. Pat. Agm. ¶ 11.5. As discussed below, this Preservation Clause is
ambiguous and its final interpretation is not appropriate for summary judgment.
1. The text and context of the Preservation Clause
The disputed provision of the Preservation Clause is the final sentence, which states that:
“Termination or expiration of this Agreement will not extinguish a claim or right that has
Page 13 – OPINION AND ORDER
accrued prior to termination or expiration.” Pat. Agm. ¶ 11.5. The key to resolving this dispute is
determining what rights or claims accrue, when they accrue, and how they accrue. The parties
offered little briefing on this issue. At oral argument, Apeldyn argued that only a license,
judgment, settlement, or verdict completed before expiration of the Patent Agreement but with
outstanding obligations (such as payment obligations) would qualify as an accrued claim or right
under the Preservation Clause. Eidos argued that essentially everything relating to a pending and
unresolved patent enforcement lawsuit, including Eidos’s right to sit on the Steering Committee,
choose litigation counsel, participate in settlement negotiations, and share in settlement or
judgment proceeds, is an “accrued” right, provided that Eidos contributed in some way to that
litigation under the Patent Agreement before it expired.
The text of the Preservation Clause offers little guidance as to when a claim or right has
accrued and what types of claims or rights might accrue under the Patent Agreement. The parties
offered little evidence regarding the meaning of “a claim or right that has accrued prior to . . .
expiration.” The Court finds that, based on the text alone, the Preservation clause is ambiguous.
Considering the context of the Preservation Clause, immediately before the “accrued
rights” sentence, the Preservation Clause specifically preserves certain enumerated clauses of the
Patent Agreement as surviving expiration. These clauses address confidentiality, choice of law,
arbitration, notice provisions, and some miscellaneous boilerplate contract provisions. After
specifically enumerating these clauses as remaining in effect after termination or expiration of
the Patent Agreement, the parties included an additional sentence expressly preserving all
“accrued” rights or claims. Thus, the context of the Preservation Clause demonstrates that there
are rights or claims that might accrue under the Patent Agreement and be preserved after
Page 14 – OPINION AND ORDER
expiration in addition to those set forth in the specifically enumerated and preserved clauses. The
Patent Agreement, however, does not define “accrued” rights or claims.
The context of the Preservation Clause fails to illuminate precisely what those rights
might be or how and when they might accrue. It does not appear from the text and context of the
Preservation Clause that every right under the Patent Agreement necessarily would qualify as an
accrued right. If every right was an accrued right, there would be no need for the Preservation
Clause to enumerate and preserve specific clauses. See Williams, 271 P.3d at 109 (in interpreting
a contract, the court must, if possible, give effect to all of its provisions). It also appears that the
parties gave some consideration to which clauses or rights they considered essential to remain in
effect after termination or expiration of the Patent Agreement.
2. Assistance provided by other clauses in the Patent Agreement
There are some clauses in the Patent Agreement that potentially provide rights or claims
that might be considered to have accrued and thus not be extinguished by expiration of the Patent
Agreement. Unfortunately, those clauses themselves are ambiguous and do not, by themselves,
resolve the ambiguity of the Preservation Clause.
For example, Paragraph 1.5 defines “Gross Revenues” as “all sums received or recovered
by APELDYN, following the Effective Date [of the Patent Agreement], as a result of or in
connection with any license or enforcement effort pursuant to this Agreement based on the
Apeldyn Patent. . . .” There is no time restriction stated, other than that the commencement
period for Gross Revenues is after the effective date of the Patent Agreement. No termination
period is stated, and the parties do not specify whether the sums received from a “license or
enforcement effort pursuant to this Agreement” have to be received before the expiration of the
Patent Agreement in order to be considered Gross Revenues or whether the “license or
Page 15 – OPINION AND ORDER
enforcement effort” has to be completed before the expiration of the Patent Agreement. Because
the Gross Revenues clause is silent as to the effect of expiration or termination, and the Patent
Agreement clearly establishes that expiration and termination are contemplated outcomes, the
Gross Revenues clause is ambiguous as to its relationship to any accrued rights or claims that
may survive expiration.
Similarly, Paragraph 4.1 of the Patent Agreement establishes that Apeldyn has an
“obligation to promptly compensate EIDOS for its services and to reimburse EIDOS for its
expenses as set forth in, inter alia, Parts 3.3, 6.4, and 6.5 of this Agreement.” Again, there is no
time limitation expressed on this obligation, and there is no specific discussion of how expiration
or termination of the Patent Agreement might affect this obligation of Apeldyn. This paragraph
may create an accrued right or claim of Eidos for compensation or reimbursement, but this clause
is itself ambiguous—for example, how would any “compensation” or “reimbursement” be
calculated? Also, what happens if Apeldyn, after expiration of the Patent Agreement, is able to
move forward with a previously-filed patent enforcement action, retains and pays for new
counsel, and engages in significant new efforts resulting in a successful trial or settlement, all
without Eidos’s continuing participation? How would Eidos be compensated, if at all? Would
compensation be based on the Distribution of Revenue formula established in Section 4 of the
Patent Agreement? Or would compensation be determined by a percentage of that distribution,
based on each party’s relative contribution to the overall enforcement effort? These are all
questions that are not resolved by the text and context of the Patent Agreement, rendering
Paragraph 4.1 ambiguous and, by extension, the Preservation Clause.
It is unambiguous, however, that Apeldyn is under no obligation to compensate or
reimburse Eidos other than from Gross Revenues received—so if Apeldyn is unsuccessful in its
Page 16 – OPINION AND ORDER
pending and continuing enforcement actions, it will not owe any further reimbursement or
compensation to Eidos under the Patent Agreement. Pat. Agm. ¶ 4.6.
The Court finds that, after viewing the Patent Agreement as a whole, the Preservation
Clause is ambiguous as to what additional rights or claims may have accrued before expiration
and thus would survive expiration.
3. Yogman additional steps
Having found the meaning of the Preservation Clause to be ambiguous, it is generally not
appropriate to resolve a contractual ambiguity at summary judgment. See Dial Temp. Help Serv.,
2013 WL 961906, at *1; Madson, 149 P.3d at 222. There is an exception to this general rule
where there is no relevant extrinsic evidence to resolve the ambiguity. See Dial Temp. Help
Serv., 2013 WL 961906, at *2; Madson, 149 P.3d at 222 n.3. “In such circumstances, the court
can, on summary judgment, determine the contract’s meaning by applying appropriate maxims
of construction.” Madson, 149 P.3d at 222 n.3 (citing Yogman, 937 P.2d at 1022). This exception
does not apply here because the parties have not indicated that there is no relevant and
admissible extrinsic evidence to be offered. Although the parties provided limited admissible
extrinsic evidence of intent in their summary judgment submissions on this issue,1 they requested
at oral argument the opportunity to provide additional extrinsic evidence, if such may be helpful
to the Court. Thus, there is no agreed-upon lack of extrinsic evidence on which to skip Yogman
step two and have the Court determine at this time the contract’s meaning based on maxims of
construction. See id. (declining to apply the exception because “the parties each proffered some
extrinsic evidence relating to the disputed issue and, unlike in Yogman, they did not agree that
there was no other extrinsic evidence that was relevant to the meaning of the contract”).
1
The parties focused almost exclusively on the Expiration Clause in their summary
judgment submissions.
Page 17 – OPINION AND ORDER
The Court finds that resolution of the meaning of the Preservation Clause at summary
judgment is inappropriate. Accordingly, the analyses under steps two and three of Yogman shall
be conducted by the trier-of-fact at trial.2
D. Apeldyn’s Motion to Strike
Apeldyn moved to strike certain materials filed by Eidos in connection with Eidos’s cross
motion for summary judgment and response in opposition to Apeldyn’s motion for summary
judgment. At oral argument, the Court noted that certain evidence submitted by Eidos was
evidence of unexpressed, subjective intent and therefore inadmissible under Oregon’s law of
contract interpretation. See discussion, supra. The Court also noted that some evidence submitted
by Eidos was inadmissible as not being based on personal knowledge. The Court stated that it
would not consider any of the inadmissible evidence. Accordingly, the Court will not consider
any inadmissible evidence submitted by Eidos and therefore denies Apeldyn’s Motion to Strike
as moot.
CONCLUSION
Apeldyn’s motion for partial summary judgment is GRANTED IN PART AND DENIED
IN PART. Dkt. 62. Paragraph 11.1 of the Patent Agreement is unambiguous, and the Court finds
both that the Patent Agreement expired on April 23, 2012, and that under the express terms of
the Patent Agreement certain clauses remain in full force and effect even after expiration.
Paragraph 11.5 of the Patent Agreement, however, is ambiguous. The Court cannot determine, as
a matter of law, that the expiration of the Patent Agreement extinguished all claims of Eidos
against Apeldyn based on litigation that was pending before expiration. Eidos’s cross motion for
2
Based on the nature of the claims, the Court will be the trier-of-fact with respect to
interpreting the meaning of the Patent Agreement.
Page 18 – OPINION AND ORDER
partial summary judgment is DENIED. Dkt. 86. Apeldyn’s Motion to Strike is DENIED AS
MOOT. Dkt. 99.
IT IS SO ORDERED.
Dated this 8th day of April, 2013.
/s/ Michael H. Simon
Michael H. Simon
United States District Judge
Page 19 – OPINION AND ORDER
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?