Oyster Optics, LLC v. Infinera Corporation
Filing
86
MEMORANDUM OPINION AND ORDER re 39 SEALED PATENT MOTION FOR SUMMARY JUDGMENT REGARDING LICENSE AND RELEASE DEFENSES filed by Infinera Corporation.. Signed by District Judge Rodney Gilstrap on 6/25/2019. (nkl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
OYSTER OPTICS, LLC,
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Plaintiff,
v.
INFINERA CORPORATION,
Defendant.
CIVIL ACTION NO. 2:18-CV-00206-JRG
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Infinera Corporation’s (“Infinera”) Motion for Summary
Judgment Regarding Its License and Release Defenses (the “Motion”). (Dkt. No. 39.) The Court
heard oral argument on the Motion on June 12, 2019. (Dkt. No. 74.) Also before the Court are
Plaintiff Oyster Optics, LLC’s (“Oyster”) Notice of Supplemental Material Facts and Notice of
Inaccurate Case Quote in Defendant’s Slide and Argument at Hearing, (collectively, the “Notice”
or “Notices”), and Infinera’s Response to Plaintiff’s Presentation Notice (the “Response”). (Dkt.
Nos. 72, 80, 81.) Having considered the parties’ briefing and oral arguments as noted above, the
Court GRANTS the Motion for the reasons set forth herein.
I.
INTRODUCTION
On November 24, 2016, Oyster filed suit in this court against Coriant (USA), Inc., Coriant
North America, LLC, Coriant Operations, Inc. (collectively, “Coriant”), Infinera, and several other
defendants for patent infringement. See Oyster Optics, LLC v. Coriant America, Inc., et al., No.
2:16-cv-01302-JRG (the “Litigation”). The Court consolidated those cases for pretrial purposes.
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(Case No. 2:16-cv-01302-JRG, Dkt. No. 23.) 1 On May 15, 2018, Oyster filed the above-captioned
case against Infinera, alleging infringement of U.S. Patent Nos. 7,620,327 (the “’327 Patent”);
8,913,898 (the “’898 Patent”); and 9,749,040 (the “’040 Patent”) (collectively, the “Patents-inSuit”). (Dkt. No. 1). The Court severed Oyster’s earlier-filed case against Infinera from the
Litigation and consolidated it with this case. (Dkt. No. 603.)
On June 28, 2018, Oyster and Coriant entered into an agreement that settled Oyster’s
claims against Coriant in the Litigation (the “Agreement”). (Dkt. No. 39–1.) The Agreement
grants Coriant and its “Affiliates” a “royalty-free, irrevocable, perpetual, and fully paid-up license”
to the “Licensed Patents,” (id. § 4.1), and releases Coriant and its “Affiliates” from “any and all
claims . . . based on the Licensed Patents” that “aris[e] from activities” in the United States “up
to” and “prior to” June 27, 2018, (id. § 3.1). On October 1, 2018, Infinera acquired Coriant, and
“now owns, either directly or indirectly, 100% of the shares or ownership interest in [Coriant].”
(Dkt. No. 39–2 ¶¶ 4, 6.) Having acquired Coriant, Infinera argues that it is now an “Affiliate” of
Coriant, and as such, moves for summary judgment that Oyster’s infringement claims are barred
by the release and license provisions in the Agreement. (Dkt. No. 39.)
II.
LEGAL STANDARDS
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 of law.” Fed. R.
Civ. P. 56(a). Material facts are those “that might affect the outcome of the suit under the
governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute about a
material fact is “genuine” “if the evidence is such that a reasonable jury could return a verdict for
1
Unless otherwise noted, all citations to docket entries are to Case No. 2:18-cv-00206-JRG.
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the nonmoving party.” Id. “[T]he mere existence of some alleged factual dispute between the
parties will not defeat an otherwise properly supported motion for summary judgment; the
requirement is that there be no genuine issue of material fact.” Id. at 247–48 (emphasis in original).
To resolve the Motion, the Court must construe the Agreement. Contract interpretation is
a question of law and may be resolved by summary judgment. See Adirondack Transit Lines, Inc.
v. United Transp. Union, Local 1582, 305 F.3d 82, 85 (2d. Cir. 2002) (applying New York contract
law); Riverside S. Planning Corp. v. CRP/Extell Riverside, L.P., 920, N.E.2d 359, 363 (N.Y. 2009)
(“Whether an agreement is ambiguous is a question of law for the courts.”). There is no dispute
between the parties that New York law governs the Agreement and its construction.
B. License and Release
“A patent grants its owner the right to exclude others from making, using, or selling the
patented invention. However, all or part of the right to exclude may be waived by granting a
license, which may be express or implied.” Carborundum Co. v. Molten Metal Equip. Innovations,
Inc., 72 F.3d 872, 878 (Fed. Cir. 1995) (internal citations omitted). “[A] patent license agreement
is in essence nothing more than a promise by the licensor not to sue the licensee” and “can be
written to convey different scopes of promises not to sue, e.g., a promise not to sue under a specific
patent, or more broadly, a promise not to sue under any patent the licensor now has or may acquire
in the future. Spindelfabrik Suessen-Schurr, Stahlecker & Grill GmbH v. Schubert & Salzer
Maschinenfabrik Aktiengesellschaft, 829 F.2d 1075, 1081 (Fed. Cir. 1987).
Similarly, a patent owner may, by agreement, promise not to assert claims based on conduct
that arose at a particular time and place. Such promises are known as “releases” from liability.
See, e.g., Dinesol Bldg. Prod., Ltd. v. Tapco Int’l, Inc., 201 Fed. Appx. 764, 766 (Fed. Cir. 2006)
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(determining “whether the Settlement Agreement released Dinesol from claims that its custom
plastic shutters infringe Tapco’s shutter patents”).
Generally, licenses apply prospectively and releases apply retroactively.
See, e.g.,
Schering Corp. v. Roussel-UCLAF SA, 104 F.3d 341, 345 (Fed. Cir. 1997) (explaining that “the
license grants full protection against a claim of future infringement” and that to deprive another
from “the right to sue for past damages for past infringement” “would require a release, not a
license”); Murray-Gardner Mgt. v. Iroquois Gas Transmission Sys., 646 N.Y.S.2d 418, 419 (Sup.
Ct. 1996) (“Another applicable principle is that releases bar suits on causes of action arising on or
prior to the date of their execution but will not bar subsequent claims unless they are specifically
embraced within the release or fall within the fair import of its terms.”). However, any such
limitations are a matter of contract interpretation under the governing law. See e.g., Realtime Data,
LLC v. T-Mobile USA, Inc., 936 F. Supp. 2d 795, 801–04 (E.D. Tex. 2013) (interpreting license
and release provisions under New York law).
C. Contract Interpretation
As noted, the Agreement is governed by New York law. (Dkt. No. 39–1 §9.) Under New
York law, a contract must be construed in accordance with the parties’ intent. Schron v. Troutman
Sanders LLP, 986 N.E.2d 430, 433 (N.Y. 2013). To determine the parties’ intent, the court first
looks to the terms of the agreement. Id. (“The best evidence of what parties to a written agreement
intend is what they say in their writing.”); U.S. Bank Nat. Ass’n v. Mask, 30 N.Y.S.3d 713, 715
(Sup. Ct. 2016) (“The court’s fundamental objective in interpreting a contract is to determine the
parties’ intent from the language they have employed.”). “A written agreement that is complete,
clear, and unambiguous on its face must be enforced according to the plain meaning of its terms.”
Schron, 986 N.E.2d at 433; see also Ellington v. EMI Music, Inc., 24 N.Y.3d 239, 244 (2014)
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(“Where the terms of a contract are clear and unambiguous, the intent of the parties must be found
within the four corners of the contract, giving a practical interpretation to the language employed
and reading the contract as a whole.”).
A court may consider “parol evidence—evidence outside the four corners of the
document—” only if a term is ambiguous. Schron, 986 N.E.2d at 433. “Whether an agreement is
ambiguous is a question of law for the court[]” and “is determined by looking within the four
corners of the document, not to outside sources.” Riverside, 920 N.E.2d at 363; Trans-Pro Logistic
Inc. v. Coby Electronics Corp., No. 05 CV 1759 (CLP), 2012 WL 526764, at *9 n.18 (E.D.N.Y.
Feb. 16, 2012) (“[T]he search for ambiguity must be conducted within the four corners of the
writing.”). A term is ambiguous if it “fails to disclose its purpose and the parties’ intent, or when
. . . [it] is susceptible of two reasonable interpretations.” Ellington, 24 N.Y.3d at 244 (internal
citations omitted). “[A] contract is not rendered ambiguous just because one of the parties attaches
a different, subjective meaning to one of its terms.” Bank of N.Y. Mellon v. WMC Mortgage, LLC,
22 N.Y.S.3d 3, 8 (Sup. Ct. 2015); see, e.g., Triax Capital Advisors, LLC v. Rutter, 921 N.Y.S.2d
54, 56–57 (Sup. Ct. 2011) (holding that emails between the parties cannot be used to create an
ambiguity in an otherwise clear agreement).
These principles are limited by two maxims. First, if a contract contains a merger clause,
“a court is obliged ‘to require full application of the parol evidence rule in order to bar the
introduction of extrinsic evidence to vary or contradict the terms of the writing.’” Schron, 986
N.E.2d at 433; Ashwood Capital, Inc. v. OTG Mgmt., Inc., 948 N.Y.S.2d 292, 298 (Sup. Ct. 2012)
(“Furthermore, the agreement contains both a no-oral-modification clause and a broad merger
clause, which as a matter of law bars any claims based on an alleged intent that the parties failed
to express in writing.”). Second, New York courts are “extremely reluctant” to imply or vary terms
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in commercial contracts that were “negotiated at arm’s length” between “sophisticated, counseled
business people.” Ashwood, 948 N.Y.S.2d at 297. In those cases, the rule that a document’s clear
and unambiguous terms should govern is “appl[ied] with even greater force.” Id.; see, e.g.,
Greenfield v. Philles Records, Inc., 780 N.E.2d 166, 174 (N.Y. 2002) (explaining that court will
not rewrite terms “under the guise of contract interpretation” to avoid a harsh outcome for
Plaintiff).
In sum, New York courts apply an “objective theory of contract.” SR Intern. Business Ins.
Co. Ltd., et al. v. World Trade Cntr. Prop. LLC, et al., 467 F.3d 107, 125 (2d Cir. 2006) (applying
New York law). Contracts are construed “by looking to ‘the objective manifestations of the intent
of the parties as gathered by their expressed words and deeds.’” Id. Only when a contract is
ambiguous may the court consider extrinsic evidence, and even then, “a party’s uncommunicated
subjective intent cannot supply the ultimate meaning of an ambiguous contract.” Id. at 125–26
(citing cases in which courts considered parol evidence because the contracts were ambiguous).
III.
DISCUSSION
The Agreement provides a release and license under the Patents-in-Suit to Coriant and its
“Affiliates.” (Dkt. No. 39–1 §§ 3.1, 4.1.) Infinera argues that since it is an “Affiliate” of Coriant,
those “provisions independently bar Oyster from continuing to assert its patent infringement
claims against Infinera.” (Dkt. No. 39 at 1.) Oyster disagrees. It argues that (1) Infinera is not
covered by the release and license provisions because it became an “Affiliate” after the effective
date of the Agreement, and (2) regardless, Infinera breached express covenants in the Agreement.
(Dkt. No. 44.)
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The Court finds, and the parties agree, that the contract is clear and unambiguous. 2
Accordingly, the Court limits its analysis to the four corners of the document. See Schron, 986
N.E.2d at 433. The Court first reviews the relevant definitions set forth in Section 1 of the
Agreement. Then, the Court applies those definitions to the release and license provisions to
determine if they bar Oyster’s claims against Infinera. In conducting this analysis, the Court
affords terms their plain meaning and considers the contract as a whole. Ellington, 24 N.Y.3d at
244. 3
2
(Dkt. No. 39 at 9 (“There is no ambiguity in any of the relevant provisions of the Agreement”)
(Infinera’s Motion)); Dkt. No. 44 at at 5 (arguments based on “the plain language of the
Agreement”) (Oyster’s response to Motion).)
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Oyster argues that New York law requires courts to consider both the text of the agreement and
the surrounding circumstances that gave rise to it—even if the contract is clear and unambiguous
on its face. (Dkt. No. 48 at 3 (“Accordingly, New York courts interpret releases under ‘special
rules’ and caution that a release’s ‘literal language should not be determinative of the ultimate
result or be applied mechanically.’”); (Dkt. No. 77 at 17–25 (Oyster’s presentation slides).)
Consistent with that view, Oyster has submitted extrinsic evidence regarding the parties’ subjective
intent vis-à-vis the release and license provisions of the Agreement. (Dkt. Nos. 72, 80.) The Court
has conducted a careful review of New York contract law, and finds that, despite Oyster’s
arguments to the contrary, New York law does not permit courts to consider parol evidence to
construe a clear and unambiguous contract. See Greenfield v. Philles Records, Inc., 780 N.E.2d
166, 174 (N.Y. 2002) (“In contrast to the ‘four corners’ rule that New York has long applied,
California courts preliminary consider all credible evidence of the parties’ intent in addition to the
language of the contract.”); In re Rickel & Associates, Inc., 272 B.R. 74, 85 (S.D.N.Y. 2002)
(“Given the facial ambiguity [of the release provision], the Court may consider extrinsic evidence
that is consistent with the express language of the agreement.”) (emphasis added); MurrayGardner Mgt. v. Iroquois Gas Transmission Sys., 646 N.Y.S.2d 418, 419 (Sup. Ct. 1996) (“It is
well settled that releases are contracts that, unless their language is ambiguous, must be interpreted
to give effect to the intent of the parties as indicated by the language employed.”) (emphasis
added). Absent a finding of ambiguity or an allegation of fraud, mistake, or duress, New York
courts limit contractual interpretation to the four corners of the document. See, e.g., Rubycz-Boyar
v. Mondragon, 790 N.Y.S.2d 266, 267 (Sup. Ct. 2005) (“Our review of the release here reveals no
ambiguity that would permit consideration of extrinsic evidence.”); Kraft Foods, Inc. v. All These
Brand Names, Inc., 213 F. Supp. 2d 326, 330 (S.D.N.Y. 2002) (holding that “nothing within the
four corners of the Release suggests an ambiguity that would permit this Court to look beyond the
document to extrinsic evidence as to the parties’ intent” and that “absent some evidence that the
Release was ‘procured by fraud, duress, undue influence, or some other illegal means,’ Kraft’s
claim for breach of contract is barred by the Release”); Mangini v. McClurg, 249 N.E.2d 386, 388
(N.Y. 1969) (considering extrinsic evidence where the parties “alleged that the release was entered
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A.
Definitions from the Agreement
i. Effective Date
The Agreement defines the “Effective Date” as June 27, 2018. (Dkt. No. 39–1, preamble.)
ii. Litigation
The Agreement defines “Litigation” as the “litigation pending in the United States District
Court for the Eastern District of Texas, Lead Case No. 2:16-cv-01302-JRG-RSP, in which Oyster
has asserted infringement of U.S. Patent Nos. 6,594,055; 6,469,816; 6,476,952; 7,099,592;
8,913,898; 7,620,327; 8,374,511; and 9,363,012 (the ‘Patents-in-Suit’) by the Coriant
Defendants.” (Id.) “Coriant Defendants” are defined as “Coriant (USA), Inc., Coriant North
America, LLC, [and] Coriant Operations, Inc.” (Id.) The “Litigation,” which may be referred to
herein as “Case No. 2:16-cv-01302-JRG-RSP,” is the same “Litigation” defined in the Background
section above.
iii. Consolidated Litigation
“Consolidated Litigation” refers to Oyster’s “assert[ion] [of] infringement of the Patentsin-Suit by other defendants named in civil actions pending in the United States District Court for
the Eastern District of Texas, which civil actions have been consolidated into the above-identified
Litigation.” (Id.) Oyster’s infringement claims against Infinera were initially consolidated with
the Litigation, and so Infinera is one of the “other defendants” named in the Consolidated
Litigation. (See Case No. 2:16-cv-01302-JRG-RSP, Dkt. No. 23.)
iv. Territory
“Territory” is defined as the “United States.” (Dkt. No. 39–1 § 1.8.)
into under a mutual mistake of fact”). Since the Agreement is unambiguous and Oyster has not
moved for rescission, the Court limits its analysis to the parties’ express written terms.
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v. Affiliate
An “Affiliate” means “any Person, now or in the future, which . . . (ii) has Control of a
Party hereto.” (Id. §1.1.) “Person” includes “any . . . corporation,” (id. §1.5), and “Control”
means, inter alia, “that fifty percent (50%) or more of the controlled entity’s shares or ownership
interest representing the right to make decisions for such entity are owned or controlled, directly
or indirectly, by the controlling entity.” (Id. §1.1.) “Party” includes Coriant. (Id., preamble.)
Substituting “Person” and “Control” into the definition of “Affiliate,” an “Affiliate” is:
“any [corporation], now or in the future, which . . . (ii) has [fifty percent (50%) or more of the
controlled entity’s shares or ownership interest representing the right to make decisions for such
entity . . . owned or controlled, directly or indirectly, by the controlling entity].”
Infinera is a “Person” because it is a corporation. (Dkt. No. 39–2 ¶ 3 (“Infinera is a
corporation founded in 2000 and is now one of the leading optical hardware producers
worldwide.”) (Declaration of Brad Feller on behalf of Infinera).) Infinera also “has Control of a
Party hereto” because it wholly-acquired Coriant on October 1, 2018, and “now owns, either
directly or indirectly, 100% of the shares or ownership interest in Coriant (USA) Inc., Coriant
Norther America, LLC, and Coriant Operations, Inc.” (Id. ¶¶ 4, 6.) As a result, the Court finds
that Infinera is an “Affiliate” as defined in Section 1.1 of the Agreement.
vi. Licensed Patents
“Licensed Patents” are defined, inter alia, to “include, without limitation, the patents and
applications set forth in Appendix B.” (Dkt. No. 39–1 § 1.3.) Appendix B lists U.S. Patent Nos.
9,749,040; 8,913,898; and 7,620,327, which are the Patents-in-Suit. (Id. Appendix B.)
Accordingly, the Patents-in-Suit are “Licensed Patents” under the Agreement.
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vii. Licensed Product
“Licensed Product” is defined as “any Subject Matter made, have made, used, offered for
sale, sold, imported, exported, distributed, or otherwise supplied, provided or disposed of, in the
U.S. at any time, directly or indirectly by or for or on behalf of any of the Coriant Defendants,
their Affiliates, or respective predecessors, predecessors-in-interest, successors, or successors-ininterest, and combinations of the foregoing.” (Id. § 1.4.) “Subject Matter” means “regardless of
origin, any method(s), process(es), product(s), product line(s), service(s), device(s), system(s),
component(s), hardware, software and/or software algorithm, and/or combination(s) of any one or
more of the foregoing.” (Id. § 1.7.)
Substituting “Subject Matter” into the definition of “Licensed Product,” a “Licensed
Product” is defined as “regardless of origin, any method(s), process(es), product(s), product line(s),
service(s), device(s), system(s), component(s), hardware, software and/or software algorithm,
and/or combination(s) of any one or more of the foregoing, made, have made, used, offered for
sale, sold, imported, exported, distributed, or otherwise supplied, provided or disposed of, in the
U.S. at any time, directly or indirectly by or for or on behalf of any of the Coriant Defendants,
their Affiliates, or respective predecessors, predecessors-in-interest, successors, or successors-ininterest, and combinations of the foregoing.”
Oyster alleges that Infinera infringes the Patents-in-Suit because it “makes, uses, offers for
sale, and/or sells in the United States” the following products: products utilizing Infinera’s Infinite
Capacity Engine (“ICE”), including the ICE Version 4 and ICE Version 5; the DNT Family; DTNX Family; Could Xpress Family; transmode’s Tm-4000 platforms; 100G OTN Muxponder,
Infinera 100 G OTN Transponder; Infinera 100 OTN Transponder II; Infinera EMXP IIe packetoptical transport switch Family; and the Infinera PT-Fabric packet-optical transport switch
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products and the compatible chassis in which they are installed, including without limitation the
TM-300, TM-3000/II, TM-301, and TM-301/II (collectively, the “Accused Products”). (Dkt. No.
1 ¶¶ 11, 25, 39 (Complaint).) Since Infinera is an “Affiliate” of Coriant and the Accused Products
are alleged to have been “made, used, offered for sale, and/or sold in the United States,” the Court
finds that the Accused Products in this case are “Licensed Products” under the Agreement.
B. The Release
Having reviewed the relevant definitions, the Court first addresses whether Infinera is
released from liability under Section 3.1 of the Agreement (the “Release”). (Dkt. No. 39–1 § 3.1.)
The Court begins its analysis with the express terms of the Release, which states in relevant part:
3.1.
Oyster’s Release to the Coriant Defendants: In consideration of the
payment recited in this Agreement and in consideration of the covenants, licenses,
and releases granted herein as well as the dismissal of the Litigation to be filed with
the Court and joining with Oyster in motions under 35 U.S.C. 317 to terminate the
Coriant Defendants’ participations in all Inter Partes Review (“IPR”) proceedings
involving any of the Patents-in-Suit, Oyster provides a release to each of the
Coriant Defendants and their Affiliates. The scope of that release is as follows:
Oyster, on behalf of itself and its Affiliates . . . does hereby forever release and
discharge the Coriant Defendants, their Affiliates . . . , from any and all claims,
demands, matters, rights, or causes of action asserted or assertable without
regard to jurisdiction questions, in the Territory, whether known or unknown,
arising from activities in the Territory up to the Effective Date, whether or not
raised in the Litigation, based on the Licensed Patents or based on the conduct
of the Litigation, including without limitation all claims . . . whatsoever, in law or
equity, and also including without limitation any asserted or unasserted claims
of infringement of any of the Licensed Patents on account of, in whole or in part,
any method, process, product, product line, service, device, system, component,
hardware, software and/or software algorithm, and/or combination of any one or
more of the foregoing, made, have made, used, offered for sale, sold, imported,
exported, distributed, or otherwise supplied, provided or disposed of, directly or
indirectly, by or for or on behalf of any of the Coriant Defendants and their
Affiliates, prior to the Effective Date. . . .
(Id. (emphasis added).)
Focusing on the scope of the Release, it provides that: “Oyster . . . does hereby forever
release and discharge the Coriant Defendants, their Affiliates . . . from any and all claims . . .
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asserted or assertable without regard to jurisdiction questions, in the Territory, whether known or
unknown, arising from activities in the Territory up to the Effective Date, whether or not raised in
the Litigation, based on the Licensed Patents . . . including without limitation any asserted or
unasserted claims of infringement of the Licensed Patents . . . by or for or on behalf of any of the
Coriant Defendants and their Affiliates, prior to the Effective Date.” (Id.)
This provision includes the terms “Affiliate,” “Territory,” “Effective Date,” “Litigation,”
and “Licensed Patents,” which are each defined in Section 1.1 of the Agreement. As discussed
above, Infinera is an “Affiliate;” “Territory” means the United States; the “Effective Date” is June
27, 2018; the “Litigation” refers to Case No. 2:16-cv-01302-JRG-RSP; and “Licensed Patents”
includes the Patents-in-Suit. See supra Part III.A.i. Substituting the definitions of those terms into
Section 3.1, the Release states as follows: “Oyster . . . does hereby forever release and discharge
the Coriant Defendants, [Infinera] . . . from any and all claims . . . asserted or assertable without
regard to jurisdiction questions, in the [United States], whether known or unknown, arising from
activities in the [United States] up to [June 27, 2018], whether or not raised in [Case No. 2:16-cv01302-JRG-RSP], based on the [Patents-in-Suit]. . . including without limitation any asserted or
unasserted claims of infringement of the [Patents-in-Suit]. . . by or for or on behalf of any of the
Coriant Defendants and [Infinera], prior to [June 27, 2018].” (Id.)
Considering the contract as a whole and the plain meaning of each term, the Court finds no
ambiguity in the Agreement. Ellington, 24 N.Y.3d at 244. The text is clear: the Release applies
to (1) Infinera because it is an “Affiliate;” and (2) the claims asserted by Oyster against Infinera
because the claims (i) are based on “infringement of the [Patents-in-Suit];” (ii) are alleged to
“aris[e] from activities in the [United States];” and (iii) are alleged to have occurred “up to [June
27, 2018].” (Id.; see also Dkt. No. 1 ¶¶ 3–5, 10–50) (Complaint).)
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Oyster argues that Infinera is not released from liability because it became an “Affiliate”
after the Effective Date of the Agreement. (Dkt. No. 44 at 2.) According to Oyster, “Affiliate” is
defined as an entity with present “Control” of a Party to the Agreement, and so “a party is an
Affiliate . . . only during such period of time as it has the requisite control relationship with a
Party.” (Id. at 5.) Oyster also submits that the Release “is both limited to claims . . . arising from
activities in the Territory up to the Effective Date” and “to claims arising from acts ‘by or for or
on behalf of any of the Coriant Defendants and their Affiliates, prior to the Effective Date.’” (Id.
at 6.) Oyster argues that “[t]hese two references to ‘the Effective Date’ are redundant unless the
second reference is intended to modify ‘Affiliates.’” (Id.)
Oyster’s arguments are unavailing. “Affiliate” is expressly defined as any “Person, now
or in the future, which . . . (ii) has Control of a Party hereto.” (Dkt. No. 39–1 § 1.1 (emphasis
added).) When that definition is substituted into the Release, the provision reads: “Oyster provides
a release to each of the Coriant Defendants and their Affiliates [i.e., any Person, now or in the
future, which: . . . (ii) has Control of a Party hereto].” (Id. § 3.1 (emphasis added).) There is no
reasonable doubt that based on the express written language, the Release was intended to apply to
both Affiliates at the time the Agreement became effective as well as to entities that became
“Affiliates” “in the future.” (Id.) To view this otherwise would be to acknowledge a direct
impediment to just the type of future acquisition that occurred between Coriant and Infinera. That
Coriant would not want a future potential acquirer to be unprotected and thereby threaten such a
future sale is wholly consistent with the Agreement’s “in the future” language and its clear
meaning.
The Court is also not persuaded that “prior to the Effective Date” was intended to modify
“Affiliates” such that only those that existed before the Effective Date are released from liability.
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When the provision is read as a whole, it is clear that the clause “prior to the Effective Date”
modifies the types of claims that are released, and not the entities that can claim the benefit of the
release.
3.1.
The scope of that release is as follows: Oyster. . . does hereby forever release
and discharge the Coriant Defendants, their Affiliates . . . , from any and all claims
. . . asserted or assertable without regard to jurisdiction questions, in the Territory,
whether known or unknown, arising from activities in the Territory up to the
Effective Date, whether or not raised in the Litigation, based on the Licensed
Patents or based on the conduct of the Litigation, including without limitation all
claims . . . whatsoever, in law or equity, and also including without limitation
any asserted or unasserted claims of infringement of any of the Licensed
Patents on account of, in whole or in part, any method, process, product,
product line, service, device, system, component, hardware, software and/or
software algorithm, and/or combination of any one or more of the foregoing,
made, have made, used, offered for sale, sold, imported, exported, distributed,
or otherwise supplied, provided or disposed of, directly or indirectly, by or for
or on behalf of any of the Coriant Defendants and their Affiliates, prior to the
Effective Date. . . .
(Id. (emphasis added).)
The bold section above clarifies that the Release “also includ[es] without limitation any
asserted or unasserted claims of infringement of any of the Licensed Patents.” That clause is
modified by the phrase “prior to the Effective Date” as indicated by the commas separating the
clauses. (Id. (“. . . , and also including without limitation any asserted or unasserted claims of
infringement of any of the Licensed Patents on account of, in whole or in part, any method . . . . ,
and/or any combination of any one or more of the foregoing, made, have made, . . . , directly or
indirectly, by or for or on behalf of any of the Coriant Defendants and their Affiliates, prior to the
Effective Date.”) (emphasis added).) 4
Oyster’s interpretation would render superfluous the
4
“Let there be no mistake—the comma wields a power far greater than its humble looks might
suggest. ‘You will go you will return never in the battle you will perish’ is the most famous
example of it. This saying is usually attributed to the Oracle of Delphi, and it is supposed to be an
answer to the question of whether or not to go to war. If you place a comma before ‘never,’ the
answer becomes a green light. Place it after ‘never,’ and then answer becomes a warning against
14
Agreement’s express definition that “Affiliates” include “any Person now, or in the future,” and
would result in a strained reading of the text. See Bank of N.Y. Mellon, 22 N.Y.S.3d at 5 (“[C]ourts
may not by construction add or excise terms, nor distort the meaning of those used and thereby
make a new contract for the parties under the guise of interpreting the writing.”).
Anticipating that the Court might find that the Release applies to Infinera, Oyster presents
an alternative ground for denying the Motion. (Dkt. No. 44 at 8–10.) It argues that Coriant and
Infinera have violated the Release’s representation and warranty clause:
The Coriant Defendants represent and warrant that none of the Coriant Defendants
nor their Affiliates sell or supply optical-telecommunications transceivers, or
components for optical-telecommunications transceivers, to any of the other named
defendants in the Consolidated Litigation, although the Parties to this Agreement
agree that the remedy for any breach by the Coriant Defendants of this
representation and warranty is limited to an exclusion from the scope of this
Paragraph 3.1 of such other named defendants with respect to those sales or supply
that give rise to such breach.
(Dkt. No. 39–1 §3.1.) According to Oyster, this language means that “the release was not intended
to extend to Affiliates, [such as Infinera], that themselves are defendants in the Consolidated
Litigation.” (Dkt. No. 44 at 9 (emphasis in original).) Oyster argues that Infinera employs a
“vertically integrated” business model and “‘supplies’ transceivers and their components to itself.”
(Id.) Oyster contends that any “products and components supplied in this manner are excluded
from the release.” (Id. at 10.)
The Court disagrees. The plain text of the warranty states that “[t]he Coriant Defendants
represent and warrant that none of the Coriant Defendants nor their Affiliates sell or supply opticaltelecommunications transceivers, or components for optical-telecommunications transceivers, to
any of the other named defendants in the Consolidated Litigation.” (Dkt. No. 39–1 § 3.1 (emphasis
going to war.”
Comma Rules for Business Emails, GRAMMARLY (Jan. 10, 2016),
https://www.grammarly.com/blog/comma-rules-for-business-emails/.
15
added).) By its terms, the provision does not apply to sales or delivery of supplies by Infinera to
itself. Moreover, there is no evidence within the four corners of the document that the parties
intended to exclude the defendants in the Consolidated Litigation from the Release. Preceding the
warranty statement in Section 3.1 is a clause about customer sales. That section informs the scope
of the Release’s warranty, and states in relevant part:
The release provided by this Paragraph 3.1 also extends to all customers, users,
distributors, buyers, foundries, manufacturers, suppliers, integrators, and resellers
of Licensed Product or components thereof, but only to the extent such customers,
users, distributors, buyers, foundries, manufacturers, suppliers, integrators, and
resellers exported or imported, made, have had made, used, distributed, offered to
sell, sold, or otherwise supplied, provided or disposed of Licensed Product or
components thereof. Pursuant to the Definition of Licensed Products, this does not
release any products or components thereof from Third Parties that were not by,
for, or on behalf of the Coriant Defendants, their Affiliates, or respective
predecessors, predecessors-in-interest, successors, or successors-in-interest. The
Coriant Defendants represent and warrant that none of the Coriant Defendants nor
their Affiliates sell or supply optical-telecommunications transceivers, or
components for optical-telecommunications transceivers, to any of the other named
defendants in the Consolidated Litigation, although the Parties to this Agreement
agree that the remedy for any breach by the Coriant Defendants of this
representation and warranty is limited to an exclusion from the scope of this
Paragraph 3.1 of such other named defendants with respect to those sales or supply
that give rise to such breach.
(Dkt. No. 39–1 §3.1.)
This section states that the Release extends to all past sales or supplies made by “customers,
users, distributors, buyers, foundries, manufacturers, suppliers, integrators, and resellers of
Licensed Product or components thereof.” (Id.) However, such extension is limited in two ways:
(1) it does not apply to past sales or supplies made by Third Parties; and (2) it does not apply to
past sales or delivery of supplies by the Coriant Defendants and their Affiliates to “any of the other
named defendants in the Consolidated Litigation.” (Id.) There is nothing in the text that indicates
the Release is otherwise inapplicable to past sales made by or supplies delivered by “any of the
other named defendants in the Consolidated Litigation” generally. Nor is there any support for
16
such an interpretation in any other part of the Agreement. Where, as here, the “release is executed
‘in a commercial context by parties in a roughly equivalent bargaining position and with ready
access to counsel, the general rule is that, if the language of the release is clear . . . the intent of the
parties [is] indicated by the language employed.” Kraft Foods, Inc. v. All These Brand Names,
Inc., 213 F. Supp. 2d 326, 330 (S.D.N.Y. 2002) (applying New York law). If Oyster and Coriant
wanted to expressly exclude all defendants in the Consolidated Litigation from the Release, “they
could have easily expressed this intent in the language of the agreement.” Ashwood, 948 N.Y.S.2d
at 298. They did not do so here. As a result, the Court finds that the Release is clear and applies
to Oyster’s claims against Infinera. 5
C. The License
The Court next determines whether Infinera has a license to the Patents-in-Suit under
Section 4.1 of the Agreement (the “License”). (Dkt. No. 39–1 § 4.1.) Like the Release, the Court
first examines the relevant text:
4.1
Subject to the terms and conditions of this Agreement, Oyster hereby grants
to each of the Coriant Defendants, their Affiliates, a non-exclusive, nontransferable, non-assignable (except as provided herein), royalty-free, irrevocable,
perpetual, and fully paid-up license, without the right to sublicense, in the Territory
under the Licensed Patents, to make, have made, use, offer for sale, sell, import,
export, distribute, or otherwise supply, provide or dispose of, the Licensed Product.
(Id.)
Section 4.1 includes the terms “Affiliates,” “Licensed Patents,” “Territory,” and “Licensed
Product,” which are each defined in Section 1.1 of the Agreement. As discussed above, Infinera
5
As Infinera indicates in its Response to Oyster’s Notices, both at the hearing and in its Notices
to the Court, Oyster presented “new theories long after the briefing on Infinera’s summary
judgment motion concluded,” including “new arguments regarding third-party beneficiaries, what
claims qualify as ‘assertable,’ and fraud in the inducement.” (Dkt. No. 81 at 2.) Most, if not all,
of these arguments rest on parol evidence. Given the untimeliness of these arguments and the clear
terms of the Agreement, the Court does not consider these new theories in resolving the instant
Motion.
17
is an “Affiliate;” the Patents-in-Suit are “Licensed Patents;” “Territory” means the United States;
and the Accused Products qualify as “Licensed Product[s].” See supra Part III.A.i. Substituting
those definitions into Section 4.1, the provision reads:
4.1
Subject to the terms and conditions of this Agreement, Oyster hereby grants
to each of the Coriant Defendants, [Infinera], a non-exclusive, non-transferable,
non-assignable (except as provided herein), royalty-free, irrevocable, perpetual,
and fully paid-up license, without the right to sublicense, in the [United States]
under the [Patents-in-Suit], to make, have made, use, offer for sale, sell, import,
export, distribute, or otherwise supply, provide or dispose of, the [Accused
Products].
(Id.) Under a plain reading of the text, the Court finds that the Agreement expressly grants Infinera,
an “Affiliate,” a license under the Patents-in-Suit to “make . . . use, offer for sale, sell, import,
export, distribute, or otherwise supply, provide, or dispose of, the [Accused Products]” in the
United States. (Id.)
Oyster argues that Infinera is not entitled to a license because it violated the Agreement’s
“no assignment” clause. Section 4.1 states that the License is “non-assignable (except as provided
herein).” (Id.) Sections 13.2 outlines the types of assignments permitted under the Agreement:
13.2 This Agreement shall be separately assignable by the Coriant Defendants:
(i) to any of their Affiliates; and (ii) to any entity that either acquires all or
substantially all of the assets and/or business of the Coriant Defendants to which
this Agreement relates or is a partner in a merger, consolidation, equity exchange
or reorganization with respect to such business, but in either event only as to (a)
Licensed Product released or substantially developed before the date of such
acquisition or other transaction, and (b) any successors of the Licensed Product of
(a); and (iii) with the written consent of Oyster, which such consent shall not be
unreasonably withheld.
(Id. § 13.2.)
Oyster argues that “[t]he former Coriant business and product lines are being incorporated
into Infinera” and that “by transferring manufacture and/or sale of these products to Infinera, it has
also transferred the associated rights and benefits under the license to Infinera.” (Dkt. No. 44 at
18
11.) Without much explanation, Oyster claims that the “intent of the assignment [provision] was
to prevent an acquirer, [such as Infinera] from immunizing its own products by acquiring Coriant.”
(Id. at 12.)
The Court finds Oyster’s argument to be both logically challenged and inconsistent with
the plain terms of the Agreement. Section 4.1 expressly grants a license “to each of the Coriant
Defendants” and “their Affiliates” and that such a license is “nonassignable (except as provided
herein).” (Dkt. No. 39–1 § 4.1.) Infinera’s license rights stem directly from its status as an
“Affiliate.” Whether or not any purported assignment of the Agreement has occurred is simply
irrelevant. Even if such an assignment did occur, Section 13.2 expressly states that the Agreement
“shall be separately assignable by the Coriant Defendants: (i) to any of their Affiliates.” (Id. §
13.2(i).) There is simply nothing in the text to suggest that the License is inapplicable to products
made by companies that acquire Coriant. See Greenfield, 780 N.E.2d at 173 (“[O]ur established
precedent [is] that silence does not equate to contractual ambiguity.”). Accordingly, under the
Agreement’s unambiguous text, the Court finds that the Accused Products are licensed under the
Patents-in-Suit.
D. No Circumvention Covenant
As a final ground for denying summary judgment, Oyster argues that even if its claims
against Infinera are covered by the Release and License, Infinera cannot enforce those provisions
because it breached the Agreement’s “no circumvention” covenant. (Dkt. No. 44 at 13–14.) That
provision is contained in Section 14 of the Agreement (the “No Circumvention Clause”):
14.
Further Assurances and No Circumvention. . . . Each Party also covenants
and agrees to not act through or in conjunction with any Affiliate or Third Party to
circumvent or frustrate the purposes of this Agreement, and to not structure any
future transactions either that are in conflict with this Agreement or where the effect
of such transaction is to limit the licenses, rights, releases, covenants, or immunities
provided for under this Agreement.
19
(Dkt. No. 39–1 § 14.)
According to Oyster, “[a]mong the purposes of the Agreement expressed in Section 3.1
and 13.2 was to prevent other companies facing lawsuits for infringing Oyster’s patents from
taking advantage of Coriant’s Agreement.” (Dkt. No. 44 at 14.) By “[w]orking with Infinera to
structure the purchase transaction in an attempt to extend the release and license to cover Infinera’s
own products, Coriant attempted to frustrate this purpose of the Agreement and breached the nocircumvention covenant.” (Id.)
The Court once again finds no support in the Agreement for Oyster’s suggested
interpretation. Oyster submits that the Agreement was intended to only settle its lawsuit with
Coriant, and was not meant to cover other claims asserted in the Consolidated Litigation. While
the Court agrees that the purpose of the contract was to settle Oyster’s claims against Coriant, “the
Agreement’s broad definition of ‘Affiliate’ as including parents ‘now or in the future,’ the release
clause’s express inclusion of ‘future . . . parents,’ and the Agreement’s explicit statement that it
shall ‘inure to the benefit of . . . future Affiliates,’ all conclusively establish [that] the [A]greement
was [also] written and intended to cover future parent companies” of the Parties. (Dkt. No. 46 at
9.)
By enforcing the clear terms of the Agreement, there can be no violation of the No
Circumvention Clause. Oyster’s argument is without merit and is rejected by the Court.
E. Discovery
Oyster also requests that the Court defer a ruling on the Motion to permit further discovery
“as to Infinera’s and its subsidiaries’ sale and supply of components and products to Infinera, and
whether Coriant worked with Infinera in an attempt to circumvent the terms of the Agreement.”
(Dkt. No. 44 at 16.) “Because the agreement is clear and complete on its face, ‘[a]ny such
discovery would simply be an opportunity for plaintiff to uncover parol evidence to attempt to
20
create an ambiguity in an otherwise clear and unambiguous agreement.” Ashwood, 948 N.Y.S.2d
at 299 (emphasis in original). Accordingly, Oyster’s request is denied.
IV.
.
CONCLUSION
Based on the foregoing and for the reasons stated herein, the Court GRANTS Defendant
Infinera Corporation’s Motion for Summary Judgment Regarding Its License and Release
Defenses (Dkt. No. 39). The Parties are ORDERED to file within forty-eight (48) hours of the
issuance of this Order a Joint Status Report that specifically identifies (1) all claims or
counterclaims, if any, that remain live before the Court; (2) all claims or counterclaims, if any, that
have been rendered moot; and (3) the resulting status of this case, in light of this opinion.
So ORDERED and SIGNED this 25th day of June, 2019.
____________________________________
RODNEY GILSTRAP
UNITED STATES DISTRICT JUDGE
21
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