WI-LAN Inc. v. Alcatel-Lucent USA Inc. et al

Filing 410

ORDER granting 352 Sealed Motion to Strike Extrinsic Evidence; granting 171 Sealed Motion for Partial Summary Judgment; denying 172 Sealed Motion for Summary Judgment; denying 181 Sealed Motion, Sony Mobile Defendants' Cross-Motion for Summary Judgment. Signed by Judge Leonard Davis on 6/4/13. (mjc, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION

WI-LAN INC.,
Plaintiff,
vs.
ALCATEL-LUCENT USA INC.,
ET AL.,
Defendants.

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CASE NO. 6:10-CV-521

ORDER
Before the Court are Plaintiff’s Motion for Partial Summary Judgment (Dkt. No. 171);
The Ericsson Defendants’ Motion for Summary Judgment (Dkt No. 172); The Sony Mobile
Defendants’ Cross-Motion for Summary Judgment (Dkt No. 181); and The Ericsson and Sony
Mobile Defendants’ Motion to Strike Extrinsic Evidence (Dkt No. 352). Having considered the
Parties’ briefing and oral argument, the Court hereby GRANTS Plaintiff’s Motion for Partial
Summary Judgment (Dkt. No. 171) and DENIES the Ericsson Defendants’ Motion for Summary
Judgment (Dkt No. 172) and the Sony Mobile Defendants’ Cross-Motion for Summary
Judgment (Dkt No. 181). The Court also GRANTS the Ericsson and Sony Mobile Defendants’
Motion to Strike Extrinsic Evidence (Dkt No. 352).
BACKGROUND
On February 15, 2008, Telefonaktiebolaget LM Ericsson (“Ericsson”) and Sony Ericsson
Mobile Communications (USA) Inc. (“Sony”; collectively, “Defendants”) entered into identical
Patent and Conflict Resolution Agreements (“PCR Agreements”). See Dkt. No. 171-1; Dkt. No.
171-2. The Parties executed the PCR Agreements to resolve a possible conflict of interest
involving Wi-Lan, Ericsson, Sony, and the law firm of McKool Smith. Dkt. No. 171-1 at 1.

The PCR Agreements address four specific patents: U.S. Patent Nos. 5,282,222;
RE37,802; 6,192,068; and 6,320,897. The Agreements refer to these patents, and their family
members or foreign counterparts, as “the Wi-Lan Patents” (hereinafter, “PCR patents”). Dkt. No.
171-1 at 3, 15. Further, the PCR Agreements also address a specific set of products,
UMTS/HSPA Products, defined as “any product complying with the 21–35 series of 3GPP
agreed protocols and/or protocol standards setting body which include substantially
corresponding to the 21–35 series of 3GPP agreed protocols irrespective of the frequency band
(by the way of non-limiting example, including the ETSI TS-125 protocols), as well as any new
releases or updates of such protocols.” Id. at 3.
Three Articles in the PCR Agreements are germane to the resolution of the present
motions. Article III is titled “Non-Assert and Release” and reads in relevant part:
“Wi-Lan hereby irrevocably covenants that neither Wi-Lan nor its affiliates will, directly
or indirectly, alone or by, with or through others, cause, induce or authorize, or
voluntarily assist, participate or cooperate in, the commencement, maintenance or
prosecution of any action seeking or having the tendency to establish any liability on the
part of, or to exact any sanction or penalty, or any injunctive, equitable, legal,
declaratory, administrative or other relief from or against, [Defendants], [their] direct or
indirect distributors, affiliates, customers, or any other individual or entity arising from,
by reason of, or in connection with making, using, selling, offering to sell or importing
[Defendants’] Products which would, but for this Agreement, infringe any Wi-Lan
Patents.”
Id. at 4. Article IV is titled “Patents other than the Wi-Lan Patents” and reads:
“[w]ith respect to patents other than the Wi-Lan Patents (to which Article III of this
Agreement applies), . . . Wi-Lan hereby agrees that no damages shall accrue against
[Defendants] . . . for infringement of any patents that, on or after the Effective Date, are
owned or controlled by Wi-Lan where liability results from making, having made,
importing, using, selling, offering to sell, or otherwise disposing of [Defendants’]
UMTS/HSPA Products and damages shall only accrue for such making, having made,
importing, using, selling, offering to sell or otherwise disposing of UMTS/HSPA
Products beginning after such time as Wi-Lan commences an action against [Defendants]
or its Affiliates relating to UMTS/HSPA Products and infringement of said Wi-Lan
patents.”

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Id. at 5. Finally, Article VII is titled “Most-Favoured Licensee Provisions” and states:
“[i]n the event that Wi-Lan owns or controls the licensing of patents not already
addressed under this Agreement and which are infringed or alleged to be infringed by
UMTS/HSPA Products, Wi-Lan hereby agrees that at any time during the term of this
Agreement, at [Defendants’] request, Wi-Lan will grant to [Defendants] and its Affiliates
a non-exclusive license to make, have made, use, sell, offer for sale, lease or otherwise
dispose of, and import [Defendants’] products including UMTS/HSPA Products and WiLan agrees to grant such a license at most-favored licensee status as compared to any
future licensee of Wi-Lan.”
Id. at 6.
On October 5, 2010, Wi-Lan filed suit against Defendants Ericsson and Sony alleging
patent infringement by Defendants’ HSPA-compliant products of U.S. Patent Nos. 6,088,326;
6,195,327; 6,222,819; and 6,381,211 (collectively, “patents-in-suit”). Dkt. No. 1. Wi-Lan
acquired the patents-in-suit on April 29, 2009, after the effective date of the PCR Agreements,
and there is no dispute that the patents-in-suit are not among the four identified PCR Patents.
Dkt. No. 171 at 4.
Defendants allege that the PCR Agreements bar the current lawsuit and filed motions for
summary judgment to enforce the PCR Agreements’ covenant not to sue. Dkt. Nos. 172 and 181.
Plaintiff also filed a motion for summary judgment regarding Defendants’ affirmative defenses
and counterclaims for breach of contract. Dkt. No. 171.
After the Parties completed briefing on the motions for summary judgment, Defendants
filed a supplement1 requesting, in the alternative, partial summary judgment that Wi-Lan
breached the PCR Agreements by failing to provide a license to the patents-in-suit on terms
consistent with the PCR Agreeements’ most-favored licensee provision. Dkt. No. 276.

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On December 7, 2012, Defendants filed a motion seeking leave to supplement the existing summary judgment
briefing. Dkt. No. 275. Plaintiffs originally opposed the motion. Dkt. No. 283. However, after the Court set the
motion for hearing, Plaintiff withdrew its opposition (Dkt. No. 328) and the Court granted leave to supplement the
briefing. The supplement to Defendants’ Motions for summary judgment was deemed filed on February 26, 2013.
Dkt. No. 340 at 2.

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Defendants also filed a motion to strike extrinsic evidence that Wi-Lan referenced in its
opposition to Defendants’ supplemental summary-judgment briefing. Dkt. No. 352.
APPLICABLE LAW
Summary judgment shall be rendered when the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a judgment as a
matter of law. FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323—325 (1986);
Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998). An issue of material fact is
genuine if the evidence could lead a reasonable jury to find for the non-moving party. Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In determining whether a genuine issue for trial
exists, the court views all inferences drawn from the factual record in the light most favorable to
the nonmoving party. Id.; Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986).
Under Article VIII, Section 10 of the contract at issue, the parties agreed that the PCR
Agreements must be construed in accordance with the laws of the state of New York. Dkt. 171-1
at 12; Dkt. 171-2 at 13. Under New York law “[t]he proper interpretation of an unambiguous
contract is a question of law for the court, and a dispute on such an issue may properly be
resolved by summary judgment.” Adirondack Transit Lines, Inc. v. United Transp. Union, Local
1582, 305 F.3d 82, 85 (2d Cir. 2002). “[T]he Court must look first to the parties’ written
agreement to determine the parties’ intent and limit its inquiry to the words of the agreement
itself if the agreement sets forth the parties intent clearly and unambiguously.” Russo v. Estee
Lauder Corp., 856 F. Supp. 2d 437, 460 (E.D.N.Y. 2012). When the parties dispute the meaning
of specific contract clauses, the Court must “determine whether such clauses are ambiguous
when read in the context of the entire agreement.” Sayers v. Rochester Tel. Corp. Supp. Mgmt.

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Pension Plan, 7 F.3d 1091, 1095 (2d Cir. 1993) (internal quotations omitted). While Defendants
and Plaintiff offer different interpretations of the Agreements, unambiguous contractual language
does not become ambiguous simply because the parties to the litigation offer different
interpretations. Metropolitan Life Ins. Co. v. RJR Nabisco, 906 F.2d 884, 889 (2nd Cir. 1990).
The question of ambiguity is resolved by examining “the four corners of the document” and not
through reference to extrinsic sources. JA Apparel Corp. v. Abboud, 568 F.3d 390, 396 (2d Cir.
2009). However, in the case of an apparent ambiguity, “extrinsic evidence as to the parties’
intent may properly be considered.” Id. at 397.
ANALYSIS
Covenant not to Sue
Defendants argue that the PCR Agreements prohibit lawsuits against all products that fall
within the scope of the four PCR Patents, including the products accused in the present litigation.
Dkt. No. 172 at 7. Defendants contend that in Article III of the PCR Agreements, Wi-Lan
covenants not to commence or participate in any action against “products which would, but for
th[e] Agreement[s], infringe any [PCR Patents].” Id. at 14. Defendants point to Wi-Lan’s
stipulation that “HSPA-compliant products infringe one or more of the PCR Patents.” Dkt. No.
403. Therefore, Defendants argue that Article III bars suits against all Defendants’ products that
support HSPA. Dkt. No. 172 at 17–18. In the instant suit, Wi-Lan accuses HSPA-compliant
products, and the patents-in-suit read on the HSPA standard. Id. at 18–19. Thus, Defendants
argue that the current suit is barred under the PCR Agreements.
Defendants further contend that their reading of the PCR Agreements is consistent with
the rest of the Agreements’ provisions. Id. Defendants argue that HSPA-compliant products are
only a subset of products that implement the UMTS standard. Id. at 16–17. According to

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Defendants then, the PCR Agreements prohibit lawsuits against Defendants’ products that
support HSPA, and limit pre-suit damages for any future infringement suits against the broader
class of Defendants’ products that do not support HSPA but do comply with other UMTS
requirements. Id. at 16–17.
Wi-Lan contends that the PCR Agreements’ covenant not to sue only applies to the four
PCR Patents. Dkt. No. 186 at 5. Wi-Lan argues that in Article IV, the PCR Agreements
expressly contemplate lawsuits accusing HSPA-compliant products based on patents other than
the PCR Patents. Id. at 8. Such lawsuits are limited to damages accruing from the date of
commencement of the action. Id. Wi-Lan also argues that the patents-in-suit fall under Article
IV’s definition of “patents other than the [PCR Patents],” because they were acquired after
execution of the PCR Agreements. Id. Thus, rather than prohibiting lawsuits such as the instant
one, the PCR Agreements expressly permit them. Id. Further, Wi-Lan contends that Defendants’
interpretation is improperly broad, as it would bar any action by Wi-Lan against Defendants, be
it for patent infringement, warranty claims, fraud, or anything else, as long as an HSPAcompliant product is involved. Thus, Wi-Lan argues, Defedants’ interpretation of the covenant
not to sue is inconsistent with the rest of the PCR Agreements. Dkt. 171 at 11.
Defendants’ interpretation contradicts the Parties’ agreement. First, Defendants rely on
Article III’s provision barring suit against “[Defendants’] products which would, but for this
Agreement, infringe any [PCR Patents]” to argue that all lawsuits against Defendants’ HSPAcompliant products are prohibited. Dkt. No. 172 at 7. Yet, Defendants never concede that the
accused products infringe the PCR Patents. See Dkt. No. 152, ¶¶22, 27, 38, 70–73; Dkt. No. 151,
¶¶ 22, 27, 38, 70–73.

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Second, even if Defendants conceded that their accused products infringe the PCR
Patents, Article IV specifically contemplates actions commenced by Wi-Lan against Defendants’
UMTS/HSPA Products for infringement of patents, other than the PCR Patents. The Agreements
define UMTS/HSPA Products as “any product complying with the 21-35 series of 3GPP agreed
protocols . . . corresponding to the 21–35 series of 3GPP agreed protocols . . . including the ETSI
TS-125 protocols.” Dkt. No. 171-1 at 3. Notably, the ETSI TS-125 protocols listed as an
example reads on the same series-25 protocol as the PCR Patents. Dkt. No. 190 at 2. Thus, while
the Parties’ definition of UMTS/HSPA products may include more than HSPA products, reading
the Agreements to bar all lawsuits against any HSPA-compliant products would directly
contradict the Parties’ agreement.
When “read in the context of the entire agreement,” it is clear that Article III does not bar
all actions brought against Defendants’ HSPA-compliant products. Sayers v. Rochester Tel.
Corp. Supp. Mgmt. Pension Plan, 7 F.3d 1091, 1095 (2d Cir. 1993). Instead, the PCR
Agreements bar actions for infringement of the four specified PCR Patents, and contemplate
actions for infringement of other patents, like the patents-in-suit, while limiting damages.
Therefore, the current suit is not barred by the PCR Agreements and partial summary judgment
in favor of Plaintiff is appropriate.
Most-Favored Licensee Provision
Defendants request, in the alternative, partial summary judgment that Wi-Lan breached
the PCR Agreements by failing to comply with the most-favored licensee provision. Dkt No.
276. Defendants argue that if Article III only applies to the four PCR Patents, then under Article
VIII, Wi-Lan must grant Defendants most-favored licensee status for other patents not addressed
in the Agreements. Id. at 3. Defendants contend that when they attempted to invoke their rights

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under this provision, however, Wi-Lan refused to provide licenses for the patents-in-suit at mostfavored licensee status, in breach of the PCR Agreements. Id. at 1.
Wi-Lan responds that the most-favored licensee provision is only triggered by the
assertion of “patents not already addressed under th[e] Agreement[s]” that Wi-Lan owned or
controlled on the Agreements’ effective date of November 1, 2007. Dkt. No. 345 at 3. Wi-Lan
argues that the patents-in-suit were not owned or controlled by Wi-Lan until 2009, therefore the
patents-in-suit are governed by Article IV, which specifically addresses patents acquired by WiLan after the effective date. Id. at 14-15. Wi-Lan contends that as the most-favored licensee
provision cannot be triggered by the assertion of the patents-in-suit, Wi-lan has not breached its
obligations under the Agreements. Id. at 17.
By its own terms, the most-favored licensee provision in Article VII applies only “[i]n
the event that Wi-Lan owns or controls the licensing of patents not already addressed under this
Agreement and which are infringed or alleged to be infringed by UMTS/HSPA products.” Dkt.
No. 171-1 at 7. As stated above, Article IV of the PCR Agreements specifically address “patents
other than the [PCR Patents] . . . that, on or after [November 1, 2007], are owned or controlled
by Wi-Lan.” Id. at 5. Wi-Lan acquired the patents-in-suit on April 29, 2009, thus they are
explicitly addressed by Article IV. Since patents “already addressed under [the] Agreement[s]”
do not fall under Article VII’s most-favored licensee provision, Wi-Lan is not obligated to grant
Defendants such a license to the patents-in-suit.
As there is no breach of the PCR Agreements, Defendants’ Motions for Summary
Judgment are DENIED and Plaintiff’s Motion for Partial Summary Judgment is GRANTED.

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Motion to Strike Extrinsic Evidence
The Parties agree that the PCR Agreements are unambiguous. Defendants argue that
extrinsic evidence may not be considered to devise the Parties’ intentions in drafting an
unambiguous contract and move to strike Plaintiff’s proffered extrinsic evidence. Dkt. No. 352 at
2. Wi-Lan counters that, despite the Parties’ stipulations that the PCR Agreements are
unambiguous, the question of ambiguity is a question of law for the Court to determine. Dkt. No.
377 at 2. Wi-Lan also contends that the extrinsic evidence will be useful if the Court decides the
PCR Agreements are, in fact, ambiguous. Id.
Extrinsic evidence may not be considered in the interpretation of an agreement that is
undisputedly unambiguous. Chimart Associates v. Paul, 66 N.Y.2d 570, 572, 498 N.Y.S.2d 344,
489 N.E.2d 231 (N.Y. 1986); TI v. Hyundai Elec. Indus., Co., 42 F. Supp. 2d 660, 673 (E.D. Tex.
1999). As the Parties note, the PCR Agreements are fully integrated and unambiguous.
Accordingly, extrinsic evidence may not be considered and Defendants’ Motion to Strike
Extrinsic Evidence is GRANTED.
CONCLUSION
For the above-mentioned reasons, the Court hereby GRANTS Plaintiff’s Motion for
Partial Summary Judgment (Dkt. No. 171) and DENIES the Ericsson Defendants’ Motion for
Summary Judgment (Dkt No. 172) and the Sony Mobile Defendants’ Cross-Motion for
Summary Judgment (Dkt No. 181). The Court also GRANTS the Ericsson and Sony Mobile
Defendants’ Motion to Strike Extrinsic Evidence (Dkt No. 352).
So ORDERED and SIGNED this 4th day of June, 2013.

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LEONARD DAVIS
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UNITED STATES DISTRICT JUDGE