Alexx, Inc. v. Charm Zone, Inc. ( 2012 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
__________________________
ALEXX, INC.,
Plaintiff-Appellee,
v.
CHARM ZONE, INC.,
Defendant-Appellant.
__________________________
2011-1445
__________________________
Appeal from the United States District Court for the
Northern District of California in case no. 09-CV-3623,
Judge Charles R. Breyer.
__________________________
Decided: May 14, 2012
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BRETT A. LOVEJOY, Morgan, Lewis & Bockius, LLP, of
San Francisco, California, for plaintiff-appellee. With
him on the brief was THOMAS M. PETERSON.
ROBERT P. ANDRIS, II, Ropes Majeski Kohn & Bentley,
of Redwood City, California, for defendant-appellant. Of
counsel was LAEL D. ANDARA.
__________________________
ALEXX v. CHARM ZONE 2
Before RADER, Chief Judge, DYK and PROST, Circuit
Judges.
PER CURIAM.
Charm Zone, Inc. appeals from a final judgment in a
patent infringement case enforcing a settlement agree-
ment and awarding damages and attorney’s fees to Alexx,
Inc. after the district court determined that Charm Zone
had breached the settlement agreement. For the reasons
set forth below, we affirm.
I. BACKGROUND
Alexx holds three patents covering locator clips used
to locate keys and other easily misplaced objects. 1 Alexx
sued appellant Charm Zone for patent infringement,
copyright infringement, and various state law claims
based on Charm Zone’s marketing and selling of key
locators over the internet.
On July 8, 2010, the parties attended a settlement
conference. One of the issues the parties confronted was
the need to address Charm Zone’s remaining inventory of
key locators: both those in stock and those already or-
dered but not yet received. During negotiations, Alexx
turned down a $100,000 cash payment as a term of set-
tlement and instead opted to receive Charm Zone’s re-
maining inventory. Alexx, Inc. v. Charm Zone, Inc., No. C
09-03623, 2011 WL 249471, at *1 (N.D. Cal. Jan. 26,
2011). Charm Zone also agreed to cease selling key
locators and withdraw from the key locator market en-
tirely within seven days. For its part, Alexx agreed to
1 United States Design Patent No. D539526, United
States Patent No. 7,308,922 B2, and United States Patent
No. 7,537,032 B2.
3 ALEXX v. CHARM ZONE
release Charm Zone from any claims arising out of the
lawsuit. Alexx did not, however, agree to release Charm
Zone for conduct during the seven-day performance
window following the execution of the agreement. The
parties also agreed to confer jurisdiction on the district
court to enforce the settlement agreement. On July 13,
2010 (the “effective date”), the parties executed a written
settlement agreement reflecting these terms.
Rather than transferring inventory to Alexx, Charm
Zone proceeded to sell its entire remaining inventory
within the seven-day performance window. In response,
Alexx moved to enforce the settlement agreement. Before
the district court, Charm Zone asserted that it had com-
plied with the settlement agreement because, having sold
its key locator inventory within seven days of the effective
date, it had no “remaining inventory” to provide Alexx
within the meaning of the settlement agreement. The
district court, however, granted Alexx’s motion, finding
that the “remaining inventory” language of the settlement
agreement meant the inventory which existed at Charm
Zone or was on order as of the effective date—not inven-
tory that was in its possession seven days later.
Charm Zone appealed, and we have jurisdiction pur-
suant to 28 U.S.C. § 1295(a)(1).
II. DISCUSSION
“Because the interpretation of a settlement agreement
is not an issue unique to patent law, we apply the law of
the appropriate regional circuit.” Sanofi-Aventis v. Apotex
Inc., 659 F.3d 1171, 1178 (Fed. Cir. 2011) (citing No-
vamedix, Ltd. v. NDM Acquisition Corp., 166 F.3d 1177,
1180 (Fed.Cir.1999)). Under Ninth Circuit law, “[t]he
determination of whether contract language is ambiguous
ALEXX v. CHARM ZONE 4
is a matter of law. When the interpretation includes a
review of factual circumstances surrounding the contract,
the principles of contract interpretation applied to those
facts present issues of law” which are reviewed de novo.
In re U.S. Fin. Sec. Litig., 729 F.2d 628, 632 (9th Cir.
1984). Moreover, under California Law, “[t]he whole of a
contract is to be taken together, so as to give effect to
every part, if reasonably practicable, each clause helping
to interpret the other.” Cal. Civ. Code § 1641.
On appeal, Charm Zone asserts that the settlement
agreement clearly and unambiguously allowed it to sell
its key locator inventory for seven days following the
effective date of the settlement agreement. Alexx, how-
ever, argues that the district court properly determined
that the settlement agreement required Charm Zone to
provide Alexx with all of the key locators that Charm
Zone possessed or had on order as of the effective date.
According to Alexx, Charm Zone’s act of selling its entire
inventory during the seven-day performance window was
a breach of the settlement agreement.
We agree with the district court that Charm Zone’s
obligation to send its remaining inventory to Alexx meant
that Charm Zone had up to seven days to provide it to
Alexx, not a week to continue selling. Charm Zone’s
arguments to the contrary are unpersuasive. As the
district court observed, Charm Zone could not cease all
market participation instantaneously. In context, the
settlement agreement allowed Charm Zone to remain in
the key locator market for seven additional days only to
wind down its outstanding business commitments, not to
liquidate its remaining inventory. The settlement agree-
ment’s release provision further confirms that Charm
Zone was required to provide Alexx with its remaining
inventory as of the effective date, not seven days later. If
5 ALEXX v. CHARM ZONE
Charm Zone were indeed entitled to continue selling key
locators after the date of execution, the parties would
have agreed to release Charm Zone from liability for
doing what the settlement agreement expressly author-
ized. Yet the settlement agreement only releases Charm
Zone from liability up to the effective date, not after.
Considering the settlement agreement as a whole, we
agree with the district court that Charm Zone’s “remain-
ing inventory” refers to the key locators that Charm Zone
possessed or had on order as of the effective date of the
settlement agreement, not seven days later.
Accordingly, we affirm the final judgment of the dis-
trict court.
AFFIRMED