Mosaid Technologies Inc v. LSI Corp

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 14-4090
___________
MOSAID TECHNOLOGIES, INC.
v.
LSI CORPORATION; AGERE SYSTEMS, LLC
LSI CORPORATION; AGERE SYSTEMS, LLC,
Counterclaim-Plaintiffs
v.
MOSAID TECHNOLOGIES, INC.;
LENOVO (UNITED STATES), INC.;
LENOVO GROUP, LTD.;
LENOVO (SINGAPORE) PTE. LTD.,
Counterclaim-Defendants
LENOVO (SINGAPORE) PTE. LTD.,
Counterclaim-Plaintiff
v.
LSI CORPORATION; AGERE SYSTEMS, LLC,
Counterclaim-Defendants
LSI Corporation; Agere Systems, LLC,
Appellants
____________________________________
On Appeal from the United States District Court
for the District of Delaware
(D.C. Civil Action No. 1-10-cv-00192)
District Judge: Honorable Richard G. Andrews
____________________________________
Submitted under Third Circuit LAR 34.1(a)
on October 6, 2015
Before: SHWARTZ, KRAUSE, AND GREENBERG, Circuit Judges.
(Opinion filed: October 30, 2015)
OPINION*
KRAUSE, Circuit Judge.
Before this Court is an appeal by LSI Corporation and Agere Systems, Inc.
(“LSI/Agere”) of the District Court’s grant of summary judgment in favor of Lenovo
(United States), Inc., Lenovo Group, Ltd., and Lenovo (Singapore) Pte., Ltd.
(collectively, “Lenovo”). For the reasons set forth below, we will affirm.
I. Background
We write for the parties and therefore provide background only as relevant to the
issues on appeal. In 2007, LSI/Agere entered into a Patent Assignment Agreement (the
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7
does not constitute binding precedent.
2
“2007 PAA”) assigning certain of its patents (the “Assigned Patents”) to Plaintiff
Mosaid, which is not a party to this appeal. In that agreement, LSI/Agere included
Lenovo in a list of entities LSI/Agere warranted had no rights in the Assigned Patents. In
June 2007, Mosaid approached Lenovo about licensing the Assigned Patents. Lenovo,
however, responded that it already had been licensed the Assigned Patents under any one
of five Patent License Agreements (the “PLAs”) executed between LSI/Agere and IBM
because IBM had divested its computing division to Lenovo. Although the precise
language varies, each of these PLAs contains a provision specifying that one party, upon
request by the other party and under specified terms and conditions, will license the
divested entities of the other party (the “Divested Entities Provisions”).
In light of this information, Mosaid proceeded to file suit against LSI/Agere,
alleging LSI/Agere breached an express warranty and its contract with Mosaid when it
included Lenovo in the list of entities with no rights in the Assigned Patents.1 In its
answer, LSI/Agere denied Mosaid’s claims and sought declaratory judgments that it
neither breached an express warranty to Mosaid nor its contract with Mosaid. LSI/Agere
also added Lenovo as a Counterclaim-Defendant, seeking a declaratory judgment that the
PLAs did not grant Lenovo rights to any patents. In response, Lenovo asserted it had
1
Mosaid also claimed that LSI/Agere improperly included another company,
Matsushita, in this list. The District Court granted partial summary judgment to
LSI/Agere on this claim, and neither Lenovo nor LSI/Agere raises any arguments as to
this claim on appeal.
3
licenses to the Assigned Patents and counterclaimed for specific performance. After
limited discovery, the parties filed cross-motions for summary judgment.
On July 20, 2012, the Magistrate Judge issued a Report and Recommendation on
the parties’ summary judgment motions. The Magistrate Judge concluded there was no
signed writing that could provide the basis for a licensing agreement between Lenovo and
LSI/Agere and therefore applied the so-called Winston factors to determine whether a
binding contract had been formed under New York law in the absence of a signed
writing. See Winston v. Mediafare Entm’t Corp., 777 F.2d 78, 80 (2d Cir. 1985).2 After
considering the Winston factors, the Magistrate Judge determined that no reasonable jury
could find that the 1995, 1999, or 2005 PLAs between IBM and LSI/Agere formed a
contract between Lenovo and LSI/Agere but that there were questions of fact as to the
2000 and 2002 PLAs. The Magistrate Judge therefore recommended that the District
Court grant partial summary judgment in favor of LSI/Agere on the 1995, 1999, and 2005
PLAs and otherwise deny the parties’ summary judgment motions.
On March 29, 2013, the District Court issued a Memorandum Opinion and Order
rejecting the Magistrate’s recommendations as to the 1995, 1999, 2000, and 2002 PLAs,
concluding that those PLAs did grant licensing rights to Lenovo.3 Specifically, the
2
The PLAs provide, and the parties do not dispute, that New York law applies.
3
As to the 2005 PLA, the Magistrate Judge found that it could not have granted
licensing rights to Lenovo because its Divested Entities Provision specifically applies
only to entities divested by one of the parties after 2006 and the Lenovo divestiture
transaction occurred in 2005. The District Court granted partial summary judgment to
4
District Court held that there was no need to consider the Winston factors because the
PLAs themselves constituted signed writings that properly formed the basis for licensing
agreements between Lenovo and LSI/Agere. Concluding that the PLAs unambiguously
provided for “automatic license transfer[s],” the District Court granted partial summary
judgment in favor of Mosaid and Lenovo. J.A. 11. Following the Order, however,
LSI/Agere settled its dispute with Mosaid, and the District Court entered a Stipulation
and Order of Dismissal of all the claims between those two parties. LSI/Agere now
appeals only the grant of partial summary judgment in favor of Lenovo.
II. Jurisdiction and Standard of Review
Before addressing the merits of this appeal, we must resolve a threshold
jurisdictional challenge raised by Lenovo, specifically whether the settlement between
LSI/Agere and Mosaid as to the Assigned Patents has mooted this appeal. See Am. Bird
Conservancy v. Kempthorne, 559 F.3d 184, 188 (3d Cir. 2009) (addressing mootness as a
“threshold matter” before turning to the merits).
The central question in determining whether a case has become moot is “whether
the decision of the dispute continues to be justified by sufficient prospect that it will have
impact on the parties.” Ruocchio v. United Transp. Union, Local 60, 181 F.3d 376, 383
(3d Cir. 1999) (citing 13A Charles A. Wright & Arthur R. Miller et al., Federal Practice
and Procedure § 3533.1 (3d ed. 1984)). An appeal should be dismissed as moot when
LSI/Agere on this point, and neither party has raised any argument on appeal as to the
2005 PLA.
5
the court “cannot grant any effectual relief whatever in favor of the appellant.” Calderon
v. Moore, 518 U.S. 149, 150 (1996) (internal quotation marks omitted). The burden of
demonstrating to the court that a decision in the case would not have an impact on the
parties lies with the party claiming mootness. See Firefighters Local Union No. 1784 v.
Stotts, 467 U.S. 561, 569-70 (1984).
Lenovo argues the appeal is moot because LSI/Agere settled with Mosaid, “no
longer owns any interest in the Assigned Patents,” and “has made no showing that there
are remaining patents that would be impacted by a decision regarding the various license
agreements at issue.” Appellee’s Br. 25-26. The first problem with this argument is that
the PLAs are cross-licenses to “every patent” issued to the parties, with specified
exceptions, and thus, from the outset, LSI/Agere sought a declaration from the District
Court that Lenovo has no rights in any patent under the PLAs. Indeed, the parties appear
to be in agreement that the 1999 PLA exclusively implicates patents other than the
Assigned Patents. To drive the point home, LSI/Agere has previously asserted patents
other than the Assigned Patents against Lenovo, and in its representations to this Court,
Lenovo has declined to “unequivocally state” it does not have a license by operation of
the PLAs to any patents other than the Assigned Patents. Letter Mem. for Appellees 4-5.
Even as to the Assigned Patents, moreover, Lenovo cannot carry its burden of
establishing that LSI/Agere has no rights that could be affected by a decision in the case.
Although LSI/Agere has settled its dispute with Mosaid, it may have nevertheless
retained some rights in the Assigned Patents. For example, if LSI/Agere retained a right
6
to royalties flowing from Mosaid’s licensing of the Assigned Patents, LSI/Agere may
have an interest in whether Lenovo already possesses licensing rights in the Assigned
Patents through the PLAs. Put another way, if we determine Lenovo does not have those
rights, Mosaid may be able to license the Assigned Patents to Lenovo, which, depending
on the terms of the settlement agreement, may affect Mosaid’s obligations to LSI/Agere.
For this reason, Lenovo has not carried its burden as the party claiming mootness, even
with respect to the Assigned Patents.
Having concluded this appeal is not moot, we will exercise jurisdiction under 28
U.S.C. § 1291. We undertake plenary review of a grant of summary judgment, E.T.
Browne Drug Co. v. Cococare Prods., Inc., 538 F.3d 185, 191 (3d Cir. 2008), and will
affirm “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).
III. Discussion
LSI/Agere asks us to adopt the Magistrate Judge’s position that the PLAs are
merely agreements to agree in the future as to the terms of a licensing agreement and that
there is no signed writing reflecting that such an agreement was ever completed. Under
those circumstances, LSI/Agere contends, we must apply the Winston factors and should
conclude, like the Magistrate Judge did, that no agreement was ever finalized. Lenovo,
on the other hand, asserts that the PLAs are themselves complete agreements to grant
licensing rights to Lenovo, with no requirement that an additional writing be executed.
Lenovo contends that it received a license under the PLAs when it satisfied certain
7
conditions precedent specified in the Divested Entities Provisions.4 We conclude that
Lenovo has the better of the argument.
We first address LSI/Agere’s argument that we should apply the Winston factors
in the present case to “determine whether the parties intended to be bound in the absence
of a document executed by both sides.” Winston, 777 F.2d at 80. LSI/Agere contends
that because there is no “free-standing license” between LSI/Agere and Lenovo separate
from the PLAs, there is no signed writing we can properly interpret to determine whether
there is a licensing agreement between LSI/Agere and Lenovo. Appellant’s Br. 22.
It is not entirely clear whether LSI/Agere’s argument turns on the fact that the
alleged license agreement is not free-standing, that Lenovo itself is not a signatory, or
both, but neither argument passes muster. First, there is no legal basis for the proposition
that a licensing agreement must be free-standing from any other agreement. On the
contrary, New York law has long recognized that a patent license agreement may be
entered into as part of a larger agreement. See, e.g., Remington Rand v. Int’l Bus. Mach.
Corp., 3 N.Y.S.2d 515, 517 (Sup. Ct. 1937) (recognizing possibility of contract
4
In its brief, LSI/Agere does not contest that Lenovo satisfied these conditions
precedent—a concession supported by the record. The Divested Entities Provisions
require that (1) IBM divest part of its business to a third party, (2) the business be worth
more than $100,000,000, except under the 1999 PLA, in which case it must be worth
more than $25,000,000, and (3) IBM make a joint request with the third party to
LSI/Agere within 60 days of the divestiture. Under the 2000 and 2002 PLAs, the
divestiture was required to take place before October 1, 2005. In accordance with these
terms, the record reflects that on April 30, 2005, IBM divested its personal computing
division, which was valued at more than $100,000,000, to Lenovo, and that in letters sent
8
containing both a settlement agreement and a cross-licensing agreement). Second, as to
whether Lenovo can claim a license under a contract to which it was not a signatory, it is
a well-established principle of contract law that parties may contract to provide a benefit
to a third party. See, e.g., Septembertide Pub., B.V. v. Stein & Day, Inc., 884 F.2d 675,
679-80 (2d Cir. 1989) (applying New York law of third-party beneficiaries in the context
of licensing agreements); see also 13 Williston on Contracts § 37:1 (4th ed. 2015).
LSI/Agere’s reliance on Read-Rite, which applied the Winston factors in a case
involving a similar IBM PLA, is misplaced. See In re Read-Rite Corp., No. CV-06-
04173 SC, 2007 WL 2318901, at *2 (N.D. Cal. Aug. 13, 2007) aff’d, 393 F. App’x 535
(9th Cir. 2010). Even putting aside the case’s non-precedential status, in Read-Rite, the
parties stipulated that they “needed to execute a licensing agreement,” so the court did
not consider whether the PLA itself could constitute an enforceable licensing agreement.
Id. at *1. Read-Rite thus offers no basis for deviating from applicable New York
precedent by analyzing the Winston factors.
Having determined that the Winston factors do not apply because there are signed
writings, we now turn to the plain language of those writings to determine whether the
PLAs between LSI/Agere and IBM gave rise to licensing agreements between LSI/Agere
and Lenovo. Under New York law, “a written agreement that is complete, clear and
unambiguous on its face must be enforced according to the plain meaning of its terms.”
within 60 days of the divestiture, IBM and Lenovo requested that LSI/Agere license
Lenovo.
9
Greenfield v. Philles Records, Inc., 780 N.E.2d 166, 170 (N.Y. 2002). LSI/Agere argues
there is no enforceable licensing agreement between LSI/Agere and Lenovo on three
grounds.
First, LSI/Agere contends that the PLAs do not contain all the terms of the
licensing agreements to be granted to divested entities. Under New York law, a contract
that fails to include all material terms may be an unenforceable “agreement to agree.”
Joseph Martin, Jr. Delicatessen, Inc. v. Schumacher, 417 N.E.2d 541, 543 (N.Y. 1981)
(citations omitted). Such an agreement is usually unenforceable because it “requires
further expressions by the parties and therefore fails to ‘reduc[e] uncertainty to
certainty.’” Clifford R. Gray, Inc. v. LeChase Const. Servs., LLC, 819 N.Y.S.2d 182, 185
(App. Div. 2006) (quoting Cobble Hill Nursing Home v. Henry & Warren Corp., 548
N.E.2d 203, 206 (N.Y. 1989)) (alteration in original).
We conclude that the PLAs do not require further expressions of the parties and
leave open no material terms of a licensing agreement between LSI/Agere and Lenovo
because each of the Divested Entities Provisions states that the terms of the existing
license apply, except as otherwise specifically provided. The 1995 Divested Entities
Provision provides that each party agrees to grant licenses to the other party’s divested
entities “under terms and conditions similar to those contained herein.” J.A. 507.
Similarly, the 1999 Divested Entities Provision provides that the parties “agree[] to grant
a royalty-free license (under the same terms as the license granted . . . herein).” J.A. 287.
The 2000 and 2002 Divested Entities Provisions provide that the parties “will license”
10
“two divested entities” “in accordance with the terms and conditions of” their respective
PLAs, which in turn incorporate the terms and conditions of the 1995 PLA. J.A. 39, 41-
42. Each Divested Entities Provision also enumerates specific changes to be made to the
terms and conditions of the existing licenses.
LSI/Agere makes much of the fact that the 1995 Divested Entities Provision states
that the terms and conditions of the new licensing agreements must be “similar” to the
terms of the 1995 PLA. In this context, however, the use of the word “similar” reflects
the drafters’ acknowledgment of the changes made to the terms and conditions of the
1995 PLA by the Divested Entities Provision itself. Furthermore, in its brief LSI/Agere
does no more than speculate that the parties might have wanted to negotiate additional
terms without demonstrating that the parties in fact failed to address any material term.
Perhaps for that reason, at oral argument on the parties’ motions for summary judgment,
LSI/Agere acknowledged that the additional writing it claims is required need only have
recited the terms of an existing PLA and changed the party names.
Second, LSI/Agere argues the PLAs alone cannot grant Lenovo a license because
each of the PLAs expressly requires that an additional writing be executed before the
licensing agreements contemplated in the Divested Entities Provisions go into effect. In
support, LSI/Agere points to three places in the 1995 PLA, which is incorporated into the
2000 and 2002 PLAs, and one provision in the 1999 PLA: (1) the signature page of the
1995 PLA, which provides, “THIS AGREEMENT DOES NOT BIND OR OBLIGATE
EITHER PARTY IN ANY MANNER UNLESS DULY EXECUTED BY
11
AUTHORIZED REPRESENTATIVES OF EACH PARTY,” J.A. 507; (2) a provision in
the 1995 PLA stating that the parties do not intend for the rights in the PLA to extend to
entities other than related companies “without the other parties’ express written consent,”
J.A. 465; (3) a provision in the 1995 PLA stating the parties do not intend to be bound
“other than as expressly provided herein or in a [signed] writing,” J.A. 170; and (4) a
provision in the 1999 PLA stating that the agreement “shall not be binding upon the
parties until it has been signed hereinbelow,” J.A. 291. Noting that each Divested
Entities Provision states that the license will be granted on the same or similar “terms and
conditions” as the existing PLA, LSI/Agere contends that the language in these
provisions requires the parties to create and execute new licensing agreements effecting
the transfer of licensing rights to divested entities under the Divested Entities Provisions.
We perceive no such requirement in the plain language of the agreement, nor
under New York law. Where a contract is between sophisticated commercial entities,
courts should interpret the contract to “realize the reasonable expectations of the ordinary
businessperson.” Bank of New York v. Amoco Oil Co., 35 F.3d 643, 662 (2d Cir. 1994).
An ordinary business person would interpret the language on the signature page of the
1995 PLA and in the similar provision of the 1999 PLA to require simply that the
existing written licenses be signed, not to require that an additional writing be drafted, in
order for the otherwise complete licensing agreements contemplated by the PLAs to go
into effect. As to the other two provisions in the 1995 PLA, both merely require that any
agreement as to rights other than those granted by the PLA be in writing. At issue here,
12
however, are licensing rights expressly granted by the PLAs, which therefore do not
implicate either of these provisions.
Finally, LSI/Agere posits that an additional writing was required by the PLAs,
based upon the alleged extrinsic evidence of the “parties’ course of conduct,” Appellant’s
Br. 32, in the form of the June 23, 2005, letters in which IBM and Lenovo, in accordance
with the requirements of the Divested Entities Provisions, requested a “new patent cross
license agreement” from LSI/Agere, J.A. 180, 184. This argument is also unavailing.
We do not look beyond the four corners of the contract unless the language therein is
ambiguous. See Greenfield, 780 N.E.2d at 170. For this reason, “extrinsic and parol
evidence is not admissible to create an ambiguity in a written agreement which is
complete and clear and unambiguous upon its face.” S. Rd. Assocs., LLC v. Int’l Bus.
Machs. Corp., 826 N.E.2d 806, 809 (N.Y. 2005). Because the language of the PLAs is
unambiguous and clearly reflects that an additional writing is not required, we will not
consider IBM’s letters as supposed extrinsic evidence of a contrary intent. Even were we
to take IBM’s letters into account, however, they would not alter our conclusion, as the
letters show nothing more than that IBM’s lawyer prudently believed that an additional
writing, although not required by the PLAs, “could not have hurt.” J.A. 14.5
For these reasons, we will affirm the judgment of the District Court.
5
LSI/Agere also argues that any license afforded Lenovo is “null and void under
the New York Statute of Frauds” absent a signed writing. Appellant’s Br. 56. We reject
this argument because, as discussed above, the PLAs constitute enforceable, signed
writings.
13