WALKER DIGITAL LLC V, EXPEDIA, INC.

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
WALKER DIGITAL, LLC,
Plaintiff-Appellant,
v.
EXPEDIA, INC.,
Defendant-Appellee,
AND
AMAZON.COM, INC.,
Defendant-Appellee,
AND
AMERICAN AIRLINES, INC.,
Defendant-Appellee,
AND
ZAPPOS.COM, INC.,
Defendant-Appellee.
______________________
2013-1520, 2014-1080
______________________
Appeals from the United States District Court for the
District of Delaware in No. 11-CV-0313, Judge Sue L.
Robinson.
2 WALKER DIGITAL, LLC v. EXPEDIA, INC.
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WALKER DIGITAL, LLC,
Plaintiff-Appellant,
v.
AMAZON.COM, INC.,
Defendant-Appellee.
_______________________
2013-1521, 2014-1077
______________________
Appeals from the United States District Court for the
District of Delaware in No. 12-CV-0140, Judge Sue L.
Robinson.
------------------------------------------------
WALKER DIGITAL, LLC,
Plaintiff-Appellant,
v.
BARNES & NOBLE, INC.
Defendant-Appellee.
_______________________
2013-1522, 2014-1090
______________________
Appeals from the United States District Court for the
District of Delaware in No. 12-CV-0141, Judge Sue L.
Robinson.
------------------------------------------------
WALKER DIGITAL, LLC,
Plaintiff-Appellant,
WALKER DIGITAL, LLC v. EXPEDIA, INC. 3
v.
EXPEDIA, INC.
Defendant-Appellee.
_______________________
2013-1523, 2014-1081
______________________
Appeals from the United States District Court for the
District of Delaware in No. 12-CV-0142, Judge Sue L.
Robinson.
______________________
Decided: December 30, 2014
______________________
MICHAEL CARDOZO, Proskauer Rose LLP, of New
York, New York, argued for plaintiff-appellant. On the
brief were ANTHONY G. SIMON, BENJAMIN R. ASKEW,
MICHAEL P. KELLA, STEPHANIE H. TO, and TIMOTHY D.
KRIEGER, The Simon Law Firm, P.C., of St. Louis, Mis-
souri, TIMOTHY E. GROCHOCINSKI, Innovalaw, P.C., of
Orland Park, Illinois, and MARC A. FENSTER
and BENJAMIN T. WANG, Russ, August & Kabat, of Los
Angeles, California.
JEFFREY S. LOVE, Klarquist Sparkman LLP, of Port-
land, Oregon, argued for all defendants-appellees. With
him on the brief for Amazon.com Inc. and Zappos.com,
Inc. were KLAUS H. HAMM, KRISTEN L. REICHENBACH,
PHILIP WARRICK, and GARTH A. WINN. For defendant-
appellee Expedia, Inc., were AHMED J. DAVIS and LINHONG
ZHANG, Fish & Richardson, P.C., of Washington, DC. For
defendant-appellee American Airlines, was JOHN B.
CAMPBELL, McKool Smith, P.C., of Austin, Texas. For
defendant-appellee Expedia, was NEIL J. MCNABNAY, Fish
4 WALKER DIGITAL, LLC v. EXPEDIA, INC.
& Richardson, P.C., of Dallas, Texas. For defendant-
appellee Barnes & Noble, Inc. were PHILIP A. ROVNER
and JONATHAN A. CHOA, Potter Anderson & Corroon LLP,
of Wilmington, Delaware.
______________________
Before PROST, Chief
Judge, NEWMAN and WALLACH, Circuit Judges.
Opinion for the court filed by Chief Judge PROST.
Dissenting opinion filed by Circuit Judge WALLACH.
PROST, Chief Judge.
This consolidated appeal pertains to five actions for
patent infringement brought by Walker Digital (“Walker”)
against Expedia, Inc., Amazon.com, Inc., American Air-
lines, Inc., Zappos, Inc., and Barnes & Noble, Inc. (collec-
tively, “appellees”). Walker appeals from the United
States District Court for the District of Delaware’s order
dismissing with prejudice Walker’s complaints for lack of
standing. The district court found that Walker lacked
standing because it had transferred its interest in all of
the patents at issue pursuant to a December 9, 2011
Confidential Settlement and License Agreement between
eBay, Inc. and Walker (“Settlement Agreement”). 1 For
the reasons stated below, we affirm.
BACKGROUND
On April 11, 2011, Walker filed suit in case number
11-CV-313, against ten defendants, including eBay,
alleging infringement of U.S. Patent Nos. 7,831,470 (“’470
1 Although the district court placed a protective or-
der preventing discussion of certain factual information
related to the Settlement Agreement, this opinion refers
only to facts that were disclosed in the district court’s
opinion and other public proceedings below.
WALKER DIGITAL, LLC v. EXPEDIA, INC. 5
patent”) and 7,827,056 (“’056 patent”). Walker also filed
case number 11-CV-315 against numerous defendants,
including eBay, alleging infringement of U.S. Patent No.
7,236,942 (“’942 patent”). Later, on February 7, 2012,
Walker filed against Amazon.com, Inc. in case number 12-
CV-140, against Barnes & Noble, Inc. in case number 12-
CV-141, and against Expedia, Inc. in case number 12-CV-
142. In case numbers 12-CV-140, 12-CV-141, and 12-CV-
142, Walker alleged infringement of U.S. Patent No.
8,112,359 (“’359 patent”). The ’470, ’056, ’942, and ’359
patents share a number of similar parents, but can all be
traced back to U.S. Patent No. 6,694,300 (“’300 patent”). 2
In order to settle case number 11-CV-315, Walker and
eBay executed the Settlement Agreement at issue here.
In addition to an irrevocable, nonexclusive license to
Walker’s entire patent portfolio, the agreement also
transferred ownership of certain patent rights from
Walker to eBay. The first paragraph of the Settlement
Agreement’s Patent Purchase Terms provides:
1.1 Purchase and Sale. Walker Digital LLC
(“Seller” for purposes of this Exhibit A) hereby
conveys, assigns, and transfers to eBay Inc.
(“Purchaser” for purposes of this Exhibit A), and
Purchaser hereby accepts, all right title, and in-
terest in and to the patents and patent applica-
tions described on Schedule A (collectively, the
“Transferred Patents”). The Transferred Pa-
2 Specifically, the ’470 patent is a continuation-in-
part of the ’300 patent, and the ’056 patent is a continua-
tion of the ’470 patent. The ’359 patent is a continuation
of U.S. Patent No. 7,856,379, which is a continuation of
the ’942 patent, which is a continuation-in-part of the ’300
patent. The ’359 patent is also a continuation-in-part of
the U.S. Patent No. 6,405,174, which in turn is a continu-
ation-in-part of the ’300 patent.
6 WALKER DIGITAL, LLC v. EXPEDIA, INC.
tents include all counterparts, continuations, con-
tinuations-in-part, divisionals, reissues, reexami-
nations, and extensions thereof, and all current,
future, or abandoned patents and patent applica-
tions (whether filed by Seller or Purchaser and
whether filed before, on, or after the Effective
Date) claiming priority from, derived from, or re-
lated to any of the foregoing in any jurisdiction.
The sale of the Transferred Patents to Purchaser
includes the transfer of (i) the right to sue and re-
cover damages for past, present, and/or future in-
fringement; (ii) the right to injunctive relief and;
(iii) any and all causes of action relating to any of
the inventions or discoveries described in the
Transferred Patents. Seller reserves no rights
whatsoever in the Transferred Patents.
Walker Digital, LLC v. Expedia, Inc., 950 F. Supp. 2d 729,
732 (D. Del. 2013). Schedule A of the Agreement does not
list the ’056, ’470, ’942, or ’359 patents. However, Sched-
ule A does include, inter alia, the ’300 patent, and other
patents of which the patents-at-issue are continuations or
continuations-in-part.
Following execution of the Settlement Agreement and
dismissal of all claims against eBay in the -313 and -315
cases, the remaining appellees moved to dismiss Walker’s
complaints against them in the -313, -315, -140, -141, and
-142 cases. The appellees argued that because the Patent
Purchase Terms provide that the “Transferred Patents”
include “the patents and patent applications described on
Schedule A,” as well as “all counterparts, continuations,
continuations-in-part, divisionals, reissues, reexamina-
tions, and extensions thereof,” Walker Digital, 950 F.
Supp. 2d at 732, the Settlement Agreement transferred
ownership of the four patents-in-suit—all continuations or
continuations-in-part of patents included in Schedule A—
to eBay. The appellees submitted that, having trans-
WALKER DIGITAL, LLC v. EXPEDIA, INC. 7
ferred ownership of the patents-in-suit, Walker lost
standing to sue.
In its response to appellees’ motion, Walker included
a letter from eBay, which stated in its entirety: “This
confirms eBay, Inc. is not the owner of U.S. Patent Nos.
7,831,470 (09/219267) and 7,827,056 (11/423481). eBay
Inc. reserves all rights and no other rights, express or
implied, are granted.” Walker Digital, 950 F. Supp. 2d at
737. The district court concluded that the letter, which it
noted was not signed under oath and did not address all
the patents-in-suit, was insufficient to answer the ques-
tion of ownership. The district court then granted a
temporary stay in a February 7, 2013 hearing in order to
allow Walker to obtain a formal declaration from eBay.
Walker’s subsequent response on March 4 included a
signed declaration from Anup Tikku, eBay’s Senior Patent
Counsel, who confirmed that the parties (Walker Digital
and eBay) did not intend for Walker Digital to assign
the ’470 patent, the ’056 patent, or the ’942 patent to eBay
in connection with the License Agreement. See id.
The district court found that the broad granting lan-
guage of the Settlement Agreement was unambiguous,
and overcame the “equivocal parol evidence” of the par-
ties’ intent, which the court noted still had not addressed
the ’359 patent. The district court thus granted appellees’
motion to dismiss for lack of standing on June 19, 2013.
The decision did not specify whether the dismissal was
with prejudice. The appellees filed a motion on July 12
under Rule 59(e) of the Federal Rules of Appellate Proce-
dure to clarify that the judgment was with prejudice. On
July 19, Walker filed its notices of appeal. In response to
appellees’ motion, the district court on October 25 modi-
fied its holding to dismiss the case with prejudice, reason-
ing that “[Walker] was offered multiple opportunities to
cure the standing defect,” and “has offered no evidence
that it has a plan to cure the standing defect” apart from
engaging in continued discussions with eBay regarding
8 WALKER DIGITAL, LLC v. EXPEDIA, INC.
ownership of the patents-in-suit. Walker Digital, LLC v.
Expedia, Inc., No. 1:11-CV-313, 2013 WL 5799912, at *2
(D. Del. Oct. 25, 2013) (“Order”). Walker filed a new
notice of appeal, contesting both the judge’s decision with
respect to standing and, in the alternative, the dismissal
of its complaint with prejudice.
DISCUSSION
I. Standard of Review
Standing under Article III, section 2, clause 1 of the
United States Constitution is reviewable at all stages of a
proceeding, but it is a requirement that must be satisfied
when the case is filed or brought. See Friends of the
Earth, Inc. v. LaidLaw Envtl. Servs. (TOC), Inc., 528 U.S.
167, 189 (2000); Nat’l Org. for Women, Inc. v. Scheidler,
510 U.S. 249, 255 (1994). Mootness, by contrast, while
sometimes colloquially referred to as standing, is the
requirement, also under Article III, that the plaintiff have
a personal stake in the case or controversy throughout the
action. See Arizonans for Official English v. Arizona, 520
U.S. 43, 68 (1997). We need not decide here whether this
case presents an issue of standing or mootness; regardless
of the correct nomenclature, it is clear that if Walker
currently has no interest in the patents it is asserting, it
may not continue its case. See Sicom Sys., Ltd. v. Agilent
Techs., Inc., 427 F.3d 971, 976 (Fed. Cir. 2005); Propat
Int’l Corp. v. RPost, Inc., 473 F.3d 1187, 1189 (Fed. Cir.
2007). We review de novo the question of whether there
exists a case or controversy under Article III. See Green
Edge Enters., LLC v. Rubber Mulch Etc., LLC, 620 F.3d
1287, 1300 (Fed. Cir. 2010).
Walker also appeals the district court’s dismissal with
prejudice. In determining whether a dismissal should
have been with or without prejudice, this court applies the
law of the pertinent regional circuit. Sicom, 427 F.3d at
975. In the Third Circuit, dismissal with prejudice is
reviewed under an abuse of discretion standard. Id.WALKER DIGITAL, LLC v. EXPEDIA, INC. 9
Under this deferential standard, the district court’s
holding must be upheld unless no reasonable person
would adopt the court’s view. In re VistaCare Grp., 678
F.3d 218, 232 (3d Cir. 2012) (quoting United States v.
Green, 617 F.3d 233, 239 (3d Cir. 2010)).
Contract interpretation is a question of law that this
court reviews de novo. SUFI Network Servs., Inc. v.
United States, 755 F.3d 1305, 1321 (Fed. Cir. 2014) (quot-
ing Mass. Bay Transp. Auth. v. United States, 254 F.3d
1367, 1372 (Fed. Cir. 2001)). We apply the law of the
state of Delaware in interpreting the Settlement Agree-
ment language. See Thatcher v. Kohl’s Dep’t Stores, Inc.,
397 F.3d 1370, 1373 (Fed. Cir. 2005) (quoting Novamedix,
Ltd. v. NDM Acquisition Corp., 166 F.3d 1177, 1180 (Fed.
Cir. 1999)); Regents of Univ. of Mex. v. Knight, 321 F.3d
1111, 1118 (Fed. Cir. 2003) (“State law governs contractu-
al obligations and transfers of property rights, including
those relating to patents.”).
II. Ownership of the Patents-in-Suit
The Settlement Agreement provides that Walker “re-
serves no rights whatsoever in the Transferred Patents.”
Walker Digital, 950 F. Supp. 2d at 732. Therefore, in
order to determine whether Walker satisfies Article III’s
case or controversy requirement, we interpret the Settle-
ment Agreement language to determine whether the
patents-in-suit were included in the category of Trans-
ferred Patents.
The Agreement’s Patent Purchase Terms have only
one reasonable interpretation. The first sentence of
Section 1.1 states that “the Transferred Patents” include
the patents and patent applications described in Schedule
A; the second sentence further modifies the set of Trans-
ferred Patents to include “all counterparts, continuations,
[and] continuations-in-part . . . thereof . . . .” Walker
Digital, 950 F. Supp. 2d at 732. It is undisputed that
the ’056, ’470, ’942, and ’359 patents are continuations or
10 WALKER DIGITAL, LLC v. EXPEDIA, INC.
continuations-in-part of patents included in Schedule A.
Therefore, the only reasonable interpretation of this
language is that the patents-in-suit were included within
the category of the Transferred Patents.
Walker argues the language in the Settlement
Agreement is reasonably susceptible to an alternative
interpretation. Under Walker’s proposed reading, only
the first sentence of Section 1.1 grants rights to eBay
(specifically, a grant of the twenty-six patents and appli-
cations in Schedule A), and the second sentence of Section
1.1 is simply “an inaccurate declarative statement,”
describing what Schedule A “includes” without actively
modifying its scope. However, subsequent language in
Section 1.1 clearly includes “patent applications . . .
filed . . . after the Effective Date” of the Agreement.
Walker Digital, 950 F. Supp. 2d at 732. Inaccurate or not,
there is no way for the language following the first sen-
tence of Section 1.1 to be a mere description of the present
contents of Schedule A, because it clearly comprehends
patent applications filed in the future. Courts will not
read a contract to render a provision or term meaningless
or illusory. Restatement (Second) of Contracts § 203(a)
(1981); Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153,
1159 (Del. 2010). Therefore, Walker’s proposed interpre-
tation is not reasonable. 3
3 Walker also argues that given the large number of
patents that are descendant from the patents listed in
Schedule A, “no reasonable party to the [Agreement]
would have interpreted the Patent Purchase Terms as
giving away this many additional patents/applications,”
and therefore the Settlement Agreement as a whole is
ambiguous. Even if it may be true that no reasonable
party would have agreed to such a broad grant had they
read the provision thoroughly, this argument fails to
WALKER DIGITAL, LLC v. EXPEDIA, INC. 11
Walker alternatively argues that the Settlement
Agreement as a whole is ambiguous. The traditional rule
is that ambiguity exists when, within the four corners of
an agreement, the provisions in controversy are suscepti-
ble to more than one reasonable interpretation. See
GMG, 36 A.3d at 780; City Investing Co. Liquidating
Trust v. Cont’l Cas. Co., 624 A.2d 1191, 1198 (Del. 1993).
Additionally, some cases have held that a party may
establish ambiguity if an agreement’s provisions neces-
sarily conflict with one another. See Cordis Corp. v.
Boston Scientific Corp., 868 F. Supp. 2d 342, 352 (D. Del.
2012) aff’d in part, vacated in part, 504 F. App’x 922 (Fed.
Cir. 2013) (“inconsistent contractual provisions may
create ambiguity in a contract”); Empire of Am. Relocation
Servs., Inc. v. Commercial Credit Co., 551 A.2d 433, 436
(Del. 1988) (“the terms of the amended agreement were
ambiguous because they were, in fact, in conflict”).
Where a contract is ambiguous, the court must look
beyond the language of the contract to ascertain the
parties’ intentions. GMG Capital Invs., LLC v. Athenian
Venture Partners I, 36 A.3d 776, 780 (Del. 2012). Howev-
er, the Delaware Supreme Court has held repeatedly that
“[e]xtrinsic evidence is not to be used to interpret contract
language where that language is ‘plain and clear on its
face.’” O’Brien v. Progressive N. Ins. Co., 785 A.2d 281,
289 (Del. 2001) (alteration in original) (quoting E.I. du
Pont de Nemours & Co. v. Allstate Ins. Co., 693 A.2d 1059,
1061 (Del. 1997)); Halliburton Co. v. Highlands Ins. Grp.,
811 A.2d 277, 280 n.9 (Del. 2002); Barron Bancshares,
Inc. v. United States, 366 F.3d 1360, 1379 (Fed. Cir. 2004)
(collecting cases applying the parol evidence rule). 4
establish that the granting language itself is subject to
more than one reasonable interpretation.
4 Appellees note that the Settlement Agreement
contains a standard merger clause. Under Delaware law,
12 WALKER DIGITAL, LLC v. EXPEDIA, INC.
Walker argues that the Settlement Agreement is am-
biguous because the grant in Section 1.1 of the continua-
tions-in-part is inconsistent with the structure of Sched-
Schedule A. See Cordis Corp., 868 F. Supp. 2d at 352
(“inconsistent contractual provisions may create ambigui-
ty in a contract.”). Walker notes that some of the patents
listed in Schedule A are relatives of other patents also
included in Schedule A. According to Walker’s argument,
if the parties had wished to transfer all related patents
and applications of the ones listed in Schedule A, the
parties would have listed only the three parents of each
and every patent involved. Instead, Schedule A includes
a number of parent patents, and some, but not all of their
children. If, as appellees argue, the second sentence of
Section 1.1 grants all children of the patents and applica-
tions listed in Schedule A, Walker argues that there
would be no reason to list some children in Schedule A but
not others. Walker argues that the district court’s inter-
pretation therefore renders many of Schedule A’s listings
redundant. However, the genealogies of each of the
patents listed in Schedule A are not described anywhere
within the four corners of the Settlement Agreement.
Therefore, a person considering only the intrinsic evi-
dence within the Settlement Agreement would not detect
any redundancy. We may not rely on extrinsic evidence
such as the history of a patent application to establish an
a merger clause further bars consideration of parol evi-
dence. See, e.g., RTN Investors, LLC v. RETN, LLC, No.
08C-04-007-JRJ, 2011 WL 862268, at *13 n. 204 (Del.
Super. Ct. Feb. 10, 2011); Hyansky v. Vietri, No. 14645-
NC, 2003 WL 21976031, at *4 (Del. Ch. Mar. 28, 2003).
However, a merger clause may be set aside if ambiguous
terms in the contract exist. Oglesby v. Conover, No.
K10C-08-017-RBY, 2011 WL 3568276, at *3 (Del. Super.
Ct. May 16, 2011).
WALKER DIGITAL, LLC v. EXPEDIA, INC. 13
ambiguity when the language transferring it is clear.
O’Brien, 785 A.2d at 289.
Walker also argues that the Settlement Agreement is
ambiguous because under Section 1.1, the parties would
have transferred patents inconsistent with the Agree-
ment’s warranty provision, which guarantees that none of
the Transferred Patents were the subject of pending
litigation. The fact that the ’056, ’470, and ’942 patents
were involved in litigation at the time of the Settlement
Agreement’s execution is parol evidence, and thus cannot
be used to establish an ambiguity. Id. Even if this were
not the case, this evidence at best establishes inconsisten-
cy between the Settlement Agreement terms and what
may have been a party or both parties’ knowledge, intent,
or behavior. The fact that a party may not be in compli-
ance with a provision in an agreement does not, however,
establish internal inconsistency within the four corners of
the agreement itself. 5
Lastly, Walker relies on the Settlement Agreement’s
drafting history and the parties’ behavior after its execu-
tion to show ambiguity. This remaining evidence, which
includes previous drafts of the Settlement Agreement and
emails between the parties, may well establish the intent
of the parties was not to transfer all the patents-in-suit.
Nevertheless, under Delaware law, when a contract’s
language is unambiguous, extrinsic evidence may not be
used to vary the terms of the contract or to create an
ambiguity. O’Brien, 785 A.2d at 289; Eagle Indus., Inc. v.
DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del.
1997); Osborn, 991 A.2d at 1159 (Delaware adheres to the
“objective” theory of contracts). Because we conclude that
the Settlement Agreement language is clear and unam-
5 The ’359 patent was not involved in litigation at
the time the Agreement was executed.
14 WALKER DIGITAL, LLC v. EXPEDIA, INC.
biguous, we decline to review Walker’s extrinsic evidence
here.
III. Dismissal with Prejudice
Walker’s appeal of the district court’s dismissal with
prejudice is premised on two grounds: first, that the
district court lacked jurisdiction to modify its dismissal
after Walker had filed its first timely notice of appeal, and
second, that the district court abused its discretion by
refusing to allow Walker to cure its Article III defect and
dismissing with prejudice. We find both grounds unavail-
ing.
First, the district court did indeed have jurisdiction to
modify its order and dismiss the case with prejudice as
moot. The filing of a valid notice of appeal does have
jurisdictional significance, insofar as it confers jurisdic-
tion on the court of appeals and divests the district court
of its control over those aspects of the case involved in the
appeal. Griggs v. Provident Consumer Disc. Co., 459 U.S.
56, 58 (1982). However, a notice of appeal filed while a
Rule 59(e) motion is pending is ineffective until the mo-
tion is disposed of. Fed. R. App. P. 4(a)(4)(B)(i);
4(a)(4)(A)(iv); Kraft, Inc. v. United States, 85 F.3d 602,
604 (Fed. Cir. 1996). Appellees filed a motion on July 12,
2013 to amend the judgment under 59(e). Later, on July
19, Walker filed its notices of appeal. The district court
still retained jurisdiction to decide appellees’ 59(e) motion,
and Walker’s notice of appeal was therefore ineffective
until the district court disposed of said motion on October
25. Walker argues that appellees’ Rule 59(e) motion was
invalid because there was no judgment at the time that
could have been amended given the district court’s dis-
missal for lack of Article III case or controversy. Howev-
er, for reasons already stated, the district court still
WALKER DIGITAL, LLC v. EXPEDIA, INC. 15
retained jurisdiction to amend its dismissal pursuant to
Appellees’ Rule 59(e) motion. 6
Walker also argues that under Third Circuit prece-
dent, courts generally disfavor dismissing an action with
prejudice based on lack of standing, particularly when the
defect is curable. Univ. of Pittsburgh v. Varian Med. Sys.,
Inc., 569 F.3d 1328, 1333 (Fed. Cir. 2009). However, this
presumption is not absolute, particularly when the plain-
tiff has been given ample opportunities to cure the defect
but has failed. See Sicom, 427 F.3d at 980 (affirming a
dismissal with prejudice under Third Circuit law because
“Sicom already had a chance to cure the [standing] defect
and failed”); accord Textile Prods., Inc. v. Mead Corp., 134
F.3d 1481, 1485 (Fed. Cir. 1998) (“The district court
correctly dismissed the infringement claim with prejudice
because Textile had its chance to show standing and
failed.”); Frempong v. Nat’l City Bank of Ind., 452 F.
App’x 167, 171 (3d Cir. 2011) (affirming a dismissal for
lack of standing with prejudice when the plaintiff had
both notice and a full and fair opportunity to contest or
cure its standing defect).
We conclude that the district court did not abuse its
discretion when it imposed a dismissal with prejudice in
this case. Walker had multiple opportunities to cure its
Article III defect. After concluding that the letter from
eBay, which was not made under oath and did not ad-
6 Appellees also argue that Walker could not file a
notice of appeal until the district court had ruled on its
counterclaims. See Nystrom v. TREX Co., Inc., 339 F.3d
1347, 1351 (Fed. Cir. 2003)) (“[A] judgment that does not
dispose of pending counterclaims is not a final judg-
ment.”). However, the district court’s order explains that
it disposed of the counterclaims as moot at the time it
dismissed Walker for lack of an Article III case or contro-
versy. See Order, 2013 WL 5799912, at *1.
16 WALKER DIGITAL, LLC v. EXPEDIA, INC.
dress all of the patents-in-suit, was insufficient to answer
the question of ownership, the district court ordered a
month-long stay on all of Walker’s cases in order to pro-
duce some legally binding affirmation of eBay’s position
with respect to the Settlement Agreement and its owner-
ship interest. The declaration provided by Walker of Mr.
Tikku was also insufficient. At any time during the
litigation, Walker could have received an assignment of
the patents back from eBay, or if necessary, filed a suit
against eBay seeking reformation of the Settlement
Agreement. 7 Instead, Walker offered no evidence that it
had a plan to cure its Article III defect, stating only that it
“has been and currently is engaged in continued discus-
sions with eBay regarding ownership of the patents-in-
suit.” Order, 2013 WL 5799912, at *2. Under these
circumstances, the district court did not abuse its discre-
tion when it dismissed with prejudice Walker’s claims
against appellees.
CONCLUSION
For the aforementioned reasons, we affirm the judg-
ment of the district court dismissing with prejudice Walk-
er’s claims related to the ’470, ’056, ’942, and ’359 patents.
AFFIRMED
7 Under the doctrine of scrivener’s error as estab-
lished in the Third Circuit, “the mistake of a scrivener in
drafting a document may be reformed based upon parol
evidence, provided the evidence is ‘clear, precise, convinc-
ing and of the most satisfactory character’ that a mistake
has occurred and that the mistake does not reflect the
intent of the parties.” Int’l Union of Elec., Elec., Salaried,
Mach. & Furniture Workers, AFL-CIO v. Murata Erie N.
Am., Inc., 980 F.2d 889, 907 (3d Cir. 1992).
NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
WALKER DIGITAL, LLC,
Plaintiff-Appellant,
v.
EXPEDIA, INC.,
Defendant-Appellee,
AND
AMAZON.COM, INC.,
Defendant-Appellee,
AND
AMERICAN AIRLINES, INC.,
Defendant-Appellee,
AND
ZAPPOS.COM, INC.,
Defendant-Appellee.
______________________
2013-1520, 2014-1080
______________________
Appeals from the United States District Court for the
District of Delaware in No. 11-CV-313-SLR, Judge Sue L.
Robinson.
WALKER DIGITAL, LLC v. EXPEDIA, INC. 2
------------------------------------------------
WALKER DIGITAL, LLC,
Plaintiff-Appellant,
v.
AMAZON.COM, INC.,
Defendant-Appellee.
_______________________
2013-1521, 2014-1077
______________________
Appeals from the United States District Court for the
District of Delaware in No. 12-CV-140-SLR, Judge Sue L.
Robinson.
------------------------------------------------
WALKER DIGITAL, LLC,
Plaintiff-Appellant,
v.
BARNES & NOBLE, INC.
Defendant-Appellee.
_______________________
2013-1522, 2014-1080
______________________
Appeals from the United States District Court for the
District of Delaware in No. 12-CV-141-SLR, Judge Sue L.
Robinson.
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WALKER DIGITAL, LLC,
Plaintiff-Appellant,
WALKER DIGITAL, LLC v. EXPEDIA, INC. 3
v.
EXPEDIA, INC.
Defendant-Appellee.
_______________________
2013-1523, 2014-1081
______________________
WALLACH, Circuit Judge, dissenting.
The majority holds the contract language in the eBay
Settlement Agreement is “clear and unambiguous” in
transferring “all counterparts, continuations, [and]
continuations-in-part” of those patents listed on Schedule
A. Maj. Op. at 14. Consequently, the majority “decline[s]
to review Walker’s extrinsic evidence.” Id. at 13. Because
conflicting clauses in the Settlement Agreement create
ambiguity regarding the parties’ intent, I respectfully
dissent.
The majority correctly declines to label the “the
second sentence of Section 1.1” as “an inaccurate
declarative statement,” as Walker proposes. Maj. Op. at
10. As the majority notes, “[c]ourts will not read a
contract to render a provision or term meaningless or
illusory.” Id. (citing Restatement (second) of Contracts,
§ 203(a) (1981) and Osborn ex rel. Osborn v. Kemp, 991
A.2d 1153, 1159 (Del. 2010)). However, contrary to the
majority’s view, Section 1.1’s plain language conflicts with
other provisions in the Agreement, rendering the
Agreement ambiguous as to whether unlisted patents
(including the ’359, ’056, ’942, and ’470 patents (“the
patents-in-suit”)) related to the listings on Schedule A,
were transferred to eBay.
WALKER DIGITAL, LLC v. EXPEDIA, INC. 4
I. The Structure of the Settlement Agreement Creates
Ambiguity
As an initial matter, ambiguity is created by the
structure of the Agreement; neither “Schedule A” nor
“Exhibit A” is referenced anywhere in what is titled the
“Settlement Agreement.” The district court acknowledged
this, noting in its opinion that “[i]n addition to Appendix
B, but neither mentioned in the body of the Settlement
Agreement nor separately executed, is a document labeled
‘EXHIBIT A, PATENT PURCHASE TERMS.’” J.A. 5
(emphasis added). [[Concessions were made.]]
“A contract can be created by reference to the terms of
another instrument if a reading of all documents together
gives evidence of the parties’ intention and the other
terms are clearly identified.” Realty Growth Investors v.
Council of Unit Owners, 453 A.2d 450 454 (Del. 1982).
Here, as both parties and the trial court acknowledge,
neither Schedule A nor Exhibit A is referenced in the
Settlement Agreement. Intrinsic ambiguity necessarily
exists.
II. The Second Sentence of Section 1.1 Renders Some
Listings on Schedule A Redundant
The majority rejects Walker’s argument that the
district court’s interpretation renders some of Schedule
A’s listings redundant, thereby creating ambiguity within
the Agreement. The majority reasons “the genealogies of
each of the patents listed in Schedule A are not described
anywhere within the four corners of the Settlement
Agreement. Therefore, a person considering only the
intrinsic evidence within the Settlement Agreement
would not detect any redundancy.” Maj. Op. at 12.
[[There is redundancy in Schedule A.]]
“Delaware courts have consistently held that an
interpretation that gives effect to each term of an
agreement is preferable to any interpretation that would
WALKER DIGITAL, LLC v. EXPEDIA, INC. 5
result in a conclusion that some terms are uselessly
repetitive.” O’Brien v. Progressive N. Ins. Co., 785 A.2d
281, 287 (Del. 2001) (emphasis added); see also Intel Corp.
v. Am. Guarantee & Liab. Ins. Co., 51 A.3d 442, 451 (Del.
2012) (“[N]o part of an agreement should be rendered
superfluous.”); Preferred Inv. Servs., Inc. v. T & H Bail
Bonds, Inc., No. 5886VCP, 2013 WL 3934992, at *13 (Del.
Ch. July 24, 2013). Section 1.1’s broad grant of “all
counterparts, continuations, continuations-in-part,
divisionals, reissues, reexaminations, and extensions
thereof” conflicts with the parties’ decision to list twenty-
six patents rather than only the three grandparent
applications, to which all other patents/applications,
including the patents-in-suit, claim priority.
[[Concessions were made.]] It is illogical to list
twenty-three divisionals and continuations-in-parts, but
not the several hundred others that Section 1.1 plainly
transfers, necessarily creating ambiguity regarding what
was transferred.
Furthermore, as explained by the majority, the
Settlement Agreement gives eBay a nonexclusive license
to all the patents listed in Appendix B. [[Similarities.]]
That some patents appear on both creates ambiguity
because it is irrational that a party would pay to both
license a patent and gain an assignment of the same.
III. Section 1.1 Conflicts with the Warranty Clause
The Majority also says the warranty clause in the
Settlement Agreement does not create ambiguity when
reading Section 1.1 as transferring all related patents to
those on Schedule A. Specifically, the Majority concludes:
The fact that the ’056, ’470, and ’942 patents were
involved in litigation at the time of the Settlement
Agreement’s execution is parol evidence, and thus
cannot be used to establish an ambiguity. Even if
this were not the case, this evidence at best
WALKER DIGITAL, LLC v. EXPEDIA, INC. 6
establishes inconsistency between the Settlement
Agreement terms and what may have been a
party or both parties’ knowledge, intent, or
behavior. The fact that a party may not be in
compliance with a provision in an agreement does
not, however, establish internal inconsistency
within the four corners of the agreement itself.
Maj. Op. at 13 (citation and footnote omitted). “[W]hile
unambiguous contract language is generally interpreted
without resort to extrinsic evidence, it need not be
interpreted in a vacuum.” 11 Williston on Contracts §
30:6 (4th ed. 2011); see also E.I. du Pont de Nemours &
Co. v. Shell Oil Co., 498 A.2d 1108, 1114 (Del. 1985) (“In
this case, we are dealing with what first appears to be two
independent contracts. Indeed, were each contract to be
considered in a vacuum, each would constitute a
permissible exercise of Shell’s rights under the License
Agreement. . . . However, because of the manner in which
the parties entered into the Toll Conversion Agreement
and the Purchase and Sale Agreement, it is obvious that
these Agreements cannot be considered apart from one
another and must be read together as two parts of the
same business transaction.”) (emphases added). The
majority’s conclusion violates this principle.
A court’s consideration of the circumstances
surrounding execution of a contract in order to determine
the parties’ intent does not necessarily implicate the parol
evidence rule. See GRT, Inc. v. Marathon GTF Tech.,
Ltd., No. 5571-CS, 2011 WL 2682898, at *n.88 (Del. Ch.
July 11, 2011) (quoting 11 Williston on Contracts § 32:7
(4th ed. 2011)) (“[T]he circumstances surrounding the
execution of a contract may always be shown and are
always relevant to a determination of what the parties
intended by the words they chose. . . . Some courts have
held that the former rule runs afoul of the parol evidence
rule . . . . These decisions in truth, reflect a
misunderstanding of the parol evidence rule. . . . [T]he
WALKER DIGITAL, LLC v. EXPEDIA, INC. 7
term [‘surrounding circumstances’] refers to the
commercial or other setting in which the contract was
negotiated and other objectively determinable factors that
give a context to the transaction between the parties.”)
(emphasis added).
Accordingly, “[a] court must accept and apply the
plain meaning of an unambiguous term in the context of
the contract language and circumstances, insofar as the
parties themselves would have agreed ex ante.” Lorillard
Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 740 (Del.
2006) (emphasis added); see also Pharm. Prod. Dev., Inc.
v. TVM Life Sci. Ventures VI, L.P., No. 5688-VCS, 2011
WL 549163, *n.24 (Del. Ch. Feb. 16, 2011) (“Although
recourse to extrinsic evidence is generally not appropriate
in interpreting an unambiguous contract, that does not
mean that the court must be blind to the general business
context in which a given contract was negotiated.”). The
majority’s refusal to consider the pending litigation, the
very circumstance that led to the creation of the
Settlement Agreement, runs afoul of this well-settled
principle. Section 1.1’s assignment of all continuations,
continuations-in-part, and related patents/applications to
those listed in Schedule A conflicts with the no-pending
litigation warranty because the -313 and -315 cases were
pending when the Settlement Agreement was executed.
See, e.g., J.A. 386, 734. This inconsistency creates
ambiguity.
Moreover, “[a] court must interpret contractual
provisions in a way that gives effect to every term of the
instrument, and that, if possible, reconciles all of the
provisions of the instrument when read as a whole.”
Counsel of the Dorset Condo. Apartments v. Gordon, 801
A.2d 1, 7 (Del. 2002); United Rentals, Inc. v. RAM
Holdings, Inc., 937 A.2d 810, 831 (Del. Ch. 2007) (A
“canon of construction . . . requires harmonization of
seemingly conflicting contract provisions”); GRT, Inc. v.
Marathon GTF Tech., Ltd., No. 5571-CS, 2012 WL
WALKER DIGITAL, LLC v. EXPEDIA, INC. 8
2356489, at *4 (Del. Ch. June 21, 2012) (“[A] court will
prefer an interpretation that harmonizes the provisions in
a contract as opposed to one that creates an inconsistency
or surplusage.”). By disregarding the conflict between
the warranty clause and the pending litigation, the
majority fails to give effects to all provisions, nullifying
the warranty clause.
The district court itself acknowledged “the broad
granting language is inconsistent with plaintiff’s
warranty that none of the Transferred Patents were [the]
subject of litigation,” J.A. 13, but ultimately “declin[ed] to
elevate a standard warranty clause above unambiguous
granting language—the clear purpose of the document,”
J.A. 14. It is impossible to reconcile the court’s
simultaneous recognition of conflicting terms and its
insistence on unambiguous contract language. Cordis
Corp. v. Boston Scientific Corp., 868 F. Supp. 2d 342, 352
(D. Del. 2012) aff’d in part, vacated in part on other
grounds, 504 F. App'x 922 (Fed. Cir. 2013) (“[i]nconsistent
contractual provisions may create ambiguity in a
contract.”).
IV. The Majority’s Interpretation Conflicts with the
Overall Plan of the Settlement Agreement
“[T]he meaning inferred from a particular provision
cannot control the meaning of the entire agreement if
such an inference conflicts with the agreement’s overall
scheme or plan.” Riverbend Cmty., LLC v. Green Stone
Eng’g, LLC, 55 A.3d 330, 334–335 (Del. 2012) (internal
quotation marks and citation omitted). Rather, “[a] court
must interpret contractual provisions in a way that gives
effect to every term of the instrument, and that, if
possible, reconciles all of the provisions of the instrument
when read as a whole.” Counsel of the Dorset Condo., 801
at 7; see also Delta & Pine Land Co. v. Monsanto Co., C.A.
No. 1970–N, 2006 WL 1510417, at *4 (Del. Ch. May 24,
2006) (“It is, of course, a familiar principle that contracts
WALKER DIGITAL, LLC v. EXPEDIA, INC. 9
must be interpreted in a manner that does not render any
provision illusory or meaningless.”) (internal quotation
marks and citation omitted).
The majority elevates Section 1.1 over all other
clauses in the Agreement, rendering listings on Schedule
A redundant, the warranty clause meaningless, and the
parties’ clear intent irrelevant. An interpretation with
such effects cannot be the “only reasonable
interpretation.” Maj. Op. at 9.
“An unreasonable interpretation produces an absurd
result or one that no reasonable person would have
accepted when entering the contract.” Osborn, 991 A.2d
at 1160. Reading the Section 1.1 as the district court and
WALKER DIGITAL, LLC v. EXPEDIA, INC. 10
majority do leads to an absurd result, a fact the district
court itself acknowledged. 1 See J.A. 3425.
1 In entirety, the court stated:
It strikes me that . . . defendants’
interpretations are leading us to a ludicrous
result, and by that I mean the following. As I
understand it, the parties to the contract at
issue have no dispute and agree that
ownership of the patents-in-suit were never
transferred to eBay and that they are still
owned by Walker Digital. The movants, who
are non-parties to the contract, are urging
the Court to interpret the contract contrary
to the parties’ intentions, and I think even in
their papers, the defendants say, kind of
consistently, that maybe the parties didn't
realize that this language they were using
would lead to this result, but I think even
the parties don’t dispute that the, even the
movants don't dispute that the parties didn't
intend the consequence urged by the
movants. And so the non-movants are urging
the Court to accept their interpretation
despite the fact that it’s contrary to the
parties’ intention and despite the fact that
their interpretation leads to what I would
consider an absurd result. . . . So I
understand and, you know, I appreciate
intellectually the exercise you all went
through to come to your interpretation, but I
didn't see a case, and you can correct me if
I’m wrong, where non-parties to a contract
interpreted a contract contrary to the parties’
intention and leading to a result that does
not make any sense in the real world.
WALKER DIGITAL, LLC v. EXPEDIA, INC. 11
In sum, because Section 1.1’s plain language conflicts
with other provisions in the Agreement, as well as the
general circumstances and intent surrounding its
execution, the Settlement Agreement is ambiguous
whether the unlisted child patents and applications,
including the patents-in-suit, were transferred to eBay.
V. Extrinsic Evidence Clearly Demonstrates the Parties
Did Not Intend to Transfer the Patents-in-Suit
When there is uncertainty in the meaning and
application of contract language, the reviewing court must
consider the evidence offered in order to arrive at a proper
interpretation of contractual terms. Eagle Indus., Inc. v.
DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del.
1997); GMG Capital Investments, LLC v. Athenian
Venture Partners I, L.P., 36 A.3d 776, 780 (Del. 2012)
(Where a contract is ambiguous, “the interpreting court
must look beyond the language of the contract to ascertain
the parties’ intentions.” (emphasis added) (internal
quotation marks and citation omitted); United Rentals,
Inc. v. RAM Holdings, Inc., 937 A.2d 810 (Del. Ch. 2007).
These findings are reviewed with deference. Honeywell
Int’l Inc. v. Air Prods. & Chems., Inc., 872 A.2d 944, 950
(Del. 2005) (“To the extent the trial court’s interpretation
of the contract rests upon findings extrinsic to the
contract, or upon inferences drawn from those findings,
our review requires us to defer to the trial court’s
findings, unless the findings are not supported by the
record or unless the inferences drawn from those findings
are not the product of an orderly or logical deductive
reasoning process.”); see also AT&T Corp. v. Lillis, 970
A.2d 166, 169–70 (Del. 2009).
Though the district court found the Agreement
unambiguous, it determined the parol evidence was
“equivocal” and insufficient to establish standing. J.A. 15;
J.A. 3425–26 (emphases added).
WALKER DIGITAL, LLC v. EXPEDIA, INC. 12
see also J.A. 25 n.1 (“[T]he court ultimately found the
parol evidence to be unpersuasive . . .”). This statement
diverges from many of the district court’s other
statements, such as: “It strikes me that [] defendants’
interpretations are leading us to a ludicrous result . . . .”
J.A. 3425; “[t]heir interpretation leads to what I would
consider an absurd result,” id.; and “it is difficult for
someone like me to resolve [this issue] in defendants’
favor based solely on the language because it is such an
incredible result.” J.A. 3435.
The extrinsic evidence overwhelmingly supports
Walker’s position despite the district court’s conclusion
and Defendants’ arguments to the contrary. As discussed
above, both the no-pending litigation warranty as well as
the first sentence of Section 1.1 in connection with
Schedule A support Walker’s position that the parties
intended to transfer only those patents on Schedule A.
[[Another section of the Settlement Agreement also
supports Walker’s interpretation.]]
In accord with this section, Walker executed and
delivered twenty-six short form assignments
corresponding to the patents and applications listed in
Schedule A. J.A. 6. [[Other actions Walker took conflict
with the majority’s interpretation.]] The parties simply
did not intend to transfer those patents.
[[Communications prior to the execution of the
Settlement Agreement also support Walker’s position.]]
Communications after the execution of the Agreement
further demonstrate Walker and eBay’s intent that
Schedule A be an exhaustive list. Upon informing eBay
about the Defendants’ motion to dismiss for lack of
standing, eBay provided a letter stating: “[t]his confirms
that eBay Inc. is not the owner of U.S. Patent Nos.
7,831,470 (09/219267) and 7,827,056 (11/423481).” J.A.
14. Furthermore, Mr. Tikku, Senior Patent Counsel at
WALKER DIGITAL, LLC v. EXPEDIA, INC. 13
eBay, provided a declaration stating eBay did not intend
to transfer the patents. J.A. 14.
[[Evidence supporting this assertion]]
Though eBay has neither asserted nor
disclaimed ownership of the ’359 patent, there is
no compelling reason to treat it differently than
the ’470, ’056, and ’942 patents; it is not listed on
Schedule A. Mr. Tikku’s testimony devastates the
district court’s finding that the extrinsic evidence
was “equivocal” and “unpersuasive.”
In sum, the extrinsic evidence resolves the ambiguity
due to the conflicting provisions in the Agreement, and
demonstrates that Walker and eBay did not intend to
transfer all continuations, continuations-in-part, and
related applications, including the patents-in-suit, to
eBay. Accordingly, I would find the district court abused
its discretion.
VI. To the Extent Walker Lacked Standing, the
District Court Should Have Dismissed the Case without
Prejudice
The majority determined the trial court “did not abuse
its discretion when it imposed a dismissal with prejudice
in this case [because] Walker had multiple opportunities
to cure its Article III defect.” Maj. Op. at 15.
In the Third Circuit, a dismissal with prejudice is a
“severe and disfavored remedy.” Alvin v. Suzuki, 227
F.3d 107, 122 (3d Cir. 2000). Indeed, “the Third
Circuit . . . as well as other regional circuit courts, have
repeatedly emphasized that a dismissal for lack of
standing should generally be without prejudice,
particularly when the defect is curable.” Univ. of
Pittsburgh v. Varian Med. Sys., Inc., 569 F.3d 1328, 1332
(Fed. Cir. 2009) (emphasis added); see also H.R. Techs.,
Inc. v. Astechnologies, Inc., 275 F.3d 1378, 1384 (Fed. Cir.
2002) (“Because lack of standing is not an issue that goes
WALKER DIGITAL, LLC v. EXPEDIA, INC. 14
to the merits of the underlying patent issues, a dismissal
of a complaint for lack of standing would not normally be
expected to be made with prejudice.”). As this court has
recognized, “the law universally disfavors dismissing an
action with prejudice based on lack of standing, and there
is a strong presumption that such a dismissal is
improper.” Univ. of Pittsburgh, 569 F.3d and 1333
(emphasis added).
An important inquiry under the law is whether “the
defect is curable.” Id. at 1332. The district court’s
standing ruling did not extinguish any claims and was not
an adjudication on the merits. See Univ. of Pittsburgh,
569 F.3d at 1332 (citing Kasap v. Folger Nolan Fleming &
Douglas, Inc., 166 F.3d 1243, 1248 (D.C. Cir. 1999)).
Walker maintained it had “been and currently is engaged
in continued discussion with eBay regarding ownership of
the patents-in-suit,” J.A. 26, but the court nonetheless
found Walker had opportunities to fix the standing
problem and failed to provide evidence “that it has a plan
to cure,” J.A. 26. [[Moreover, Walker had irrefutable
proof of its rights.]]
The majority also focuses on the fact that Walker had
multiple opportunities to cure the standing defect yet
failed to do so. Maj. Op. at 15, 16. [[Walker provided
evidence it attempted to cure.]] It was reasonable for
Walker not to cure when the court, which had stated on
record that Defendants’ “interpretations are leading us to
a ridiculous result,” J.A. 3425, and initially dismissed the
case without prejudice after finding Walker lacked
standing. Additionally, the district court itself
acknowledged:
The motions to dismiss involved complex
questions of law, with there being grounds for
reasonable disagreement. With arguably valuable
property rights at stake, it is not surprising that
plaintiff choose to have the court resolve the
WALKER DIGITAL, LLC v. EXPEDIA, INC. 15
dispute rather than amicably resolve such with
defendants.
J.A. 25 (footnote omitted). By dismissing Walker’s claims
with prejudice, the district court effectively punished
Walker because it chose to have the district court resolve
the standing issue rather than obtaining an assignment
from eBay. Because our law strongly disfavors dismissal
with prejudice, and because the district court itself
recognized the logic in Walker to “choos[ing] to have the
court resolve the dispute,” I would reverse the court’s
dismissal with prejudice.
VII. Conclusion
Given Delaware law and that all provisions in the
Agreement except for the second sentence of Section 1.1
reflect Walker’s (and eBay’s) understanding that only the
patents listed in Schedule A were transferred, I would
find the district court erred in finding no ambiguity.
Moreover, the extrinsic evidence clearly demonstrates the
parties intended to transfer only the patents and
applications listed on Schedule A. For these reasons, I
respectfully dissent.