EDWARD J. DAVILA, District Judge.
Presently before the court in this licensing dispute action are Plaintiff Tessera, Inc.'s ("Tessera") Motion for Partial Summary Judgment, Dkt. No. 128, and Defendant UTAC (Taiwan) Corporation's ("UTC") Motion for Summary Judgment as to Contract Interpretation, Dkt. No. 141. The court held a hearing on these matters on November 8, 2013. Having reviewed the parties' briefing and heard the parties' arguments, the court GRANTS UTC's Motion and DENIES Tessera's Motion.
Tessera is a patent holding company and developer of semiconductor packaging technology, which is sometimes referred to as "microBGA technology." Decl. of Joseph M. Lipner ISO Tessera's Mot. Partial Summ. J., Dkt. No. 138 Ex. 1 at 1-2. UTC is a Taiwanese semiconductor packaging assembler.
The parties met in person in Taiwan on June 20, 2001 and August 9, 2001 to discuss terms of the licensing agreement, Tessera's willingness to introduce UTC to potential customers, and the parties' interest in working together on future technology development. Dkt. No. 138 Exs. 12-13. After these meetings, on August 22, 2001, UTC's legal and intellectual property manager Wei-Heng Shan emailed Mr. Pickett to express UTC's willingness to enter into a licensing agreement provided the parties could agree on a licensing fee and royalties. Dkt. No. 138 Ex. 15. In that email, Mr. Shan also noted that UTC executives were "impressed" by Tessera's presentation of its "business cooperation plan" and that they hoped to meet with Tessera's "strategic partners" during an upcoming trip to the United States.
On September 4, 2001, Mr. Shan again sent an email to Mr. Pickett summarizing the key points of UTC's position, including highlighting that the nature of UTC and Tessera's relationship is "quite different" from that of a technical transfer arrangement because UTC did not require a technical transfer or any kind of engineering support. Decl. of Dave H. Herrington ISO UTC's Mot. Partial Summ. J., Dkt. No. 142, Ex. 13. In that email, Mr. Shan suggested it would be better to "establish a patent license agreement instead of [a] technical transfer agreement."
Under the Agreement, Tessera granted UTC the right to make, use, and sell "TCC [Tessera Compliant Chip] packages" in exchange for royalties on the basis of those TCCs, calculated by reference to a defined schedule. Dkt. No. 138 Ex. 2 ¶¶ II.A and III.B. Particularly, the Agreement's license grant provided UTC with "a worldwide, non-exclusive, non-transferable, non-sublicensable, limited license to the Tessera Patents and Technical Information to assemble ICs into TCC packages and use or sell such TCC Packages." Dkt. No. 138 Ex. 2 ¶ II.A. The Agreement defined "TCC" as
Dkt. No. 138 Ex. 2 ¶ I.B. It also contained an attachment listing the specific Tessera patents and applications it covers. Dkt. No. 138 Ex. 2 Attach. A. The term of the Agreement was set such that it "shall remain in full force until the expiration of the last to expire of any Tessera Patent." Dkt. No. 138 Ex. 2 ¶ X.A.
In August 2002, UTC contacted Tessera regarding a Taiwanese tax issue it faced as a result of the Agreement. Dkt. No. 138 Ex. 22. To remedy the issue, UTC requested a change in wording of two provisions of the Agreement to make clear that the Agreement involved a transfer of technology. Accordingly, the parties executed the First Amendment to TCC License Agreement and Joint Cooperation Agreement (the "Amended Agreement") on September 24, 2002. Dkt. No. 138 Ex. 24.
The changes to the Agreement highlighted the parties' understanding that the Agreement contemplated a transfer in technology from Tessera to UTC. To that end, the recitals contain statements that "the parties wish to clarify that Tessera transfers technology to Licensee under the Agreement and Licensee will use such technology in Taiwan" and that "the parties wish to amend the Agreement to reflect such intent."
Following the parties' execution of the Agreement, UTC began to accrue and pay royalties on its wBGA package.
Less than a week after the expiration of the Khandros patents, on September 30, 2010, Tessera filed the instant action against UTC, raising claims of (1) breach of contract; (2) declaratory relief; and (3) breach of the implied covenant of good faith and fair dealing. Dkt. No. 1. UTC filed a motion to dismiss, which this court granted on March 28, 2012. Dkt. No. 76. Tessera filed its First Amended Complaint ("FAC") on April 19, 2012 (Dkt. No. 81) and UTC answered the FAC and filed two counterclaims for declaratory judgment on May 22, 2012 (Dkt. No. 87). On June 26, 2012, this court issued a scheduling order limiting the initial phase of discovery and dispositive motion practice to issues of contract interpretation. Dkt. No. 92. In accordance with that order, the parties filed the instant cross motions for summary adjudication on the issue of contract interpretation on July 3, 2013. The court now turns to the substance of these motions.
A motion for summary judgment should be granted if "there is no genuine dispute as to any material fact and the movant is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(a);
If the moving party does not satisfy its initial burden, the nonmoving party has no obligation to produce anything and summary judgment must be denied.
Where the moving party will have the burden of proof on an issue at trial, it must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party.
California law governs the interpretation of the Agreement. "The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties."
The parties agree that UTC must pay royalties on products that satisfy the definition of TCC ("a type of integrated circuit (`IC') package which is the subject matter of certain Tessera Patents licensed hereunder"). The parties also agree that, pursuant to this definition, UTC must pay royalties on products embodying one or more claims of relevant Tessera patents, as such technology would readily be classified as embodying the "subject matter" of Tessera's patents. The parties disagree, however, as to whether UTC must also pay royalties for products that arguably embody the "subject matter" of Tessera's patents but that are not explicitly covered by the claims of such patents. Accordingly, the parties contend that their cross-motions for summary judgment turn solely on the interpretation of the phrase "subject matter."
Tessera proffers that "subject matter" should be considered in its ordinary and broad sense and found to signify the "core concepts" described in the entire patent document, including in the abstract, specification, drawings, and claims. Dkt. No. 128 at 13, 15. UTC counters that "subject matter," in the context of the Agreement, means the technology that has actually been patented,
The court begins with an examination of the language of the Agreement itself. In doing so, the court is mindful that the parties are both sophisticated corporations with experience in patent licensing and thus would have negotiated the Agreement with patent law in mind.
The Agreement obligates Tessera to provide UTC a "license to Tessera Patents and Technical Information to assemble ICs into TCC packages and use or sell such TCC packages." Dkt. No. 138 Ex. 2 ¶ II.A.
Under the Agreement, TCC is defined as "a type of integrated circuit (`IC') package which is the subject matter of certain Tessera Patents licensed hereunder." Dkt. No. 138 Ex. 2 ¶ I.A. The parties spill much ink on the generalized meaning of "subject matter," insisting that the instant motions can be resolved by a reading of this phrase alone. Indeed Tessera embraces the term's breadth, arguing that the court should define the "subject matter" of a patent the same it would the "subject matter" of "a contract, a movie, or anything else." Dkt. No. 128 at 15. Such efforts amount to nothing more than misdirection. The term does not rest alone in the Agreement, such that the court must provide guidance on the abstract notion of "subject matter" without any mooring; to the contrary, the term, when read completely as "subject matter of certain Tessera patents" drops its own anchor.
In focusing the parties' arguments on the actual term in dispute—the "subject matter of ... patents"—the meaning of the term becomes quite obvious. A "patent," according to the PTO, is:
Contrary to Tessera's assertion, the Agreement's definition of "Patent" as including patent applications does not support a finding that "subject matter of ... patents" should be understood to cover anything other than patented technology. Patent applications convey no non-provisional U.S. government-granted "property rights" to the applicant; thus their inclusion in the Agreement's definition of "Patent," and by extension to "Tessera Patents" and "TCC," could indeed suggest a broader understanding of the term than the strict PTO definition. Yet in this case, the very next section of the disputed Agreement belies any such interpretation. That section, which defines the term "Tessera Patent," makes clear that the technology contained in any relevant patent applications are only "prospectively licensed" under the Agreement. Dkt. No. 138 Ex. 2 ¶¶ I.D, I.E. By its terms, the Agreement contemplates that the license grant will extend to include technology disclosed in Tessera's patent applications once those applications have matured,
Nor do the Agreement and Amended Agreement's references to "Technical Information" compel a different conclusion. Under the Agreement, Tessera provided a license to both "Tessera Patents" and "Technical Information" so that UTC could assemble, use, and/or sell TCC packages. Dkt. No. 138 Ex. 2 ¶ II.A. "Technical Information" is defined as "package assembly know-how relating to the design, manufacture and assembly of TCC packages." Dkt. No. 138 Ex. 2 ¶ I.B Thus, under the Agreement, Tessera provided a license both to the patented technology—TCC packages—as well as to the practical information that may be needed to assemble the technology. As has already been discussed, the Agreement defines TCC in clear relationship to "Tessera Patents" (
Tessera's argument regarding the infringement-based language used elsewhere in the Agreement is equally unpersuasive. This language appears in the context of UTC's granting Tessera a cross-license to any UTC-made improvements on or relating to the licensed Tessera technology. The Agreement shows that UTC granted a cross-license to Tessera to use any "UTC improvements and UTC's Patents covering any inventions contained in such UTC Improvements" and defines "UTC improvements" as "derivatives, improvements, modifications, or enhanced specifications relating to a TCC package, or related materials, that may infringe a Tessera Patent or may be made or incorporated in a TCC package by or for UTC." Dkt. No. 138 Ex. 2 ¶¶ I.G, VII.B. As to the term "covering," Tessera has failed to provide any compelling evidence or argument showing a functional difference between a license to "patents covering [a technology]" and to "the subject matter of ... patents;" therefore that the parties employed both phrases in their Agreement does not disturb the court's finding. As to the phrase "infringe a Tessera Patent," it appears in the distinct context of a hypothetical UTC invention that encroaches upon Tessera's patent rights. In contrast, the "subject matter of ... patents" term at issue in this case appears in the context of defining Tessera's own technology, specifically defining that technology as "a type of integrated circuit ("IC") package which is the subject matter of certain Tessera Patents." Dkt. No. 138 Ex. 2 ¶ I.A. It would have been contradictory or even absurd to use the term "infringe" in this latter context, as Tessera certainly could not infringe its own patents. Under these circumstances, the parties' specific use of infringement-based language in the Agreement does not suggest that "subject matter of ... patents" means anything other than the patented technologies.
For the reasons stated, the definition of "subject matter of ... patents" is not reasonably susceptible to Tessera's interpretation. Accordingly, the term is not ambiguous and its clear and explicit meaning must govern.
Based on the foregoing, the court hereby GRANTS UTC'S Motion for Partial Summary Judgment and DENIES Tessera's Motion for Partial Summary Judgment. The court hereby sets a CMC in this matter for May 9, 2014 at 10:00 a.m. The parties shall submit a Joint Case Management Conference Statement, which shall fully comply with the Standing Order for All Judges of the Northern District of California and this court's standing orders, by no later that May 2, 2014.