NITZA I. QUIÑONES ALEJANDRO, U.S.D.C.J.
On October 5, 2015, Welding Engineers Ltd. ("WEL"), as the Buyer, and NFM/Welding Engineers, Inc. ("NFM"), as the Seller, executed an agreement entitled Technology Transfer Agreement ("TTA"), in which NFM, inter alia, "irrevocably assign[ed] to Buyer the entire right, title and interest in the Purchased Technology,
On September 7, 2016, WEL filed this breach-of-contract action against NFM, essentially
Before this Court are the parties' cross-motions for summary judgment filed pursuant to Federal Rule of Civil Procedure ("Rule") 56. Specifically, WEL seeks summary judgment on its breach-of-contract claim against NFM and on all of NFM's counterclaims. [ECF 57]. In turn, NFM seeks summary judgment on both of WEL's claims and on Counts One, Two, and Three of its counterclaims.
As noted, WEL claims that NFM breached the TTA and, as a result of the breach, seeks specific performance requiring the delivery of all relevant drawings as well as compensatory damages for lost sales revenue caused by not having the drawings (Count I), and a declaration that NFM is in material breach of the TTA and, therefore, that the "limited license agreements" referenced in the TTA are terminated (Count II). [ECF 1]. In its answer, NFM denies the allegations and, in turn, asserts counterclaims against WEL for misappropriation and infringement of NFM's trademarks, specifically, the infringement of the "Welding Engineers" name and the "W-E" logo in violation of Section 43(a) of the Lanham Act, 115 U.S.C. § 1125(a) (Count II) and common law (Counts III, VII), and seeks damages for these violations. NFM also seeks declaratory judgments declaring to wit: that WEL has no right to use any of the relevant trademarks (Count I); that certain disputed devices do not fall within the scope of the TTA's definition of "Turbulator Technology," and, thus, WEL is not entitled to royalties with respect to NFM's use of those devices (Count IV); that WEL is not entitled to drawings of a device called a "vertical feeder" (Count V); and that WEL is not permitted to offer barrels manufactured with hot isostatic pressing ("HIP") technology to customers and that NFM is entitled to sell HIP barrels to any customer in any "field of use" (Count VI). [ECF 17].
Procedurally, discovery ensued and closed. Thereafter, the parties filed cross-motions for summary judgment based on the following uncontested relevant facts:
NFM is an Ohio corporation in the business of designing, manufacturing, and supplying extrusion equipment and other products for the plastic and rubber industries.
In April 1998, pursuant to an Asset Purchase Agreement (the "APA"), NFM acquired the rights to WEI's twin screw extruder technology.
Consistent with the requirement of the APA, WEL and NFM executed a License Agreement and a Cross-License Agreement on the same day they executed the APA, and agreed therein to the following:
In the Cross-License Agreement, WEL granted NFM the right to use "Licensed Technology" to make, use, market, and sell defined "Products," listed in Exhibit A to said agreement. (Cross-License Agreement at Sections 1.1, 1.3, 3.1, Exhibit A). Notably, vertical feeders were not among the products listed in Exhibit A.
In April 2015, NFM
In the section of the TTA entitled "Spare Parts License Back," WEL granted to NFM one license to use the Purchased Technology for work related to spare parts for a set of companies, and another license to use the "Turbulator Technology"
The section of the TTA entitled "Termination of 1998 License Agreement and Cross-License Agreement and Release" provides that:
Additionally, in the section of the TTA titled "Limitation on Remedies," the parties agreed that:
In February 2016 (four months after the execution of the TTA), WEL requested from NFM, inter alia, the delivery of all the drawings of machinery referenced in the TTA, including, the drawings of the vertical feeder, the parts list, drawings list, components data sheets, and serial numbers list. (ECF 59-9 at 17-19). In response, NFM asserted that WEL had "grossly exaggerated and misinterpreted" the relevant provisions
Rule 56 governs the practice for summary judgment motions. Fed. R. Civ. P. 56. Specifically, this rule provides that summary judgment is appropriate "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." Id. A fact is "material" if proof of its existence or non-existence might affect the outcome of the litigation, and a dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Under Rule 56, the court must view the evidence in the light most favorable to the non-moving party. Galena v. Leone, 638 F.3d 186, 196 (3d Cir. 2011). At summary judgment, the inquiry is whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law. Id. at 251-52, 106 S.Ct. 2505. In making this determination, the Court must "consider all evidence in the light most favorable to the party opposing the motion." A.W. v. Jersey City Pub. Schs., 486 F.3d 791, 794 (3d Cir. 2007).
The moving party has the initial burden of identifying evidence that shows an absence of a genuine issue of material fact. Conoshenti v. Pub. Serv. Elec. & Gas Co., 364 F.3d 135, 145-46 (3d Cir. 2004). Once the moving party has shown that there is an absence of evidence to support the non-moving party's claims and/or defenses, "the non-moving party must rebut the motion
The standards to be applied in deciding cross-motions for summary judgment are the same as those applied when only one party has filed a summary judgment motion; the court rules "on each party's motion on an individual and separate basis, determining, for each side, whether summary judgment may be entered in accordance with the Rule 56 standard." Auto-Owners Ins. Co. v. Stevens & Ricci, Inc., 835 F.3d 388, 403 (3d Cir. 2016) (citation and internal quotation marks omitted).
As noted, WEL seeks summary judgment on its breach-of-contract claim against NFM, and on all of NFM's counterclaims against it. NFM seeks summary judgment on its counterclaims for and related to trademark infringement, (Counterclaims I, II, and III), and on WEL's claims. These motions and arguments will be separately addressed.
In the complaint, WEL contends that NFM breached Section 2.4 of the TTA by failing to provide WEL with all drawings, "in detail that include[ ] the parts lists, drawings lists, component data sheets and serial numbers of the machines" (collectively, "the Data"), and, as a result of this failure, requests, inter alia, specific performance by way of delivery of said drawings. (ECF 1 at ¶¶ 17, 26). After the complaint was filed, NFM produced a series of drawings to WEL, many containing the Data embedded directly on the drawings themselves. However, some of the drawings produced by NFM did not contain the Data itself, but had notations referencing external documents containing the Data. WEL contends that there is no genuine issue of material fact as to the meaning of the term "drawings" in Section 2.4 of the TTA and that the term unambiguously includes the external documents containing the Data, which were incorporated by reference into some of the produced drawings. Thus, WEL argues entitlement to judgment as a matter of law on its claim for the specific performance of the delivery of the external documents not produced. Conversely, NFM argues that the use of the term "drawings" in Section 2.4 unambiguously referred to only the drawings and excluded any and all external
Pennsylvania law governs the interpretation of the TTA.
Here, the parties both argue that the term "drawings," as used in Section 2.4 of the TTA, is unambiguous. They disagree, however, on the meaning of the unambiguous term. Under Pennsylvania law, "mere disagreement between the parties over the meaning of a term is insufficient to establish that term as ambiguous." Bohler-Uddeholm Am., Inc. v. Ellwood Group, Inc., 247 F.3d 79, 94 (3d Cir. 2001). After carefully reviewing the TTA, this Court finds that there is no ambiguity in the meaning of "drawings" as used in Section 2.4. In the context of the TTA, "drawings" clearly refers to drawings that can meaningfully assist WEL in manufacturing the relevant parts and machinery.
The Court is unpersuaded by NFM's contention that professionally created drawings of complicated machinery, bereft of technical data incorporated by reference on the drawing itself, could satisfy the intent of the parties as evidenced by the TTA contract. Indeed, it is undisputed that many of the drawings NFM produced to WEL in October 2016 contained the Data embedded directly on the drawings, while other drawings provided by NFM to WEL referenced separate external documents that contained the Data. The essence of NFM's argument is that, under the negotiated terms of the TTA, "a drawing is just a drawing" and nothing more, and so long as NFM provided WEL with drawings of the relevant machinery and parts, NFM satisfied Section 2.4. However, consideration of the entire TTA simply does not support this contention. WEL paid over $10 million dollars for, inter alia, the right to manufacture certain equipment and to purchase the rights, title and interest in the intellectual property related to the twin screw extruder technology. As part of the TTA, NFM was required to give WEL drawings necessary for WEL to accomplish that purpose. Further, for the drawings to meaningfully assist in manufacturing the equipment, these drawing must include or be accompanied by the Data referenced in the drawings. This is
WEL next seeks summary judgment on Count V of NFM's counterclaims, in which NFM seeks a declaratory judgment that WEL is not entitled to drawings of the "vertical feeder." NFM did not move for summary judgment on this counterclaim. Nonetheless, pursuant to Rule 56(f)(1), a court may, after giving notice and a reasonable time to respond, "grant summary judgment for a nonmovant." Fed. R. Civ. P. 56(f)(1). Although notice of a court's intent to grant summary judgment pursuant to Rule 56(f)(1) is typically required, the United States Court of Appeals for the Third Circuit recognized in Gibson v. Mayor & Council of City of Wilmington that an exception to this rule applies when there is a fully developed record, a lack of prejudice to the parties, and a decision on a purely legal issue. 355 F.3d 215, 223-24 (3d Cir. 2004) (affirming district court's grant of summary judgment in favor of a non-moving party and against a party that brought a motion for summary judgment, without first giving notice to moving party); see also Zimmerlink v. Zapotsky, 539 F. App'x 45, 49 (3d Cir. 2013) (holding same and quoting Gibson). The court in Gibson agreed with the United States Court of Appeals for the First Circuit that, "[i]n the context of sua sponte summary judgment [for the nonmoving
As noted, Section 2.4 of the TTA requires NFM to provide WEL with the drawings "for machines covered by the Cross-License Agreement[.]" At issue is whether the vertical feeder is a machine covered by the Cross-License Agreement. This Court concludes that the vertical feeder was not covered.
At the outset, the Cross-License Agreement indicated that WEL and W-Bar-E were "engaged in the business of designing, manufacturing and selling extrusion machinery for the synthetic rubber processing industry." (Cross-License Agreement at page 1). The primary purpose of the Cross-License Agreement was for WEL to license certain single screw extruder technology to NFM (the "Licensed Technology"), so that NFM could "make, use, market and sell the Products" in North America. (Id. at Section 3.1). To this end, WEL "agree[d] to provide to [NFM] sufficient information and materials relating to the Licensed Technology, to allow [NFM] to make, use, sell and market the Products." (Id. at Section 3.3). The Cross-License Agreement in turn defined "Products" as "any of the items listed on Exhibit A hereto, which are designed, manufactured and sold either individually or in combination, utilizing the Licensed Technology for the processing of polymers." (Id. at Section 1.3). The vertical feeder was not listed in Exhibit A to the Cross-License Agreement. In light of these facts, this Court concludes that there is no genuine issue of fact that the TTA's reference to "machines covered by the Cross-License Agreement," was a reference to the "Products" specifically defined in the Cross-License Agreement. This product definition did not include the vertical feeder.
WEL also seeks summary judgment with respect to NFM's counterclaims for and related to trademark infringement. In these counterclaims, NFM alleges that WEL infringed upon the "Welding Engineers" name and the "W-E" logo in violation of Section 43(a) of the Lanham Act, 115 U.S.C. § 1125(a) (Count II) and common law (Counts III, VII). NFM also seeks a declaration that WEL has no right to use either trademark (Count I). For the
At issue is whether WEL, by the TTA's provision entitled "Termination of 1998 License Agreement and Cross-License Agreement and Release," relinquished all rights in its corporate name, "Welding Engineers, Ltd.," which it has used since it was incorporated in 1958. Under Pennsylvania contract law, the rules of contract construction govern the interpretation of releases. Bickings v. Bethlehem Lukens Plate, 82 F.Supp.2d 402, 406 (E.D. Pa. 2000) (citing Evans v. Marks, 421 Pa. 146, 218 A.2d 802 (1966), and Three Rivers Motors Co. v. Ford Motor Co., 522 F.2d 885 (3d Cir. 1975)). As such, courts endeavor to ascertain the intent of the parties based on "(1) the language of the release and (2) the circumstances surrounding the execution of the release." Bickings, 82 F.Supp.2d at 406 (citing Wenger v. Ziegler, 424 Pa. 268, 226 A.2d 653 (1967)). Pennsylvania courts have long held that "a release covers only those matters which may fairly be said to have been within the contemplation of the parties when the release was given." Restifo v. McDonald, 426 Pa. 5, 230 A.2d 199, 201 (Pa. 1967). The language of the release is viewed in the context of the entire contract. ILM Sys. v. Suffolk Constr. Co., 252 F.Supp.2d 151, 158 (E.D. Pa. 2002). Additionally, courts must examine the circumstances surrounding the execution of a release to determine the parties' intent, as such circumstances "clarify the intention of the parties and identify `matters which may be fairly said to have been within the contemplation of the parties when the release was given.'" Bickings, 82 F.Supp.2d at 406 (quoting Vaughn v. Didizian, 436 Pa.Super. 436, 648 A.2d 38 (1994)).
With these principles in mind, this Court has reviewed the relevant releases in light of the agreements made. NFM argues that Section 13 of the Cross-License Agreement, which outlined the parties' agreements regarding the use of their respective corporate names, is the sole source of WEL's legal right to use its corporate name and logo. NFM further contends that any rights obtained under the Cross-License Agreement, including the use of the corporate name, were extinguished by the following language of the TTA release:
(TTA at Section 7.12). NFM's reliance on this provision is misplaced.
When the language in this provision is parsed, it simply means that the parties release any rights they may have "relating to limitations on general releases." The TTA, by way of illustration, cites to California Civil Code Section 1542, which limits general releases from extending to claims unknown at the time of the agreement. As WEL aptly argues in rebuttal, "[t]he purpose of this language is clear and unambiguous: it enables the parties to
This Court finds that the plain language of Section 7.12 of the TTA clearly provides that the parties are releasing their rights relating to limitations on general releases. Section 7.12 cannot be read to state, as NFM suggests, that the parties are releasing any and all rights they have under the License and Cross-License Agreements, including WEL's rights to the use of its corporate name and logo.
This Court further notes the context and circumstances of the execution of the TTA, as it relates to this issue. See Bickings, 82 F.Supp.2d at 406. The TTA does not once mention or discuss any parties' rights to the corporate name and/or logo. Conversely, the Cross-License Agreement contained explicit language establishing the survival of the parties' rights in their respective use of the relevant trademarks. Specifically, Section 13.5 provided: "The provisions of this Section 13 shall survive termination of the license under this Agreement and termination of any other provision herein." (Id. at Section 13.5). Thus, given the plain and unambiguous language of Section 13.5, merely terminating the Cross-License Agreement was insufficient to extinguish any rights WEL had to the use of its corporate name and logo under the Agreement.
For these reasons, summary judgment is granted in WEL's favor as to Counts I (declaratory judgment as to trademark infringement), II (violations of the Lanham Act), III (common law trademark infringement and unfair competition), and VII (unjust enrichment), of NFM's counterclaims.
At Count IV of the counterclaims, NFM seeks a declaration that certain "disputed devices do not fall within the scope of the TTA's definition of Turbulator Technology and that NFM/Welding Engineers is not subject to any limitation or restriction in use of the devices, and WEL is not entitled to any royalty in relation [sic] NFM/Welding Engineers' use of such devices."
To determine whether a dispute has matured to a point that permits judicial intervention, courts consider the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration. Wyatt v. Virgin Islands, Inc., 385 F.3d 801, 806 (3d Cir. 2004). A dispute is not ripe if it rests on contingent future events that may not occur as anticipated, or even at all. Id. A court evaluates ripeness by examining (1) the adversity of the parties' interests, (2) the conclusiveness of the judicial judgment, and (3) the utility, or practical help, of a judgment. Step-Saver Data Sys., Inc. v. Wyse Tech., 912 F.2d 643, 647 (3d Cir. 1990).
Here, all of the ripeness factors are present. Clearly, the parties have adverse legal interests regarding the Turbulator Technology. NFM has alleged an actual dispute between the parties as to whether certain devices fall within the TTA's definition of Turbulator Technology, and whether NFM is required to pay royalties for the sale of those devices. This dispute is prevalent in that NFM is currently paying royalties under protest. The Court also finds that the issue lends itself to a conclusive judgment as there are concrete factual issues to be resolved, i.e., whether or not the disputed devices fall within the scope of Turbulator Technology. Finally, such a declaratory judgment would have utility to the parties in resolving any royalty dispute. Accordingly, this issue is ripe for adjudication under the Declaratory Judgment Act.
With regard to WEL's merits argument, the Court concludes that genuine issues of material fact exist as to whether the disputed devices fall into the TTA's definition of Turbulator Technology, namely, a device invented and developed by WEL that meets the other relevant criteria. See Cloverland-Green Spring Dairies, Inc. v. Pa. Milk Mktg. Bd., 298 F.3d 201, 210 n.12 (3d Cir. 2002) ("The standard for granting summary judgment on a request for a declaratory judgment is the same as for any other type of relief.") (citations omitted). As such, WEL's motion for summary judgment as to Count IV of NFM's counterclaims is denied.
At Count VI of the counterclaims, NFM seeks two declarations; to wit: (1) that WEL is not permitted to offer HIP barrels to customers, "as it is a proprietary technology used on NFM/Welding Engineers' counter-rotating twin screw extruders both inside and outside the field of use as described in the TTA"; and (2) that NFM is entitled to sell HIP barrels to any customer in any "field of use." Only WEL has moved for summary judgment on this counterclaim. As to the first requested declaration, WEL apparently concedes that the issue is ripe, arguing only that it
The TTA expressly excluded barrels manufactured with HIP technology from the scope of the "Purchased Technology" that WEL acquired from NFM. (TTA at 1.1.7). The issues raised by NFM's counterclaims, however, revolve around the import of this exclusion as it relates to the parties' respective rights to HIP barrel technology.
As to the first requested declaration— that WEL is not permitted to offer HIP barrels to its customers—WEL "does not dispute that NFM's drawings of HIP barrels were excluded from the scope of transfer effected by the TTA, but certainly disputes that NFM has cornered the market on HIP barrel technology." (ECF 57-1 at 56). As such, WEL argues that it is permitted under the TTA to sell HIP barrels. These disputes have not been factually flushed out in the parties' motions. As with the Turbulator Technology dispute, this Court concludes that genuine issues of material fact exist as to what, if any, HIP barrel technology NFM may preclude WEL from selling. Accordingly, WEL's motion for summary judgment is denied on the first requested declaration in counterclaim VI.
As to the second requested declaration— that NFM is entitled to sell HIP barrels to any customer in any "field of use"—WEL argues that the request should be dismissed as not ripe under the Declaratory Judgment Act, contending that "[f]actual determinations such as the type of HIP barrel sold, to whom, and for what use are just examples of facts that would be needed in order for the court to adjudicate any such dispute." (ECF 57-1 at 57). This Court disagrees, and concludes that the matter is in fact ripe, given that the parties have adverse legal interests, the Court can issue a conclusive judgment, and such a judgment would have utility to the parties. See Step-Saver Data Sys., 912 F.2d at 647. As to WEL's request for summary judgment, this Court deems that the same issues WEL cited in arguing that the dispute is not ripe—i.e., factual determinations regarding the type of HIP barrel sold, to whom, and for what purpose—are genuine issues of material fact which preclude summary judgment. Accordingly, WEL's motion is denied with regard to the second requested declaration in Count VI of NFM's counterclaims.
As noted, at Count I, WEL claims that NFM breached the TTA by failing to provide WEL with the drawings. At Count II, WEL requests a declaratory judgment that such breach is material and, therefore, the "limited license agreements" referenced in the TTA should be terminated.
In its motion for summary judgment as to these two counts, NFM simply contends that it did not breach the TTA. As discussed above, this Court has concluded that NFM did breach the TTA when it failed to provide the drawings. On that basis, this Court granted WEL's motion for summary judgment as to WEL's request for specific performance on the breach-of-contract claim at Count I. Since the issue of a breach of contract has been decided, NFM's motion for summary judgment as to Count I (with regard to specific performance only), and Count II, is denied.
NFM moves for summary judgment on WEL's request for compensatory damages for the breach-of-contract claim, arguing that WEL has not provided any evidence of damages. In response, WEL asserts that it "[h]as [p]roperly [p]led [d]amages," (ECF 61 at 9); that damages are easily identifiable; and that, at the very least, it is entitled to nominal damages.
A party cannot overcome a motion for summary judgment with respect to damages by merely relying on pleadings. See Berckeley Inv. Grp. Ltd., 455 F.3d at 201 (holding that once moving party has shown absence of evidence to support non-moving party's claims, "the non-moving party must rebut the motion with facts in the record and cannot rest solely on assertions made in the pleadings, legal memoranda, or oral argument."). Furthermore, the mere assertion that a party "can ... easily identify damages related to the breach," (ECF 61 at 10), without more, is insufficient to overcome a summary judgment motion. Under Pennsylvania law, proving damages resulting from a breach of contract requires a plaintiff to provide a factfinder with "evidence from which damages may be calculated to a `reasonable certainty.'" Ware v. Rodale Press, Inc., 322 F.3d 218, 225-26 (3d Cir. 2003) (quoting ATACS Corp. v. Trans World Communications, Inc., 155 F.3d 659, 668 (3d Cir. 1998)). For a damages calculation to be capable of reasonable certainty, it must not be "`too speculative, vague or contingent' upon some unknown factor." ATACS Corp., 155 F.3d at 669 (quoting Spang & Co. v. United States Steel Corp., 519 Pa. 14, 545 A.2d 861, 866 (1988)). Although Pennsylvania contract law does not require mathematical certainty in calculating damages, "the plaintiff must introduce sufficient facts upon which the jury can determine the amount of damages without conjecture." Delahanty v. First Pennsylvania Bank, N.A., 318 Pa.Super. 90, 464 A.2d 1243, 1257 (1983).
Here, WEL argues that NFM's failure to provide the complete versions of the drawings "prevented [WEL] from manufacturing, servicing, and selling machines and spare parts, resulting in lost sales." (ECF 61 at 10). However, the only evidence WEL points to in support of this argument is a few of NFM's past royalty reports with no explanation provided. This is not a sufficient showing from which a damages calculation can be made to a reasonable degree of certainty. See Ware, 322 F.3d at 225-26. Thus, WEL has failed to present evidence sufficient to for a factfinder to conclude that WEL is entitled to compensatory damages.
WEL correctly asserts, however, that under Pennsylvania law any breach of contract entitles the injured party to at least nominal damages. See Wolfe v. Allstate Prop. & Cas. Ins. Co., 790 F.3d 487, 497 (3d Cir. 2015) (citing Thorsen v. Iron & Glass Bank, 328 Pa.Super. 135, 476 A.2d 928, 931 (1984), and Scobell Inc. v. Schade, 455 Pa.Super. 414, 688 A.2d 715, 719 (1997)). To defeat summary judgment based on an entitlement to nominal damages, a plaintiff must request nominal damages in its complaint or seek to amend its complaint to request nominal damages.
In the complaint, WEL requests compensatory damages only, and does not request nominal damages. Further, WEL has not sought to amend its complaint to include a request for nominal damages. Accordingly, NFM is entitled to summary judgment on WEL's request for damages arising from the breach of contract claim.
As to NFM's counterclaims for trademark infringement, i.e., Counts I (declaratory judgment as to trademark infringement), II (violations of the Lanham Act), and III (common law trademark infringement and unfair competition), these issues were discussed above with respect to WEL's summary judgement motion and, therefore, need not be readdressed. Accordingly, for the reasons previously stated in said discussion, NFM's motion for summary judgment is denied.
To summarize, consistent with the analysis made, WEL's motion for summary judgment is granted as to Count I of its complaint for the specific performance of the delivery of the relevant external documents referenced in the drawings NFM produced in October 2016 (excluding drawings of the vertical feeder), and as to Counts I, II, III, and VII of the counterclaims. WEL's motion for summary judgment is denied as to its request for damages at Count I of its complaint, and as to Counts IV, V, and VI of the counterclaims.
NFM's motion for summary judgment is granted as to WEL's request for damages at Count I of its complaint. NFM is also granted summary judgment as to its request at Count V of the counterclaims for declaratory judgment that WEL is not entitled to drawings of the vertical feeder. NFM's motion for summary judgment is denied as to WEL's request at Count I of its complaint for specific performance of the relevant external documents; as to Count II of WEL's complaint; and as to Counts I, II, and III of the counterclaims.
Separate Orders addressing each motion for summary judgment and consistent with this Memorandum Opinion follow.