Filed: May 23, 2012
Latest Update: Mar. 26, 2017
Summary: 10-3835-cv (L) Owens-Illinois, Inc. v. BTR, plc, UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATI
Summary: 10-3835-cv (L) Owens-Illinois, Inc. v. BTR, plc, UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATIO..
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10-3835-cv (L)
Owens-Illinois, Inc. v. BTR, plc,
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED
ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE
PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A
DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST
SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
1 At a stated term of the United States Court of Appeals
2 for the Second Circuit, held at the Daniel Patrick Moynihan
3 United States Courthouse, 500 Pearl Street, in the City of
4 New York, on the 23rd day of May, two thousand twelve.
5
6 PRESENT: DENNIS JACOBS,
7 Chief Judge,
8 AMALYA L. KEARSE,
9 JOSEPH M. McLAUGHLIN,
10 Circuit Judges.
11
12 - - - - - - - - - - - - - - - - - - - -X
13 OWENS-ILLINOIS, INC.,
14 Plaintiff-Appellant-
15 Cross Appellee,
16
17 -v.- 10-3835-cv (Lead)
18 10-4026-cv (XAP)
19 BTR, PLC,
20 Defendant-Appellee-
21 Cross Appellant.
22
23 - - - - - - - - - - - - - - - - - - - -
24
25 FOR APPELLANT: DOUGLAS A. FREEDMAN (Nicholas J.
26 Siciliano, on the brief), Latham
27 & Watkins LLP, Chicago, Ill.
28
1
1 FOR APPELLEE: BARRY G. SHER (Stephen B.
2 Kinnaird, Rebecca K. Myers,
3 Laura K. Isenberg, Paul Hastings
4 LLP, New York, N.Y., George L.
5 Graff, Briarcliff Manor, N.Y.,
6 on the brief), Paul Hastings
7 LLP, New York, N.Y.
8
9 Appeal from a judgment of the United States District
10 Court for the Southern District of New York (Stanton, J.).
11
12 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED
13 AND DECREED that the judgment of the district court be
14 AFFIRMED.
15
16 Plaintiff Owens-Illinois, Inc. appeals from a judgment
17 of the United States District Court for the Southern
18 District of New York (Stanton, J.), granting defendant BTR,
19 plc’s motion for summary judgment. Owens’s suit sought to
20 recover losses that it incurred--as a result of an
21 intellectual property dispute with a competitor--through an
22 indemnification provision contained in a purchase agreement
23 between it and BTR. We assume the parties’ familiarity with
24 the underlying facts, the procedural history, and the issues
25 presented for review.
26
27 In 1998, Owens bought a group of food and beverage
28 packaging companies from BTR for $3.6 billion. Prior to the
29 purchase, Owens was made aware of a promising new product
30 being developed by one of the companies it was purchasing,
31 Continental PET Technologies, Inc., better known by the
32 acronym CPET. The product, “CPTX-312,” permitted CPET to
33 produce a plastic bottle that was safe for beer packaging
34 (other plastic containers permitted too much oxygen to get
35 into the beer) and was an improvement for the packaging of
36 juices and ketchup.
37
38 In the Share Disposition Agreement (“SDA”) that
39 effected the Owens-BTR sale, BTR warranted that it owned or
40 had licenses to all the intellectual property necessary to
41 operate CPET “as currently conducted”:
42
43 With respect to Intellectual Property, the Packaging
44 Companies own, or possess licenses or other valid
45 rights to use, all Intellectual Property necessary to
46 operate the Packaging Business as currently conducted.
47
2
1 Joint Appendix (“JA”) 162. BTR promised to indemnify Owens
2 for any losses, above a stated deductible amount, suffered
3 by Owens “relating to arising out of” any breach of its
4 representations and warranties:
5
6 Seller hereby agrees that it shall, or shall cause the
7 Selling Companies to, indemnify, defend and hold
8 harmless Purchaser and its Affiliates . . . against and
9 in respect of any actual Losses imposed on, sustained,
10 incurred or suffered by any of the Purchaser
11 Indemnified Parties relating to or arising out of (i)
12 any breach of any representation or warranty made by
13 Seller contained in this Agreement . . . .
14
15 JA 245.
16
17 In the fourth quarter of 1998--roughly six months after
18 the Owens-BTR sale was complete--CPET began selling products
19 containing CPTX-312. A competitor soon sued CPET, alleging
20 that CPTX-312 infringed one of its patents. Five years
21 later, CPET settled the infringement case. It then filed
22 this lawsuit, alleging that BTR breached its warranty that
23 it possessed the intellectual property necessary to operate
24 CPET at the time of sale.
25
26 A key limitation of BTR’s intellectual-property
27 warranty was that it only extended to operations of CPET “as
28 currently conducted.” It is undisputed that its current
29 operations at the time of the SDA did not include selling or
30 manufacturing them for sale. On appeal, Owens relies
31 principally on the fact that, prior to the closing of the
32 SDA, CPET had manufactured about 150 bottles containing
33 CPTX-312 for research and development. The act of making
34 these bottles without a license, according to Owens,
35 necessarily infringed the competitor’s patent, and therefore
36 was a breach of BTR’s warranty that it had all the necessary
37 intellectual property to operate its business. See 35
38 U.S.C. § 271(a) (“[W]hoever without authority makes, uses,
39 offers to sell, or sells any patented invention, within the
40 United States, . . . infringes the patent.”).
41
42 However, even assuming for purposes of this appeal that
43 CPET’s pre-sale research and development of CPTX-312
44 (including manufacturing a limited number of bottles) did
45 technically infringe the competitor’s patent, the SDA still
46 does not require BTR to indemnify Owens for losses related
3
1 to the post-acquisition sale and marketing of billions of
2 CPTX-312 bottles.
3
4 Of course, in a very abstract way, the fact that CPET
5 had not obtained a license to research and develop CPTX-312
6 “relates” to the fact that it did not acquire a license to
7 sell them before proceeding to do so. While the phrase
8 “relates to” is undoubtedly broad, see Coregis Ins. Co. v.
9 Am. Health Foundation, Inc.,
241 F.3d 123, 129 (2d Cir.
10 2001), it would be a mistake to allow the phrase to “extend
11 to the furthest stretch of its indeterminancy,” N.Y. State
12 Conference of Blue Cross & Blue Shield Plans v. Travelers
13 Ins. Co.,
514 U.S. 645, 655 (1995). Rather, a court must
14 strive to read the provisions of the SDA “together as a
15 harmonious whole,” Kinek v. Paramount Commc’ns, Inc., 22
16 F.3d 503, 509 (2d Cir. 1994), giving effect both to the
17 limitation in the warranty (i.e., business “as currently
18 conducted”) and to the indemnity provision. Applying these
19 principles, the losses suffered by Owens as a result of the
20 post-acquisition sale and marketing of CPTX-312 neither
21 “arise out of” nor “relate to” BTR’s breach of its promise
22 that it had the necessary intellectual property (only) to
23 research and develop CPTX-312. The interpretation urged by
24 Owens would read the “as currently conducted” limitation out
25 of the SDA. It would also violate the principle that
26 indemnity provisions are construed narrowly. See Hooper
27 Assocs., Ltd. v. AGS Computers, Inc.,
74 N.Y.2d 487, 491
28 (1989).
29
30
31 Finding no merit in Owens’s remaining arguments, we
32 hereby AFFIRM the judgment of the district court. Because
33 we affirm based on the plain language of the SDA, we need
34 not address the alternative grounds for affirming raised in
35 BTR’s cross appeal.
36
37
38 FOR THE COURT:
39 CATHERINE O’HAGAN WOLFE, CLERK
40
4