JOHN A. GIBNEY, JR., District Judge.
The essence of this case is a familiar one: a business deal soured by funding problems during an economic recession. At its inception, the deal was marked by optimism and cooperation between the parties. Negotiations culminated in the Contractor Confidentiality, Invention Rights, Exclusivity and Non-Compete Agreement (the "Invention Rights Agreement," "IRA," or "Agreement"), a written contract that focused too heavily on future profit margins from a revolutionary product not yet in existence.
Fundamentally, the Invention Rights Agreement encompassed a joint venture between an inventor/developer and backing company. Wi-Sky Inflight, Inc. ("Wi-Sky"), the capital provider, contracted with inventor-Michael Leabman (and his company, Vivano Networks, Inc. ("Vivano")) to utilize his expertise in the creation of a functional and FAA-approved mechanism to provide high-speed internet access to
The instant litigation centers on what Leabman transferred when he signed the Agreement. Wi-Sky claims it purchased Leabman's intellectual property, inventions, and all related patents (or patents pending). Leabman and Vivano disagree. They claim the IRA's explicit language is forward-looking and grants ownership only for those concepts and inventions created by Leabman for Wi-Sky after the Agreement's signing.
This matter is currently before the Court on a number of motions filed by the parties in the case. The plaintiff, Lufthansa Systems Infratec, GmbH ("Lufthansa"), and one of the defendants, True Path Holdings, LLC
Holding the opposite interest in this case is Wi-Sky, who seeks enforcement of the Agreement. The company also petitions the Court for a declaration that it owns all of Leabman's intellectual property and inventions related to air-to-ground, broadband internet communication. Wi-Sky has filed two motions related to discovery that are currently pending: (1) a motion for entry of a new scheduling order, and (2) a motion for an extension to complete discovery under Federal Rule of Civil Procedure 56(d). Ostensibly, Wi-Sky aims to recover information or documents pertaining to the IRA's formation that supports their enforceability argument.
For the following reasons, the Court finds that the Invention Rights Agreement is an enforceable contract. The summary judgment motions filed by Lufthansa and True Path must be denied as a result. Wi-Sky's discovery motions must also be denied since they were filed for the purpose of extending the discovery period if the Agreement was deemed unenforceable.
After extensive and careful deliberation, however, the Court concurs with Lufthansa and True Path's interpretation of the IRA. The contract language is clear and explicit: Wi-Sky only paid Leabman to build a marketable, finished product for its benefit using his sophisticated design concept. In other words, Leabman did not forfeit the rights to his own prior inventions and intellectual property by signing
This case involves disputes over plans to develop new technology for airplanes. The various parties attempted to negotiate contracts to create, market, and purchase devices to provide high-speed internet service to airplane passengers. Their deals fell apart, and litigation ensued.
The plaintiff in this case is Lufthansa, a German corporation with an interest in purchasing technology to transmit wireless internet signals, known as Wi-Fi, to airplanes. The primary defendant, Wi-Sky, is a Delaware corporation formed to develop and market Wi-Fi for airplanes. Michael Leabman, another defendant, is an inventor-engineer who developed a design concept and accompanying technology for the transmission of high-speed Wi-Fi to moving aircraft as well as other modes of transportation (the "Technology"). Defendant Vivano is a Delaware corporation organized by Leabman to serve as a vehicle in the development of his Wi-Fi Technology. True Path is a limited liability company to which Leabman eventually transferred his rights in the Technology following Wi-Sky's filing of a lawsuit against Leabman and others in Georgia state court (the "Atlanta suit"). Defendants V10 Capital Partners, LLC ("V10") and Turnstone Capital Partners, LLC ("Turnstone") are entities that provided or were approached to provide financing to Wi-Sky and Leabman in their joint venture to develop the Technology.
In March 2008, Wi-Sky began to work on a project to improve internet service for airline passengers. By November 2008, Michael Leabman, an electrical engineer, had formed Vivano to produce ground-based "base stations" and radios/"mobile clients" designed to provide broadband Wi-Fi to passengers in planes, boats, cars, and trains. Leabman designed and constructed a ground-to-air communication system in 2008 while at his former company, Data Runway. In early 2008, he filed a provisional United States patent application for this system, Serial No. 61/025,219. Around that time, Wi-Sky became interested in marketing Leabman's Technology and entered into the Invention Rights Agreement.
The Agreement was signed by Grant Sharp as representative of Wi-Sky on January 27, 2009; by Vivano, through Leabman, on January 28, 2009; and by Leabman himself, on the same date, January 28, 2009. Paragraph 1 of the IRA recites the consideration: 50,000 shares of Wi-Sky stock was transferred from Wi-Sky to Leabman/Vivano.
The crux of this case is the proper interpretation of paragraph 5 of the IRA, specifically the transfer of inventions and intellectual property from Leabman to Wi-Sky. The relevant portions of paragraph 5 state:
(IRA ¶ 5(a)-(b) (emphasis added).) Appendix B to the Agreement provided examples of the types of intellectual property funded by Wi-Sky that pertain to its mission of inflight communication and were its exclusive property:
(IRA ¶ 5(f), App. B.) Throughout this litigation, Wi-Sky has argued that the Agreement explicitly provides for the conveyance of all of Leabman's rights to the ground-to-air Technology, including past concepts/inventions as well as future creations. Leabman and Vivano contend that any transfer of Leabman's past inventions and intellectual property either did not occur or was ineffective for various reasons, including a breach of contract by Wi-Sky.
After the IRA's execution, Wi-Sky began negotiations to provide Lufthansa with the Wi-Fi Technology for use in its airplanes. As this relationship progressed, the two sides determined that certain aspects of their business dealings needed to be kept confidential. On July 16, 2009, therefore, Lufthansa and Wi-Sky entered into a confidentiality agreement (the "Confidentiality Agreement") that prohibited either party from disclosing any proprietary information or business plan discussed during their negotiations, or from soliciting the other's employees.
Eventually, the deal between the parties fell apart. Wi-Sky had significant trouble securing financing for the project which led to strained relations between Leabman, Wi-Sky, and Lufthansa. Thereafter, Leabman began negotiating with Lufthansa directly using different financiers, V10 and Turnstone. Wi-Sky was alerted to Leabman's actions and threatened Lufthansa with suit.
On October 15, 2010, Lufthansa filed its original complaint for injunctive and declaratory relief against defendants Wi-Sky, Leabman, Vivano, Turnstone, and V10.
Additionally, True Path filed a crossclaim against Wi-Sky seeking a declaratory judgment as to the ownership of the Technology.
Wi-Sky, in turn, asserted various counterclaims against Lufthansa and also sought a declaratory judgment with respect
On November 11, 2010, Wi-Sky filed a motion to dismiss based on this Court's alleged lack of jurisdiction. It claimed that none of the events leading up to the creation of the IRA occurred in Virginia; therefore, the Court had no subject matter jurisdiction and was bound by the Georgia forum selection clause in the Agreement. The Court disagreed, memorializing its reasoning in a March 9, 2011 opinion, 2011 WL 862314. (See Dk. No. 110.)
Thereafter, the Court scheduled a March 16, 2011 hearing date on newly filed cross-motions for summary judgment from Lufthansa and Wi-Sky; a bench trial was set for March 22, 2011. (See Dk. Nos. 80, 81.) Following oral argument on the cross-motions, the Court indicated, inter alia, its intent to grant summary judgment in Wi-Sky's favor on the Technology ownership issue.
During that time period, the Court engaged in extensive deliberation concerning the issues raised in the original summary judgment motions and those for reconsideration. The Court has concluded that its March 16, 2012 oral ruling on the declaratory judgment issue must be vacated in the interest of justice.
Pursuant to the Court's September 21, 2011 order, the parties were granted leave to file supplementary motions for summary judgment on the enforceability of the Invention Rights Agreement. (See Dk. No. 186.) The Court also granted Lufthansa's motion to amend or correct its First Amended Complaint.
Under Rule 56(a), 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." Fed. R.Civ.P. 56(a). The relevant inquiry in a summary judgment analysis is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In reviewing a motion for summary judgment, the Court must view the facts in the light most favorable to the nonmoving party. Id. at 255, 106 S.Ct. 2505.
Once a motion for summary judgment is properly made and supported, the opposing party has the burden of showing that a genuine dispute exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact. Anderson, 477 U.S. at 247-48, 106 S.Ct. 2505. Summary judgment must be granted if the nonmoving party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). To defeat an otherwise properly supported motion for summary judgment, the nonmoving party must rely on more than conclusory allegations, "mere speculation," the "building of one inference upon another," the "mere existence of a scintilla of evidence," or the appearance of some "metaphysical doubt" concerning a material fact. Lewis v. City of Va. Beach Sheriff's Office, 409 F.Supp.2d 696, 704 (E.D.Va. 2006) (citations omitted). Of course, the Court cannot weigh the evidence or make credibility determinations in its summary judgment analysis. Williams v. Staples, Inc., 372 F.3d 662, 667 (4th Cir.2004).
Furthermore, pursuant to Virginia's choice of law rules, the Court will apply the law of the state in which the contract at issue was executed. Black v. Powers, 48 Va.App. 113, 628 S.E.2d 546, 554 (2006). The Invention Rights Agreement was executed in Georgia and the parties intended for Georgia law to govern any disputes: "[The IRA] shall be governed by and construed in accordance with the laws of the State of Georgia without regard to conflict of laws rules." (IRA ¶ 13.)
In short, the Inventions Rights Agreement is not so ambiguous or undefined as to render it unenforceable. Nor is parole evidence necessary to interpret the Agreement and determine the intention of the contracting parties. Rather, the parties were explicit in stating that Leabman's role was to create a marketable, ground-to-air radio system for the benefit of Wi-Sky's business. Wi-Sky obtained the rights to only those concepts and inventions that Leabman and Vivano created for Wi-Sky at Wi-Sky's expense. As such, the rights to Leabman's prior inventions and designs concepts were not transferred with the IRA's execution.
"The test of an enforceable contract is whether it is expressed in language sufficiently plain and explicit to convey what the parties agreed upon." See e.g., Kueffer Crane & Hoist Serv., Inc. v. Passarella, 247 Ga.App. 327, 330, 543 S.E.2d 113 (2000) (quoting Demer v. Capital City Cable, Inc., 190 Ga.App. 40, 43, 378 S.E.2d 162 (1989)); accord Jimenez v. Gilbane Bldg. Co., 303 Ga.App. 125, 129, 693 S.E.2d 126 (2010) (holding that the contracts terms were impossible to interpret and that the rules of construction did not clarify the contract's meaning); Kitchen v. Insuramerica Corp., 296 Ga.App. 739, 743, 675 S.E.2d 598 (2009) (enforcing a contract which constituted a meeting of the minds and clear intent to be legally bound, despite the fact that it did not cover less material aspects of the agreement, such as tax consequences); Key v. Naylor, Inc., 268 Ga.App. 419, 422-23, 602 S.E.2d 192 (2004) (holding that three contradictory terms in an employment contract made the term of the contract, an essential term, impossible to ascertain and rendered the contract unenforceable). It is unnecessary that a contract state definitively and specifically all facts in detail to which the parties may be agreeing, but it will be sufficiently definite and certain if it contains matters which will enable the courts, under proper rules of construction, to ascertain the terms and conditions on which the parties intended to bind themselves. Passarella, 247 Ga.App. at 330, 543 S.E.2d 113. "[T]he cardinal rule of contract construction is to ascertain the intention of the parties." Holcim, Inc. v. AMDG, Inc., 265 Ga.App. 818, 820, 596 S.E.2d 197 (2004); Sharpie v. AirTouch Cellular of Georgia, 250 Ga.App. 216, 218, 551 S.E.2d 87 (2001).
When a contract contains no ambiguity, a court must enforce the agreement as a matter of law according to its clear terms. Ben Farmer Realty, Inc. v. Owens, 286 Ga.App. 678, 680, 649 S.E.2d 771 (2007). No construction is necessary. See Caswell v. Anderson, 241 Ga.App. 703, 527 S.E.2d 582 (2000). Contract language is unambiguous if it is capable of only one reasonable interpretation. Id. at 703, 527 S.E.2d 582. When a contract is unambiguous, parol and extrinsic evidence is not admissible to contradict or construe the contract. Safe Shield Workwear, LLC v. Shubee, Inc., 296 Ga.App. 498, 501, 675 S.E.2d 249 (2009).
If an apparent ambiguity exists, the trial court must seek to resolve the ambiguity through the application of the rules of construction. Sheridan v. Crown Capital Corp., 251 Ga.App. 314, 315, 554 S.E.2d 296 (2002). Under the rules of construction, the goal is to "ascertain the intent of the parties." Id. at 315, 554 S.E.2d 296. A contract "must be construed as a whole rather than in separate and district parts, giving effect to all terms." Id. at 317, 554 S.E.2d 296. A contract should not be determined by examining isolated clauses and provisions. Id. This rule reflects the "well-settled ... policy of the law ... against the destruction of contracts on the ground of uncertainty if it is possible in the light of the
Here, Lufthansa and True Path claim that the IRA is simply an "agreement to agree" with no meeting of the minds on certain essential terms. They focus on three allegedly essential aspects of the IRA left undefined: (1) the future price of the airborne radios designed by Leabman and Vivano; (2) the non-recurring engineering ("NRE") costs of creating the custom radio; and (3) the timeframe over which Wi-Sky was obligated to provide the NRE.
As previously stated, the IRA provides for specific consideration, 50,000 shares of Wi-Sky stock, in exchange for the development of a custom radio by Leabman and Vivano.
In sum, the business deal at issue involved sophisticated parties who negotiated the IRA, provided for mutual consideration, and signed it voluntarily. It must be enforced, and the summary judgment motions filed by Lufthansa and True Path must be denied. Additionally, the Agreement, although poorly-worded, contains explicit language that answers the underlying question in this case: what ownership rights did Leabman transfer when he executed the IRA. In this Court's view, the answer to that question is clear and unambiguous.
The Court's analysis of the Invention Rights Agreement begins and ends with the capitalized, introductory provision to paragraph 5, entitled "Inventions and Intellectual Property Rights." It states:
(IRA ¶ 5 (emphasis added).) The phrase "for the benefit and use of Wi-Sky" is repeated several times in the Agreement, notably in paragraph 2 when discussing the type of technical matters that are "Confidential Information." (See IRA ¶¶ 2, 5(a).) The parties thereby made clear that the basis of the contract bargain was forward-looking. Leabman was receiving compensation for his new role as CTO of the company — one that required him to make certain technological developments for Wi-Sky, at its direction and expense. He was not forfeiting his entire body of work in the ground-to-air communication arena.
Leabman was hired based on the theories and expertise he demonstrated in these previous concepts and inventions. The IRA encompassed the next step: a commercial, ground-to-air radio system that could be sold to major airline companies. At the time of the Agreement's execution, no system existed. Leabman was employed by Wi-Sky to develop off-the-shelf parts into a marketable product. Because of funding issues, production was halted, and Leabman left Wi-Sky in search of other backing companies.
Wi-Sky's primary argument in response to the capitalized, introductory language centers on the phrase "now has made, conceived, or developed" in the IRA's definition of "Inventions" (IRA ¶ 5(a).) In full, "Inventions" are defined as: "all inventions, proprietary ideas, copyrightable material, designs, improvements and discoveries of any kind whether hardware or software which Contractor [Leabman] now has made, conceived, or developed, or which contractor may later make, conceive or develop, during the period of Contractor's engagement with Wi-SKY, which pertain to, apply to, relate to, or benefit Wi-SKY's business, inflight communication mission, patents, patents pending or business model or any of the work or businesses carried on by Wi-SKY."
The Court recognizes the potential ambiguity that the phrase "now has made, conceived, or developed" presents in its interpretation of the IRA. Yet, the Court rejects Wi-Sky's argument for two reasons. First, the Court is guided by the prevalence and relative importance of provisions in the Agreement which recognize that "Inventions" encapsulated only those things made for Wi-Sky's benefit. These statements are found in paragraph 2 of the Agreement as well as three separate times in paragraph 5. (See IRA ¶ 2, 5.)
Second, the rules of construction dictate that the Court should prioritize the provisions of the contract in favor of Lufthansa's interpretation (as well as that of Leabman, Vivano, and True Path). Chaudhuri v. Fannin Regional Hosp., 317 Ga.App. 184, 730 S.E.2d 425, 427 (2012) ("If the court determines that an ambiguity exists, however, a jury question does not automatically arise, but rather the court must first attempt to resolve the ambiguity by applying the rules of contract construction set forth in OCGA § 13-2-2.").
Moreover, under general rules of contract construction, a limited or specific provision will prevail over one that is more broadly inclusive. See Central Ga. Elec. Membership Corp. v. Ga. Power Co., 217 Ga. 171, 173-74, 121 S.E.2d 644 (1961). The introductory section to paragraph 5 is clearly and purposefully more specific in comparison to the undefined ambiguity of "now has made, conceived, or developed." As such, the Court must favor the interpretation proffered by Lufthansa and True Path. See Triple Eagle Assocs. v. PBK, Inc., 307 Ga.App. 17, 24, 704 S.E.2d 189 (2010) ("`The construction of a particular phrase that will uphold a contract in its entirety is preferred, and the entire contract must be looked at in the construction of any of its parts.'") (quoting Kreimer v. Kreimer, 274 Ga. 359, 361, 552 S.E.2d 826 (2001)).
Finally, even accepting some ambiguity in the contract provisions, Georgia courts have spoken: "[I]n the event of an irreconcilable conflict in the provisions of a contract[,] the provision first set forth in the contract prevails." See Wilner's, Inc. v. Fine, 153 Ga.App. 591, 594, 266 S.E.2d 278 (1980); accord Coker v. Coker, 265 Ga.App. 720, 722, 595 S.E.2d 556 (2004) ("It is a well-established rule in the construction of contracts that in the event of such a conflict, the first provision prevails."); see also Hardman v. Dahlonega-Lumpkin Cnty. Chamber of Commerce, 238 Ga. 551, 553, 233 S.E.2d 753 (1977); Barge & Co. v. City of Atlanta, 161 Ga.App. 675, 678, 288 S.E.2d 98 (1982); Garner v. Metro. Life Ins. Co., 152 Ga.App. 242, 243, 262 S.E.2d 544 (1979); Atlanta Biltmore Hotel Corp. v. Martell, 118 Ga.App. 172, 175, 162 S.E.2d 815 (1968); Whitney v. Hagan, 65 Ga.App. 849, 850, 16 S.E.2d 779 (1941). Viewing the contract as a whole, where there are conflicting provisions, "[t]he clause contributing most essentially to the contract is entitled to the greater consideration...." 17A C.J.S. Contracts § 309, p. 163. In this case, the Court finds that the capitalized, introductory provision that limits "Inventions" to only those things created for Wi-Sky's benefit at its expense encapsulates the essence of the Agreement and true intention of the contracting parties. The section is also the first and more specific of the two at issue.
Accordingly, the Court finds in favor of the IRA interpretation proffered by Lufthansa and True Path. Leabman's prior inventions and intellectual property were not transferred with the Agreement's execution; instead, Wi-Sky inherited the rights to all concepts and inventions developed after the signing.
For those reasons, the Court will deny the motions for summary judgment filed
An appropriate order shall issue
THIS MATTER is before the Court on several motions filed by the parties in the case. For the reasons stated in the accompanying Memorandum Opinion, the Court FINDS that the Invention Rights Agreement, as defined therein, is enforceable and DENIES the motions for summary judgment filed by Lufthansa Systems Infratec GmbH ("Lufthansa") and True Path Holdings, LLC (Dk. Nos. 188, 190). The Motion for Entry of New Scheduling Order (Dk. No. 195), Motion for Extension of Time to Complete Discovery (Dk. No. 198), and Motion to Change Venue, Sever and Stay (Dk. No. 223) filed by Wi-Sky Inflight, Inc. ("Wi-Sky") are also DENIED.
Additionally, the Court VACATES its oral ruling of March 16, 2011. The Court FINDS, as a conclusion of law, that defendant Michael Leabman did not forfeit his rights in his prior inventions and intellectual property (the "Technology") by signing the Agreement.
Furthermore, the Court hereby DNIES the amended motion to dismiss True Path's crossclaim (Dk. No. 211) filed by Wi-Sky. The previous motion to dismiss (Dk. No. 205) is DENIED as moot.
Finally, the Motion for Hearing on Plaintiffs Summary Judgment Motion or, in the alternative, Request for Status Conference (Dk. No. 233) filed by Lufthansa is DENIED as moot.
It is so ORDERED.
Let the Clerk send a copy of this Order and accompanying Memorandum Opinion to all counsel of record.
(Invention Rights Agreement (Dk. No. 212, Ex. A) ¶ 7.)
Leabman claims that the shares were subject to a lock-up agreement that made them illiquid. They argue that the 200,000 shares constituted illusory consideration and, therefore, the Agreement should be held unenforceable. The Court disagrees. Leabman was aware of the nature of the shares when he signed the IRA; he agreed to accept the shares in lieu of cash. The Court finds that the Agreement provided for adequate consideration in this case. These individuals and entities must be held responsible for the contracts to which they bound themselves. The lock-up limitation was voluntarily signed by Leabman and Vivano because they wanted the deal to proceed.
Given the Court's oral ruling, the remaining claims were Count I and II of Lufthansa's First Amended Complaint.
O.C.G.A. § 13-2-2.