JOSEPH S. VAN BOKKELEN, District Judge.
This case is about rights to a patent related to vehicular frame rails. The parties agree Ruehl
Both sides move for partial summary judgment.
When considering AM General's motion the Court views the facts in the light most favorable to Ruehl, and when considering Ruehl's motion the Court views the facts in the light most favorable to AM General. The Court does not weigh the evidence or determine the truth regarding the facts.
The parties agree Ralf Pionke of AM General contacted his former co-worker Philip Ruehl in late 2004 or early 2005 about consulting with AM General on a project to upgrade the frame rails for its Humvee line of trucks.
Mr. Pionke sent Mr. Ruehl drawings of the then-current side rail design on February 17, 2015 (via email), and on February 23, 2005 (via UPS). AM General claims Mr. Ruehl admitted that once he had its print drawings, which he did not receive until February 25, 2005, he looked at them and wanted to modify the spacers.
Mr. Ruehl signed a purchase order on February 26, 2005. The front of this purchase order says: "This purchase order is issued to cover cost to provide engineering support for HMMWV frame rail feasibility study." (Feb. Purchase Order, DE 51-13 at 2.) It also caps the cost at $22,500. (Id.) It warns: "ACCEPTANCE OF THIS ORDER CONSTITUTES AN ACCEPTANCE OF THE TERMS AND CONDITIONS ON FACE AND REVERSE HEREOF." (Id.)
The back of this purchase order says:
(Feb. Purchase Order, DE 51-13 at 3.
On March 5, 2005, Mr. Ruehl sketched the big idea at the heart of this case. But the parties disagree about the genesis of this idea.
Mr. Ruehl claims in his amended complaint he conceived the idea before signing the purchase order on February 26, 2005. But he testified on November 19, 2015: "The iterative process of inventing the concept was completed on March 5, 2005." (Ruehl Dep., DE 51-11 at 15.) And on April 14, 2016, Mr. Ruehl signed his declaration stating: "None of my invoices to AM General included charges for my work inventing my new frame rail concept, which was completed no later than March 5, 2005 (and, to my best recollection, earlier than that.)" (Ruehl Decl., DE 55-3 at 2.)
AM General argues there is no evidence Ruehl conceived the idea before signing the February purchase order other than his say-so. AM General argues the evidence demonstrates that the spacer concept was not completed until March 5, 2005, and that the idea continued to develop after that date: "[T]he undisputed evidence demonstrates that Ruehl, after reviewing AMG's frame rail drawings and signing the February PO, came up with a spacer concept and then spent three weeks further refining and developing this concept as part of the engineering support he provided to AMG." (AM General's Br. Opp'n Pl.'s Mot. Partial Summ. J., DE 60 at 20.)
Not only do the parties disagree about the genesis of the idea, they also disagree about what happened to the idea after Ruehl sketched it on March 5, 2005. Ruehl claims the idea never changed or developed after that date, or perhaps even for some time before. Ruehl claims no one refined, tested, supported, or funded the idea after that date, or perhaps even for some time before. AM General, however, argues that the idea was subject to continued development, refinement, and testing during the following months.
The parties refer to the idea in various ways. Ruehl refers to it as an invention "comprised of a box-type frame rail assembly," and as "a much improved means of assembling frame rails." (Am. Compl., DE 22 at 4, 6.) He says the patent, entitled "Boxed Frame Member and Method for Manufacture," covers the invention. (Id. at 7.)
AM General refers to the idea as a "spacer concept." (AM General's Br. Supp. Mot. Partial Summ. J., DE 51 at 5.) AM General denies the amended complaint's detailed definition of the invention is accurate, but admits the patent relates to the new frame rail design. Mr. Ruehl also refers to the idea as "my spacer concept" in correspondence. (Email, Dec. 1, 2005, DE 52-7 at 3.) For the sake of simplicity, the Court will use "idea" to reference the contested intellectual property.
On March 5, 2005, Mr. Ruehl showed the sketch of the idea to Werner Kraenzler, a prototype shop owner, who confirmed he believed he could make a prototype of the idea. Mr. Ruehl did not identify the idea as confidential.
On March 7, 2005, Ruehl met with representatives of Applied Technologies, Inc., and Mr. Pionke at AM General's facility in Livonia, Michigan. Ruehl claims he showed the ATI representatives his sketch of the idea before Mr. Pionke even entered the room.
At that meeting, after disclosing his idea to the ATI representatives and to Mr. Pionke, Ruehl signed a confidentiality agreement presented to him by AM General. R.J. Gula, a vice president of AM General, signed it the next day.
The confidentiality agreement states:
(Mutual Confidentiality Agreement, DE 22-1 at 1-3.)
After the meeting on March 7, 2005, Ruehl worked with AM General and ATI on the frame rail feasibility study. The parties disagree about whether this work included work on the idea itself.
On March 24, 2005, Ruehl completed a report summarizing his work. He identified the spacer concept as a "key feature" of his proposed redesigned frame rails. He did not mark the report, or anything included in the report, as confidential.
On March 28, 2005, he emailed Mr. Pionke drawings, including a drawing of the spacer concept. Ruehl did not mark the drawing as confidential.
Mr. Ruehl billed AM General for his work via two invoices dated March 29, 2005. The first invoice itemizes travel expenses with precision, and totals $2,699.58. (Invoice # 120, DE 51-2 at 2.) The first three items on the list bill for travel on March 6, 2005.
The second invoice does not specify the dates it covers, nor does it itemize the work for which Ruehl billed. The second invoice indicates he chose not to bill for 3.5 days of work, as a "Professional Courtesy." (Invoice # 121, DE 51-3 at 2.) In an email to Mr. Pionke dated March 30, 2005, Mr. Ruehl apparently explained that he reduced the bill to keep it under the budget of $22,500: "I have adjusted billing to remain within budget; but we have exhausted the allocated funds." (Email, Mar. 30, 2005, DE 51-9 at 2.) In an attachment to another email, he apparently sheds further light on the bill: "I pondered the problem for weeks with nothing to show. The problem is as old as the industry. I could not consider billing for such `dreaming', with high probability of failure — in 100 years the problem had not been solved." (Email, Dec. 1, 2005, DE 52-7 at 4.) The second invoice seeks $19,800.
The combined total of these two invoices is $22,499.58. AM General paid this amount to Ruehl. Ruehl claims the invoices did not include any time spent conceiving the invention.
On April 21, 2005, AM General sent Ruehl a second purchase order for "ENGINEERING SUPPORT OF FRAME RAIL REVIEW." (Apr. Purchase Order, DE 51-16 at 2.) The April purchase order and the February purchase order carry the same terms on their backs. Ruehl signed the April purchase order on April 24, 2005.
Again, the parties dispute the nature of the work Ruehl performed under the April purchase order. AM General claims Ruehl took an active role in evaluating the spacer concept and was instrumental in arranging meetings between AM General and the prototype shop to produce prototype rails incorporating the spacer concept. AM General claims his work included development of the idea itself. Ruehl denies this, and instead claims that the idea itself did not change or develop during this time period.
Pursuant to an invoice following the April purchase order, AM General paid Ruehl an additional $15,027.93.
AM General claims that in the fall of 2005, after it had spent money in both phases to have the spacer concept developed, defined, tested, and prototyped, AM General concluded that the spacer concept Ruehl developed for it was patentable. Ruehl argues AM General did not fund the spacer concept itself, but only funded its application to AM General's needs.
On November 1, 2005, Ruehl filed a patent application. On November 7, 2005, Ruehl requested for the first time that AM General pay him royalties for using the spacer concept.
On February 1, 2006, AM General filed its own patent application. AM General listed Ruehl as the sole inventor, and listed itself as the sole owner.
On July 16, 2013, the United States Patent and Trademark Office issued to Ruehl a patent covering the idea. This patent, called "Boxed Frame Member and Method for Manufacture," embodies the spacer concept.
Ruehl claims AM General used and continues to use his idea without paying for it, in violation of the patent and the confidentiality agreement. Ruehl brings a claim for patent infringement and a claim for breach of contract.
AM General brings counter-claims. It seeks a declaratory judgment that it owns all right, title, and interest in and to the new frame rail design and all related inventions, patent rights, and other intellectual property, or, alternatively that it has at least a nonexclusive, paid up, irrevocable, worldwide right and license, by virtue of the purchase orders. AM General further seeks a declaratory judgment that it has not infringed the patent, because it has ownership or license rights over it. AM General also brings a counter-claim for breach of contract, alleging Ruehl breached the confidentiality agreement by applying for a patent using confidential information Ruehl received from AM General, and also using confidential information belonging to AM General pursuant to the purchase orders. Finally, AM General brings a counter-claim for breach of warranty and indemnification on the basis of the purchase orders.
The parties traded motions for partial summary judgment.
AM General seeks summary judgment in its favor on both of Ruehl's claims and on its own declaratory judgment and warranty counter-claims. AM General argues that Ruehl contractually assigned to it all rights to the idea; that if neither the assignment nor license are effective then Ruehl breached the warranty in the purchase orders; and that the confidentiality agreement does not apply to the information Ruehl claims was confidential.
Ruehl also seeks summary judgment on the issues of ownership and confidentiality. Ruehl argues that the purchase orders did not transfer any rights over the idea to AM General and that the confidentiality agreement protects Ruehl's rights over the idea.
A motion for summary judgment must be granted "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). In viewing the facts presented on a motion for summary judgment, a court must construe all facts in the light most favorable to the non-moving party and draw all legitimate inferences and resolve all doubts in favor of that party. NLFC, Inc. v. Devcom Mid-Am., Inc., 45 F.3d 231, 234 (7th Cir. 1995).
This notion applies equally where, as here, opposing parties each move for summary judgment in their favor pursuant to Rule 56. I.A.E., Inc. v. Shaver, 74 F.3d 768, 774 (7th Cir. 1996). Indeed, the existence of cross-motions for summary judgment does not necessarily mean there are no genuine issues of material fact. R.J. Corman Derailment Serv., Inc. v. Int'l Union of Operating Eng'rs, 335 F.3d 643, 647 (7th Cir. 2003). Rather, the process of taking the facts in the light most favorable to the nonmovant, first for one side and then for the other, may reveal that neither side has enough to prevail without a trial. Id. at 648. "With cross-motions, [the court's] review of the record requires that [the court] construe all inferences in favor of the party against whom the motion under consideration is made." O'Regan v. Arbitration Forums, Inc., 246 F.3d 975, 983 (7th Cir. 2001) (quoting Hendricks-Robinson v. Excel Corp., 154 F.3d 685, 692 (7th Cir. 1998)).
AM General proposes a simple resolution to this case: The February purchase order transferred ownership of the idea to it, and then the confidentiality agreement executed on March 7, 2005, did nothing to alter that transfer. So, the argument goes, AM General owns the idea and is therefore not susceptible to any claims that it infringed the patent it owns or that it breached confidentiality regarding the idea it owns.
Ruehl, however, proposes an equally simple resolution: Neither purchase order transferred any rights over the idea to AM General because AM General did not satisfy the funding clause. Moreover, the confidentiality agreement ensured Ruehl retained all rights over confidential information he submitted to AM General.
This case hinges not only on contract interpretation, but also on genuine issues of material fact.
This case involves three contracts. Regarding the two purchase orders, the Federal Circuit held that "[c]onstruction of patent assignment agreements is a matter of state contract law." Euclid Chem. Co. v. Vector Corrosion Techs, 561 F.3d 1340, 1343 (Fed.Cir. 2009). So the Court will apply state law to determine whether the purchase orders assigned any rights in the patent to AM General.
Regarding the confidentiality agreement, federal courts in federal question cases apply state substantive law to supplemental state law claims. United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725 (1966). So the Court will apply state law to determine whether AM General breached the confidentiality agreement.
Here, the purchase orders contain no choice-of-law clause, the parties agreed Indiana law would govern the confidentiality agreement, the parties' summary judgment briefs rely heavily on Indiana law, and Indiana is the forum state. No parties dispute the applicability of Indiana law to the interpretation of the three contracts.
In Indiana, the law of contract construction is generally well settled. See W. & S. Life Ins. Co. v. Vale, 12 N.E.2d 350, 354 (Ind. 1938); see also First Fed. Sav. Bank of Ind. v. Key Markets, Inc., 559 N.E.2d 600, 603-04 (Ind. 1990).
The ultimate goal of contract interpretation is to ascertain the intent of the parties at the time they made the agreement. Citimortgage, Inc. v. Barabas, 975 N.E.2d 805, 813 (Ind. 2012). A court should "begin with the plain language of the contract, reading it in context and, whenever possible, construing it so as to render each word, phrase, and term meaningful, unambiguous, and harmonious with the whole." Id. Indiana follows the "four corners rule": extrinsic evidence is inadmissible to add to, vary, or explain the terms of a written contract if the terms are clear and unambiguous. Roberts v. Cmty Hosps. of Ind., 897 N.E.2d 458, 467 (Ind. 2008).
A court should give a contract's language its plain and ordinary meaning, unless the contract uses a particular term in a manner intended to convey a specific technical concept. Citizens Action Coal. of Ind. v. Duke Energy Ind., 44 N.E.3d 98, 108 (Ind. Ct. App. 2015). A court should construe a contract "in a way that gives each term independent meaning, rather than rendering one surplusage." Pohl v. Pohl, 15 N.E.3d 1006, 1014 (Ind. 2014).
Conditions precedent are generally disfavored, and must be explicitly stated in the contract. Sasso v. Carsaw Orthopedic, 45 N.E.3d 835, 840 (Ind. Ct. App. 2015).
A contract is ambiguous only if reasonable persons could disagree about its interpretation; and if the ambiguity is in the contractual language, its interpretation remains a question of law. See Estate of Williams v. S. Indiana Gas & Elec. Co., 551 F.Supp.2d 751, 758 (S.D. Ind. 2008). Finally, if a contract is ultimately ambiguous, it should be construed against its drafter. MPACT Const. Group v. Superior Concrete Constructors, 802 N.E.2d 901, 910 (Ind. 2004).
AM General claims the February purchase order transferred to it all rights over the idea. AM General focuses on the latter portion of paragraph 9:
(Feb. Purchase Order, DE 51-13 at 3 (emphasis added).)
AM General urges the Court to interpret the phrase "and for which Purchaser has provided or is to provide support to Seller in the form of funding" as modifying the phrase "goods or services to be provided under this purchase order," rather than as modifying the phrase "the development of any ideas, inventions, improvement or discoveries." AM General asserts that grammar requires such an interpretation, but does not point to any clear and dispositive grammatical rule.
The Court disagrees. A compelling key to this interpretation is the word "and" in the middle of the phrase "related to the goods or services to be provided under this purchase order
For "and" here to have meaning, and not be mere surplusage, "and" must mean that the "support" clause reaches back and applies to the phrase "development of any ideas, inventions, improvement or discoveries."
This interpretation also makes better sense of the "support" clause. As Ruehl notes, the entire purchase order concerns and assumes payment by AM General for goods or services to be provided under this purchase order. The "support" clause would be redundant and strange, even mere surplusage itself, if it only referred to "goods or services to be provided under this purchase order."
The better interpretation of this portion of paragraph 9 of the purchase order is the one advanced by Ruehl. For Ruehl to assign all rights, title, and interest over his idea to AM General, two requirements must obtain: (1) the idea must be "related to the goods or services to be provided under this purchase order"; and (2) AM General "provided or is to provide support to Seller in the form of funding" for "the development of any ideas, inventions, improvement or discoveries."
But despite this interpretation of the purchase order, a genuine issue of material fact precludes summary judgment: Did AM General satisfy the second requirement for transfer of ownership even under Ruehl's interpretation of the contract?
Ruehl insists AM General provided no support for the development of the idea itself. But AM General insists it did. Ruehl signed the first purchase order on February 26, 2005. The earliest extant drawing of the idea on record is dated March 5, 2005, after Ruehl signed the first purchase order. This suggests the possibility that Ruehl conceived of or developed or refined the idea itself after signing the first purchase order, and while under its terms, and during a period of work for which AM General provided or at least was to provide support in the form of funding. The invoice Ruehl sent following the February purchase order further muddies these factual issues because it fails to itemize the dates or hours or precise nature of the work for which Ruehl billed. Indeed, the budget for the first purchase order was $22,500. Ruehl billed $22,499.58.
Ruehl argues that the execution of the confidentiality agreement was a condition precedent to the parties' rights and obligations under the purchase order. But the February purchase order says nothing about depending on execution of another document before becoming effective. In fact, the February purchase order says it "constitutes the entire agreement between the parties." (Feb. Purchase Order, DE 51-13 at 3.) Moreover, Ruehl did not even know when he signed the February purchase order that AM General would later expect him also to sign the confidentiality agreement. The February purchase order can't be subject to a condition precedent of the execution of the confidentiality agreement when the first document doesn't say anything about the second, the first document has an integration clause, and Ruehl didn't even know of the second document when he signed the first.
In addition, AM General argues that it provided funding to support the idea or its development throughout the further iterative process, including payments to ATI to test the idea and payments to Assured Design to develop prototype frame rails using the spacer and the manufacturing process.
In sum, there are genuine issues of material fact regarding whether AM General provided funding to support the idea or its development, and related genuine issues of material fact regarding the timing, process, and progress of the idea from its conception, through its development, to its completion.
The Court notes the parties barely briefed the first portion of paragraph 9 of the purchase order:
(Feb. Purchase Order, DE 51-13 at 3.) The Court encourages the parties to address this portion of the purchase order more fully in any appropriate future briefs.
Ruehl insists the confidentiality agreement protects his idea. AM General, however, argues the confidentiality agreement never even applied to the idea.
As in the February protective order, the relevant contractual language in the confidentiality agreement presents two modifying clauses separated by the word "and" but by no commas:
(Mutual Confidentiality Agreement, DE 22-1 at 1 (emphasis added).)
Now the parties arguably swap their interpretative lenses. Ruehl interprets the "marked as confidential or proprietary" clause as modifying only the phrase "any compilation or combination of the foregoing." AM General interprets the "marked" clause as applying more broadly to "any information."
The Court interprets the structure of the language in paragraph 1 of the confidentiality agreement consistently with its interpretation of the language of paragraph 9 of the protective order. Both phrases involve the use of "and" without commas:
Similarly to its conclusion regarding the purchase orders, the Court concludes that the "marking" clause applies broadly to the phrase "any information" in the first line of paragraph 1.
Moreover, the clause "that is disclosed to Receiving Party" is parallel to the clause "marked as confidential or proprietary." These clauses are separated only by "and." The first of these parallel clauses surely applies broadly to "any information" in the first line of the paragraph, so the second of these parallel clauses should as well.
Also, this interpretation is harmonious with the sentence regarding orally transmitted information, which requires written documentation of the confidential or proprietary nature of information broadly for any orally transmitted information to be "Confidential Information."
But that does not end the issue. The last part of paragraph 1 perplexes. Here it is just as it appears in the confidentiality agreement:
(Id.) Paragraph 1's conclusion is not a sentence. It never explicitly justifies or explains itself. It starts by mentioning "any information" with value to the Disclosing Party and not generally known to its competitors, like the initial "any information" mentioned at the beginning of the paragraph, and then it includes a reference to the frame feasibility study. But then it drops its thought, like a bored child dropping a toy, and moves on to something else. It doesn't even bother to end with a period.
Ruehl argues the last part of paragraph 1 means information with value to the Disclosing Party and not generally known to its competitors, including information related to the frame feasibility study, is protected confidential information even if it is not marked as confidential or proprietary, because the last part does not include a "marked" clause. But the last part doesn't include a "disclosed" clause either. Ruehl's interpretation would render the "marked" clause, and other clauses, mere surplusage.
AM General argues the last part merely identifies another example of information that could be confidential if properly marked. The Court is inclined to agree with AM General's interpretation on this point. Interpreting the last line as an inartful addition to the list of nonexclusive particulars seems more sensible than interpreting it as a revocation of multiple clauses that come immediately before it, like "disclosed to Receiving Party," "marked as confidential or proprietary," "identified as proprietary or confidential," and "notice is subsequently provided in writing."
The Court is inclined to conclude that the confidentiality agreement required Ruehl to mark his information as confidential or proprietary in order to satisfy the definition of "Confidential Information" and be protected by the agreement. But since the claims pertaining to rights over the patent on the basis of the protective order survive summary judgment, since the parties did not thoroughly address the potential ultimate rights of the parties in the event that AM General's claims grounded on the purchase orders fail and Ruehl's claim of breach of the confidentiality agreement fails, and since the parties did not thoroughly address the first part of paragraph 9 of the purchase orders, the Court declines to grant summary judgment regarding Ruehl's claim for breach of the confidentiality agreement at this stage, with leave granted to the parties to address this issue later.
For these reasons, the Court
The Court also