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Oyster Optics, LLC v. Infinera Corp.

United States District Court, E.D. Texas, Marshall Division

June 25, 2019

OYSTER OPTICS, LLC, Plaintiff,
v.
INFINERA CORPORATION, Defendant.

          MEMORANDUM OPINION AND ORDER

          RODNEY GILSTRAP UNITED STATES DISTRICT JUDGE.

         Before the Court is Defendant Infinera Corporation's (“Infinera”) Motion for Summary Judgment Regarding Its License and Release Defenses (the “Motion”). (Dkt. No. 39.) The Court heard oral argument on the Motion on June 12, 2019. (Dkt. No. 74.) Also before the Court are Plaintiff Oyster Optics, LLC's (“Oyster”) Notice of Supplemental Material Facts and Notice of Inaccurate Case Quote in Defendant's Slide and Argument at Hearing, (collectively, the “Notice” or “Notices”), and Infinera's Response to Plaintiff's Presentation Notice (the “Response”). (Dkt. Nos. 72, 80, 81.) Having considered the parties' briefing and oral arguments as noted above, the Court GRANTS the Motion for the reasons set forth herein.

         I. INTRODUCTION

         On November 24, 2016, Oyster filed suit in this court against Coriant (USA), Inc., Coriant North America, LLC, Coriant Operations, Inc. (collectively, “Coriant”), Infinera, and several other defendants for patent infringement. See Oyster Optics, LLC v. Coriant America, Inc., et al., No. 2:16-cv-01302-JRG (the “Litigation”). The Court consolidated those cases for pretrial purposes. (No. 2:16-cv-01302-JRG, Dkt. No. 23.)[1] On May 15, 2018, Oyster filed the above-captioned case against Infinera, alleging infringement of U.S. Patent Nos. 7, 620, 327 (the “'327 Patent”); 8, 913, 898 (the “'898 Patent”); and 9, 749, 040 (the “'040 Patent”) (collectively, the “Patents-in-Suit”). (Dkt. No. 1). The Court severed Oyster's earlier-filed case against Infinera from the Litigation and consolidated it with this case. (Dkt. No. 603.)

         On June 28, 2018, Oyster and Coriant entered into an agreement that settled Oyster's claims against Coriant in the Litigation (the “Agreement”). (Dkt. No. 39-1.) The Agreement grants Coriant and its “Affiliates” a “royalty-free, irrevocable, perpetual, and fully paid-up license” to the “Licensed Patents, ” (id. § 4.1), and releases Coriant and its “Affiliates” from “any and all claims . . . based on the Licensed Patents” that “aris[e] from activities” in the United States “up to” and “prior to” June 27, 2018, (id. § 3.1). On October 1, 2018, Infinera acquired Coriant, and “now owns, either directly or indirectly, 100% of the shares or ownership interest in [Coriant].” (Dkt. No. 39-2 ¶¶ 4, 6.) Having acquired Coriant, Infinera argues that it is now an “Affiliate” of Coriant, and as such, moves for summary judgment that Oyster's infringement claims are barred by the release and license provisions in the Agreement. (Dkt. No. 39.)

         II. LEGAL STANDARDS

         A. Summary Judgment

         “The court shall grant summary judgment 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). Material facts are those “that might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute about a material fact is “genuine” “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. “[T]he 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.” Id. at 247-48 (emphasis in original). To resolve the Motion, the Court must construe the Agreement. Contract interpretation is a question of law and may be resolved by summary judgment. See Adirondack Transit Lines, Inc. v. United Transp. Union, Local 1582, 305 F.3d 82, 85 (2d. Cir. 2002) (applying New York contract law); Riverside S. Planning Corp. v. CRP/Extell Riverside, L.P., 920, N.E.2d 359, 363 (N.Y. 2009) (“Whether an agreement is ambiguous is a question of law for the courts.”). There is no dispute between the parties that New York law governs the Agreement and its construction.

         B. License and Release

          “A patent grants its owner the right to exclude others from making, using, or selling the patented invention. However, all or part of the right to exclude may be waived by granting a license, which may be express or implied.” Carborundum Co. v. Molten Metal Equip. Innovations, Inc., 72 F.3d 872, 878 (Fed. Cir. 1995) (internal citations omitted). “[A] patent license agreement is in essence nothing more than a promise by the licensor not to sue the licensee” and “can be written to convey different scopes of promises not to sue, e.g., a promise not to sue under a specific patent, or more broadly, a promise not to sue under any patent the licensor now has or may acquire in the future. Spindelfabrik Suessen-Schurr, Stahlecker & Grill GmbH v. Schubert & Salzer Maschinenfabrik Aktiengesellschaft, 829 F.2d 1075, 1081 (Fed. Cir. 1987).

         Similarly, a patent owner may, by agreement, promise not to assert claims based on conduct that arose at a particular time and place. Such promises are known as “releases” from liability. See, e.g., Dinesol Bldg. Prod., Ltd. v. Tapco Int'l, Inc., 201 Fed.Appx. 764, 766 (Fed. Cir. 2006) (determining “whether the Settlement Agreement released Dinesol from claims that its custom plastic shutters infringe Tapco's shutter patents”).

         Generally, licenses apply prospectively and releases apply retroactively. See, e.g., Schering Corp. v. Roussel-UCLAF SA, 104 F.3d 341, 345 (Fed. Cir. 1997) (explaining that “the license grants full protection against a claim of future infringement” and that to deprive another from “the right to sue for past damages for past infringement” “would require a release, not a license”); Murray-Gardner Mgt. v. Iroquois Gas Transmission Sys., 646 N.Y.S.2d 418, 419 (Sup. Ct. 1996) (“Another applicable principle is that releases bar suits on causes of action arising on or prior to the date of their execution but will not bar subsequent claims unless they are specifically embraced within the release or fall within the fair import of its terms.”). However, any such limitations are a matter of contract interpretation under the governing law. See e.g., Realtime Data, LLC v. T-Mobile USA, Inc., 936 F.Supp.2d 795, 801-04 (E.D. Tex. 2013) (interpreting license and release provisions under New York law).

         C. Contract Interpretation

         As noted, the Agreement is governed by New York law. (Dkt. No. 39-1 §9.) Under New York law, a contract must be construed in accordance with the parties' intent. Schron v. Troutman Sanders LLP, 986 N.E.2d 430, 433 (N.Y. 2013). To determine the parties' intent, the court first looks to the terms of the agreement. Id. (“The best evidence of what parties to a written agreement intend is what they say in their writing.”); U.S. Bank Nat. Ass'n v. Mask, 30 N.Y.S.3d 713, 715 (Sup. Ct. 2016) (“The court's fundamental objective in interpreting a contract is to determine the parties' intent from the language they have employed.”). “A written agreement that is complete, clear, and unambiguous on its face must be enforced according to the plain meaning of its terms.” Schron, 986 N.E.2d at 433; see also Ellington v. EMI Music, Inc., 24 N.Y.3d 239, 244 (2014) (“Where the terms of a contract are clear and unambiguous, the intent of the parties must be found within the four corners of the contract, giving a practical interpretation to the language employed and reading the contract as a whole.”).

         A court may consider “parol evidence-evidence outside the four corners of the document-” only if a term is ambiguous. Schron, 986 N.E.2d at 433. “Whether an agreement is ambiguous is a question of law for the court[]” and “is determined by looking within the four corners of the document, not to outside sources.” Riverside, 920 N.E.2d at 363; Trans-Pro Logistic Inc. v. Coby Electronics Corp., No. 05 CV 1759 (CLP), 2012 WL 526764, at *9 n.18 (E.D.N.Y. Feb. 16, 2012) (“[T]he search for ambiguity must be conducted within the four corners of the writing.”). A term is ambiguous if it “fails to disclose its purpose and the parties' intent, or when . . . [it] is susceptible of two reasonable interpretations.” Ellington, 24 N.Y.3d at 244 (internal citations omitted). “[A] contract is not rendered ambiguous just because one of the parties attaches a different, subjective meaning to one of its terms.” Bank of N.Y. Mellon v. WMC Mortgage, LLC, 22 N.Y.S.3d 3, 8 (Sup. Ct. 2015); see, e.g., Triax Capital Advisors, LLC v. Rutter, 921 N.Y.S.2d 54, 56-57 (Sup. Ct. 2011) (holding that emails between the parties cannot be used to create an ambiguity in an otherwise clear agreement).

         These principles are limited by two maxims. First, if a contract contains a merger clause, “a court is obliged ‘to require full application of the parol evidence rule in order to bar the introduction of extrinsic evidence to vary or contradict the terms of the writing.'” Schron, 986 N.E.2d at 433; Ashwood Capital, Inc. v. OTG Mgmt., Inc., 948 N.Y.S.2d 292, 298 (Sup. Ct. 2012) (“Furthermore, the agreement contains both a no-oral-modification clause and a broad merger clause, which as a matter of law bars any claims based on an alleged intent that the parties failed to express in writing.”). Second, New York courts are “extremely reluctant” to imply or vary terms in commercial contracts that were “negotiated at arm's length” between “sophisticated, counseled business people.” Ashwood, 948 N.Y.S.2d at 297. In those cases, the rule that a document's clear and unambiguous terms should govern is “appl[ied] with even greater force.” Id.; see, e.g., Greenfield v. Philles Records, Inc., 780 N.E.2d 166, 174 (N.Y. 2002) (explaining that court will not rewrite terms “under the guise of contract interpretation” to avoid a harsh outcome for Plaintiff).

         In sum, New York courts apply an “objective theory of contract.” SR Intern. Business Ins. Co. Ltd., et al. v. World Trade Cntr. Prop. LLC, et al., 467 F.3d 107, 125 (2d Cir. 2006) (applying New York law). Contracts are construed “by looking to ‘the objective manifestations of the intent of the parties as gathered by their expressed words and deeds.'” Id. Only when a contract is ambiguous may the court consider extrinsic evidence, and even then, “a party's uncommunicated subjective intent cannot supply the ultimate meaning of an ambiguous contract.” Id. at 125-26 (citing cases in which courts considered parol evidence because the contracts were ambiguous).

         III. DISCUSSION

         The Agreement provides a release and license under the Patents-in-Suit to Coriant and its “Affiliates.” (Dkt. No. 39-1 §§ 3.1, 4.1.) Infinera argues that since it is an “Affiliate” of Coriant, those “provisions independently bar Oyster from continuing to assert its patent infringement claims against Infinera.” (Dkt. No. 39 at 1.) Oyster disagrees. It argues that (1) Infinera is not covered by the release and license provisions because it became an “Affiliate” after the effective date of the Agreement, and (2) regardless, Infinera breached express covenants in the Agreement. (Dkt. No. 44.)

         The Court finds, and the parties agree, that the contract is clear and unambiguous.[2]Accordingly, the Court limits its analysis to the four corners of the document. See Schron, 986 N.E.2d at 433. The Court first reviews the relevant definitions set forth in Section 1 of the Agreement. Then, the Court applies those definitions to the release and license provisions to determine if they bar Oyster's claims against Infinera. In conducting this analysis, the Court affords terms their plain meaning and considers the contract as a whole. Ellington, 24 N.Y.3d at 244.[3]

         A. Definitions from the Agreement

         i. Effective Date

         The Agreement defines the “Effective Date” as June 27, 2018. (Dkt. No. 39-1, preamble.)

         ii. Litigation

         The Agreement defines “Litigation” as the “litigation pending in the United States District Court for the Eastern District of Texas, Lead No. 2:16-cv-01302-JRG-RSP, in which Oyster has asserted infringement of U.S. Patent Nos. 6, 594, 055; 6, 469, 816; 6, 476, 952; 7, 099, 592; 8, 913, 898; 7, 620, 327; 8, 374, 511; and 9, 363, 012 (the ‘Patents-in-Suit') by the Coriant Defendants.” (Id.) “Coriant Defendants” are defined as “Coriant (USA), Inc., Coriant North America, LLC, [and] Coriant Operations, Inc.” (Id.) The “Litigation, ” which may be referred to herein as “No. 2:16-cv-01302-JRG-RSP, ” is the same “Litigation” defined in the Background section above.

         iii. ...


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