Augustine Med v. Progressive Dynamics

• Decision Date: 25 October 1999
• Citation: 194 F.3d 1367
• Parties: (Fed. Cir. 1999) AUGUSTINE MEDICAL, INC., Plaintiff-Appellant, v. PROGRESSIVE DYNAMICS, INC., EUGENE KILBOURN, ROBERT CROZIER, BLUE RIDGE ANESTHESIA & CRITICAL CARE, INC., BRETT SMITH, STEVEN MORRIS, KEOMED, INC., DESMOND KEOGH, CENTRAL MEDICAL, INC. and DENNIS MILLS, Defendants-Appellees. 98-1364 DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 1367

194 F.3d 1367 (Fed. Cir. 1999)

AUGUSTINE MEDICAL, INC., Plaintiff-Appellant, v. PROGRESSIVE DYNAMICS, INC., EUGENE KILBOURN, ROBERT CROZIER, BLUE RIDGE ANESTHESIA & CRITICAL CARE, INC., BRETT SMITH, STEVEN MORRIS, KEOMED, INC., DESMOND KEOGH, CENTRAL MEDICAL, INC. and DENNIS MILLS,

Defendants-Appellees.

98-1364

United States Court of Appeals for the Federal Circuit

DECIDED: October 25, 1999

Appealed from: United States District Court for the District of Minnesota Judge James M. Rosenbaum

Jacob M. Holdreith, Oppenheimer Wolff & Donnelly LLP, of Minneapolis, Minnesota, argued for plaintiff-appellant. With him on the brief were Craig J. Lervick and Christopher C. Cain. Of counsel on the brief was J. Randall Benham, Augustine Medical, Inc., of Eden Prairie, Minnesota. Of counsel was Robert M. Rauker, Oppenheimer Wolff & Donnelly LLP, of Minneapolis, Minnesota.

Christopher R. Magid, Dorsey & Whitney LLP, of Minneapolis, Minnesota, argued for defendants-appellees. With him on the brief was Joseph F. Haag. Of counsel was Mark A. Wolfe.

Before MAYER, Chief Judge, RADER, and GAJARSA, Circuit Judges.

GAJARSA, Circuit Judge.

DECISION

Augustine Medical, Inc. ("Augustine") appeals from the March 28, 1997 grant of summary judgment to Progressive Dynamics, Inc. ("Progressive") by the United States District Court for the District of Minnesota dismissing Augustine's claims of patent infringement. See Augustine Med., Inc. v. Progressive Dynamics, Inc., No. 4-96-CV-345 (D. Minn. March 28, 1997). After concluding that the district court correctly construed the language of the Settlement Agreement between the two parties, we affirm the district court's grant of summary judgment.

BACKGROUND

I. 1993 Unfair Competition Lawsuit

Augustine sued Progressive on June 2, 1993, in Minnesota federal district court claiming unfair competition, false advertising, deceptive trade practices, and product disparagement. The claims generally related to Progressive's alleged misrepresentations to customers concerning the effectiveness of its products and their compatibility with Augustine's product. Progressive counterclaimed, alleging violations of section 43(a) of the Lanham Act, deceptive trade practices, illegal tying arrangements, and attempted monopolization. It is undisputed that patent infringement was not part of this lawsuit; nevertheless, Progressive's convective warming blankets at issue in this unfair competition suit were the same as the accused blankets in the later-filed patent infringement suit, which we discuss below.

The parties entered into a Settlement Agreement and Release of Claims on April 24, 1995 ("Settlement Agreement"). The Settlement Agreement states in Paragraph 1:

AMI does hereby . . . release and forever discharge PDI from any and all manner of action or actions . . . that AMI and/or its owners . . . have, have had, or may have against PDI upon or by reason of or relating to any acts, omissions or statements made by PDI on or before the date of this Settlement Agreement, including, but not limited to, any and all claims that were or could have been asserted by AMI in the [present lawsuit]. . . . AMI covenants and agrees not to commence any action or proceeding against PDI arising out of or related to, statements not otherwise precluded by this Settlement Agreement made after the date hereof that are in substance repetitions of statements made by PDI prior to the date of this Settlement Agreement that were at issue in the above-referenced litigation.

(Emphasis added.)

During the negotiation of the Settlement Agreement, Augustine asserts that Progressive sought a license from Augustine. According to Augustine, it informed Progressive that it would not agree to refrain from suing Progressive in the future for patent infringement occurring after the date of the Settlement Agreement. On its part, Progressive asserts that Augustine requested that the Settlement Agreement be revised to specifically exclude claims of patent infringement, but Progressive refused, and Augustine signed the Settlement Agreement as drafted.

II. 1995 Patent Infringement Lawsuit

On October 19, 1995, Augustine sued Progressive and various individual defendants for infringement of its '188 '102, '320, '371, and '417 patents.¹ All five of the patents issued prior to the date of the Settlement Agreement. The lawsuit specifically limits the claims to Progressive's actions occurring after April 24, 1995, the date of the Settlement Agreement. Progressive's accused convective warming blankets were on sale in a materially identical form prior to the execution of the Settlement Agreement.

On December 22, 1995, Progressive moved to dismiss for failure to state a claim and to dismiss the claims against the individual defendants. The district court granted the latter motion, and Augustine does not appeal that issue. On December 10, 1996, Progressive moved for summary judgment on all of the patent claims based on the April 24, 1995 Settlement Agreement. The district court conducted a hearing on March 28, 1997 and granted Progressive's motion, stating that Augustine was trying "simply to reopen that which [the parties] have already agreed upon and settled," that Augustine's present lawsuit was a "future dispute[ ] involving activity that had already begun," and that, by Augustine's own admission, all of the claims could have been asserted prior to execution of the Settlement Agreement. Augustine Med., slip op. at 19-20. Augustine filed a timely appeal with this court on the grant of summary judgment.

DISCUSSION

I. Standard of Review

On appeal, we review a grant of summary judgment de novo in which we view all evidence, make all reasonable inferences, and resolve all factual disputes in favor of the nonmovant, reapplying the standards of review used below. See Wang Labs., Inc. v. Mitsubishi Elecs. Am., Inc., 103 F.3d 1571, 41 USPQ2d 1263 (Fed. Cir. 1997), cert. denied, __ U.S. __, 118 S. Ct. 69 (1997); see also Opus Corp. v. IBM, 141 F.3d 1261, 1265 (8th Cir. 1998). The interpretation of a Settlement Agreement, i.e., a contract, is a question of law that we review de novo. See Mays v. United States Postal Serv., 995 F.2d 1056, 1059 (Fed. Cir. 1993) ("The settlement agreement is a contract, of course, and its interpretation is a matter of law."). A court of appeals applies the state's contract law in interpreting a settlement agreement. See Gjerlov v. Schuyler Lab. Inc. 131 F.3d 1016, 1020, 44 USPQ2d 1881, 1885 (Fed. Cir. 1997). Minnesota contract law holds that the settlement of a lawsuit is contractual in nature, requiring offer and acceptance for its foundation, and it is subject to all of the other rules of interpretation and enforcement. See Theis v. Theis, 271 Minn. 199, 204, 135 N.W.2d 740, 744 (1965). Whether an implied license exists is a question of law that we review de novo. See Glass Equip. Dev., Inc. v. Besten, Inc., 174 F.3d 1337, 1341 (Fed. Cir. 1999). The burden of proving that an implied license exists is on the party asserting an implied license as a defense to infringement.² See Met-Coil Sys. Corp. v. Korners Unlimited, Inc., 803 F.2d 684, 687, 231 USPQ 474, 476 (Fed. Cir. 1986).

II. Analysis

A. The Settlement Agreement Release

This is a case of first impression for this court in interpreting the language of the Settlement Agreement reached between the two parties. We must determine whether the language as drafted by Augustine and Progressive functions as a bar to any future claims of Augustine for patent infringement occurring after the Settlement Agreement, related to those goods that were included in the Settlement Agreement.

Augustine would have us construe the language of the Settlement Agreement, namely:

AMI does hereby . . . release and forever discharge PDI from any and all manner of action or actions . . . that AMI and/or its owners . . . have, have had, or may have against PDI upon or by reason of or relating to any acts, omissions or statements made by PDI on or before the date of this Settlement Agreement,

as limiting the release to "claims based on PDI's pre-settlement actions and does not refer to future claims." Progressive urges us to affirm the district court's holding, adopting the position that the language "may have" was prospective in nature, and therefore the release barred future claims that would arise after the date of the Settlement Agreement, as long as the claims were related to acts that were taken on or before the date of the Settlement Agreement. For the following reasons, we find that the terms of the Settlement Agreement clearly reach the present dispute between the parties, and therefore find Progressive's interpretation of the settlement provisions to be correct.

The phrase "may have" is necessarily future-oriented. In the context of the Settlement Agreement, it implies a future possibility of Augustine having a claim. Augustine argues that the phrase "have, have had, or may have" is restricted by the phrase which appears later in the same paragraph, "on or before the date of this Settlement Agreement," and argues that a claim could not have existed on or before the date of the Settlement Agreement because the post-settlement patent infringement had not yet occurred. We find this interpretation to be contrary to the clear language of the agreement by unduly emphasizing the role of the settlement date clause.

Specifically, Augustine fails to consider the intervening words between the two phrases they cite. In "releas[ing] . . . PDI from any and all . . . actions . . . that AMI . . . may have against PDI . . . relating to any acts, omissions or statements made by PDI on or before the date of th[e] Settlement Agreement," Augustine has discharged its ability to sue Progressive not for claims that existed on or before the date of the Settlement Agreement, but for claims related to any actions taken by Progressive on or before the date of the Settlement Agreement. Prior to...