Jacobs v. Nintendo of America, Inc.
| Decision Date | 28 May 2004 |
| Docket Number | No. 03-1297.,03-1297. |
| Citation | 370 F.3d 1097 |
| Parties | Jordan Spencer JACOBS, Plaintiff-Appellant, v. NINTENDO OF AMERICA, INC., Defendant-Appellee. |
| Court | U.S. Court of Appeals — Federal Circuit |
John Edwin Fisher, Fisher, Rushmer, Werrenrath, Dickson, Talley & Dunlap, P.A., of Orlando, FL, argued for plaintiff-appellant. On the brief was Gerard H. Bencen, Patent Arts, of Gainesville, FL.
Robert J. Gunther, Jr., Latham & Watkins LLP, of New York, NY, argued for defendant-appellee. With him on the brief were John J. Kirby, Jr., Daiske Yoshida, and Richard C. Rosalez.
Before MICHEL, BRYSON, and LINN, Circuit Judges.
Patent owner and appellant Jordan Spencer Jacobs terminated a patent infringement lawsuit against Analog Devices, Inc., by entering into a settlement and licensing agreement with Analog. Jacobs later sued appellee Nintendo of America, Inc., for infringing the same patent. As a defense, Nintendo asserted that the settlement agreement between Jacobs and Analog protected not only Analog, but also Analog's customers, including Nintendo, for making and selling devices that incorporated Analog's components. The district court agreed and entered summary judgment in Nintendo's favor. We affirm.
Jacobs owns U.S. Patent No. 5,059,958 ("the '958 patent"), entitled "Manually Held Tilt Sensitive Non-Joystick Control Box." The invention relates to a video game controller that the operator holds in two hands. The operator tilts the controller to achieve corresponding motion in the video game. Before suing Nintendo, Jacobs sued various hardware manufacturers, including Microsoft and Logitech, alleging that they were directly infringing the '958 patent. In the same action, Jacobs named Analog as a defendant, charging Analog with inducement and contributory infringement. Jacobs alleged that Analog provided tilt-sensitive components called accelerometers to the other defendants. Although Jacobs did not allege that Analog's accelerometers infringed the ' 958 patent, he alleged that the other defendants used those components in their tilt-sensitive control boxes, which allegedly infringed the '958 patent.
In July 2001, Jacobs's case against Analog was dismissed pursuant to a settlement agreement. Two provisions of the agreement are critical here:
3. License. Jacobs grants Analog an irrevocable, perpetual, fully paid up license to take any actions set forth in 35 U.S.C. § 271 which would, but for this license, constitute an infringement or violation of Jacobs' patent rights under the '958 patent. Without limiting the foregoing, the license granted hereunder includes the right to make, use, sell, import and export components, including micromachined accelerometers, for use in tilt-sensitive control boxes.
5. Covenant-not-to-sue. Jacobs covenants not to sue Analog for any alleged infringement or violation of the '958 patent. This covenant-not-to-sue extends to any cause of action having as an element the infringement of the '958 patent by Analog or any other party, whether occurring in the past, present, or in the future.
After the settlement and dismissal of the litigation against Analog, Jacobs filed a patent infringement action against Nintendo in the United States District Court for the Middle District of Florida. No. 6:01-CV-1379-Orl-31KRS. The complaint charged Nintendo with infringing or inducing infringement of the '958 patent by producing the game "Kirby Tilt `n Tumble" for its hand-held Game Boy video game systems. When the Kirby game is inserted into the system, the player can control the movement of the Kirby character in the video game by tilting the controller in the desired direction of movement.
Nintendo moved for summary judgment of noninfringement, asserting that it was entitled to practice the '958 patent by virtue of the settlement agreement between Jacobs and Analog, the supplier of the accelerometers for the Kirby game. The district court granted Nintendo's motion and entered judgment of noninfringement for Nintendo. The court held that because the settlement agreement between Jacobs and Analog permitted Analog to sell accelerometers for use in tilt-sensitive control boxes, such as the ones manufactured and sold by Nintendo, the agreement necessarily gave Nintendo an implied license to use the Analog accelerometers in its tilt-sensitive control boxes. For Jacobs to bar Analog's customer, Nintendo, from using Analog's accelerometers in the products expressly referred to in the settlement agreement, the court concluded, would undermine the provision of the agreement permitting the sale of accelerometers "for use in tilt-sensitive control boxes." The court explained that Jacobs should not be permitted to do "through the back door — by suing a customer of Analog — what he cannot do through the front door," i.e., by suing Analog.
The agreement between Jacobs and Analog granted Analog two important rights: (1) the right not to be sued for infringement of the '958 patent; and (2) the right to "sell ... micromachined accelerometers for use in tilt-sensitive control boxes." The first right (granted by paragraph 5 of the agreement) provided "peace" by assuring Analog that it would not face any further claims of infringement of the '958 patent based on any of its past or future conduct, including liability for indirect infringement, i.e., a cause of action "having as an element the infringement of the '958 patent by ... any other party." The second right (granted by paragraph 3 of the agreement) provided "prosperity" by giving Analog a right to sell its accelerometers for a particular use.
Jacobs argues that the settlement agreement protected Analog against being sued for direct or indirect infringement, but that it did not give Nintendo a general right to use Analog's accelerometers in tilt-sensitive control boxes that infringed the '958 patent. Thus, Jacobs contends that paragraph 3 and paragraph 5 of the agreement both secured Analog against the prospect of suit for any of its conduct or any conduct by Analog's customers, but did not grant similar rights to Analog's customers. Nonetheless, Jacobs does not suggest that Nintendo obtained no rights whatsoever from the agreement between Jacobs and Analog. According to Jacobs, paragraph 3 of the agreement would give Nintendo the right to use Analog's accelerometers in infringing control boxes if it could prove that Analog's accelerometers had no noninfringing uses. In that event according to Jacobs, the Analog-Jacobs agreement would give Nintendo an implied license to use those accelerometers without liability under the '958 patent, because otherwise the license to sell the accelerometers would be of no commercial benefit to Analog. Jacobs contends, however, that in the absence of proof that the accelerometers had no noninfringing uses, paragraph 3 provides no protection to Nintendo against an action for infringement of the '958 patent based on...
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