487 F.3d 1368 (Fed. Cir. 2007), 2006-1569, General Mills, Inc. v. Kraft Foods Global, Inc.

Docket Nº:2006-1569, 2006-1606.
Citation:487 F.3d 1368, 82 U.S.P.Q.2d 1773
Party Name:GENERAL MILLS, INC., Plaintiff-Appellant, v. KRAFT FOODS GLOBAL, INC., Defendant-Cross Appellant.
Case Date:May 16, 2007
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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487 F.3d 1368 (Fed. Cir. 2007)

82 U.S.P.Q.2d 1773

GENERAL MILLS, INC., Plaintiff-Appellant,

v.

KRAFT FOODS GLOBAL, INC., Defendant-Cross Appellant.

Nos. 2006-1569, 2006-1606.

United States Court of Appeals, Federal Circuit

May 16, 2007

Appealed from: United States District Court for the District of Minnesota, Judge Joan N. Ericksen.

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[Copyrighted Material Omitted]

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Ronald J. Schutz, Robins, Kaplan, Miller & Ciresi L.L.P., of Minneapolis, Minnesota, argued for plaintiff-appellant. With him on the brief was, David P. Swenson, Sang Young A. Brodie, and David B. Zucco.

Holly A. Harrison, Sidley Austin LLP, of Chicago, Illinois, argued for defendant cross-appellant. With her on the brief was Julie K. Potter. Of counsel on the brief was Tara C. Norgard, Carlson Caspers Vandenburg & Lindquist P.A., of Minneapolis, Minnesota.

Before BRYSON, Circuit Judge, CLEVENGER, Senior Circuit Judge, and LINN, Circuit Judge.

LINN, Circuit Judge.

General Mills, Inc. ("General Mills") appeals from a final judgment by the United States District Court for the District of Minnesota dismissing its claim for patent infringement against Kraft Foods Global, Inc. ("Kraft"), on the ground that the claim is barred by a covenant not to sue that General Mills granted to Kraft's predecessor in interest, the Farley Candy Company ("Farley"). Kraft cross-appeals, challenging

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the district court's decision to treat its counterclaim to General Mills' original complaint as having been abandoned after General Mills filed an amended complaint. Because Kraft became the successor to Farley's rights under the covenant not to sue before commencing the allegedly infringing activities and did not lose that status during the period at issue on appeal, and because the district court did not abuse its discretion in deeming Kraft's counterclaim to have been abandoned, we affirm as to both appeals.

I. BACKGROUND

A. Facts

General Mills sells rolled food items under the brand name Fruit by the Foot®, and it owns U.S. Patent Nos. 5,284,667 ("Rolled Food Item Fabricating Methods") and 5,723,163 ("Rolled Food Item"). In 1995, General Mills sued Farley for infringement of these patents, a dispute that General Mills and Farley resolved through a settlement agreement (hereinafter, "the Settlement Agreement").1 The Settlement Agreement required Farley to pay General Mills a lump sum in exchange for the grants by General Mills of a release of its patent claims and a covenant not to sue Farley for past, current, or future infringement. "Farley" is defined in Article 1.6 of the Settlement Agreement to mean "Farley Candy Company and its Affiliates, including, without limitation, all parent corporations, subsidiaries, heirs, executors, administrators, and corporate predecessors and successors." (Emphasis added.) The covenant not to sue, which was attached as Exhibit B to the Settlement Agreement, also contains language defining the "Releasee" as including Farley and its "successors."

The Settlement Agreement also contains two provisions, Articles 8.3 and 8.4, that define limiting conditions to the assignment or transfer of rights under the Agreement to another party by Farley (or its successors, pursuant to Article 1.6 and the language of the covenant):

8.3 Except as expressly provided in Article 8.4 herein, neither this Agreement nor any rights granted hereunder may be assigned or otherwise transferred by either General Mills or Farley, nor shall the same inure to the benefit of any trustee in bankruptcy, receiver or other successor of such party, whether by operation of law or otherwise, nor, except as expressly provided in Article 8.4 herein, shall any rights herein be or become in any way directly or indirectly transferable or available to, or divisible or capable of being shared with, any third party, without the prior written consent of the other party, and any assignment, transfer or other disposition without such prior written consent shall be null and void.

8.4 Notwithstanding any provision of this Agreement to the contrary, Farley may assign the entirety of their non-divisible respective rights and obligations under this Agreement, provided that all of the following conditions are satisfied:

a. Farley must transfer its entire rolled food product business, including without limitation all assets, good will, and trademarks to the party to whom

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the rights and obligations are being assigned; and

b. Farley must provide General Mills with sixty (60) days written notification prior to the transfer of rights and obligations under this Agreement; and

c. the party receiving the rights and obligations from Farley must not have been charged with infringement by written notification or initiation of litigation by General Mills of any of General Mills' Patents and Applications, as those terms are defined herein, prior to General Mills receiving written notification from Farley pursuant to Article 8.4(b).

In 2001, through a series of intermediate transactions, Kraft succeeded to the business of Farley. At the time of these transactions, Kraft and Farley complied with the requirements of Articles 8.3 and 8.4. (We refer to these transactions collectively as "the Farley transaction.") General Mills concedes that by virtue of the Farley transaction in 2001, Kraft stepped into Farley's shoes and became Farley's successor. See Oral Arg. at 02:35-02:45, available at http://www.cafc.uscourts.gov/oralarguments/mp3/06-1569.mp3; see also Amended Complaint ¶ 15; Br. for Appellant at 20-21.

In 2002, Kraft "sold and transferred Farley assets, including the Farley trademark and goodwill, to a subsidiary of Catterton Partners." Amended Complaint ¶ 16. Because this appeal is from the grant of a motion to dismiss, the details of...

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