Baseload Energy Inc. v. Roberts

• Decision Date: 09 September 2010
• Docket Number: No. 2010-1053.,2010-1053.
• Citation: 619 F.3d 1357
• Parties: BASELOAD ENERGY, INC., Plaintiff-Appellant, v. Bryan W. ROBERTS, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

619 F.3d 1357

BASELOAD ENERGY, INC., Plaintiff-Appellant,

v.Bryan W. ROBERTS, Defendant-Appellee.

No. 2010-1053.

United States Court of Appeals,Federal Circuit.

Sept. 9, 2010.

John M. Weyrauch, Dicke, Billig & Czaja, PLLC, of Minneapolis, MN, argued for plaintiff-appellant. With him on the brief were Patrick G. Billig and Paul P. Kempf.

William T. Bisset, Hughes Hubbard & Reed LLP, of Los Angeles, CA, argued for defendant-appellee. With him on the brief was Jason S. Cohen, of Washington, DC.

Before LOURIE, LINN, and DYK, Circuit Judges.

DYK, Circuit Judge.

Baseload Energy, Inc. (“Baseload”) sought a declaratory judgment that U.S. Patent No. 6,781,254 (“the '254 patent”) owned by Bryan W. Roberts (“Roberts”) was invalid and unenforceable. On summary judgment, the district court held that the terms of a 2008 Settlement Agreement (the “Settlement Agreement”) barred “all claims between the parties,” including the present action. See Baseload Energy, Inc. v. Roberts, 654 F.Supp.2d 21, 27 (D.D.C.2009). We reverse, because we conclude that the language of the Settlement Agreement did not release either claims of infringement of the ' 254 patent or the accompanying defenses of invalidity or unenforceability.

Background

This action represents the second round of litigation between these parties and their affiliates concerning a so-called “flying electric generator” (“FEG”). In this action, Baseload is the plaintiff, and Roberts is the defendant. The FEG is a flying wind turbine, which harvests wind power and transmits it through tethers to ground stations linked to a utility grid. The '254 patent issued on August 24, 2004, to Roberts. The invention of the '254 patent comprises “[a] windmill kite for converting the kinetic energy of high altitude winds into useful work or other forms of energy.” ' 254 patent col.7 ll.44-46. Roberts, the owner of the '254 patent, founded the Sky WindPower Corporation (“SWPC”) to produce and market the FEG technology. SWPC's president is David Shepard (“Shepard”), while Roberts is SWPC's chairman. SWPC is the exclusive licensee of the '254 patent pursuant to a written agreement dated April 15, 2008.

David Resnick (“Resnick”), the founder and chief executive officer of Baseload, is a venture capitalist interested in wind energy projects. In June of 2006, Resnick expressed interest in a potential joint venture between SWPC and Baseload. Following a subsequent meeting, the parties allegedly entered into an oral agreement, by which SWPC and Roberts agreed to assign the '254 patent rights to a new venture, Sky Power LLC (“Sky Power”), a limited liability company that would be created specifically for the venture. SWPC and Roberts would receive an 80% interest in Sky Power, while Resnick would have a 20% ownership interest and would serve as the chief executive officer of Sky Power. Sky Power was to raise an equity investment of $30 million from additional investors for the development of the FEG project. A written agreement memorializing the oral agreement was prepared, but it was never signed by the parties. Baseload, in this action, alleged that in reliance on Resnick's understanding of the agreement, Resnick immediately began to perform under the contract, forming Sky Power LLC, developing a business plan, and contacting investors.

Subsequently, the relationship between Resnick and Roberts broke down. On May 4, 2007, Resnick and Sky Power initiated litigation in the United States District Court for the Southern District of California against Roberts, SWPC, and SWPC's president, Shepard, for various state law breach of contract, fraud, and promissory estoppel claims (hereinafter the “breach of contract” action). The complaint sought $1 million in compensatory damages for breach of contract, as well as an order compelling SWPC and Roberts' performance of the terms of the oral agreement. Complaint at 23-24, Resnick v. Shepard, No. 07-CV-0813-L (S.D.C.A. May 7, 2004). The complaint included no allegations of patent invalidity.

On March 19, 2008, the parties entered into the Settlement Agreement. The Settlement Agreement contained the following release provision, releasing claims that Resnick, Baseload, and Sky Power (collectively, the “Resnick Parties”) could have brought against Shepard, SWPC, and Roberts (collectively, the “SWPC Parties”):

3. Resnick Parties' Release. Resnick, SPLLC [Sky Power], BEI [Baseload], and Grenier, on behalf of themselves, any entity in which any of them has an interest and any employee, affiliate, or coowner of any such entity, and their respective spouses, agents, partners, members, representatives, heirs, attorneys, shareholders, officers, directors, employees, affiliates, parents, subsidiaries, successors and assigns (collectively, “Resnick Parties”), forever release and discharge Shepard, the Shepard estate, SWPC and Roberts, any entity in which any of them has an interest and any employee, affiliate or co-owner of such entity, and their respective predecessors, successors and present or former affiliates and their respective spouses, agents, members, representatives, heirs, attorneys, shareholders, officers, directors, employees, affiliates, parents, subsidiaries, successors and assigns (collectively, “SWPC Parties”), of and from any and all losses, liabilities, claims, expenses, demands and causes of action of every kind and nature, known and unknown, suspected and unsuspected, disclosed and undisclosed, fixed and contingent, whether direct or by way of indemnity, contribution or otherwise, that the Resnick Parties ever had, now have, or hereafter may have or be able to assert against the SWPC Parties by reason of any matter, cause or circumstance whatsoever arising or occurring prior to and including the date of this Agreement, as stated in its first sentence, that arise from or relate in any way, directly or indirectly, to SWPC, the Resnick Action, the Grenier Action or any plan or effort to research or develop a flying electric generator (“FEG”).

Settlement Agreement ¶ 3 (emphasis added). Paragraph 4 of the Settlement Agreement contained an identical release of claims that could be brought by the SWPC Parties against the Resnick Parties. See id. ¶ 4. ¹ Paragraph 6 provided that the parties “hereto represent and warrant that they are aware of no right or claim, and no fact that might give rise to a right or claim, against a released party or his or its related persons and entities referred to in paragraphs 3 or 4 above that this Agreement does not effectively release.” Additionally, the Settlement Agreement included an Option Agreement, by which Roberts and SWPC granted Baseload an option to acquire a nonexclusive license under the ' 254 patent at a price of $1.75 million, payable in installments; the Option Agreement was appended to the Settlement Agreement as “Exhibit C,” while the Nonexclusive Patent License (“the License Agreement”) was appended as “Exhibit D.” ² The release expressly exempted disputes arising from the Option Agreement and License Agreement from the scope of the release. J.A. 78 (“Anything herein to the contrary notwithstanding, the releases given in paragraphs 3 and 4 above shall not cover or extend to any losses, liabilities, claims, expenses, demands and/or causes of action arising from or relating to the breach by any party of this Agreement or Exhibits C or D attached hereto.”). Pursuant to a joint stipulation of the parties, the breach of contract action was dismissed by the district court.

On September 15, 2008, the option granted to Baseload pursuant to the Settlement Agreement lapsed when Baseload was unable to secure financing to pay the licensing fee. As a result, Baseload could not develop the FEG technology without risking an infringement suit brought by Roberts under the '254 patent. On October 27, 2008, Baseload filed this action against Roberts, seeking a declaratory judgment that the '254 patent is invalid and unenforceable.

Roberts moved for summary judgment on the ground that Baseload's claims were barred by the 2008 Settlement Agreement. The district court granted Roberts' summary judgment motion, concluding that the “unambiguous and expansive language” of the Settlement Agreement barred all claims deriving “from events occurring before March 18, 2008” and “aris[ing] from or relat[ing] in any way” to “any plan or effort to research or develop a flying electric generator.” Baseload, 654 F.Supp.2d at 26, 27. The court reasoned that both Roberts' and SWPC's infringement claims and Baseload's patent invalidity and unenforceability claims clearly fell within this category of claims, as the development and patenting of the FEG technology that is the subject of the ' 254 patent occurred before March 18, 2008, and was clearly related to an effort to research or develop a flying electric generator. The district court rejected Baseload's arguments that this release failed to meet the standard laid out by Flex-Foot, Inc. v. CRP, Inc., 238 F.3d 1362 (Fed.Cir.2001), for the valid release of patent claims. It noted that while this court upheld the particular release provision laid out in Flex-Foot, “it did not announce that only provisions arising from precisely the same set of circumstances and containing the same or similar language could pass muster.” Baseload, 654 F.Supp.2d at 27. Baseload timely appealed, and we have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

Discussion

This court reviews grants of summary judgment without deference. Young v. Lumenis, Inc., 492 F.3d 1336, 1345 (Fed.Cir.2007); Johns Hopkins Univ. v. CellPro, Inc., 152 F.3d 1342, 1353 (Fed.Cir.1998). Summary judgment is, of course, appropriate “if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c).

Baseload asserts that the correct law for us to apply in ...