Macom Tech. Solutions Holdings, Inc. v. Infineon Techs. AG

• Decision Date: 29 January 2018
• Docket Number: 2017-1448
• Citation: 881 F.3d 1323
• Parties: MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC., Nitronex, LLC, Plaintiffs-Appellees v. INFINEON TECHNOLOGIES AG, Defendant Infineon Technologies Americas Corporation, Defendant-Appellant
• Court: U.S. Court of Appeals — Federal Circuit

881 F.3d 1323

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC., Nitronex, LLC, Plaintiffs-Appellees

v.INFINEON TECHNOLOGIES AG, Defendant

Infineon Technologies Americas Corporation, Defendant-Appellant

2017-1448

United States Court of Appeals, Federal Circuit.

Decided January 29, 2018

Amanda Tessar, Perkins Coie, LLP, Denver, CO, argued for plaintiffs-appellees. Also represented by Elizabeth M. Banzhoff ; Dan L. Bagatell, Hanover, NH; Daniel Tyler Keese, Portland, OR.

David G. Wille, Baker Botts, LLP, Dallas, TX, argued for defendant-appellant. Also represented by Jeffery D. Baxter, Brian Douglas Johnston.

Before Prost, Chief Judge. Wallach and Stoll, Circuit Judges.

Prost, Chief Judge.

Plaintiffs MACOM Technology Solutions Holdings, Inc. and Nitronex, LLC (together, "MACOM") sought and obtained a preliminary injunction against defendant Infineon Technologies Americas Corp. ("Infineon") in the U.S. District Court for the Central District of California. The injunction declared that Infineon's termination of an agreement was ineffective and ordered Infineon to comply with that agreement. Infineon appeals the injunction on several grounds. We affirm in part, vacate in part, and remand for further proceedings.

BACKGROUND

Nitronex Corporation ("Nitronex") was formed in 1999 and developed semiconductors using gallium nitride ("GaN"). Nitronex obtained several patents related to that technology. In 2010, it sold its GaN patents to International Rectifier Corporation ("IR"). As part of the sale, Nitronex and IR executed a separate license agreement (the "Agreement"), which licensed back to Nitronex certain rights under the patents. Both companies were later acquired and renamed. For present purposes, the relevant parties to the Agreement are MACOM (formerly Nitronex) and Infineon (formerly IR).

The Agreement defines a "Field of Use" characterized by GaN-on-silicon ("GaN-on-Si") technology and licenses MACOM to practice what are now Infineon's GaN patents (the "Licensed Patents") within the "Field of Use only." MACOM and Infineon share rights to practice the Licensed Patents in the Agreement's Field of Use. But the Agreement further defines an "Exclusive Field" within the Field of Use in which MACOM has certain exclusive rights to practice the Licensed Patents—even as against Infineon.

In February 2016, Infineon notified MACOM that it believed MACOM had breached the Agreement by making and selling products using GaN-on-silicon-carbide ("GaN-on-SiC") technology, which is distinct from GaN-on-Si technology and outside the Agreement's Field of Use.¹ MACOM responded that the GaN-on-SiC sales were minimal and that any breach had been cured. Nevertheless, Infineon terminated the Agreement on March 22, 2016, because it deemed MACOM's GaN-on-SiC activity to be a material breach.

MACOM then sued Infineon, asserting various contract claims and a claim for declaratory judgment of non-infringement of the Licensed Patents. MACOM also moved for a preliminary injunction based on its third claim for relief—a declaratory judgment that the Agreement was wrongly terminated and remains in effect (the "Wrongful Termination claim").

The district court held a hearing and issued an opinion and order granting a preliminary injunction. The district court's December 7, 2016 injunction (the "Injunction") states:

The Court hereby GRANTS [MACOM's] Motion for Preliminary Injunction. The Court ORDERS that until further order of the Court, the [Agreement] shall remain in full force and effect and that defendant [Infineon's] purported termination of that agreement on March 22, 2016 shall have no effect.

In the event that [Infineon] asserts that there is a new breach of the [Agreement] by plaintiffs, [Infineon] shall advise the Court in writing of its intention to declare a breach, stating the action it intends to take and the claimed basis for that action. [Infineon] shall provide the Court with such notice 30 days before declaring a breach.

Consistent with existence of a valid License Agreement, [Infineon] may not design, develop, make, have made, use, offer to sell, sell, or service products in MACOM's Exclusive Field (as defined by the under-seal [Agreement] ) that practice the [Licensed Patents], nor may [Infineon] directly or indirectly market, sell, or service products in the Exclusive Field that practice the [Licensed Patents]. In addition, [Infineon] may not grant licenses or sublicenses to the Licensed Patents (identified in Schedule A to the [Agreement] ) to design, develop, make, have made, use, market, sell or service products in the Exclusive Field or Field of Use (as defined by the [Agreement] ) that practice the [Licensed Patents], including but not limited to the grant of such licenses to its corporate affiliates. Nothing in this order shall prevent [Infineon] from designing, making, having made, using, offering to sell, selling, or servicing gallium nitride-on-silicon carbide (GaN-on-SiC) products, or from directly or indirectly marketing, selling, or servicing such products.

Infineon shall, within ten days from the date of issuance of this Preliminary Injunction, provide notice and a copy of this Preliminary Injunction to all subsidiaries, affiliates, officers, directors, employees, principals, agents, customers, and attorneys that may have any involvement whatsoever in designing, developing, making, having made, using, marketing, selling, servicing, or licensing products in the Exclusive Field or Field of Use that use the [Licensed Patents], as well as any other person or entity acting in active concert or participation with [Infineon] with respect to any of the activities enjoined here.

J.A. 50–52.

Infineon appeals the district court's order granting the Injunction. We have subject-matter jurisdiction under 28 U.S.C. §§ 1292(a) and (c)(1).

DISCUSSION

Because the grant, denial, or modification of a preliminary injunction is not unique to patent law, we apply regional circuit law when reviewing and interpreting such decisions. E.g. , Aevoe Corp. v. AE Tech Co. , 727 F.3d 1375, 1381 (Fed. Cir. 2013). The Ninth Circuit reviews a district court's decision granting a preliminary injunction for abuse of discretion. Disney Enters., Inc. v. VidAngel, Inc. , 869 F.3d 848, 856 (9th Cir. 2017). A district court abuses its discretion by basing its decision on an erroneous legal standard or clearly erroneous findings of fact. All. for the Wild Rockies v. Cottrell , 632 F.3d 1127, 1131 (9th Cir. 2011).

In the Ninth Circuit, a party may obtain a preliminary injunction by showing that (1) it is "likely to succeed on the merits," (2) it is "likely to suffer irreparable harm in the absence of preliminary relief," (3) the "balance of equities tips in [its] favor," and (4) "an injunction is in the public interest." Disney , 869 F.3d at 856 (alteration in original) (quoting Winter v. Nat. Res. Def. Council, Inc. , 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008) ). Additionally, this court "has itself built a body of precedent applying these general considerations to a large number of factually variant patent cases, and we give dominant effect to Federal Circuit precedent insofar as it reflects considerations specific to patent issues." Mikohn Gaming Corp. v. Acres Gaming, Inc. , 165 F.3d 891, 894 (Fed. Cir. 1998).

Infineon challenges the Injunction on several grounds. First, Infineon argues that the district court erred in finding that MACOM showed a likelihood of success on its Wrongful Termination claim. Second, Infineon argues that the district court erred in finding that MACOM showed irreparable harm. Finally, Infineon challenges the content of the Injunction. We address these arguments in turn.

I

Infineon argues that MACOM's Wrongful Termination claim is not likely to succeed on the merits because Infineon's termination of the Agreement was not wrongful. Specifically, Infineon argues that MACOM's GaN-on-SiC activity outside the licensed Field of Use materially breached the Agreement's implied covenant of good faith and fair dealing, justifying the Agreement's termination.² The district court disagreed. It found that MACOM could likely establish that its activity outside the Agreement's licensed Field of Use did not breach the Agreement's implied covenant of good faith and fair dealing—and that, therefore, Infineon was not entitled to the breach remedy of termination. Accordingly, the district court found that MACOM showed a likelihood of success on its Wrongful Termination claim. We conclude that the district court did not err in this finding.

The parties agree that the Agreement is governed by California law, which implies a covenant of good faith and fair dealing in every contract. E.g. , Foley v. Interactive Data Corp. , 47 Cal. 3d 654, 683–84, 254 Cal.Rptr. 211, 765 P.2d 373 (1988). The covenant of good faith and fair dealing "is read into contracts in order to protect the express covenants or promises of the contract."

Id. at 690, 254 Cal.Rptr. 211, 765 P.2d 373. But it "cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms" of the contract. Guz v. Bechtel Nat'l, Inc. , 24 Cal. 4th 317, 349–50, 100 Cal.Rptr.2d 352, 8 P.3d 1089 (2000) ; see Berger v. Home Depot U.S.A., Inc. , 476 F.Supp.2d 1174, 1177 (C.D. Cal. 2007) (observing that the "implied covenant will not apply where no express term exists on which to hinge an implied duty"); Love v. Fire Ins. Exch. , 221 Cal.App. 3d 1136, 1153, 271 Cal.Rptr. 246 (1990) (noting that, absent an express and effective contractual right, the implied covenant "has nothing upon which to act").

We review this question of contract interpretation without deference. See Tex. Instruments Inc. v. Tessera, Inc. , 231 F.3d 1325, 1329 (Fed. Cir. 2000) (citing Plaza Freeway Ltd. P'ship v. First Mountain Bank , 81 Cal.App. 4th 616, 621, 96 Cal.Rptr.2d 865 (2000) ).

The Agreement's relevant provision states:

[Infineon] hereby grants to [MACOM] the following: a) a worldwide,

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