Imation Corp. v. Koninklijke Philips Electronics

• Decision Date: 03 November 2009
• Docket Number: No. 2009-1209.,No. 2009-1208.,2009-1208.,2009-1209.
• Citation: 586 F.3d 980
• Parties: IMATION CORP., Plaintiff-Appellant, v. KONINKLIJKE PHILIPS ELECTRONICS N.V., U.S. Philips Corporation, and Philips Electronics North America Corporation, Defendants/Third-Party Plaintiffs-Appellees, v. Moser Baer India Limited, Third-Party Defendant-Appellant, and Global Data Media FZ-LLC, MBI International FZ-LLC, MBI International Services Private Limited, MBI India Marketing Private Limited, Glyphics Media, Inc., and Memorex International, Inc., Third-Party Defendants.
• Court: U.S. Court of Appeals — Federal Circuit

586 F.3d 980

IMATION CORP., Plaintiff-Appellant, v. KONINKLIJKE PHILIPS ELECTRONICS N.V., U.S. Philips Corporation, and Philips Electronics North America Corporation, Defendants/Third-Party Plaintiffs-Appellees, v. Moser Baer India Limited, Third-Party Defendant-Appellant, and Global Data Media FZ-LLC, MBI International FZ-LLC, MBI International Services Private Limited, MBI India Marketing Private Limited, Glyphics Media, Inc., and Memorex International, Inc., Third-Party Defendants.

No. 2009-1208.

No. 2009-1209.

United States Court of Appeals, Federal Circuit.

November 3, 2009.

Ronald J. Schutz, Robins, Kaplan, Miller & Ciresi L.L.P., of Minneapolis, MN, argued for plaintiff-appellant. Of counsel were Scott M. Flaherty and David P. Swenson.

Marc De Leeuw, Sullivan & Cromwell LLP, of New York, NY, argued for appellees. With him on the brief were Garrard R. Beeney and Adam R. Brebner. Of counsel on the brief were Darren B. Schwiebert and Kurt J. Niederluecke, Fredrikson & Byron, P.A., of Minneapolis, MN.

Jeff G. Randall, Skadden, Arps, Slate, Meagher & Flom LLP, of Palo Alto, CA, for third-party defendant-appellant. Of counsel were Chuck P. Ebertin, of Palo Alto, CA; Albert L. Hogan III, of Chicago, IL; and Allan M. Soobert, of Washington, DC.

Before BRYSON and GAJARSA, Circuit Judges, and ST. EVE,^* District Judge.

AMY J. ST. EVE, District Judge.

Appellants Imation Corporation ("Imation") and Moser Baer India Limited ("Moser Baer," and collectively, "Appellants") appeal from the partial final judgment entered by the United States District Court for the District of Minnesota that granted judgment on the pleadings in favor of Appellees Koninklijke Philips Electronics, N.V. and Philips Electronics North America Corporation (collectively, "Philips"). See Imation Corp. v. Koninklijke Philips Elec. N.V., 630 F.Supp.2d 1044, 1045-46 (D.Minn.2008) ("Rule 12(c) Opinion"). Because the district court erred in holding that two of Imation's subsidiaries are not licensed under the parties' patent license agreement and thus improperly granted judgment on the pleadings, this court reverses the judgment of the district court, orders entry of judgment in favor of Appellants, and remands the case for appropriate further proceedings consistent with this opinion.

I. BACKGROUND

In 1995, Philips entered into a patent cross-license agreement with Minnesota Mining and Manufacturing Company ("3M") for optical and magneto optical information storage and retrieval technology (the "CLA" or "Agreement"). The Agreement between these sophisticated parties modified on-going royalty rates 3M paid with regard to existing licenses, and granted each party to the Agreement royalty-free, paid-up, nonexclusive cross-licenses to "make, use, import, offer to sell, and sell other products incorporating optical and magneto-optical information storage and retrieval technology" patented by the other party, for the life of the licensed patents. In 1996, 3M spun-off Imation, and the Agreement continued between Imation and Philips.

A. The Relevant Terms of the Agreement

In Article 2 of the Agreement, each party granted two licenses (to products and to processes, respectively) to the other party and its subsidiaries.¹ This case involves the scope of Imation's licenses, each of which states in relevant part that Philips "agrees to grant and does hereby grant to [Imation] and its SUBSIDIARIES a personal, nonexclusive, indivisible, nontransferable, irrevocable, worldwide, royalty-free license under PHILIPS LICENSED PATENTS." Each license grant thus relies on several defined terms relevant to this appeal. Article 1 of the Agreement sets forth these definitions. In particular, Article 1, Section 12 of the Agreement articulates a three-part definition of the scope of "Licensed Patents," which includes patents that:

(1) are owned or controlled by the granting party or any of its SUBSIDIARIES such that such party or its SUBSIDIARIES now has or hereafter obtains the right to grant the licenses within the scope of this Agreement;

(2) relate to optical or magneto-optical information storage and retrieval technology; and

(3) have a filing date, or claim priority from a date, or are or were entitled to claim priority from a date, on or before the expiration date of this Agreement as set forth in Article 4, herein.

Immediately following Section 12, Section 13 defines "Subsidiary" as "any ... form of business organization as to which the party now or hereafter has more than a fifty percent (50%) ownership interest." Article 3 provides that the term of the licenses granted under Article 2 "shall commence on the effective date of this Agreement and shall continue as to each Licensed Patent for its life." According to Imation, at least one of the patents licensed under Article 2 will not expire until 2020. Article 4 of the Agreement, which contains the expiration date referenced in Section 12(3), states that "[t]he term of this Agreement shall expire on March 1, 2000, except that any patent license which has been granted under ARTICLE 2 shall continue thereafter for the term provided in ARTICLE 3."

Since the expiration of the Agreement on March 1, 2000 (the "expiration date"), Imation has formed or acquired at least two additional subsidiaries. In 2003, Imation formed a joint venture with Moser Baer under the name Global Data Media FZ-LLC ("GDM"). Imation owns 51% of the GDM joint venture and Moser Baer owns 49%. In addition to GDM, Imation acquired Memorex International, Inc. ("Memorex") in 2006, and now possesses at least a 50% ownership interest in Memorex. Both GDM and Memorex are third-party defendants to the underlying case, but neither is a party to this appeal.

B. The District Court's Rule 12(c) Opinion

Imation brought the underlying declaratory judgment action against Philips in 2007, seeking, among other things, a declaration that GDM and Memorex are licensed "Subsidiaries" under the Agreement. As the parties attached the Agreement to the pleadings, Philips moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). The district court granted judgment on the pleadings, holding that: (1) the expiration provision of Article 4 of the Agreement limited license coverage to only those "Subsidiaries" which obtained licenses prior to the expiration date; and (2) GDM and Memorex do not qualify as "Subsidiaries" under the Agreement because they did not meet the definition of "Subsidiary" prior to the Agreement's expiration date.

The first basis for the district court's decision turns on the language in Article 4, which provides that "the term of this Agreement shall expire on March 1, 2000, except that any patent license which has been granted under Article 2 shall continue thereafter for the term provided in Article 3" (emphasis added). Examining the licenses granted in Article 2, the district court found that because GDM and Memorex "did not become Imation subsidiaries until after the CLA expired, they could not have been granted a license as of the date of the expiration." Rule 12(c) Opinion, at 1051.

In so holding, the district court accepted Philips's argument that Article 2 grants multiple licenses over time and that, until the Agreement's expiration in March 2000, licenses arose as new Imation "Subsidiaries" came into being. The district court thus rejected Moser Baer's argument that Article 2 effected a present license grant to a group of "Subsidiaries," the membership of which could change at any point during the term of the license:

Moser Baer asserts that Philips granted a single license to a group of licensees comprised of Imation and its subsidiaries, including subsidiaries formed after March 1, 2000. The assertion of a "group license" is incompatible with the language of the CLA, which, despite its reference to a singular license in Article 2, section 2, plainly contemplates the grant of multiple "personal" licenses.

Id. at 1051 n. 5. In support of this holding, the district court pointed to the heading of Article 2, "Grant of Royalty Free Licenses," and the reference in Article 3 to "[t]he term of the licenses granted under Article 2." Id.

The second basis articulated by the district court rests on the defined term "Subsidiary." The district court held that the term "Subsidiary"—defined in Article 1, Section 13 to include any "business organization as to which the party now or hereafter has more than a fifty percent (50%) ownership interest"—excludes companies that were not Imation subsidiaries prior to March 1, 2000. Id. at 1053. Specifically, the district court held that the phrase "now or hereafter" in Section 13 "refers to any time up until the expiration of the agreement" because the "expiration provision applies to the CLA as a whole." Id. at 1050-52. The district court thus rejected Imation's argument, based on the term "hereafter" and the absence of any reference to the Agreement's expiration, that the "Subsidiary" definition contains no temporal limitation that would preclude GDM and Memorex from qualifying as "Subsidiaries."

Following its Rule 12(c) opinion, the district court granted Imation and Moser Baer's motion for certification of a partial final judgment under Rule 54(b) as to Imation's Counts III and IV and Philip's first counterclaim, and this appeal followed. Because Imation's declaratory judgment complaint includes claims for noninfringement, invalidity, and unenforceability of the patents allegedly covered under the CLA, this court has jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

II. DISCUSSION

In reviewing a grant of judgment on the pleadings, this court applies the procedural law of the regional circuit. See Rentrop v. Spectranetics Corp., 550 F.3d 1112, 1118 (Fed.Cir.2008) ("The Federal Circuit defers to the law of the regional circuits on matters of procedural law that do not implicate issues of patent law." (internal quotation marks omitted)). Accordingly, this court reviews the...