Transocean Offshore Deepwater Drilling Inc. v. Noble Corp.

• Decision Date: 02 April 2020
• Docket Number: Civil Action No. 4:17-CV-123
• Parties: TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC., Plaintiff, v. NOBLE CORPORATION PLC, et al, Defendants.
• Court: U.S. District Court — Southern District of Texas

451 F.Supp.3d 690

TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC., Plaintiff,

v.NOBLE CORPORATION PLC, et al, Defendants.

Civil Action No. 4:17-CV-123

United States District Court, S.D. Texas, Houston Division.

Signed April 2, 2020

Jean C. Frizzell, Michael Steven McCoy, Lindsey Hargrove Raspino, John Christopher Reynolds, Reynolds Frizzell, Houston, TX, J. Reid Bumgarner, Port & Bumgarner LLP, Bellaire, TX, for Plaintiff.

Lee L. Kaplan, Hector Raul Chavez, III, Yevgeniy Zilberman, Smyser Kaplan & Veselka, Robert J. McAughan, Jr., McAugan Deaver PLLC, Houston, TX, for Defendants.

MEMORANDUM OPINION AND ORDER

GEORGE C. HANKS, JR., UNITED STATES DISTRICT JUDGE

Pending before the Court are cross-motions for summary judgment on the breach-of-contract claim pled by the plaintiff, Transocean Offshore Deepwater Drilling, Incorporated ("Transocean"). Having considered the summary judgment record, the other filings in the case, and the parties' excellent briefing and oral argument regarding the novel issues raised therein, the Court will DENY both motions (Dkt. 132 and Dkt. 133).

I. BACKGROUND

This lawsuit began as a straightforward patent infringement case in which Transocean sued the defendants (a group of related entities¹ to which the Court will refer collectively as "Noble") alleging that five of the defendants' dual-activity offshore drillships infringed on four of Transocean's patents relating to dual-activity offshore drilling rigs ("the patents-in-suit"). However, during the parties' briefing and motion practice regarding claim-construction and infringement issues, a separate but related matter that had apparently been lurking in the background since the beginning of the lawsuit emerged. Transocean amended its complaint to allege that Noble had breached a no-challenge clause contained in a license agreement that settled a different patent infringement case between Transocean and Noble ("the license agreement") (Dkt. 94; Dkt. 133-1). For the alleged breach of contract, Transocean seeks $11 million, plus interest, in liquidated damages (Dkt. 94 at p. 14).

Transocean and Noble signed the license agreement in 2007 after Transocean filed a lawsuit alleging that a Noble drillship called the Clyde Boudreaux —which, to be clear, is not one of the drillships at issue in this case—infringed the patents-in-suit. See Southern District of Texas case number 4:07-CV-618 at Dkt. 1. Emails contained in the summary judgment record in this case indicate that, when the parties signed the license agreement to settle the Clyde Boudreaux lawsuit, Transocean discounted its normal initial licensing fee from $15 million to $4 million in exchange for a no-challenge promise from Noble (Dkt. 138-3 at p. 2). According to the emails, the $11 million liquidated damages figure contained in the no-challenge clause represents that discount (Dkt. 138-3 at p. 2). The no-challenge clause constitutes Section 4.3 of the license agreement, and it reads:

Noble Licensee covenants that it will not participate as a party or financially support a third party in any administrative or court proceeding or effort in the world to invalidate, oppose, nullify, reexamine, reissue or otherwise challenge the validity, enforceability, or scope of any claim of the Licensed Patents. Breach of this section 4.3 shall be considered a material breach which may not be cured under section 5.2. If Noble Licensee breaches this section 4.3, then Noble must pay Transocean an additional eleven million dollars ($11,000,000) plus interest accumulating since the Effective Date of this Agreement.

Dkt. 133-1 at p. 5; Dkt. 94 at p. 8.

Transocean alleges that Noble's actions in this lawsuit have breached the no-challenge clause's prohibition against "challeng[ing] the...scope of any claim of the" patents-in-suit (Dkt. 132 at p. 6). Transocean alleges three specific breaches:

(1) In the briefing on its motion for summary judgment on the basis of noninfringement, Noble, citing instances in which Transocean allegedly distinguished prior art by claiming that floating rigs need motion compensation equipment to advance tubular members to the seabed, argued that "the principles of disclaimer, estoppel, and basic fairness" should prevent Transocean from arguing in this lawsuit that a floating rig without motion compensation equipment is capable of advancing tubular members to the seabed (Dkt. 76 at pp. 24–27; Dkt. 83 at pp. 16– 21).

(2) In its claim-construction briefing, Noble argued that the phrase "to the seabed and into the body of water to the seabed" in claim 17 of one of the patents-in-suit was "nonsensical" and should be construed to mean "to the seabed and into the bed of the body of water," a proposed construction that Transocean contends was an attempt to narrow the scope of the claim (Dkt. 53 at pp. 32–34).

(3) In the briefing on its motion for summary judgment on the basis of noninfringement, Noble, citing instances in which Transocean allegedly distinguished prior art by differentiating preassembly of tubular string portions from drilling activities and operations, argued that "the preassembly of tubular string portions is not itself a drilling activity [or a] drilling operation" (Dkt. 76 at pp. 14–20; Dkt. 83 at pp. 10–15; Dkt. 116 at pp. 8–14).

Neither the license agreement nor the balance of the summary judgment record contains any language clarifying what the license agreement means when it refers to "challeng[ing] the...scope" of a patent claim. No helpful definitions are provided in the license agreement; and the emails in the summary judgment record discussing the license agreement never mention challenges to the scope of claims, even though they contain passages specifically addressing challenges to patent validity and enforceability. For instance, with regard to the consent judgment that terminated the Clyde Boudreaux litigation, Transocean's counsel wrote to Noble's counsel that "Transocean believes a consent judgment ensures that patent validity and enforceability will not be litigated again with respect to the Clyde Boudreaux or any subsequent dual activity rig" (Dkt. 138-3 at p. 2) (emphasis added). In the same email, Transocean's counsel wrote of the no-challenge clause's liquidated damages provision that "[t]he $11M payment for challenging validity is based upon a discount of the normal initial payment of $15M" (Dkt. 138-3 at p. 2) (emphasis added). In other words, even when supplemented by summary judgment evidence shedding light on the parties' negotiations, the license agreement does not clearly establish the parameters of the conduct prohibited by the "challenge the...scope of any claim" language in the no-challenge clause. Nevertheless, each party seeks judgment in its favor regarding Transocean's claims for breach of the license agreement as a matter of law under Federal Rule of Civil Procedure 56.

II. THE APPLICABLE LEGAL STANDARDS

A. Rule 56

In deciding a motion for summary judgment under Federal Rule of Civil Procedure 56, the Court must determine whether 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. Celotex Corp. v. Catrett , 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "An issue is material if its resolution could affect the outcome of the action. A dispute as to a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." DIRECT TV Inc. v. Robson , 420 F.3d 532, 536 (5th Cir. 2006) (citations omitted). In deciding whether a genuine and material fact issue has been created, the Court must review the facts and the inferences to be drawn from those facts in the light most favorable to the non-movant. Reaves Brokerage Co. v. Sunbelt Fruit & Vegetable Co ., 336 F.3d 410, 412 (5th Cir. 2003).

B. Choice of law

First the Court must decide which body of law to apply to Transocean's breach of contract action. Even though this lawsuit contains claims for patent infringement, the claim at issue in these cross-motions for summary judgment is an action for breach of the license agreement's no-challenge clause. "Generally, interpretation of a settlement agreement is not an issue unique to patent law, even if arising in the context of a patent infringement suit[,]...[and the Federal Circuit] appl[ies] the law of the appropriate regional circuit" to interpretation of the agreement. Novamedix, Ltd. v. NDM Acquisition Corp. , 166 F.3d 1177, 1180 (Fed. Cir. 1999). In an action brought specifically for breach of a settlement agreement, typically "[t]he question of interpretation is...governed not by federal patent law, but by state contract law" because the "grounds for decision are based on state contract law." Gjerlov v. Schuyler Labs., Inc. , 131 F.3d 1016, 1020 (Fed. Cir. 1997). Under those general choice-of-law rules, Texas and Fifth Circuit law would govern Transocean's breach of contract action and the interpretation of the "challenge the ...scope of any claim" language in the no-challenge clause. Sanofi-Aventis v. Apotex Inc. , 659 F.3d 1171, 1178 (Fed. Cir. 2011) ; see also Gjerlov , 131 F.3d at 1020–22 (holding that Iowa contract law governed interpretation of the terms "glucose" and "Iowa State University Testing Laboratories" in an appeal from the district court's grant of a motion to enforce a settlement agreement that had resolved a patent infringement case); Interspiro USA, Inc. v. Figgie International Inc. , 18 F.3d 927, 931 (Fed. Cir. 1994) (holding that "[i]nterpretation of an agreement presents a question of law, governed by state contract law" and that New York law accordingly governed interpretation of the contractual provisions controlling royalty calculation in an appeal from the district court's grant of a motion to enforce a settlement agreement that had resolved a patent infringement case).

So, does this general rule also...