Verson Corp. v. Verson Intern. Group PLC

• Decision Date: 17 July 1995
• Docket Number: No. 93 CV 2996.,93 CV 2996.
• Citation: 899 F. Supp. 358
• Parties: VERSON CORPORATION, a Delaware corporation, Plaintiff, v. VERSON INTERNATIONAL GROUP PLC, an English corporation, Verson Wilkins Limited, an English corporation, and Verson International Limited, an English corporation, Defendants.
• Court: U.S. District Court — Northern District of Illinois

899 F. Supp. 358

VERSON CORPORATION, a Delaware corporation, Plaintiff, v. VERSON INTERNATIONAL GROUP PLC, an English corporation, Verson Wilkins Limited, an English corporation, and Verson International Limited, an English corporation, Defendants.

No. 93 CV 2996.

United States District Court, N.D. Illinois, Eastern Division.

July 17, 1995.

Gordon Nash, Jr., Michael P. Padden, and Gail J. Berritt, Gardner, Carton & Douglas, Chicago, Illinois, for plaintiff.

Thomas Johnston and Catherine A.T. Nelson, Keck, Mahin & Cate, Chicago, Illinois, for defendants.

MEMORANDUM AND ORDER

MORAN, Senior District Judge.

Plaintiff Verson Corporation brought this lawsuit alleging that defendants Verson International Group, Verson Wilkins Limited, and Verson International Limited violated a license agreement for intellectual property. Before us now is defendants' motion to dismiss plaintiff's amended complaint. For the reasons set forth below, the motion is denied.

BACKGROUND

Verson Corporation (Verson), the successor to Verson Allsteel Press Company (VASP) and the wholly-owned subsidiary of Allied Products Corporation, manufactures presses for the metal-forming industry. In the early 1980s VASP began experiencing financial difficulties. In order to ease through its financial downturn VASP and a group of its international managers entered into an agreement wherein the managers would buy out VASP's international operations with a newly formed independent company, Verson International Limited (collectively referred to herein, along with Verson Wilkins Limited and Verson International Limited, as "VIL"). VIL and VASP entered into a series of agreements to facilitate the management buyout (MBO), the most important for our purposes being the VASP/VIL License Agreement (license agreement). In that agreement VASP agreed to turn over to VIL its patents and non-patented trade secrets, and allowed VIL to use this know-how. The license agreement called for both parties to turn over all newly developed know-how to the other for a period of five years. The parties also agreed to a series of restrictive covenants that gave VASP the exclusive right to market its products in the United States and Canada and gave VIL the exclusive right to market its products in the rest of the world. Both territorial restrictions were to last five years.

In the first lawsuit between the parties VIL sued VASP alleging that VASP¹ had violated the license agreement's restrictive covenants and seeking an injunction requiring Verson to turn over certain know-how. VASP argued that the territorial and durational restrictions violated state and federal antitrust laws. We enforced the restrictions only in part, finding that VIL was barred only from the use of VASP know-how in the United States and Canada, and that VASP was barred only from marketing its products in Europe. Verson Wilkins Ltd. v. Allied Products Corp., 723 F.Supp. 1, 20 (N.D.Ill. 1989). We also required VASP to turn over the know-how covered under the license agreement. In 1990 the parties executed a settlement agreement disposing of the remaining disputes regarding exchange of the know-how.

Soon thereafter VIL entered into an agreement with Enprotech Mechanical Services, Inc. (Enprotech), a direct competitor of Verson in the North American market. In this agreement VIL turned over know-how it received from VASP in the 1985 license agreement and granted Enprotech the exclusive right to use this know-how to manufacture replacement parts for Verson presses.² This arrangement spawned the present lawsuit. In its complaint Verson alleged that VIL violated Article 16 of the 1985 license agreement which required VIL to obtain VASP's approval before licensing the know-how to another party, by turning over VASP know-how to Enprotech. Defendants moved to dismiss the complaint, claiming that Article 16 did not survive the termination of the agreement. We granted that motion on December 30, 1994. Verson moved for reconsideration of our order and for leave to amend its complaint, arguing that the Enprotech agreement, which Verson claims is an assignment, violated the license agreement's restriction on VIL's right to assign the know-how. Although this constituted a new line of attack for Verson, we allowed it to amend its complaint to more fully make out this claim. Verson has since amended its complaint to incorporate the assignment argument. Before us now is VIL's motion to dismiss the amended complaint. VIL argues that the 1990 settlement agreement prevents Verson from maintaining this action; that it is the co-owner of the know-how, not a licensee, and thus had the right to assign it to Enprotech; that the right to assign the know-how was implicit in the 1985 licensing agreement; that a perpetual ban on assignability would be an unreasonable restraint of trade; and that its transaction with Enprotech is a sublease rather than an assignment. We will examine each of these arguments in turn.³

DISCUSSION

A. The 1990 Settlement Agreement

VIL argues that a settlement agreement executed in connection with the earlier case involving these parties bars Verson's action here. In the first lawsuit VIL obtained an injunction requiring Verson to turn over various types of know-how related to the licensing agreement. The case was still pending, however, because the parties disputed what documents needed to be produced and who was to pay for the copying. The parties entered into a settlement in which VIL accepted some of the disputed know-how in complete satisfaction of any claim for know-how it might have had under the licensing agreement, and Verson agreed not to challenge VIL's right to use this know-how.⁴ VIL argues that this action challenging VIL's assignment (or sublease) of the know-how to Enprotech is a restriction on the use of the know-how and thus violates the settlement agreement. Verson responds that VIL's right to assign or transfer the know-how remained as it was under the licensing agreement.

We agree with Verson that the 1990 settlement agreement does not prevent it from attempting to restrict VIL's right to assign the know-how. In settlements, as in all contracts, every effort should be made to give force to the words employed by the parties and to not imply words that the parties could have used but did not. Harris Bank Naperville v. Morse Shoe, Inc., 716 F.Supp. 1109, 1122 (N.D.Ill.1989). Through the settlement Verson agreed only not to restrict VIL's use of the know-how. The word "use" does not ordinarily also include sale, transfer, or assignment. This is especially so when dealing with the right to use intellectual property. One can use know-how, trade secrets, or patents freely, but still not transfer or assign that information. The right to the know-how at issue here could easily be separated into the right to use the know-how and the right to sell, transfer, or assign the know-how, and the parties' selection of the word "use" provides support for the view that they did not intend for the settlement agreement to grant VIL a right to assign the know-how that was not already granted under the terms of the license agreement. The parties could have added "transfer or assign" to "use," and the fact that they did not is probative of the issue.

Other sections of the settlement also provide some support for that view. Under a section entitled "Reservation of Rights," both parties reserved the right to sue each other for any breach of the licensing agreement. The fact that both parties sought to preserve their rights under the licensing agreement arguably indicates that the settlement was intended only to resolve the dispute as to what know-how Verson was required to turn over and who was to pay for the copying costs. VIL's reading of the reservation-of-rights clause, that the parties intended only to prevent public disclosure of the know-how, is strained, given that the parties could have easily drafted the clause to reflect that intent but did not. Therefore, we hold that the 1990 settlement agreement was not an unambiguous waiver of Verson's right to challenge VIL's assignment of the know-how.⁵

B. Is VIL a Co-Owner of the Know-How Or Only a Licensee?

The premise behind Verson's complaint is that VIL is a non-exclusive licensee of the know-how. In earlier orders we expressed some doubt regarding this proposition and left open the question whether VIL is a co-owner of the know-how. See Verson Corp. v. Verson International Group, No. 93 C 2996, 1994 WL 376278 at *3 (N.D.Ill. July 13, 1994). VIL seizes upon this language and presses the argument here.

The starting place for determining whether VIL is a co-owner of the know-how is the 1985 license agreement. The agreement states that "upon expiration of the term of this Agreement, subject to confidentiality provisions, Licensee shall have the non-exclusive perpetual royalty free right to continue to exercise, use or practice the rights granted Licensee under Section 2.01 without limitation as to Territory...." As we indicated above, the use of know-how can be readily distinguished from the ownership of the know-how. Thus, one meaning of the license agreement grants VIL only the right to use the know-how to compete with Verson worldwide. The language of this provision, or the other provisions in the agreement, do not necessarily indicate the parties intended for VIL to become co-owner of the know-how at the termination of the five-year period.

Despite the lack of any express provision in the license agreement granting it co-ownership of the know-how, VIL presents four arguments to support its claim: first, that the amount it paid in connection with the MBO indicates that VIL would become co-owner of the know-how; second, that it developed some of the know-how itself; third, that the clear intent of the MBO and license agreement was to make VIL and Verson head-to-head competitors after five years; and, fourth, that VIL acquired property...