Xco Intern. Inc. v. Pacific Scientific Co., 01 C 6851.
| Decision Date | 02 October 2002 |
| Docket Number | No. 01 C 6851.,01 C 6851. |
| Citation | 255 F.Supp.2d 825 |
| Parties | XCO INTERNATIONAL INCORPORATED, Plaintiff, v. PACIFIC SCIENTIFIC COMPANY, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Patrick D. Ertel, Thomas Jefferson Ramsdell, Carl Ellis Myers, Marshall, Gerstein & Borun, Chicago, IL, for Plaintiff.
Michael Peter Siavelis, John A. Childers, Johnson & Bell, Ltd., Chicago, IL, for Defendant.
Plaintiff, XCO International Inc. ("XCO"), filed suit against Defendant, Pacific Scientific Co. ("Pacific"), alleging breach of contract. Pacific filed a counterclaim, alleging that XCO breached a licensing agreement between the parties (Counts I and II).
Presently before the Court is XCO's Motion for Summary Judgment on Count I of Its First Amended Complaint, XCO's Motion for Summary Judgment on Count I of Pacific Scientific's Counterclaim, and XCO's Motion for Summary Judgment on Count II of Pacific Scientific's Counterclaim.
Summary judgment is proper if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, All U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). All the evidence and the reasonable inferences that may be drawn from the evidence are viewed in the light most favorable to the nonmovant. Miller v. American Family Mut. Ins. Co., 203 F.3d 997, 1003 (7th Cir.2000). Summary judgment may be granted when no "reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., Ml U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
United States Patents Nos. 4,491,822 ("'822 Patent"); 4,540,972 ("'972 Patent"); and 4,614,024 ("'024 Patent") (collectively, the "U.S. Patents") were issued to Bayard C. Davis on January 1, 1985, September 10, 1995, and September 30, 1996, respectively. The U.S. Patents were assigned to XCO. (Plaint's 56.1(a)(3) Statement ¶¶ A4-6)1.
The U.S. Patents include the claim that the insulation has "an insulation resistance variable with temperature over said temperature range between approximately 100 and 50,000 ohms...." (U.S.Patents). The second claim states that the "said insulation material comprises manganese dioxide heated in a vacuum furnace at a temperature of approximately 1650." (U.S.Patent).
In February 1991, XCO entered into a Purchase Agreement with Pacific for the purchase of the U.S. Patents and all foreign patents and applications corresponding thereto (collectively, "the Patents"). (Id., at ¶ A7). At the same time, XCO entered into a License Agreement with Pacific granting XCO an exclusive license to use and sell metallic sheathed heat sensitive cable limited to the field of refractory line process vessels under the Patents throughout the world. (Id., at ¶ A8). Pursuant to the Purchase Agreement, the Purchase Agreement is construed in accordance with the laws of the state of Illinois. (Id., at ¶ A10). Pursuant to the License Agreement, the License Agreement is construed in accordance with the laws of the state of California. (Id., at ¶ A11).
Under Paragraph 1.3 of the Purchase Agreement, the purchase price of the Patents consisted of a $725,000 cash payment at closing. In addition, Pacific was required to pay the greater of 5% of product sales or $100,000 per year beginning February 1, 1995, until February 1, 2000. (Def.'s 56.1(B)(3) Statement ¶ A7). Pursuant to the Purchase Agreement and XCO's demands for payment, Pacific made $50,000 semi-annual payments per year, totaling $250,000. The last payment was made and accepted in February 2000. (Id., at ¶ A9).
Paragraph 1.5.3 of the Purchase Agreement states:
Prorations and Future Expenses. Any personal property taxes, patent maintenance fees, or other similar costs paid by SELLOR [XCO] prior to the Closing Date and relating to the Patent and Related Proprietary Rights after the Closing Date will be prorated as of the Closing Date. The amount to be paid to SELLER, as agreed to be the SELLER and PURCHASER [Pacific] shall be paid to SELLER at closing. After the Closing Date, PURCHASER will be responsible for all expenses of any kind relating to the Patent and Related Proprietary Rights, except SELLER will be responsible for any and all expenses related to the ongoing opposition to European Patent 0 078 675 Granted on Application 82 305756.7 XCO International Incorporated. (Plaint.'s 56.1(a)(3) Statement ¶ A12).
Paragraph 2.2.10 of the Purchase Agreement states:
Taxes. PURCHASER warrants that all property taxes which become due and payable on the Patent and Related Proprietary Rights after the Closing Date will be paid and that there will be no outstanding liabilities incurred against the Patent and Related Proprietary Rights. PURCHASER agrees to pay such property taxes if, when and as discussed, due and payable. All federal, state and other tax returns and reports, domestic or foreign, required to be filed by or on behalf of PURCHASER with respect to the ownership or operation of the Patent and Related Proprietary Rights will be duly filed, and all taxes and other assessments and levies (including interest and penalties) and all installments of estimated taxes, domestic or foreign, required to be paid by PURCHASER will be duly paid. PUCHASER will not waive any statute of limitations with respect to any tax or other assessment or levy, domestic or foreign, applicable to such Patent and Related Proprietary Rights and such taxes and other assessments and levies which PURCHASER is required by law to withhold or to collect will be duly withheld and collected and will be paid over to the proper governmental agencies and shall be so paid by PURCHASER as required by law. (Plaint's 56.1(a)(3) Statement ¶ A13).
Paragraph 9.2 of the Purchase Agreement states:
If the Agreement is terminated in accordance with Paragraph 9.1, it is specifically agreed that all amounts then due and owing SELLER by PURCHASER, including such amounts which constitute overdue, delinquent or otherwise unpaid amounts under this Agreement plus one hundred thousand dollars ($100,000) per year from and including the year of such termination to and including the year of the last to expire of the patent rights, shall then constitute liquidated damages under this Agreement, and PURCHASER guarantees SELLER that it will submit a written statement and make full payment of such liquidated damages to SELLER within THIRTY (30) days of the effective date of termination. (Plaint.'s 56.1(a)(3) Statement IIA41).
Paragraph II of the License Agreement states:
Subject to the terms herein set forth, LICENSOR hereby grants LICENSEE an exclusive license under the Patent and Related Proprietary Rights to use and sell PRODUCTS within the MAKET agreed. (License Agreement). Pursuant to the License Agreement, PRODUCT ("Product") is "metallic sheathed heat sensitive cable (sold under the trademark CT2Q" covered by the Patent and Related Proprietary Rights. (License Agreement; Plaint.'s 56.1(a)(3) Statement ¶ B10). The MARKET is "restricted to the field of Refactory Lined Process Vessels ... through the world".
"Patent Rights" as used within the Purchase Agreement "mean the rights embodied in and deriving from United States Letters Patent 4,491,822; 4,540,972; and 4,614,024, and all foreign patents and applications corresponding thereto." (License Agreement). "Proprietary Rights ... mean all purchasing, manufacturing, marketing, sales and installation information and materials including know-how, drawings, sketches, plans, designs, specifications, data, methods, processes, techniques, inventions or discoveries whether patentable or not which relate in any way to the PRODUCTS covered by the Patent Rights." (License Agreement).
Paragraph VII of the License Agreement states, in pertinent part
Quantities of the PRODUCT received by [Pacific] from [XCO] will be furnished by [XCO] to [Pacific] for $8.75 U.S. per foot for 3 mm ... Starting with the fifth anniversary of the date of this Agreement through the balance of the term ... the purchase will be subject to negotiation between [Pacific] and [XCO], with changes in price being substantiated by [XCO]'s submittal of product manufacturing cost increases. PRODUCT configurations other than that described in the preceding shall be priced at the previous most favorable customer price. (Plaint's 56.1(a)(3) Statement ¶ C 10).
On April 12, 1991, Pacific paid its prorations at the closing pursuant to the Purchase Agreement. (Plaint's 56.1(a)(3) Statement ¶ A16). In July 1992, Pacific paid patent tax maintenance fees for Australia Patent Nos. 555,243 and 577,208; Brazil Patent No. P18206249; West Germany No. P32793987; South Africa No. 82/7958; European Patent No. 0 078 675 designated in Austria, Belgium, France, Netherlands, Italy, Luxembourg, Sweden, Switzerland, and the United Kingdom; and U.S. Patent No. 4,491,822. (Id., at ¶¶ A17-18). In September 1992, Pacific paid the patent tax maintenance fees for Mexico Patent No. 158570. (Id., at ¶ A19).
In September 1993, Pacific did not pay the patent tax maintenance fees for Australia Patent Nos. 555,243 and 577,208; Brazil Patent No. P18206249; and South Africa Patent No. 82/7958. (Plaint.'s 56.1(a)(3) Statement ¶ A20).
In October 1993, Pacific paid the patent tax maintenance fees for West Germany Patent No. P32793987 and European Patent No. 0 078 675. (Plaint.'s 56.1(a)(3) Statement ¶ A21).
In November 1993, South Africa Patent No. 82/7958 lapsed for failure to pay patent maintenance fees. (Plaint.'s 56.1(a)(3) Statement ¶ A22). In July 1994, Australia Patent Nos. 555,243 and 577,208 lapsed for failure to pay patent maintenance fees. (Id., at ¶...
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