MEMORANDUM AND ORDER

PAUL MAGNUSON, Senior District Judge

This matter is before the Court on Defendant Barton Nelson's Motion for Summary Judgment. For the following reasons, Defendant's Motion is granted in part and denied in part.

BACKGROUND

Plaintiffs 3M Innovative Properties and 3M Company (collectively, "3M') claim that Defendant Barton Nelson ("Barton Nelson") is infringing its United States Patent No. 4,907,825 ("the `825 patent"). The `825 patent is the commercialized Post-It® brand tape flags. 3M contends that Barton Nelson's "adhesive tab" product infringes this patent. 3M seeks a permanent injunction enjoining Barton Nelson from further infringing this patent, and treble damages for this infringement. Defendant Barton Nelson moves this Court for summary judgment, arguing that it is immune from suit under a contract between 3M and Barton Nelson.

In 1987, 3M approached Barton Nelson and requested that Barton Nelson assist 3M in connection with an interference proceeding before the United States Patent and Trademark Office ("USPTO"). 3M, Avery International, and Beiersdorf GmbH were involved in this interference proceeding, to "determine who [was] the first inventor of the repositionable adhesive sheets in which a pressure-sensitive adhesive is present in the form of small spaced islands." (Def.'s Ex. B.) 3M requested that Barton Nelson provide evidence of the earliest sale of its `Touchdown" notes (re-positional paper note products), which had pressure-sensitive adhesive applied in the form of small spaced dots or islands. (Id. at 1.) In consideration for Barton Nelson's information, 3M and Barton Nelson entered into a Covenant Not to Sue ("Covenant"). The particular provision at issue states:

In exchange for Barton Nelson's cooperation, 3M hereby covenants not to sue Barton Nelson for making, using, or selling any removable adhesive items of the type in which the adhesive is solely a conventional pressure-sensitive adhesive (i.e., not a microsphere adhesive) applied in the form of small spaced dots or "islands." This covenant extends and is assignable only to Barton-Nelson's successor in the removable adhesive item business.

(Def.'s Ex. B. at ¶ 3.) At the time of the interference proceeding, one of 3M's pending patents was for "Repositionable Pressure-Sensitive Adhesive Sheet Material" (later issued as patent no. 5,194,299 ("`299 patent")). (Def.'s Ex. D.)

After signing, 3M and Barton Nelson had limited interaction. As part of its operation, Barton Nelson showed the Covenant to its dealers, to represent that it did not market products that infringed 3M patents. In 1990, at 3M's request, Barton Nelson agreed to stop exhibiting the Covenant to dealers, to prevent any misrepresentation about the relationship with 3M. In 1991, Barton Nelson President Dwight Nelson was deposed in connection with the interference proceeding involving the patented adhesive dot technology. He testified that the Covenant permitted Barton Nelson "to continue producing their adhesive notes and that 3M . . . would promise . . . not to sue Barton Nelson for production of their adhesive notes." (Liro Decl. Ex. D at 40 (Dwight Nelson 1991 Dep.).)

On September 8, 1988, 3M filed its application for the `825 patent, better known as its commercialized Post-It® Note polyester tape flags. In 1997, Barton Nelson began manufacturing and selling similar polyester adhesive tabs. 3M brought this suit alleging that Barton Nelson's polyester tabs infringe the `825 patent. Barton Nelson brought this Motion, arguing only that it is not liable for any infringement because of the 1987 Covenant. 3M argues that the Covenant is not applicable. 3M alternatively argues that Barton Nelson's manufacture of tape flags is outside the scope of the Covenant. The only issue before this Court is whether the Covenant applies to Barton Nelson's polyester adhesive tabs, and if so, whether Barton Nelson is acting within the scope of this Covenant.

DISCUSSION

A. Standard of Review

Summary judgment is appropriate if "there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The Court must view the evidence in a light most favorable to the non-moving party. The burden of demonstrating that there are no genuine issues of material fact rests on the moving party. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party has carried its burden, the non-moving party must demonstrate the existence of specific facts in the record that create a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986).

B. Covenant Not to Sue

3M and Barton Nelson entered into an agreement in 1987, and now dispute its application. A covenant not to sue is a covenant by one party who, at the time the covenant was made, had a right of action against another party, by which the first party agrees not to sue to enforce such action.See Gronquist v. Olson, 64 N.W.2d 159, 163-64 (Minn. 1954). In 1987, at the time of the agreement, 3M admits that it did not yet have a patent, and that it had no cause of action against Barton Nelson. (Pl's Opp'n Mem. at 14.) As a matter of law, then, the agreement cannot be a covenant not to sue.

3M alternatively argues that it granted Barton Nelson a license to "practice certain intellectual property rights of 3M." (PL's Opp'n Mem. at 15.) Even though the application for the `299 patent was pending at the time of the agreement, a license may be granted before the invention is patented. See St. Louis Flushing Mach. Co. v. Sanitary St. Flushing Mach., Co., 178 F. 923, 926-27 (8th Cir. 1910). A grant of immunity from suit for future infringements of a patent is equivalent to a license. See Am. Tel. Tel. Co. v. Radio Audion Co., 281 F. 200, 202-03 (D. Del. 1922). Accordingly, 3M and Barton Nelson had a license agreement, granting Barton Nelson immunity from suit for future infringement. However, the remaining issue is whether 3M promised not to sue under the pending `299 patent, or more broadly, promised not to sue under any patent 3M had or would acquire in the future, so long as Barton Nelson conformed to the terms of the Covenant. See Spindlefabrik Suessen-Schurr Stahlecker Grill v. Schubert Salzer Maschinenfabrik Aktiengesellschaft, 829 F.2d 1075, 1081 (Fed. Cir. 1987) ("[P]atent license agreements can be written to convey different scopes of promise not to sue, e.g., a promise not to sue under a specific patent or, more broadly, a promise not to sue under any patent the licensor now has or may acquire in the future."). Patent license agreements should be interpreted according to state law. Medtronic, Inc. v. Guidant Corp., Civ. No. 00-1473, 2003 WL 21181103 (D. Minn. May 16, 2003) (Davis, J.).

C. Contract Interpretation

Barton Nelson asserts that the Covenant entitles Barton Nelson to make, use or sell any removable adhesive items, so long as the adhesive is a "conventional pressure-sensitive adhesive . . . applied in the form of small spaced dots or `islands.'" (Def.'s Ex. 5 at ¶ 3.) 3M argues that the Covenant is not that expansive; that it only allows Barton Nelson to continue to make, use, and sell removable adhesive products that were the subject of the patent interference proceeding in 1987.

The dispute is whether the Covenant is based on a product or a patent. If the Covenant is based on a patent, then 3M is entitled to bring this infringement suit, because the `825 patent did not result from the interference proceeding. Conversely, if the Covenant is product-based — that it is based on "removable adhesive items of the type in which the adhesive is solely a conventional pressure-sensitive adhesive applied in the form of small spaced dots or `islands'" — then, Barton Nelson is immune from liability provided it is operating within the Covenant's scope.

Contract interpretation is a substantive issue, to be determined under state law. Since the Covenant does not contain a choice of law provision, Missouri or Minnesota state law applies. Missouri and Minnesota do not differ in their treatment of contract interpretation. In both states, the primary goal of contract interpretation is to ascertain and enforce the intent of the parties.Motorsports Racing Plus. Inc. v. Arctic Cat Sales, Inc., 666 N.W.2d 320, 323 (Minn. 2003); Butler v. Mitchell-Hugeback, Inc., 895 S.W.2d 15, 21 (Mo. 1995). Contract construction requires the Court to examine not only the contract itself, but also the surrounding circumstances at the time of the contract and the positions and actions of the parties. Motorsports, 666 N.W.2d at 324;Butler, 895 S.W.2d at 21. Whether the terms of a contract are ambiguous is a question of law, which must be determined based on contract language itself. Cooper v. Lakewood Eng'g Mfg. Co., 874 F. Supp. 947, 953 (D. Minn. 1994) (Kyle, J.); Union Elec. Co. v. Consolidation Coal Co., 188 F.3d 998, 1002 (8th Cir. 1999) (interpreting Missouri contract law). If the contract is reasonably susceptible to more than one interpretation, it is ambiguous and thus an issue for the fact finder. Cooper, 874 F. Supp. at 953;Union, 188 F.3d at 1002.

The plain language of the contract permits Barton Nelson to "mak[e], us[e], or sell any removable adhesive items of the type in which the adhesive is solely a conventional pressure-sensitive adhesive applied in the form of small spaced dots or `islands.'" (Def.'s Ex. B.) The unambiguous interpretation of this Covenant permits Barton Nelson to manufacture and sell "any" product that has this particular adhesive. The plain language of the Covenant does not limit this application to the `299 patent, nor to any other patent that was the subject of the interference proceeding. The Covenant does not limit this immunity to any particular substrate or product, nor to a specific period of time. Rather, this license by 3M entitles Barton Nelson to immunity from suit so long as its "removable adhesive items [are] of the type in which the adhesive is solely a conventional pressure-sensitive adhesive applied in the form of small spaced dots or `islands.'" (Def.'s Ex. B.) Therefore, the Covenant applies to this action.

D. Scope of the Covenant Not to Sue

Barton Nelson must operate within the scope of the Covenant to claim its protection. 3M contends that Barton Nelson's adhesive is not applied in small spaced dots or islands. The parties dispute the definition of "applied." Barton Nelson contends that "applied" should be interpreted as the very instant that the cavity of the adhesive roller makes contact with the substrate. (Def.'s Reply Mem. at 7.) Conversely, 3M argues that "applied" should be interpreted as encompassing the entire process, from the beginning of the manufacturing process to the completed final product. (PL's Opp'n Mem. at 11-13.)

"Apply" has not been defined in this context under either Minnesota or Missouri law. Webster's dictionary defines "apply" as "to lay or spread." Webster's Collegiate Dictionary 97 (9th ed. 1984). For purposes of this Motion, the Court adopts 3M's assertion that "applied" covers the entire manufacturing process, not just the instant when the adhesive contacts the substrate. The parties agreed to the Covenant during an interference proceeding in 1987. The purpose of the interference proceeding was to determine who the first inventor of repositionable adhesive sheets was, where "pressure-sensitive adhesive is present in the form of small spaced `islands.'" (Def.'s Ex. B.) Barton Nelson agreed to provide information regarding "such products." In exchange for this information, 3M promised not to sue Barton Nelson in the future for patent infringement of its products, so long as these products had adhesive in the form of small spaced dots or islands. In order for the Covenant to be interpreted consistently, "applied" should be construed as the resulting product, not the instant where the adhesive contacts the substrate.

3M presents a genuine issue of material fact as to whether or not Barton Nelson's polyester tape flags have adhesive present in the form of small spaced dots or "islands." 3M submits evidence from Dr. Jeffrey Payne, Ph.D., a research specialist at 3M, who conducted scanning electron microscopy (SEM) and x-ray microanalysis (XRMA), to characterize the "surface topography, composition, and other properties" of Barton Nelson's polyester adhesive tabs. (Payne, Decl. ¶¶ 3, 6-7.) Dr. Payne concluded that Barton Nelson's adhesive is not applied in the form of islands, but rather as "`islands' of uncoated areas in a `sea' of adhesive, with the uncoated areas being surrounded by adhesive." (Id. ¶¶ 8, 9.) Supporting these conclusions were digital photomicrograhs of Barton Nelson's polyester adhesive tabs. (Id.) Mark Cavaleri, a research specialist at 3M, further supported Dr. Payne's conclusions. (Cavaleri Decl. ¶¶ 10-11.) The evidence submitted by Barton Nelson further creates a genuine issue of material fact as to whether Barton Nelson is acting within the scope of the Covenant. (See Liro Decl. Ex. A at 22-23; G. Nelson Decl.) This evidence compels the conclusion that a genuine issue of material facts exists as to whether Barton Nelson's polyester adhesive tabs conform with the terms of the Covenant.

CONCLUSION

The unambiguous language of the Covenant compels the conclusion that it applies to this action. A genuine issue of material fact exists as to whether Barton Nelson is acting within the scope of the Covenant between the parties. Accordingly, based on all the files, records and proceedings herein, IT IS HEREBY ORDERED that Defendant Barton Nelson's Motion for Summary Judgment (Clerk Doc. No. 30) is GRANTED in part and DENIED in part.