Opinion
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT, AND DENYING PLAINTIFF'S MOTION TO STRIKE
JEREMY FOGEL, District Judge.
Defendant moves for summary judgment. Plaintiff opposes the motion and moves to strike portions of the evidence submitted by Defendant. The Court has considered the moving and responding papers and the oral argument presented on July 12, 2004. For the reasons discussed below, the motion for summary judgment will be granted in part and denied in part, and the motion to strike will be denied.
I. BACKGROUND
A. Introduction
Plaintiff Townshend Intellectual Property, L.L.C. ("Townshend") accuses Defendant Agere Systems, Inc. ("Agere") of manufacturing products that infringe the claims of Townshend's patents. Agere denies this claim, arguing that it is licensed to use Townshend's patents, and moves for summary judgment. Agere alleges that it is a corporate successor of Lucent Technologies Inc. ("Lucent"), which itself was a corporate successor of American Telephone and Telegraph Company ("AT&T"), and that it has received a license to use the Townshend patents from its corporate lineage. Townshend acknowledges that it authorized U.S. Robotics Access Corporation ("USR") to sublicense Lucent if certain conditions were met, but asserts that because these conditions were not met, USR could not have issued a valid sublicense to Lucent. Townshend further asserts that Agere could not have received a valid sublicense from Lucent in any case.
Townshend Intellectual Property, L.L.C. was created in 2001 with Dr. Brent Townshend ("Dr. Townshend") as the managing member. The term "Townshend patents" refers to all patents issued or issuable from Dr. Townshend's Application for U.S. Patent No. 08/352, 651, originally owned by Dr. Townshend and later transferred to Townshend Intellectual Property.
U.S. Robotics Inc. changed its name to U.S. Robotics Access Corp. in 1995. The term "USR" refers to both U.S. Robotics Inc. and U.S. Robotics Access Corp.
B. The AT&T-USR Patent Agreement
On October 1, 1993, AT&T and USR entered into a patent license agreement covering patents owned by both parties for use in modems and related products. Defendant's Ex. 1, § 1.01. AT&T granted USR a nonexclusive and nontransferable license for patents relating to data/fax modems and data/fax modem programs. Specifically, AT&T granted USR a license to use patents essential to any communications protocol adopted as a standard as of the agreement's effective date, including the 212A and V.34 standards "and extensions thereof as, and when, incorporated into an official standard by an official standards body." Id. at p. 15. These extensions included inventions reduced to practice prior to October 1, 1998 that claim extensions of the V.34 standard but "not including other, separate as yet undefined, numbered modem STANDARDS in the ITU modem series." Id. at p. 13.
In the same agreement, USR granted AT&T a nonexclusive, royalty-free, and nontransferable license for patents relating to data/fax modems, data/fax modem components, and data/fax modem programs. In particular, USR agreed to license any invention which USR had the "right to grant the licenses and rights which are herein granted by [USR]" before October 1, 1998. Id. at 14-15.
Each party to the AT&T-USR agreement had the right to grant sublicenses to its subsidiaries. AT&T was permitted to assign its rights to "any direct or indirect successor to the business of AT&T as the result of any internal reorganization." Id. at § 4.02. As is described below, Agere contends that the rights under this agreement were assigned by AT&T to Lucent in 1996, and that Lucent subsequently assigned all rights and obligations under the agreement to Agere in 2001.
C. The USR-Townshend Agreement
On April 5, 1996, Dr. Townshend and USR entered into a license and option agreement. Defendant's Exs. 6-7. Dr. Townshend granted USR a license to practice and use all inventions covered by the Townshend patents as well as the right to purchase the Townshend patents at a later date. This agreement was amended on November 14, 1996. The amended agreement gave USR the right to grant a sublicense of its rights in the Townshend patents to Lucent on the condition that Lucent and USR enter into a cross-license agreement of patents and patent applications owned or controlled by Lucent "that cover technology essential to implement a commercial embodiment of the Townshend Intellectual Property." Defendant's Ex. 8, p. 2. The amended agreement included a provision requiring USR to notify Dr. Townshend of any sublicenses granted and to provide Dr. Townshend with a copy of any sublicense agreement. Id.
Agere contends that Lucent fulfilled its obligation to enter into a cross-license agreement with USR by virtue of Lucent's acquisition of AT&T's rights under the 1993 AT&T-USR patent agreement, which allegedly covers the technology essential to implement a commercial embodiment of the Townshend patents and requires USR to license Lucent for any modem-related invention that USR has the ability to license. However, Townshend argues that the 1993 AT&T-USR patent license agreement was not assignable to Lucent, that the Townshend patents were not assignable to Lucent under the AT&T-USR license agreement, that USR never actually granted Lucent a sublicense for the Townshend patents, and that in any event any alleged sublicense from USR to Lucent for the Townshend patents could not have been assigned by Lucent to Agere.
III. DISCUSSION
A. Defendant's Motion for Summary Judgment
1. Legal Standard
A motion for summary judgment should be granted if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). The moving party bears the initial burden of informing the Court of the basis for the motion and identifying the portions of the pleadings, depositions, answers to interrogatories, admissions, or affidavits that demonstrate the absence of a triable issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
If the moving party meets this initial burden, the burden shifts to the non-moving party to present specific facts showing that there is a genuine issue for trial. FED. R. CIV. P. 56(e); Celotex, 477 U.S. at 324. A genuine issue for trial exists if the non-moving party presents evidence from which a reasonable jury, viewing the evidence in the light most favorable to that party, could resolve the material issue in his or her favor. Anderson, 477 U.S. 242, 248-49; Barlow v. Ground, 943 F.2d 1132, 1134-36 (9th Cir. 1991).
2. License Defense
Agere has failed to meet its initial burden of showing that there is no genuine issue of material fact with respect to its license defense. Agere has presented evidence that AT&T and USR entered into a patent licensing agreement in 1993 covering modems and modem-related technology, and that in 1996 USR had the right to grant Lucent a sublicense for the Townshend patents if Lucent and USR entered into a cross-licensing agreement for the technology essential to implement a commercial embodiment of the Townshend patents. However, Agere has failed to show either that Lucent entered into the required cross-licensing agreement or that Lucent already was a party to such an agreement with USR by virtue of its rights under the 1993 AT&T-USR license agreement.
Agere claims that, by assuming AT&T's rights and obligations under the AT&T-USR license agreement, "USR therefore obtained a license under all patents and applications owned or controlled by Lucent relating to data and fax modems." Motion for Summary Judgment, pp. 6-7. However, under the terms of the AT&T-USR agreement, Lucent, stepping into the shoes of AT&T, granted USR "under AT&T PATENTS" license for "DATA/FAX MODEMS and DATA/FAX MODEM PROGRAMS." Defendant's Ex. 2, p. 1. The term "AT&T PATENTS" is defined in the Definitions Appendix of the AT&T-USR license agreement as:
all patents (including utility models but excluding design patents and design registrations) that use of which is essential to, and which claim, any STANDARD or any designated option associated with a STANDARD, issued at any time in any or all countries of the world for:
(i) inventions actually reduced to practice or documented in writing prior to the effective date of this agreement and owned or controlled as of such effective date by AT&T or any of its RELATED COMPANIES, and
The effective date of the agreement was October 1, 1993.
(ii) inventions actually reduced to practice or documented in writing prior to the termination of the LIMITED PERIOD which specifically claim extensions of V.34 STANDARD or a recommendation using the V.34 designation or other designation, analogous to bis or ter, whose purpose includes the improvement of V.34 performance, such as the addition of new data rates, shortening of the training time or applications for cellular, including facsimile STANDARDS based on V.34, but not including other, as yet undefined, numbered modem STANDARDS in the ITU modem series or any STANDARD covering simultaneous transmission of voice and data by an analog modem or modem PROGRAM, and are owned or controlled at any time during the LIMITED PERIOD by AT&T or any of its RELATED COMPANIES.
The limited period was a term of five years from the effective date of the agreement, terminating on October 1, 1998.
(iii) any other inventions actually reduced to practice or documented in writing prior to the effective date of this agreement, with repsect to which and to the extent to which any such company shall, as of such effective date, have the right to grant the licenses and rights which are herein granted by AT&T.
Id. at 13.
The term "STANDARD" is defined in the agreement itself as "any protocol adopted by any U.S. or foreign official standards body (such as CCITT, ITU-T, IEEE, ANSI, or EIA) prior to the effective date relating to voice band analog modems of this agreement, and includes the standards known as 212A and V.34 and extensions thereof as, and when, incorporated into an official standard by an official standards body." Id. at 15. The actual grant of rights by Lucent to USR under the 1993 AT&T-USR agreement thus is significantly more restrictive than Agere asserts. Agere has not identified which patents held by Lucent in 1996 were essential to implement a commercial embodiment of the Townshend patents or how these patents meet the definition of "AT&T PATENTS" in the AT&T-USR license agreement. Indeed, Agere has not shown how a license relating to modem standards circa 1993 is applicable to technology embodied in a new standard that was not even developed until several years after the effective date of the AT&T-USR agreement.
Agere nonetheless alleges that Lucent acquired a license to the Townshend patents under USR's obligation to license "ROBOTICS PATENTS" in the AT&T-USR license agreement, and not as part of a separate agreement with USR. Id. at 14-15. In relevant part, the AT&T-USR agreement states USR shall license AT&T for any invention "with respect to which and to the extent to which [USR] shall at any time during the LIMITED PERIOD have the right to grant the licenses and rights which are herein granted by [USR]." Id. Under the terms of the AT&T-USR agreement, the "rights which are herein granted" by USR to Lucent were in the form of a nonexclusive, royalty free, and non-transferrable license that was sublicensable only to a successor in business or subsidiary. As noted by Townshend, USR could not have licensed the Townshend patents to Lucent under the terms of the AT&T-USR license agreement because the grant would have involved rights that USR could not have possessed.
Moreover, even if the Court were to conclude Agere had met its initial burden, Townshend has shown that at the very least there are genuine issues of material fact in dispute. Townshend notes that the terms of the USR-Townshend license agreement authorized USR to grant Lucent a license that was nontransferable and not further sublicensable. Lucent thus would not have the ability to sublicense the Townshend patents to Agere even if it had received a license from USR. Carnation Co. v. C.I.R., 640 F.2d 1010, 1013 (9th Cir. 1981) (related insurance contracts must be considered together), is inapposite because the case involved a series of related transactions designed to distribute economic risk among corporations. While the Carnation court held that several related agreements had to be considered together, there is no evidence of a similar interrelationship between the various agreements at issue here.
See infra section III.
3. Business Defense
Agere alleges that it did not exist as a corporation prior to August 1, 2000 and that it had no material assets or activities as a separate corporate entity before February 1, 2001, when Lucent began transferring assets to Agere. Agere supports this assertion with statements from the declaration of Gerald A. deBlasi ("deBlasi") and Lucent's form 10-K. See deBlasi Decl., ¶¶ 4-6; Defendant's Ex. 3. The relevant form 10-K states that Agere made sales to Lucent in excess of two billion dollars between 1999 and 2001, and that Agere was comprised of businesses which were integrated with Lucent prior to the February 1, 2001 separation of the companies. See Defendant's Ex. 3, pp. 47, 79. At oral argument Agere stated that the 10-K sales figures were not generated by Agere as a separate company but instead they reflected sales generated by the divisions of Lucent that were later spun off under the Agere name in 2001.
In general, a corporation cannot be liable for actions taken prior to the date of its incorporation. But see Chartrand v. Barney's Club, Inc., 380 F.2d 97 (9th Cir. 1967) (preincorporation contracts are enforceable under some circumstances). Based on the record before it, the Court concludes that Agere, as a corporate entity, could not have infringed upon the Townshend patents before it existed. However, there is a question of fact as to whether Agere undertook any infringing activity between its August 1, 2000 incorporation and the February 1, 2001 transfer of assets.
B. Townshend's Motion to Strike
Agere's motion is supported in part by the deBlasi declaration, which includes copies of the Separation and Distribution Agreement between AT&T and Lucent, a Securities and Exchange Commission form 10-K from Agere for the fiscal year ending September 30, 2001, and a letter confirming assignment of AT&T-USR patent license agreement from Lucent to Agere. Defendant's Exs. 2-4. These documents were produced for the first time in connection with Agere's motion. Townshend alleges that these documents should have been produced either as part of initial disclosure or in response to Townshend's Document Request No. 37 and moves to strike these documents for the purpose of Agere's motion for summary judgment.
Townshend requested "all documents that refer or relate to any contention by [Agere] that Agere has an implied and/or express license to practice the claims of the Townshend Patents." Plainitff's Ex. G.
Plaintiff has also moved to strike Defendant's Exhibits 15 and 16. The Court will not address these documents because they were not considered in the present motions.
Federal Rule of Civil Procedure 37(c)(1) states that "[a] party that without substantial justification fails to disclose information required by Rule 26(a) or 26(e)(1)... is not, unless such failure is harmless, permitted to use as evidence at trial, at a hearing, or on motion any witness or information not so disclosed." District courts are permitted particularly wide latitude in assigning discretionary sanctions under Rule 37(c)(1). Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001). The burden of showing harmlessness in the failure to disclose is placed on the party facing sanctions. Id. at 1107. Agere argues that Exhibit 2 (aside from Schedule 2.15) and Exhibit 3 are publicly available documents and that it objected to producing public documents more than a year ago without further action by Townshend. Agere's counsel also states that he had difficulty obtaining copies of Exhibits 2 and 4 until shortly before filing the motion for summary judgment. Because Defendant's Exhibits 2-4 do not materially affect the outcome of Agere's motion, the motion to strike will be denied.
III. TOWNSHEND'S REQUEST PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 56(D)
Although it is not the moving party herein, Townshend requested at oral argument that the Court "excise" Agere's license defense from the instant proceedings. Based upon the record now before it, the Court is inclined to agree with Townshend not only that Agere has not met its initial burden on summary judgment but that Agere's own evidence establishes that Agere cannot prevail on its license defense as a matter of law. Because Townshend did not make a formal motion, the Court hereby advises Agere that it will grant Townshend's request as to Agere's license defense sua sponte pursuant to Federal Rule of Civil Procedure 56(d) unless Agere can identify additional evidence sufficient to raise an issue of material fact. On or before September 10, 2004, Agere shall file a brief not to exceed fifteen (15) pages in length addressing why the Court should not grant Townshend's request. Townshend may file a responsive brief of the same length on or before September 24, 2004. The matter thereafter will stand submitted.
IV. ORDER
Good cause therefore appearing, IT IS HEREBY ORDERED that:
(1) Agere's motion for summary judgment is GRANTED to the extent that it seeks a determination that Agere is not liable for patent infringement prior to August 1, 2000 and otherwise is DENIED;
(2) Townshend's motion to strike is DENIED; and
(3) The parties shall submit additional briefing as set forth in Section III, supra.