Electronics and Telecommunications Research Institute v. Acacia Research Group, LLC
1:15-cv-03419
S.D.N.Y.Jun 1, 2017Background
- ETRI (a South Korean research institute) granted Acacia exclusive "all substantial rights" to two patent portfolios (U.S. and foreign) under two license agreements (Jan 14 and May 7, 2010). Acacia was to use "good faith efforts" to pursue licensing and enforcement of the ETRI patents.
- Under the agreements, ETRI was entitled to 50% of "Net Proceeds" (Total Recoveries less Acacia's Costs) from licensing and enforcement of the ETRI patents.
- Acacia later entered multiple "Global Agreements" with third parties that included either licenses or covenants not to sue with respect to various patents, and Acacia received substantial revenue from those deals.
- ETRI sued, seeking partial summary judgment on liability for breach of contract, arguing Acacia’s covenants not to sue and other Global Agreement consideration constitute "licensing" triggering a share of proceeds.
- Acacia argued the contract’s terms limit "licensing" to conduct tied to pursuing infringement (i.e., licensing as an enforcement activity), so covenants not to sue/other commercial deals outside enforcement do not trigger payments to ETRI.
- The Court found the agreements unambiguous, adopted Acacia’s interpretation, and denied ETRI’s motion for partial summary judgment on breach of contract liability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Acacia must pay ETRI 50% of Net Proceeds from Global Agreements that include covenants not to sue or other non-enforcement licenses | ETRI: "Licensing" includes covenants not to sue; any consideration from Global Agreements is "licensing" and thus shareable | Acacia: "Licensing" and "enforcement" mean activities to pursue infringement; covenants not to sue/other commercial deals outside enforcement do not trigger sharing | Court held for Acacia: agreements unambiguous; "licensing" construed in context as part of enforcement/pursuit of infringement, not all covenants not to sue or commercial grants |
| Whether contract terms are ambiguous so extrinsic evidence may be considered | ETRI: terms could cover broader licensing; cites cases equating covenants and licenses | Acacia: terms have plain meaning; context (e.g., Sec. 6.1) shows licensing tied to suspected infringers | Court: contract unambiguous; extrinsic evidence not considered |
| Whether ejusdem generis and contract context support ETRI’s broad reading | ETRI: general language can encompass covenants not to sue | Acacia: ejusdem generis and Sec.1/6 show licensing is an enforcement tool among similar enforcement rights | Court: ejusdem generis and Sec.6.1 support Acacia’s narrower enforcement-related meaning |
| Whether adopting ETRI’s reading would impose additional payment terms not in agreement and be commercially unreasonable | ETRI: would get at least some portion of Global recoveries; damages calculable at trial | Acacia: no contractual basis for extra sharing; result would force sharing with many counterparties and be absurd | Court: rejected ETRI as adding terms and producing commercially unreasonable/absurd results |
Key Cases Cited
- Fay v. Oxford Health Plan, 287 F.3d 96 (procedural standard for summary judgment)
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment/genuine issue standard)
- K. Bell & Assoc., Inc. v. Lloyd's Underwriters, 97 F.3d 632 (initial contract interpretation is for the court)
- Readco, Inc. v. Marine Midland Bank, 81 F.3d 295 (contract interpretation principles)
- Chesapeake Energy Corp. v. Bank of New York Mellon Trust Co., N.A., 773 F.3d 110 (give effect to parties' intent; plain meaning rule)
- Mastrovincenzo v. City of New York, 435 F.3d 78 (intent of parties controls; plain meaning)
- JA Apparel Corp. v. Abbud, 568 F.3d 390 (ambiguity determined within four corners)
- Kass v. Kass, 91 N.Y.2d 554 (New York law on contract interpretation and ambiguity)
- Law Debenture Trust Co. of N.Y. v. Maverick Tube Corp., 595 F.3d 458 (contract ambiguity standard)
- Allen v. Coughlin, 64 F.3d 77 (view evidence in light most favorable to nonmoving party)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (nonmoving party must show specific facts creating genuine issue)
- Graham v. Long Island R.R., 230 F.3d 34 (summary judgment standards)
- Marvel Characters, Inc. v. Simon, 310 F.3d 280 (any record evidence supporting non-movant requires denial)
- Bailey v. Fish & Neave, 8 N.Y.3d 523 (courts may not add or excise terms to contracts)