Lead Opinion
Opinion for the court filed by Circuit Judge RADER. Dissenting opinion filed by Circuit Judge LOURIE.
In the United States District Court for the Central District of California, Texas Instruments Incorporated (TI) sought to enjoin Tessera, Inc. (Tessera) from continued participation in an International Trade Commission (ITC) infringement action that Tessera had initiated. The district court denied TI’s motion. Because the license agreement between TI and Tessera requires any litigation, including ITC proceedings under Section 337 of the Tariff Act of 1930, to occur in the State of California, this court vacates and remands to the district court to re-entertain TI’s preliminary injunction motion.
On November 1, 1996, TI entered into a “Limited TCC License Agreement” with Tessera. The license agreement covers technology claimed in several of Tessera’s United States patents. The technology relates to chip scale packaging, a semiconductor package with connections between the semiconductor chip and a circuit board underneath the chip, within the periphery of the chip itself. Tessera designates this type of chip package with the brand name “TCC,” for Tessera Compliant Chip. TCCs occupy less space on a circuit board than conventionally packaged chips, a feature which is particularly attractive in applications such as cellular phones.
The license agreement between Tessera and TI contains a clause that governs the law and venue that applies to the agreement:
Governing Lato. This Agreement shall be governed, interpreted and construed in accordance with the laws of the States [sic] of California as if without regard to its provisions with respect to conflicts of Laws. Both parities [sic] shall use their best efforts to resolve by mutual agreement any disputes, controversies, claims or difference which may arise from, under, out of or in connection with this Agreement. If such disputes, controversies, claims or differences cannot be settled between the parties, any litigation between the parties relating to this Agreement shall take place in California. The parties hereby consent to personal jurisdiction and venue in the state and federal courts of California.
(Emphasis added.)
In April 1999, Tessera requested royalties for a class of TI imports known as “MicroStar BGA.” Tessera sought royalties under its United States Patents Nos. 5,679,977, “Semiconductor Chip Assemblies, Methods of Making Same and Components for Same” (’997 patent); 5,852,326, “Face-Up Semiconductor Chip Assembly” (’997 patent); and 5,347,159, “Semiconductor Chip Assemblies with Face-Up Mounting and Rear-Surface Connection to Substrate.” After negotiations, TI and Tessera could not agree on whether the license agreement covered the accused TI products. Therefore, on January 17, 2000, Tessera notified TI of its termination of the license agreement. In response to Tessera’s notice of termination, TI filed an action for declaratory judgment of invalidity and non-infringement in the United States District Court for the Central District of California on February 1, 2000.
On March 28, 2000, Tessera filed a complaint with the ITC, under Section 337 of the Tariff Act of 1930, charging that TI’s importation of the MicroStar BGA products and certain importations by others infringe the ’997 and ’326 patents. See 19 U.S.C. § 1337 (1994).
On April 4, 2000, TI applied for a Temporary Restraining Order (TRO) and an order requesting an expedited preliminary injunction hearing in the California district court. TI requested the court to restrain Tessera “from pursuing any disputes, controversies, claims or differences ... against TI that arise from, under, out of or in connection with” the license agreement, in any place outside California. TI asserted that because the ITC tribunal is located in Washington, D.C., Tessera’s ITC complaint violated the license agreement. TI further explained that the ITC determines whether to initiate an investigation within thirty days of the filing of a complaint. TI considered its request for an expedited preliminary injunction hearing warranted because Tessera could not simply withdraw its. complaint once the ITC initiated an investigation. The district court denied TI’s application for a TRO and set the preliminary injunction hearing date for May 1, 2000.
On May 2, 2000, the district court granted ITC’s motion to intervene and denied TI’s motion for a preliminary injunction. See Texas Instruments Inc. v. Tessera, Inc.,
II.
This court generally views the grant or denial of a preliminary injunction as a procedural issue not unique to the exclusive jurisdiction of the Federal Circuit. See Mikohn Gaming Corp. v. Acres Gaming, Inc.,
TI’s preliminary injunction motion was a request for the district court to enjoin Tessera from continued participation in an ITC proceeding. This court has .exclusive appellate jurisdiction over ITC determinations made under section 337 of the Tariff Act of 1930. See 28 U.S.C. § 1295(a)(6) (1994). Thus, TI’s appeal relates to a procedural matter arising from substantive issues in an area of law within the unique jurisdiction of this circuit. This circuit’s procedural law, therefore, applies to the district court’s order under review. Under Federal Circuit law, this court sustains a grant or denial of a preliminary injunction unless the district court abused its discretion, or based its decision on an erroneous legal standard or clearly erroneous findings of fact. See Mentor Graphics Corp. v. Quickturn Design Sys., Inc.,
The district court’s order denying TI’s motion for a preliminary injunction also presents an issue concerning interpretation of a license agreement. General contract interpretation is not within the exclusive jurisdiction of the Federal Circuit. The Supreme Court has held that “[t]he interpretation of private contracts is ordinarily a question of state law.” Volt Info. Sci, Inc. v. Bd. of Tr. of Leland Stanford Junior Univ.,
According to this circuit’s law, a party seeking an injunction must show: (1) a reasonable likelihood of success on the merits; (2) irreparable harm; (3) a balance of hardships in its favor; and (4) a public interest in favor of the injunction. See Chrysler Motors Corp.,
The Cal. Civ.Code supplies basic rules for contract interpretation: (1) “clear and explicit” language which does not produce an absurdity will govern, Cal. Civ. Code § 1638; (2) ambiguous terms receive the meaning “which the promisor believed, at the time of making it, that the promisee understood,” Cal. Civ.Code § 1649; and (3) ambiguity persisting beyond the application of the previous rule will be resolved against “the party who caused the uncertainty to exist,” Cal. Civ.Code § 1654. In sum, “the mutual intention of the parties at the time the contract is formed governs interpretation.” AIU Ins. Co. v. Superior Court,
When interpreting a contract provision, a court gives the contract terms their ordinary and popular meaning unless the contracting parties use them in a technical or a special sense. Id. at 822,
As noted above, contracts in California rely for meaning predominantly upon the mutual intention of the parties at the time of contracting. The district court did not make any findings as to the parties’ understanding of the term “litigation” at the time of contracting. The license agreement at issue in this suit governs a very specific form of business arrangement, namely the licensing of patented technology. Both Tessera and TI are sophisticated corporations with experience in patent licensing. The United States Patent and Trademark Office Patent Bibliographic Database lists Tessera as the assignee of over 110 patents, TI of over 8000 patents. These corporations necessarily regularly apply the basic tenets of patent practice. Each is well aware of available
Patent law affords a patentee several alternative remedies against a purported infringer. For alleged domestic infringement, a patentee can file an action in a district court. See 35 U.S.C. § 281 (1952); see also 28 U.S.C. § 1338 (1994). For alleged infringement through importation, a patentee can also file an action in a district court or in the ITC. See 19 U.S.C. § 1337. In fact, a patentee can bring suit both in a district court and in the ITC against an alleged infringer who is importing an allegedly infringing product.
The two forums offer a patentee different types of remedies. In a district court, a patentee can seek an injunction and damages. With respect to infringing imports, however, the patentee must take the additional step of requesting the U.S. Customs Service to enforce the district court judgment by seizing the offending goods. In the ITC, the patentee may not seek money damages, Bio-Tech. Gen. Corp. v. Genentech, Inc.,
Thus, when TI and Tessera negotiated the terms of their licensing ’ agreement, this court attributes to them adequate knowledge of the basic patent law actions and remedies available to litigants, including the available forums and venues. Both parties would have been fully aware of the forums of the district courts and the ITC for resolution of future controversies arising from the license agreement. With this in mind, this court next examines the parties’ intentions in using the word “litigation” in the governing law clause of their agreement. As mentioned earlier, the district court determined the meaning of “litigation” based on the California Code of Civil Procedure Title for “Vexatious Litigants.” The definition of “litigation” in that title does not govern this licensing agreement for Tessera patents. In the first place, the Cal.Code Civ. PROC., section 391, states: “As used in this title ... ‘Litigation’ means .... ” (emphasis added). Thus, the California Code limits its definition to use in that particular title. This limitation hardly suggests that TI and Tessera would have incorporated that meaning from the California “Vexatious Litigants” section into their license agreement on patented technology.
In the field of patent law, which is more relevant to the meaning of this license, “litigation” does not exclude ITC proceedings under section 337. Section 337 proceedings are inter partes actions initiated by the filing of a complaint and including discovery, filing of briefs and motions, and testimony and arguments at a hearing before an administrative law judge. See 19 U.S.C. § 1337(c). In section 337 proceedings relevant to patent infringement, the ITC follows Title 35 of the United States Code and the case law of this court. See 19 U.S.C. § 1337(c). In sum, this court has consistently treated section 337 patent infringement proceedings as litigation. See, e.g., San Huan New Materials High Tech, Inc. v. Int’l Trade Comm’n,
Indeed, the ITC itself refers to its section 337 proceedings as “litigation.” See, e.g., ITC R. Prac. & P„ 19 C.F.R. § 210.27 (1999) (referring to the “cost of litigation” and “issues at stake in the litigation” with respect to ITC discovery rules); see also U.S. International Trade Commission Fiscal Year 1996 Annual Report, 1997 ITC Lexis 410 (August 1997) (“The ITC’s Administrative Law Judges (ALJs) direct litigation, hold hearings, and make initial determinations in investigations under section 337 of the Tariff Act of 1930.”). Moreover, practitioners, commentators, and scholars in the areas of both intellectual property and trade law also refer to section 337 investigations as litigation. See
Therefore, section 337 proceedings at the ITC are recognized as litigation. As noted earlier, this court attributes knowledge of patent law and its language and usages to both parties at the time of contracting. In interpreting contracts, words are given their “clear and explicit” meaning in the field of the agreement unless it is clearly shown that the parties intended a different meaning. See Cal. Civ.Code § 1638; see also Cal. Civ.Code § 1649. Thus, the term “litigation” in the governing law clause of the license agreement includes section 337 proceedings at the ITC. The governing law clause, therefore, requires any litigation between the parties, including ITC proceedings, to take place in California. Because ITC actions cannot be brought in California, it follows that the parties did not agree to the ITC as a forum for litigation.
This court further notes that the governing law clause of the license agreement is not limited to license related issues such as the amount of royalty due, term of agreement, and cross-licensing. The governing law clause lists “disputes, controversies, claims or differencefs] which may arise from, tinder, out of or in connection with this Agreement.” (Emphasis added.) Patent infringement disputes do arise from license agreements. See, e.g., United States Valves, Inc. v. Dray,
The district court denied TI’s preliminary injunction motion based on a finding that TI was not likely to succeed on its claim that the governing law clause includes ITC proceedings. Because this
Following a combination of Ninth Circuit and California state law, the district court only examined TI’s likelihood of success on the merits in denying the motion for preliminary judgment. TI I,
III.
The district court also declined to grant TI’s motion for a preliminary injunction because it found that to do so would interfere “with the [ITCj’s statutory mandate to investigate complaints brought under 19 U.S.C. § 1337 and would adversely impact the ITC’s ability to perform its statutory duties.” TI I,
In light of its interpretation of the term “litigation” in the license agreement, this court also observes that the district court erred in assessing the implications of enforcing the license agreement. Because the governing law clause encompasses ITC section 337 proceedings, Tessera breached this provision of the license agreement by bringing an action against TI at the ITC (which is in Washington, D.C.), rather than in a court in California, as mandated by the agreement. Thus, TI may have been prejudiced by Tessera’s breach, for TI had already filed suit in California and would now be obliged to defend a second action in a Washington, D.C., forum. In effect, Tessera is attempting to compel TI to fight infringement battles on two fronts.
More important, TI’s preliminary injunction motion will not and cannot enjoin the ITC action. TI has not sought to enjoin the ITC directly, but only to enjoin Tess-era from participating in the ITC proceedings against TI. The ITC, intervening in this appeal, advised that the action will continue, even without Tessera’s participation with respect to TI. The ITC’s investigation of Tessera’s complaint includes Sharp Corporation and Sharp Electronics Corporation as respondents in addition to TI. Tessera, therefore, will still participate in the overall ITC proceeding, even if TI’s preliminary injunction request is ultimately granted. Any potential injunction would simply implement the governing law clause and any litigation between Tessera and TI will occur in a California district court.
CONCLUSION
This court reverses the district court’s judgment that TI would not be likely to succeed in proving that Tessera’s action before the ITC is covered by the governing law clause. This court, therefore, vacates the district court’s denial of TI’s preliminary injunction motion and remands to the district court to reconsider the preliminary injunction motion on the remaining preliminary injunction factors.
COSTS
Each party shall bear its own costs.
VACATED and REMANDED
Notes
. On June 2, 2000, the Central District of California granted Tessera's "Motion to Transfer Venue” to the Northern District of California under 28 U.S.C. § 1404(a) (1994).
Dissenting Opinion
dissenting.
I respectfully dissent.
Because ITC litigation is part of the patent world, as the majority clearly agrees, I believe that if the parties had intended that ITC proceedings be part of this paragraph, they would have so stated. I believe the limitation to California was intended to mean California, and not Texas or Delaware. The indication of California is a geographic limitation, not one indicating the type of forum. It did not state that litigation should be in a district court, rather than at the ITC.
Moreover, the provision relates to disputes “in connection with the agreement.” Disputes in connection with a license agreement are most often disputes about the scope of licensed subject matter, amount of royalty due, term of agreement, cross-licensing, the meaning of other provisions, etc., rather than concerning the validity or infringement of the patent. The whole point of a license is not to exclude, as a patent does, but to legitimize the licensee under the patent. While obviously disputes can arise concerning validity and infringement, I believe that the language indicates that the parties meant questions most likely to arise under the contract, i.e., those that can be resolved by invoking California contract law. License agreements are construed under state law, in which case the particular venue might matter, thus supporting the idea that the parties intended one state as the venue, not another state. Moreover, the parties could not have intended that California law would govern the question of whether or not ITC proceedings are litigation, as California law has nothing relevant to offer on that issue.
In addition, enjoining Tessera, even though it would not enjoin the Commission, would potentially impede and complicate the Commission’s opportunity to pursue its own statutory duty to investigate possible violations of the Tariff Act. Any subpoena issued to Tessera would create a conflict with the district court’s injunction. Such conflicts are to be abhorred and avoided if at all possible. Although it was pointed out at oral argument that Tessera could still prosecute its complaint against Sharp, any district court injunction would not be binding against TI. Thus, we might have the situation in which both parties to this appeal are in the ITC action, with TI having the opportunity to assist Sharp in its attack on Tessera’s patent, but Tessera would have one hand tied behind its back, not being able to proceed against TI. That likelihood does not argue for the resolution adopted by the majority. Practicality supports affirmance.
Finally, we review a denial of an injunction on an abuse of discretion standard. Although contract interpretation is a question of law, I believe some reluctance should still exist in overthrowing a district court’s denial of the injunction. I do not believe the facts of this case and the language of this contract justify reversal of the trial court.