Sanyo Electric Co., Ltd. v. Intel Corporation
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Opinion
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
SANYO ELECTRIC CO., LTD., ) ) Plaintiff, ) ) v. ) C.A. No. 2018-0723-MTZ ) INTEL CORPORATION, ) ) Defendant. )
MEMORANDUM OPINION Date Submitted: November 18, 2020 Date Decided: February 26, 2021
Todd C. Schiltz, FAEGRE DRINKER BIDDLE & REATH LLP, Wilmington, Delaware; David Ben-Meir, NORTON ROSE FULBRIGHT US LLP, Los Angeles, California; Mark Eberhard, Erik Janitens, and Jaime Stark, NORTON ROSE FULBRIGHT US LLP, Houston, Texas, Attorneys for Plaintiff and Counterclaim Defendant Sanyo Electric Co., Ltd.
Jack B. Blumenfeld and Jennifer Ying, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; Tiffany P. Cunningham, PERKINS COIE LLP, Chicago, Illinois; Chad S. Campbell, Tyler R. Bowen, and Bryan Banks, PERKINS COIE LLP, Phoenix, Arizona, Attorneys for Defendant and Counterclaim Plaintiff Intel Corporation.
ZURN, Vice Chancellor. Cross licensing is common in the computer and semiconductor industries, in
which complex products are susceptible of being covered by hundreds of patents.1
Generally, a cross license is “an agreement between two or more patentees to
exchange licenses for their mutual benefit and use of the licensed products,”
allowing each contracting party to participate in what would otherwise amount to
patent infringement.2 Competitors in a common field of innovation come together
and agree in advance that neither will be precluded by the other’s patents from
introducing new products or adopting new processes.3 “As a result of the cross
license, the industry leaders are effectively unable to use patents against one
another.”4
The parties here, market leaders in the computer and semiconductor industry,
have been counterparties to a cross license since 1982. This action arises from a
1 Cecil D. Quillen, Jr., Cornerstone Rsch., American Law Institute-American Bar Association Continuing Legal Education Advanced New ALI-ABA Course of Study, Intellectual Property Licensing in Today’s “E-conomy”, Licensing Strategies for Innovators 242 (May 29–30, 2003) (transcript available in West’s ALI database at SH087 ALI-ABA 235); see also John H. Barton, Patents and Antitrust: A Rethinking in Light of Patent Breadth and Sequential Innovation, 65 Antitrust L.J. 449, 462 (“Normally, when confronted with a variety of patents having overlapping claims and owned by a number of different firms, cross-licenses are negotiated, if only to avoid conflict over mutually blocking patents. The arrangements may relate only to current technologies or may affect future technologies as well. . . . Among the most important examples of such cross-licenses is the semiconductor fabrication sector.”). 2 License, Black’s Law Dictionary (11th ed. 2019) (defining “cross-license”). 3 See Quillen, supra note 1, at 243. 4 Barton, supra note 1, at 463.
1 June 30, 2006 Patent Cross License Agreement (the “Cross License”) between
Plaintiff and Counterclaim Defendant Sanyo Electric Co., Ltd. (“Sanyo”) and
Defendant and Counterclaim Plaintiff Intel Corporation (“Intel”). Sanyo and Intel
have cross-moved for summary judgment on a number of issues, centering on
whether the Cross License permits Intel to make and sell Wi-Fi adapters under
Sanyo’s patents. This memorandum opinion resolves those cross motions with
respect to the Cross License’s scope and the parties’ rights thereunder, as well as
whether reformation is available as a remedy to Sanyo. For the reasons that follow,
partial summary judgment is entered in Intel’s favor regarding the scope of the Cross
License as written, with the caveat that Sanyo may still be able to prevail on
reformation of the Cross License.
2 I. BACKGROUND5
Intel is a Delaware corporation and a leading manufacturer, designer, and
supplier of integrated circuit products, also called chips or semiconductor devices.6
For fifty years, Intel has designed, manufactured, and supplied a variety of chips,
including microprocessors, digital signal processors, network processors,
application processors, memory chips, radio frequency chips, and many others.7
Intel’s contractual counterparty and competitor, Sanyo, is a Japanese corporation.8
Historically, Sanyo has manufactured televisions and other consumer electronics,
mobile phones, rechargeable batteries, solar cells, and a range of integrated circuit
5 Citations in the form of “Am. Compl. ¶ ––” refer to Sanyo’s Amended Complaint, available at Docket Item (“D.I.”) 28. Citations in the form of “Countercl. ¶ ––” refer to Intel’s Counterclaim, available at D.I. 32. Citations in the form of “Cross License § ––” refer to the Cross License, available as Exhibit 1 to Sanyo’s Amended Compliant and Exhibit A to Intel’s Counterclaim. Citations in the form of “Kitchin Decl. ––” refer to the Declaration of Duncan Kitchin in Support of Intel Corporation’s Motion for Partial Summary Judgment, available at D.I. 109. Citations in the form of “Counsel Decl. ––” refer to the Counsel Declaration (Nathan Kassebaum) in Support of Intel Corporation’s Motion for Partial Summary Judgment, available at D.I. 109. Citations in the form of “Def.’s Ex. ––” refer to exhibits to the Counsel Declaration, available at D.I. 109 and D.I. 110. Citations in the form of “Pl.’s Ex. ––” refer to exhibits to the Transmittal Affidavit of Todd C. Schiltz in Support of Sanyo’s Cross Motion for Partial Summary Judgment and in Opposition to Intel’s Motion for Partial Summary Judgment, available at D.I. 123, D.I. 124, D.I. 125, and D.I. 126. 6 See Def.’s Ex. 1 at 5; Def.’s Ex. 2 at 1. 7 See Def.’s Ex. 1 at 5. 8 Am. Compl. ¶ 23. Sanyo is now a wholly owned subsidiary of Panasonic Corporation. Id.
3 products, including microcontrollers and specialized chips for televisions and solar
cells.9
Intel and Sanyo first entered a long-term, portfolio-wide patent cross license
agreement in 1982.10 More than two decades later, in 2005, they began negotiating
a new agreement to capture additional patents that had issued in the interim. 11 The
parties’ negotiations lasted over a year, spanned several drafts, emails, and in-person
meetings, and culminated in the final Cross License.12 After extensive negotiations,
including over whether chips mounted on cards—specifically Wi-Fi adapters
referred to as Wireless Communication Modules (“WCMs”)—were included in the
Cross License,13 the parties signed the final Cross License, which became effective
on June 30, 2006.14 The Cross License punctuated the parties’ extensive
negotiations with an integration clause.15
9 See Def.’s Ex. 3. 10 Def.’s Ex. 4. 11 See Am. Compl. ¶ 25. 12 See, e.g., id. ¶¶ 8, 30; Pl.’s Ex. 9; Pl.’s Ex. 22; Pl.’s Ex. 23; Pl.’s Ex. 24; Pl.’s Ex. 25; Pl.’s Ex. 26; Pl.’s Ex. 27; Pl.’s Ex. 29; Pl.’s Ex. 30. 13 See, e.g., Pl.’s Ex. 10; Pl.’s Ex. 11; Pl.’s Ex. 12; Pl.’s Ex. 13; Pl.’s Ex. 14; Pl.’s Ex. 15; Pl.’s Ex. 27; Pl.’s Ex. 29; Pl.’s Ex. 31; Pl.’s Ex. 32; Pl.’s Ex. 33; Pl.’s Ex. 34; Pl.’s Ex. 35; Pl.’s Ex. 36; Def.’s Ex. 11; Def.’s Ex. 14; Def.’s Ex. 15; Def.’s Ex. 16. 14 See generally Cross License. 15 Id. § 6.6.
4 The Cross License addresses the manufacture of, sale of, and materials and
components used in computer chips, memory, processors, central processing units,
solar cells, displays, and more.16 The relevant provisions here grant Intel a
nonexclusive license under Sanyo’s patents to “make, use, sell (directly and/or
indirectly), offer to sell, import and otherwise dispose of” Intel Licensed Products,17
which include “any product that constitutes an Integrated Circuit.”18 The dispute in
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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
SANYO ELECTRIC CO., LTD., ) ) Plaintiff, ) ) v. ) C.A. No. 2018-0723-MTZ ) INTEL CORPORATION, ) ) Defendant. )
MEMORANDUM OPINION Date Submitted: November 18, 2020 Date Decided: February 26, 2021
Todd C. Schiltz, FAEGRE DRINKER BIDDLE & REATH LLP, Wilmington, Delaware; David Ben-Meir, NORTON ROSE FULBRIGHT US LLP, Los Angeles, California; Mark Eberhard, Erik Janitens, and Jaime Stark, NORTON ROSE FULBRIGHT US LLP, Houston, Texas, Attorneys for Plaintiff and Counterclaim Defendant Sanyo Electric Co., Ltd.
Jack B. Blumenfeld and Jennifer Ying, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; Tiffany P. Cunningham, PERKINS COIE LLP, Chicago, Illinois; Chad S. Campbell, Tyler R. Bowen, and Bryan Banks, PERKINS COIE LLP, Phoenix, Arizona, Attorneys for Defendant and Counterclaim Plaintiff Intel Corporation.
ZURN, Vice Chancellor. Cross licensing is common in the computer and semiconductor industries, in
which complex products are susceptible of being covered by hundreds of patents.1
Generally, a cross license is “an agreement between two or more patentees to
exchange licenses for their mutual benefit and use of the licensed products,”
allowing each contracting party to participate in what would otherwise amount to
patent infringement.2 Competitors in a common field of innovation come together
and agree in advance that neither will be precluded by the other’s patents from
introducing new products or adopting new processes.3 “As a result of the cross
license, the industry leaders are effectively unable to use patents against one
another.”4
The parties here, market leaders in the computer and semiconductor industry,
have been counterparties to a cross license since 1982. This action arises from a
1 Cecil D. Quillen, Jr., Cornerstone Rsch., American Law Institute-American Bar Association Continuing Legal Education Advanced New ALI-ABA Course of Study, Intellectual Property Licensing in Today’s “E-conomy”, Licensing Strategies for Innovators 242 (May 29–30, 2003) (transcript available in West’s ALI database at SH087 ALI-ABA 235); see also John H. Barton, Patents and Antitrust: A Rethinking in Light of Patent Breadth and Sequential Innovation, 65 Antitrust L.J. 449, 462 (“Normally, when confronted with a variety of patents having overlapping claims and owned by a number of different firms, cross-licenses are negotiated, if only to avoid conflict over mutually blocking patents. The arrangements may relate only to current technologies or may affect future technologies as well. . . . Among the most important examples of such cross-licenses is the semiconductor fabrication sector.”). 2 License, Black’s Law Dictionary (11th ed. 2019) (defining “cross-license”). 3 See Quillen, supra note 1, at 243. 4 Barton, supra note 1, at 463.
1 June 30, 2006 Patent Cross License Agreement (the “Cross License”) between
Plaintiff and Counterclaim Defendant Sanyo Electric Co., Ltd. (“Sanyo”) and
Defendant and Counterclaim Plaintiff Intel Corporation (“Intel”). Sanyo and Intel
have cross-moved for summary judgment on a number of issues, centering on
whether the Cross License permits Intel to make and sell Wi-Fi adapters under
Sanyo’s patents. This memorandum opinion resolves those cross motions with
respect to the Cross License’s scope and the parties’ rights thereunder, as well as
whether reformation is available as a remedy to Sanyo. For the reasons that follow,
partial summary judgment is entered in Intel’s favor regarding the scope of the Cross
License as written, with the caveat that Sanyo may still be able to prevail on
reformation of the Cross License.
2 I. BACKGROUND5
Intel is a Delaware corporation and a leading manufacturer, designer, and
supplier of integrated circuit products, also called chips or semiconductor devices.6
For fifty years, Intel has designed, manufactured, and supplied a variety of chips,
including microprocessors, digital signal processors, network processors,
application processors, memory chips, radio frequency chips, and many others.7
Intel’s contractual counterparty and competitor, Sanyo, is a Japanese corporation.8
Historically, Sanyo has manufactured televisions and other consumer electronics,
mobile phones, rechargeable batteries, solar cells, and a range of integrated circuit
5 Citations in the form of “Am. Compl. ¶ ––” refer to Sanyo’s Amended Complaint, available at Docket Item (“D.I.”) 28. Citations in the form of “Countercl. ¶ ––” refer to Intel’s Counterclaim, available at D.I. 32. Citations in the form of “Cross License § ––” refer to the Cross License, available as Exhibit 1 to Sanyo’s Amended Compliant and Exhibit A to Intel’s Counterclaim. Citations in the form of “Kitchin Decl. ––” refer to the Declaration of Duncan Kitchin in Support of Intel Corporation’s Motion for Partial Summary Judgment, available at D.I. 109. Citations in the form of “Counsel Decl. ––” refer to the Counsel Declaration (Nathan Kassebaum) in Support of Intel Corporation’s Motion for Partial Summary Judgment, available at D.I. 109. Citations in the form of “Def.’s Ex. ––” refer to exhibits to the Counsel Declaration, available at D.I. 109 and D.I. 110. Citations in the form of “Pl.’s Ex. ––” refer to exhibits to the Transmittal Affidavit of Todd C. Schiltz in Support of Sanyo’s Cross Motion for Partial Summary Judgment and in Opposition to Intel’s Motion for Partial Summary Judgment, available at D.I. 123, D.I. 124, D.I. 125, and D.I. 126. 6 See Def.’s Ex. 1 at 5; Def.’s Ex. 2 at 1. 7 See Def.’s Ex. 1 at 5. 8 Am. Compl. ¶ 23. Sanyo is now a wholly owned subsidiary of Panasonic Corporation. Id.
3 products, including microcontrollers and specialized chips for televisions and solar
cells.9
Intel and Sanyo first entered a long-term, portfolio-wide patent cross license
agreement in 1982.10 More than two decades later, in 2005, they began negotiating
a new agreement to capture additional patents that had issued in the interim. 11 The
parties’ negotiations lasted over a year, spanned several drafts, emails, and in-person
meetings, and culminated in the final Cross License.12 After extensive negotiations,
including over whether chips mounted on cards—specifically Wi-Fi adapters
referred to as Wireless Communication Modules (“WCMs”)—were included in the
Cross License,13 the parties signed the final Cross License, which became effective
on June 30, 2006.14 The Cross License punctuated the parties’ extensive
negotiations with an integration clause.15
9 See Def.’s Ex. 3. 10 Def.’s Ex. 4. 11 See Am. Compl. ¶ 25. 12 See, e.g., id. ¶¶ 8, 30; Pl.’s Ex. 9; Pl.’s Ex. 22; Pl.’s Ex. 23; Pl.’s Ex. 24; Pl.’s Ex. 25; Pl.’s Ex. 26; Pl.’s Ex. 27; Pl.’s Ex. 29; Pl.’s Ex. 30. 13 See, e.g., Pl.’s Ex. 10; Pl.’s Ex. 11; Pl.’s Ex. 12; Pl.’s Ex. 13; Pl.’s Ex. 14; Pl.’s Ex. 15; Pl.’s Ex. 27; Pl.’s Ex. 29; Pl.’s Ex. 31; Pl.’s Ex. 32; Pl.’s Ex. 33; Pl.’s Ex. 34; Pl.’s Ex. 35; Pl.’s Ex. 36; Def.’s Ex. 11; Def.’s Ex. 14; Def.’s Ex. 15; Def.’s Ex. 16. 14 See generally Cross License. 15 Id. § 6.6.
4 The Cross License addresses the manufacture of, sale of, and materials and
components used in computer chips, memory, processors, central processing units,
solar cells, displays, and more.16 The relevant provisions here grant Intel a
nonexclusive license under Sanyo’s patents to “make, use, sell (directly and/or
indirectly), offer to sell, import and otherwise dispose of” Intel Licensed Products,17
which include “any product that constitutes an Integrated Circuit.”18 The dispute in
this case concerns the Cross License’s definitions of “Intel Licensed Product” and
“Integrated Circuit,” and the actions the Cross License allows Intel to take with those
items.
The parties agree that, at bottom, an Integrated Circuit is a computer chip.19
Such chips are used to make up the processing and memory of modern computers.20
A chip is “a device consisting of a number of connected circuit elements, such as
transistors and resistors, fabricated on a single chip of silicon crystal or other
16 See, e.g., id. §§ 1, 3. 17 Id. § 3.1(a). 18 Id. § 1.13; see also id. § 1.6 (defining “Integrated Circuit”). 19 See Pl.’s Ex. 3 at 98 (defining “chip” by referring to “integrated circuit”); id. at 277 (defining “integrated circuit”); Pl.’s Ex. 1 ¶ 67 (“An integrated circuit is . . . [a]lso called: chip.’”); id. ¶ 240 (“Based on the foregoing, one in the industry would conclude that 1.6(a) is a definition of what is conventionally known as a chip, or integrated circuit—the term sought to be defined.”). Both Sanyo and Intel have served expert reports that provide the parties’ views on technical aspects of the Cross License. See Pl.’s Ex. 1; Pl.’s Ex. 2. 20 See, e.g., Pl.’s Ex. 1 ¶ 70.
5 semiconductor materials.”21 The silicon portion of the chip is a semiconducting
substrate.22 The silicon is typically hermetically sealed in packaging, with
conductive leads protruding from it that enable portions of the chip to connect to
other components.23 Chips are often mounted on printed circuit boards (“PCBs”) to
form what are known as cards or adapters that can be plugged into a computer to
provide additional functionality.24 Such cards and adapters include, among other
things, wireless adapters or cards that provide computers with wireless internet
capabilities; such adapters are sometimes referred to as WCMs.25
21 Pl.’s Ex. 3 at 277; accord Pl.’s Ex. 1 ¶ 67. 22 See Pl.’s Ex. 3 at 472; Pl.’s Ex. 1 ¶¶ 66, 184. 23 See Pl.’s Ex. 1 ¶¶ 102–15, 203, 205. 24 See Pl.’s Ex. 3 at 84 (defining “card” as “[a] printed circuit board or adapter that can be plugged into a computer to provide added functionality or new capability,” explaining that “[t]hese cards provide specialized services, such as mouse support and modem capabilities, that are not built into the computer,” and cross-referencing “adapter, board, printed circuit board”); id. at 419 (defining a PCB as a “flat board made of nonconducting material, such as plastic of fiberglass on which chips and other electronic components are mounted”); Pl.’s Ex. 1 ¶ 39 (describing Wi-Fi adapters as “products generally consist[ing] of specialty baseband and MAC chips assembled on a printed circuit board with other components that are necessary to enable Wi-Fi communications”); id. ¶ 109 (describing how an integrated circuit is mounted on a PCB). 25 See Kitchin Decl. ¶¶ 6–17; see also Pl.’s Ex. 1 ¶ 39 (describing various Intel Wi-Fi adapters or cards and referring to “these wireless cards as ‘wireless communication modules’ or ‘WCM’”).
6 After executing the Cross License, Intel began producing Intel-designed,
single-chip MAC/baseband/radio processors for Wi-Fi (the “Wi-Fi Chips”).26 The
parties agree that the Wi-Fi Chips are Integrated Circuits under the Cross License.27
Each Wi-Fi Chip is mounted on a wireless adapter card that plugs into a computer’s
main system board.28 When the Wi-Fi Chip is mounted on the adapter board, or
PCB, it forms a WCM (the “Intel WCM”).29
26 See Kitchin Decl. ¶¶ 11–15. “MAC” stands for medium access control, one of three major tasks that the highly integrated processor provides. Id. ¶¶ 3, 12. The other two task categories are radio frequency processing and digital signal processing. Id. 27 Intel concedes that the Wi-Fi card as a whole does not meet the definition of Integrated Circuit under the Cross License. See Pl.’s Ex. 40 at 30 (contending only that the Wi-Fi Chips “are Integrated Circuits,” “regardless of whether the chips support wireless functions and regardless of the unit of sale that Intel makes to its customers”); D.I. 109 at 29 (“Whether the wireless adapter as a whole constitutes an Integrated Circuit is beside the point.”); id. at 35 (“Intel does not contend that the license grant of Section 3.1 extends to ‘Wireless Communication Modules.’”). 28 See, e.g., Kitchin Decl. ¶¶ 11–16 (describing an Intel WCM as having a Wi-Fi Chip mounted on the adapter’s PCB); Pl.’s Ex. 32 ¶ 41 (noting that “an Intel-WiFi chip is mounted onto a printed circuit board . . . on the Intel 7265 Wi-Fi adapter”). 29 See Kitchin Decl. ¶¶ 11–16; Pl.’s Ex. 32 ¶ 41.
7 Intel has produced multiple generations of Intel WCMs and sells them to
Lenovo to provide Wi-Fi functionality in Lenovo computers.30 Below is an image
of the inside of a 2017 Lenovo Thinkpad T470 laptop computer.31 The red circle
highlights the Intel WCM, specifically an Intel Dual Band Wireless-AC 8265
wireless adapter.32
30 See, e.g., Pl.’s Ex. 1 ¶¶ 38–39; Def.’s Ex. 10. 31 Kitchin Decl. ¶ 16. 32 Id. The Intel Dual Band Wireless-AC 8265 wireless adapter is one generation of an Intel WCM, but is generally representative of all Intel WCMs.
8 The next images zero in on that Intel WCM: the picture on the left shows the
Intel WCM with the adapter’s cover intact, and the picture on the right shows the
Intel WCM with the cover removed.33 As highlighted in red, a single large Integrated
Circuit—a Wi-Fi Chip—is mounted on the Intel WCM’s adapter board.34
In 2011, five years after executing the Cross License, Sanyo sold a large
portfolio of “Wi-Fi Patents” related to wireless communication to nonparty Hera
Wireless S.A., a patent enforcement entity (“Hera”).35 In the sale, Sanyo assigned
only those rights “as would have been held and enjoyed by [Sanyo] had th[e]
Assignment not been made.”36 Sanyo did not specifically identify the Cross License
33 Id. ¶ 14. 34 Id. 35 See Am. Compl. ¶¶ 9, 97; Def.’s Ex. 8; D.I. 108, Ex. 2; D.I. 108, Ex. 4. 36 D.I. 108, Ex. 4 at SANYO0006164; D.I. 108, Ex. 3 at SANYO0006161.
9 to Hera as an encumbrance on Sanyo’s rights.37 In exchange for the Wi-Fi Patents,
Hera agreed to give Sanyo, inter alia, a percentage of the revenues that Hera collects
in the future through its efforts to license and enforce the Wi-Fi Patents.38
In August 2017, Hera and its authorized licensing company, Sisvel UK
Limited (“Sisvel”) sued Lenovo and other companies for patent infringement in the
United States District Court for the District of Delaware.39 Hera and Sisvel alleged
that Lenovo products that use Wi-Fi Chips in Intel WCMs infringe nine of the Wi-
Fi Patents that Hera acquired from Sanyo.40 The suit specifically identifies and
37 See Def.’s Ex. 17 at 3 (stating that “Sanyo admits only that it did not inform Hera of the Cross License,” and that “Sanyo admits that Sanyo identified to Hera licensees to the Assigned Patents, and that Intel was not identified to Hera as a licensee”); see also D.I. 108, Ex. 2; D.I. 108, Ex. 4. 38 See, e.g., Def.’s Ex. 8 § 3.1. 39 See, e.g., Am. Compl. ¶¶ 11–12; Countercl. ¶¶ 16–18. The Hera suits include the following: Hera Wireless SA v. Lenovo Holding Company, Inc., Civ. No. 1-17-cv01088- RGA (D. Del.); Hera Wireless SA v. LG Electronics, Inc., Civ. No. 1-17-cv01089-RGA (D. Del.); Hera Wireless SA v. Amazon.com, Inc., Civ. No. 1-17-cv-00947-RGA (D. Del.); Hera Wireless SA v. ARRIS Group, Inc., Civ. No. 1-17-cv-00948-RGA (D. Del.); Hera Wireless SA v. Belkin International, Inc., Civ. No. 1-17-cv-00949-RGA (D. Del.); Hera Wireless SA v. Buffalo Americas, Inc., Civ. No. 1-17-cv-00950- RGA (D. Del.); Hera Wireless SA v. Netgear, Inc., Civ. No. 1-17-cv-00951-RGA (D. Del.); Hera Wireless SA v. Roku, Inc., Civ. No. 1-17- cv-00952-RGA (D. Del.). 40 See, e.g., Am. Compl. ¶¶ 11–12; Countercl. ¶¶ 16–18. The Wi-Fi Patents are U.S. Patent Nos. 7,369,878; 7,454,234; 7,873,389; 7,962,103; 8,295,400; 8,412,115; 8,737,377; 8,934,851; and 9,270,024. E.g., Countercl. ¶ 16. The lawsuit against Lenovo has been stayed pending completion of inter partes review proceedings at the Patent Trial and Appeal Board of the United States Patent and Trademark Office regarding eight of the nine asserted patents. To date, all challenged claims have been found unpatentable, and Hera has appealed to the United States Court of Appeals for the Federal Circuit. Counsel Decl. ¶¶ 19–20; Def.’s Ex. 18.
10 accuses nine generations of Intel WCMs that use Wi-Fi Chips as the source of
infringement.41
Intel later learned that Sanyo had never informed Hera about the existence or
terms of the Cross License.42 Intel brought the Cross License to Hera’s attention and
asked Hera to dismiss the claims targeting any Lenovo computer that is equipped
with an Intel WCM that includes a Wi-Fi Chip. Intel reasoned that the Cross License
authorized Intel to sell to Lenovo Intel WCMs that include Wi-Fi Chips and that,
because the Wi-Fi Chips substantially embody the claims under Hera’s infringement
theory, the patents were exhausted as to Lenovo computers using the Wi-Fi Chips.43
Hera refused to dismiss the claims.44
41 See, e.g., Def.’s Ex. 10. 42 See Def.’s Ex. 17 at 3. 43 See Def.’s Ex. 19. The doctrine of patent exhaustion limits the patent rights that survive the initial authorized sale of a patented item and the patentee’s right to control what others can do with an article embodying or containing an invention. Under the doctrine, “the initial authorized sale of a patented item terminates all patent rights to that item.” Quanta Comput. Inc. v. LG Elecs., Inc., 553 U.S. 617, 625 (2008). However, “[e]xhaustion is triggered only by a sale authorized by the patent holder.” Id. at 636. Thus, “if a patentee has not given authority for a licensee to make a sale, that sale cannot exhaust the patentee’s rights.” Purdue Pharma L.P. v. Collegium NF, LLC, 2019 WL 2525399, at *4 (D. Del. June 19, 2019) (quoting Impression Prods., Inc. v. Lexmark Int’l, Inc., 137 S. Ct. 1523, 1535 (2017)). But if authorized, the sale exhausts the patentee’s monopoly over the item and gives the purchaser, or any subsequent owner, a right to use or resell that article. See Bowman v. Monsanto Co., 569 U.S. 278, 283 (2013). 44 See Def.’s Ex. 20.
11 In February 2018, Intel raised the issue with Sanyo and invoked the Cross
License’s dispute resolution procedures.45 Intel and Sanyo met three times,
including once with a mediator.46 The parties’ efforts were unsuccessful.
Sanyo filed this action in October 2018.47 In September 2019, Sanyo filed the
operative amended complaint (the “Amended Complaint”).48 Count I seeks a
declaratory judgment of the parties’ rights under the Cross License, specifically
requesting an order that the Cross License does not authorize Intel to make or sell
WCMs and that any of Intel’s customers’ products incorporating Intel’s WCMs are
not licensed or authorized under the Cross License.49 Count II asserts a claim for
intentional interference with performance of contract by a third party, specifically
Hera.50 Count III asserts a claim for intentional interference with another’s
performance of his own contract.51 Count IV asserts a claim for trespass to chattels.52
And Count V seeks reformation of the Cross License “[i]n the event that it is
45 See Def.’s Ex. 21. 46 See id.; D.I. 109 at 16. 47 D.I. 1. 48 See generally Am. Compl. 49 Id. ¶¶ 120–48. 50 Id. ¶¶ 149–56. 51 Id. ¶¶ 157–67. 52 Id. ¶¶ 168–79.
12 determined that the Cross License [], as written, licenses Intel to make and sell
WCM.”53
Intel filed its Answer and Counterclaim in October 2019.54 Count I alleges
that Sanyo breached the Cross License by assigning the Wi-Fi Patents to Hera.55
Count II seeks a declaratory judgment that the Wi-Fi Patents are subject to the Cross
License; that Intel’s Integrated Circuits, specifically the Wi-Fi Chips that perform
wireless communication functionality, are licensed under the Cross License; and
that, therefore, the Cross License does not foreclose the production and sale of Intel
WCMs.56
After substantial discovery, the parties turned to summary judgment to resolve
the pending claims. The parties filed and briefed cross motions on Count I of the
Counterclaim, concerning whether Sanyo’s Hera assignment breached the Cross
License.57 The parties also filed and briefed cross motions on Count I of the
Amended Complaint and Count II of the Counterclaim, concerning whether Intel’s
Wi-Fi Chips are licensed under the Cross License when used in Intel WCMs.58 In
53 Id. ¶ 186; see also id. ¶¶ 180–85, 187. 54 See generally Countercl. 55 Id. ¶¶ 60–77. 56 Id. ¶¶ 78–87. 57 See D.I. 108; D.I. 128; D.I. 133; D.I. 139. 58 See D.I. 109; D.I. 122; D.I. 134; D.I. 143.
13 particular, Intel moved on the grounds that the Wi-Fi Chips that are sold to Lenovo
as a component of Intel WCMs are licensed;59 Sanyo cross-moved on the grounds
that “Intel does not have a license [to] sell Wi-Fi adapters or Wi-Fi chips as
components of Wi-Fi adapters under Section 3.1 of the Cross License.”60 Finally,
Intel sought summary judgment on Count V of the Amended Complaint, contending
that Sanyo’s reformation claim is barred by the Cross License’s integration clause.61
The parties briefed these motions (the “Motions”) as of November 3.62
I heard argument on the Motions on November 18.63 I took the Motions under
advisement only with respect to the Cross License’s scope and the availability of
reformation.64 The remaining issues depend at least in part on the outcome of this
decision and therefore remain pending.65
59 D.I. 109, Mot. 60 D.I. 122, Mot. 61 See D.I. 109. 62 See D.I. 109; D.I. 122; D.I. 134; D.I. 143. 63 See D.I. 155 [hereinafter “Hr’g Tr.”]. 64 Id. 69–70. 65 After argument, I concluded that judicial economy would be best served by handling the remaining issues in phases. Today, I adopt Intel’s reading of the Cross License and conclude its integration clause does not bar reformation. The next phase of litigation will focus on the parties’ negotiation history and whether there are genuine issues of material fact that preclude summary judgment on reformation, as well as whether Sanyo breached the Cross License via the Hera assignment and its involvement or lack of involvement in the underlying infringement litigation. See Hr’g Tr. 69–71. A scheduling conference is set in the coming weeks.
14 II. ANALYSIS
Summary judgment is appropriate where there is no genuine dispute of
material fact and the moving party is entitled to judgment as a matter of law.66
Where the parties have filed cross motions for summary judgment and have not presented argument to the Court that there is an issue of fact material to the disposition of either motion, the Court shall deem the motions to be the equivalent of a stipulation for decision on the merits based on the record submitted with the motions.67
In cases involving questions of contract interpretation, like this one, the Court will
grant summary judgment in two scenarios: (1) when the contract is unambiguous,
or (2) when the extrinsic evidence fails to create a triable issue of material fact.68
Accordingly, “[s]ummary judgment is the proper framework for enforcing
unambiguous contracts because there is no need to resolve material disputes of
fact.”69
The parties dispute whether the Cross License, as written, licenses Wi-Fi
Chips when mounted on cards or adapters, as in an Intel WCM. The parties agree
that the Cross License’s language is clear and unambiguous and that there are no
66 Ct. Ch. R 56(c). 67 Id. 56(h). 68 E.g., GRT, Inc. v. Marathon GTF Tech., Ltd., 2012 WL 2356489, at *4 (Del. Ch. June 21, 2012). 69 HIFN v. Intel Corp., 2007 WL 1309376, at *9 (Del. Ch. May 2, 2007).
15 genuine disputes of material fact.70 Thus, the Cross License’s scope, the parties’
rights thereunder, and reformation’s availability as a remedy based on the Cross
License’s plain language are suited for resolution on the Motions.
A. Section 3.1 Of The Cross License Permits Intel To Use Wi-Fi Chips In Intel WCMs.
The parties’ cross motions pose the question of whether Intel has engaged in
a licensed activity by placing the Wi-Fi Chips on adapter boards to form Intel
WCMs.71 Section 3.1(a) permits Intel to “make, use, sell (directly and/or indirectly),
offer to sell, import and otherwise dispose of all Intel Licensed Products.”72 Section
1.13 defines “Intel Licensed Product” as “any product that constitutes an Integrated
Circuit, and that if sold, is sold by Intel or an Intel Licensed Subsidiary as its own
product . . . and not on behalf of another, provided that Intel Licensed Product shall
not include any Sanyo Proprietary Product.”73
I conclude that the Wi-Fi Chips are and remain Intel Licensed Products when
used or disposed of on an adapter board to form Intel WCMs. I also conclude that
the Cross License broadly permits Intel to use or dispose of the Wi-Fi Chips, and
70 See Hr’g Tr. 68–69. 71 See, e.g., id. 45–46. 72 Cross License § 3.1(a). 73 Id. § 1.13.
16 that mounting them on adapter cards, even for eventual sale, is such a permitted use
or disposal.
1. The Wi-Fi Chips Are Intel Licensed Products Under Section 1.13.
The parties’ dispute centers on the proper reading of Section 1.13’s phrase
“any product that constitutes an Integrated Circuit,” and the object or “product” it
encompasses. The primary issue is whether the “product that constitutes an
Integrated Circuit” is the Wi-Fi Chip regardless of its installation in an Intel WCM,
or the Intel WCM as a unit.74 I conclude that the “product” is the Wi-Fi Chip, not
the Intel WCM. The rest of Section 1.13’s requirements readily apply to the Wi-Fi
Chip.
a. Under Section 1.13, The Wi-Fi Chip Is A “Product.”
Hera’s infringement allegations against Intel focus on the alleged misuse of
the Wi-Fi Chips contained in Intel WCMs, not the Intel WCMs as a whole. Intel
therefore seeks summary judgment on the grounds that the Wi-Fi Chips are licensed,
asserting that a Wi-Fi Chip is a “product that constitutes an Integrated Circuit” even
when a part of an Intel WCM, such that Section 3.1’s license encompasses the Wi-
Fi Chips that are sold as components of Intel WCMs. Intel does not assert that Intel
74 Id.
17 WCMs themselves qualify as an Integrated Circuit or Intel Licensed Product, nor
that Intel WCMs are licensed under the agreement.75
Sanyo presses that the “product” under Section 1.13 is the Intel WCM as a
whole, not the Wi-Fi Chip as a component. Under that theory, Sanyo concludes that
the license does not encompass Intel WCMs. Sanyo’s argument is incongruent with
the underlying infringement dispute, and, more importantly, is unsupported by the
plain language of the Cross License.
The plain meaning of Section 1.13 indicates that the “product” in question is
the Wi-Fi Chip, in isolation or as a component of an Intel WCM. Section 1.13
broadly includes “any product” in the definition of Intel Licensed Product, so long
as it “constitutes an Integrated Circuit.”76 Merriam-Webster defines “product” as
“something produced.”77 Intel produces Wi-Fi Chips.78 Therefore, the Wi-Fi Chip
is a “product” under the Cross License’s plain terms, even as a component of an Intel
WCM. Other sections of the Cross License use the term “product” according to its
75 See D.I. 109 at 27; D.I. 134 at 8–9. 76 Cross License § 1.13 (emphasis added). 77 Product, Merriam-Webster Online Dictionary, https://www.merriam- webster.com/dictionary/product (last visited February 25, 2021). 78 See also Produce, Merriam-Webster Online Dictionary, https://www.merriam- webster.com/dictionary/produce (last visited February 25, 2021) (defining “produce” as “to compose, create, or bring out by intellectual or physical effort” or “to make available for public exhibition or dissemination”).
18 common and ordinary meaning of “something produced,” and use it to refer to
components of a larger product.79
Sanyo tries to muddy this straightforward conclusion with three unsuccessful
arguments. First, Sanyo argues that this plain definition of “product” would render
Section 3.6 of the Cross License ambiguous. Section 3.6(h) provides in part that
79 Section 1.33 defines “Sanyo Proprietary Product.” Cross License § 1.33. The definition includes “CCB Circuitry” and further defines that term to mean certain “circuit blocks” and “circuitry.” Id. Circuitry is a component integrated into a larger product (e.g., a semiconductor chip), yet it qualifies as a “Sanyo Proprietary Product.” Section 1.33 also notes that “CCB Circuitry” “shall not include any other product or circuitry.” Id. The language “other product” in the definition of “CCB Circuitry” makes clear that CCB Circuitry is itself a product. Section 1.13 provides, “Intel Licensed Product shall not include any Sanyo Proprietary Product.” Id. § 1.13. This language contemplates that one product could include another absent such a prohibition. And Section 3.3(b) provides that “[t]he Parties understand and acknowledge that a Party’s Licensed Products may consist of firmware and drivers.” Id. § 3.3(b). Thus, the term “product” refers to “firmware” and “drivers,” which are components of an Integrated Circuit. And while Sanyo attempts to circumvent Section 3.3’s illustration by arguing that firmware and drivers are supplied separately from an Integrated Circuit, Section 3.3(b) says no such thing. Instead, the provision describes distributing firmware and drivers using a “single master copy” without requiring separate shipments. Section 1.6 makes clear that such firmware and drivers can be “shipped with such integrated unit(s) and/or circuit(s).” Id. § 1.6. Contrary to Sanyo’s reading, Section 3.3(b) shows the term “product” may extend to components of a larger object. Finally, the Cross License contains another example of licensing a part of a whole where other parts of that whole may not be licensed. The last sentence of Section 1.6 explains that “if an integrated unit contains circuitry that satisfies the above definition but also contains circuitry that would satisfy the definition of Solar Cell, Liquid Crystal Display or Electroluminescence Display, only that circuitry within the integrated unit that satisfies the above definition shall be deemed an Integrated Circuit.” Id. Accordingly, that circuitry does not lose its status as an Integrated Circuit and its associated rights simply because it is one component in a larger scheme.
19 Intel will grant a license to any entity that Sanyo divests so long as the divested
entity’s “cumulative net sales of products that constitute Sanyo Licensed Products”
in the previous year does not exceed three billion dollars.80 As with Intel Licensed
Product, the Cross License defines Sanyo Licensed Product as “any product that
constitutes an Integrated Circuit.”81 Sanyo argues that using the common and
ordinary meaning of “product” in applying Section 3.6(h) would make it
“impossible” to determine net sales of Sanyo Licensed Products under that section
because a component part, like a Wi-Fi Chip sold as part of an adapter—does not
“have a price per unit.”82
Sanyo’s argument is flawed in two respects. First, it presupposes that a
Licensed Product under the Cross License must, or certainly will, be sold. As
explained in more detail infra, the Cross License licenses actions in addition to sales.
Sections 1.13 and 3.1 contemplate a sale as a possibility, but do not require it.
Second, Sanyo’s argument ignores the fact that a product within a component can
have independent value, and that the value of the larger object in which it is
incorporated can be apportioned to each of its components. As Sanyo’s corporate
representative acknowledged, “Integrated Circuits” sold in retail packages,
80 Cross License § 3.6(h)(1)(i). 81 Id. § 1.30. 82 D.I. 122 at 4, 42–43.
20 including other items such as fans and heat sinks, would nevertheless be licensed,83
even though such sales would require the very apportionment exercise that Sanyo
deems impossible.
Sanyo’s second argument against the common and ordinary meaning of the
term “product” is that it renders part of the definition of “Integrated Circuit” in
Section 1.6 meaningless. Section 1.6 offers two definitions of an Integrated Circuit.
The first, Section 1.6(a), undisputedly encompasses a standalone Wi-Fi Chip.84
Section 1.6(b) provides an additional definition of “an integrated unit” that (1)
“consist[s] of one or more units falling within the terms of Section l.6(a), on one or
more substrates”; (2) “has associated with such integrated unit conductive leads,
and/or conductive pads, and/or conductive traces and/or wire bonds and/or
conductive bumps and/or solder balls”; and (3) is “sealed in one package; or
physically integrated and sold as a unit primarily comprising a circuit assembly, the
material function of which is to perform general computing tasks . . . and/or to store
data . . . .”85 Sanyo contends equating a Wi-Fi Chip with a “product,” rather than
83 See Pl.’s Ex.16 at 162–163. 84 Cross License § 1.6(a) (defining “Integrated Circuit” as “an integrated unit comprising one or more active and/or passive circuit elements associated on one or more semiconductor substrates, such unit forming, or contributing to the formation of, a circuit for performing electrical functions (including, if provided therewith, housing and/or supporting means)”). 85 Id. § 1.6(b)(1)–(3); see also id. § 1.6 (“The definition of ‘Integrated Circuit’ shall also include, without limitation, any and all firmware, microcode and drivers, if needed to cause such integrated unit(s) and/or circuit(s) to perform substantially all of its (their) intended
21 limiting “product” to the larger assembly containing the Wi-Fi Chip, would render
Section 1.6(b) meaningless as “an inconsequential expansion of the license right to
merely cover additional conventional electrical components” like the PCB.86
But Section 1.6(b) covers assemblies of multiple chips and other technology
that allows them to connect and cooperate, above and beyond inventions embodied
by the single semiconductor chip defined in Section 1.6(a). Calling that singular
chip a “product” under Section 1.13 licenses that chip as an Intel Licensed Product
(assuming the other requirements of Section 1.13 are met). Licensing the chip does
not transform any broader assembly of which it is a component into an Integrated
Circuit or Intel Licensed Product. Such a broader assembly is licensed only if it
meets other licensing requirements, like those in Section 1.6(b). Invoking the plain
and ordinary meaning of “product” in Section 1.13 does not render Section 1.6(b)’s
definition of Integrated Circuit meaningless.
Finally, Sanyo is correct that an Intel WCM is a “product” in that it is
something Intel produces. But Intel WCMs can be products, and their component
Wi-Fi Chips can also be products; either can only be an Intel Licensed Product by
“constitut[ing] an Integrated Circuit” and meeting the other requirements of Section
hardware functionality, whether or not such firmware, microcode or drivers are shipped with such integrated unit(s) and/or circuit(s) or are installed at a later time.”). 86 D.I. 122 at 41.
22 1.13.87 Nothing in the plain language mandates limiting “product” to the Intel
WCM, to the exclusion of its component Wi-Fi Chip.
b. The Wi-Fi Chips Satisfy Section 1.13’s Other Requirements.
Having determined that a Wi-Fi Chip is a “product” under Section 1.13, the
other provisions of that Section readily apply. First, Wi-Fi Chips “constitute[] an
Integrated Circuit.”88 In Sanyo’s words, the parties agree that this language means
that “the product must be or is an Integrated Circuit.”89 They also agree Wi-Fi Chips
are Integrated Circuits.90 The plain meaning of “constitutes” supports this
equivalency. Merriam-Webster defines “constitute” as “make up, form, compose.”91
“Constitute,” “compose,” and “comprise” are interchangeable;92 other synonyms for
“constitute” include “form, make up.”93 “Compose” means “to form by putting
87 See Cross License § 1.13; see also Hr’g Tr. 17 (“The wireless adapter can be a product and also the chip itself is a product. And what we know is that Intel’s chips constitute an Integrated Circuit and would be licensed under the plain language of the cross license.”). 88 Cross License § 1.13. 89 Hr’g Tr. 38; see also id. 21–22, 39. 90 See id. 32; see also id. 18, 20, 29. 91 Constitute, Merriam-Webster Online Dictionary, https://www.merriam- webster.com/dictionary/constitute (last visited February 25, 2021) (offering as examples that “12 months constitute a year,” that “high school dropouts . . . constitute a major problem in large city slums,” that “[w]omen constitute 70 percent of the student population at the college,” and that “nine players constitute a baseball team”). 92 See Comprise, Merriam-Webster Online Dictionary, https://www.merriam- webster.com/dictionary/comprise (last visited February 25, 2021). 93 Constitute, Merriam-Webster Online Dictionary, supra note 91 (listing synonyms).
23 together” or “to form by the substance of.”94 “Make up” means “to form by fitting
together or assembling” or “to combine to produce (a sum or whole).”95 And “form”
means “to serve to make up or constitute : be an essential or basic element of.”96
Therefore, a Wi-Fi Chip “constitutes an Integrated Circuit” and is a “product that
constitutes an Integrated Circuit” under Section 1.13.97
94 Compose, Merriam-Webster Online Dictionary, https://www.merriam- webster.com/dictionary/compose (last visited February 25, 2021). 95 Make Up, Merriam-Webster Online Dictionary, https://www.merriam- webster.com/dictionary/make%20up (last visited February 25, 2021). 96 Form, Merriam-Webster Online Dictionary, https://www.merriam- webster.com/dictionary/form (last visited February 25, 2021). 97 Sanyo contends that by adopting the plain meaning of the term “constitutes,” Intel reads the word “product” out of the definition of Intel Licensed Product. D.I. 122 at 4. Sanyo contends that “Intel is effectively rewriting the definition of Intel Licensed Product to read, in part, ‘any product that constitutes an Integrated Circuit.’” D.I. 143 at 3. Sanyo’s position fails for two reasons. First, the Court’s analysis gives meaning to each word of Section 1.13, including “product” and “constitutes.” The Wi-Fi Chip is a product, and it constitutes an Integrated Circuit in that the sum of its parts makes up an Integrated Circuit. See Constitute, Merriam- Webster Online Dictionary, supra note 91 (offering as an example that “12 months constitute a year,” indicating that a whole is constituted by the sum of its parts). The plain meaning of the term supports this equivalency. Second, Section 1.6 undermines Sanyo’s position that the language of Section 1.13 “forecloses sale of Integrated Circuits as a component of a product.” D.I. 122 at 47. Reading the Cross License as a whole indicates that the parties drafted Section 1.13 to read “any product that constitutes an Integrated Circuit” to account for Section 1.6(b), which allows a “product” with multiple parts to “constitute an Integrated Circuit. See Cross License § 1.6(b). By drafting Section 1.13 to read “any product that constitutes an Integrated Circuit,” rather than “any Integrated Circuit,” the parties built in necessary leeway to address inventions, present and future, that may satisfy the pluralities of Section 1.6(b).
24 Next, Section 1.13 mandates “that if sold,” the product constituting the
Integrated Circuit must be “sold by Intel or an Intel Licensed Subsidiary as its own
product . . . and not on behalf of another.”98 Sanyo contends that Intel cannot
reconcile its interpretation of “product” with this language in Section 1.13 because
Intel sells Intel WCMs, not Wi-Fi Chips as standalone products. But the plain
language of Section 1.13 does not require that any product thereunder be sold, and
is not confined to products that are in fact sold by Intel. Instead, Section 1.13
requires that Intel sell any product “as its own” only “if sold” at all.99 Broadly
drafted, Section 1.13 accounts for the reality that Intel may or may not sell “any
product that constitutes an Integrated Circuit.” As discussed below, this reading is
consistent with Section 3.1(a).100
Finally, Section 1.13 requires that the “Intel Licensed Product shall not
include any Sanyo Proprietary Product.”101 There is no dispute that each of Intel’s
Wi-Fi Chips has no circuitry or other technology related to any “Sanyo Proprietary
Product” as identified and defined in Section 1.33 of the Cross License. Each Wi-
98 Cross License § 1.13 (emphasis added). 99 Id. 100 Even if I were to conclude that the Wi-Fi Chips are technically “sold” when sold as a component of Intel WCMs, the chips would satisfy this requirement of Section 1.13: the Wi-Fi Chips are proprietary to Intel and are sold with Intel’s logo, as components of larger adapters which are also proprietary to Intel and sold with Intel’s logo. 101 Cross License § 1.13.
25 Fi Chip uses a proprietary Intel design.102 Because the Wi-Fi Chips do not include
any Sanyo Proprietary Product, they satisfy that requirement of Section 1.13.
The Wi-Fi Chips are products that constitute Integrated Circuits and do not
include any Sanyo Proprietary Product. Hence, the Wi-Fi Chips are Intel Licensed
Products under Section 1.13 and are licensed under Section 3.1.
2. Under Section 3.1, Intel May “Use” Or “Otherwise Dispose Of” The Wi-Fi Chips As Components Of Intel WCMs.
The next issue is whether using the Wi-Fi Chips in Intel WCMs fits into one
of the permissible actions under Section 3.1. Intel does not sell Wi-Fi Chips
individually; it sells them as components of Intel WCMs. Section 3.1(a) permits
Intel to “make, use, sell (directly and/or indirectly), offer to sell, import and
otherwise dispose of all Intel Licensed Products.”103 I conclude that placing Wi-Fi
Chips on adapter boards to form Intel WCMs is licensed as “us[ing]” or “otherwise
dispos[ing] of” the Wi-Fi Chips.104
Section 3.1 grants Intel broad authority to act with respect to the Wi-Fi Chips.
Selling the Wi-Fi chips is only one of at least six actions Intel can take. While “sale”
may be a narrow term, the other actions are more expansive. For example, “use”
102 Kitchin Decl. ¶ 12. 103 Cross License § 3.1(a). 104 Id.
26 means “to carry out a purpose or action by means of.” 105 “Use” of an Intel
Licensed Product, such as a Wi-Fi Chip, can encompass a number of actions,
including incorporating it into or onto an adapter card to enable the card “to carry
out” a wireless communication purpose or function.
The broadest action is Section 3.1’s catchall: “or otherwise dispose of.”106
“Dispose of” means “to get rid of,” “to deal with conclusively,” “to transfer to the
control of another,” or “to place, distribute, or arrange, especially in an orderly
way.”107 Synonyms include “deposit, emplace, fix, lay, place, position, put, set,
set up, situate, stick.”108 Accordingly, by “placing” or “putting” Wi-Fi Chips on
adapter boards to form Intel WCMs, Intel “otherwise dispose[d] of” the Wi-Fi
Chips.
Sanyo contends that “‘otherwise dispose of’ may mean a lot of different
things . . . but it doesn’t mean ‘sell’” and that “the word that’s relevant here is ‘sell’
because that’s the activity that’s at issue.”109 Sanyo’s argument that the Cross
License forecloses the use or of disposition of Wi-Fi Chips in Intel WCMs because
105 Use, Merriam-Webster Online Dictionary, https://www.merriam- webster.com/dictionary/use (last visited February 25, 2021). 106 Cross License § 3.1(a). 107 See Dispose, Merriam-Webster Online Dictionary, https://www.merriam- webster.com/dictionary/dispose (last visited February 25, 2021). 108 See id. (listing synonyms). 109 Hr’g Tr. 45.
27 those WCMs are then sold is unsupported by its plain terms. This argument is a
symptom of Sanyo’s misplaced focus on Intel WCMs, rather than the Intel Licensed
Products at issue: the Wi-Fi Chips.
Sanyo is correct that “otherwise dispose of” does not mean sell and requires
some distinct action under Section 3.1. The product Intel “sells” is the Intel
WCMs.110 Sanyo skips the intermediate, yet critical, step before the sale of Intel
WCMs: placing the Wi-Fi Chip on the adapter board for the purpose of enabling the
adapter to carry out a wireless communication function. Other verbs govern what
Intel does with the licensed Wi-Fi Chips it puts on adapter boards to form Intel
WCMs. The fact that “sale” is a possible and express activity under Section 3.1 does
not preclude licensing the potential intermediate steps of using or otherwise
disposing of the Wi-Fi Chips. Sanyo conceded as much at argument, stating that
Sanyo “wouldn’t necessarily take issue with the idea that [Intel] can put [a Wi-Fi
Chip] on a card, because that might be a use, too.”111
Sanyo also argues that the Cross License permits Intel to sell the Wi-Fi Chips
only with certain enumerated parts, such as those enumerated in Section 1.6(b), but
110 See id. 37 (“Intel is not selling Integrated Circuits alone. . . . [I]f we were talking about selling Integrated Circuits alone, we wouldn’t be having an argument about this. What they’re doing is selling -- the thing that they’re doing, the thing that they’re selling, are these [WCMs].”). 111 Id. 47.
28 not with any type of Wi-Fi adapter card or in any WCM that is not specifically
permitted or enumerated in the agreement.112 But the Cross License is broadly
permissive once the Wi-Fi Chips are “used” or “disposed of.” Nothing in the Cross
License mentions, let alone forbids, the use or disposition of Intel Licensed Products,
such as the Wi-Fi Chips, in WCMs.113 Nothing in the Cross License strips the Wi-
Fi Chip of its license when it is used in an Intel WCM that is eventually sold. The
Cross License prohibited certain combinations; the final sentence of Section 1.6
explicitly excludes Solar Cells, Liquid Crystal Displays, and Electroluminescence
Displays from Integrated Circuits.114 The plain text of the Cross License includes
no such carveout for WCMs.
The Cross License’s plain terms allow Intel to use or dispose of the Wi-Fi
Chips by placing them on an adapter board to form an Intel WCM. Intel is therefore
entitled to summary judgment on Count I of the Amended Complaint and Count II
of the Counterclaim.
B. Reformation Is Not Foreclosed By Section 6.6 Of The Cross License.
Having determined that Intel’s actions are permitted under the plain text of
the Cross License, I turn to Sanyo’s contention that reformation is appropriate here.
112 See id. 37–38. 113 See generally Cross License. 114 See id. § 1.6.
29 According to Sanyo, interpreting the Cross License to allow Intel to use Wi-Fi Chips
in Intel WCMs that are sold is inconsistent with what the parties agreed upon in
negotiations.115 In response, Intel contends that any claim for reformation is
foreclosed by the integration clause in Section 6.6 of the Cross License.116 I
conclude that Section 6.6 does not foreclose reformation.
The Court may reform a contract “only when the contract does not represent
the parties’ intent because of fraud, mutual mistake or, in exceptional cases, a
unilateral mistake coupled with the other parties’ knowing silence.”117 “It is true
that evidence of agreements and negotiations prior to the adoption of a fully
integrated contract are admissible to establish grounds for granting or denying the
remedy of reformation.”118 But failure of justifiable reliance is fatal to a claim for
mutual mistake that supports reformation.119 This Court has determined that a
115 As explained in note 65, supra, Sanyo’s reformation argument will be addressed and resolved in a future opinion. 116 See Cross License § 6.6. 117 Great-W. Invs. LP v. Thomas H. Lee P’rs, L.P., 2011 WL 284992, at *11 (Del. Ch. Jan. 14, 2011) (quoting James River-Pennington Inc. v. CRSS Cap., Inc., 1995 WL 106554, at *7 (Del. Ch. Mar. 6, 1995)). 118 T.P. Inc. v. J&D’s Pets, Inc., 1999 WL 135243, at *5 (Del. Ch. Feb. 26, 1999). 119 See Progressive Int’l Corp. v. E.I. Du Pont de Nemours & Co., 2002 WL 1558382, at *7 (Del. Ch. July 9, 2002) (stating that “sophisticated parties may not reasonably rely upon representations that are inconsistent with a negotiated contract, when that contract contains a provision explicitly disclaiming reliance upon such outside representations” and dismissing mistake and fraud claims given anti-reliance integration clause in the written contract); Great Lakes Chem. Corp. v. Pharmacia Corp., 788 A.2d 544, 555–56 (Del. Ch. 2001) (“[W]ere we to permit plaintiffs’ use of the defendants’ prior representations . . . to
30 plaintiff’s reliance is unreasonable where the parties have agreed to explicit anti-
reliance language in the terms of the governing agreement.120 In Progressive
International Corp. v. E.I. Du Pont de Nemours & Co., then-Vice Chancellor Strine
stated,
As a general matter, under the objective theory of contracts to which Delaware adheres, it is presumed that the language of a contract governs when no ambiguity exists. Under the objective theory, “‘intent’ does not invite a tour through [the plaintiff’s] cranium, with [the plaintiff] as the guide.” This presumption that parties will be bound by the language of the contracts they negotiate holds even greater force when, as here, the parties are sophisticated entities that bargained at arm’s length. More specifically, Delaware courts have held that sophisticated parties may not reasonably rely upon representations that are inconsistent with a negotiated contract, when that contract contains a provision explicitly disclaiming reliance upon such outside representations.121
Delaware’s enforcement of clear anti-reliance provisions reverberates through a long
line of cases.122 “[A] party cannot promise, in a clear integration clause of a
defeat the clear words and purpose of the Final Agreement’s integration clause, contracts would not be worth the paper on which they are written.” (quoting One-O-One Enters., Inc. v. Caruso, 848 F.2d 1283, 1287 (D.C. Cir. 1988)); Liberto v. Bensinger, 1999 WL 1313662, at *14 (Del. Ch. Dec. 8, 1999) (“I believe that, just as the [plaintiff’s] innocent misrepresentation claim has failed in part due to unjustifiable reliance, their mutual mistake argument is also flawed because it was they who assumed the risk of the mistake.”). 120 See, e.g., Progressive Int’l Corp., 2002 WL 1558382, at *7. 121 Id. (alteration in original) (footnotes omitted) (quoting E. Allan Farnsworth, Farnsworth on Contracts § 3.6 (2d ed. 2000)). 122 See, e.g., Prairie Cap. III, L.P. v. Double E Hldg. Corp., 132 A.3d 35 (Del. Ch. 2015); Abry P’rs V, L.P. v. F & W Acq. LLC, 891 A.2d 1032 (Del. Ch. 2006); Kronenberg v. Katz, 872 A.2d 568 (Del. Ch. 2004); H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129 (Del. Ch. 2003); Progressive Int’l Corp., 2002 WL 1558382.
31 negotiated agreement, that it will not rely on promises and representations outside
of the agreement and then shirk its own bargain in favor of a ‘but we did rely on
those other representations’ . . . claim.”123
“To be effective, a contract must contain language that, when read together,
can be said to add up to a clear anti-reliance clause by which the plaintiff has
contractually promised that it did not rely upon statements outside the contract’s four
corners in deciding to sign the contract.”124 Such provisions “identify the specific
information on which a party has relied and which foreclose reliance on other
information.”125 “Delaware law does not require magic words.”126
Section 6.6 of the Cross License is a standard integration clause that does not
include clear anti-reliance language. Section 6.6 provides:
Entire Agreement. This Agreement embodies the entire understanding of the Parties and their Granting Subsidiaries with respect to the subject matter hereof, and merges all prior oral or written communications between them. Neither of the Parties or their Granting Subsidiaries shall be bound by any conditions, definitions, warranties, understandings, or representations with respect to the subject matter hereof other than as expressly provided herein. No oral explanation or oral information by either Party or any Granting Subsidiary shall alter the meaning or interpretation of this Agreement. . . .
123 Abry P’rs, 891 A.2d at 1057. 124 Prairie Cap. III, 132 A.3d at 51 (internal quotation marks omitted) (quoting Kronenberg, 872 A.2d at 593). 125 Id. at 50 (citing RAA Mgmt., LLC v. Savage Sports Hldgs., Inc., 45 A.3d 107, 118–19 (Del. 2012)). 126 Id. at 51.
32 The first sentence is a standard integration clause. The third sentence is a more
specific integration clause, codifying the parol evidence rule and confining
interpretation to the four corners of the Cross License. The second sentence comes
closest to anti-reliance language, but falls short.
While “Delaware law does not require magic words,”127 the relevant clauses
of Section 6.6, taken together or standing alone, do not amount to clear anti-reliance
language that forecloses Sanyo from seeking reformation. Section 6.6 does not
include any clear or express statement that Sanyo has contractually promised that it
did not rely upon statements outside the Cross License’s four corners.128 Nor does
Section 6.6 identify the specific information on which Sanyo relied, which would
foreclose Sanyo’s reliance on other information.129
Instead, Section 6.6 reads as a “standard integration clause alone, which does
not contain explicit anti-reliance representations and which is not accompanied by
other contractual provisions demonstrating with clarity that [Sanyo] had agreed that
it was not relying on facts outside the contract,” and therefore does not suffice to bar
reliance allegations that underlie a mistake theory.130 Delaware Courts have
concluded that similar clauses stating that the contract “contains the final and entire
127 Id. 128 See id. 129 See id. at 50. 130 Kronenberg, 872 A.2d at 593.
33 Agreement between the parties” and that “neither they nor their agents shall be
bound by any terms, conditions, or representations not herein written” do not amount
to clear anti-reliance language.131 By agreeing not to be bound “by any conditions,
definitions, warranties, understandings, or representations with respect to the subject
matter hereof other than as expressly provided” in the Cross License, Sanyo did not
simultaneously promise that it would not rely on Intel’s representations and
understandings beyond the agreement’s four corners.132 Section 6.6 does not, by
itself, negate any argument that Sanyo justifiably relied on Intel’s representations
during negotiations about WCMs and multi-chip adapters, and therefore does not
foreclose Sanyo’s reformation claim.
III. CONCLUSION
Sanyo’s Motion is DENIED with respect to Count I of the Amended
Complaint and Count II of the Counterclaim. Intel’s Motion is GRANTED with
131 Two Farms, Inc. v. Davis, Bowen & Friedel, Inc., 2018 WL 2714796, at *4 (Del. Super. Ct. June 4, 2018) (noting such language does not indicate that the plaintiff “contractually promised that it did not rely upon statements outside the contract’s four corners in deciding to sign the contract” (quoting Kronenberg, 872 A.2d at 593)); see also Alltrista Plastics, LLC v. Rockline Indus., Inc., 2013 WL 5210255, at *5–6 (Del. Super. Sept. 4, 2013) (denying motion to dismiss fraud claim based on anti-reliance clause in contract that stated: “The Agreement sets forth the entire understanding between the Parties with respect to the subject matter herein, and supersedes and replaces the terms of any and all prior discussions, agreements or understanding between the parties. There are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties with regard to the subject matter herein other than as set forth in the agreement.”). 132 Cross License § 6.6.
34 respect to Count I of the Amended Complaint and Count II of the Counterclaim, and
is DENIED with respect to Count V of the Amended Complaint. The parties shall
submit an implementing order within twenty days of this decision.
Related
Cite This Page — Counsel Stack
Sanyo Electric Co., Ltd. v. Intel Corporation, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sanyo-electric-co-ltd-v-intel-corporation-delch-2021.