Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_05-cv-03522/USCOURTS-cand-4_05-cv-03522-3/pdf.json

Parties Involved:
Monolithic Power Systems, Inc.
Counter-defendant
Taiwan Sumida Electronics, Inc.
Counter-claimant

Document Text:

United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

MONOLITHIC POWER SYSTEMS, INC., a

Delaware corporation,

Plaintiff,

v.

TAIWAN SUMIDA ELECTRONICS, INC., a

Taiwan corporation,

Defendant.

 /

TAIWAN SUMIDA ELECTRONICS, INC., a

Taiwan corporation,

Counterclaimant,

v.

MONOLITHIC POWER SYSTEMS, INC., a

Delaware corporation,

Counterclaim Defendant.

 /

No. C 05-3522 CW

ORDER DENYING

DEFENDANT'S

MOTION FOR

PARTIAL JUDGMENT

ON THE PLEADINGS 

Defendant and Counterclaimant Taiwan Sumida Electronics, Inc.

(Sumida) moves for partial judgment on the pleadings. Plaintiff

and Counterclaim Defendant Monolithic Power Systems, Inc. (MPS)

Case 4:05-cv-03522-CW Document 41 Filed 06/02/06 Page 1 of 7
United States District Court

For the Northern District of California

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opposes the motion. The matter was heard on May 26, 2006. Having

considered all of the papers filed by the parties and oral argument

on the motion, the Court denies Sumida's motion.

BACKGROUND

On December 25, 2002, MPS and Sumida entered into a written

indemnification agreement. The agreement is governed by California

law. It provides:

2. MPS and SUMIDA agree that MPS has the right to defend or

at its option to settle, and MPS agrees, at its own

expense, to defend or at its option to settle any claim,

suit or proceeding brought against SUMIDA alleging

infringement of any patent owned by O2 Micro

International Limited or O2 Micro, Inc. (collectively,

"Action") for the sale of any Product or any combination

including a Product wherein such infringement would not

occur but for such Product being a part of such

combination, subject to the limitations hereinafter set

forth. MPS shall have sole control of any such Action or

settlement negotiations, and MPS agrees to pay any and

all expenses, losses, damages, demands, liabilities and

expenses (including attorneys' fees and court costs), and

final judgment entered against SUMIDA, or settlement

amount agreed to by MPS, in any such Action, subject to

the limitations hereinafter set forth.

3. SUMIDA agrees to notify MPS promptly in writing of such

Action, gives MPS authority to proceed as contemplated

above, and gives MPS proper and full information and

assistance to defend and/or settle any such Action.

On January 26, 2003, O2 Micro International, Ltd. (O2 Micro)

filed a complaint in the United States District Court for the

Eastern District of Texas, alleging patent infringement by Sumida. 

Pursuant to the indemnification agreement, MPS defended Sumida in

the Texas action. 

While MPS was defending Sumida in Texas, MPS was also engaged

in litigation with O2 Micro before this Court. The Northern

Case 4:05-cv-03522-CW Document 41 Filed 06/02/06 Page 2 of 7
United States District Court

For the Northern District of California

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1Although the Northern California District litigation

consisted of two cases, because those cases were consolidated for

trial, the Court refers to the litigation as the Northern

California action. See C 00-4071 CW and C 01-3995 CW. 

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California District litigation1 revolved around use of a MPS

integrated circuit in combination with Sumida's transformer. Also

at issue was whether MPS misappropriated O2 Micro's trade secrets. 

On July 18, 2005, after an eleven-day trial, the jury ruled against

MPS in the Northern California action. 

Trial was set in the Texas action for September 19, 2005. On

August 30, 2005, MPS terminated its indemnification agreement with

Sumida. According to MPS, Sumida materially breached the agreement

by failing to provide full information and assistance, as section 3

of the agreement required. Specifically, MPS alleges that, in

order to defend itself in the Northern California action and to

defend Sumida in the Texas action, it requested information and

assistance from Sumida on numerous occasions. Despite the fact

that the information and assistance requested as to both the

Northern California and Texas actions were directly relevant to the

Texas action, Sumida failed to provide all the requested

information and assistance. MPS contends that the verdict against

it in the Northern California action was caused, at least in part,

by Sumida's failure to provide the requested assistance and

information. O2 Micro has sought to use the verdict and evidence

from the Northern California action against Sumida in the Texas

action. MPS alleges that Sumida's failure to provide the requested

information and assistance deprived MPS of its right to control the

Texas action and deprived it of benefits expected under the

Case 4:05-cv-03522-CW Document 41 Filed 06/02/06 Page 3 of 7
United States District Court

For the Northern District of California

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indemnification agreement.

After terminating the indemnification agreement, MPS sued

Sumida for breach of contract and breach of the covenant of good

faith and fair dealing. Sumida has countersued, claiming that,

under the indemnification agreement, its duty to provide MPS with

"full information and assistance to defend and/or settle" did not

extend to information relevant only to the Northern California

litigation between MPS and O2 Micro.

LEGAL STANDARD

Federal Rule of Civil Procedure 12(c) provides, "After the

pleadings are closed but within such time as not to delay the

trial, any party may move for judgment on the pleadings." Judgment

on the pleadings is proper when the moving party clearly

establishes on the face of the pleadings that no material issue of

fact remains to be resolved and that it is entitled to judgment as

a matter of law. Hal Roach Studios, Inc. v. Richard Feiner & Co.,

Inc., 896 F.2d 1542, 1550 (9th Cir. 1990). In considering a motion

for judgment on the pleadings, the Court must accept the

allegations of the non-moving party as true; the allegations of the

moving party which have been denied are assumed to be false. Id. 

DISCUSSION

Sumida seeks judgment on the pleadings that its duty under the

indemnification agreement to provide MPS with "full information and

assistance to defend and/or settle" the Texas action did not extend

to information relevant only to the litigation between MPS and O2

Micro in the Northern District of California. Sumida explains that 

Case 4:05-cv-03522-CW Document 41 Filed 06/02/06 Page 4 of 7
United States District Court

For the Northern District of California

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it is not arguing that it could not be obliged to provide

information for use in the Texas action that might have also been

useful in the Northern California action. Rather, it argues that

it was not obliged under the agreement to provide testimony,

evidence and information for use in the Northern California action,

because the agreement only requires that it provide information and

assistance to defend and/or settle "any such Action." The

agreement defines an "Action" as "any claim, suit or proceeding

brought against SUMIDA alleging infringement of any patent owned by

O2 Micro." According to Sumida, the Northern California action is

not an action within the scope of the agreement.

As noted above, California law governs any dispute under the

indemnification agreement. In its moving papers, Sumida states

that, under California law, the interpretation of contract language

is a question of law and if the contractual language is clear, it

governs. In re Bennett, 298 F.3d 1059, 1064 (9th Cir. 2002). 

However, in applying California law to contracts, courts often look

at extrinsic evidence. California Code of Civil Procedure § 1856

provides that, even when a contract is integrated, the evidence of

the circumstances under which the agreement was made, or evidence

"to explain an extrinsic ambiguity or otherwise interpret the terms

of the agreement," may be considered. 

In Founding Members of the Newport Beach Country Club v.

Newport Beach Country Club, Inc., 109 Cal. App. 4th 944 (2003), the

court explained the "Controlling Principles of Contract

Interpretation":

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United States District Court

For the Northern District of California

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The basic goal of contract interpretation is to give effect to

the parties' mutual intent at the time of contracting. When a 

contract is reduced to writing, the parties' intention is

determined from the writing alone, if possible. The words of

a contract are to be understood in their ordinary and popular

sense. Extrinsic evidence is admissible to prove a meaning to

which the contract is reasonably susceptible. If the trial

court decides, after receiving the extrinsic evidence, the

language of the contract is reasonably susceptible to the

interpretation urged, the evidence is admitted to aid in

interpreting the contract. Thus, the test of admissibility of

extrinsic evidence to explain the meaning of a written

instrument is not whether it appears to the court to be plain

and unambiguous on its face, but whether the offered evidence

is relevant to prove a meaning to which the language of the

instrument is reasonably susceptible.

109 Cal. App. 4th at 955-56 (citations and quotation omitted).

The term "Action" is clearly defined in the agreement. But

Sumida's obligation to give MPS "full information and assistance to

defend and/or settle any such Action" is not clearly defined;

rather, it is a broad obligation, the scope of which is not

specifically constrained and is disputed by the parties. To

determine the scope of the agreement and the meaning of the term

"full information and assistance to defend and/or settle any such

Action," extrinsic evidence is admissible. Because extrinsic

evidence cannot be considered on a motion for judgment on the

pleadings, the motion cannot be granted. Sumida fails to establish

clearly on the face of the pleadings that no material issue of fact

remains to be resolved and that it is entitled to judgment as a

matter of law.

CONCLUSION

For the foregoing reasons, the Court DENIES Sumida's motion 

Case 4:05-cv-03522-CW Document 41 Filed 06/02/06 Page 6 of 7
United States District Court

For the Northern District of California

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2

 Sumida's Request for Judicial Notice (Docket No. 25) is

GRANTED.

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for partial judgment on the pleadings (Docket No. 22).2

IT IS SO ORDERED.

Dated: 6/2/06 

CLAUDIA WILKEN

United States District Judge

Case 4:05-cv-03522-CW Document 41 Filed 06/02/06 Page 7 of 7