* Concurring in the judgment only. 

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 11-41408

TEKELEC, INC., 

Plaintiff - Appellee

v.

VERINT SYSTEMS, INC., 

Defendant - Appellant

Appeal from the United States District Court

for the Eastern District of Texas

Before HIGGINBOTHAM, ELROD, and HAYNES,* Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

This appeal arises out of a contract dispute between Verint Systems, Inc.

(“Verint”) and Tekelec, Inc. (“Tekelec”). The district court awarded summary

judgment to Tekelec and denied Verint’s cross-motion for summary judgment.

We affirm. 

United States Court of Appeals

Fifth Circuit

F I L E D

February 13, 2013

Lyle W. Cayce

Clerk
No. 11-41408

1 See Appendix, No. 1. 

2

I.

The facts of this case begin with a patent dispute between two corporate

entities not directly involved in this appeal, Blue Pumpkin Software, L.L.C.

(“Blue Pumpkin”), and IEX Corporation (“IEX”). In 2001, IEX—which was, at

the time, a wholly owned subsidiary of Tekelec—filed suit against Blue Pumpkin

for allegedly infringing U.S. Patent No. 6,044,355 (the “‘355 Patent”). In 2005,

Blue Pumpkin commenced its own infringement action against IEX. In April

2006, Blue Pumpkin and IEX executed the Blue Pumpkin/IEX Settlement &

Cross-License Agreement (“Blue Pumpkin/IEX Agreement”) to resolve their

ongoing patent dispute.1 Under Section 2 of the Agreement, entitled “Settlement

and Dismissal of Litigations,” Blue Pumpkin and IEX agreed to settle the two

pending infringement actions between them. The only condition to settlement

was Blue Pumpkin’s payment of an $8,250,000 lump sum fee, on or before April

7, 2006. 

Under Section 6.1.2, which creates the right to payment that Tekelec seeks

to enforce in this appeal, Blue Pumpkin agreed that beginning on April 1, 2007,

it would make six annual payments of $500,000 to IEX (the “Section 6.1.2

Payments”). The Payments are listed under the heading “License Fee/Balancing

Payment.” No provision of the Blue Pumpkin/IEX Agreement makes the

settlement set forth in Section 2 contingent on Blue Pumpkin’s timely tender of

the Section 6.1.2 Payments. 

Finally, under Section 4.3, IEX granted Blue Pumpkin an “irrevocable,

perpetual”license in its ‘355Patent. However, under Section 4.3.5, IEX reserved

the right to terminate the license “upon Blue Pumpkin’s failure to make any of

the payments set forth in Section 5.1.2" (the “Termination Provision”). As there

is no Section 5.1.2 in the Agreement, and as Section 5 contains no reference to
No. 11-41408

2 See Appendix, No. 2. 

3

payments, the parties presumably intended the Termination Provision to refer

to the aforementioned Section 6.1.2 Payments.

In accordance with the terms of the Blue Pumpkin/IEX Agreement, Blue

Pumpkin timely paid IEX the initial settlement fee of $8,250,000, and pursuant

to Section 2 of the Agreement, the parties dismissed their infringement actions

with prejudice. Shortly after Blue Pumpkin and IEX executed the Agreement,

Tekelec sold IEX to NICE Systems, Inc. (“NICE”)—an entity not party to this

appeal—in a stock purchase agreement. However, under the separate

Assignment of Royalty Rights Agreement (“Royalty Assignment Agreement”),

executed at the same time NICE finalized its acquisition of IEX, IEX assigned

its right to the six Section 6.1.2 Payments to Tekelec.2In the instrument of

assignment, IEX also promised that it “would not terminate the [Blue

Pumpkin/IEX Agreement] without [Tekelec’s] written permission,” and that it

would “provide reasonable assistance to [Tekelec] to facilitate the resolution of

any failure of Blue Pumpkin” to timely make any of the six Section 6.1.2

Payments due under the Blue Pumpkin/IEX Agreement.

At some point after IEX assigned its right to the Section 6.1.2 Payments

to Tekelec but before the first payment came due, Witness Systems, Inc.—also

not a party to this appeal—assumed all of Blue Pumpkin’s rights and obligations

under the Blue Pumpkin/IEX Agreement, including the license in IEX’s ‘355

Patent as well as the obligation to make the six Section 6.1.2 Payments to

Tekelec. In accordance with its obligations, Witness timely made the first

$500,000 payment to Tekelec on April 1, 2007. In May 2007, Verint, the

appellant in this case, acquired Witness, assuming all of its rights and
No. 11-41408

3 See Appendix, No. 3. 

4 See Appendix, No. 4. 

4

obligations under the Blue Pumpkin/IEX Agreement.3 On April 1, 2008, Verint

timely made the second $500,000 payment to Tekelec. 

At this time, Verint was embroiled in its own patent dispute with NICE,

involving five separate infringement actions and dozens of patents. In August

2008, Verint and NICE entered into the Verint/NICE Settlement Agreement and

Covenant Notto Sue (“Verint/NICE Settlement”)to resolve their ongoing patent

disputes on a global, portfolio-wide basis.4 Both parties recited that they were

entering into the Settlementto “compromise, settle, discharge, and resolve, fully

and finally,” all claims for patent infringement then pending or assertable

between them. 

In furtherance of this objective, NICE agreed, both on behalf of itself and

its subsidiaries, not to initiate or prosecute any infringement actions against

Verint on any and all patents then held by NICE or its subsidiaries (the

“Covenant Not to Sue”). The Covenant Not to Sue would begin on August 1,

2008 and terminate on a patent-specific basis, as set forth in the Settlement.

Moreover, NICE agreed, both on behalf of itself and its subsidiaries, that “any

royalties or other patent damages that may have otherwise accrued” against

Verint during the pendency of the Covenant Not to Sue on any and all patents

held by NICE or its subsidiaries “shall not accrue as to [Verint]” (the “NonAccrual Clause”). Verint made mirror-image promises to NICE.

On April 1, 2009—eight months after the effective date ofthe Verint/NICE

Settlement—Verint timely made the third $500,000 Section 6.1.2 payment to

Tekelec. However, after that date, Verint made no further payments, claiming

that the Non-Accrual Clause in the Verint/NICE Settlement extinguished its

obligations to Tekelec. Tekelec sued Verint for breach in the Eastern District of
No. 11-41408

5 Jenkins v. Cleco Power, LLC, 487 F.3d 309, 313 (5th Cir. 2007). 

6 See Westlake Petrochems., L.L.C. v. United Polychem, Inc., 688 F.3d 232, 238–39 (5th

Cir. 2012) (citing Martin v. Martin, 326 S.W.3d 741, 747 (Tex. App. 2010)). Texas law governs

the enforceability and interpretation of the Blue Pumpkin/IEX Agreement, for two

independently sufficient reasons. First, “[w]e apply Texas law to the enforcement of settlement

agreements in Texas diversity cases.” See Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d

256, 266 (5th Cir. 2005). Second, the Agreement designates Texas law as controlling. We give

effect to such a choice-of-law provision unless a party can show that it is “unreasonable under

the circumstances.” Ginter ex. rel. Ballard v. Bletcher, Prendergast & Laporte, 536 F.3d 439,

449 (5th Cir. 2008).

5

Texas. In its answer, Verint counterclaimed to recover the April 1, 2009

payment, which it alleged it had made in error. The district court awarded

summary judgment to Tekelec, denied Verint’s cross-motion for summary

judgment, and ordered Verint to pay up. Verint appeals.

II.

Verint claims that Tekelec lacks constitutional standing to enforce its right

to the remaining three Section 6.1.2 Payments, offering three related theories

as to why it is not party to an enforceable agreement with Tekelec. Though

couched in terms of Article III, Verint’s theories of non-liability really go to the

merits of whether an enforceable agreement exists, and we address them as

such. Because this case is before us on the parties’ cross motions for summary

judgment, we review de novo, asking whether the evidence leaves no genuine

issue as to any material fact and shows that Tekelec is entitled to judgment as

a matter of law.5 The enforceability of a contract is a legal question that is

proper subject matter for summary judgment.6

Verint first argues that IEX assigned to Tekelec only the “limited and

discrete rightto receive”the Section 6.1.2 Payments, notthe power to enforce the

Payments as against Blue Pumpkin or its assigns. But under Texas law, a

promise to pay becomes binding if it meets certain formation requirements

Verint does not challenge here; there is no additional requirement that the
No. 11-41408

7 See generally 49 DAVID R. DOW & CRAIG SMYSER, TEXAS PRACTICE SERIES: CONTRACT

LAW § 1 (West 2012) (surveying the requirements for contract formation). 

8 See, e.g., Thweatt v. Jackson, 838 S.W.2d 725, 728 (Tex. App. 1992) (“[I]t is axiomatic

that an assignee . . . stands in the shoes of the assignor and obtains the rights, title, and

interest that the assignor had at the time of the assignment. Moreover, the assignee of a debt

ordinarily obtains all remedies which were available to the assignor against the debtor for the

enforcement of the obligation.”). 

9 Thweatt, 838 S.W.2d at 728. 

10 Bifano v. Young, 665 S.W.2d 536, 539 (Tex. App. 1984) (emphasis in original)

(citations omitted); see also McCarty v. Montgomery, 290 S.W.3d 525, 534 (Tex. App. 2009)

(holding that in order for a termination provision to be construed as the exclusive remedy, it

must containeither language making terminationthe “sole” or “exclusive” remedy, or language

expressly limiting remedies to a discrete number of choices).

6

promise be accompanied by an express grant of enforcement authority, either

when first made to the promisee,7or when assigned by the promisee to a third

party.8 As IEX validly assigned its right to the Section 6.1.2 Payments to

Tekelec, and as Tekelec thereby “stepp[ed] into [IEX’s] shoes” with respect to

Blue Pumpkin’s promise to make thePayments,9 Tekelec has the rightto enforce

the Payments against Blue Pumpkin’s successor Verint. 

Verint next suggests that IEX itself did not have the right to enforce the

Section 6.1.2 Payments, and that Tekelec, as assignee, can have no greater

rights than IEX. Verint apparently reasons that because the Termination

Provision in the Blue Pumpkin/IEX Agreement gave IEX the right to terminate

Verint’s license in the ‘355 Patent if Blue Pumpkin or its assigns failed to timely

tender the Section 6.1.2 Payments, the Termination Provision was necessarily

IEX’s exclusive remedy for nonpayment. But as Tekelec points out in its brief,

this argument “misses the obvious additional enforcement right inherent with

any contract: the right to sue for breach.” Under Texas contract law, “[a]

construction which renders [a] specified remedy exclusive should not be made

unless the intent of the parties that it be exclusive is clearly indicated or

declared.”10 In this case, there is no language in the Blue Pumpkin/IEX
No. 11-41408

11 See, e.g., Nat’l Union Fire Ins. Co. v. Crocker, 246 S.W.3d 603, 606 (Tex. 2008) (“[W]e

must give [a contract’s] words their plain meaning, withoutinserting additionalprovisions into

the contract.”). Though the Agreement does give IEX the right to terminate the license in the

‘355 Patent if Blue Pumpkin or its assigns fail to timely make the Section 6.1.2 Payments,

nothing in the Agreement gives IEX a unilateral right to terminate. 

7

Agreementthat suggests—let alone “clearly indicate[s]” —thatthe Termination

Provision was to serve as IEX’s exclusive remedy for nonpayment. IEX retained

the right to sue for nonpayment, and Tekelec succeeded to that right by virtue

of the assignment. 

Finally, Verint claims that “IEX retained the right to terminate the [Blue

Pumpkin/IEX Agreement],” and that “it would be entirely inconsistent to allow

Tekelec to sue for the non-payment of royalties that IEX was entitled to

extinguish.” Verint points to no specific provision in the Blue Pumpkin/IEX

Agreement that gives IEX the unilateral right to terminate the Agreement;

rather, it argues that under the separate Royalty Assignment Agreement

between IEX and Tekelec, IEX promised that it would not terminate the Blue

Pumpkin/IEX Agreement. Verint reasons that unless IEX had a unilateral

termination right, “there would have been no reason for Tekelec and IEX to

include the non-termination covenant in the Royalty Assignment Agreement.”

Verint’s argument is flawed, for three reasons. First, the Royalty

Assignment Agreement is extrinsic evidence that cannot be used to prove that

IEX has a unilateral termination right never mentioned in the Blue

Pumpkin/IEX Agreement.11 Second, the non-termination provision in the

Royalty Assignment Agreement is not rendered superfluous if IEX lacks an

affirmative termination right, as the provision still protects Tekelec from the

risk that IEX could terminate the Agreement without an affirmative right to do

so (which might excuse Blue Pumpkin or its assigns from making the Section

6.1.2 Payments to Tekelec). Third, even assuming that IEX does have the

unilateral right to extinguish the Section 6.1.2 Payments, that right is not
No. 11-41408

12 Boudreaux v. Unionmutual Stock Life Ins. Co. of Am., 835 F.2d 121, 123 (5th Cir.

1988). 

13 Transource Int’l, Inc. v. Trinity Indus., Inc., 725 F.2d 274, 289 (5th Cir. 1984). 

14 Verint’s construction of the Settlement on this point is correct, but requires a close

reading of the contract. The Non-Accrual Clause extinguishes all “royalties or patent

damages”that “would have otherwise accrued against Verint[during the term ofthe Covenant

Not to Sue] with respect to the NICE Patents [and] the Non-Asserted Nice Patents.” Section

3.4 defines “Non-Asserted NICE Patents” to include “any patent . . . owned or controlled by

VERINT or a Subsidiary,” and Section 5.1 specifies that the Covenant Not to Sue commences

on August 1, 2008. Section 3.1 defines the term “Subsidiary” in a manner that includes IEX,

a wholly-owned subsidiary of NICE. IEX owns the ‘355 Patent. 

8

“inconsistent” with Tekelec’s right to enforce the Payments against Verint unless

IEX actually extinguished the Payments—the central issue disputed in this

case. So long as IEX has not extinguished the Payments, Verint’s obligation to

make the Payments remains, as does Tekelec’s right to sue for nonpayment. 

III. 

Having determined that Tekelec has the power to enforce the Blue

Pumpkin/IEX Agreement against Verint, we turn to Verint’s claim that the

subsequent Verint/NICE Settlement extinguished its obligation to make the

disputed Section 6.1.2 Payments. We again apply the same summary judgment

standard as the district court. The interpretation of an unambiguous contract is

a legal question that can be properly decided on summary judgment.12 However,

if a contract’s terms are ambiguous, summary judgment is generally

inappropriate.13

Verint’s argument is relatively simple: Under the Non-Accrual Clause of

the Verint/NICE Settlement, NICE agreed, on behalf of IEX, to extinguish all

“royalties or other patent damages that may have otherwise accrued” against

Verint on IEX’s ‘355 Patent at any point after August 1, 2008 and throughout

the pendency of the Covenant Not to Sue.14 According to Verint, the parties to

the Blue Pumpkin/IEX Agreementintended the Section 6.1.2 Payments to serve
No. 11-41408

15 As Verint observes, the Agreement provides that the only condition to the settlement

of past claims is Blue Pumpkin’s timely payment of the initial $8,250,000 lump sum; nothing

in the Agreement makes the settlement contingent on Blue Pumpkin’s tender of the Section

6.1.2 Payments. Moreover the Agreement ties the Section 6.1.2 Payments to Blue Pumpkin’s

(now Verint’s) license in IEX’s ‘355 Patent by giving IEX the right to terminate the license if

Blue Pumpkin (now Verint) fails to timely make any of the Section 6.1.2 Payments. Finally,

the Agreement sets forth the Payments under the heading “License Fee/Balancing Payment.”

9

as “royalties” for Blue Pumpkin’s (and eventually Verint’s) license in IEX’s ‘355

Patent. Consequently, Verint reasons, because the last four Section 6.1.2

payments “accrued” after August 1, 2008, NICE has, on behalf of IEX,

extinguished Verint’s obligation to make those payments.

Tekelec disagrees, urging that the parties to the Blue Pumpkin/IEX

Agreement did not intend the Section 6.1.2 Payments to serve as “royalties” for

the ‘355 Patent, but merely as a deferred component of the price Blue Pumpkin

paid to settle IEX’s claims for pastinfringement. According to Tekelec, “Verint’s

argument that the up-front $8.25 million constituted the consideration for the

settlement and release, and that the [Section 6.1.2 Payments] were tied only to

the continuing license to the [‘355 Patent], has no basis or supportfrom the plain

language of the [A]greement.”

Perhaps Verint is correct that the parties to the Blue Pumpkin/IEX

Agreement intended the Section 6.1.2. Payments to serve as fees for the license

in IEX’s ‘355 Patent,15 but this argument misses the point. The principal

question presented by this appeal is not whether the Payments serve as

“royalties” in some abstract, economic sense, but whether they fall within the

scope ofthe “royalties or other patent damages” extinguished by the Non-Accrual

Clause in the subsequent Verint/NICE Settlement. We think they do not.
No. 11-41408

16 See, e.g., United States Fid. and Guar. Co. v. Goudeau, 272 S.W.3d 603, 606 (Tex.

2008) (“Under the traditional canon of construction noscitur a sociis (‘a word is known by the

company it keeps’), each of the words used [in the insurance contract at issue] here must be

construed in context.”); see also 11 RICHARD A.LORD,WILLISTON ON CONTRACTS § 32:6 (4th ed.

1999 & Supp. 2009) (“The context and subject matter of a contract may indicate that an

ordinary word or phrase has an unusual meaning in a given sentence. . . . The ancient maxim

noscitur a sociis summarizes the rule of both language and law that the meanings of particular

words may be indicated or controlled by associated words.”). 

17 E.g., Cherokee Water Co. v. Freeman, 33 S.W.3d 349, 355 (Tex. App. 2000) (“Where

the words used have a technical or legal meaning and there is nothing in the deed, when

construed as a whole, to show that any other meaning was intended, they will be given their

legal meaning.”); see also LORD, supra note 16, at § 32:4 (“Technical terms or words of art will

be given their technical meaning [unless] the circumstances or context show that the parties

intended a [different] meaning.”).

18 Under § 284, courts are empowered to award a patent holder “damages adequate to

compensate for [an] infringement, but in no event less than a reasonable royalty for the use

made of the invention by the infringer, together with interests and costs as fixed by the court.”

See 35 U.S.C. § 284. “Reasonable royalty” awards under § 284 are distinguishable from

contractual royalty arrangements, both practically and conceptually. As a practical matter,

§ 284 awards are court-mandated, not bargained for. As a conceptual matter, courts have

acknowledged that “[t]he setting of a reasonable royalty after infringement cannot be treated

. . . as the equivalent of ordinary royalty negotiations among truly ‘willing’ patent owners and

licensees,” as “[t]hat view would . . . make an election to infringe a handy means for

competitors to impose a ‘compulsory license’ policy upon every patent owner.” See Panduit

Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1158 (6th Cir. 1978).

10

Under Texas law, the words of a contract must be read in context,16 and

technical or legal terms of art must be given their technical or legal meaning.17

Here, the Non-Accrual Clause extinguishes “royalties or other patent damages

that may have otherwise accrued” against Verint on all patents held by NICE

and its subsidiaries during the pendency of the Covenant Not to Sue. We read

the qualifying phrase “or other patent damages” to indicate that the term

“royalties” refers not to Verint’s contractually bargained-for payment obligations

under Section 6.1.2 of the Blue Pumpkin/IEX Agreement, but to the courtordered “reasonable royalties” that serve as the generally accepted measure of

patent damages under 35 U.S.C. § 284.18 Our reading is bolstered by the

immediately succeeding phrase “that may have otherwise accrued,” which

reinforces the conclusion that the phrase “royalties or other patent damages”
No. 11-41408

19 See College Sav. Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 148 F.3d

1343, 1354 (Fed. Cir. 1998) (“[U]nder the federal patent law, damages begin to accrue at the

time that the alleged infringer receives notice of infringement, either through a marked

product or directly from the patentee.”). 

20 See 12 RICHARD A. LORD, WILLISTON ON CONTRACTS § 36:16 (4th ed. 1999 & Supp.

2009) (“A covenant not to sue for a limited time does not suspend or affect in any other way the

covenantor’s right to sue, [and] the covenantee’s only remedy is by an action for damages for

breach ofthe covenant.”); Core Labs., Inc. v. Hayward-Wolff Research Corp., 136 A.2d 553, 571

(Del. 1958) (holding that the effect of a covenant not to sue for a limited period of time was

merely “to postpone [the patent holder’s] claim against [the defendant] for infringement” until

the covenant expired); see also Samsung Elecs. Co., Ltd. v. Rambus, Inc., 440 F. Supp. 2d 495,

504 (E.D. Va. 2006) (“If [the patent-holder] breached the covenant not to sue by asserting an

infringement claim . . . , its suit would not fail for lack of jurisdiction. Whether the covenant

not to sue could be pleaded as an affirmative defense, in addition to forming the basis for a

breach of contract action, would have to be litigated.”); cf. Robert H. Mnookin et al., “HardBargaining” and“Over-Lawyering”: Common Pitfalls in Constructing a Deal, 18 ALTERNATIVES

TO HIGH COST LITIG. 171 (2000) (observing that transactional attorneys often “waste the

client’s time and money by focusing on small or unlikely risks that do not justify contractual

planning.”). 

11

refers not to the fixed Section 6.1.2 Payments, but to the potential patent

damages a court might find accrued against Verint on patents held by NICE or

its subsidiaries during the pendency of the Covenant Not to Sue.19In the

absence of the Non-Accrual Clause, NICE could conceivably recover such accrued

damages by breaching the Covenant or suing after the Covenant expired.20

Even if we were presented with the question of how to characterize the

Section 6.1.2 Payments in the abstract, the Payments do not present in the most

common form of “royalty.” We can assume without deciding that the parties to

the Blue Pumpkin/IEX Agreement intended the Payments to serve as fees for

the license in IEX’s ‘355 Patent. But a “royalty” is generally defined as a

payment that fluctuates with the licensee’s actual usage of the licensor’s

intellectual property, such as a payment based on the number of patented
No. 11-41408

21 See, e.g., BLACK’S LAW DICTIONARY 1356 (8th ed. 2004) (defining “royalty” as “a

payment made to an . . . inventor for each copy of a work or article sold under a . . . patent.”);

MERRIAM WEBSTER’S COLLEGIATE DICTIONARY 1021 (10th ed. 1996) (defining “royalty” as “a

payment made to an author or composer for each copy of a work sold or to an inventor for each

article sold under a patent.”); AMERICAN HERITAGE COLLEGE DICTIONARY 1190 (3d ed. 1993)

(defining “royalty” as (i) “a share of the profit paid to a writer or composer out of the proceeds

resulting from the sale or performance of his or her work” or (ii) “a share in the proceeds paid

to an inventor or a proprietor for the right to use his or her invention or services.”). 

22 See generally Morton I. Kamien & YairTauman,Fees Versus Royalties and thePrivate

Value of a Patent, 101 Q. J. ECON. 471 (1986).

12

articles sold.21 A fixed-fee licensing arrangement such as the one at issue here

is conceptually distinct from a royalty.22

Because we conclude that Verint’s fixed, contractual payment obligations

under the Blue Pumpkin/IEX Agreement unambiguously fall outside of the scope

ofthe subsequent Verint/NICE Settlement’s boilerplate Non-Accrual Clause, we

need not consider Tekelec’s alternative argument that the disputed payments

“accrued” prior to the August 1, 2008 effective date of the Verint/NICE

Settlement. 

IV.

We AFFIRM the district court’s grant of summary judgment to Tekelec

and denial of Verint’s cross-motion for summary judgment. 
Appendix — Chart of Relevant Parties and Agreements

13

Verint

(Appellant)

Tekelec

(Appellee)

Blue Pumpkin

NICE

IEX

BP/IEX

Agreement

(4/6/06)

V/N

Settlement 

(8/1/08)

Verint assumes Blue Pumpkin’s

rights and obligations under

BP/IEX Agreement, incl. license

in ‘355 Patent and obligation to

make the five remaining Section

6.1.2 Payments (~5/07)

IEX assigns its right to the six

Section 6.1.2 Payments to

Tekelec (7/6/06)

‘355 Patent

IEX grants Blue Pumpkin a license in

‘355 Patent and Blue Pumpkin agrees to

make the six Section 6.1.2 Payments

NICE and Verint reach global settlement of

their patent disputes and NICE agrees to 

Non-Accrual Clause

4

2

3

1