UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

National Pasteurized

Eggs, LLC

v. Civil No. 07-103-JL

Opinion No. 2011 DNH 208

L. John Davidson

FINDINGS OF FACT, RULINGS OF LAW, AND ORDER FOR JUDGMENT

This is a dispute over the ownership of a patent, which the

parties refer to as “the Jumbo,” on a process for pasteurizing

chicken eggs in their shells. See U.S. Patent No. 6,692,784

(issued Feb. 17, 2004). The plaintiff, National Pasteurized

Eggs, LLC (“NPE”), traces its claimed ownership to a 2001

agreement between the defendant, L. John Davidson, and, among

others, the now-defunct company he founded, Pasteurized Eggs

Corporation (“PEC”). NPE says that agreement, known as the

“Global Settlement Memorandum” or “GSM,” assigned Davidson’s

rights in the Jumbo to PEC. It is undisputed that, after PEC

declared bankruptcy in 2002, NPE succeeded to PEC’s rights under

the GSM when NPE purchased PEC’s assets in a sale approved by the

Bankruptcy Court. In re Pasteurized Eggs Corp., No. 02-13086

(Bankr. D.N.H. July 25, 2003).

NPE now seeks a declaratory judgment that it is “the

rightful owner of the Patent Rights conveyed by the Bankruptcy

Case 1:07-cv-00103-JL Document 156 Filed 12/15/11 Page 1 of 51
Court Order,” including the Jumbo. But Davidson argues that the

scope of the assignment in the GSM did not include the Jumbo. He

further argues that NPE cannot enforce the GSM against him, both

because it was merely an “agreement to agree” and because, in any

event, PEC breached it before it declared bankruptcy by failing

to make certain payments to him.

This court has diversity jurisdiction over this action

between NPE, a limited liability company with no New Hampshire

members, and Davidson, a New Hampshire citizen, in which the

amount in controversy exceeds $75,000. See 1 28 U.S.C. 

§ 1332(a)(1). The court conducted a five-day bench trial on

NPE’s claim between July 18 and July 22, 2011. Before trial, the

parties each submitted a trial memorandum and a set of proposed

findings and rulings, see L.R. 16.2(b)(2), and jointly filed a

statement of agreed-upon facts as directed by the court, see

Order of Apr. 12, 2011. Following trial, each party filed a

supplemental memorandum addressing particular issues, also at the

Davidson moved to dismiss this action for lack of subject- 1

matter jurisdiction, arguing, among other things, that the amount

in controversy did not exceed $75,000. Judge Barbadoro, to whom

this case was previously assigned, denied this motion “for the

reasons stated in [NPE’s] objection,” which included an argument

and a supporting affidavit that the value of the patent rights at

issue exceeded $75,000. Order of July 14, 2008. While Davidson

suggested otherwise at the final pretrial conference, he did not

pursue that argument at trial, and none of the evidence cast

doubt on this jurisdictional conclusion. 

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court’s direction. With the assistance of these materials, the

court makes the following findings of fact and rulings of law,

see Fed. R. Civ. P. 52(a), which result in the entry of judgment

for NPE on its claim to ownership of the Jumbo.

Findings of Fact

1. In 1993, Davidson and others formed Pasteurized Eggs,

L.P., and its general partner, Davidson Group Shell Egg

Corporation. Davidson served as the chief executive officer and 2

chairman of the board of directors of Davidson Group, which had

its office in Laconia, New Hampshire.

2. Through Davidson’s efforts, the Group entered into an

agreement with James P. and R.W. “Duffy” Cox, a father-and-son

team of inventors from Washington state, to license certain

technology they had developed for the pasteurization of chicken

eggs in their shells. In relevant part, this technology involved

heating the eggs for a particular length of time in a bath set to

a particular temperature in order to reduce their bacterial

content while retaining their “raw” character, i.e., without

partially cooking them.

For simplicity’s sake, this order will use “PELP” to refer 2

to either Pasteurized Eggs, L.P., Davidson Group Shell Egg

Corporation, or both. 

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3. In 2000, PELP commissioned the construction of two

pasteurization machines by an equipment manufacturer, Heat and

Control, located in Concord, New Hampshire, and installed them in

a facility in Newberry, South Carolina. This work was overseen

by Myron “Mike” Wagner, a PELP employee who was in frequent

contact with Davidson during this time. Another PELP employee,

Mike Myshrall, also worked with the equipment in the South

Carolina facility. 

4. By early in the summer of 2000, PELP had started using

the machines to pasteurize eggs on a commercial scale. The eggs,

placed in containers called “flats,” were moved by conveyor belt

into a pasteurization tank, filled with water at a temperature of

approximately 138N F. This temperature was maintained through

the use of heat exchangers positioned underneath the tank, and

kept consistent throughout the tank through the use of air

bubbles in a technique known as “perturbation.” The conveyor

belt then moved the eggs into a “chiller tank,” filled with cool

water. After cooling, the eggs were moved to a piece of

equipment known as “the Diamond,” which packaged them for sale.

5. Within a few weeks, PELP started receiving complaints

from its customers that the eggs pasteurized through this process

were prematurely rotting, forcing a product recall. Wagner and

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Myshrall, in frequent consultation with Davidson, began working

to try to identify the source of the problem.

5. As part of these efforts, the men made a number of

changes to the pasteurization process at the South Carolina

facility during the summer and fall of 2000. Significantly, they

eliminated the chilling bath, instead allowing the eggs to cool

in ambient air after the pasteurization bath. They also began

removing the eggs from the pasteurization bath before they

reached the desired reduction in bacteria concentration, allowing

them to reach that point as they cooled in the air afterwards. 

They began spraying the eggs with quaternary ammonia, a

disinfectant, after they left the pasteurization bath. 

Eventually, they began contacting the shells with a mixture of

wax and disinfectant after the eggs left the pasteurization bath.

6. Within a few weeks of these measures’ implementation,

the eggs stopped showing signs of rot. In fact, in a November 8,

2000, communication to PELP’s limited partners (i.e., its

investors), Davidson wrote:

As expected, our initial installation required

significant adjustment and fine tuning along with

training and adaptation to new challenges particularly

in the area of recontamination after pasteurization. I

am pleased to report that the pasteurizing machine has

been functioning superbly for the past six weeks as a

result of the knowledge gained and implemented . . . . 

The recontamination issues have been addressed and are

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now fully under control through further inventiveness

which is qualified for patent protection.3

9. Also in the fall of 2000, around the same time he was

trying to solve the rot problem, Wagner realized that the heat

exchangers on the pasteurization tank could maintain “zones” of

different temperatures. Wagner discovered this accidentally; he

was interrupted by a telephone call amidst the process of turning

on the heat exchangers in the pasteurization tank and had to

leave the area. When he returned, he noticed that while the

water had become heated to the desired temperature in the area of

tank where the exchangers had been activated, the water in the

rest of the tank--where the exchangers had not yet been

activated--maintained its original temperature. 

10. Realizing that this would allow eggs to be heated to

different temperatures in a single tank, Wagner immediately

telephoned Davidson in New Hampshire to inform him of this

discovery. Davidson flew to South Carolina the very next day to

visit the PELP facility, where he and Wagner began efforts to use

the separate zones in the tank to pasteurize quantities of eggs

at different temperatures.

Similarly, in a September 20, 2000, letter to PELP’s patent 3

attorney, Davidson wrote, “We have determined that deep chilling

in lieu of natural cooling is not necessary and, if used, is

risky.”

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11. Before the end of 2000, PELP had started pasteurizing

eggs for market at the South Carolina facility, using a process

that passed them through two zones of different temperatures in

the same tank. While Wagner tried to create zones of three

different pasteurizing temperatures in the same tank, the heat

exchangers at the South Carolina facility were not powerful

enough to accomplish that.

12. Also in late 2000, Wagner began assisting PELP in

building a pasteurization machine to be installed at its new

facility in Lansing, Michigan. This work took place at the Heat

and Control facility in New Hampshire. Wagner directed that the

new machine have the capacity to create zones of three different

pasteurizing temperatures in the same tank and, at some point,

successfully tested the machine for that capacity.

13. Further testing of the new pasteurization machine at

the Heat and Control facility revealed that the three different

temperature zones could be used to pasteurize eggs effectively. 

Wagner recalled that, as a result of this testing, “we developed

at that time a three temperature test that worked very well and

probably was the best pasteurized egg I'd ever seen,” i.e., it

looked like a “farm fresh egg,” without the cloudiness in the

white often present in pasteurized eggs.

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14. The evidence is in dispute as to when this breakthrough

occurred. Wagner recalled that it was in 2001, “within a couple

weeks” of when the new pasteurization machine was shipped to the

Lansing facility, which was not operational until summer 2001 at

the earliest. But Davidson described successful tests of a 4

three-temperature process in a November 14, 2000 letter to PELP’s

patent counsel, Fred Whisenhunt:

A differential in temperature setting currently

employed occurs in the first of the 3 zones at 2N F

higher than the preferred setting of 133N F in the

second and third zones . . . .

In addition, further testing has been performed

successfully that allows for the same settings

described above with the exception that the third zone

employs a 2N F higher setting (135N F) than the

preferred temperature . . . . When the third zone is

increased to 135N F together with a 133N F setting for

zone #2 and a setting for zone #1 in a range between

136N F and 139N F the processing time is reduced.

15. Whether the successful testing of the three-temperature

pasteurization process occurred in 2001, as Wagner recalled, or

2000, as Davidson stated in this contemporaneous writing, is

potentially a significant factual issue in this case because of

agreements struck between Davidson and PELP’s successor entity,

PEC, in 2001. See infra ¶¶ 17, 26. At trial, Davidson testified

Wagner also recalled that the breakthrough occurred after 4

Davidson had been terminated as a PEC employee and re-hired as a

consultant, which did not occur until September 2001. See infra

¶¶ 23, 25. 

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that the memorandum reflected results that he had simply

“anticipated,” and not that had actually occurred. The court

does not credit Davidson’s newfound modesty as to the status of

his inventions. Instead, as to the date when the successful

testing of the three-temperature process occurred, this court

relies on Davidson’s contemporaneous memorandum over any

conflicting testimony by Wagner--who came across as an entirely

forthcoming witness at trial, but was attempting to remember

events that happened 10 years or so ago. 

16. In 2000, as a means of attracting greater investment,

PELP’s investors decided to convert it from a limited partnership

a corporation, PEC, which was organized under Delaware law. In

December 2000, Davidson described the conversion to PELP’s

investors by sending them a memorandum prepared by the company’s

law firm. The memorandum stated, in relevant part, that Davidson

would assign to PEC “without consideration any invention or

improvement which, during the term of his employment, is tested

or used by [PEC] at a [PEC] facility or has been the subject of a

patent application” (parenthetical omitted). In December 2000,

Davidson executed an “Assignment of U.S. Patents” assigning to

PEC “all right, title and interest” in specified patents, not

including the Jumbo (as to which, as discussed infra, no

application had yet been filed).

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17. As part of the PELP-PEC conversion, which took effect

on January 1, 2001, Davidson signed an employment agreement. The

agreement, which took effect on January 21, 2001, provided in

relevant part that:

Inventions conceived, developed or reduced to practice

(or tested or used by [PEC] at a [PEC] facility . . .

or which has been the subject of a patent application)

prior to January 1, 2001 shall be [PEC’s] exclusive

property as against [Davidson]. [Davidson] will, at

[PEC’s] request and at its expense, execute all

documents reasonably necessary to assign your right,

title and interest in any such Invention. Inventions

conceived, developed or reduced to practice on or after

January 1, 2001, will be owned by [Davidson] and [his]

successors for the life of the Invention, however

[Davidson] will offer to license to [PEC], on an

exclusive basis within the field of the business of

[PEC], such Inventions useful in the business of [PEC].

(parentheticals omitted).

18. The next month, Whisenhunt’s firm filed two provisional

patent applications naming Davidson as the inventor. See U.S.

Patent Application Nos. 60/271,726 (filed Feb. 28, 2001) and

60/271,746 (filed Feb. 28, 2001). The ‘726 application consisted

entirely of verbatim excerpts from the memorandum Davidson had

written to Whisenhunt in November 2000. See ¶ 14, supra.

19. The ‘746 provisional application described a method of

“overpasteurization,” i.e., reducing the bacterial content of the

eggs by more than 5 logs but also causing some coagulation, on

the theory that this would not only “provide even greater safety”

but also reduce the preparation time for the eggs, making them

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useful to fast food restaurants. The ‘746 provisional

application consisted entirely of verbatim excerpts from a

memorandum Davidson had written to Whisenhunt, bearing a date of

January 31, 2001, and stating, “My experiments indicate that we

can achieve up to a one minute saving by providing an advanced

log reduction and a more coagulated product.”

20. In relevant part, the ‘726 provisional application

(and the November 2000 memorandum) described “our current

learnings as applied to our pasteurization technology and

processing.” These “learnings” included, in relevant part:

• “the eggs exit the water bath at 4.80 logs [bacteria

concentration] and achieve a minimum of 5.0 logs

[bacteria concentration] during the first 4 minutes

after exit and while naturally cooling down”;

• “it was impossible in a commercial environment to

maintain the water quality of the cold water bath to a

standard that eliminated forms of bacteria that may

reduce shelf life through the introduction of organisms

which accelerated rot”;

• “treatment of the eggs upon exit [from the bath] with

an anti-bacterial agent must be prompt and precede all

further processing”; and

• “following the anti-bacterial application, a

protective sealant at a higher temperature than the

internal temperature of the eggs is to be applied. The

preferred sealant is a paraffin based wax containing an

anti-bacterial agent.”

21. The ‘726 provisional application and the November 2000

memorandum also described a pasteurization process using three

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zones of different temperatures in a single tank, as already

discussed. See ¶ 14, supra.

22. In March 2001, Davidson wrote to PEC’s board of

directors, claiming to own certain inventions in the egg

pasteurization field by virtue of the employment agreement

because they were “new inventiveness,” i.e., created on or after

January 1, 2001. See ¶ 17, supra. These inventions included

treating the eggs with disinfectant after they exited the

pasteurization bath.

23. At least one of PEC’s board members, however, believed

he had seen that process in use at PELP’s South Carolina facility

during 2000. So, as a result of Davidson’s contrary claim, among

other reasons, the PEC board of directors terminated his

employment with the company, effective May 30, 2001. To

accomplish this, certain directors obtained the written consent

of a majority of PEC’s shareholders to remove Davidson (and one

other director, Arthur Blasberg, Jr.) from the board. 

24. Davidson and Blasberg responded by filing suit against

PEC and certain of its directors in the Delaware Chancery Court,

alleging that those directors had wrongfully procured the consent

of the corporation’s shareholders to his termination. See 5

Section 225 of the Delaware General Corporation Law 5

authorizes the Chancery Court to “hear and determine the validity

of any election, appointment, removal or resignation of any

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Davidson v. Gorman, No. 18972-NC (Del. Ch. June 22, 2001). The

court later issued a “status quo order” that, among other things,

restricted the PEC board in its ability to take certain actions,

including entering into contracts for more than $250,000. This

order interfered with PEC’s efforts to raise additional capital. 

25. To settle the Delaware litigation, Davidson, Blasberg,

PEC, and its remaining board members entered into the GSM,

effective September 20, 2001. The GSM was drafted by James Rand,

a PEC board member whose company, Atlantic Capital Partners,

L.L.C., had invested in PEC, and who negotiated the terms of the

agreement with Davidson. The GSM provided for Davidson to

dismiss the Delaware action challenging his termination, but that

his employment agreement would “be cancelled by mutual consent.” 

Sections 1(a)(ii), 1(a)(iii), and 1(a)(v) of the GSM stated that

the employment contract would be replaced by an agreement under

which Davidson would “be engaged as a consultant to PEC” through

the end of the following year in exchange for a monthly fee of

$17,500 (the same as his salary as PEC’s chairman under the

employment agreement) and other benefits. The GSM further

provided, in section 1(a)(iv), that “[a]ny remuneration due

director or officer of any corporation.” Del. Code Ann. tit. 8,

§ 225. So Davidson and PEC’s directors have referred to the

Chancery Court action, both around the time it was filed and

since, as the “225 litigation” or the “225 action.”

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[Davidson] with respect to calendar year 2001 not paid up to the

date of settlement shall be paid, in cash, upon settlement.”

26. The GSM also contained a number of sections dealing

with the ownership of intellectual property, numbered 1(b)-1(d):

b. Patents and all other intellectual property

applied for prior to January 1, 2001, shall be

owned by PEC . . . .

c. New patents or intellectual property

(“Inventiveness”) developed prior to January 1,

2001 (“Old Inventiveness”), including a method for

extending the shelf life of pasteurized eggs by

treatment with antibacterial agents, shall be the

property of PEC and [Davidson] shall take such

actions as may reasonably be required to assist

PEC to complete the development, improvement,

documentation, protection and patenting of such

Old Inventiveness.

d. Inventiveness developed by [Davidson], whether in

combination with Old Inventiveness or prior

inventiveness, which results in protection from

new patents or patent applications providing

broader or improved protection, on or subsequent

to January 1, 2001 (“New Inventiveness”) shall be

considered the property of [Davidson] . . . .

Section 1(d) further required Davidson “to offer PEC the New

Inventiveness for exclusive license,” the terms of which would

require “a royalty of $0.0025 per dozen pasteurized eggs sold on”

the new inventiveness, provided Davidson was no longer working

for PEC as a consultant or otherwise.

27. While negotiating the GSM, Davidson had asked Rand to

add the phrase “whether in combination with Old Inventiveness or

prior inventiveness, which results in protection from new patents

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or patent applications providing broader or improved protection”

to the definition of “New Inventiveness” set forth in section

1(d). In a memorandum circulating the final version of the GSM

to the other PEC board members, Rand explained that he had

incorporated this change because “1) we have already agreed on

licensing at a minimum the multi-temperature process and 2) the

financial liability under the royalty provisions is capped and 

3) [Davidson] is precluded from unilaterally utilizing ‘Old’ or

prior inventiveness I don’t think that the requested revision

materially changes PEC’s rights.”

28. Rand testified at trial that this statement did not

reflect his understanding that “the multi-temperature process”

was “New Inventiveness” and therefore subject to the GSM’s

licensing provision, but rather, his understanding that, if that

process was in fact “New Inventiveness,” then PEC would have the

right to license it from Davidson if it so chose.

29. The GSM also entitled Davidson to receive a promissory

note in the principal sum of more than $530,000, plus interest,

known as the “Settlement Note.” The note was payable on June 30,

2002, unless PEC completed a planned stock offering before then,

in which case the company would have the right to repay the note

in the monthly installments or convert the obligation into stock. 

The GSM also stated, in section 3(d), that Davidson and Blasberg

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“will be reimbursed their reasonable fees and expenses, subject

to the review of PEC prior to the completion of the closing of

the agreement contemplated hereby, by a payment to [them] of

$100,000 in cash at closing and an amendment to the [note] for

the balance.”

30. Section 4 of the GSM stated, as one of several

“Conditions Precedent,” that Atlantic Capital (together with

another entity, Antaeus Enterprises, Inc.) “will lend to PEC, on

or immediately following the settlement date” the sum of

$600,000. The proceeds were to be directed, first, to

discharging “minimum royalty obligations” under PEC’s licenses

for the Cox family technology and, “subject to there remaining a

balance,” to paying “the sums payable by PEC under [sections]

1(a)(iv) and 3(d)” of the GSM (which, as just discussed, provided

for “remuneration” to Davidson “with respect to calendar year

2001” and reimbursement of the expenses of the 225 litigation,

respectively).6

31. The final paragraph of the GSM stated:

This agreement shall be given effect as of September

20, 2001. Appropriate documents (the “Settlement

Documents”) to effectuate the foregoing will be

The other “Conditions Precedent” involved another $600,000 6

loan to PEC, from the directors named as defendants in the 225

litigation, as well as the settlement of that lawsuit, releases

of the claims brought therein, and changes to the composition of

PEC’s board. 

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prepared and signed as soon as practicable by all

Parties. The Parties agree that this “Heads of

Agreement” memorandum summarizes the provisions to be

included in such documents. The Parties further agree

that this memorandum will be binding until such time as

the Settlement Documents are prepared and accepted and

that where this memorandum lacks specificity as to any

matter, the Settlement Documents will contain

provisions that are usual and customary, modified to

reflect the intent of the Parties as embodied in the

memorandum, where necessary.

32. After signing the GSM, Davidson attempted to

renegotiate its terms, including those dealing with the ownership

of intellectual property, but those renegotiations never ripened

into a different agreement. Davidson admitted at trial, and

affirmatively alleged in his counterclaim in this action, that

the GSM was an enforceable agreement. Indeed, Davidson’s

counterclaim states that the GSM “contained all the essential

terms of the parties’ agreements and was effective and

enforceable as the agreement by its express terms.”7

33. Following the execution of the GSM, Davidson began

negotiating with PEC over the terms of a consulting agreement

which would govern the new relationship between Davidson and PEC

contemplated by the GSM. See ¶ 25, supra. During those

negotiations, a law firm representing PEC’s investors circulated

Davidson made the same statement in a writ he filed against 7

a number of PEC’s former directors and others in Rockingham

County Superior Court. See Davidson v. Rand, No. 04-C-805 (N.H.

Super. Ct. Sept. 17, 2004).

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a draft consulting agreement. The draft stated, inter alia, that

“all Old Inventiveness is owned by the Company” and that “‘Old

Inventiveness’ shall mean processes or intellectual property

developed prior to January 1, 2001 and shall include, upon

payment in full of the LJD Settlement Note or the conversion of

the LJD Settlement note into securities of the Company . . . ,

methods for extending the shelf life of pasteurized eggs by

incorporating antibacterial agents into the wax coating”

(underlining and parenthetical omitted). Davidson and PEC never

reached accord on the terms of the consulting agreement, however.

34. Davidson recalled that, after the execution of the GSM,

he was paid the equivalent of three months’ wages. There is

evidence that the “Settlement Note” envisioned by the GSM was

prepared and executed, but there is no evidence that it was ever

delivered to Davidson. Nor was Davidson otherwise reimbursed for

the fees and expenses he incurred in the 225 litigation.

35. In the meantime, the application for the patent that

ultimately became the Jumbo was filed with the United States

Patent and Trademark Office. U.S. Patent Application No.

10/084,444 (filed Feb. 28, 2002). The application, prepared by

Whisenhunt’s law firm, 

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both listed Davidson as an inventor, and claimed priority through

the provisional patent applications filed by the firm in February

2001. See ¶ 18, supra.

36. The ‘444 application contained, so far as is relevant

here, three independent claims, numbered as claims 1, 30, and

55. Claim 1 of the ‘444 application described: 8

A method of pasteurizing in-shell chicken eggs,

comprising: (1) placing the eggs in a heated fluid

having a temperature of between about 128 degree. F.

and 146 degree. F.; (2) allowing the eggs to dwell in

the heated fluid until there is a log reduction of at

least 4.6 of any Salmonella bacteria within the eggs;

(3) removing the eggs from the heated fluid into a

gaseous atmosphere; and (4) contacting the eggs with an

antibacterial fluid containing an antibacterial agent.

Claim 4, a dependent claim, described “[t]he method of claim 1,

wherein the heated fluid is at different temperatures.”

37. Claim 30 of the ‘444 application described:

A method of pasteurizing in-shell chicken eggs,

comprising: (1) placing the eggs in a heated fluid

having temperatures between about 128 degree. F. and

146 degree. F. so as to heat the eggs, said heated

fluid having a first temperature of about 139 degree F.

to 146 degree F., a second temperature from about 130

degree. F. to less than 135 degree F. and a third

temperature from about 135 degree. F. to 138 degree.

F., and wherein the first, second, and third

temperatures of the heated fluid are maintained in

separate zones of the heated fluid; (2) allowing the

eggs to pass through the first, second, and third

temperatures in a time period which causes at least a

The application contained additional independent claims 8

numbered 82 and 84-86, but those claims were ultimately withdrawn

when the application was amended. See infra ¶ 38.

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log reduction of at least 4.6 of any Salmonella

bacteria within the eggs; and (3) removing the eggs

from the heated fluid to a gaseous atmosphere and

allowing the eggs to cool.

38. Claim 55 of the ‘444 application described:

The method of pasteurizing in-shell chicken eggs,

comprising: (1) passing the eggs through a tank

containing a heated fluid at different temperatures in

separate zones of the heated fluid, said different

temperatures being about 139 degree F. to 146 degree F.

in a first zone, from about 130 degree. F. to less than

135 degree F. in a second zone and from about 135

degree. F. to 138 degree. F. in a third zone; and 

(2) removing the eggs from the heated fluid when the

eggs have reached at least about a 4.6 log reduction of

any Salmonella within the eggs.

39. In response to the ‘444 application, the USPTO issued

an “office action,” dated December 20, 2002. This office action

rejected (among other claims) claim 1, explaining that it had

been anticipated by a patent issued to Cox and his parents in

1995. The office action stated that this patent “discloses

pasteurizing in-shell eggs comprising heating same at a

temperature of, for example, at least 139 [degrees Fahrenheit]

for at least 20 minutes,” as in claim 1 of the ‘444 application,

“followed by placing said eggs in a gaseous environment, wherein

said gaseous environment includes an antibacterial agent”

(parentheticals omitted). According to the office action, “it is

considered inherent that such heat treatment would provide the

particular log reduction called for in” claim 1. The office

action noted that the Cox patent “further discloses treating aid

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[sic] shell eggs with a pore sealant wax.” Finally, the office

action stated that claim 4 (among other dependent claims) was

“objected to as dependent upon a rejected base claim, but would

be allowable if rewritten in independent form including all of

the limitations of the base claim and any intervening claims.” 

40. Whisenhunt, acting on Davidson’s behalf, responded by

filing an amendment to the ‘444 application. The amendment, in

relevant part, changed claim 1 to state:

A method of pasteurizing in-shell chicken eggs,

comprising: (1) placing the eggs in a heated fluid

having different temperatures of between about 128

degree. F. and 146 degree. F.; (2) allowing the eggs to

dwell in the heated fluid until there is a log

reduction of at least 4.6 of any Salmonella bacteria

within the eggs; (3) removing the eggs from the heated

fluid into a gaseous atmosphere where the eggs are

allowed to cool; and (4) contacting the eggs with an

antibacterial fluid containing an antibacterial agent.

(emphasis supplied to show additions from ‘444 application). The

amendment explained that “the subject matter of claim 4, an

allowed claim, has been incorporated into claim 1 . . . . An

additional clarifying amendment to claim 1 has also been made in

step (3) in connection with the eggs being cooled in the lower

temperature gaseous atmosphere. Thus, it is believed that claim

1 is now clearly allowable.”

41. The USPTO ultimately granted the ‘444 application, as

amended, when it issued the ‘784--or “Jumbo”--patent on February

17, 2004. The Jumbo contains three independent claims, numbered

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1, 27, and 48. The language of claim 1 is the same as that set

forth in the amendment to the ‘444 application. See ¶ 40, supra. 

The language of claim 27 of the Jumbo is the same as that set

forth as claim 30 of the ‘444 application. See ¶ 37, supra. And

the language of claim 48 is the same as that set forth in claim

55 of the ‘444 application. See ¶ 38, supra.

42. In the meantime, PEC filed for bankruptcy protection in

the Bankruptcy Court for the District of New Hampshire. In re

Pasteurized Eggs Corp., No. 02-13086 (Bankr. D.N.H. Oct. 5,

2002). Davidson filed a claim against PEC for more than

$903,000, including $100,000 in legal fees he incurred in

prosecuting the 225 litigation and for which, under the GSM, PEC

had agreed to reimburse him. 

43. PEC filed a disclosure statement with the Bankruptcy

Court in support of a proposed reorganization plan, acknowledging

“a prepetition breach by [PEC] of the Global Settlement

Agreement” that had jeopardized its “ability to continue using

certain intellectual property,” including the Jumbo. The

statement explained that PEC and Davidson had “agreed to settle

and resolve” that dispute, among others, through a “mutually

acceptable written settlement agreement.” The agreement was to

make Davidson the owner of the Jumbo “and any improvements and

new inventions conceived of at any time relating to pasteurized

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eggs,” but would provide PEC an “exclusive worldwide license” in

that technology, with specified royalties due to Davidson.

44. Notwithstanding these statements, no such agreement was

ever reached. Davidson said as much in an adversary complaint he

filed against PEC in the Bankruptcy Court, in July 2003, seeking

a declaratory judgment that he was the “sole and exclusive owner”

of the disputed intellectual property, including the Jumbo patent

application. Davidson’s complaint alleged that the settlement

referred to in PEC’s disclosure statement “was at no point in

time consummated” and that “PEC’s multiple breaches of the

[Global Settlement Memorandum] relieved him of . . . any

obligation to assign further intellectual property interests to

PEC.” The complaint did not assert, however, that the Jumbo or

any of the other disputed intellectual property amounted to “New

Inventiveness” belonging to Davidson under the GSM.

45. PEC subsequently entered into an asset purchase

agreement with NPE providing for the conveyance of “all of

[PEC’s] right, title and interest in all of [its] real and

personal property,” including “Intellectual Property” set forth

in an attached schedule. The schedule listed the then-pending

application for the Jumbo, among other patents, applications, and

trademark registrations. NPE moved the Bankruptcy Court for

approval of the sale, but Davidson objected on the grounds that

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he--not PEC--was “the owner of and has exclusive rights to a

substantial portion of the patents and patent applications”

listed on the schedule, including the Jumbo. Davidson argued,

among other things, that PEC had “no rights under the [GSM] and

the Employment Agreement by virtue of its failure to perform.” 

But he did not argue that, irrespective of any breach, the Jumbo

or any of the other intellectual property on the schedule was

“New Inventiveness” belonging to him under the GSM.

46. The Bankruptcy Court later approved the sale of PEC’s

assets to NPE over Davidson’s objection. In re Pasteurized Eggs

Corp., No. 02-13086 (Bankr. D.N.H. July 23, 2003). But the court

noted that, as to the Jumbo and other intellectual property

listed on a schedule to the asset purchase agreement: 

title in said assets is disputed and subject to the

competing claims of [PEC] and Davidson. Accordingly,

[PEC] is authorized to convey to NPE all legal and

equitable rights [PEC] has to claim ownership in the

assets listed on [the schedule], subject only to the

competing ownership claims of Davidson.

Id. at 3. The closing on the asset purchase agreement took place

in late July or early August 2003.

47. Davidson then filed a complaint against NPE in this

court, seeking a declaratory judgment that he owned, inter alia,

the Jumbo application. Davidson v. Nat’l Pasteurized Eggs, LLC,

No. 03-377 (D.N.H. Aug. 27, 2003). Davidson claimed that PEC,

and hence NPE, had no rights to the application under either the

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employment agreement or the GSM because of PEC’s breach of those

agreements. Again, though, Davidson did not claim that the Jumbo

was “New Inventiveness” under the GSM. Just before the issuance

of the Jumbo patent, Davidson filed a stipulation dismissing that

action without prejudice.

48. Nearly three years later, NPE commenced this action

against Davidson. NPE alleged that, in the weeks prior to that

filing, Davidson “asserted that he owns and controls” the rights

to certain patents, including the Jumbo, “in contravention of his

obligations” under the employment agreement and GSM, thus

jeopardizing several of NPE’s pending international patent

applications “derived from” those patents. NPE seeks a

declaratory judgment that it owns “all right, title and interest”

in a number of patents and patent applications, including the

Jumbo and related foreign patent applications. 

49. Davidson answered, raising several affirmative

defenses, including failure of consideration. He also

counterclaimed for a declaratory judgment that “the claim set

forth in the ‘Jumbo’ patent describing the process of extending

the shelf life of eggs be declared an independent claim that is

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not within the public domain.” Davidson did not, however, seek 9

rescission of the GSM.

50. This court finds that the GSM represents a meeting of

the minds on all the essential terms of an agreement between

Davidson and PEC and, therefore, that it is a valid contract.

51. This court finds that the Jumbo was “developed prior to

January 1, 2001” as that phrase is used in the GSM.

Rulings of Law

A. As noted at the outset, it is undisputed that NPE

succeeded to PEC’s rights in the Jumbo when NPE purchased PEC’s

assets out of its bankruptcy. NPE claims that those assets

include the Jumbo because it was among the intellectual property

which, under the GSM, “shall be owned” by PEC. As fully

explained below, NPE has proven this claim by a preponderance of

the evidence, and Davidson has failed to prove any defense to it.

B. As an initial matter, the GSM is an enforceable

agreement. “A valid, enforceable contract requires offer,

acceptance, and a meeting of the minds on all essential terms 

The court eventually granted NPE’s motion to dismiss this 9

counterclaim because it failed to present a justiciable case or

controversy. Nat’l Pasteurized Eggs, LLC v. Davidson, 2011 DNH

009, 36-37 (document no. 118).

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. . . . A meeting of the minds occurs when the evidence, viewed

objectively, indicates that the parties have assented to the same

terms.” Glick v. Chocorua Forestlands Ltd. P’ship, 157 N.H. 240,

252 (2008). Whether a meeting of the minds has occurred, and a

valid contract has been created, are questions of fact. Id. As

already noted, see ¶ 50, supra, this court finds that the GSM

represents a meeting of the minds on all the essential terms of

an agreement between Davidson and PEC and, therefore, that it is

a valid contract.

C. The principal purpose of the GSM was to settle the 225

litigation between Davidson and PEC, which had itself arisen out

of their dispute over the ownership of intellectual property

between and, in turn, Davidson’s continued role in the management

of the company. The GSM sets forth the essential terms for the

resolution of that controversy: it provides for dismissal of the

225 litigation, cancellation of Davidson’s employment contract,

his continued work for (and remuneration by) PEC as a consultant,

settlement of his monetary claims against PEC, and--most

importantly for present purposes--division of the ownership of

intellectual property between Davidson and PEC. As to that final

subject, the GSM assigns ownership depending on whether patents

were issued or applied for, or “Inventiveness” was “developed,”

prior to January 1, 2001, and sets forth detailed provisions for

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PEC to license any intellectual property assigned to Davidson. 

Davidson does not identify any “essential terms” of his agreement

with PEC that these provisions fail to address.

D. Instead, Davidson argues that the GSM was merely “an

agreement to prepare a far more detailed documentation of the

complex interrelationship between [him], PEC, and the other

parties,” emphasizing its statements that “[a]ppropriate

documents (the ‘Settlement Documents’) to effectuate the

foregoing will be prepared and signed as soon as practicable” and

that “[a] new agreement will be substituted” for Davidson’s

employment agreement. But “[a] written memorandum is sufficient

to establish a contract if it demonstrates that the parties have

manifested their intent to be bound to the essential terms of a

more detailed forthcoming agreement.” Lower Vill. Hydroelec.

Assocs., L.P. v. City of Claremont, 147 N.H. 73, 75 (2001). The

GSM readily satisfies this standard. Indeed, in its last

paragraph, the GSM specifically provides that

this memorandum will be binding until such time as

further Settlement Documents are prepared and accepted

and that where this memorandum lacks specificity as to

any matter, the Settlement Documents will contain

provisions that are usual and customary, modified to

reflect the intent of the Parties as embodied in the

memorandum, where necessary.

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It is difficult to imagine a clearer manifestation of intent to

be bound by the essential terms of an agreement even though

details remain to be worked out.

E. There is no merit to Davidson’s argument, then, that

the GSM is merely an agreement for the parties’ “good faith

preparation and execution of the Settlement Documents” which

would themselves resolve the division of intellectual property. 

See, e.g., Hogan Family Enters., Ltd. v. Town of Rye, 157 N.H.

453, 457-58 (2008) (enforcing agreement for the settlement of a

nuisance action, which included the grant of an easement, even

though the agreement provided that the language of the easement

remained to be negotiated by counsel); Lower Vill. Hydroelec.,

147 N.H. at 75-76 (enforcing agreement evinced by letter

accepting offer, even though it “explicitly stated that an

agreement would be drawn up”); Guy v. Starwood Hotels & Resorts

Worldwide, Inc., 2005 DNH 126, 7 (“An enforceable agreement

results under New Hampshire law when the parties manifest their

intent to be bound to the essential terms of a more detailed

forthcoming agreement even if the more detailed agreement never

materializes.”) (quotation marks and bracketing omitted). This

is to say nothing of the fact that Davidson himself has

repeatedly stated that the GSM “contained all the essential terms

of the parties’ agreements and was effective and enforceable as

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the agreement by its express terms,” including in his

counterclaim in this action. See ¶ 32, supra.

F. Davidson also argues that, even if the GSM is

enforceable, it never operated to assign any of his intellectual

property to PEC because PEC failed to make the payments to him

due under the GSM--in particular, the monthly “consulting fee”

under section 1(a)(iii) and the reimbursement of his legal fees

and expenses of the 225 action under section 3(b). See ¶ 25,

supra. As a result, Davidson argues, he “was under no obligation

to transfer intellectual property” to PEC. Davidson has

repeatedly advanced this argument unlike his other claims to his

continued ownership of the Jumbo) since he made his adversary

complaint against PEC in the bankruptcy proceedings. It is

without merit.

G. First, Davidson suggests that the parties’ agreement

itself contemplated that Davidson’s duty to assign did not arise

until PEC honored its duty to pay. This seems to be an argument

that the parties’ agreement made Davidson’s performance of the

assignment conditional on PEC’s performance of the payments.

“Conditions precedent are those facts and events, occurring

subsequently to the making of a valid contract, that must occur

before there is a right to performance.” In re Est. of Kelly,

130 N.H. 773, 781 (1988) (quotation marks and ellipses omitted).

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H. Davidson points out that section 4 of the GSM states,

among a list of events expressly entitled “Conditions Precedent,”

that Atlantic and Antaeus would lend $600,000 to PEC, the

proceeds of which would be used to discharge PEC’s “minimum

royalty obligations” under its licenses for the Cox patents and,

“subject to there remaining a balance,” to making certain

payments to Davidson due under sections 1(a)(iv) and 3(d) of the

GSM. See ¶ 30, supra. These payments were, respectively, 10

“remuneration due [Davidson] with respect to calendar year 2001”

and reimbursement of the “reasonable legal fees and expenses” he

incurred in the 225 litigation. But Davidson does not argue that

PEC failed to pay him any of the “remuneration” called for by

section 1(a)(iv). He acknowledged in his trial testimony, in

fact, that he received the equivalent of three months’ wages

after signing the GSM (which would have covered the three months

left in 2001 at that point).

I. It is undisputed that Davidson did not receive

reimbursement of his expenses and legal fees in the 225

litigation. But, under section 3(d), that payment was “subject

The record is unclear as to how much of the proceeds of 10

the Atlantic/Anteaus loan remained after PEC settled its

obligations under the Cox family licenses. For purposes of this

discussion, however, the court will assume that a balance

remained which would have enabled PEC to meet its obligations to

Davidson under sections 1(a)(iv) and 3(b) of the GSM. 

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Case 1:07-cv-00103-JL Document 156 Filed 12/15/11 Page 31 of 51
to a review of PEC prior to a completion of the closing of the

agreement contemplated hereby” and was to take the form of

“$100,000 in cash at closing and an amendment to the . . .

Settlement Note for the balance” (emphasis added). The “closing

of the agreement”--which, as section 6 of the GSM contemplates,

is the signing of “[a]ppropriate documents to effectuate” its

provisions--never occurred. So, by the express terms of the GSM,

the reimbursement for Davidson’s legal fees and costs in the 225

litigation never came due. Davidson does not argue to the

contrary and acknowledged at trial that his position that the

reimbursement was due before the documents envisioned by the GSM

were signed “may have been overreaching.” Because the 11

conditions precedent imposed by section 4 were either satisfied

(in the case of the remuneration called for by section 1(a)(iv))

or not triggered (in the case of the reimbursement called for by

section 3(b)), those conditions had no effect on Davidson’s

assignment of intellectual property rights under section 1(c).

J. Davidson also argues that PEC’s failure, beginning in

January 2002, to pay the monthly “consulting fee” called for by

Indeed, although the GSM, by its terms, took effect on 11

September 20, 2001, there is no evidence that Davidson demanded

reimbursement of his legal fees and expenses until after PEC

filed for bankruptcy protection more than one year later. That

inaction is plainly inconsistent with any understanding that the

reimbursement was due upon the signing of the GSM, as opposed to

the more formal documents it contemplated.

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section 1(a)(iii) of the GSM relieved him of its assignment

provision. But he does not identify any section of the GSM that

conditions the assignment upon PEC’s making those monthly

payments to him, and the court cannot locate any. As the New

Hampshire Supreme Court has held, a contract will not be read to

impose conditions precedent “unless required by the plain

language of the agreement.” Holden Eng’g & Surveying, Inc. v.

Pembroke Rd. Realty Trust, 137 N.H. 393, 396 (1993) (quotation

marks omitted). Generally, this “plain language” embodies “words

such as ‘if,’ ‘on condition that,’ ‘subject to,’ and ‘provided.’” 

Id. (further internal quotation marks omitted).

K. Here, the provision of the GSM on which NPE relies for

its ownership of the Jumbo, section 1(c), states simply that “Old

Inventiveness” (as therein defined) “shall be the property of

PEC.” It does not say, as Davidson seems to imagine, that Old 12

Relying on Federal Circuit caselaw, NPE argues at length 12

that this provision operated as an “automatic assignment” of the

rights in the Jumbo to PEC. But the federal-law doctrine of

“automatic assignment” serves to determine whether a plaintiff

has standing, by virtue of its contract with the inventor of the

patented matter, to bring a patent infringement claim against a

third party and therefore plays little, if any, role in resolving

a dispute (like this one) between two parties both claiming to

own an invention under the contract between them. Cf. DBB

Techs., L.L.C. v. MLB Advanced Media, L.P., 517 F.3d 1284, 1289-

90 (Fed. Cir. 2008) (explaining that “whether a patent assignment

clause creates an automatic assignment or merely an obligation to

assign is intimately bound up with the question of standing in

patent cases” and is therefore “a matter of federal law”). As

this court has previously observed, such ownership disputes are

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Inventiveness shall be the property of PEC “if,” “on condition

that,” or “provided that” PEC make the monthly payments. Nor

does section 1(a)(iii) of the GSM, which imposes the payment

obligation, contain any language indicating that it serves as a

condition of the assignment. Finally, section 4 of the GSM

(which, as just discussed, does serve to impose conditions

precedent) does not list payment of the monthly consulting fee

among them. The “plain language” of the GSM, then, does not

condition Davidson’s assignment of intellectual property upon

PEC’s remission of the monthly payments to him.

L. Second, Davidson argues that PEC’s failure, beginning

in January 2002, to pay the monthly consulting fee under section

1(a)(iii) of the GSM amounted to a “material breach” so that his

“obligation to assign the intellectual property that comprised

the Jumbo Patent was discharged.” Davidson is correct that “a

breach that is sufficiently material and important to justify

ending the whole transaction is a total breach that discharges

the injured party’s duties.” Fitz v. Coutinho, 136 N.H. 721, 725

(1993). But, as Davidson recognizes, the duties that are

discharged by a total breach are “the injured party’s remaining

resolved under state law. See Nat’l Pasteurized Eggs, 2011 DNH

009, 33 n.13; Order of May 7, 2008 (Barbadoro, J.) (document no.

29). So this court applies New Hampshire principles of contract

interpretation, rather than the federal doctrine of “automatic

assignment,” in deciding the effect of section 1(c) of the GSM.

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duties.” Id. (emphasis added); see also Restatement (Second) of

Contracts § 237 (1981) (“it is a condition of each party’s

remaining duties to render performances . . . that there be no

uncured material failure by the other party to render any such

performance due at an earlier time”).

M. As just discussed, Davidson’s duty to assign

intellectual property under section 1(c) of the GSM was not

“remaining” at the time that PEC stopped making the monthly

payments to him under section 1(a)(iii), because the GSM did not

condition the assignment upon the payments. Again, section 1(c)

provides simply that the specified intellectual property “shall

be owned by PEC” (emphasis added), and does not say that this is

to occur only after PEC makes all (or even any) of the monthly

payments. So the GSM does not allow Davidson to wait to assign 13

the intellectual property in question until he has received his

consulting fee--which, of course, was not due up front, but on a

Section 1(c) applies only to intellectual property 13

“developed prior to January 1, 2001,” so the subject of the

assignment would necessarily have already come into existence at

the time the GSM was signed. Cf. Arachnid, Inc. v. Merit Indus.,

Inc., 939 F.2d 1574, 1580 (Fed. Cir. 1991) (ruling that a

“provision that all rights to inventions developed during [a

specified] period ‘will be assigned’ . . . does not rise to the

level of a present assignment of an existing invention”). It is

also worth noting that even the draft consulting agreement,

circulated after the execution of the GSM, did not condition

Davidson’s assignment of “Old Inventiveness” upon PEC’s payment

of the consulting fee, but only upon its payment of the

“Settlement Note.” See ¶ 32, supra.

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monthly basis. See Restatement (Second) of Contracts § 237 cmt.

b (directing that “the terms of the agreement should be

considered” in “determining the relative times when performance

is due”). It follows that the assignment was not one of

Davidson’s “remaining duties” under the GSM at the time PEC

breached the agreement by discontinuing the monthly payments in

January 2002. Indeed, by that point, Davidson had already

rendered that performance by signing off on the GSM’s

unconditional provision that the specified intellectual property

“shall be owned by PEC.”

N. At least one court has rejected the argument that one

party’s material breach of contract allows the other “to cancel

his previous performance,” reasoning that, once tendered, it is

“not a remaining duty of performance which the material breach

would excuse” under § 237 of the Restatement. Waste Mgmt., Inc.

v. Danis Indus. Corp., No. 00-256, 2004 WL 5345389, at *9 (S.D.

Ohio Feb. 24, 2008) (ruling that defendant’s failure to continue

indemnifying plaintiffs, in breach of the parties’ settlement

agreement, did not cancel plaintiffs’ release of claims against

the defendant, which became effective upon execution of the

agreement). Moreover, the Federal Circuit has rejected the view

that “following a breach of the assignment[], the [assignor]

could unilaterally declare the assignment null and void and

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thereby reobtain ownership of the patents that are covered.” Jim

Arnold Corp. v. Hydrotech Sys., Inc., 109 F.3d 1567, 1578 (Fed.

Cir. 1997) (applying Texas law). Davidson has provided no 14

authority to the contrary. PEC’s failure to make the monthly

payments from January 2002 onward, then, had no effect on

Davidson’s assignment of intellectual property under section 1(c) 

of the GSM, because Davidson had already made that assignment

when he executed the GSM--which states that such intellectual

property “shall be owned by PEC.”

O. Davidson complains that this is “an absurd result”

which “unjustly deprives him of the benefit of the bargain

intended by the monetary and non-monetary consideration he was to

receive in return for the division of intellectual property

rights summarized in the GSM.” But Davidson--who, by all

accounts, is an experienced businessman and an effective

negotiator--exposed himself to this risk by signing the GSM. 

Once again, that agreement assigns the specified intellectual

As Jim Arnold explains, “a party must seek the aid of a 14

court in order to obtain cancellation or rescission of any

assignment, thus obtaining reassignment of title.” 109 F.3d at

1578. Like the plaintiff there, however, Davidson has never

secured that relief from any court, and he did not seek it in his

counterclaim in this action. In any event, “[r]escission as a

remedy for breach of contract is not available against a

defendant whose defaulted obligation is exclusively an obligation

to pay money,” Restatement (Third) of Restitution and Unjust

Enrichment § 37(2) (2011), so Davidson would not have been able

to obtain rescission of the GSM even had he sought that relief.

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property to PEC without conditioning the assignment on the

company’s continued payments to Davidson or, for that matter, its

compliance with any of its obligations to him (save for those

expressly made conditions precedent by section 4, as already

discussed). Where, as is the case here with PEC’s monthly

payments to Davidson, “the performance of one party requires a

period of time and the performance of the other party does not,

their performance cannot be simultaneous. Since one of the

parties must perform first, he must forego the security that a

requirement of simultaneous performance affords against

disappointment of his expectation of an exchange.” Restatement

(Second) of Contracts § 234 cmt. e. While “parties can by

express provision mitigate the harshness of [this] rule,” id.,

they did not do so here. 

P. Davidson, then, put himself in the same position as

anyone who agrees to give something of value immediately in

exchange for a promise of payment over time: assuming the risk

that the promisor will not deliver, leaving the promisee with

less than he bargained for. There is nothing “absurd” about this

scenario and, in fact, many of those who had loaned money to or

bestowed other benefits on PEC found themselves in the same

predicament when PEC declared bankruptcy (as creditors of a

bankrupt debtor often do). In any event, whatever the “fairness”

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of this result from a cosmic perspective, it is the result

dictated by the GSM, and “courts cannot make better agreements

than the parties themselves entered into or rewrite contracts

merely because they might operate harshly or inequitably.” 

Livingston v. 18 Mile Point Drive, Ltd., 158 N.H. 619, 623-24

(2009). PEC’s discontinuance of the monthly consulting fee

payments to Davidson under section 1(a)(iii) had no effect on the

assignment under section 1(c).

Q. Finally, Davidson argues that, even if the assignment

provision of section 1(c) was not voided by PEC’s breaches, that

clause does not cover the Jumbo anyway. To recapitulate, section

1(c) states that:

New patents or intellectual property (“Inventiveness”)

developed prior to January 1, 2001 (“Old

Inventiveness”), including a method for extending the

shelf life of pasteurized eggs by treatment with

antibacterial agents, shall be the property of PEC and

[Davidson] shall take such actions as may reasonably be

required to assist PEC to complete the development,

improvement, documentation, protection and patenting of

such Old Inventiveness.

Davidson argues that the inventiveness in the Jumbo was not

“developed”--as he says the parties understood that term--prior

to January 1, 2001, so that the Jumbo does not amount to “Old

Inventiveness” under section 1(c). Instead, Davidson argues, the

Jumbo is “New Inventiveness” covered by section 1(d) of the GSM. 

Under his interpretation, that section reposits ownership of the

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Jumbo in him, subject only to PEC’s right to license it for

specified royalties (a right he says was never exercised).15

R. Davidson’s argument turns on the proper construction of

the language of sections 1(c) and 1(d), particularly the term

“developed.” New Hampshire principles of contract interpretation

“give the language used by the parties its reasonable meaning,

considering the circumstances and the context in which the

agreement was negotiated, and reading the document as a whole.” 

Birch Broad., Inc. v. Capitol Broad. Corp., 161 N.H. 192, 196

(2010). While this exercise serves to “give an agreement the

meaning intended by the parties when they wrote it[,] [a]bsent

ambiguity . . . , the parties’ intent will be determined from the

plain meaning of the language used in the contract.” Id.

(quotation marks and citation omitted).

S. The parties here have essentially agreed that sections

1(c) and 1(d) are ambiguous, i.e., that they “could reasonably

Davidson also argues, by way of a pretrial motion in 15

limine, that NPE cannot sustain its burden of proof on its claim

for ownership of the Jumbo without expert testimony as to the

“inventiveness” it describes. As the ensuing discussion makes

clear, however, the question here is not whether the Jumbo

contains “inventiveness” in the patent law sense of novelty,

usefulness, and non-obviousness, but when the inventiveness

described in the Jumbo was “developed” (there is also no question

here that it was developed by Davidson). Cf. Lucent Techs., Inc.

v. Gateway, Inc., 543 F.3d 710, 718 (Fed. Cir. 2008). Davidson

does not explain why this court needs expert testimony to decide

the factual question of when certain technology was developed. 

His motion in limine (document no. 138) is denied.

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disagree as to the meaning of that language.” 

16 Id. (quotation

marks omitted). So “it must be determined, under an objective

standard, what the parties, as reasonable people, mutually

understood the ambiguous language to mean.” Id. To apply this

test, “a court should examine the contract as a whole, the

circumstances surrounding execution and the object intended by

the agreement, while keeping in mind the goal of giving effect to

the intentions of the parties.” Id. at 197-98. Based on these

considerations, the court concludes that the inventiveness set

forth in the Jumbo falls within section 1(c), rather than section

1(d), and therefore became the property of PEC under the GSM.

T. As discussed in detail supra, see ¶¶ 35-40, the Jumbo

contains three independent claims, numbered 1, 27, and 48, all

describing methods of pasteurizing chicken eggs in their shells

by placing them in a heated fluid of different temperatures, then

removing them when they have reached at least a 4.6 log reduction

in any Salmonella bacteria within. This was, in essence, the

In his post-trial memorandum, Davidson argues that these 16

provisions are in fact “clear and unambiguous” in giving him

ownership of the Jumbo, as “New Inventiveness.” But Davidson

spent much of the trial introducing extrinsic evidence as to the

meaning of the GSM (particularly sections 1(c) and 1(d)). As

just noted, that evidence would be irrelevant if the agreement

was in fact unambiguous as Davidson now argues. In any event,

whether a contract is ambiguous is a question of law for the

court to decide, see Birch Broad., 161 N.H. at 196, and, in this

court’s view, sections 1(c) and 1(d) are ambiguous. 

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process described in Davidson’s November 2000 memorandum to

Whisenhunt, the patent attorney--who used verbatim excerpts from

that memorandum as the ‘726 provisional patent application. See

¶¶ 18-21, supra. The Jumbo patent application, in turn, claimed

priority through that provisional application. See ¶ 35, supra. 

Because, in November 2000, Davidson described the methods later

patented in the Jumbo--and, moreover, described them as “our

current learnings”--it follows that they were “developed” prior

to January 1, 2001 and therefore constitute “Old Inventiveness”

that is the property of PEC under section 1(c) of the GSM.

U. Davidson argues that the Jumbo embodies several “claims

of inventiveness” that were not “developed” until after January

1, 2001, amounting to “New Inventiveness” that is the property of

Davidson under section 1(d) of the GSM. In his view, these

“claims of inventiveness” comprise (i) applying an antibacterial

agent to the shells of the eggs, and cooling them in ambient air,

following the pasteurization bath, (ii) employing a “threetemperature process” for pasteurization, (iii) a “food service

process” through which the eggs are not only pasteurized, but

partially cooked, (iv) “perturbation” of the fluid in the bath

using fluid, rather than air, and (v) using “jet fluid walls” to

separate the different temperature zones in the bath. In the

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court’s view, however, none of these meets the definition of “New

Inventiveness” under section 1(c) of the GSM.

V. First, the method of applying an antibacterial agent to

the shells of the eggs and allowing them to cool in ambient air

after the pasteurization bath was in use in PEC’s South Carolina

facility in the summer and fall of 2000. See ¶ 5, supra. 

Davidson nevertheless argues that, because he, Wagner, and

Myshrall conducted “ongoing testing and experimentation” as to

the solution to the rot problem beyond the end of 2000, these

steps were not “developed prior to January 1, 2001.” But, as

evinced by the November 2000 memorandum to Whisenhunt, see ¶ 20,

supra, and Davidson’s contemporaneous memorandum to PELP’s

investors, see ¶ 8, supra, Davidson claimed that he had solved

the rot problem before the end of 2000, through “inventiveness”

that included applying the antibacterial agent and cooling the

eggs in air (rather than water) following the pasteurization

bath. By the end of 2000, then, that “inventiveness” had been

“developed” within any reasonable understanding of that term.

W. Indeed, while “[c]ourts that have interpreted

assignment agreements requiring the employee to assign inventions

to an employer disagree over what is required before such an

invention exists,” that disagreement is over whether “the

invention dates from the written expression of the idea” or “the

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completion of a specimen or prototype.” Target Tech. Co. v.

Williams Advanced Materials, Inc., No. 04-1083, 2007 WL 6201689,

at *10 (C.D. Cal. Feb. 6, 2007) (citing cases). The successful

implementation of an invention plainly meets even the more

demanding of these standards. Moreover, section 1(c)

specifically lists “a method for extending the shelf life of

pasteurized eggs by treatment with antibacterial agents” as “Old

Inventiveness.”

X. Davidson posits that his employment agreement, executed

prior to (and superseded by) the GSM, supports a more

circumscribed reading of “developed.” While “[a]greements and

negotiations prior to or contemporaneous with the adoption of a

writing are admissible in evidence to establish . . . the meaning

of the writing,” Gintzler v. Melnick, 116 N.H. 566, 568 (1974)

(quotation marks omitted; ellipse in original), the employment

contract does not support Davidson’s view. It is true that its 17

Davidson also relies on the draft consulting agreement, 17

which states that “‘Old Inventiveness’ . . . shall include

methods for extending the shelf life of pasteurized eggs by

incorporating antibacterial agents into the wax coating,”

suggesting that the scope of that phrase in the GSM should be

limited accordingly. See ¶ 33, supra. But the parties never

reached accord on the consulting agreement, so terms that were

proposed as part of it shed little, if any, light on the meaning

of the GSM. In any event, because “the term ‘includ[e]’ is not

one of all-embracing definition, but connotes simply an

illustrative application of the general principle,” Fed. Land

Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95, 100 (1941),

the language of the draft consulting agreement does not suggest

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assignment provision extends to “[i]nventions conceived,

developed or reduced to practice (or tested or used by [PEC] at a

[PEC] facility . . .) prior to January 1, 2001,” while section

1(c) of the GSM encompasses only inventiveness “developed” before

then. But Davidson has not pointed to anything suggesting that

this linguistic change reflected a conscious effort by the

parties to narrow the scope of the assignment; they may well have

thought that “developed,” on its own, did the job of all the

different verbs listed in the prior contract’s assignment clause.

Y. In any event, “conceived” seems to be the only verb in

the employment contract’s assignment provision with a broader

scope than “developed.” Cf. Jamesbury Corp. v. Worcester Valve

Co., 443 F.2d 205, 210-11 (1st Cir. 1971) (reading an assignment

agreement covering “inventions which are made or worked out”

during a specified period to require that the invention was “put

in tangible form,” not just “conceived,” during that time)

(applying Massachusetts law). As just discussed, applying

antibacterial agents to the eggs and allowing them to cool in

ambient air had not just been “conceived,” but had been put into

practice, before the end of 2000. So, even if section 1(c) of

the GSM should be read to exclude inventiveness merely

that “Old Inventiveness” is limited to the placement of

antibacterial agents in the wax coating.

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“conceived” before January 1, 2001, that reading would not render

the process “New Inventiveness.” 

Z. Second, for largely the same reasons, the threetemperature pasteurization process embodied in the Jumbo was also

“developed” prior to January 1, 2001. Claims 27 and 48 of the

Jumbo describe a method of pasteurizing eggs by placing them in a

heated fluid comprised of three “separate zones” of different

temperatures of, respectively, 139E to 146E, 130E to less than

135E, and 135E to 138E. See ¶¶ 37-38, supra. As NPE points out,

these are essentially the same three temperature zones that

Davidson described as having produced “[s]uccessful test

results,” shortening pasteurization times, in his November 2000

memorandum to Whisenhunt. See ¶ 14, supra. Largely as a result

of that writing, this court has found that the three-temperature

process was successfully tested before the end of 2000. See 

¶ 15, supra. Again, any reasonable understanding of the GSM’s

requirement that inventiveness have been “developed” by that

point would have to include its “successful” testing by then.

AA. In arguing to the contrary, Davidson relies on Rand’s

comment in his memorandum circulating a draft of the GSM (which

he authored) that “we have already agreed on licensing at a

minimum the multi-temperature process.” See ¶ 27, supra. 

Davidson takes this to reflect Rand’s understanding that the

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process was “New Inventiveness,” since that is what the GSM gave

PEC the right to license. What the memorandum says, though, is

that PEC will have that right “at a minimum” as to the multitemperature process--suggesting Rand’s understanding that PEC’s

rights may in fact be broader, i.e., an assignment of the process

as “Old Inventiveness” under section 1(c). In fact, that was

precisely the understanding to which Rand testified at trial. 

See ¶ 28, supra. The comment in Rand’s memorandum, then, does

not support reading the GSM to treat the multi-temperature

process as “New Inventiveness.” 

18

BB. Third, Davidson’s contemporaneous writings to

Whisenhunt also indicate that what Davidson identifies as “the

food service process” of the Jumbo was developed prior to the end

of 2000. While that process was not mentioned in Davidson’s

November 2000 memorandum, it was discussed at length in his

memorandum of January 31, 2001, including the results of

“experiments” demonstrating that the process could “achieve up to

Davidson testified that he recalled conversations, prior 18

to or at the time the GSM was executed, that “the

multi-temperature process clearly was part of the new

inventiveness” set forth in the agreement, but he did not

describe those conversations any more specifically, nor do any of

the contemporaneous documents between the parties corroborate

that account. Rand, for his part, did not recall any such

discussions. So, while not necessarily questioning Davidson’s

subjective belief in the veracity of his self-serving and vague

recollections, the court does not rely on his testimony as to

those conversations in construing the GSM.

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a one minute saving” in cooking time. See ¶ 19, supra. The

memorandum also relates that the fast-food behemoth McDonald’s

“has done extensive testing of our eggs over a period of at least

three months before making the decision to go forward last

December,” apparently with a plan to test-market “a new breakfast

menu consisting of our eggs.” The most reasonable inference to

draw is that the food service application of the Jumbo had been

tested successfully (at least successfully enough to draw the

interest of one the largest restaurant chains in the world)

before the end of 2000 and that, as a result, the “food service

process” was also “developed” before the end of 2000.

CC. There is no evidence that the other area of “New

Inventiveness” that Davidson has identified in the Jumbo--the use

of “jet fluid” perturbation or “walls” in the pasteurization

tank--was put in place, successfully tested, or otherwise

“developed” before 2001. Indeed, there is no evidence as to when

the claimed “jet fluid” innovations were even conceived: the

concept was not mentioned in either of the February 2001

provisional patent applications, see ¶ 19, supra, appearing for

the first time in the application for the Jumbo, filed in July

2002. It follows, Davidson argues, that these innovations are

“New Inventiveness” belonging to him under section 1(d). 

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DD. Davidson’s argument, however, ignores the other

limitation that the GSM places on “New Inventiveness”: not only

must it be “developed . . . on or subsequent to January 1, 2001,”

it must also “result[] in protection from new patents or patent

applications providing broader or improved protection.” The

alleged “jet fluid” innovations do not meet this standard.

EE. As Davidson acknowledges, these “innovations” are not

described in any of the Jumbo’s independent claims, but only in

its dependent claims. It is, of course, “a fundamental principle

of patent law that ‘dependent claims cannot be found infringed

unless the claims on which they depend have been found to have

been infringed.’” Jeneric/Pentron, Inc. v. Dillon Co., 205 F.3d

1377, 1383 (Fed. Cir. 2000) (quoting Wahpeton Canvas Co. v.

Frontier, Inc., 870 F.2d 1546, 1553 (Fed. Cir. 1989)). As a

result, NPE argues, any inventiveness not described in the

Jumbo’s independent claims, but only in its dependent claims,

does not “result[] in protection from new patents or patent

applications providing broader or improved protection” and

therefore falls outside the scope of “New Inventiveness” under

section 1(d). The court agrees.

FF. Under the fundamental principle of patent law just set

forth, the holder of the Jumbo could not prevent a third party

from using the “jet fluid” processes described in certain of the

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dependent claims, unless that third party was also using one of

the processes described in one of the independent claims. It

follows that the “jet fluid” inventiveness, whenever it was

developed, did not “provid[e] broader or improved protection”

beyond the inventiveness embodied in the Jumbo’s independent

claims (which, as just discussed at length, is “Old

Inventiveness,” having been “developed” prior to the end of

2000). Instead, the “protection” provided by the Jumbo’s

dependent claims is narrower than that provided by its

independent claims, because, each “dependent claim, by

definition, incorporates all of the limitations of the

[independent] claim to which it refers” in addition to its own

limitations. Jeneric/Pentron, 205 F.3d at 1383. So the “jet

fluid” innovations, described only in the Jumbo’s dependent

claims, are not “New Inventiveness” belonging to Davidson under

section 1(d) of the GSM.19

GG. Accordingly, because all of the inventiveness described

in the Jumbo was either developed prior to January 1, 2001, or

did not result in broader or improved protection, sections 1(c)

and 1(d) of the GSM gave ownership of the Jumbo to PEC. It

The same is true of the Jumbo’s food service application, 19

which is also not described in any of its independent claims. 

Thus, even if that application was not “developed” until January

1, 2001 or later, but see ¶ BB, supra, it would still not

constitute “New Inventiveness” under the GSM.

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follows that NPE, who purchased PEC’s rights under the GSM

through the asset purchase agreement approved as part of PEC’s

bankruptcy, owns the Jumbo.

Order for Judgment

Based on the findings and rulings set out above, the clerk

shall enter judgment for NPE on its claim that it owns all right,

title, and interest in the Jumbo, U.S. Patent No. 6,692,784. 

Davidson’s motion in limine is DENIED. 20

SO ORDERED.

____________________________

Joseph N. Laplante

United States District Judge

Dated: December 15, 2011

cc: Peter G. Callaghan, Esq.

Adam Taylor Rick, Esq.

Paul C. Bordeau, Esq.

David H. Bownes, Esq.

Document no. 20 138. 

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