## United States Court of Appeals for the Federal Circuit

04-1397 MARK THATCHER and DECK ERS OUTDOOR CORPORATION (Successor in Interest to Mark Thatcher), Plaintiffs-Appellants,

v. KOHL’S DEPARTMENT STORES, INC. and KOHL’S CORPORATION, Defendants-Appellees, and ASSOCIATED FOOTWEAR, INC., Defendant.

Thomas D. Rosenwein , Gordon, Glickman, Flesch & Rosenwein, of Chicago, Illinois, argued for plaintiffs-appellant s. Of counsel on the brief were Paul G. Juettner and Laura R. Wanek , Greer, Burns & Crain, Lt d., of Chicago, Illinois. John T. Gabrielides , Brinks Hofer Gilson & Lione, of Chicago, Illinois, argued for defendants-appellees. With him on the brief was Nicholas G. De La Torre

. Appealed from: United States District C ourt for the Northern District of Illinois Senior Judge George M. Marovich

## United States Court of Appeals for the Federal Circuit

04-1397

MARK THATCHER and DECK ERS OUTDOOR CORPORATION, (Successor in Interest to Mark Thatcher), Plaintiff-Appellants,

v. KOHL’S DEPARTMENT STORES, INC. and KOHL’S CORPORATION, Defendants-Appellees, and ASSOCIATED FOOTWEAR, INC., Defendant.

__________________________ DECIDED: February 10, 2005

__________________________
Before MICHEL *
, Chief Judge , MAYER ** , and LINN, Circuit Judges

. MAYER, Circuit Judge

. Deckers Outdoor Corporation (“Deckers”) appeals the ruling of the United States District Court for the Northern Dist rict of Illinois, dismissing its motion for a rule to show cause for lack of standing. Thatcher v. Kohl’s Dep’t Stores, Inc. , No. 97-CV-4746 (N.D.

* Paul R. Michel assumed the pos ition of Chief Judge on December 25, 2004.

** Haldane Robert Mayer vacated the pos ition of Chief Judge on December 24, 2004.Ill. Mar. 9, 2004). Becaus e the consent judgment entered into between Mark Thatcher and Kohl’s Department Stores, Inc. and Kohl’s Corpor ation (collectively “Kohl’s”) does not give Deckers the ri ght to enforce the judgment against Kohl’s, we affirm. Background Deckers filed the motion for a rule to show cause to enforce a consent judgment entered int o by Mark Thatcher and Kohl’s, which s e ttled a suit brought in J u ly 1997 by Thatcher, also in the Northern District of Illin o i s. The compla int of the origina l suit alleged pat ent infringement, copyright infrin gement, trade dress infringement, and unfair competition by Kohl’s . The source of the action was Thatc her’s conc eption and development of a footwear product known commercially as the TEVA ® sandal. According to Deckers, the allegedly infri nging products were marketed under the designation “Bay Area Trader” and were sold at certain Kohl’s stores in 1997. The settlement included the filing of an amended complaint , which named Associated Footwear, Inc., the supplier of t he Bay Area Trader sandal s to Kohl’s, as an additional defendant, and an agreem ent to the entry of a c onsent judgment settling the dispute. In pertinent part, t he consent judgment recited t hat the “trade dress [of the
TEVA ® sandal] is a distinctive an d valid trade dress,” and: “On entry of this judgment Defendant corporations, t heir servants, employees, successors-in-interest , subsidiaries and all persons acting under, in c oncer t with, or for them, incl uding t he supplier Associated Footwear, Inc., are permanently enj oined from directly or indirec t ly making or causing to be made, selling or causing to be sold, or using or causing to be used any sandals employing t he trade dress of the Plaint iff or confusingly similar trade dress.”

04-1397 2(emphasis added). T he consent judgment goes on to identify three types of trade dress found in United States Patent No. 4,793,075 (“the ’075 patent”). The judgment incorporates a similar pe rmanent injunction prev enting Kohl’s from violating T hatcher’s ’075 pat ent rights. The paragraph disc ussing Kohl’s obligation t o avoid infringing activit y also applies to Kohl’s “agents, servants, employees, successorsin-interest , subsidiaries and all persons acting under, in concert with, or for them. . . .” (emphasis added). Both the complaint and t he cons ent judgment refer to Thatcher a s “MARK THATCHER, an indiv i dual, Plaintiff,” and neither make reference to Deckers. As to Thatcher’s rights and obligations, t he consent decree is devoid of languag e of assignability, such as the “successo rs-in-interest” language us ed when discussing Kohl’s obligations. No one ot her than Thatcher was expressl y given the right to proceed with a contempt action to enforce the judgment under the terms of the consent judgment. Deckers acquired all intellect ual property ri ghts for the TEVA ® patents and trade dress via a November 25, 200 2 agreement with T hatcher. As a result, Deckers also purchased the right to “all cont racts, claims, rights, causes of action, [and] judgments

. . . related to the Business and Intellect ual Property Assets.” In 2003, Deckers discovered an alleged violati on of the 1997 consent judgment by Kohl’s. It believed a sandal labeled as “Pacific Trail” and sold in ce rtain Kohl’s stores in Illinois was an exact replica of a TEVA ® sandal cov e red by the consent judgment. As the purported successor-in-interest to Thatcher, Deckers f iled a motion for a rule to show cause, seeking to: (1) impose sanctions for civil contempt; (2) coerce obedienc e to the consent

04-1397 3judgment; and (3) compensate Deckers for losse s. Kohl’s mov ed to dismiss becaus e Deckers, as assignee, lacked standing. Rely ing h e a vily o n United States v. Armour & Co. , 402 U.S. 673 (1971) , the district court ruled that Deckers lacked stan ding to enf orce the 1997 consent judgment. It held “that the scope of a consent judgment must be discerned withi n its four corners

. . . .” Recogniz i ng the absence of language giving Thatcher the power to assign his rights, or for Thatcher’s “successor” to enf orce his rights, the court reasoned “that a consent decree is not enf orceable directly or in collater al proceedings by those who are not parties to it, even though they were intended to be benefitted [sic] by it.” (quoting Blue Chip Stamps v

. Manor Drug Stores , 421 U.S. 723, 750 (1975)). The court determined that the consent judgment only allowed e n forc ement by Thatcher because the parties failed to extend t he j udgment to Thatcher’s “successors-in-interest” as they did for Koh l’s. Decke rs filed a motion for reconsider ation t hat was denied on April 5, 2004. Because the original claim for relie f arose under the pat ent laws, 28 U.S.C. § 1338(a), and the consent judgment disposi ng of the case contained a provision retaining jurisdiction for purposes of enforc e ment, we have jurisdiction pur suant to 28 U.S.C. § 1295(a)(1). See Gjerlov v. Schuyler Labs., Inc. , 131 F.3d 1016, 1019 (Fed. Cir. 1997). Discussion “Generally, interpretation of a settlem ent agreement is not an issue uniq ue to patent law, even if arisi ng in the context of a pat ent infringement suit.” Nov a medix, Ltd. v. NDM Ac quisition Corp. , 166 F

. 3d 1177, 1180 (Fed. Cir. 1999) . Accordingly, we apply the law of the appropriate r egional circuit , which in this cas e is the Seventh. Se e

04-1397 4Waymark Corp. v. Porta Sys. Corp. , 334 F.3d 1358, 1362 (F ed. Cir. 2003). In the Seventh Circuit, a dismissal for lack of standing is reviewed de novo. Doe v. County of Montgomery , 41 F.3d 1156, 1158 (7th Cir. 1994). The consent judgment serves as a carefully crafted settlement agreement between t he parties. The Seventh Circ u it views a consent decree or a consent judgment as a form of contract, and, as such, the rules of contract interpretation app ly. Ferrell v. Pierce , 743 F.2d 454, 461 (7th Cir. 1984); see also Diversey Lever, Inc. v. Ecolab, Inc

. , 191 F.3d 1350, 1352 (Fed. Cir. 1999). “T he plain meaning of language of
a contract or consent decree is a pure question of law, s ubject to de novo review by the appellate court.” Sou t h v. Rowe , 759 F.2d 610, 613 (7th Cir. 1985) (citation omitted). Howev e r, “i f the intent of the parti es is not unambiguously express e d by the language of the decree, the district court may review extrinsic ev idence and ent er subsidiary factual findings as to the parti es’ intent, whic h are reviewed only for clear error.” Id. The parties did not include a c hoice of la w provis io n in t he c o nsent judgment; accordingly , we apply the law of Illinois wher e appropriate. See Gjerlov , 131 F.3d at 1020 (settlement agreements in patent case s should not be gover ned by federal common law but ins t ead by st ate contract law). I n Illinois, “ an agreem ent, when reduced to writing, must be presumed to speak t he intention of the parties who signed it. It speaks for itself, and the inte ntion with which it was executed must be determined from the language us ed. It is not to be changed by extrinsic evidence.” Western Ill. Oil Co. v. Thompson , 186 N.E.2d 285, 287 (Ill. 1962). “This approach is sometimes referred to as the ‘four corners’ rule.” Air Safety v. Te achers Realty Corp. , 706 N.E.2d 882, 884 (Ill. 1999). “In applying this rule, a court initially looks to the language of a

04-1397 5contract alone. . . . If the language of the c ontract is facially unambiguous, then the contract is interpreted by the trial court as a matter of law wit hout the use of parol evidenc e.” Id. (citations omitted). Accord Goluba v. Sch. Dist. of Ripon , 45 F.3d 1035, 1037-38 & n.5 (7th Cir . 1995) (exp lic it terms of consent decree c o ntrol unles s the terms are facially ambiguous); Foster v. Hallco Mfg. Co. , 947 F.2d 469, 481 (Fed. Cir. 1991) (“[T]he scope of a consent decree is limited to its terms and . . . its meaning should not be strained.”). Here, there is no ambiguity in the languag e of the consent judgment; the issue is whether Thatcher could assign his right of enforcement to another party in the absenc e of such language. Deckers believ e s that in the absence of language prohibitin g assignability the consent judgment should be freely assignable to it, as successor in interest, citing Plumb v. Fluid Pump Service , 124 F.3d 849, 864 (7th Cir. 1997) (“[E]lementary contract law provides that upon a valid and unqualified ass i gnment the assignee s t ands in the shoes of the assigno r and ass u mes the same rights, title and interest possessed by the assignor.” (citati on omitted)). Examini ng the c ontract as a whole, and in light of Armour , we disagree. Armour promotes the underly ing policy t hat consent judgments must be construed in a manner that preserves the position f o r wh ic h t he parties bargained, because the judgment reflects a compromi se between hostile litigants. Thus, Armour makes clear that while consent judgments have the attributes of contracts, they are fundamentally different from contracts in not only reflecting an agreement on terms but also a resolution and compromise of contest ed legal positions in matters that are the subject of li tigation.

04-1397 6Consent decrees are entered into by parties to a case after careful negotiation has produced agreement on th eir precise terms. The parties waive their right to litigate the issues involv ed in the c a se and th us save themselves the time, expens e, and inev itable risk of lit igation. Naturally, the agreement reached no rmally embodies a comp romise; in exchange for the saving of cost and elimination of risk, the parties each give up something they might have won had t hey proceeded with the litigation. Thus the decree itself cannot be said to hav e a purpose; rather the parties have purposes, generally opposed to each other, and the resultant decree embodies as much of those opposing purposes as the respectiv e parties have the b a rgaining p o wer and skill to ac h i eve. For these reaso n s, the scope of a consent decree must be disce rned within it s four corners, and not by reference to what might sati sfy the purposes of one of the parties to it . . . . [T]he instrument must be c onstrued as it is wr itten, and not as it might have been written had the plainti ff established his factual claims and legal theories in litigation. 402 U.S. at 681-82. There is nothing expressly set out in the consent judgment between That cher and Kohl’s extending T hatcher’s rights to any third party, including any “successor-ininterest.” This silenc e is the functional eq uivalent of the parties ’ express intent to

exc l ude language of assignmen t. Equally as telling is that the cons ent judgment specifies s u ccessors and ass i gns w hen listing Kohl’s obligations. It provides that it is enforceable against “Defendant corporations, t heir servants, employees, successors-ininterest, subsidiaries and all per sons acting under, in concert with, or for them. . . .” When the inclusion of these pr ovisions is contrasted with the absence of any provision permitting anyone other than Thatcher to enfor ce his rights under the consent judgment, the absenc e becomes profound. Indeed, around the s a me time Thatcher sued Kohl’s, he also sued Wal-Mart for alle gedly infringing the same trade dress. In settling that case, Thatcher and Wal-Mart both bound their “successors and assigns.” Thatcher and Deckers must live with the consequence of failing t o include similar la n guage of assignability here.

04-1397 7Conclusion The judgm ent of the United St ates District Court for the Nor t hern District of Illino i s is affirmed.
AFFIRMED

04-1397 8