Title: VLIW Technology, LLC v. Hewlett-Packard Company et al.
Citation: N/A
Docket Number: 305, 2003
State: Delaware
Issuer: Delaware Supreme Court
Date: December 19, 2003

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
VLIW TECHNOLOGY, LLC,  
§  
a Delaware limited liability company, §   No. 305, 2003 
 
 
 
 
 
 
§  
 
Plaintiff Below, 
 
 
§  Court Below – Court of Chancery 
 
Appellant,  
 
 
§  of the State of Delaware, 
 
 
 
 
 
 
§   in and for New Castle County 
 
v. 
 
 
 
 
§   C.A. No. 20069 
 
 
 
 
 
 
§  
HEWLETT-PACKARD COMPANY §  
and STMICROELECTRONICS, 
§  
INC., Delaware corporations, 
 
§  
 
 
 
 
 
 
§  
 
Defendants Below, 
 
 
§  
 
Appellees.  
 
 
§  
 
 
 
 
 
  Submitted:  September 23, 2003 
 
 
 
 
     Decided:  December 19, 2003 
 
Before VEASEY, Chief Justice, HOLLAND, BERGER, STEELE and 
JACOBS, Justices (constituting the Court en Banc). 
 
 
Upon appeal from the Court of Chancery.  REVERSED and 
REMANDED. 
 
 
Arthur G. Connolly, III, Esquire, of Connolly, Bove, Lodge & Hutz, 
Wilmington, Delaware, Michael O. Warnecke, Esquire (argued) and David 
R. Melton, Mayer, Brown, Rowe & Maw, Chicago, Illinois, Kevin M. 
McGovern, Esquire and Brian T. Foley, Esquire, McGovern & Associates, 
Greenwich, Connecticut, J. Brett Busby, Esquire, Mayer, Brown, Rowe & 
Maw, Houston, Texas, and Donald M. Falk, Mayer, Brown, Rowe & Maw, 
Palo Alto, California, for appellant, VLIW Technology, LLC. 
 
 
Robert K. Payson, Esquire, Philip A. Rovner, Esquire and John M. 
Seaman, Esquire, of Potter, Anderson & Corroon, Wilmington, Delaware, 
Roger D. Taylor, Esquire (argued), Virginia L. Carron, Esquire, and John D. 
Livingstone, Esquire, Finnegan, Henderson, Farabow, Garrett & Dunner, 
Atlanta, Georgia, for appellee, Hewlett-Packard Company. 
 
 
2
 
Allen M. Terrell, Jr., Esquire (argued), Jeffrey L. Moyer, Esquire and 
Brock E. Czeschin, Esquire, of Richards, Layton & Finger, Wilmington, 
Delaware, Bruce S. Sostek, Esquire and Jane Politz Brandt, Esquire, 
Thompson & Knight, Dallas, Texas, for appellee, STMicroelectronics, Inc. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HOLLAND, Justice: 
 
 
 
3
 
The plaintiff-appellant, VLIW Technology, LLC (“VLIW”), filed an 
action for breach of contract, misuse of trade secrets, and unfair trade 
practices against the defendants Hewlett-Packard Company (“H-P”) and 
STMicroelectronics, Inc. (“STM”).  The complaint asserts that H-P breached 
its contract with VLIW by sharing confidential information with STM.  H-P 
filed a motion to dismiss the complaint pursuant to Court of Chancery Rule 
12(b)(6).  STM joined that motion.  The Court of Chancery granted both of 
the defendants’ motions. 
VLIW has raised three issues on appeal.  First, VLIW argues that its 
complaint adequately alleged that H-P breached their contract by using the 
licensed technology in its partnership with STM.  Second, VLIW argues 
that, because its complaint stated a proper claim for breach of contract, the 
trade secret and unfair trade practice claims should also be reinstated.  
Finally, VLIW contends that, because STM filed its answer before joining 
H-P’s 12(b)(6) motion, STM has waived this objection and the dismissal as 
to STM should be reversed. 
We have concluded that the Court of Chancery should not have 
granted either of the defendants’ motions to dismiss.  Therefore, the 
judgments must be reversed and all claims against H-P and STM reinstated. 
 
4
Facts 
 
 
The complaint alleges that in May 1990, H-P entered into an 
agreement (“Agreement” or “1990 Agreement”) with Multiflow Computer 
Inc. (“Multiflow”).  Under the terms of this agreement, Multiflow granted 
H-P a perpetual license to a bundle of technology, which included certain of 
Multiflow’s “Intellectual Property Rights,” in exchange for a lump sum 
payment.  Included in these rights was a software program called the Trace 
compiler.   
According to the complaint, the Trace compiler uses “very long 
instruction word” programming to make certain computer hardware perform 
more than one operation at a time (parallel) with great efficiency.  The Trace 
complier is alleged to be especially versatile because it can be configured to 
work with a variety of computers and computer chips that have varying 
abilities to perform multiple operations in parallel.   
The complaint alleges that the nature of many of the software 
methodologies and routines used in the compiler, as well as the way they 
were combined in the complier, were valuable trade secrets not generally 
known in the industry.  Accordingly, Multiflow treated the details 
concerning the operations of the Trace complier as trade secrets.  The 
complaint states that Mutliflow and its successors have taken reasonable 
 
5
steps to protect the confidentiality of the Trace compiler’s operational 
details. 
The 1990 Agreement included in its definition of  “Intellectual 
Property Rights” to be licensed, “all trade secrets and all trade secrets 
rights,” before continuing on to address rights under other forms of 
intellectual property protection.  Certain limitations were placed on the 
licensing of Mutliflow’s intellectual property rights.  First, H-P was 
authorized to use Multiflow’s intellectual property—including information 
related to the Trace compiler—in H-P products only.  No definition of what 
constituted an H-P product was included in the Agreement.  Second, the 
Agreement contained confidentiality obligations for H-P regarding the 
licensed technology.  The source code for the Trace complier, as well as 
associated materials, were labeled as “confidential information.”  Paragraph 
6.3 of the Agreement provided that: 
For a period of five years from the Effective Date, HEWLETT 
PACKARD shall use the same level of care HEWLETT 
PACKARD employs with its own confidential information of 
like importance in avoiding any disclosure or use of 
Confidential Information not authorized pursuant to the licenses 
granted under this Agreement.  Nothing in this Agreement shall 
prevent the disclosure, distribution or sublicense of those 
portions of the Licensed Technology that are Confidential 
Information to a third party for the purpose of making, using 
having made or selling or otherwise disposing of HEWLETT 
PACKARD products. 
 
 
6
Paragraph 6.5 of the Agreement also stated that “HEWLETT PACKARD 
shall not be obligated to hold in confidence, and shall not be subject to the 
confidentiality obligations of this Article 6 with respect to any Confidential 
Information which” H-P already possessed or was known to H-P, is or 
becomes public knowledge, or is available to H-P without a confidentiality 
restriction.   
In June of 1991, Multiflow went out of business.  As a result, 
Multiflow sold all of its remaining assets, including its intellectual property 
assets to TLI, a Connecticut corporation that was formed in May 1991 for 
the purpose of succeeding to and pursuing licensing of Multiflow’s 
intellectual property rights.  In November 2000, all of TLI’s assets, 
including information relating to the Trace compiler, were transferred to 
VLIW, LLC.   
According to the complaint, in late 1999, H-P and STM formed a 
research and development partnership.  The purpose of the partnership was 
to work on the design and development of computer chips and other 
computer products that use the “very long instruction word” technology.  
The complaint alleges that in the course of their partnership, H-P shared 
derivatives of the Trace compiler with STM.   
 
7
The complaint further alleges that STM used the derivatives of the 
Trace complier in designing chips that use “very long instruction word” 
technology.  According to the complaint, the product actually developed by 
the H-P- STM partnership is a “descendant” of the Trace compiler.  STM 
never executed a licensing agreement with Multiflow or its successors. 
Court of Chancery Proceedings 
VLIW flied an action in the Court of Chancery alleging six counts of 
breach of contract and misuse of trade secrets by H-P and STM.  The 
complaint 
alleged 
that 
H-P 
breached 
its 
contract 
with 
VLIW, 
misappropriated trade secrets, and committed unfair trade practices by 
disclosing the technology to STM.  The complaint also alleged that STM 
misappropriated trade secrets and committed unfair trade practices. 
H-P filed a motion to dismiss, pursuant to Court of Chancery Rule 
12(b)(6), arguing that VLIW had failed to state a claim for breach of 
contract.  STM subsequently joined in that motion.  The Court of Chancery 
held that VILW had not stated a claim for breach of contract because the 
confidentiality provisions of the contract had expired.  The Court of 
Chancery also dismissed VLIW’s trade secret and unfair practice claims on 
the basis that those claims were premised on the breach of contract claim. 
 
8
Standard of Review 
 
This Court reviews a dismissal of a complaint under Court of 
Chancery Rule 12(b)(6) de novo.1  “This Court, like the trial court, ‘must 
determine whether it appears with reasonable certainty that, under any set of 
facts that could be proven to support the claims asserted, the plaintiffs would 
not be entitled to relief.’”2  That determination by this Court, as in the trial 
court, is generally limited to the factual allegations contained in the 
complaint.3  In certain circumstances, however, when ruling upon a motion 
to dismiss, it is proper for the trial judge to consider a document attached to 
the complaint when the document is integral to a plaintiff’s claim.4 
On appeal, facts alleged in the complaint must be taken as true and all 
inferences therefrom are viewed in a light most favorable to the plaintiff.5  
Accepting as true all well-pleaded allegations in a complaint, the trial court's 
denial of the motion is erroneous only if a "plaintiff would not be entitled to 
recover under any reasonably conceivable set of circumstances susceptible 
                                          
 
1 In re Santa Fe Pac. Corp. Shareholder Litig., 669 A.2d 59, 70 (Del. 1995). 
2 McMullin v. Beran, 765 A.2d 910, 916 (Del. 2000) (quoting In re Tri-Star Pictures, Inc. 
Litig., 634 A.2d 319, 326 (Del. 1993)). 
3 McMullin v. Beran, 765 A.2d at 916; Vanderbilt Income and Growth Assocs. v. 
Arvida/JMB Managers, Inc., 691 A.2d 609, 612-13 (Del. 1996). 
4 In re Santa Fe Pac. Corp. Shardholder Litig., 669 A.2d at 69-70. 
5 McMullin v. Beran, 765 A.2d at 916. 
 
9
of proof."6  An allegation, though vague or lacking in detail, is nevertheless 
"well-pleaded" if it puts the opposing party on notice of the claim being 
brought against it.7  
Pleading Requirements 
In alleging a breach of contract, a plaintiff need not plead specific 
facts to state an actionable claim.  Rather, a complaint for breach of contract 
is sufficient if it contains “a short and plain statement of the claim showing 
that the pleader is entitled to relief.”8  Such a statement must only give the 
defendant fair notice of a claim and is to be liberally construed.9   
A complaint that gives fair notice “shifts to the defendant the burden 
to determine the details of the cause of action by way of discovery for the 
purpose of raising legal defenses.”10  Accordingly, under Delaware’s judicial 
system of notice pleading, a plaintiff need not plead evidence.  Rather, the 
plaintiff need only allege facts that, if true, state a claim upon which relief 
can be granted. 
                                          
 
6 Precision Air, Inc. v. Standard Chlorine of Delaware, Inc., 654 A.2d 403, 406 (Del. 
1995) (quoting Kofron v. Amoco Chems. Corp., 441 A.2d 226, 227 (Del. 1982)).  
7 Savor, Inc. v. FMR Corp.,812 A.2d 894 (Del. 2002); Precision Air, Inc. v. Standard 
Chlorine of Delaware, Inc., 654 A.2d at 406.  
8 Court of Chancery Rule 8(a)(1). 
9 Michelson v. Duncan, 407 A.2d 211, 217 (Del. 1979); see also Conley v. Gibson, 355 
U.S. 41, 47 (1957).  This simplified pleading standard applies to all civil actions, with 
limited exceptions.  Court of Chancery Rule 9(b), for example, requires greater 
particularity in all averments of fraud or mistake. 
10 Klein v. Sunbeam Corp., 94 A.2d 385, 391 (Del. 1952).   
 
10
VLIW’s Argument 
VLIW contends that the Court of Chancery erred in applying the 
notice standards of Delaware’s pleading requirements.  VLIW argues that it 
adequately alleged that H-P breached the Agreement, in that it claimed that 
H-P was using the licensed technology in its partnership with STM.  VLIW 
contends that it adequately alleged this breach in two ways: first, by alleging 
that H-P used the licensed technology in non-H-P products, and second, by 
alleging that H-P disclosed confidential information to STM.   
Because the provisions in the Agreement concerning confidentiality 
and what constitutes an “H-P product” are ambiguous, VLIW argues, all 
reasonable inferences as to their meaning should have been construed in 
favor of VLIW for purposes of deciding the defendants’ 12(b)(6) motions to 
dismiss.  Under such a circumstance, VLIW argues that its complaint was 
sufficient to meet Delaware’s notice pleading standard.  We agree. 
Breach of Contract 
In order to survive a motion to dismiss for failure to state a breach of 
contract claim, the plaintiff must demonstrate: first, the existence of the 
contract, whether express or implied; second, the breach of an obligation 
 
11
imposed by that contract; and third, the resultant damage to the plaintiff.11  
VLIW’s complaint met this burden by averring that a contract between 
VILW and H-P existed, that the licensed technology was being used in an H-
P/STM product in contravention of the Agreement, and that VLIW was 
damaged as a result.  The allegation of these facts in the VLIW complaint 
was sufficient to put the defendants, H-P and STM, on notice of VLIW’s 
claims against them. 
First, VLIW’s complaint alleges that Multiflow, VLIW’s predecessor 
in interest, entered into a license agreement with H-P in 1990.12  Alleging 
that the Agreement was for a limited purpose and contained certain 
restrictions on H-P’s use of the licensed technology, the complaint avers 
certain contractual obligations of H-P.  The complaint bases these 
obligations on VLIW’s reading of Paragraph 2.1 of the Agreement, which 
“grants HEWLETT PACKARD a  … perpetual … license … to use and 
sublicense the use of Licensed Technology for the purpose of making, using, 
                                          
 
11 Winston v. Mandor, 710 A.2d 835, 840 (Del. Ch. 1997); Moore Bus. Forms, Inc. v. 
Cordant Holdings Corp., Del. Ch., C.A. No. 13911, Jacobs, V.C. (Nov. 2, 1995), 1995 
WL 662685, at *7; Goodrich v. E.F. Hutton Group, Inc., 542 A.2d 1200, 1203-04 (Del. 
1988); Wright & Miller, Federal Practice and Procedure: Civil 2d § 1235. 
12 The Court of Chancery noted that although VLIW alleged the existence of the 1990 
Agreement, VLIW attached an unsigned draft to its complaint.  For purposes of ruling 
upon the defendants’ 12(b)(6) motion, the Court of Chancery assumed that the 
unexecuted copy of the 1990 Agreement attached to VLIW’s complaint was the same 
contract that was ultimately executed by H-P and Multiflow.  For purposes of this appeal, 
we make the same assumption. 
 
12
having made, selling and otherwise disposing of HEWLETT PACKARD 
products.”    
Second, VLIW’s complaint alleges a breach of those obligations.  The 
complaint states that “the technology in question has been improperly shared 
by H-P with STM and is now being used in unauthorized ways.”  According 
to the complaint: 
Under the 1990 Agreement, H-P was only entitled to utilize the 
Multiflow trade secrets and know-how related to the Trace 
compiler in H-P products.  H-P was not authorized to share 
those trade secrets and that know-how with other manufacturers 
nor was H-P authorized to give away or resell derivatives of the 
Trace compiler, other than as part of H-P products. 
 
The complaint implicates STM by alleging that H-P and STM had formed a 
partnership to develop computer products, that STM designed these products 
using derivatives of the Trace compiler, and that the H-P/STM partnership 
marketed an element of those products as a “descendant” of the Trace 
compiler.  The complaint refers to an attached exhibit showing that the 
product developed by the H-P/STM partnership bore an “ST” product 
designation.  VLIW’s complaint alleges that “H-P has breached its 
obligations under the 1990 Agreement by sharing trade secrets and know-
how related to the Trace compiler with STM.”   
 
Third, the complaint alleges that VLIW, “as the successor to the 
Multiflow rights in question, has been damaged by H-P’s breach of the 1990 
 
13
Agreement.”  Thus, VLIW’s complaint alleged the existence of a contract, 
the breach of that contract by H-P with the involvement of STM, and 
damages resulting from that breach.  Accordingly, both of the defendants 
were on fair notice of the claims that VLIW asserted against them. 
Reasons For Dismissal 
 
Nevertheless, the Court of Chancery dismissed VLIW’s complaint on 
two separate grounds.  First, it found that the confidentiality provisions in 
the Agreement had expired in 1995 and, therefore, were no longer binding 
on H-P.  Second, it found that VLIW had failed to allege that H-P shared the 
licensed technology for use in non-H-P products.  In granting the 
defendants’ motion to dismiss, however, the Court of Chancery’s analysis 
did not resolve in favor of the plaintiff all reasonable inferences from the 
facts alleged in the complaint and its attachments. 
Confidentiality Provisions 
 
The Court of Chancery granted the defendants’ motion to dismiss for 
failure to state a claim of breach of contract, in part, on the basis that the 
confidentiality provisions of the 1990 Agreement expired in 1995.  That 
conclusion was based on the language of Paragraph 6.3 of the Agreement, 
which provided that for a period of five years, H-P would use the “same 
level of care [H-P] employs with its own confidential information of like 
 
14
importance, avoiding any disclosure or use of Confidential Information not 
authorized pursuant to the licenses granted under this Agreement.”  The 
effective date of the Agreement was May 30, 1990.   
The Court of Chancery concluded that this confidentiality provision 
expired on May 30, 1995.  VLIW’s complaint alleges that H-P shared 
confidential information regarding the Trace compiler with STM in 1999.  
Therefore, the Court of Chancery concluded that, even if that fact were taken 
to be true, VLIW failed to state a claim upon which relief can be granted.   
VLIW argues that the Court of Chancery’s analysis fails to consider 
another reasonable reading of the scope of the confidentiality provisions in 
the Agreement.  VLIW asserts that Paragraph 6.3 imposes a heightened level 
of confidentiality on the part of H-P for a period of five years.  Following 
the expiration of the provision, a duty of confidentiality with respect to 
VLIW’s confidential information still remains for H-P, though it is less than 
the enhanced duty of confidentiality required under Paragraph 6.3.  VLIW 
argues that this reading of Paragraph 6.3 is reasonable when taken together 
with Paragraphs 2.1 and 6.5 of the Agreement.   
Paragraph 2.1 grants H-P a perpetual license under Multiflow’s 
intellectual property rights to use the licensed technology in H-P products.  
VLIW contends that this perpetual license is meaningless if the Agreement 
 
15
merely requires H-P to keep information regarding the licensed technology 
confidential for only five years.  VLIW also argues that Paragraph 6.5 of the 
Agreement distinguishes between H-P’s general obligation to keep the 
licensed technology confidential and its enhanced duties under Paragraph 
6.3 to use the same level of care it employs to protect its own trade secrets.   
Paragraph 6.5 begins, “HEWLETT PACKARD shall not be obligated 
to hold in confidence, and shall not be subject to the confidentiality 
obligations of this Article 6 [Confidentiality Provisions] with respect to any 
Confidential Information which….”  The basis of VLIW’s argument appears 
to be premised on the contention that the comma in the middle of the 
sentence separates two distinct confidentiality obligations.13  The first 
alleged duty is that H-P “hold in confidence” the Confidential Information; 
the second is the duty imposed under Article 6, namely, the heightened duty 
of confidentiality under Paragraph 6.3.    
VLIW’s reading of the Agreement is reasonable.  Accordingly, the 
five-year confidentiality requirement listed in Paragraph 6.3 is ambiguous.  
Therefore, the complaint should not have been dismissed on the basis that 
the confidentiality requirements had clearly expired. 
                                          
 
13 In other words, the placement of the comma here is used before the conjunction “and” 
to separate independent clauses in a compound sentence. 
 
16
H-P Products Provision 
 
Paragraph 2.1 of the Agreement limits H-P’s use of the licensed 
technology to use in H-P products only.  The Court of Chancery found that 
the complaint made only one allegation in that regard, i.e., that “[d]erivatives 
of the Trace compiler were utilized by STM in designing chips that use 
VLIW technology.”   The Court of Chancery held that this allegation was 
insufficient to create an inference that H-P had disclosed confidential 
information to STM for the purpose of making an STM product.  
Accordingly, the Court of Chancery ruled that “[t]here is simply no 
allegation in the complaint that a product exists or will exist that is not an H-
P product.”   
 
VLIW asserts that the Court of Chancery read the complaint too 
narrowly.  According to VLIW, its complaint alleges that H-P and STM 
formed a partnership for the purpose of designing and developing computer 
chips that use “very long instruction word” technology; that H-P shared 
derivatives of the Trace compiler with STM; that these derivatives were used 
by STM for the purpose of designing computer chips using this technology; 
and that a product described in the complaint as the H-P/STM complier is a 
copy or, at the very least, a “descendant” of the Trace complier.   
 
17
The complaint referred to, and attached, an exhibit purported to be H-
P literature showing the H-P/STM product as bearing an “ST” product 
designation, the ST200.  VLIW submits that the attachment leads to a 
reasonable inference that the ST200 is an STM product and not an H-P 
product, because the product does not bear an “H-P” product designation.   
VLIW asserts that its complaint specifically alleges, and reasonably infers 
from the exhibit, that the result of the H-P/STM partnership is not strictly an 
H-P product, but an H-P/STM product.   
The Agreement does not define what constitutes an “H-P product.”  In 
this context, the provision restricting use of the licensed technology to only 
H-P products is ambiguous.  A reasonable interpretation of this provision is 
that it restricts use of the licensed technology to products that carry the “H-
P” product designation, and not another company’s product designation or a 
hybrid of the two.  Accordingly, from the VLIW complaint one can 
reasonably infer that H-P disclosed confidential information to STM for the 
purpose of making a product that was not an H-P product.   
Ambiguous Provisions Prevent Dismissal 
 
This Court has previously stated that “a claim may be dismissed if 
allegations in the complaint or in the exhibits incorporated into the 
 
18
complaint effectively negate the claim as a matter of law.”14  In deciding a 
motion to dismiss, the trial court cannot choose between two differing 
reasonable interpretations of ambiguous provisions.15  Dismissal, pursuant to 
Rule 12(b)(6), is proper only if the defendants’ interpretation is the only 
reasonable construction as a matter of law.16   
 
Ambiguity exists “when the provisions in controversy are reasonably 
or fairly susceptible of different interpretations.”17  The record reflects that 
the contract provisions regarding confidentiality and the limitation of use of 
the licensed technology to use in H-P products are ambiguous.  As noted 
above, a reasonable person could conclude that the Agreement contains two 
separate levels of confidentiality: one that requires a heightened level of 
confidentiality for five years, and one that requires some lesser degree of 
confidentiality for the duration of the license.  A reasonable person could 
also conclude that the Agreement restricts use of the licensed to technology 
to products that have only an H-P designation.   
Because the provisions at issue in the Agreement are susceptible to 
more than one reasonable interpretation, for purposes of deciding a motion 
                                          
 
14 Malpiede v. Townson, 780 A.2d 1075, 1083 (Del. 2001). 
15 Vanderbilt Income and Growth Assocs. v. Arvida/JMB Managers, Inc., 691 A.2d 609, 
613 (Del. 1996). 
16 Id. 
17 Id. (quoting Kaiser Aluminum Corp. v. Flaherty, 681 A.2d 392, 395 (1996)). 
 
19
to dismiss, their meaning must be construed in the light most favorable to 
the non-moving party.18  A trial court must not dismiss any claim pursuant to 
Rule 12(b)(6) unless it appears with reasonable certainty that the plaintiff 
cannot prevail on any set of facts which might be proven to support the 
allegations in the complaint.19  Applying that standard to this case, we hold 
that the VLIW complaint adequately states a claim upon which relief can be 
granted.   
Conclusion 
 
The judgment of the Court of Chancery is reversed.  This matter is 
remanded for further proceedings in accordance with this opinion. 
 
                                          
 
18 Savor, Inc. v. FMR Corp., 812 A.2d 894 (Del. 2002); McMullin v. Beran, 765 A.2d 
910, 916 (Del. 2000). 
19 See Rabkin v. Philip A. Hunt Chem. Corp., 498 A.2d 1099, 1104 (Del. 1985).