Opinion ID: 6316713
Heading Depth: 2
Heading Rank: 1

Heading: License Agreement Breach

Text: The Paragon Defendants principally dispute the district court’s interpretation of the license agreement. “The cardinal rule of contract interpretation is to determine what the intent of the parties was at the time they entered into the contract.” Pillsbury Co. v. Wells Dairy, Inc., 752 N.W.2d 430, 436 (Iowa 2008). The words of the contract provide “[t]he most important evidence of the parties’ intentions at the time of contracting.” Peak v. Adams, 799 N.W.2d 535, 544 (Iowa 2011). Iowa courts “also look to extrinsic evidence such as[] the situation and relations of the parties, the subject matter of the transaction, preliminary negotiations and statements made therein, usages of trade, and the course of dealing between the parties.” NevadaCare, Inc. v. Dep’t of Hum. Servs., 783 N.W.2d 459, 466 (Iowa 2010) (cleaned up). The license agreement’s plain language belies the argument that Wildhawk purchased only the rights to manufacture and sell the four original Brava Roof Tile products. The contract partially defined Licensed Products as “all quality Roofing Shingles . . . that, if unlicensed, . . . utilizes the Know-How.” And Roofing Shingles merely “include[ed], as an example,” the four Brava Roof Tile products. Adopting the Paragon Defendants’ interpretation would render those provisions meaningless. See Art Etc. LLC v. Angel Gifts, Inc., 686 F.3d 654, 657 (8th Cir. 2012) (“Iowa law strives to give effect to all language in a contract.”). The broad language chosen to define key terms indicates the license extended to yet undeveloped products. -7- The Paragon Defendants next focus on the scope of the license being limited to the Know-How used “in practicing the Patents or in the manufacturing of raw materials for the production of Licensed Products in accordance with the Manufacturing Guidelines and Conditions.” They contend that the Natura products fall outside the license because Wildhawk does not claim patent infringement or the impermissible manufacture of actual raw materials. Yet the word “manufacture” can mean “to work up as or convert into a specified product.” Manufacture, n.2.a., Oxford English Dictionary Online, https://www.oed.com/view/Entry/113770 (last visited Feb. 10, 2022). Construing the license to cover the Know-How utilized in the working up or converting of raw materials for producing Licensed Products is consistent with the context surrounding the contract. During the preliminary negotiations, Boor proposed “an exclusive license for manufacturing . . . roofing products.” Neither Wildhawk nor the Paragon Defendants manufacture the raw materials needed to produce composite shingles. In addition, the referenced Manufacturing Guidelines discuss the process for making finished composite roofing products. “Because an agreement is to be interpreted as a whole, . . . an interpretation which gives a reasonable, lawful, and effective meaning to all terms is preferred to an interpretation which leaves a part unreasonable, unlawful, or of no effect.” C & J Vantage Leasing Co. v. Wolfe, 795 N.W.2d 65, 77 (Iowa 2011) (citation omitted). When interpreted as a whole, the license agreement afforded Wildhawk a license to the Know-How used in producing composite shingles. Finally, the Paragon Defendants claim that the NDA cleared the way for them to produce the Natura products. The NDA portrays the oral handshake agreement as a “first right of refusal on all new R&D developments . . . related to the composite roofing industry.” Since the NDA retroactively describes what the parties allegedly agreed to at the time they executed the license agreement, it is not a modification of the original contract. Instead, the NDA is extrinsic evidence of a contemporaneous oral agreement. See Garland v. Branstad, 648 N.W.2d 65, 69 (Iowa 2002) (noting that the parol evidence rule affects “negotiations or agreements that are prior to or contemporaneous with the writing”). Under the parol evidence rule, “where there is -8- a binding agreement, either completely or partially integrated, evidence of prior or contemporaneous agreements or negotiations is not admissible in evidence to contradict a term of the writing.” Restatement (Second) of Contracts § 215 (Am. L. Inst. 1981). The right of first refusal for all new product developments in the NDA contradicts the full ownership rights granted to Wildhawk in the license agreement. There is no dispute that the license agreement is partially integrated. The Paragon Defendants thus cannot rely on the NDA or any other extrinsic evidence to contradict its written terms. See Bartlett Grain Co. v. Sheeder, 829 N.W.2d 18, 24-25 (Iowa 2013) (rejecting extrinsic evidence that contradicted partially integrated agreement). The district court did not err when interpreting the license agreement. The accompanying factual determinations that the Paragon Defendants likely breached the license agreement are supportable in the record. “A factual finding is clearly erroneous ‘only if it is not supported by substantial evidence in the record, if it is based on an erroneous view of the law, or if we are left with the definite and firm conviction that an error was made.’” Radiance Cap. Receivables Eighteen, LLC v. Concannon, 920 F.3d 552, 559 (8th Cir. 2019) (quoting Wright v. St. Vincent Health Sys., 730 F.3d 732, 737 (8th Cir. 2013)). Evidence from the preliminary injunction hearing illustrates that the Paragon Defendants manufactured the Natura products by using the Know-How exclusively licensed to Wildhawk. Testimony established that the Paragon Defendants utilize similar combinations of raw materials and a comparable manufacturing process to produce their composite shingles. Notably, Boor admitted that he and Edson tapped into the technical knowledge gained from developing the Brava Roof Tile products to invent the designs and manufacturing process for the Natura products. Wildhawk additionally held an automatic license in “improvements to [the Patents and KnowHow, collectively].” An improvement ordinarily means “an addition or alteration by which the quality or standard of something is increased.” Improvement, n.6.b., Oxford English Dictionary Online, https://www.oed.com/view/Entry/92858 (last visited Feb. 10, 2022). Boor testified he built upon the Brava Roof Tile products to -9- design the Natura products with enhanced installation, weight, colorization, strength, and watershed features. Brava I.P. and Boor further promised that they had sold all “intellectual property used in or necessary to conduct the business of manufacturing and selling plastic roofing shingles . . . as currently planned to be conducted.” Boor conceded he started developing the Natura products in the 2000s and made inroads on research and development between 2011 and 2014. He confirmed he had planned to use the profits from the sale of Brava Roof Tile to finish research and development on projects such as the Natura designs. We discern no error in the district court’s finding that Wildhawk had a fair chance of proving the Paragon Defendants violated the terms of the license agreement.