Opinion ID: 153734
Heading Depth: 2
Heading Rank: 2

Heading: Evidence of the parties' intent

Text: 25 Once a contract provision is found to be ambiguous, the resolution of its proper meaning is a question of fact, subject to review on a clearly erroneous standard. Teton Exploration, 818 F.2d at 1526. Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses. Fed.R.Civ.Pro. 52(a). See Salve Regina College v. Russell, 499 U.S. 225, 233, 111 S.Ct. 1217, 1222, 113 L.Ed.2d 190 (1991). A finding of fact is not clearly erroneous unless it is without factual support in the record, or if the appellate court, after reviewing all the evidence, is left with the definite and firm conviction that a mistake has been made. Las Vegas Ice & Cold Storage Co. v. Far West Bank, 893 F.2d 1182, 1185 (10th Cir.1990) (quotation omitted). 26 Here, the district court concluded that: (1) the negotiations preceding the License Agreement indicate that the parties intended to grant a worldwide license of the wide dog technology; (2) the post-Agreement conduct of Webb further confirms that it considered the License Agreement to grant a worldwide license; and (3) Webb's explicit definition of territorial applications in its foreign licenses indicates that it did not intend to limit Mid-West's license geographically. Considering the evidence in the record, we do not believe that the court clearly erred in deciding that Webb and Mid-West intended a worldwide license. 27
28 The court determined that Clark, the Webb officer authorized to negotiate and contract with Mid-West, was aware that Mid-West intended that the License Agreement apply to all future projects, including projects outside the United States. During the negotiations between McClellan and Clark, McClellan expressed interest to Clark in obtaining a license agreement that would apply not only to the Ste. Therese, Canada, project, but to all future projects as well. In a December 19, 1988 letter to Clark, McClellan stated: 29 Our thought is that the license would initially cover 89 transfers at the General Motors facility in St. Therese and that it could be extended to other projects on the same basis. 30 (R.O.A. A98) (emphasis added). In a January 25, 1989 letter to Clark, McClellan repeated Mid-West's position that the license would encompass the Ste. Therese project, and all future projects: 31 We have reviewed your letter and would like to offer this counter proposal of $1,200 for each transfer and $100 per carrier or 2 1/2% of the total sell price, whichever is lower. This would provide a fee of $194,400 for the St. Therese project and would be applicable to all future projects. 32 (R.O.A. A102) (emphasis added). 33 In response to the January 25 letter, Clark sent McClellan draft copies of a license agreement accompanied by a cover letter dated January 27, 1989. The cover letter stated: 34 Enclosed are two copies of a license agreement incorporating terms as outlined in your letter to me dated January 25, 1989 with the exception that we have deleted the royalty payment based on a percentage of sell price. 35 (R.O.A. A115) (emphasis added). McClellan testified that he interpreted the January 27 letter's incorporation of terms of his January 25 letter--that the agreement would apply to the Ste. Therese project and would be applicable to all future projects--to mean that the License Agreement was for all future Mid-West projects without territorial limitation. Furthermore, at no time during the negotiation process did Clark, or any other representative of Webb, tell McClellan that Webb construed the scope of the License Agreement as limited to the United States or the Ste. Therese project only. 36 Furthermore, Clark testified that he understood during negotiations that Mid-West was seeking a license that would permit Mid-West to use the wide dog technology outside the United States and the Ste. Therese project, that the License Agreement accommodated Mid-West's intentions, and that Clark did not discuss any geographic limits on the license with Mid-West: 37 Q. And you knew, did you not, sir, that Mid-West Conveyor was looking to use the wide dog everywhere, were you not, sir? 38 A. I can't say everywhere. I certainly knew they were looking to use it outside of Ste. Therese in Canada and projects in the United States. 39 (R.O.A. B188.) Later, Clark testified: 40 Q. It's true, isn't it, Mr. Clark, that you believed that the language in Paragraph 2 [of the License Agreement] accommodated Mr. McClellan's desire for a license with respect to any future project by Mid-West Conveyor; isn't that correct? 41 A. That is correct. 42 (R.O.A. B224.) 43 Therefore, Mid-West provided a factual basis from which the court could conclude that the parties intended a license applicable to all future Mid-West projects. Webb responds to the correspondence and Clark's testimony by arguing that the fact the parties never explicitly discussed the territorial application of the License Agreement indicates that only a United States patent license was intended. However, we consider this argument insufficient to rebut the evidence in the record that Clark was aware that Mid-West sought a license that would apply to all future projects, including projects outside the United States and the Ste. Therese project. 7 44 Webb's argument also ignores the fact that the parties entered into the License Agreement in the context of a Canadian project. We find it difficult to understand how the License Agreement can be restricted to the United States when Webb drafted it in the context of knowingly granting Mid-West the ability to use the technology on a project outside the United States. Webb argues that it needed to grant only a United States license for the Canadian project because the components for the Ste. Therese project were made in the United States, thereby triggering the '570 patent. 8 However, we note that Webb maintains a patent on the wide dog technology in Canada. Because Webb agreed that this License Agreement allowed Mid-West to use this technology in Canada, it is not obvious why the License Agreement would not allow Mid-West to use the same technology in other foreign countries where Webb held similar patents. Furthermore, a local content clause in the contract with GM required that Mid-West manufacture as many of the components for the Ste. Therese project as possible in Canada and, according to Mid-West, parts were made both in Canada and the United States for the conveyor system on the Ste. Therese project. 45 Considering the correspondence among the parties, Clark's testimony, and Webb's failure to require Mid-West obtain a license under Webb's Canadian patent, we do not believe that the district court clearly erred in concluding that the negotiations prior to entering the License Agreement indicates that the parties intended for the License Agreement to apply to future Mid-West projects without territorial restriction. 46
47 The court also found that the post-Agreement conduct of the parties supports Mid-West's interpretation of the License Agreement as Webb unconditionally accepted royalties for all of Mid-West's domestic and foreign projects, including royalties for jobs in Canada and China. Webb offers two explanations for how accepting payments for these projects is consistent with its belief that the Mid-West held only a United States patent license. First, regarding the Canadian projects, Webb argues that there was no evidence that the materials for the conveyor systems were not produced in the United States. Therefore, according to Webb, no Canadian license was necessary. However, as discussed above, this argument is inconsistent with the argument Webb advanced when Mid-West asserted the right to use the wide dog technology in France, Australia and other countries where Webb similarly held foreign patents on the same technology. In those later instances, Webb argued that patents held in each nation affirmatively limit a U.S. patent licensee's ability to use the technology in that particular country. 9 Second, regarding the China project, Webb argues that Mid-West did not need to obtain a China-specific license because Webb does not hold a patent in China. The flaw in this argument is that Webb should not have accepted Mid-West's royalty payments if it did not believe that it was necessary for Mid-West to license the technology for a China setup. 10 48 Webb does point out that Mid-West intra-office correspondence suggests that Mid-West did not consider the License Agreement applicable to projects outside the United States. For example, after inquiring whether Webb had a patent on the wide dog technology in Australia and learning of Webb's interpretation of the License Agreement, McClellan sent a memo on January 27, 1992, to two Mid-West employees stating that, It will be necessary for us to use another method of transfer for the conveyor than the wide dog technology. Terry Cauley, a Mid-West employee, later prepared a memorandum on February 10, 1992, to Mid-West's officer in charge of international marketing, stating, With what we now know about our agreement w/Webb for Wide Dog transfers, we do not have the right to sell except in Canada & U.S.A. 49 However, this evidence does not conclusively establishes that Mid-West did not believe it had bargained originally for a worldwide license. The intraoffice correspondence reflects that Mid-West appears first to have questioned what it thought was the worldwide scope of its license only after Webb informed Mid-West that the license applied only to the United States and Canada. Clark testified that at the time the bidding for the Australian project was occurring, Clark had discussed competitive reasons with Webb officers concerning why the License Agreement should be restricted in scope: 50 Q. Now, when this dispute arose, you will agree with me, won't you, Mr. Clark, that you did discuss competitive reasons with your people at Webb why the License Agreement should be restricted in scope; isn't that true? 51 A. In terms of where it could be utilized on international projects, yes, that is true, we talked about that. 52 Q. And specifically that if Mr. [sic] Mid-West couldn't use the wide dog, it might add to the price if they had to use an alternative method on jobs that both Webb and Mid-West were bidding; isn't that true? 53 A. That is true. 54 (R.O.A. B198.) Clark then told Mid-West that it considered the License Agreement applicable only to the United States and Canada. Mid-West's actions in response appear to suggest that they were proceeding cautiously because they were uncertain whether their interpretation or Mid-West's interpretation was correct. However, we do not interpret these actions as necessarily suggesting, as Webb argues, that Mid-West believed at the time the Agreement was entered into that the License Agreement did not apply outside the United States and Canada. In fact, Mid-West states that it decided not to include the wide dog technology in Mid-West's bid for the Australian project only in order to avoid confrontation between Mid-West and Webb and because the small project did not require the wide dog technology. 55 In all, we believe that Webb's acceptance of royalty payments for foreign projects supports the court's conclusion that post-negotiation conduct by the parties indicates they considered the License Agreement applicable worldwide. Although Webb presented some evidence which might suggest that Mid-West believed the license applied only to the United States and Canada, Clark's testimony that he discussed the competitive advantage in limiting the scope of the License Agreement with Webb officials, and the fact that Mid-West's conduct appears to be a reaction to Webb's efforts to limit the Agreement, prevents us from having a definite and firm conviction that a mistake has been made. See Las Vegas Ice & Cold Storage Co. v. Far West Bank, 893 F.2d 1182, 1185 (10th Cir.1990).
56 The district court also relied on the fact that Webb's foreign licenses define the territorial limitations of each particular license. For example, a license between Webb and an Italian corporation provides that Webb grants a license to sell Webb products in the Territory. The agreement further defines the territory to mean Italy, Ethiopia, Somalia, Spain, Portugal, and several other listed nations. Based on evidence of numerous licenses with similar language and territorial definitions, the court concluded that Webb knew how to define the geographical territory and limit the license grant to the geographical scope of the defined territory. Webb had done so explicitly in each of the license agreements it had entered into with companies in foreign countries as part of its global licensing program. Mid-West Conveyor Co., Inc. v. Jervis B. Webb Co., 877 F.Supp. 552, 560 (D.Kan.1995). Webb responds that its territorial definitions in those licenses were not intended to limit the scope of the particular license agreement to certain nations, but rather to expand it by defining the various nations where the licenses could be used. Webb argues that the lack of any reference to foreign countries in the License Agreement further shows that Webb did not intend to expand the license to any countries outside the United States and Canada. 57 Although once again this evidence is not conclusive, it does provide some support for the district court's factual conclusion that the parties intended an unlimited geographical scope when they entered into the Agreement in question. 11