Opinion ID: 3066264
Heading Depth: 2
Heading Rank: 2

Heading: Ownership of the Patents-in-Suit

Text: The Settlement Agreement provides that Walker “reserves no rights whatsoever in the Transferred Patents.” Walker Digital, 950 F. Supp. 2d at 732. Therefore, in order to determine whether Walker satisfies Article III’s case or controversy requirement, we interpret the Settlement Agreement language to determine whether the patents-in-suit were included in the category of Transferred Patents. The Agreement’s Patent Purchase Terms have only one reasonable interpretation. The first sentence of Section 1.1 states that “the Transferred Patents” include the patents and patent applications described in Schedule A; the second sentence further modifies the set of Transferred Patents to include “all counterparts, continuations, [and] continuations-in-part . . . thereof . . . .” Walker Digital, 950 F. Supp. 2d at 732. It is undisputed that the ’056, ’470, ’942, and ’359 patents are continuations or 10 WALKER DIGITAL, LLC v. EXPEDIA, INC. continuations-in-part of patents included in Schedule A. Therefore, the only reasonable interpretation of this language is that the patents-in-suit were included within the category of the Transferred Patents. Walker argues the language in the Settlement Agreement is reasonably susceptible to an alternative interpretation. Under Walker’s proposed reading, only the first sentence of Section 1.1 grants rights to eBay (specifically, a grant of the twenty-six patents and applications in Schedule A), and the second sentence of Section 1.1 is simply “an inaccurate declarative statement,” describing what Schedule A “includes” without actively modifying its scope. However, subsequent language in Section 1.1 clearly includes “patent applications . . . filed . . . after the Effective Date” of the Agreement. Walker Digital, 950 F. Supp. 2d at 732. Inaccurate or not, there is no way for the language following the first sentence of Section 1.1 to be a mere description of the present contents of Schedule A, because it clearly comprehends patent applications filed in the future. Courts will not read a contract to render a provision or term meaningless or illusory. Restatement (Second) of Contracts § 203(a) (1981); Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010). Therefore, Walker’s proposed interpretation is not reasonable. 3 3 Walker also argues that given the large number of patents that are descendant from the patents listed in Schedule A, “no reasonable party to the [Agreement] would have interpreted the Patent Purchase Terms as giving away this many additional patents/applications,” and therefore the Settlement Agreement as a whole is ambiguous. Even if it may be true that no reasonable party would have agreed to such a broad grant had they read the provision thoroughly, this argument fails to WALKER DIGITAL, LLC v. EXPEDIA, INC. 11 Walker alternatively argues that the Settlement Agreement as a whole is ambiguous. The traditional rule is that ambiguity exists when, within the four corners of an agreement, the provisions in controversy are susceptible to more than one reasonable interpretation. See GMG, 36 A.3d at 780; City Investing Co. Liquidating Trust v. Cont’l Cas. Co., 624 A.2d 1191, 1198 (Del. 1993). Additionally, some cases have held that a party may establish ambiguity if an agreement’s provisions necessarily conflict with one another. See Cordis Corp. v. Boston Scientific Corp., 868 F. Supp. 2d 342, 352 (D. Del. 2012) aff’d in part, vacated in part, 504 F. App’x 922 (Fed. Cir. 2013) (“inconsistent contractual provisions may create ambiguity in a contract”); Empire of Am. Relocation Servs., Inc. v. Commercial Credit Co., 551 A.2d 433, 436 (Del. 1988) (“the terms of the amended agreement were ambiguous because they were, in fact, in conflict”). Where a contract is ambiguous, the court must look beyond the language of the contract to ascertain the parties’ intentions. GMG Capital Invs., LLC v. Athenian Venture Partners I, 36 A.3d 776, 780 (Del. 2012). However, the Delaware Supreme Court has held repeatedly that “[e]xtrinsic evidence is not to be used to interpret contract language where that language is ‘plain and clear on its face.’” O’Brien v. Progressive N. Ins. Co., 785 A.2d 281, 289 (Del. 2001) (alteration in original) (quoting E.I. du Pont de Nemours & Co. v. Allstate Ins. Co., 693 A.2d 1059, 1061 (Del. 1997)); Halliburton Co. v. Highlands Ins. Grp., 811 A.2d 277, 280 n.9 (Del. 2002); Barron Bancshares, Inc. v. United States, 366 F.3d 1360, 1379 (Fed. Cir. 2004) (collecting cases applying the parol evidence rule). 4 establish that the granting language itself is subject to more than one reasonable interpretation. 4 Appellees note that the Settlement Agreement contains a standard merger clause. Under Delaware law, 12 WALKER DIGITAL, LLC v. EXPEDIA, INC. Walker argues that the Settlement Agreement is ambiguous because the grant in Section 1.1 of the continuations-in-part is inconsistent with the structure of SchedSchedule A. See Cordis Corp., 868 F. Supp. 2d at 352 (“inconsistent contractual provisions may create ambiguity in a contract.”). Walker notes that some of the patents listed in Schedule A are relatives of other patents also included in Schedule A. According to Walker’s argument, if the parties had wished to transfer all related patents and applications of the ones listed in Schedule A, the parties would have listed only the three parents of each and every patent involved. Instead, Schedule A includes a number of parent patents, and some, but not all of their children. If, as appellees argue, the second sentence of Section 1.1 grants all children of the patents and applications listed in Schedule A, Walker argues that there would be no reason to list some children in Schedule A but not others. Walker argues that the district court’s interpretation therefore renders many of Schedule A’s listings redundant. However, the genealogies of each of the patents listed in Schedule A are not described anywhere within the four corners of the Settlement Agreement. Therefore, a person considering only the intrinsic evidence within the Settlement Agreement would not detect any redundancy. We may not rely on extrinsic evidence such as the history of a patent application to establish an a merger clause further bars consideration of parol evidence. See, e.g., RTN Investors, LLC v. RETN, LLC, No. 08C-04-007-JRJ, 2011 WL 862268, at  n. 204 (Del. Super. Ct. Feb. 10, 2011); Hyansky v. Vietri, No. 14645NC, 2003 WL 21976031, at  (Del. Ch. Mar. 28, 2003). However, a merger clause may be set aside if ambiguous terms in the contract exist. Oglesby v. Conover, No. K10C-08-017-RBY, 2011 WL 3568276, at  (Del. Super. Ct. May 16, 2011). WALKER DIGITAL, LLC v. EXPEDIA, INC. 13 ambiguity when the language transferring it is clear. O’Brien, 785 A.2d at 289. Walker also argues that the Settlement Agreement is ambiguous because under Section 1.1, the parties would have transferred patents inconsistent with the Agreement’s warranty provision, which guarantees that none of the Transferred Patents were the subject of pending litigation. The fact that the ’056, ’470, and ’942 patents were involved in litigation at the time of the Settlement Agreement’s execution is parol evidence, and thus cannot be used to establish an ambiguity. Id. Even if this were not the case, this evidence at best establishes inconsistency between the Settlement Agreement terms and what may have been a party or both parties’ knowledge, intent, or behavior. The fact that a party may not be in compliance with a provision in an agreement does not, however, establish internal inconsistency within the four corners of the agreement itself. 5 Lastly, Walker relies on the Settlement Agreement’s drafting history and the parties’ behavior after its execution to show ambiguity. This remaining evidence, which includes previous drafts of the Settlement Agreement and emails between the parties, may well establish the intent of the parties was not to transfer all the patents-in-suit. Nevertheless, under Delaware law, when a contract’s language is unambiguous, extrinsic evidence may not be used to vary the terms of the contract or to create an ambiguity. O’Brien, 785 A.2d at 289; Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997); Osborn, 991 A.2d at 1159 (Delaware adheres to the “objective” theory of contracts). Because we conclude that the Settlement Agreement language is clear and unam- 5 The ’359 patent was not involved in litigation at the time the Agreement was executed. 14 WALKER DIGITAL, LLC v. EXPEDIA, INC. biguous, we decline to review Walker’s extrinsic evidence here.