Court Opinion

ID: 9499232
Source: CourtListenerOpinion
Date Created: 2023-08-05 17:41:45.013019+00
Date Added: 2024-06-11T17:59:21.921603
License: Public Domain

KANNE, Circuit Judge,
dissenting.
I am in substantial agreement with the thorough legal analysis of the majority, but the procedural approach required for a grant of summary judgment causes me to conclude that a reversar and remand is the proper course. Briefly, the following is my reasoning.
As the majority noted, it is likely there was a mistake in the drafting of the contract, however I disagree with the majority’s conclusion that the mistake is immaterial. Not only does the addition of missing language serve to limit Raybestos’s contractual rights, it has, in my view, the additional consequence of giving rise to a factual dispute.
The license agreement involved Raybes-tos’s right, under the Copyright Act, to *762duplicate the designs for purposes stated in the contract. The license was silent both as to Raybestos’s rights to distribute the designs and to make derivative works from the designs. There is no explicit right for Raybestos to provide the designs to anyone.
ABD concedes there is an implied right for Raybestos to distribute the designs for the limited purposes of repairing and maintaining the equipment. To that end, Raybestos could hire an agent to repair and maintain the equipment and provide the agent with the designs, but, as the majority correctly states, Raybestos could not “transfer” the designs to that agent without breaching the license agreement.
The majority concludes that the language of the contract does not limit the implied right of distribution to the production of individual parts rather than the machine as a whole. But the license granted the right of duplication only insofar “as it relates to this project.” The “project,” of course, was the first machine. In general, caution is used when implying rights in a contract and is done only insofar as necessary. See Beraha v. Baxter Health Care Corp., 956 F.2d 1436, 1441-42 (7th Cir.1992) (collecting authority). In this instance, Raybestos’s implied right of distribution should not extend beyond making spare and replacement parts for the first machine because ABD has not admitted such a right of distribution. The nuances are irrelevant. Falling well outside the implied right is Raybestos’s use of the designs to bid against ABD on a replacement machine, effectively permitting Raybestos to enter the clutch plate assembly business. Cf. Empire Gas Corp. v. American Bakeries Co., 840 F.2d 1333, 1337 (7th Cir.1988) (noting that in a requirements contract, a buyer may not capitalize on a price rise by increasing his “requirements” in order to resell the goods at a profit and compete against the seller).
I believe it is a misconception in this case to determine that the right to duplicate the machine carries with it the right to use the designs to do the same thing. Patent law is the regime used to prevent duplication of the machine; as there was no patent, there is no bar to reverse engineering the machine. However, copyright law protects the designs, and I believe the use of the designs to make duplicate machines for sale to the buyer is not within the license.
In this case, PDSI was the agent Raybestos selected to service the machine, and PDSI was also a competitor of the licensor ABD. So long as PDSI acted in its capacity as an agent, and not as a competitor of ABD, Raybestos would remain within its implied right and there would be no “transfer” between Raybestos and ABD. The majority’s opinion implicitly draws the appropriate line of demarcation: If PDSI did not obtain a tangible benefit — beyond compensation for its service as an agent— from possessing the designs, there was no “transfer.”
In consonance with the settled principle that agents are bound to keep their principal’s secrets, ABD and PDSI entered into a confidentiality agreement. The majority relies upon the existence of this contract to foreclose any “transfer” in this manner. However, on a summary judgment analysis it would seem necessary to leave open the possibility — and thereby acknowledge the existence of a genuine issue of material fact — of whether PDSI breached the confidentiality agreement by misappropriating the designs to reverse engineer the replacement machine for sale to Raybestos.
The record indicates PDSI did benefit from the plans and did enter the clutch plate assembly business. PDSI would have saved a considerable expense by using ABD’s designs to reverse engineer a new machine rather than start from *763scratch. That PDSI took possession of the machine’s designs and submitted the low bid for the replacement machine (lower than ABD’s by $250,000), supports a reasonable inference that PDSI did just that. In addition, Raybestos stood to gain from any low bid, so long as ABD was kept in the dark.
It boils down to whether it is appropriate, on summary judgment, to determine that PDSI’s low bid on the replacement machine and its possession of the existing machine’s designs was merely coincidental in the face of a reasonable inference to the contrary. That contrary inference should have been taken in a light most favorable to the non-moving party — ABD. See Magin v. Monsanto Co., 420 F.3d 679, 686 (7th Cir.2005) (citation omitted). There remains a genuine issue of material fact, and I would reverse the grant of summary judgment and remand for further proceedings. I, therefore, respectfully dissent.