Court Opinion

ID: 9826552
Source: CourtListenerOpinion
Date Created: 2023-09-01 16:05:57.805921+00
Date Added: 2024-06-11T11:06:09.280631
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

INTERMEC IP CORP., and                  )
INTERMEC TECHNOLOGIES CORP., )
                                        )
                           Plaintiffs/ )
            Counterclaim Defendants, )
                                        )
      v.                                )              C.A. No. N20C-03-254
                                        )                       PRW CCLD
TRANSCORE, LP, and TRANSCORE )
HOLDINGS, INC.,                         )
                                        )
                          Defendants/ )
               Counterclaim Plaintiffs. )

                           Submitted: July 25, 2023
                           Decided: August 23, 2023
                           Issued: August 31, 2023*

                         DECISION AFTER TRIAL

Steven L. Caponi, Esquire, Matthew B. Goeller, Esquire, K&L GATES LLP,
Wilmington, Delaware; Michael S. Nelson, Esquire, Jessica L.G. Moran, Esquire,
Terrina G. LaVallee, Esquire, K&L GATES LLP, Pittsburgh, Pennsylvania, Attorneys
for Plaintiffs/Counterclaim Defendants Intermec IP Corp. and Intermec
Technologies Corp.

Jason A. Cincilla, Esquire, William B. Larson, Jr., Esquire, MANNING GROSS +
MASSENBURG LLP, Wilmington, Delaware, Lela M. Hollabaugh, Esquire, Kimberly
M. Ingram-Hogan, Esquire, BRADLEY ARANT BOULT CUMMINGS LLP, Nashville,
Tennessee, Attorneys for Defendants/Counterclaim Plaintiffs TransCore, LP and
TransCore Holdings, Inc.

WALLACE, J.
       In November 2008 TransCore LP and TransCore Holdings, Inc. (collectively

“TransCore”) and Intermec IP Corp. and Intermec Technologies Corp. (collectively

“Intermec”)1 entered into a Cross-Licensing Agreement (the “Agreement”). That

Agreement required TransCore to pay Intermec for the use of Intermec’s patents in

TransCore’s RFID products. In 2016, while the agreement was still in force,

Intermec invoked its contractual audit right. Ernst & Young (“EY”) was then hired

to conduct an audit of the royalty payments that TransCore sent to Intermec for use

of its patents. According to EY’s audit report, TransCore underpaid Intermec. EY

based its conclusion on its calculation of net present value using the gross invoice

price of the product instead of the adjusted price that TransCore had been using to

calculate and pay royalties.

       Intermec demanded payment, TransCore refused, insisting that EY’s use of

gross invoice price instead of adjusted price was incorrect, and therefore, EY’s

calculations and audit conclusions were wrong. Intermec then filed suit against

TransCore for the purported underpayments.                       In response, TransCore

counterclaimed—alleging that it had erroneously been paying Intermec for expired

patents or patents that were not used in TransCore products.

* This decision is issued after consideration of the parties’ requests for redaction of certain
confidential information and with the Court’s own necessary corrections and clarifications.
1
    In September 2013 Honeywell purchased Intermec. Pre-Trial Stipulation & Order (“PTO”)
¶ 6 (D.I. 179). To avoid any confusion, the Court refers to the Plaintiffs as “Intermec” and not
“Honeywell.”

                                              -1-
       After pre-trial motion practice,2 what remains pending before the Court is

Intermec’s breach-of-contract claim and TransCore’s breach of the implied covenant

of good faith and fair dealing counterclaim. The Court held trial on these remaining

claims without a jury.

                                        I. THE TRIAL

       The Court conducted a six-day bench trial, and the case was deemed fully

submitted for decision after the parties submitted their post-trial briefing.3

       During trial, the Court heard from and considered the testimony of the

following witnesses:

       Janis Harwell                                          George Mcgraw
       William Thomas                                         Kelly Gravelle
       Taylor Smith                                           Richard Nefzer
       Christopher Gerardi                                    Misty L. Decker

       In addition, the Court considered the trial deposition testimony of Taylor

Smith, Floyd Carpenter, Francia Lucio, and Stephanie Schwencer.4

2
     See Intermec IP Corp. v. TransCore, LP, 2021 WL 3620435 (Del. Super. Ct. Aug. 16, 2021)
(Court’s decision on parties’ motions to dismiss and for judgment on the pleadings); D.I. 191
(order denying the parties’ cross-motions for summary judgment and motions in limine). The
Court does not here reconstitute the full factual background of the parties’ relationship and of this
litigation. For that, the interested reader can turn to those earlier decisions just mentioned. The
parties are thoroughly familiar with that background and the trial evidence.
3
    D.I. 217 (TransCore’s Post-Trial Opening Br.); D.I. 218 (Intermec’s Post-Trial Opening Br.);
D.I. 222 (TransCore’s Post-Trial Answering Br.); D.I. 223 (Intermec’s Post-Trial Answering Br.).
4
   D.I. 233 (Taylor Smith Depo. Tr.); D.I. 234 (Floyd Carpenter Depo. Tr.); D.I. 235 (Francia
Lucio Depo. Tr.); D.I. 236 (Stephanie Schwencer Depo. Tr.).

                                                -2-
        The parties also submitted a number of exhibits.5

        At the close of Intermec’s case-in-chief, TransCore moved for judgment as a

matter of law,6 which the Court denied.7

                                   II. FINDINGS OF FACT

        It is difficult at times in the trial of certain actions to fully and cleanly

segregate findings of fact from conclusions of law. To the extent any one of the

Court’s findings of fact here might be more appropriately viewed as a conclusion of

law, that finding of fact may be considered the Court’s conclusion of law on that

point.8

     A. THE PARTIES’ CROSS-LICENSING AGREEMENT

        In November 2008, Intermec and TransCore executed their Cross-Licensing

Agreement (hereinafter, “the Agreement”).9 Under the Agreement,

        Intermec granted TransCore a royalty-bearing license under the
        Intermec Licensed Patents listed in Section A of Exhibit 3 to the
        License Agreement to, among other things, make and sell Licensed
        Products. Intermec also granted TransCore a non-royalty-bearing
        license under the Intermec Licensed Patents listed in Section B of
        Exhibit 3 to the License Agreement to, among other things, make and
        sell Licensed Products.10
5
     See PTO at 18-38.
6
     4/4/23 Trial Tr. at 238 (D.I. 225).
7
     4/5/23 Trial Tr. at 23 (D.I. 232).
8
    See Facchina Constr. Litigs., 2020 WL 6363678, at *2 n.12 (Del. Super. Ct. Oct. 29, 2020)
(collecting authority).
9
     JX-1 (“Agreement”); PTO ¶ 1.
10
     PTO ¶ 3.

                                            -3-
        Additionally, under the Agreement, “TransCore granted Intermec a non-

royalty-bearing license under the TransCore Licensed Patents listed in Section A of

Exhibit 4 to the License Agreement solely outside of the Transportation Markets to,

among other things, make and sell TransCore Licensed Products.”11

        Within thirty days of the end of each quarter, TransCore was required to make

royalty payments to Intermec for that just-past quarter and to submit royalty

reports.12

        In 2016, Intermec retained EY to conduct an audit of TransCore’s royalty

reports and payments—the audit covered the period of July 1, 2012, to June

30, 2016.13

        On March 27, 2017, EY issued its report.14             According to that report,

TransCore had underpaid Intermec.15 TransCore objected to the report’s conclusion

and its computation of the Net Sales Value of multiprotocol devices.16

        Although not immediately, Intermec demanded payment.17 TransCore denied

11
     PTO ¶ 4.
12
     PTO ¶¶ 7-8.
13
     PTO ¶¶ 10-11.
14
     PTO ¶ 12.
15
     JX-48 (“EY Report”) § 3.
16
     PTO ¶ 14.
17
     PX-28 (Dec. 7, 2020 letter from Intermec to TransCore).

                                               -4-
that it had underpaid royalties.18 And Intermec sued.

     B. THE PRODUCTS AT ISSUE

         While complicated by the intricacies of technological advancement, the

dispute here is fundamentally a bundle versus stick question—whether royalties

were to be calculated on the bundle, or whether they were to be calculated on the

stick.

         TransCore sells RFID readers and tags.19               This dispute is focused on

TransCore multiprotocol readers. A multiprotocol reader reads multiple protocols,

that is, it reads multiple “languages.”20 In order to read those languages, it must

have, in laymen’s terms, a translator, such as a daughterboard which allows the

reader to read certain protocols.21 For the TransCore readers at issue here to read

certain protocols,22 the daughterboard must practice Intermec-patented technology.23

18
     PX-40 (Feb. 5, 2021 response letter from TransCore to Intermec).
19
    4/5/23 Trial Tr. at 39. Again, for a fuller explanation of the technology and products involved
here, the interested reader can look back to the Court’s earlier decision on TransCore’s motion to
dismiss. Intermec, 2021 WL 3620435, at *2-3.
20
     4/5/23 Trial Tr. at 39-40.
21
     See id. at 40-42, 95.
22
    Id. at 41 (explaining SeGo and eGo are the two protocols that use Intermec-patented
technology).
23
    4/6/23 Trial Tr. at 30-32 (D.I. 230) (explaining the difference between an E6 reader that didn’t
read SeGo and eGo protocols and an E6 reader that did was the “daughterboard containing FPGA
that basically essentially contains the SeGo and eGo protocols”).

                                                -5-
If the daughterboard is removed, the reader can still read other protocols, but it won’t

be able to read the protocols that use Intermec-patented technology.24

         TransCore doesn’t sell the individual Intermec-patented technology, i.e. the

stick, to the customer, TransCore sells the full multiprotocol reader, i.e. the bundle.25

The question here is whether the Agreement required that royalties be paid using the

bundled price, which is the gross invoice price of a multiprotocol reader with

Intermec (and other) reading protocols therein or paid using the stick price, which is

TransCore’s adjusted price—that is, the portion of the reader’s price TransCore

attributes to Intermec’s patented technology.

     C. CERTAIN KEY TRIAL TESTIMONY

         The Court first heard testimony from Intermec’s former General Counsel

Janis Harwell.26 Ms. Harwell explained that Intermec licensed its patents to multiple

companies, including TransCore.27 Along with the royalty payments, Intermec

would receive a quarterly report indicating “types of products that had been sold, the

invoice price for the product, the deductions that were allowed under the contracts

from the invoice price, the percentage of the royalty that was applicable to whatever

those category of devices was, and then the calculation of what the amounts payable

24
     Id. at 32-33.
25
     Id. at 95.
26
     4/3/23 Trial Tr. at 49, 55-56 (D.I. 224).
27
     Id. at 61.

                                                 -6-
were.”28 To protect itself from “misrepresent[ation]” by a licensee, Ms. Harwell said

the Agreement gave Intermec audit rights.29

         Ms. Harwell also recounted that the parties neither discussed royalty payments

specific to multiprotocol devices,30 nor what to do in the event that TransCore

overpaid a royalty amount.31 On cross-examination, Ms. Harwell said that she

28
     Id. at 61-62.
29
     Id. at 62.
30
     See id. at 93
         Q. Did TransCore ever suggest to you that multiprotocol devices should be treated
            differently under the 2008 agreement?
         A. In terms of royalty calculations?
         Q. Yes, ma’am.
         A. No.
     Id. at 149
         Q. Ms. Harwell, my question was did you have any specific discussions that related
            to multiprotocol RFID readers or tags? Was the term ‘multiprotocol’ ever
            discussed with anybody at TransCore?
         A. No.
31
     Id. at 126-27.
         Q. Does the contract anywhere provide that TransCore has a right to recover as a
            matter of contract overpayments it makes on any royalties?
         A. There’s no such provision.
         Q. To your knowledge, did TransCore ever raise the potential to add a clause in
            the contract dealing with potential overpayments?
         A. No.
         Q. In your mind, was the risk of overpayments something that needed to be
            addressed in the contract?
         A. No. I guess another way to say it is, my focus was always on underpayments,
            because that's the place where Intermec was most likely to have exposure was
            to underpayments by the licensees.

                                                -7-
assumed TransCore products needed to use Intermec patents to function.32

         EY Managing Director William Thomas was the executive-in-charge of the

audit.33 He testified that, based on EY’s review of the Agreement and the quarterly

royalty payments, TransCore had underpaid Intermec.34 According to Mr. Thomas,

EY’s determination was based on its own independent evaluation of the

Agreement.35 Mr. Thomas told the Court that he had previously conducted ten

royalty audits, five of which involved Intermec.36

         Honeywell37 executive Taylor Smith testified that after Intermec informed

TransCore of the now-complained-of underpayment TransCore refused to pay up.38

Mr. Smith also discussed interest Intermec believed was due.39

         Intermec’s expert witness, Christopher Gerardi, explained his analysis of the

royalty payments owed by TransCore and the applicable interest for those late

payments.40

32
     See id. at 140.
33
   4/4/23 Trial Tr. at 27-28 (stating his role in the audit was primarily “oversight” and
“performing the final review of the draft reports.”).
34
     Id. at 32.
35
     Id. at 67.
36
     Id. at 14.
37
     Honeywell purchased Intermec in September 2013. PTO ¶ 6.
38
     4/4/23 Trial Tr. at 154-55, 164-66.
39
     Id. at 169-73.
40
     Id. at 192, 201-02, 219.

                                            -8-
         Former TransCore executive, George McGraw, testified that, under the

Agreement, royalties were to be paid on “[t]he portion of the bundled product that

practiced . . . one or more of Intermec’s patents.”41

         Current TransCore executive, Kelly Gravelle, testified as to how he

discovered TransCore overpaid for Intermec patents that he believes either had

expired or were not used.42 In addition, Mr. Gravelle explained how TransCore

products could still function if Intermec-patented technology were removed.43

         TransCore finance director, Richard Nefzer, testified and insisted that:

(1) Intermec never reported an issue with the royalty reports and payments to

TransCore; and (2) TransCore overpaid Intermec and is due a refund.44

         TransCore’s Expert, Misty Decker, testified as to how she derived the amount

TransCore overpaid Intermec for the use of expired or unincorporated patents.45

                          III. GENERAL LEGAL PRINCIPLES

         Though the Court sits without a jury, it has applied the same principles of law

in its deliberations and consideration of each individual claim and counterclaim that

it would have more formally instructed a jury to follow. The Court may in this

41
     4/5/23 Trial Tr. at 31, 42.
42
     4/6/23 Trial Tr. at 10, 34-35, 41.
43
     Id. at 32.
44
     4/11/23 Trial Tr. at 13, 22 97, 100 (D.I. 231).
45
     4/12/23 Trial Tr. at 5, 23-26 (D.I. 227).

                                                 -9-
writing highlight some of those most applicable to this particular case. But the fact

that some particular point or concept may be mentioned here should not be regarded

as any indication that the Court did not—during its deliberations—consider all legal

principles applicable to this case and to the parties’ claim, counterclaims, and

defenses.

        In reaching its verdict, the Court has examined all exhibits submitted and

considered the testimony of all witnesses, both direct and cross, live and by

deposition. The Court has also considered the applicable Delaware case law that has

defined the legal precepts applicable to the claims and defenses the parties have

forwarded. The Court has applied the Delaware Rules of Evidence to the testimony

and exhibits and only used for its deliberation that which would be allowed under

those rules—consistent with the Court’s knowledge of those rules and the specific

rulings that may have been made and articulated both pre-trial and during the trial

proceedings. And, of course, the Court has considered each party’s respective

arguments on the weight to be accorded the testimony and evidence.

       The Court then reviewed and applied some of the very instructions that it

would give a jury in these circumstances.46

46
    See, e.g., Del. Super. Ct. Civ. Pattern Jury Instr. 4.1 (Burden of Proof by a Preponderance of
the Evidence); id. at 4.2 (Evidence Equally Balanced); id. at 23.1 (Evidence—Direct or
Circumstantial); id. at 23.9 (Credibility of Witnesses—Weighing Conflicting Testimony); id. at
23.10 (Expert Testimony).

                                              -10-
        In this particular case, Intermec carries the burden of proof by a

preponderance of the evidence on its only remaining claim, Count I (Breach of

Contract); TransCore carries the burden of proof by a preponderance of the evidence

on its only remaining counterclaim, Count III (Breach of the Implied Covenant of

Good Faith and Fair Dealing).47

                             IV. PARTIES’ CONTENTIONS

        Intermec says that TransCore breached the Agreement in two separate ways:

(1) TransCore breached the Agreement by failing to pay the underpayment identified

by EY because, according to Intermec, Section 3.5 of Exhibit B made the auditor’s

conclusion binding on the parties; and (2) TransCore breached Section 3 by

underpaying Intermec royalties stemming from TransCore’s use of an adjusted price

to calculate royalties on certain items.48

        In response, TransCore asserts two defenses: (1) the equitable doctrine of

acquiescence49; and (2) the three-year statute of limitations for breach of contract.50

        TransCore goes on to say that it is actually Intermec that breached the

47
    See Facchina Constr. Litigs., 2020 WL 6363678, at *14 (defining burden of proof in trial of
such claims and counterclaims (citing Reynolds v. Reynolds, 237 A.2d 708, 711 (Del. 1967)
(defining preponderance of the evidence); Oberly v. Howard Hughes Med. Inst., 472 A.2d 366,
390 (Del. Ch. 1984))).
48
     Intermec’s Post-Trial Opening Br. at 17-21.
49
     TransCore’s Post-Trial Opening Br. at 24.
50
     Id. at 34-35.

                                                 -11-
Agreement by not returning overpayments.51 Those overpayments, says TransCore,

were the result of its mistaken belief that it was using certain Intermec patents that

either it wasn’t using or that had expired.52

           In response to TransCore’s counterclaim, Intermec asserts two defenses:

(1) the prior material breach doctrine53; and (2) the voluntary payment doctrine.54

                              V. FINDINGS AND VERDICT

           “To recover on a breach-of-contract claim, a party must prove the existence

of an enforceable contract; the party performed or was ready to perform; that the

other contracting party failed to perform; and that the failure to perform caused

damages.”55 The parties do not dispute they had a valid contract.56 So, what must

be decided on Intermec’s claim is: (1) whether Intermec performed under the

Agreement;           (2)   whether    TransCore        breached    the    Agreement;       and

(3) whether Intermec adequately supported its alleged damages.

           To recover for breach of the implied covenant of good faith and fair dealing,

a party must prove “a specific implied contractual obligation, a breach of that

51
     Id. at 3-4.
52
     Id.
53
     Intermec’s Post-Trial Opening Br. at 35.
54
     Id. at 31-33.
55
   Gerstley v. Mayer, 2015 WL 756981, at *5 (Del. Super. Ct. Feb. 11, 2015) (cleaned up) (citing
VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003)).
56
     See PTO ¶ 1.

                                                -12-
obligation by the defendant, and resulting damage to the plaintiff.” 57 So what must

be determined on TransCore’s counterclaim is: (1) whether an implied covenant

exists; (2) whether TransCore performed under the Agreement; (3) whether Intermec

breached the implied covenant; and (4) whether TransCore supported its alleged

damages.

     A. INTERMEC HAS NOT CARRIED ITS BURDEN ON ITS BREACH-OF-CONTRACT
        CLAIM (COUNT I).

        Intermec says TransCore breached the Agreement by failing to pay

$1,638,979—what it says (invoking Section 3.5) was the royalty underpayment

determined by EY that is now absolute.58 That purported royalty underpayment

rests, in part, on the EY Report’s conclusion “that the gross invoice price was not

used to compute the NSV for the multiprotocol products” and “[i]nstead, an

‘adjusted unit price’ was used” by TransCore.59 In Intermec’s view, once EY

calculated a figure, Section 3.5 was satisfied and that was the amount due.

        Section 3 of the Agreement requires that royalties be paid using “Net Sales

Value,”60 which is “the gross invoice price or gross invoice fee received by

57
    See Baldwin v. New Wood Resources, LLC, 283 A.3d 1099, 1117-18 (Del. 2022) (citation and
internal quotation marks omitted).
58
     Intermec’s Opening Br. at 18; see EY Report § 1.
59
     EY Report § 3.3.
60
     Agreement § 3 (using Net Sales Value to calculate royalties).

                                               -13-
[TransCore] for a Licensed Product” minus certain deductions.61 In turn, Licensed

Product means “RFID ASICs, RFID Inserts, Tags and/or Labels, Fixed RFID

Readers, Portable RFID Readers, RFID Printers, RFID software and systems which

incorporate such products and software[,] which, but for the licenses granted herein,

would infringe one or more of the Intermec Licensed Patents, . . . .”62

          The Agreement doesn’t differentiate between single protocol devices and

multiprotocol devices. In this absence, TransCore employed an adjusted price to

calculate royalty payments.63

         Intermec says TransCore breached the Agreement by (1) failing to repay the

underpayment found in the EY Report, and (2) using an adjusted price methodology

for calculating royalties, instead of certain devices’ gross price.64 TransCore admits

to both and says the Agreement supports its actions.

         The Court finds below that TransCore wasn’t obligated via the audit provision

to pay the amount suggested in the EY Report because that provision wasn’t properly

triggered. But the Court finds TransCore did breach the Agreement by historically

calculating royalties using an adjusted price, instead of the contractually-required

gross invoice price.

61
     Id., Ex 1 (defining Net Sales Value).
62
     Id. § 1.8.
63
     See JX-18 to JX-47 (“Quarterly Royalty Reports”).
64
     Intermec’s Post-Trial Opening Br. at 17-21.

                                              -14-
           Ultimately though, Intermec, during the course of this contractual

relationship, acquiesced to TransCore’s adjusted price methodology. In turn,

Intermec’s post-acquiescence breach-of-contract claim is barred by that

acquiescence. Additionally, for that part of the claim preceding the acquiescence, it

is barred by the statute of limitations.

           1. Intermec Cannot Seek Payment of the EY Calculation via Section 3.5.

           Under Section 3.5 of Exhibit 2 to the Agreement, Intermec had long held the

right to order an audit of TransCore’s quarterly reports.65 But that audit was to be

performed by an “independent Third Party.”66 Specifically, the section provides:

              Intermec has the right, upon reasonable notice, through an
              independent Third Party, during usual business hours and not
              more than once per year, and subject to confidentiality
              restrictions reasonably required by Company, to audit the records
              of Company in order to verify any representations made (in
              quarterly reports or otherwise) by Company to Intermec about
              the matters described in paragraphs 3.2 and 1.4 of this Exhibit 2,
              as well as compliance with all license requirements contained
              herein. Company will assemble in paper and electronic form all
              documents that may be necessary or desirable for such audit.
              Should the results of any such audit by Intermec’s representative
              demonstrate that any representations or payments made by
              Company resulted in an underpayment that exceeded more than
              one percent (1%) in any period, then Company will within 30
              days after notice of such underpayment, pay Intermec such
              amount, together with a late payment fee calculated in
              accordance with Section 2.6 above. Intermec will bear the cost
              of such audit unless the audit reveals an underpayment larger

65
     Agreement, Ex. B (General Terms and Conditions) § 3.5.
66
     Id.

                                             -15-
              than ten percent (10%) for the period audited, in which case
              Company shall pay the reasonable expenses of the audit within
              30 days of receiving the invoice for such expenses.

Under Exhibit 1 to the Agreement, “Third Party” is defined as “Persons other than

Intermec or Company.”67               But “independent” is not defined.68           Given that

absence69 (or the ambiguity created within the subject provision)70 the Court might

rightly rely on the dictionary definition of “independent” which Black’s Law

Dictionary defines as: (1) “Not subject to the control or influence of another”;

(2) “Not associated with another (often larger) entity”; (3) “Not dependent or

contingent on something else.”71 Too, the Court might resort to limited extrinsic

evidence to interpret a provision and understand the parties’ intent thereby.72

Though, the Court should be careful and sparing when doing so.73

           At trial, EY’s Executive William Thomas was asked specifically whether EY

67
     Id., Ex. 1 (additional definitions).
68
   And interestingly that same supposed “independent” actor required under Section 3.5 is in that
very paragraph later labeled “Intermec’s representative.”
69
    Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 738 (Del. 2006) (“Delaware
courts look to dictionaries for assistance in determining the plain meaning of terms which are not
defined in a contract.” (citations omitted)).
70
   Sunline Com. Carriers, Inc. v. CITGO Petro. Corp., 206 A.3d 836, 847 (Del. 2019) (finding:
“Here, the contract’s terms contradict each other, are susceptible to two meanings, and are thus
ambiguous.”).
71
     Independent, BLACK’S LAW DICTIONARY (11th ed. 2019).
72
     See SI Mgmt. L.P. v. Wininger, 707 A.2d 37, 42-43 (Del. 1998) (“[I]f there existed an
ambiguous provision in a negotiated bilateral agreement, extrinsic evidence should be considered
if it would tend to help the court interpret such a provision.” (citation omitted)).
73
     Id.

                                              -16-
was independent:

        Q. Okay. And you work at the direction of your client; correct?
        A. Yes.
        Q. And you -- in this case your client was Honeywell?
        A. Yes.74
        When pressed further, Mr. Thomas explained that EY didn’t work at the

“direction” of Intermec, instead EY “work[ed] under the direction per the instruction

of the contract.”75

        There were several troubling aspects of Intermec’s interaction with EY that

lead the Court to find that the “independence” expected and required under Section

3.5 was not proven here.76

        First, during the life of the audit, Intermec exerted exclusive (some might say

undue) control over EY. For example, in its December 21, 2016 Status Update, EY

had yet to decide whether the Agreement required the gross invoice price or an

adjusted price be used to calculate royalties.77 But, as part of that status report, EY

74
     4/4/23 Trial Tr. at 75
75
    Id. at 76. Mr. Thomas also stated that EY had previously worked for Intermec. Id. at 79. And
Mr. Thomas admitted that while he had EY’s ultimate supervisory sign-off authority, he was not
nearly as familiar with this particular audit’s process as others at EY would have been. See id. at
78-79. Indeed, Mr. Thomas had minimal knowledge of the details and day-to-day of this particular
audit. See id.; see also id. at 10, 27-28 (explaining that the manager—which Mr. Thomas wasn’t—
is “responsible for overseeing the day-to-day execution of the fieldwork”).
76
     Recall, on this claim, Intermec has the burden of proving its right to payment via Section 3.5.
77
    DX-30 at 6 (December 21, 2016 Honeywell RFID contract assessments project status
presentation).

                                                -17-
stated its next step was “[d]iscuss[ing] with [Intermec] re: reserve % and using

adjusted unit price (cost of the product) for NSV computation.”78 The following

month EY met with Ms. Schwencer who stated in an email to EY: “I believe in our

meeting from the prior week we had clarified that they were not allowed to use the

‘cost of RFID’ within the bundle sold.”79               After Intermec’s instruction, EY

acquiesced to Intermec’s direction and concluded that the gross invoice price should

be used to calculate royalties.80

         This is not the only instance of Intermec’s seemingly sole direction of EY’s

actions.

         Two other examples the Court finds significant. First, in an internal email

between the EY auditors, an EY auditor stated that “[f]or our call with [Mr. Nefzer]

on Monday, [Ms. Schwencer] wants us to understand” a list of issues Ms. Schwencer

raised.81 Second, while EY was in the late stages of conducting the audit, EY

emailed Mr. Nefzer and reported that it had been “directed by [Intermec] to ‘put our

pencils down’ and close out the report.”82 Neither TransCore, nor EY had any say

here. Intermec made that call ending the audit on its own.

78
     Id. at 3.
79
     DX-31 at 2 (emphasis added) (January 2017 emails between EY and Ms. Schwencer).
80
     EY Report § 1.
81
     DX-24 at 1 (March 2, 2017 EY internal email).
82
     JX-4 at 1 (January 2017 emails between Nathaniel Chellel and Richard Nefzer).

                                              -18-
           Second, the Statement of Work gave Intermec full and unfettered control over

the audit with seemingly no substantial input from TransCore. Specifically, the

Statement of Work provided that EY “will assist [Intermec] in assessing its contract

risks and developing a plan to evaluate the contractual compliance of each Third

Party with the terms of the cross-license contracts between [Intermec] and each

Third Party.”83 Further, the Statement of Work provided that EY would “provide

[Intermec] with weekly progress updates and, at [Intermec]’s request, meet with

[Intermec] periodically to review the results.”84 Moreover Appendix A to the

Statement of Work directly acknowledged that “EY perform[s] services only for the

Client,” which was Intermec.85 And “[t]he Report(s) addresses[ed] only the issues

identified by the Client, and [is/are] based solely on information obtained by EY

using the procedures specified by the Client or otherwise provided by or on behalf

of the Client.”86

           Third, the decision to hire EY was solely made by Intermec. Intermec sent

TransCore a letter informing it that Intermec was using its contractual audit rights

and had selected EY to conduct that audit.87 To be sure, audit provisions like the

83
     PX-29 (“EY Statement of Work”) at 4.
84
     Id.
85
     Id. at 11 (Appendix A to the EY Statement of Work).
86
     Id. (emphasis omitted) (first alteration added, second alteration in original).
87
    JX-9 at 2 (August 15, 2016 letter from Francia Lucio to George McGraw). See 4/11/23 Trial
Tr. at 41

                                                 -19-
one here and the action taken thereunder generally requires one of the contracted

parties to take the lead. But, having considered the testimony and evidence presented

it became evident that EY—through no fault of its own, Intermec made it clear that

it (or Honeywell) was driving the audit bus—simply was not the “independent” actor

anticipated by Section 3.5. Yet, it was only the result of such actor that could trigger

Section 3.5 and that might result in breach therethrough had payment not been made

thereunder.

      Given the trial evidence, the Court cannot find, by a preponderance of the

evidence, that EY was the independent third party contemplated by the Agreement.

Thus Section 3.5 cannot be invoked here and TransCore cannot be liable for its

refusal to pay EY’s royalty calculation. Accordingly, the Court finds against

Intermec on its claim of breach under Section 3.5 for failure to pay that sum.

      But, ironically, that does not mean TransCore was right in its method of

calculating royalties on multiprotocol readers.

      Q. I want to refer you to JX-10, which hopefully is in your binder. And have you
         seen JX-10 before?
      A. Yes.
      Q. And what is this document?
      A. This is an email from Honeywell providing the letter to George McGraw and
         an email introduction announcing the Ernst & Young upcoming audit.

                                           -20-
        2. TransCore Was Required by Section 3 to Pay Intermec for the Use of
           Its Licensed Products.

        Section 3.1 provides that TransCore was to pay Intermec:

           (i) a running royalty of 2.5% on the Net Sales Value of any
           Licensed RFID ASICs leased, sold or otherwise transferred by
           Company on or after January 8, 2008 and continuing through the
           end of the Term; and (ii) a running royalty of 3.0% on the Net
           Sales Value of any Licensed RFID Tags, Inserts, and/or Labels
           leased, sold or otherwise transferred by Company on or after
           January 8, 2008 and continuing through the end of the Term. For
           avoidance of doubt, no more than the royalty rate specified under
           this paragraph 3.1 (ii) shall be paid on any Licensed RFID Tag,
           Insert and/or Label even though such product may incorporate a
           Licensed RFID ASIC;

           and (iii) a running royalty of 7.0% on the Net Sales Value of any
           Licensed RFID Readers (fixed or portable) leased sold or
           otherwise transferred by Company on or after January 1, 2008
           and continuing through the end of the Term.88

Exhibit 1 (Additional Definitions) to the Agreement defines Net Sales Value as:

           (i) the gross invoice price or gross invoice fee received by
           Company for a Licensed Product in a transaction at arm’s length
           for monetary consideration, less (ii) allowances for returns or
           credit for bad debts less (iii) shipping; insurance, and taxes (to
           the extent separately stated on the invoice), less (iv) any RFID
           royalties paid by Company in a transaction at arm’s length to any
           Third Party, less (v) any amount paid by Company to lntermec
           for an RFID product that is incorporated into the Licensed
           Product sold or leased or otherwise transferred by Company. In
           the case of a transaction not at arm’s length or a transfer of
           Licensed Products for other than monetary consideration, or the
           transfer of Licensed Products for other than monetary
           consideration, Net Sales Value means the price at which
           Company or a similarly situated Third Party sells comparable
88
     Agreement § 3.1.

                                         -21-
              quantities of Licensed Products at approximately the same time
              and in the same or similar markets in transactions at arm’s
              length.89

Section 1.8 of the Agreement defines Licensed Products as:

              RFID ASICs, RFID Inserts, Tags and/or Labels, Fixed RFID
              Readers, Portable RFID Readers, RFID Printers, RFID software
              and systems which incorporate such products and software) [sic]
              which, but for the licenses granted herein, would infringe one or
              more of the lntermec Licensed Patents, but excluding products
              and software offered for sale, sold, or otherwise transferred
              bearing an Unauthorized Brand.90

           A “Licensed Product” is a product “but for the licenses granted herein, would

infringe one or more of the lntermec Licensed Patents.”91 Both sides agree that for

a single protocol device the entire device constitutes the Licensed Product. But they

part ways on whether that is so for a multiprotocol device.

           To TransCore, isolating a component using Intermec-patented technology

(such as a daughterboard) leaves a multiprotocol device that doesn’t utilize “one or

more of the Intermec Licensed Patents,” which means the Licensed Product is the

component using Intermec-patented technology (such as the daughterboard) and not

the entire multiprotocol device.92 To Intermec, a Licensed Product must refer to the

89
     Id., Ex. 1.
90
     Id. § 1.8.
91
     Id.
92
   TransCore’s Post-Trial Opening Br. at 21 (citing Agreement § 1.8); id. at 22 (“Therefore, the
daughterboard or transceiver board is the Licensed Product.”).

                                             -22-
entire multiprotocol reader because the Intermec-patented component alone—that

upon which TransCore would like to calculate its royalty obligation—does “not

qualify as a ‘Licensed Product’” nor does that component alone “meet the definition

of any RFID product category found in the definition of Licensed Product.”93

        Intermec’s correct. Once the component using Intermec-patented technology

was placed therein, a multiprotocol reader became for the Agreement’s purposes a

“Fixed RFID Reader[]” or a “Portable RFID Reader[].” Accordingly, the royalty

was to be calculated on that Agreement-defined reader’s gross invoice price.

        While it might have made better business sense for TransCore to strike a deal

where it only paid a royalty on an agreed-upon value of the Intermec-patented

component, that’s not the deal it struck with Intermec.94

        Both Intermec and TransCore rely on the quarterly reports in support of their

respective interpretations. TransCore says that Intermec had the ability to calculate

the adjusted sales price using the numbers provided in the quarterly report but failed

to do so.95 Intermec says the quarterly report was devoid of any information

specifying that an adjusted price was being used.96

93
     Intermec’s Post-Trial Opening Br. at 21-23 (citing 4/11/23 Trial Tr. at 202-04, 206).
94
    The Court enforces the Agreement as written—good or bad—it doesn’t rewrite it. Nemec v.
Shrader, 991 A.2d 1120, 1126 (Del. 2010) (stating Delaware courts will “not rewrite [a] contract
to appease a party who later wishes to rewrite a contract he now believes to have been a bad deal”).
95
     TransCore’s Post-Trial Opening Br. at 24.
96
     Intermec’s Post-Trial Opening Br. at 22-24.

                                                 -23-
            The royalty reports feature categories such as Shipments by Accounts; Part

Info; Quantity; Revenue; Unit Calculation Values; and Total Expenses.97 They also

include specific part numbers and part descriptions as well as specific unit sales

prices.98 Missing from these detailed reports is any mention of adjusted price.99

            By way of example, in the 2018 Q3 Quarterly Report, the first line item lists

a multiprotocol reader with a unit sales price of $                      and a total royalty amount of

$                To get to $          —given that two units were purchased, the 7% royalty,

1.6% extended revenue, and $                      reserve cost per unit—the input price would

have to be $                That is the “adjusted price” TransCore came up with. But that

specific figure is missing from the quarterly report. All that is listed is the gross

invoice price (unit sales price) and the quantity.

            TransCore says that the adjusted price came from a price list.100 This was

97
      JX-43 (2018 Q3 Quarterly Report).
98
      Id.
99
      See Quarterly Royalty Reports; see 4/11/23 at 29-30:
            Q. And what was the unit price that was charged to the customer on this particular
               TransCore action?
            A. $
            Q. And what is the price for the SeGo licensed product in this product upon which
               TransCore calculated the royalty?
            A.
            Q. And how can you tell that from looking at that line item?
            A. I can’t tell from that particular piece of information.
100
      TransCore’s Post-Trial Answering Br. at 19-20.

                                                    -24-
brought out in testimony by George McGraw, who testified that he created and

possessed a price list that listed the adjusted price for each multiprotocol device.101

But Mr. McGraw admitted that he did not share this price list with Intermec when

the quarterly reports were submitted.102 And as the Court just illustrated, unless one

worked the math backward, one wouldn’t know the gross unit sales price printed on

the royalty report was not the actual number used to calculate the royalty.

         Intermec’s former general counsel, Ms. Harwell, testified that the parties

intended royalty payments be calculated from the gross invoice price because using

a different figure, such as an adjusted price, required a post-contractual methodology

that involved judgment calls that inevitably would “lead to litigation”—something

neither party wanted.103

101
      4/5/23 Trial Tr. at 105-06.
102
      Id. at 107
         Q. Were those price lists shared with Intermec when you surveyed your quarterly
            reports?
         A. I’ve got to think about that for a minute. No. I don’t believe so. . . .
         Q. And, again, those were not documents that were transmitted with the quarterly
            reports; correct?
         A. I don’t believe so. No.
103
      4/3/23 at 93-94
         Well, I’m not sure what kind of adjusting they had been talking about, but the point
         of the net sales calculation in this contract from my perspective was to get to a
         market price for the device that they sold and use that as a starting point for the
         calculation. There was a list of permissible deductions from the gross invoice price,
         but what I did not want and what I don't think the contract permits is someone to
         basically make their best guess about how to allocate that market price between
         protocols or between technologies or any of that. So allocation was not one of the
         things that I would have agreed to because it involves judgment calls that lead to
                                                  -25-
      Ms. Harwell’s testimony is confirmed by the structure and text of the royalty

provision.    Nowhere does the Agreement provide for a price adjustment

methodology. If the parties intended that structure, it would have been expressly

laid out in the Agreement. And given its absence, it’s reasonable to conclude the

parties didn’t intend to use an adjusted price to calculate royalties, since using a

methodology not listed in the Agreement all but certainly requires extra-contractual

judgment calls that form the fodder for litigation in this Court.

      The Court finds by a preponderance of the evidence that the parties intended

for royalties to be calculated using the gross invoice price, and not an adjusted price.

This finding is based on the text of the Agreement. Nowhere therein does one find

TransCore’s adjusted price methodology.

      Even if the Court were to look beyond the four-corners of the Agreement,

which it really need not do as it finds the Agreement clear on this point, the extrinsic

evidence supports the same outcome. That evidence includes the absence of any

contemporaneous communications stating that adjusted price would be used, the

absence of any clearly-identified adjusted price penned on the quarterly reports, and

the weight given to Ms. Harwell’s testimony.

      Accordingly, the Court finds that TransCore’s use of an adjusted price to

      litigation, and I was trying to get us out of disputes with TransCore about the license
      agreement.

                                               -26-
calculate royalties resulted in underpayment to Intermec and breached the

Agreement. That said, while it was troubling how TransCore went about paying and

reporting the royalties at various points, its defenses to Intermec’s breach claim are

nonetheless successful.

          3. TransCore’s Successful Defenses

          TransCore asserts that (1) Intermec’s breach-of-contract claim is barred by

acquiescence, and (2) certain of Intermec’s payment obligations are barred by the

statute of limitations.

          a. Intermec acquiesced to TransCore’s royalty methodology.

          TransCore says Intermec’s breach-of-contract claim is barred by

acquiescence. Specifically, TransCore says that it disclosed its methodology in

2014 and 2019 without objection from Intermec.104

          The 2014 disclosure was a 2014 email chain between Floyd Carpenter and

Sergio Robles.105 In that email chain TransCore laid out its interpretation that

royalties are due for multiprotocol devices only on the “protocol specific sales

price.”106 TransCore says that because Mr. Robles was told about the methodology

and did not raise any issue with it, TransCore was led to believe its methodology

104
   TransCore’s Post-Trial Opening Br. at 24; DX-1 (February 2014 email chain between Sergio
Robles and Floyd Carpenter); DX-6 (February 2019 email chain between Floyd Carpenter and
Adriana Espinosa).
105
      DX-1 at 1-2.
106
      Id. at 2.

                                           -27-
was correct, and so Intermec acquiesced to TransCore’s methodology.107

         As observed by the Delaware Supreme Court in Klaassen v. Allegro

Development Corp., acquiescence occurs when the claimant:

         [H]as full knowledge of his rights and the material facts and (1) remains
         inactive for a considerable time; or (2) freely does what amounts to
         recognition of the complained of act; or (3) acts in a manner
         inconsistent with the subsequent repudiation, which leads the other
         party to believe the act has been approved.108

“For the defense of acquiescence to apply, conscious intent to approve the act is not

required, nor is a change of position or resulting prejudice.”109 “Application of the

standards underlying the defense of acquiescence is fact intensive, often depending,

. . . on an evaluation of the knowledge, intention and motivation of the acquiescing

party.”110

         The first inquiry is determining whether the claimant has “[k]nowledge, actual

or imputed, of all material facts.”111 “An employee’s knowledge can be imputed to

her employer if she becomes aware of the knowledge while she is in the scope of

employment, her knowledge pertains to her duties’ as an employee, and she has the

107
      TransCore’s Post-Trial Opening Br. at 24.
108
   106 A.3d 1035, 1047 (Del. 2014) (quoting Cantor Fitzgerald, L.P. v. Cantor, 724 A.2d 571,
582 (Del. Ch. 1998)).
109
      Id. at 1047 (citations omitted).
110
      Julin v. Julin, 787 A.2d 82, 84 (Del. 2001).
111
      Frank v. Wilson & Co., 32 A.2d 277, 305 (Del. 1943).

                                                  -28-
authority to act on the knowledge.”112 The Restatement (Third) of the Law of

Agency, states that:

            For purposes of determining a principal’s legal relations with a third
            party, notice of a fact that an agent knows or has reason to know is
            imputed to the principal if knowledge of the fact is material to the
            agent’s duties to the principal, unless the agent:

            (a) acts adversely to the principal as stated in § 5.04, or

            (b) is subject to a duty to another not to disclose the fact to the
                principal.113

            The rule is based on the idea that “[i]mputation creates incentives for a

principal to choose agents carefully and to use care in delegating functions to

them.”114        Moreover, “imputation encourages a principal to develop effective

procedures for the transmission of material facts, while discouraging practices that

isolate the principal or coagents from facts known to an agent.”115

            Sergio Robles was an Intermec royalty analyst.116 Part of his responsibility

was “process[ing]” royalty payments.117

112
      Hecksher v. Fairwinds Baptist Church, Inc., 115 A.3d 1187, 1200-01 (Del. 2015) (cleaned up).
113
      RESTATEMENT (THIRD) OF THE LAW OF AGENCY § 5.03 (2006 Supp. May 2023).
114
      Id., cmt. b.
115
      Id.
116
      Stephanie Schwencer Depo. Tr. at 43 (Nov. 9, 2022).
117
    DX-1 (“I just want to double check the following with you before I process this royalty report
for good.”); 4/3/23 Trial Tr. at 23; see also D.X. 1 at 1 (“I hope you can help me as this is the first
time I process one of your royalty reports. I am just getting familiar with all [sic] the Intermec
contract.”).

                                                 -29-
         According to Intermec, TransCore deceived a new analyst, whom Mr. Nefzer

knew had not processed these royalty payments before.118 To hear Intermec tell it,

after receiving Mr. Robles’s email asking why the numbers on the quarterly report

were not adding up,119 Mr. Carpenter and other senior TransCore managers worked

together to “craft[] a response,”120 and when Mr. Robles accepted the response and

processed the payment, TransCore celebrated “the ‘good news.’”121

         In her deposition, Intermec’s finance director Stephanie Schwencer stated that

all Mr. Robles “cared about was the math work” and “[i]f he had understood what

[the communications] said, he would have referred it to his supervisor.”122

         But Mr. Robles’s material job duties were more than just checking the math—

his responsibility was to process the royalty payments.123 Mr. Robles had all the

material facts available to him. The fact that he might not have understood the years-

later ramification of his actions is no defense. Principals must “choose agents

carefully and . . . use care in delegating functions to them” and “develop effective

118
      Intermec’s Post-Trial Answering Br. at 21 (citing 4/11/23 Trial Tr. at 166).
119
    DX-1 at 1 (“Per our phone conversation, attached is the document I received. I would like to
know how the Total Expense amount (Royalty?) is calculated. I see a 3% percent royalty rate
being used, and also a 1.6% Res rate which I do not know what is for. Also the Frt $ column, is it
a freight deduction?”).
120
      Intermec’s Post-Trial Answering Br. at 21 (citing PX-3).
121
      Id. at 22 (quoting PX-4).
122
      Stephanie Schwencer Depo. at 153-58 (Nov. 9, 2022).
123
      See supra note 117.

                                                 -30-
procedures for the transmission of material facts.”124 If Intermec did not want to be

responsible for Mr. Robles’s actions it should have delegated to him less authority

or established effective procedures for the transmittal of important communications

to higher-level managers.

         According to Intermec, Mr. Robles “made the mistake of trusting”

TransCore.125 But the mistake, if any, is that Intermec delegated too much authority

to someone it now dubs a junior analyst who had never processed a royalty payment

before.

         Mr. Robles processed the payment fully aware that an adjusted price was

being used.126 His actions amounted to acquiescence of the now-challenged act.127

         According to his supervisor, Stephanie Schwencer, Mr. Robles should have

escalated the issue,128 and while that may be true, Mr. Robles had the authority to

act. Intermec is therefore bound by Mr. Robles’s actions.

         As a last resort, Intermec adds that Mr. Robles’s actions effectively either

amended or waived portions of the Agreement, which under Sections 10.2 and

124
      RESTATEMENT (THIRD) OF THE LAW OF AGENCY § 5.03 cmt. b.
125
      Intermec’s Post-Trial Answering Br. at 22.
126
      DX-2 at 1 (February 2014 emails between Floyd Carpenter and Sergio Robles).
127
    TransCore believed that the royalty methodology it had used historically under the Agreement
was correct all along and now, when squarely questioned, had been approved because of
Mr. Robles’s inquiry and processing of the royalty payment. PX-4 (“The good news is that Sergio
is complete in his analysis of Q4’s 2013 royalties.”).
128
      Stephanie Schwencer Depo. at 153-58 (Nov. 9, 2022).

                                               -31-
10.3 of the General Terms and Conditions (Exhibit 2 to the Agreement),

respectively, required signed writings by authorized representatives of Intermec and

TransCore.129 But the presence of a ‘waiver ineffective’ or ‘amendment ineffective

provision’ will not bar an acquiescence defense.130

         Accordingly, the Court finds that Intermec acquiesced to TransCore’s

methodology and thus Intermec’s breach-of-contract claim for underpayments post-

Q3 2014 is barred by the equitable doctrine of acquiescence.

         b. Intermec failed to mount a viable defense to TransCore’s statute of
            limitations arguments.

         TransCore says that if Intermec is correct about its breach-of-contract claim it

cannot recover from before March 25, 2017, because Intermec waited until

129
      Intermec’s Post-Trial Answering Br. at 23; Agreement, Ex. 2 §§ 10.2, 10.3.
130
      XRI Inv. Hldgs. LLC v. Holifield, 283 A.3d 581, 659 (Del. Ch. 2022):
         [N]otwithstanding a contractual provision stating that a contract cannot be modified
         except in writing, a court may find that the parties modified their obligations orally,
         by conduct, or through waiver. Likewise, notwithstanding a contractual provision
         that states that no party can waive any rights under an agreement, a court may find
         that a right has been waived.
(citations omitted); Aveanna Healthcare, LLC v. Epic/Freedom, LLC, 2021 WL 3235739, at *29
n.273 (Del. Super. Ct. July 29, 2021) (“[C]ontractually afforded protections against waivers
themselves may be waived if facts so indicate.” (citing Amirsaleh v. Bd. of Trade of City of N.Y.,
Inc., 27 A.3d 522, 529-30 (Del. 2011)); see Pepsi-Cola Bottling Co. of Asbury Park v. Pepsico,
Inc., 297 A.2d 28, 33 (Del. 1972):
         [A] written agreement does not necessarily govern all conduct between contracting
         parties until it is renounced in so many words. The reason for this is that the parties
         have a right to renounce or amend the agreement in any way they see fit and by any
         mode of expression they see fit.

                                                  -32-
March 25, 2020, to bring its action.131 The Agreement called for quarterly royalty

payments, so each alleged underpayment amounts to a separate breach.132 Because

Intermec filed its complaint on March 25, 2020, any claim arising before March

25, 2017, would be untimely absent a tolling exception. Intermec foregoes a tolling

defense and says that because Section 3.5 was breached, its claims are timely.133

Having found that Section 3.5 wasn’t breached, Intermec is left without a defense

and implicitly waives any potential tolling argument.134

         But even if the Court were to find that Intermec did not waive its defense to

TransCore’s statute of limitations argument, the statute of limitations would still bar

Intermec’s remaining claim here. That is because Intermec was on inquiry notice of

the adjusted price methodology.135 To be on inquiry notice, a “person[] of ordinary

intelligence and prudence would [need to] have facts sufficient to put them on

inquiry which, if pursued, would lead to the discovery of the injury.”136 Here the

131
      TransCore’s Post-Trial Opening Br. at 34-35.
132
    Sutherland v. Sutherland, 2013 WL 2362263, at *5 (Del. Ch. May 30, 2013) (“The statute of
limitations would then accrue upon, and for, each quarterly payment made to Cimarron for these
overages.”).
133
      Intermec’s Post-Trial Answering Br. at 29-33.
134
   Brown v. United Water Delaware, Inc., 3 A.3d 272, 276 (Del. 2010) (finding “waiver occurs
where a party intentionally relinquishes an available contention or objection” (citations omitted)).
135
    In re Dean Witter P’ship Litig., 1998 WL 442456, at *6 (Del. Ch. July 17, 1998) (finding “the
limitations period begins to run when the plaintiff is objectively aware of the facts giving rise to
the wrong” (emphasis in original) (citation omitted)).
136
      Id. at *7 (emphasis in original) (citation omitted).

                                                  -33-
Court finds that (1) Intermec had the ability to order an audit of the quarterly reports

(and chose not to), and (2) the quarterly reports contained enough information (if

one worked backwards through the math) to find out that an adjusted price was being

used to calculate royalties.

          Accordingly, Intermec was on inquiry notice since at least the second quarter

of 2012 when Intermec received the first quarterly report.137 As such, even if

Intermec did not waive its defense to TransCore’s statute of limitations argument,

its remaining claims would still be barred by that limitations period.

      B. THE COURT FINDS AGAINST TRANSCORE ON ITS BREACH OF THE IMPLIED
         COVENANT OF GOOD FAITH AND FAIR DEALING COUNTERCLAIM.

          In TransCore’s remaining counterclaim it says that the Agreement includes an

implied obligation that Intermec must return any overpayment made by TransCore

and that TransCore indeed overpaid.138

          Intermec first says that TransCore hasn’t satisfied the requirements for finding

an implied covenant exists.139 Second, it asserts two defenses: it says (1) if the Court

finds that TransCore breached the Agreement by underpaying Intermec, then

TransCore’s counterclaim is barred by the prior material breach doctrine 140; and

137
      JX-18.
138
      Countercl. ¶¶ 90-97 (D.I. 26).
139
      Intermec’s Post-Trial Opening Br. at 34-35.
140
      Id. at 35.

                                               -34-
(2) TransCore’s counterclaim is barred by the voluntary payment doctrine.141

Third, Intermec says TransCore failed to meet its burden that Intermec breached an

implied covenant.142

          1. TransCore Has Successfully Invoked the Implied Covenant of Good
             Faith and Fair Dealing.

          As the Court observed earlier in this case, “[w]ielding the implied covenant is

a ‘cautious enterprise.’”143 “As a result, implying the covenant should be ‘a rare and

fact-intensive exercise, governed solely by issues of compelling fairness.’”144

          TransCore insists that the overpayment issue was “so obvious” it didn’t need

to be expressly included in the Agreement.145

          To counter, Intermec first notes that TransCore was solely responsible for

payment of royalties and that it was financially disadvantageous to overpay. 146 But

just because the Agreement gave TransCore the responsibility to pay its due does

not mean the Agreement addressed underpayment.

141
      Id. at 31-33.
142
      Intermec’s Post-Trial Answering Br. at 6-15.
143
      Intermec, 2021 WL 3620435, at *12 (quoting Nemec, 991 A.2d at 1125).
144
      Id. (quoting Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434, 442 (Del. 2005)).
145
      TransCore’s Post-Trial Opening Br. at 13-14 (quoting Intermec, 2021 WL 3620435, at *27).
146
   Intermec’s Post-Trial Answering Br. at 3 (citing 4/5/23 Trial Tr. at 77-78; 4/11/23 Trial Tr. at
119-20); 4/5/23 Trial Tr. at 78:
          Q. And TransCore had a financial incentive to make sure especially the quantities
             were correct so they didn't face the risk of overpayment; correct?
          A. Correct.

                                                -35-
         Intermec next points to Oxbow Carbon & Minerals Holdings, Inc. v.

Crestview-Oxbow Acquisition, LLC147 and Nemec v. Shrader148 and says that

because the overpayment issue “could have been anticipated” that it cannot be filled

with an implied covenant.149 But our Supreme Court declined to find an implied

covenant in Oxbow because the requested implied covenant there attempted to

rebalance certain bargained-for protections.150 And in Nemec, the Supreme Court

affirmed the trial court’s rejection of an implied covenant that an option needed to

be redeemed at a certain time, since, as the Supreme Court found, “the Stock Plan

explicitly authorized the redemption’s price and timing.”151

         That is not the situation here. The overpayment issue was not discussed at all.

147
      202 A.3d 482, 507 (Del. 2019).
148
      991 A.2d 1120 (Del. 2010).
149
      Intermec’s Post-Trial Opening Br. at 34 (quoting Oxbow, 202 A.3d at 507).
150
    Oxbow, 202 A.3d at 507. In Oxbow, our Supreme Court “decline[d] to apply the implied
covenant . . . because no gap exist[ed] concerning the admission of the Small Holders, and because
the admission of new Members and their impact on the Exit Sale process could have been
anticipated.” Id. While Intermec goes right to the Court’s concluding phrase that the gap “could
have been anticipated,” it does so without examining those few words’ context. Intermec’s Post-
Trial Opening Br. at 34 (quoting Oxbow, 202 A.3d at 507).
    In Oxbow, the Court quoted its previous Nemec decision, where it observed: “Delaware’s
implied duty of good faith and fair dealing is not an equitable remedy for rebalancing economic
interests after events that could have been anticipated, but were not, . . . later adversely affected
one party to a contract.” Oxbow, 202 A.3d at 507 (alteration added) (quoting Nemec, 991 A.2d at
1128). Contrary to Intermec’s reading, Oxbow and Nemec do not bar any covenant that could have
been anticipated when drafting. Rather, they remind us that an implied covenant is not cognizable
where it is engaged injudiciously to “rebalance economic interests” visited by later-realized events
that “could have been anticipated.” Id. (quoting Nemec, 991 A.2d at 1128).
151
      Nemec, 991 A. 2d at 1126.

                                                -36-
Naturally the parties could have included such a term, but their failure to do so

doesn’t doom an implied covenant claim. That is because a provision providing that

refunds are owed for overpayments under a quarterly royalty contract is the type of

“obvious” omission that is well-suited for an implied covenant as it doesn’t change

any bargained-for protections.152

         Accordingly, the Court finds here there is an implied covenant in the

Agreement to return any overpayment TransCore made to Intermec.153

         2. Intermec’s Defenses Do Not Bar TransCore’s Counterclaim.

         a. TransCore did not commit the prior material (Section 3.5) breach
            pled.

         Intermec says that TransCore cannot recover under its overpayment theory

because it materially breached the Agreement first, so under the prior material

breach doctrine TransCore’s counterclaim should be barred.154 Because the Court

has found that TransCore did not breach Agreement Section 3.5, as pled, Intermec’s

prior material breach defense fails.

152
   Dieckman v. Regency GP LP, 155 A.3d 358, 361 (Del. 2017) (finding “so obvious” “a
requirement that the general partner not engage in misleading or deceptive conduct to obtain safe
harbor approvals”).
153
    The Court makes this finding after examining the entirety of the trial evidence on Transcore’s
implied covenant claim and mindful that “one generally cannot base a claim for breach of the
implied covenant on conduct authorized by the agreement”—here Intermec would say receiving
royalty payments—and mindful too that the covenant shouldn’t be employed as some equitable
remedy meant to rebalance the parties’ financial interests or otherwise provide a protection not
obtained at the negotiating table. Dunlap, 878 A.2d at 441; see Nemec, 991 A.2d at 1126-28.
154
      Intermec’s Post-Trial Opening Br. at 35.

                                                 -37-
          b. The voluntary payment doctrine excuses only the ‘632 patent
             underpayment claim.

          Intermec also says that the voluntary payment doctrine defeats TransCore’s

implied covenant counterclaim.155 To Intermec, “TransCore’s alleged overpayments

are not the result of any ‘mistake of fact,’ they are the result of a unilateral mistake

arising from gross administrative incompetence.”156 Intermec continues that a

mistake of fact could not have occurred because “TransCore had full knowledge of

the facts” and “knew exactly which Intermec patents were at issue, and it had access

to the products, the design schematics, and the engineers.”157

          “The voluntary payment doctrine provides that ‘where money has been

voluntarily paid with full knowledge of the facts, it cannot be recovered on the

ground that the payment was made under a misapprehension of the legal rights and

obligations of the person paying.’”158

          “The negligence of the payor in mistakenly compensating the payee, alone, is

no bar to restitution of the sum paid. However, where the mistake of fact was not

155
      Id. at 31-33.
156
      Id. at 33.
157
      Intermec’s Post-Trial Answering Br. at 16-17.
158
   Winshall v. Viacom Int’l, Inc., 2019 WL 960213, at *15 (Del. Super. Ct. Feb. 25, 2019)
(quoting Nieves v. All Star Title, Inc., 2010 WL 2977966, at *6 (Del. Super. Ct. Jul. 27, 2010)).
    TransCore argues that the voluntary payment doctrine should not be applied here because it
“is better suited to equity.” TransCore’s Post-Trial Answering Br. at 11. But this Court has applied
this doctrine and the Court here finds no reason why it cannot, or should not, be invoked in this
instance. See Intermec, 2021 WL 3620435, at *15 n.140.

                                               -38-
shared by the payee, i.e., in cases of unilateral mistake on the payor’s part, equitable

principles may bar restitution of the sum paid.”159

         The term “voluntary payment” might seem to suggest that the payor must have

enthusiastically paid an excess sum (only to seek recoupment later on). But the

voluntary payment doctrine doesn’t require true voluntariness—if it did then

successfully invoking the doctrine in a business dispute would be close to

impossible. The doctrine, instead, refers to the situation where a business “choose[s]

to act on the basis of inadequate knowledge, assuming the risk that further

information may reveal the choice to have been less than optimal.”160

         So, in addition to the requirement that the mistake be a mistake of fact and not

law, the Court must also assess whether the mistake of fact was actually a mistake,

or whether it was a calculated risk. If it is the latter, the voluntary payment doctrine

will bar the claim.         Here the Court must look at TransCore’s overpayment

counterclaim as it relates to (1) the EM4285 tags, and (2) the ‘632 patent.

         i. The EM4285 Tags

         Concerning the EM4285 tags, Mr. Nefzer explained that the accounting team

made a mistake based on an assumption it took from the project management

159
      Home Ins. Co. v. Honaker, 480 A.2d 652, 654 (Del. 1984) (citations omitted).
160
   RESTATEMENT (THIRD) OF RESTITUTION AND UNJUST ENRICHMENT § 6 cmt. e (2011 Supp. May
2023).

                                               -39-
team.161        According to Mr. Nefzer, the accounting team did not realize that

Intermec’s EM4285 tag was different than its predecessor.162

            Intermec says that “TransCore’s failure to determine whether a product

satisfied the definition of ‘Licensed Product’ because it practiced one or more of

Intermec’s royalty bearing Licensed Patents before it paid royalties was a mistake

of law, not a mistake of fact.”163 For support Intermec cites to CG Technology

Development, LLC v. FanDuel, Inc.164 But that federal patent action doesn’t help

here. It seems Intermec is arguing that patent claim construction is a question of

law. Maybe so. But here the TransCore accounting team did not act under a mistake

concerning the construction of a patent. It acted under a mistake that a certain

current product was identical to a previous product. That is a mistake of fact.

Moreover, it was not a calculated risk, it was simply a communications error between

teams.

            Accordingly, the voluntary payment doctrine would not bar the overpayment

counterclaim concerning the EM4285 tags, if indeed the Court found by a

preponderance of the evidence that TransCore did not, at the time alleged, practice

161
      4/11/23 Trial Tr. at 91-93.
162
      Id.
163
      Intermec’s Post-Trial Answering Br. at 15; see Intermec’s Post-Trial Opening Br. at 31-32.
164
      442 F.Supp.3d 840, 845 (D. Del. 2020).

                                                -40-
any Intermec patents covered by the Agreement.165

            ii. The ‘632 Patent

            Not so, though, for the TransCore products that would be royalty-free if they

no longer practiced Intermec’s ‘632 patent.166 On these products, instead of blaming

miscommunication, Mr. Gravelle blames his other job duties as the reason he didn’t

check the expiration date of the patents.167

            If this supposed expiration occurred and passed without TransCore acting on

it, the overpayments were the product of a TransCore business decision to forego

some more regular periodic review of patent expiration dates and instead check them

on an 18- to 24-month basis.168 This is the type of calculated risk the voluntary

payment doctrine bars.

            According to Mr. Gravelle, the witness TransCore proffered as to patent

165
     Intermec, 2021 WL 3620435, at *15 (“When ‘money [is] paid under a mistake of fact,’ even
if the mistake is unilateral, the errant payment may be excused and recovery possible.” (alteration
in original) (emphasis added) (quoting Honaker, 480 A.2d at 653-54)).
    Intermec’s citation to Home Insurance Company v. Honaker is unhelpful. There, our Supreme
Court held recovery was barred for an insurer’s erroneous payment because compensating the
insurer for the overpayment would, in effect, have forced the appellee “to disgorge a benefit
received from a separate source for entirely different reasons.” 480 A.2d at 655. That
misalignment isn’t present here.
166
    And assuming those products identified in TransCore’s overpayment counterclaim did not
practice any other Agreement-covered Intermec patent—an assumption not easy to make at all
given the paucity of evidence on this issue.
167
   4/6/23 Trial Tr. at 34 (“My involvement in that was really to sort of on as I had time and
availability, which would run every 18 months or over an 18 to two-year period sort of on
average.”).
168
      Id.

                                               -41-
expiration, he had all the information he needed to determine that the ‘632 patent

had expired. The information was not with another person or with another team—

the information was squarely with him. Moreover, the Agreement gave TransCore

the responsibility of tabulating the quarterly reports and making the quarterly royalty

payments. The fact that Mr. Gravelle did not check to see if TransCore was paying

for expired patents reflects a decision about where Mr. Gravelle thought it was best

to deploy his resources and time—it wasn’t checking royalty expiration dates on a

regular basis to avoid overpayment. The risk that TransCore’s failure to check

expiration dates would result in overpayment was a known and calculated risk.

         Accordingly, the voluntary payment doctrine does bar the ‘632 patent

overpayment claim.

         3. TransCore Hasn’t Carried Its Burden to Prove that Intermec
            Breached the Covenant of Good Faith and Fair Dealing by Refusing
            to Reimburse TransCore for Its Purported Overpayment.

         To recover under the implied covenant of good faith and fair dealing, a party

must prove “a specific implied contractual obligation, a breach of that obligation by

the defendant, and resulting damage to the plaintiff.”169

         As stated above, TransCore has successfully shown the Agreement contained

an implied obligation to repay royalty overpayments. Now, TransCore must show

Intermec actually breached that implied covenant.

169
      See Baldwin, 283 A.3d at 1117-18 (citation and internal quotation marks omitted).

                                               -42-
          TransCore says Intermec breached the obligation by failing to repay

overpayments due because: (1) TransCore product EM4285 “did not practice

Intermec patents”; and (2) TransCore paid for expired patents.170 The Court already

found the second breach claim was barred by the voluntary payment doctrine leaving

just the EM4285 breach claim at issue.

          Mr. Nefzer and Mr. Gravelle were the only two witnesses to testify as to

EM4285. And the source of Mr. Nefzer’s belief that EM4285 did not practice any

Intermec patent was Mr. Gravelle.171

          In his affidavit, Mr. Nefzer stated that “[a]fter Intermec filed its Complaint . .

. in 2020, TransCore investigated whether it had made any overpayments of royalties

to Intermec.”172 Mr. Nefzer said the Engineering Department investigated and

determined that EM4285 did not practice any Intermec patents.173 But in making

this determination, “the Engineering Department did not review schematics or

perform a tear down of any product in analyzing this issue because the individuals

involved with this investigation had no need to do so, given their deep and lengthy

familiarity with TransCore products.”174

170
      TransCore’s Post-Trial Opening Br. at 3-4 (citing 4/6/23 Trial Tr. at 40-41).
171
      4/11/23 Trial Tr. at 91-92.
172
      PX-31 (“Nefzer Affidavit”) ¶ 5.
173
      Id. ¶ 7.
174
      Id. ¶ 6.

                                                 -43-
          Absent any documented analysis, TransCore was left with Mr. Gravelle’s

testimony. He testified that the earlier design of EM4285 used Intermec patents but,

he believed, the later product did not.175 This averment was supported by only

Mr. Gravelle’s word—EM4285 did not practice any Intermec patents—with little

substantive support.176

          The Court has no doubt that Mr. Gravelle is a talented and knowledgeable

engineer who truly believes that the latter version of the EM4285 tag no longer

practices any Intermec patent. But left with only his word, the Court must grapple

with whether that is enough. It isn’t. And absent any additional support, the Court

cannot find by a preponderance of the evidence that TransCore has met its burden to

prove the identified EM4285 tags practiced no Agreement-covered Intermec patents.

Accordingly, TransCore has not shown that Intermec breached the implied covenant

to return overpayments on those EM4285 products.177 In short, for lack of credible

175
      4/6/23 Trial Tr. at 21-22.
176
      Id. at 116.
          Q. So you concluded as part of your testimony in this case that the EM4285 did
             not practice any Intermec patents. Right?
          A. Right.
177
    In its answering brief, TransCore says that “[b]y not arguing that TransCore failed to carry its
burden of proof on the counterclaim, Intermec implicitly concedes that there was an overpayment
of $1,940,838 that Intermec never returned.” TransCore’s Post-Trial Answering Br. at 8.
    To TransCore, Intermec’s failure to argue that TransCore didn’t meet its burden to show
Intermec breached an implied covenant and resultant damages constitutes waiver. But it’s
TransCore’s burden that never shifted. Here, TransCore simply failed to show breach. It tried to
make its affirmative case with a single fact witness and no other support. That attempt failed.

                                               -44-
and sufficient evidence of overpayment on the EM4285 products, TransCore’s

counterclaim on such fails.

                                  VI. CONCLUSION

      Intermec and TransCore entered into a cross-license agreement where

TransCore would pay Intermec quarterly royalties for use of its patents. Relevant

here, the parties intended that royalties would be paid on the gross invoice price of

RFID readers including any of the Agreement-identified Intermec-patented

technology. But from the start, it appears, TransCore decided only to calculate

royalties based on the adjusted price it had devised for certain multiprotocol devices.

That resulted in multi-year underpayments to Intermec. Along the way, Intermec

was made aware of TransCore’s adjusted price methodology. Intermec elected to

continue to process the payments calculated via that methodology quarter-after-

quarter with that awareness.

      Eventually, after a change in control, Intermec invoked its audit rights and

hired EY to conduct the audit of TransCore’s quarterly royalty payments. EY—who

was hired by and functionally worked at the direction of Intermec—reported that

TransCore underpaid Intermec. Intermec eventually demanded payment, which

TransCore rejected, thus commencing this action. TransCore, in turn, examined its

books and suggested that it had overpaid Intermec because certain of Intermec’s

patents had either expired or were not being used in TransCore products.

                                         -45-
       Following a six-day bench trial the Court now finds both Intermec’s breach-

of-contract claim and TransCore’s breach of the implied covenant of good faith and

fair dealing counterclaim fail. Intermec acquiesced to TransCore’s methodology.

And TransCore voluntarily paid Intermec for an allegedly expired patent it easily

should have known expired (if it had) and it failed at trial to show it overpaid for a

patent it claimed was no longer being used.

       Accordingly, the Court awards no damages. Neither party is entitled to relief.

The Court therefore leaves the parties where they began in this litigation, but with a

few more answers as to where they may be headed if they continue their relationship.

       While this is likely not the outcome either party hoped for, it is the outcome

each created by its own action—both during the life of the Agreement and during

the trial.

                         VII. VERDICT AND JUDGMENT

   ON INTERMEC’S COMPLAINT:
       - Count I – Breach of Contract: For TransCore

   ON TRANSCORE’S COUNTERCLAIM:
       - Counterclaim III – Breach of the Implied Covenant of Good Faith and Fair
         Dealing: For Intermec

   IT IS SO ORDERED.

                                                    _
                                                    Paul R. Wallace, Judge
Original to Prothonotary
cc: All counsel via File & Serve
                                        -46-