Court Opinion

ID: 3164688
Source: CourtListenerOpinion
Date Created: 2015-12-22 17:01:09.304255+00
Date Added: 2024-06-11T12:08:53.605730
License: Public Domain

NOTE: This disposition is nonprecedential.

  United States Court of Appeals
      for the Federal Circuit
                ______________________

  PERSONALIZED MEDIA COMMUNICATIONS,
                  L.L.C.,
             Plaintiff-Appellee

                           v.

       ROVI GUIDES, INC., TVG-PMC, INC.,
              Defendants-Appellants

  ECHOSTAR CORPORATION, DISH NETWORK
      CORPORATION, FKA ECHOSTAR
     COMMUNICATIONS CORPORATION,
                 Defendants
           ______________________

                      2014-1825
                ______________________

   Appeal from the United States District Court for the
Eastern District of Texas in No. 2:08-cv-00070-RSP,
Magistrate Judge Roy S. Payne.
                ______________________

             Decided: December 22, 2015
               ______________________

   DANIEL J. SHIH, Susman Godfrey LLP, Seattle, WA,
argued for plaintiff-appellee. Also represented by
STEPHEN D. SUSMAN, CHANLER ASHTON LANGHAM, Hou-
2                   PERSONALIZED MEDIA   v. ROVI GUIDES, INC.

ston, TX; ARUN SUBRAMANIAN, New York, NY; STEPHEN
SCHREINER, Goodwin Procter LLP, Washington, DC.

     JOEL LANCE THOLLANDER, McKool Smith, P.C., Aus-
tin, TX, argued for defendants-appellants. Also represent-
ed by RODERICK GEORGE DORMAN, MARC MORRIS, McKool
Smith Hennigan, P.C., Los Angeles, CA; DANIEL LUKE
GEYSER, Stris & Maher LLP, Los Angeles, CA.
                 ______________________

      Before REYNA, MAYER, and CHEN, Circuit Judges.
REYNA, Circuit Judge.
     Plaintiff-Appellee Personalized Media Communica-
tions (“PMC”) is the assignee of U.S. Patent Nos.
4,965,825; 5,109,414; 5,233,654; 5,335,277; and 5,887,243
(collectively, the “Harvey Patents”), which relate to dis-
tributing and controlling media content. Defendant-
Appellants EchoStar Corporation (“EchoStar”) and Rovi
Guides, Inc. (“Rovi”) make and sell interactive television
programming guides for finding, watching, and recording
television shows, and for performing related functionality.
Rovi holds a limited license to use the Harvey Patents in
the “Interactive Program Guide” (“IPG”) field, and EchoS-
tar is its sub-licensee.
    In 2008, PMC sued EchoStar for infringement of the
Harvey Patents. EchoStar asserted a license defense, and
Rovi intervened as EchoStar’s licensor. PMC moved for
summary judgment on EchoStar’s license defense, argu-
ing that the accused technology falls outside the scope of
Rovi’s license. J.A. 2801-22. The district court granted
PMC’s motion because it found that “the contract at issue
is unambiguous and does not cover the accused instru-
mentalities in this case.” J.A. 11. The district court
concluded that because the license’s scope is unambigu-
ous, consideration of extrinsic evidence was unnecessary.
J.A. 9-10.
PERSONALIZED MEDIA   v. ROVI GUIDES, INC.                 3

    The issue on appeal is whether the district court erred
in its determination that Rovi’s license is unambiguous,
such that extrinsic evidence was rightfully excluded. We
hold that the license is ambiguous, and accordingly, we
vacate the district court’s grant of summary judgment and
remand for further consideration in light of the extrinsic
evidence.
                      I. BACKGROUND
    In 2000, PMC and Rovi entered into a license agree-
ment (the “IPG License” or “License”) giving Rovi exclu-
sive rights to use the Harvey Patents in the IPG field.
J.A. 2363. The parties defined the IPG field in Section 1.3
of the agreement, which reads, in relevant part:
   [Sentence One] The “Interactive Program
   Guide” field means applications and services (col-
   lectively “IPG Applications”), the primary purpose
   of which is to provide descriptive information (in-
   cluding without limitation program listings) relat-
   ing to television or radio programming available
   to Consumers, and which may, or through actions
   by a Consumer may, control Consumer equipment
   that enables viewing, listening, recording or stor-
   ing of such television or radio programming, but
   where such IPG applications are not primarily in-
   tended to provide descriptive information relating
   solely to advertising or promotional programming
   available to Consumers.
   [Sentence Two] Such IPG Applications shall in-
   clude, without limitation, tuning, flip, browse, pa-
   rental control, recording, reminders, favorites,
   searching or sorting listings by any category or
   criteria, video on demand, near video on demand,
   pay per view, picture in guide functionality, help,
   user profile setup, generation or use, TV mail, TV
   chat, and TV newsgroups.
4                   PERSONALIZED MEDIA   v. ROVI GUIDES, INC.

    [Sentence Three] The Interactive Program
    Guide field shall also include the ability to access
    from such IPG Applications any other interactive
    or passive application, service or feature; provid-
    ed, however, that the creation, distribution,
    transmission and use by a Consumer of such other
    interactive or passive applications, features, or
    services or the television or radio programming
    accessible through such IPG Applications shall
    not be deemed to be included in the Interactive
    Program Guide field.
J.A. 2360.
    In 2008, PMC sued EchoStar, a Rovi sub-licensee, in
the Eastern District of Texas for infringement of the
Harvey patents. PMC accused EchoStar’s uplink centers
and set top box equipment of infringing by implementing
various functionality, including video-on-demand, pay-
per-view, interactive or premium-content television
applications, transmission, encryption/decryption, video
recording, and program processing. Rovi intervened to
argue that EchoStar’s activity fell within the scope of the
IPG License.
    PMC sought declaratory judgment that PMC’s in-
fringement claims are outside the IPG field, as defined in
the License. EchoStar argued that the accused technolo-
gies are within the IPG field because they are listed in
Sentence Two as example IPG Applications. J.A. 3297-98.
PMC countered that the Applications listed in Sentence
Two are only licensed when their “primary purpose . . . is
to provide descriptive information,” as required by Sen-
tence One, and that the accused technologies did not have
that primary purpose. J.A. 2810-11. Rovi argued that
Sentence Two lists not example IPG Applications, but
“features and functions of or driven by IPG Applications,”
and that such features and functions are licensed regard-
PERSONALIZED MEDIA   v. ROVI GUIDES, INC.                5

less of whether they meet the primary purpose require-
ment. J.A. 4975.
    The district court adopted PMC’s position. It rea-
soned that the language “[s]uch IPG Applications” in
Sentence Two “suggests a definitive link between the first
and second sentences—namely that the list set forth in
the second sentence is a subset of examples of the ‘IPG
Applications’ generally referred to in the first sentence,
which are covered if the primary purpose of the applica-
tion is to provide descriptive information.” J.A. 6. The
court concluded that, “[h]aving found no ambiguity in the
contract, the Court need not review extrinsic evidence.”
J.A. 9.
    On appeal, Rovi again argues that the examples in
Sentence Two are not “IPG Applications,” but merely
functions that are licensed when performed in connection
with a licensed IPG Application (i.e., a guide whose pri-
mary purpose is to provide descriptive information). It
argues that Sentence Two cannot list example IPG Appli-
cations that are licensed only if they meet the primary
purpose requirement because some of the listed items,
such as tuning, cannot have a primary purpose of provid-
ing descriptive information.
    PMC now abandons its position below and agrees with
Rovi that Sentence Two lists functions rather than exam-
ple IPG Applications. But it disagrees with Rovi that
those functions are covered whenever performed in con-
nection with a guide. Instead, PMC argues that the
License covers only invocation of those listed functions by
a licensed guide, but not the performance of those func-
tions or the components that actuate that performance.
In support, it highlights Sentence Three, which states
that the licensed guides may access applications, services,
or features that are not themselves licensed. Accordingly,
PMC concludes that although the “ability to access exter-
nal features may be covered, those features themselves
6                   PERSONALIZED MEDIA   v. ROVI GUIDES, INC.

are not.” PMC Opening Br. 32. PMC contends that to
read the License otherwise would transform a limited
field-of-use license covering only program guides into a
broad license covering virtually every aspect of a modern
television system.
    In light of the disparate interpretations advanced by
the parties and by the district court, Rovi argues that the
License is ambiguous, and that we should therefore
vacate the district court’s judgment and remand for
consideration of the extrinsic evidence. We agree.
                 II. STANDARD OF REVIEW
    Because summary judgment is not an issue unique to
patent law, we apply the law of the regional circuit where
the appeal would otherwise lay, which is here the Fifth
Circuit. Depuy Spine, Inc. v. Medtronic Sofamor Danek,
Inc., 469 F.3d 1005, 1013 (Fed. Cir. 2006). The Fifth
Circuit “reviews a motion for judgment as a matter of law
de novo, applying the same legal standard as did the trial
court.” Ford v. Cimarron Ins. Co., 230 F.3d 828, 830 (5th
Cir. 2000). Summary judgment should be granted “if the
movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a).
    The parties agree that Delaware law governs the in-
terpretation of the IPG License. Under Delaware law, the
interpretation of a contract—including a determination of
whether an ambiguity exists—is reviewed de novo. Paul
v. Deloitte & Touche LLP, 974 A.2d 140, 145 (Del. 2009).
Delaware follows an objective theory of contracts, under
which the contract is construed as it would be understood
by “an objective, reasonable third party.” Estate of Osborn
v. Kemp, 991 A.2d 1153, 1159 (Del. 2010). A contract is
ambiguous if it is subject to two different reasonable
interpretations, Rhone-Poulenc Basic Chems. Co. v. Amer-
ican Motorists Ins. Co., 616 A.2d 1192, 1196 (Del. 1992),
and extrinsic evidence is not admissible on the question of
PERSONALIZED MEDIA   v. ROVI GUIDES, INC.                7

whether an ambiguity exists, O’Brien v. Progressive N.
Ins. Co., 785 A.2d 281, 288-89 (Del. 2001). The fact that
the parties disagree on the correct interpretation of the
contract does not automatically make the contract ambig-
uous. Rhone-Poulenc 616 A.2d at 1196.
                      III. DISCUSSION
    The only issue on appeal is whether the IPG License
is facially ambiguous on the disputed issue, such that
consideration of extrinsic evidence is appropriate. We
conclude that the IPG License contains at least two
ambiguities, which the lower court must resolve in light of
the extrinsic evidence. First, the License is ambiguous
regarding whether Sentence Two lists features of an IPG
Application, as both parties propose on appeal, or “a
subset of examples of the ‘IPG Applications’ generally
referred to in the second sentence,” as the parties argued
below and the district court found. J.A. 6. Second, if
Sentence two lists functions rather than example Applica-
tions, it is unclear whether the License permits a licensed
guide merely to access those functions, as PMC proposes,
or whether the License also covers actual performance of
the accessed functions, as Rovi proposes.
                              A
    The core dispute below was whether the items listed
in Sentence Two are example IPG Applications subject to
the primary purpose requirement of Sentence One. Both
parties agreed that Sentence Two lists example IPG
Applications, but they disagreed on whether each such
Application must also meet the primary purpose require-
ment. The district court’s rationale for concluding that
the listed items are subject to the primary purpose re-
quirement was its understanding that “the list set forth in
the second sentence is a subset of examples of the ‘IPG
Applications’ generally referred to in the first sentence,
which are covered if the primary purpose of the applica-
tion is to provide descriptive information.” J.A. 6.
8                   PERSONALIZED MEDIA   v. ROVI GUIDES, INC.

     Although the district court was correct that the recita-
tion of “IPG Applications” in Sentence Two clearly refers
back to the “IPG Applications” defined in Sentence One, it
was incorrect that Sentence Two therefore necessarily
lists examples of these Applications rather than their
features. Nothing in the structure of the sentence “[s]uch
IPG Applications shall include . . . ,” requires that what
follows are example Applications rather than features of
such Applications. For example, while the sentence “such
sports shall include baseball and football” lists examples
of sports, the sentence “such sports shall include running
and jumping” lists features of sports. The sentence struc-
ture therefore does not settle the ambiguity.
     Moreover, compelling reasons exist to believe the dis-
trict court’s interpretation is not the correct one. Telling-
ly, both parties now disagree with the district court’s
interpretation that Sentence Two lists example IPG
Applications rather than features. Even PMC, who
triumphed on the back of the district court’s interpreta-
tion, now characterizes that same interpretation as “ab-
surd.” PMC Opening Br. 22, n7. Another problem with
interpreting Sentence Two as enumerating example
Applications is that some of the examples are verbs,
which indicate features rather than independent applica-
tions. Yet another issue, as Rovi notes, is that some of the
examples in Sentence Two can never have the primary
purpose of providing descriptive information. For exam-
ple, the primary purpose of “tuning” is to tune, not to
provide descriptive information. It therefore makes little
sense for the License to grant rights to tuning applica-
tions, but only so long as the primary purpose of those
tuning applications is to provide descriptive information.
A basic tenet of contract interpretation is that “[w]e must
interpret the contract in a manner that gives meaning to
all of its provisions and makes sense.” Shell Oil Co. v.
United States, 751 F.3d 1282, 1293 (Fed. Cir. 2014). To
PERSONALIZED MEDIA   v. ROVI GUIDES, INC.                9

read Sentence Two as granting rights to logically impos-
sible applications would not make sense.
     We need not decide here on the correct construction;
we need only conclude that the language of the License is
ambiguous. As both parties have highlighted, the district
court based its judgment on a construction that not only
fails to be unambiguously correct, but is likely incorrect.
This reason is alone sufficient to vacate the court’s order
and remand for consideration of the extrinsic evidence.
                              B
    If Sentence Two lists functions, as both parties now
argue on appeal, the IPG License is still ambiguous on
whether permission to “include” those functions permits
performing those functions whenever “connected to the
use of” a licensed guide (as Rovi argues) or only invoking
those functions by the licensed guide (as PMC argues).
PMC believes that Sentence Two only permits the guide
to invoke the listed functions, but that the performance of
those functions—and the components that actuate that
performance—are not themselves licensed. In contrast,
Rovi believes that Sentence Two not only permits a li-
censed guide to invoke other components to perform the
enumerated functions, but also permits the actual per-
formance of those functions. This distinction was not
raised before the district court.
     The text of the License does not speak unambiguously
to the rather nuanced dispute between the parties.
Sentence Two states that licensed IPG Applications shall
“include” the listed functions. It is reasonable to under-
stand “include” as permitting the guide to perform the
listed functions, and nothing in the term “include” dic-
tates unambiguously that the guide must perform the
function itself without invoking any external components.
Sentence Two is at least ambiguous on this issue.
10                   PERSONALIZED MEDIA   v. ROVI GUIDES, INC.

    To support its interpretation that the guide may only
invoke unlicensed external components, PMC looks to
context in Sentence Three. Sentence Three permits the
guide to “access . . . other interactive or passive applica-
tions,” but specifically excludes the “creation, distribution,
transmission and use by a Consumer of such other inter-
active or passive applications . . . .” But Sentence Three is
not dispositive because it may refer only to standalone
applications used apart from a licensed guide. In addi-
tion, the recited “other interactive or passive applications”
may reasonably be read as referring to features other
than those listed in Sentence Two. Sentence Three there-
fore creates only further ambiguity.
    Based on the text of the License, a reasonable third
party could arrive at two reasonable interpretations on
the disputed issue of invocation and performance. The
License is therefore ambiguous on this second point, and
consideration of extrinsic evidence is therefore appropri-
ate on this second independent ground. Again, we do not
decide which party’s interpretation is correct, only that
the License is ambiguous and that consideration of ex-
trinsic evidence is appropriate. We leave such considera-
tion to the court of first instance.
                      IV. CONCLUSION
    Because the License includes at least two ambiguities,
we vacate the district court’s summary judgment and
remand for reconsideration of the disputed scope in view
of the extrinsic evidence.
                 VACATED AND REMANDED
                           COSTS
     No costs.