Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.

Advanced Micro Devices Inc. v. Altera Corp.

U.S. Court of Appeals, Federal Circuit


April 07, 1999

ADVANCED MICRO DEVICES, INC., PLAINTIFF-APPELLANT,
v.
ALTERA CORPORATION, DEFENDANT/CROSS-APPELLANT.

Before Newman, Schall, and Bryson, Circuit Judges.

The opinion of the court was delivered by: Per Curiam.

NOTE: Pursuant to Fed. Cir. R. 47.6, this Disposition is not citable as precedent. It is a public record. The Disposition will appear in tables published periodically.

Opinion for the court filed PER CURIAM. Dissenting opinion filed by Circuit Judge BRYSON.

Advanced Micro Devices, Inc. (AMD) appeals the judgment of the United States District Court for the Northern District of California *fn1 holding that Altera Corporation has a license under the eight AMD patents asserted against it. Altera has filed a conditional cross-appeal with respect to the court's determination that five of Altera's patents are licensed to AMD. We reverse the judgment that the eight AMD patents at issue are included in the license to Altera, affirm the judgment that the five Altera patents at issue remain licensed to AMD, and remand for appropriate further proceedings.

DISCUSSION

In early 1987 Altera and Monolithic Memories, Inc. (MMI) settled various patent disputes by entering into a cross-licensing agreement ("Agreement" or "Altera-MMI Agreement") concerning certain existing patents and pipeline inventions, as described in Article I:

Section 1. "MMI PATENTS" means U.S. Patent 4,124,899 and any reissues, continuations, reexaminations and divisionals thereof, and all corresponding patents in all countries of the world issued or to be issued, and all other patents of all countries of the world having claims covering programmable or reprogrammable logic devices or parts thereof or a process or processes for making such devices now owned or to be owned by MMI and having a first filing date prior to two years after the date of entry of judgment by the court terminating the present litigation.

Section 2. "ALTERA PATENTS" means patents of all countries of the world issued or to be issued having claims covering programmable or reprogrammable logic devices or parts thereof or a process or processes for making such devices now owned or to be owned by Altera and having a first filing date prior to two years after the date of entry of judgment by the court terminating the present litigation.

Article III '2 provided that a successor to the entire business of either company could succeed to the Agreement if it "agree[d] in writing to become bound" by the Agreement:

Neither party shall assign or otherwise transfer, without the written consent of the other party, this Agreement or any license or right granted hereunder or any interest herein, or grant any sublicense for any purpose, and any such assignment or transfer or sublicense shall be null and void; provided however, that the licenses and rights granted hereunder to either party shall pass to any assignees for the benefit of creditors of such party and to any receiver of its assets, and shall be extendible to any person, corporation, or other entity succeeding to its entire business and good will in LICENSED PRODUCTS of either party if such assignee or successor shall without unreasonable delay agree in writing to become bound by this Agreement.

Article VII '1(d) provided that:

Later in 1987 AMD acquired MMI and its entire business, and in 1988 merged MMI into AMD. AMD's general counsel then wrote to Altera, stating:

Pursuant to Article III, Section 2 of the Agreement, AMD hereby notifies Altera that AMD is succeeding to MMI's rights and obligations under the Agreement and agrees to be bound by the terms of the Agreement.

In 1995 AMD sued Altera asserting infringement of eight AMD patents, none of which had been acquired by AMD in the merger with MMI. Altera raised the defense of license, based on the Altera-MMI Agreement and the general counsel's letter quoted supra. Upon the district court's determination that the phrase "agree in writing to become bound by this Agreement" in the Altera-MMI Agreement was reasonably susceptible to more than one meaning, the issue was presented to a jury. The jury found that AMD, upon agreeing to become bound by the Altera-MMI Agreement, became obligated to license to Altera its own patents on inventions in the field of the Altera-MMI Agreement.

AMD argues that there is no reasonable interpretation of that Agreement that would include AMD patents independently developed by AMD. AMD argues that AMD's written notice of adherence to that Agreement, upon its acquisition of MMI, related only to the patents that were already included in the Agreement between Altera and MMI, as contemplated when that Agreement was entered. Thus AMD argues that when AMD succeeded to the Altera-MMI Agreement, that did not add AMD's own, pre-existing patents to the cross-license. AMD states that no reasonable jury could have found that there was a different contractual intent.

A

Interpretation of the Altera-MMI Agreement is a matter of state contract law. Article X of the Agreement provides that it is to be governed "in all respects" by California law. "A contract must be interpreted so as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful." Cal. Civ. Code '1636. In interpreting a contract, "[t]he language of the contract is to govern its interpretation if the language is clear and explicit, and does not involve an absurdity." Id. '1638. California law further provides that "[w]hen a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible. . . ." Id. '1639.

Under California law, parol or extrinsic evidence is admissible to resolve an ambiguity. Wyda Associates v. Merner, 42 Cal. App. 4th 1702, 1710, 50 Cal. Reptr. 2d 323, 327 (1996). The decision whether to admit parol evidence involves a two-step process. Appleton v. Waessil, 27 Cal. App. 4th 551, 554, 32 Cal. Reptr. 2d 676, 677 (1994). The first step is to review the proffered parol evidence regarding the parties' intent to see if the language of the contract is reasonably susceptible to the interpretation urged by a party. Id. At this stage, the court "provisionally receives (without actually admitting)" the parol evidence. Winet v. Price, 4 Cal. App. 4th 1159, 1165, 6 Cal. Reptr. 2d 555, 557 (1992). If in light of the proffered extrinsic evidence the court concludes that the contract is reasonably susceptible of the interpretation urged, the extrinsic evidence is admitted to aid in the second step of the two-step process -- the actual interpretation of the contract. Id. Significantly, "[t]he test of whether parol evidence is admissible to construe an ambiguity is not whether the language [of the contract] appears to the court to be unambiguous, but whether the evidence presented is relevant to prove a meaning to which the language [of the contract] is reasonably susceptible." Pacific Gas & Elec. Co. v. G.W. Thomas Drayage, etc. Co., 9 Cal. 2d 33, 37, 69 Cal. Reptr. 561, 442 P.2d 641 (1968).

The trial court's determination of whether an ambiguity exists in a contract is a question of law, subject to independent review on appeal. Wyda v. Merner, 42 Cal. App. 4th at 1710, 50 Cal. Reptr. 2d at 327. The trial court's resolution of ambiguity also is a question of law if no parol evidence is admitted or if the parol evidence is not in conflict. Id. When the parol evidence is in conflict, however, the jury's resolution of that conflict presents a question of fact and must be upheld if supported by substantial evidence. Id. Finally, "[w]hen two equally plausible interpretations of the language of a contract may be made . . . parol evidence is admissible to aid in interpreting the Agreement, thereby presenting a question of fact which precludes summary judgment if the evidence is contradictory." Walter E. Heller Western, Inc. v. Tecrim Corp., 196 Cal. App. 3d 149, 158, 241 Cal. Reptr. 677 (1987).

The parties had cross-moved for summary judgment on the issue of Altera's license defense. In that setting, AMD argued that the language of the Altera-MMI Agreement did not support the Conclusion that, by agreeing to be bound by the Agreement, AMD automatically licensed to Altera its own patents in the inventive area involved. For its part, Altera claimed that the "shall be extendible" language of Article III '2 of the Agreement meant that a successor, such as AMD, had the option of stepping into the shoes of its predecessor under the Agreement and thereby adding its own patents to the Agreement. Id.

The district court, applying the California rules for determining whether parol evidence was admissible, stated:

[T]he court finds the language of the Agreement reasonably susceptible to both the interpretation of AMD and the interpretation of Altera. Therefore, the court believes that evidence concerning the negotiations of the parties as well as the circumstances surrounding the transaction is admissible to allow the fact finder to ascertain the meaning of the words used, i.e. what was the expressed intent of the parties. The term "extendible to" may objectively mean, as Altera contends, that the Agreement could be "enlarged " to encompass the successor's relevant patents. On the other hand, the term "extendible to" may mean, as AMD contends, that only the rights and obligations under the original MMI and Altera patents were "transferred" to AMD.

The jury heard parol evidence of both sides concerning their contractual intent, and found that, by agreeing to be bound by the Altera-MMI Agreement, AMD granted Altera licenses in AMD's pre-existing patents in the area of invention covered by the Agreement. AMD contends that the district court "should have ruled as a matter of law that Altera was not licensed to AMD's patents, and should not have received any extrinsic evidence to interpret Article III, '2."

We agree that the district court erred as a matter of law in admitting the extrinsic evidence that Altera put forward. Article III, '2 is not ambiguous, and is reasonably susceptible to only one interpretation. When Altera and MMI cross-licensed their existing patents and pipeline inventions, that defined the subject matter of the contract; the scope of the Altera-MMI exchange of consideration was established when the Agreement was made.

The contract also stated the procedure to be followed and the intention of the parties upon any future merger; the purpose was plainly not to encumber any future merger, but to accommodate it. A critical part of Article III '2 is the text "provided, however, that the licenses and rights granted hereunder to either party . . . shall be extendible. . . ." These licenses and rights refer to the "MMI PATENTS" and "ALTERA PATENTS" as defined in Article I ''1 and 2. Thus only licenses to the "MMI PATENTS" and "ALTERA PATENTS" as defined are extendible under Article III '2. The definition of "MMI PATENTS" in Article I '1, can not be read to include AMD's patents, for AMD's patents were never owned by MMI, as required by the definition of "MMI PATENTS" (patents "now owned or to be owned by MMI"). Article VII '1(d) confirmed that this definition was so limited.

Since the language of Article III '2 is not reasonably susceptible to the interpretation urged by Altera, parol evidence was not properly admitted to change its terms. Under those terms, which are not ambiguous, the existing patents of a successor to MMI did not become subject to the Agreement if the successor did nothing more than agree to become bound by the Agreement. Thus, by accepting the terms of the Agreement and by agreeing to be bound by those terms, AMD did not agree to subject its existing patents to the Agreement. AMD only agreed to the continuing licensing of the "MMI PATENTS," as defined in the Agreement. AMD's simple letter of adherence, quoted above, can not reasonably be read as adding to the completed contract AMD's separately developed inventions and patents.

The judgment that these eight AMD patents are licensed to Altera must be reversed.

B.

Altera argued that if AMD's patents are not deemed licensed to Altera under the Altera-MMI Agreement, Altera can withdraw the licenses it granted to MMI under that Agreement and to which AMD succeeded. Thus Altera filed a conditional counterclaim for infringement by AMD of certain of the Altera patents that were included in the Agreement in 1987.

Altera's view was correctly rejected by the district court. The original cross-license between Altera and MMI relates to certain patents and pipeline inventions that each party then owned. That cross-license remains in effect as to its subject matter, and AMD appropriately acquired MMI's rights under that Agreement, in accordance with its terms.

C.

The issue of the meaning of "first filing date" in Article I '1 of the Altera-MMI Agreement is rendered moot by our holding that Altera acquired no rights under that Agreement to AMD's separate patents and inventions.

Costs No costs.


Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.