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Minebea Co., Ltd. v. Papst

August 17, 2006

MINEBEA CO., LTD., ET AL., PLAINTIFFS,
v.
GEORG PAPST, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Paul L. Friedman United States District Judge

OPINION, FINDINGS OF FACT AND CONCLUSIONS OF LAW

PART ONE: BACKGROUND AND FACTUAL FINDINGS

I. BACKGROUND

This is a complex patent case involving parties who have either been doing business together or litigating against each other for the last sixteen years. The patent rights and technology at issue relate generally to computer hard disk drives ("HDDs") and hard disk drive motors. In 1990, the parties entered into a joint venture to engage in the design, manufacture, and sale of improved hard disk drive motors, and thereby to compete effectively in the highly competitive market for such components. The joint venture terminated in 1993. In creating the joint venture, dissolving it, and attempting to resolve various conflicts that arose during and after the joint venture, the parties entered into numerous written agreements, the proper interpretation of which is central to this lawsuit.

A. The Joint Venture

Plaintiff Minebea Co., Ltd. ("Minebea") is a Japanese concern that supplies hard disk drive spindle motors to hard disk drive manufacturers.*fn1 These customers incorporate Minebea's spindle motors into hard disk drives which they sell to computer manufacturers, the final end product being computers.*fn2

Hard disk drives store information on rigid magnetic storage disks inside computers. According to the commands of the computer user, information is written to and retrieved from discrete locations on the storage disks by a read/write head that accesses information on the disk, while a spindle motor spins the disk in a precise fashion to move the relevant storage locations into position near the read/write head.

The patents and patent rights at issue in this case belong to defendant Papst Licensing GmbH ("Papst Licensing"), a German company holding a substantial portfolio of patents relating to hard disk drives and hard disk drive spindle motors. In general, the patents in Papst Licensing's portfolio were developed by Papst Motoren GmbH & Co. ("Papst Motoren") and were assigned to Papst Licensing in 1993. Papst Motoren is not a party to this litigation.

Minebea and Papst Motoren combined forces in 1990 to form a joint venture, Papst Minebea Deutsche Motoren ("PMDM" or "Joint Venture"), for the design, manufacture and sale of HDD motors. Mr. Georg Papst, whose father had founded Papst Motoren in1952, was appointed the Managing Director of the Joint Venture. Papst Motoren granted licenses to Minebea and, through Minebea, to the Joint Venture, to those Papst patents "required and necessary" for the Joint Venture's and (later) Minebea's participation in the HDD motor business. The Joint Venture sold its motors to hard disk drive manufacturers who incorporated those motors into finished hard disk drives.

In 1992, Papst Motoren was sold to a company not involved in this litigation, Electrobau Mulfingen GmbH & Co. ("EBM"). On January 1, 1993, Georg Papst founded Papst Licensing, which purchased Papst Motoren's entire portfolio of patents in May 1993. Papst Licensing does not manufacture motors, but owns and licenses patents concerning small electric motors and devices in which electric motors are used. In May of 1993, the joint operation of the Joint Venture was terminated and Papst Motoren sold its share of the Joint Venture to Minebea. 7/28/05 (p.m.) Trial Tr. at 25:22-27:4 (G. Papst testim.).*fn3 On June 19, 1995, Georg Papst, Papst Licensing and Minebea entered into a Settlement Agreement to resolve disputes between them arising from the Joint Venture and its termination. See PTX 771, Settlement Agreement (June 19, 1995) ("1995 Settlement Agreement").

One of the central questions in this litigation is what rights in Papst's patents Minebea acquired for itself and, importantly, for its customers during the Joint Venture, and what rights it had when the Joint Venture was terminated in 1993, and after the parties entered into the Settlement Agreement in 1995.

B. Minebea's Claims Against Papst

In 1997, plaintiffs Minebea Co., Ltd., Precision Motors Deutsche Minebea, GmbH, and Nippon Miniature Bearing Corporation (collectively "Minebea") filed their complaint against Georg Papst, Papst Licensing GmbH, and Papst Licensing Verwaltungsgesellschaft Mit Beschrankter Haftung (collectively "the Papst defendants") in this Court. On October 12, 1999, the case was consolidated with other similar actions and transferred by the Multidistrict Litigation Panel ("MDL") to Judge Morey Sear of the United States District Court for the Eastern District of Louisiana. See In re Papst Licensing, GmbH, Patent Litigation, MDL No. 99-1298 (E.D. La. 1999); Minebea Co. Ltd. v. Georg Papst, Civil No. 99-3118 (E.D. La. 1999).*fn4

Minebea's Second Amended and Supplemental Complaint ("Second Amended Complaint"), filed on February 22, 2000, in the Eastern District of Louisiana, included sixteen counts: (I) Declaratory Judgment of Exhaustion of Patent Rights; (II) Fraudulent Concealment; (III) Negligent Misrepresentation; (IV) Breach of Fiduciary Duty; (V) Conversion, Unjust Enrichment and for an Accounting; (VI) Contract Reformation; (VII) Violation of Section 43(A) of the Lanham Act; (X) Declaratory Judgment of License Rights; (XI) Declaratory Judgment of Invalidity and Non-Infringement of the '010 Patent, '665 Patent, '373 Patent, and '406 Patent; (XII) Declaratory Judgment of Invalidity and Non Infringement; (XIII) Declaratory Judgment of Equitable Estoppel; (XIV) Declaratory Judgment of Patent Misuse; (XV) Sherman Act, Section 2 (15 U.S.C. § 2); (XVI) Sherman Act, Section 2 (15 U.S.C. § 2); (XVII) Sherman Act, Section 1 (15 U.S.C. § 1); and (XVIII) Inequitable Conduct.*fn5

Nine of the sixteen counts in the MDL litigation were remanded to this Court on April 19, 2002. See In re Papst Licensing, GmbH, Patent Litigation, MDL No. 99-1298, Separation of Claims and Remand Order (E.D. La. Apr. 19, 2002). The remanded Counts were: (I) Declaratory Judgment of Exhaustion of Patent Rights; (II) Fraudulent Concealment; (III) Negligent Misrepresentation; (IV) Breach of Fiduciary Duty; (V) Conversion, Unjust Enrichment and for an Accounting; (VI) Contract Reformation; (X) Declaratory Judgment of License Rights; (XIII) Declaratory Judgment of Equitable Estoppel; and (XIV) Declaratory Judgment of Patent Misuse. The remaining counts, still pending in the United States District Court for the Eastern District of Louisiana, have been stayed pending this Court's resolution of the claims before it.

After extensive and intensive discovery in the United States and abroad, managed for the Court by Special Master David Plant, and many disputes that had to be resolved by the Special Master or by the Court, the remanded counts were all scheduled for trial during the summer of 2005. On June 27, 2005, nearly the eve of trial and shortly after this Court issued its Opinion on patent exhaustion on June 24, 2005, see Minebea Co. v. Papst, 374 F. Supp. 2d 202 (D.D.C. 2005), denying the parties' cross-motions for summary judgment on the Patent Exhaustion claim (Count I), Minebea withdrew with prejudice its claims for Fraudulent Concealment (Count II), Negligent Misrepresentation (Count III), Breach of Fiduciary Duty (Count IV), and Contract Reformation (Count VI). Finally, after a lengthy jury selection process and the actual selection of a jury, Papst withdrew its jury demand on June 28, 2005. The trial thus proceeded as a bench trial, which began on July 5, 2005.

The central question raised by several of Minebea's claims (there are others) is whether Papst, which holds patents on hard disk drives in addition to hard disk drive motors, may enforce those "drive patents," not against Minebea but against companies that purchase spindle motors from Minebea and integrate those motors into hard disk drives that infringe Papst's patents. Minebea claims in Count I that under the terms of the Joint Venture agreement and all subsequent agreements (including the 1995 Settlement Agreement), Minebea was fully authorized by Papst to design, manufacture and sell HDD motors under all Papst patents (including the so-called drive patents) without restriction and that Minebea's authorized and unrestricted sale of HDD motors occurs under the Papst U.S. patents.*fn6 Accordingly, Minebea contends, the Papst U.S. patents are exhausted, and Papst is precluded from enforcing its patents against (and from obtaining or attempting to obtain a second royalty from) Minebea customers who purchase fully authorized HDD motors from Minebea and incorporate them into hard disk drives.

Minebea contends in Count V that pursuant to the terms of the 1990 Agreement for the Sale of Intangible Assets, any patents applied for during the period of the Joint Venture that related to HDD motors were to be owned by the Joint Venture, and that Georg Papst as Managing Director of the Joint Venture had a duty to ensure that all such patents were properly assigned to the Joint Venture. Minebea argues that Papst failed to comply with this contractual obligation and converted to its own use valuable patent rights that properly belonged to the Joint Venture. Accordingly, Minebea maintains, Papst's registration in its own name of U.S. Patents relating to HDD motors, based on inventions arising during the Joint Venture and corresponding to German patents registered (improperly, Minebea argues) to Papst, gives rise to various claims under German law, which Minebea characterizes as "the German equivalent to conversion and unjust enrichment." Minebea's Summary of its Conversion Claims (Count V) (July 1, 2005) (Docket No. 1204) at 2.

In Count X, Minebea claims that by suing and threatening to sue Minebea's customers for their use of Minebea-supplied HDD motors in hard disk drives, Papst breached the 1995 Settlement Agreement between the parties and the covenant of good faith and fair dealing that is implied thereunder.

Minebea contends in Count XIII of its Second Amended Complaint that Papst's actions misled Minebea and its customers to believe that Papst would not enforce its so-called drive patents against Minebea's customers for their use of Minebea-supplied HDD motors in hard disk drives. See 2d Am. Compl. ¶ 217. Minebea claims that because it and its customers detrimentally relied on Papst's misleading actions, Papst should be equitably estopped from enforcing its drive patent rights against Minebea's customers. See id. ¶¶ 218-20. Alternatively, Minebea claims under Count XIII that Papst is legally estopped from enforcing its drive patents against Minebea's customers for their use of Minebea-supplied HDD motors in hard disk drives. Minebea argues that because Papst, in the 1995 Settlement Agreement, licensed or assigned Minebea the right to sell HDD motors for use in hard disk drives, and because Papst received consideration for that right, it cannot now take steps to derogate from the right it has granted. See Minebea Br. at 18-21; Minebea's Prop. Concl. of Law ¶¶ 5.1, 5.6.*fn7 Under Minebea's theory of legal estoppel, Papst has granted Minebea's customers an implied sublicense which bars Papst from suing them for infringement of the drive patents. See Minebea Br. at 21; Minebea's Prop. Concl. of Law ¶ 5.6.

Finally, Minebea claims in Count XIV, its patent misuse claim, that under the 1995 Settlement Agreement and prior agreements, Minebea paid Papst a first royalty in order to design, manufacture and sell without restriction HDD motors under all Papst patents (including the drive patents). Minebea's customers also paid Papst a royalty under Papst's drive patents in order to use Minebea-supplied HDD motors in hard disk drives. Minebea claims that by collecting, or attempting to collect, a second royalty from Minebea's customers for their use of Minebea-supplied HDD motors in hard disk drives, Papst misued its drive patents, rendering them unenforceable. It also claims that Papst misused its patents by engaging in illegal, anticompetitive package licensing.

II. THE TRIAL

At trial, which began on July 5, 2005 and ended on August 5, 2005, each side was allotted 60 in-court hours to present its case, and the Court sat five days a week from 9:00 a.m. until (usually) 5:30 p.m. Eighteenwitnesses were called to present live testimony during the trial. Of these 18 live witnesses, seven were expert witnesses. Each expert witness's direct testimony was submitted in writing in advance, either through written expert statements and rebuttal reports and/or through written testimony. The testimony of more than 20 witnesses was presented through deposition testimony, including some Hague Convention examination transcripts.*fn8 Only five of these witnesses also testified in person at trial. In total, the Court considered the testimony (including trial and/or deposition testimony) of some three dozen witnesses, ten of whom were experts.*fn9 In addition to the testimony of the witnesses, the Court considered hundreds of exhibits, mostly patents, agreements, letters, memoranda and other correspondence. Minebea also offered in evidence 12 physical exhibits, and Papst offered 10 physical exhibits.

A. Minebea's Witnesses

1. Minebea's Testifying Fact Witnesses

Rex Bergsma was an employee of NMB USA, a United States subsidiary of Minebea, from roughly April of 1991 through July of 2003. 7/8/05 (p.m.) Trial Tr. at 23-24, 15:2-3, 15:15-16 (Bergsma testim.). He was a sales engineer for ball bearings and ball bearing value added products when he was hired, then was promoted to division manager for NMB's spindle motor business. Id. at 16:16-20. In the Fall of 1994, Mr. Bergsma was promoted to product manager, overseeing all of NMB's motor business in the United States. Id. at 16:21-22. Two years later, in Fall of 1996, he became director, overseeing all of NMB's products and a group of managers running those business units. Id. at 16:23-25. He became director of business development in 1999 or 2000. Id. at 17:1-5. Mr. Bergsma testified about the role of NMB in selling and facilitating the sale of HDD spindle motors in the United States.

Koichi Dosho began working for Minebea in 1973. He was employed by PMDM from 1990 to 1995. See 3/2/04 Dosho Dep. Tr. at 95:13-15; 7/7/05 (p.m.) Trial Tr. at 66:24-68:4 (Dosho testim.). Mr. Dosho is the managing director in charge of worldwide sales for Minebea and is a member of the board of directors of Minebea. He testified about worldwide sales for Minebea's HDD motors.

Kenji Fukunaga is an engineer who has worked for Minebea for 29 years. 7/14/05 (p.m.) Trial Tr. at 7:22 (Fukunaga testim.). From 1991 until 1996 or 1997, he was a manager for spindle motor production for Minebea in Thailand. Id. at 8:19-25. From 1996 or 1997 until 2005, he was General Manager of Minebea's spindle motor department, and was responsible for manufacturing and production, including the technological aspects. Id. at 8:15-18. In July 2005, he became the Deputy Division Manager of the DC brush motor department. Id. at 8:1-6.

Douglas Hymas was associate general counsel of Minebea from the Fall of 1993 through June of 1995. 8/1/05 (p.m.) Trial Tr. at 24:22-25:5 (Hymas testim.). During the time Mr. Hymas held this position at Minebea, he reported to Minebea's General Counsel, Takuya Naka. Id. at 25:10-17. Mr. Hymas is an attorney licensed to practice law in California. Id. at 24:3-6. He prepared the initial draft of the 1995 Settlement Agreement and was responsible for the negotiation and drafting of the Agreement on behalf of the Minebea side. Id. at 25:18-22, 32:25-33:6.

Yoshihisa Kainuma is an employee and member of the board of directors of Minebea, currently holding the title of Senior Managing Executive Officer. 7/8/05 (a.m.) Trial Tr. at 48:21-49:6 (Kainuma testim.). He started working full-time for Minebea around 1989, briefly in the legal department before joining management. Id. at 53:19-23. Mr. Kainuma holds a law degree from Keio University in Tokyo and an L.L.M. from Harvard Law School. He is licensed to practice law in Japan and New York. Id. at 53:10-18. Mr. Kainuma negotiated agreements in connection with the Joint Venture between Minebea and Papst in 1990.

Oswald Kuwert retired from PMDM on April 30, 2005. He had been employed there for 14 years. See 7/5/05 (p.m.) Trial Tr. at 15:11-14 (Kuwert testim.). Mr. Kuwert succeeded Georg Papst as Managing Director of PMDM, and held that position for almost 12 years before his retirement. See id. at 15:18-24.

Ryusuke Mizukami, probably the key fact witness for Minebea with respect to the Joint Venture, is currently a director and Senior Managing Director of Minebea. He has worked for Minebea for 38 years. For the past 23 years he has been the Senior Managing Executive Officer in charge of corporate planning and production. He is one of the seven inside directors of Minebea. 7/6/05 (a.m.) Trial Tr. at 54:18-55:16 (Mizukami testim.). He was involved in the formation of the joint venture between Minebea and Papst, Minebea's purchase of Papst Motoren's interest in the joint venture, and the 1995 Settlement Agreement.

Junichi Taino began working for Minebea in 1985, handling sales of ball bearings, cooling fan motors, step motors, and other components. 7/11/05 (a.m.) Trial Tr. at 41:3-10 (Taino testim.). He transferred to Minebea-Thailand in 1987 to become Sales Coordinator, where his duties included organizing visits to factories for overseas customers. Id. at 41:19-24. In 1989, he became Sales Coordinator for Minebea-Singapore. Id. at 42:3-16. In 1990, he began working as Sales Coordinator for NMB Technologies in the United States. Id. at 42:20-43:23. His duties for NMB included supporting sales activities between customers in the United States and sales people in regard to cooling fan motors and keyboards. Id. at 43:20-23. In 1994, he became responsible for HDD spindle motors. Id. at 44:1-8. In 1997 he became Assistant Product Manager at NMB, where his duties included supporting HDD sales activities and coordinating between sales members and the HDD customers and overseas operations. Id. at 44:14-23. In 2002, he became Manager of the Storage Components Division. Mr. Taino testified for several days about the role of NMB in selling and facilitating the sale of HDD spindle motors and about certain specific Minebea motor projects.

In addition to these witnesses, Minebea called Jerold Schnayer and Richard Smith as adverse witnesses.

2. Minebea's Expert Witnesses

Martin J. Adelman is Minebea's patent law expert. Professor Adelman teaches at the George Washington University Law School. Adelman Expert Report (Apr. 4, 2005) ¶ 2. He previously taught patent law for 24 years at Wayne State University Law School. Id. Before that, Professor Adelman practiced patent law for many years and was a partner at Barnard, McGlynn & Reising in Michigan. Id. Professor Adelman is the sole author of a continuously updated, eight-volume treatise on patent law. Id. ¶ 3.

Dr. Christopher Ann is a German lawyer who holds a German doctorate degree in law and an LL.M. from Duke University School of Law. Dr. Ann is a tenured law professor at Munich Technical University. He provided an expert opinion on German law issues, primarily relevant to Minebea's conversion and unjust enrichment claim.

Warren L. Dalziel is Minebea's technical expert on hard disk drives. Mr. Dalziel has a master's degree in Mechanical Engineering and 42 years of experience as an electromechanical design engineer, including 18 years in the computer peripheral industry and 24 years as an independent contractor-consultant. Written Direct Testimony of Warren L. Dalziel (July 10, 2005) (Docket No. 1300) ¶ 2. He has worked on designing major mechanical and electromechanical components of disk drives including hubs, spindles, disk clamping components, read/write head arms and actuators, base-castings, top covers, seals and filters. Id.

Thomas E. Gardner is one of Minebea's damages experts. He is an expert in the hard disk drive industry, including engineering, marketing and operations. Gardner Expert Report (Apr. 4, 2005) ¶ 1. Mr. Gardner is a principal at Regent Pacific Management Corporation in California. Id. at Exhibit 1. He holds master's degrees in Management and Engineering Science and a Bachelors degree in Electronics Engineering. Id. He has extensive experience with the technical and business aspects of the computer industry. Id.

Jerry A. Hausman is Minebea's economics/damages expert. He is a professor of economics at the Massachusetts Institute of Technology. Written Direct Testimony of Jerry A. Hausman (July 6, 2005) (Docket No. 1269) ¶ 1. He received a Ph.D. in economics from Oxford University. Id. His academic specialties include econometrics, the application of statistical methods to economic data, and applied microeconomics, the study of behavior by firms and by consumers. Id. Professor Hausman has published over 130 academic research papers in leading economic journals. Id. at ¶ 2.

James E. Malackowski is one of Minebea's damages experts. He is President and CEO of ICMB Ocean Tomo, an Intellectual Capital Bank providing expert services, among other things. Malackowski Expert Report (Apr. 4, 2005) at 4. Prior to forming Ocean Tomo, he spent two years at a private equity firm and 15 years as a management consultant and forensic accountant focused on intangible assets. Id. Mr. Malackowski holds a Bachelors degree in Accountancy and is a Certified Public Accountant in Illinois. Id. He has written many articles and given numerous presentations related to his profession. Id.

B. Papst's Witnesses

1. Papst's Testifying Fact Witnesses

Georg Papst is the President of Papst Licensing and a named defendant in this case. See 7/29/05 (p.m.) Trial Tr. at 33:11-13 (G. Papst testim.). He is one of the sons of Herman Papst, the founder of Papst Motoren. See 7/27/05 (p.m.) Trial Tr. at 6:6-24 (G. Papst testim.). Georg Papst began his employment with Papst Motoren in 1958, and became Papst Motoren's technical manager in 1965. See id. at 7:7-24. He was the Managing Director of PMDM, the Joint Venture between Minebea and Papst, until August 5, 1993, three months after the May 1993 termination of the Joint Venture. See 5/8/03 G. Papst Dep. Tr. at 383:12-15, 385:19-386:9. Mr. Papst testified about the events and agreements relevant to the Joint Venture, its termination in 1993, the formation of Papst Licensing, and the negotiation and execution of the 1995 Settlement Agreement with Minebea.

Richard H. Smith, a partner at Finnegan, Henderson, Farabow, Garrett & Dunner, is a patent attorney who started representing Papst Motoren around 1989. See 7/28/05 (a.m.) Trial Tr. at 75:23-76:76 (Smith testim.). Mr. Smith has been involved in representing Papst Licensing since its creation in 1993. See id. at 76:5-7.

Jerold B. Schnayer, a partner in the law firm of Welsh & Katz, is a patent attorney who represented Papst Motoren beginning in the early 1990s. See 7/21/05 (p.m.) Trial Tr. at 6:13-7:8 (Schnayer testim.). At first, he represented Papst Motoren only in the negotiation of certain contracts and with respect to patent prosecution issues. See id. at 7:7-11. He was not involved in negotiating the Joint Venture Agreement on behalf of Papst. See id. at 72:9-13. He was involved in advising with respect to the overall business relationship between Papst and Minebea beginning in late 1993, and in the disputes that developed between them. He has been closely involved in the present litigation by representing Papst at depositions and many appearances in Court. See 7/21/05 (p.m.) Trial Tr. at 15:16-20:1 (Schnayer testim.).

2. Papst's Expert Witnesses

Bruce G. Dubinsky is Papst's damages expert. Mr. Dubinsky is a principal at the public accounting firm of Klausner, Dubinsky & Associates. 8/4/05 (a.m.) Trial Tr. at 43:13-14 (Dubinsky testim.). He holds a bachelor's degree in accounting and a master's degree in taxation. Id. at 43:17-25. Mr. Dubinsky has over 22 years of practical experience in forensic accounting and fraud examinations, commercial damage analyses, income tax and accounting matters, business valuations and investment matters. Dubinsky Rebuttal Report (Apr. 25, 2005) at 33.

George H. Gerstman is Papst's patent law expert. He is a partner at the law firm of Seyfarth Shaw LLP in Chicago. Gerstman Expert Report (Mar. 16, 2005) ¶ 1. Mr. Gerstman is a former United States Patent Examiner and has over 40 years of experience as an attorney in the field of patent law. Id. ¶ 2.

Andreas Junius is Papst's German law expert. Dr. Junius has an LL.M. from Columbia University School of Law and a doctor of jurisprudence (J.S.D.) equivalent from a German university. He is admitted to practice law in both New York and Germany and is currently an attorney with Clifford Chance in New York. His opinions were considered by the Court primarily in connection with Count V, conversion and unjust enrichment.

Chera M. Sayers is Papst's economics expert. Dr. Sayers holds a doctoral degree in economics and works for the firm of Klausner Dubinsky & Associates. 8/3/05 (p.m.) Trial Tr. at 33:10-18 (Sayers testim.). She testified about the relative market positions of Minebea and Nippon Densan ("Nidec"), the market leader in the HDD spindle motor market. See id. at 35:19-39:11.

C. Hague Convention Witnesses and Deposition Testimony*fn10

Takao Anzai began working at Minebea in 1977 and is currently employed there. 5/13/05 Anzai De Bene Esse Dep. Tr. at 9:4-7, 9:23-10:1; 5/16/05 Anzai De Bene Esse Dep. Tr. at 83:20-22. He worked as an engineer, engineering HDD spindle motors from 1980 through 1995. He was stationed at PMDM beginning in December of 1990, where his title was Senior Project Manager. 5/13/05 Anzai De Bene Esse Dep. Tr. at 10:12-14, 11:13-15, 14:7-15:2, 15:25-16:3. At his deposition, Mr. Anzai discussed the formation of the joint venture and conversations he had with Georg Papst and Georg Papst's brother (and Papst executive) Hans Dieter Papst, although his recollection of specific events and conversations was vague and limited.

Heinrich Cap worked for Papst Motoren until leaving the company on December 31, 1990. 2/23/05 Cap Hague Tr. at 1. He was department head of the cassette drive department and then head of the motor construction department, which he led for four years. Id. He invented one or more of the inventions underlying a number of the patents at issue.

Dieter Elsasser is a precision engineer and was team leader of the design division of Papst Motoren. 2/15/05 Elsasser Hague Tr. at 1. Mr. Elsasser was employed by Papst Motoren until September 30, 1990, and began working for EBM Papst in 1999. Id. He invented one or more of the inventions underlying a number of the patents at issue here.

Michael Hermann worked in the patent department of Papst Motoren from mid-1989 until March 31, 1993, doing general patent-related administrative work including preparing patent applications, cooperating with outside patent attorneys, testing outside products for patent infringement and patent research. 2/14/05 Hermann Hague Tr. at 2-3. He occasionally advises Papst Licensing on patent issues, especially with regard to patent matters pending before German courts. Id. at 3. He invented one or more of the inventions underlying a number of the patents at issue here.

Tobias Kessler began working for Papst Licensing in September or October of 1998. 4/10/03 Kessler Dep. Tr. at 37:6-9. He is in-house general counsel for Papst Licensing. Id. at 22:2-3. He also is Georg Papst's personal lawyer.

Ulrich Koletzki is a certified engineer specializing in mechanical engineering. 12/16/04 Koletzki Hague Tr. at 1. He was President of Sales and Marketing for the joint venture. Prior to working for PMDM, he worked for Papst Motoren as technical support for fans. Id. He has been working in HDD motors since the early 1980s when at Papst Motoren. Id. He invented one or more of the inventions underlying a number of the patents at issue.

Klaus Lenz has a master's degree in engineering. 2/11/05 Lenz Hague Tr. at 2. He worked in the Papst Motoren patent department for Hans Dieter Papst. Id. at 3. His work focused on research of foreign patents, evaluation of foreign patents, the preparation of patent rights, and the maintenance of patents. Id.

Dr. Rolf Müller was an engineer working at Papst Motoren until he left in 1987. 4/27/05 Müller Hague Tr. at 2-3. Thereafter, he continued to do some freelance work for Papst Motoren and then for Papst Licensing. Id. He invented one or more of the inventions underlying a number of the patents at issue.

Takuya Naka is Minebea's General Counsel. He began working for Minebea in late 1990. 7/6/05 (p.m.) Trial Tr. at 21:7-10 (Mizukami testim.). He holds a Master's of law degree from Columbia University School of Law and is licensed to practice law in both California and New York. 4/22/03 Naka Dep. Tr. at 6:4-24. He was involved in the purchase of Papst's interest in the joint venture in 1993.

Hans Dieter Papst is Georg Papst's brother. He was head of the Papst Motoren patent department from 1968 through the end of 1992. 3/15/05 H.D. Papst Dep. Tr. at 21:10-19. He worked full-time as head of the patent department for Papst Licensing from the time the company was created in 1993 until 1995 or 1996. Id. at 14:24-15:11.

Manfred Reuter works for Papst Licensing. 2/2/05 Reuter Dep. Tr. at 10:20-22. His job responsibilities involve disassembling hard disk drives and PC peripherals, to look for certain characteristics, including possibly infringing characteristics. Id. at 41:4, 8-9, 14-17; 42:1-4.

Jeffrey Salmon is a patent attorney and a partner at Welsh & Katz, where he has been since 1995. 2/18/05 Salmon Dep Tr. at 7:19-8:5. Mr. Salmon's representation of Papst Licensing has included: patent prosecution, assisting in licensing efforts and involvement in litigation. Id. at 9:16-22. He has prosecuted applications for Papst Licensing that concern various aspects and applications of brushless DC motor technology. Id. at 12:1-4.

Dr. Gerhard Schätzle was one of the three directors of Papst Motoren in 1990. 2/21/05 Schätzle Hague Tr. at 3. He was responsible for controlling, human resources, purchasing, and information technology. Id. At that time, the other two directors were two of the Papst brothers, Georg, responsible for product development and motor sales, and Gunter, responsible for the sale of ventilators and for public relations. Id. Dr. Schätzle worked there at the time of the sale of Papst Motoren and for a period of time thereafter.

Bernhard Schuh is a graduate engineer whose last position at Papst Motoren was as section head of DC Systems. 4/19/05 Schuh Hague Tr. at 4. He began in the Papst Motoren sales department in 1972 as a sales engineer and he advanced to team leader for the sale of motors within the United States and Europe. Id. He worked on various ideas while at Papst Motoren, including having an operating system without belts and sealing relating to the hard disk drive and motor. Id. at 5. He invented one or more of the inventions underlying a number of the patents at issue.

Johann Von der Heide is a professional engineer who worked for Papst Motoren from 1971 through 1991. 4/25/05 Von der Heide Hague Tr. at 3-4. He was director of motor development, which included motors for hard disk drives. Id. at 4. He worked only on technical issues. Id. Papst Motoren filed patent applications on the improvements he made to motors for hard disk drives. Id. He began working for the joint venture, PMDM, on January 1, 1992. Id. at 8. He invented one or more of the inventions underlying a number of the patents at issue.

III. FINDINGS OF FACT

A. Introduction

Despite the dozens of witnesses who were deposed in this case, many of whose deposition excerpts were introduced at trial, the lay witnesses who were presented live at trial, and the expert witnesses who presented expert reports and/or written direct testimony and were cross-examined at trial, this case turns largely on issues of law and the meaning and significance of certain written agreements -- that is, binding contracts between the parties, as well as on correspondence they exchanged over the years and other documentary evidence. Much of the testimony presented at trial and through depositions sought to explain the agreements or to put them in context -- or, in some cases, to explain away what the contents of the documents appear clearly to mean. As the Court held in its two rulings (one oral and one written) denying the parties' motions for partial summary judgment on patent exhaustion, and reiterates here, however, the key provisions of the 1995 Settlement Agreement (and many provisions of other relevant agreements) are clear and unambiguous. See 10/19/04 Tr. at 46-56 (Court's oral ruling); Minebea Co. v. Papst, 374 F. Supp. 2d at 205-12.

The testimony at trial also sought to explain the realities of the hard disk drive and HDD spindle motor industries, Minebea's sales in the United States, and the course of dealing between the parties. The parties offered expert testimony to aid the Court in understanding some of these matters, as well as certain technical areas of both patent law and the industry, German law, and damages. All the expert witnesses were helpful and credible, although the opinions of some (particularly Warren Dalziel) were not fully supported in certain particulars, and much of the testimony of both parties' experts on German law did not explicate the relevant principles of German law, but simply sought to apply it (in an often partisan and unhelpful manner) to the facts of the case.

For reasons that were expressed by the Court during the trial -- and, as necessary or appropriate, as are elucidated here -- the Court did not find credible certain aspects of the testimony of Douglas Hymas and Ryuske Mizukami for Minebea, and Jerold Schnayer for Papst. Mr. Hymas' performance at his deposition totally undermined his credibility at trial and the Court simply cannot rely on it except where corroborated by documentary evidence. Mr. Mizukami's insistence throughout days of testimony that he always thought Minebea obtained all rights to all Papst patents cannot be credited when there were no documents to support it and when every relevant document that was offered in evidence leads to the opposite conclusion. Mr. Schnayer was such an advocate for his client during discovery and pretrial proceedings that his objectivity as a fact witness was dubious from the start. His testimony about events in which he was not a direct participant, his thought processes, his understanding of the meaning of terms such as "drive patents," and his statements that he brought that understanding to various meetings, discussions and negotiations over the years must be discounted either as post-hoc rationalizations, advocacy or wishful thinking. With regard to events in which he was directly involved and information that representatives of Minebea acknowledge that he conveyed -- and particularly when his testimony is corroborated by documentary evidence -- the Court (insofar as noted below) does rely on his testimony as to what was said and done. Georg Papst was a much more credible witness than Mr. Schnayer on many of the same matters, however, and the documentary evidence introduced at trial largely supported what he said.

There is too much testimony and there are too many documents to permit a full statement of the facts as shown by the evidence. The findings of fact included in this section are of necessity abbreviated and not inclusive. For the most part, they state only the factual findings that are essential to the decision in this case. Additional "findings of fact" are found later in this Opinion as they are important to the particular claim or count of the complaint then being discussed.

B. Creation of the Joint Venture, its Termination, the 1995 Settlement, and Beyond

1. The Inception of the Joint Venture

1. Mr. Ryusuke Mizukami of Minebea met Mr. Georg Papst in or about 1976, soon after Mr. Mizukami began his European assignment for Minebea. Mr. Mizukami was introduced to Papst-Motoren and to Georg Papst by Mr. Koichi Dosho of Minebea. Mr. Dosho had been working for Minebea in Europe for a number of years, was stationed in Germany, and knew Mr. Papst. 7/6/05 (a.m.) Trial Tr. at 65:7-24, 66:8-21, 72:2-4 (Mizukami testim.).

2. Georg Papst was Geschäftsführer, or Managing Director, of Papst Motoren. 7/5/05 (p.m.) Trial Tr. at 69:25-70:4 (Kuwert testim.); 7/6/05 (p.m.) Trial Tr. at 37:2-38:24 (Mizukami testim.); 5/8/03 G. Papst Dep. Tr. at 385:21-23.

3. In 1990, Georg Papst and Mr. Dosho of Minebea discussed the possibility of the two companies joining forces to go into the hard disk drive spindle motor business together, to combine Papst's patent portfolio and technological expertise in the design and development of HDD motors with Minebea's mass production and sales capabilities. There was a meeting between them and other Minebea representatives in early 1990 in Tokyo. 7/28/05 (a.m.) Trial Tr. at 20:3-24 (G. Papst testim.). The business of the proposed joint venture was, among other things, to engage in the research, development, manufacture and sales of HDD spindle motors. 7/6/05 (a.m.) Trial Tr. at 72:4-11 (Mizukami testim.); 7/28/05 (a.m.) Trial Tr. at 51:23-52:4 (G. Papst testim.).

4. From its experience manufacturing HDD motors for HDD manufacturer Seagate, Minebea believed that there were promising growth opportunities in the HDD motor market. See 7/6/05 (a.m.) Trial Tr. at 75:3-11 (Mizukami testim.).

5. At that time, Nidec was the dominant supplier of HDD spindle motors, possessing approximately 80 to 90 percent of the market. See 7/6/05 (a.m.) Trial Tr. at 75:13-24-76:14-17 (Mizukami testim.); 7/28/05 (a.m.) Trial Tr. at 21:2-11 (G. Papst testim.). Minebea believed that hard disk drive manufacturers did not like being so dependent on a single supplier of HDD motors, and believed that hard disk drive manufacturers would welcome and seek to do business with a new supplier of HDD motors. See 7/6/05 (a.m.) Trial Tr. at 75:19-24 (Mizukami testim.).

6. It was understood that Minebea and Papst-Motoren had complementary strengths that, in combination, might enable them to create an effective and competitive new supplier in the HDD motor market. See 7/6/05 (a.m.) Trial Tr. at 73:2-14 (Mizukami testim.).

7. Minebea had expertise in the large-scale manufacture of precision parts and components, but did not have the technology or engineering expertise to design and develop HDD motors on its own. See 7/6/05 (a.m.) Trial Tr. at 73:13-20, 74:6-10, 79:7-10 (Mizukami testim.).

8. Minebea understood that Papst-Motoren already was in the business of designing HDD motors, and possessed many technologies and patents that would be useful in a joint enterprise. 7/6/05 (a.m.) Trial Tr. at 74:12-22, 76-3-10, 79:7-12 (Mizukami testim.).

9. During the discussions between Minebea and Papst, Georg Papst told several representatives of Minebea that Seagate had been infringing Papst patents and that Papst was considering suing Seagate. See 7/28/05 (a.m.) Trial Tr. at 38:12-39:6, 40:4-41:25 (G. Papst testim.).

10. On August 14, 1990, Georg Papst sent a letter to Mr. Mizukami with respect to the Papst patents that would be available to the Joint Venture. See PTX 138, Letter from G. Papst to R. Mizukami (Aug. 14, 1990). Among other things, he stated: "The Joint Venture is entitled to take a non-exclusive, not-transferable license on all patent matters, as long as they will be used for spindle motors for hard disk drives and be manufactured and distributed by the Joint Venture." Id. at 2.

11. Prior to entering into the joint venture, Minebea requested and received copies of Papst Motoren patents. In a letter to Georg Papst dated July 31, 1990, Mr. Dosho of Minebea advised Mr. Papst that Minebea "would like to check the contents of these patents [Papst patents concerning the future joint venture] before signing an agreement." DTX 44, Letter from K. Dosho to G. Papst re: joint venture negotiations (July 31, 1990). The letter describes these as "patents for disk memory motor." Id.

12. On August 16, 1990, Ms. Uta Simon of Papst sent Mr. Mizukami three packages which together included 45 U.S. patents related to hard disk drives. See PTX 147, Letter from Uta Simon, to R. Mizukami (enclosing "45 granted US patent specifications relevant to hard disk drives") (one of three packages) (Aug. 16, 1990); PTX 148 (same, one of three packages); PTX 149 (same, one of three packages); see also PTX 143, Letter from G. Papst to R. Mizukami (Aug. 14, 1990) (enclosing "126 pages of our German first applications of patents"); DTX 44, Fax from K. Dosho to G. Papst (July 31, 1990); 7/6/05 (a.m.) Trial Tr. at 84:10-87:22 (Mizukami testim.); 7/6/05 (p.m.) Trial Tr. at 51:20-55:7 (Mizukami testim.).

13. On August 17, 1990, Hans Dieter Papst, the head of Papst Motoren's patent department, wrote to Mr. Mizukami concerning events leading up to the creation of the joint venture between Minebea and Papst Motoren. Referring to the 45 U.S. Patents, Hans Dieter Papst stated:

Yesterday, we sent you by courier letter in three envelopes copies of 45 US-Patents, which are listed in the following enclosure. These patents reflect somehow Papst's activities in developing spindle motors.

We want to point out, that the bigger part of these patents are typical for use in spindle motors, whereas a smaller part can or may be used or have been used in this field. Yet, there may be further patents of Papst which could be applicable in spindle motors. In an [sic] US-patent there are sometimes several different independent claims, i.e. it is like several patents -- and therefore one can have a mixed situation with regard to application in one and the same patent. So, these things are sometimes complex.

In any event, it is clear, as already expressed, that any spindle motor of the envisaged project would be free from any charge based on Papst-patents.

PTX 152, Letter from H.D. Papst to R. Mizukami (Aug. 17, 1990).

14. On August 24, 1990, the parties entered into a letter of intent signed by the President of Minebea and Georg Papst. PTX 157, Letter of Intent (Aug. 24, 1990); see also 7/6/05 (a.m.) Trial Tr. at 91:8-92:19 (Mizukami testim.). They agreed in the letter to create a joint venture in which Papst-Motoren and Minebea would be equal partners. See PTX 157, Letter of Intent (Aug. 24, 1990) at 1. Each partner agreed to "transfer into the joint venture all activities and assets including the right to use patents related to HDD motors." Id. Minebea was to pay Papst-Motoren for the joint venture between 22 million and 28 million Deutsche Marks. Id. at 2; see also 7/6/05 (a.m.) Trial Tr. at 90:20-91:13, 92:24-93:8 (Mizukami testim.).

15. The letter of intent concluded: "It is further understood that this letter is not intended to constitute a contract or create any legal obligation by either Papst-Motoren or Minebea, but only serves to establish those broad areas of agreement leading to a formal contract which reflect the matters described in this letter." PTX 157, Letter of Intent (Aug. 24, 1990) at 3.

16. Among the series of faxes between the parties concerning the drafting of agreements between Minebea and Papst was an October 30, 1990, fax from Mr. Mizukami and Yoshihisa Kainuma to Papst Motoren. DTX 75, fax from R. Mizukami and Y. Kainuma to G. Papst re: joint venture negotiations (Oct. 30, 1990); 7/8/05 (p.m.) Trial Tr. at 4:5-6:10 (Kainuma testim.). In the fax, Minebea expressed its view that the phrase "required and necessary," to be included in the proposed Intangible Assets Agreement, was ambiguous:

Minor deletions and assertions were made for the sake of clarity. The words "required and necessary" were deleted because at this time neither party knows what information is actually necessary or required for the research, development and manufacture of HDD motors. In addition, for tax purposes the listing of as many intangible assets as possible is advantageous to us. Therefore, the transfer of all technical information related to Papst's HDD Motor Division is reasonable.

DTX 75, fax from R. Mizukami and Y. Kainuma to G. Papst and G. Schätzle, re: Comments Regarding Agreement for the Sale of Intangible Assets (Oct. 30, 1990) at 3.

17. Despite these concerns, the phrase "required and necessary" was included in the final version of the 1990 Agreement for the Sale of Intangible Assets, signed by both parties six days later. See PTX 195, Agreement for the Sale of Intangible Assets (Nov. 5, 1990) ¶¶ 4(a), 4(d) .

18. Mr. Mizukami testified that he believed Papst represented to Minebea that Papst Motoren would make its patent portfolio fully available to the Joint Venture. 7/6/05 (a.m.) Trial Tr. at 76:18-77:6, 79:7-25, 80:13-17 (Mizukami testim.). He also testified that the Joint Venture would have the right to use any Papst patents that were necessary for the HDD motor business: "[W]e can use all his patent, everything, if it is necessary and for making, manufacturing and distributing . . . he has a lot of patent[s] and everything is available when we get together, if that is necessary for doing this HDD motor business." Id. at 80:24-81:12. Georg Papst testified that he never intended to license all Papst Motoren patents to Minebea, only the spindle motor patents. 7/28/05 (a.m.) Trial Tr. at 51:23-25 (G. Papst testim.).

2. The Agreements Founding the Joint Venture

19. PMDM was founded on November 5, 1990, officially as a joint venture between Papst Motoren and Minebea, Ltd. See PTX 193, Joint Venture Agreement (Nov. 5, 1990).

20. In establishing the Joint Venture, Papst Motoren and Minebea entered into a number of agreements, including:

(a) a General Business Agreement, entered into on October 2, 1990, establishing the joint venture relationship between Papst-Motoren and Minebea, see PTX 169;

(b) two Joint Venture Agreements, one to establish a German joint venture entity, see PTX 193 (Nov. 5, 1990), and the other to establish a Thai joint venture entity;

(c) an Agreement for the Sale of Intangible Assets (or "Intangible Assets Agreement"), entered into on November 5, 1990, see PTX 195, for Papst-Motoren to transfer to Minebea various "intangible assets" of Papst's motor division (including manufacturing know- how and patents on HDD motors) which were "required and necessary" for Minebea's participation in the HDD motor business; and

(d) a License Agreement Regarding Intangible Assets, entered into on March 15, 1991, see PTX 264, for Minebea to license the patent rights acquired from Papst Motoren to the joint venture entities.

a. The General Business Agreement

21. On October 2, 1990, Minebea and Papst-Motoren entered into the General Business Agreement to establish the parties' joint venture. Georg Papst signed the General Business Agreement on behalf of Papst-Motoren. Mr. Goro Ogino signed it on behalf of Minebea. PTX 169, General Business Agreement (Oct. 2, 1990); Jul. 6, 2005 (p.m.) Trial Tr. at 8:4-21 (Mizukami testim.).

22. The "Whereas" clauses of the General Business Agreement noted the following:

Papst has been -- amongst various operations in other fields of business -- engaged for years, and has gained extensive experience, patents, know-how, etc. in research and development (R), manufacturing, and sale of Hard Disc Drive Spindle Motors . . . and in related fields; . . . Minebea has been -- also amongst various operations in other fields of business -- engaged in manufacturing precision parts and components for HDD Motors and so possesses favorable conditions and local advantage for manufacturing HDD Motors; . . . . [B]oth parties to this Agreement intend to closely cooperate in the field of HDD Motors by the establishment of Joint Ventures for R D, engineering, manufacturing and sale of HDD Motors[.]

PTX 169, General Business Agreement (Oct. 2, 1990) at 1-2.

23. The General Business Agreement provided that Minebea and Papst-Motoren "shall jointly incorporate" a joint venture company in Germany (the "GJV") and a joint venture company in Thailand (the "TJV"), each "on an equal 50/50% basis." "[T]he purpose" of each joint venture company "shall be to conduct R D and to develop, manufacture and sell HDD Motors." PTX 169, General Business Agreement (Oct. 2, 1990) ¶¶ 2-3; see 7/6/05 (p.m.) Trial Tr. at 9:11-14 (Mizukami testim.).*fn11

24. The General Business Agreement also provided that:

Papst agrees to spin off [its] HDD motor division, including machinery, tools, materials, works in process (the 'Tangible Assets'), technical information and data, drawings of the HDD motors developed and/or being developed, know-how, the right to use all relevant patents, and the current order balance as of the date of transfer from Papst (the 'Intangible Assets') which are all required and necessary for the operation and business of GJV [the German joint venture] and TJV [the Thai joint venture]. Papst shall sell the Intangible Assets for the consideration specified in Article 5 hereunder, and shall sell the Tangible Assets to GJV and TJV principally on the book value basis which shall be agreed by the parties hereto.

PTX 169, General Business Agreement (Oct. 2, 1990) ¶ 4; see also 7/6/05 (p.m.) Trial Tr. at 8:22-9:19 (Mizukami testim.).

b. The Joint Venture Agreement

25. On November 5, 1990, Minebea and Papst-Motoren entered into a Joint Venture Agreement to establish their German joint venture. See PTX 193, Joint Venture Agreement (Nov. 5, 1990); 7/6/05 (p.m.) Trial Tr. at 10:7-14 (Mizukami testim.). The Joint Venture Agreement was signed by Georg Papst for Papst-Motoren and Goro Ogino for Minebea. See id.

26. The Joint Venture Agreement stated that the name of the parties' new joint venture company would be "Papst-Minebea-Disc-Motor-GmbH" ("PMDM"). PTX 193, Joint Venture Agreement (Nov. 5, 1990) ¶ 3(a). Management responsibilities were divided between Papst-Motoren and Minebea. See id. ¶ 7(c)-(d); 7/6/05 (p.m.) Trial Tr. at 15:24-17:9 (Mizukami testim.).

27. The Joint Venture Agreement stated that "Minebea and Papst . . . desire to establish a joint venture company . . . in which they will jointly invest, to conduct research and development ('R & D'), manufacture, and sell hard disc drive spindle motors[.]" PTX 193, Joint Venture Agreement (Nov. 5, 1990).

28. The Joint Venture Agreement stated that the scope of PMDM's activities would include:

(a) to conduct R & D, manufacture, market and sell HDD Motors;

(b) to establish and organize a facility located in Spaichingen to develop and to manufacture the HDD Motors;

(c) to lease the premises and/or space for the Company from Papst;

(d) to develop HDD Motors manufacturing technology and other related technologies;

(e) to license to use such developed technology to a third party as the Parties [i.e., Papst and Minebea] deem appropriate;

(f) to market and sell the HDD Motors to the worldwide market;

(g) to provide engineering and technical support to various sales companies to enhance and support sales activities.

PTX 193, Joint Venture Agreement (Nov. 5, 1990) ¶ 2.

29. The Joint Venture Agreement required that Minebea -- having agreed in the October 2, 1990 General Business Agreement to purchase Papst-Motoren's Intangible Assets for 22 to 28 million Deutsche Marks -- would grant to the German Joint Venture "a license with a sublicensing right to TJV [the Thai Joint Venture]" to "use the Intangible Assets in order to support R & D, manufacturing and sales of HDD Motors." PTX 193, Joint Venture Agreement (Nov. 5, 1990) ¶ 3(e); see also PTX 169, General Business Agreement (Oct. 2, 1990) ¶ 5(a).

30. The Joint Venture Agreement further provided that "[n]ew patents, patent applications and petty patents required and necessary for the R, manufacturing, use and sale of HDD motors, which arise by Minebea or Papst during the life of the General Business Agreement and this Agreement, shall be made available by Minebea or Papst to GJV [the German Joint Venture] by way of a cost-free, non exclusive and non-assignable license." PTX 193, Joint Venture Agreement (Nov. 5, 1990) ¶ 3(f).

c. The Agreement for the Sale of Intangible Assets

31. On November 5, 1990, Minebea and Papst Motoren also entered into an Agreement for the Sale of Intangible Assets, signed by Georg Papst on behalf of Papst Motoren and Goro Ogino on behalf of Minebea. PTX 195, Agreement for the Sale of Intangible Assets (Nov. 5, 1990).

32. Under this Agreement, Papst was to give up its HDD Motor Division and "convince its customers to transfer current orders and contracts respecting its HDD Motor Division to GJV." PTX 195, Agreement for the Sale of Intangible Assets (Nov. 5, 1990) ¶ 7(c).

33. Under the Agreement, Minebea was granted a license to patents and patent applications "required and necessary for research and development (R), manufacturing, engineering, use and sale of HDD motors." PTX 195, Agreement for the Sale of Intangible Assets (Nov. 5, 1990) ¶ 4(a); see 8/1/05 (p.m.) Trial Tr. at 9:10-10:3 (G. Papst testim.).

34. More specifically, Paragraph 4(a) of the 1990 Intangible Assets Agreement states:

Papst as the holder of patents (for the purposes of this agreement the term "patent" is defined as patents, and patent applications) grants to Minebea the right to use all of its patents; especially the predominant German patents and the corresponding international patents, enumerated in Exhibit B [C] attached hereto, world-wide as far as they are required and necessary for research and development (R), manufacturing, engineering, use and sale of HDD motors. Minebea as licensee is not entitled to use the patents in other fields.

PTX 195, Agreement for the Sale of Intangible Assets (Nov. 5, 1990) ¶ 4(a).

35. Paragraph 4(d) of the Intangible Assets Agreement states:

Patents which arise or are acquired by Papst during the life of this agreement and which may be required and necessary for research and development (R), manufacturing, engineering, use and sale of HDD Motors shall be made available by Papst by granting licenses to Minebea with the provisions of this Article 4(a)-(c) without additional royalties.

PTX 195, Agreement for the Sale of Intangible Assets (Nov. 5, 1990) ¶ 4(d).

36. On December 10, 1990, Papst-Motoren and Minebea jointly issued a press release announcing the formation of Papst-Motoren's and Minebea's joint venture and the formation of PMDM. The press release stated in part:

The combination of development know-how, engineering expertise and patents of Papst with Minebea's large scale production capabilities and manufacturing components in cost competitive locations is expected to create synergy effects ensuring competitiveness of the new joint venture companies which will enable them to obtain a leading position in the HDD Motor market.

PTX 204, Press release (Dec. 10, 1990).

3. Operation of the Joint Venture

37. Following the execution of the several agreements establishing the Joint Venture, Papst-Motoren and Minebea engaged jointly in the business activities contemplated by their several related agreements. 7/6/05 (p.m.) Trial Tr. at 11:20-15:22 (Mizukami testim.).

38. Georg Papst was appointed Geschäftsführer, or Managing Director, of PMDM. See 7/6/05 (p.m.) Trial Tr. at 36:12-37:19 (Mizukami testim.); 7/29/05 (p.m.) Trial Tr. at 33:17-20 (G. Papst testim.). He resigned as Managing Director of PMDM on August 5, 1993. See 5/8/03 G. Papst Dep. Tr. at 383:12-15, 385:19-386:9; 7/29/05 (p.m.) Trial Tr. at 33:17-20 (G. Papst testim.).

39. Georg Papst testified that during the existence of the Joint Venture Papst normally did not enforce its patents against motor customers of the Joint Venture or Minebea, on the theory that "as long as we could make business with people, we have normally not asserted our customers for those products where we have sold, shipped them or provided them with motors." PTX 695, 5/11/95 G. Papst Dep. Tr. (Western Digital litig.) at 155-57.

40. After the formation of the Joint Venture, representatives of Papst-Motoren and Minebea jointly visited customers and potential customers in the United States and other countries to promote the Joint Venture's HDD motors. Georg Papst participated in some of these visits. PTX 209, Letter from G. Papst to R. Mizukami (Dec. 19, 1990); 7/6/05 (p.m.) Trial Tr. at 34:24-36:8 (Mizukami testim.).

41. On June 25, 1991, Georg Papst, in his capacity as Managing Director of Papst Motoren, sent a letter to the president of Minebea, Mr. Ogino, offering to sell Minebea a license to the Papst Motoren drive patents. DTX 141, Letter from G. Papst to G. Ogino (June 25, 1991).

The following day, a copy of this letter also was sent by Georg Papst to Mr. Mizukami. DTX 142, Letter from G. Papst to Mizukami (June 26, 1991). In this letter, Mr. Papst advised Mr. Ogino that, pursuant to the current license agreement in place between the parties, neither Minebea nor the Joint Venture had rights under Papst Motoren drive patents. 7/28/05 (a.m.) Trial Tr. at 54:19-59:24 (G. Papst testim.).

42. Georg Papst's June 25, 1991 letter to Mr. Ogino (with a copy to Mr. Mizukami) stated in part:

As you know, Papst owns a large number of international patent rights, which are related to hard disk drives per se, so-called "drive patents" and, also especially to spindle motors, so-called "HDD motor patents." One drive patent in particular (US RE 32,702) has gained extraordinary importance since not only the market leader Seagate but also numerous other drive manufacturers are or have been using this significant US patent. As you can surely easily imagine, we are more and more confronted with the question of what our position is towards such disk drive manufacturers who, on the one hand, desire to be supplied by PMDM and, on the other hand, have largely used the above mentioned patent in the past or may do so still in the future. Not only have these questions been raised towards your sales people by Toshiba but also, recently, by IBM-Fujisawa.

These questions have, of course, resulted in basic considerations on our side. First, we may recall that the patent policy of Papst towards PMDM principally differentiates between such rights with disk drives per se or with HDD spindle motors. For the future use of HDD spindle motor patents such customers can be released by Papst without their having to pay any extra license fee.

As you know, in the framework of our present agreement, PMDM can make use of all patents of Papst applicable to HDD spindle motors. Drive patents, however, are reserved solely for exploitation directly with the drive manufacturers.

It is therefore my proposal to grant to PMDM the right to convey licenses under Papst's drive patents directly to the drive manufacturers.

In return for granting these rights to PMDM, Papst believes that it would be entitled to a fair compensation from Minebea, which, of course, would be a matter of further discussion between us.

DTX 141, Letter from G. Papst to G. Ogino (June 25, 1991); see 7/6/05 (p.m.) Trial Tr. at 66:7-72:20 (Mizukami testimony); 7/28/05 (a.m.) Trial Tr. at 54:19-59:24 (G. Papst testim.).

43. Georg Papst testified that he never received a letter from anybody at Minebea in response to his June 26, 1991 letter to Minebea president Ogino, which letter also was sent to Mr. Mizukami. See 7/28/05 (a.m.) Trial Tr. at 59:25-60:5 (G. Papst testim.). Mr. Mizukami testified that he does not recall whether, after he received a copy of Georg Papst's June 25, 1991 letter to President Ogino, he sent any response to Georg Papst asserting that Minebea already had rights to the drive patents. See 7/6/05 (p.m.) Trial Tr. at 78:9-15 (Mizukami testim.). Other than this asserted lack of recollection at trial, Minebea offered no testimony and no exhibit to contradict anything stated in the letter, or to contradict Mr. Papst's testimony.

44. Three months later, in September 1991, there was a meeting of the PMDM board of directors in Bangkok, Thailand. Representing Minebea were Mr. Mizukami, Mr. Dosho, Mr. Obara, and Mr. Yoshimura. Georg Papst and Dr. Schätzle represented Papst Motoren. Mr. Yoshimura of Minebea drafted the minutes of the meeting. Both Mr. Mizukami and Mr. Papst signed the minutes. These minutes describe what was discussed and decided at the board meeting concerning Papst Motoren drive patents. See DTX 147, PMDM Board Meeting minutes (Sept. 28, 1991). The minutes state, in pertinent part:

(B) Subjects and decisions

1. HDD Drive Patents

Conclusion 1.

Minebea will not purchase above patents. Papst KG is free to deal with third parties.

Conclusion 2.

Further patent rights are as follows:

Papst[Past]*fn12Future Drive patentPapstPapst Motor patentPapstPM.DM.*fn13

DTX 147, PM-DM Board Meeting minutes (Sept. 28, 1991) (footnote added).

45. According to the testimony of Georg Papst, Minebea representatives told Papst Motoren representatives at the meeting that Minebea did not want to acquire rights to the Papst Motoren drive patents, and, as reflected in the minutes of the meeting, Minebea declined to purchase the Papst Motoren drive patents. See 7/29/05 (p.m.) Trial Tr. at 31:24-33:7 (G. Papst testim.); DTX 147, PMDM Board Meeting Minutes ("Minebea will not purchase above patents [HDD Drive Patents]"). Mr. Mizukami testified that he must have been at the meeting and did sign the minutes, but he had no recollection of the meeting and found the minutes "confusing." 7/21/05 (p.m.) Trial Tr. at 35:1-22, 38:8-23 (Mizukami testim.). Beyond this, Minebea called no witnesses to dispute the testimony of Mr. Papst or the Board minutes. The Court credits the uncontradicted testimony of Georg Papst, which is consistent with the minutes of the meeting.

46. Papst Motoren entered into a number of licensing agreements whereby certain HDD manufacturers acquired licenses to a particular patent owned by Papst, U.S. Patent No. Re 32,702 (the "'702 patent"). These companies included Seagate, Hitachi, Fujitsu, and NEC. 7/21/05 (p.m.) Trial Tr. at 11:24-12:9 (Schnayer testim.).

47. On September 28, 1990, Papst Motoren sued hard disk drive manufacturer Seagate for infringement of the '702 patent in the United States District Court for the District of Delaware. See Papst-Motoren GmbH & Co. KG v. Seagate Tech., Inc., Civil No. 90-0542 (D. Del. 1990). On June 23, 1992, Mr. Naka at Minebea received a copy of the complaint filed by Papst in that litigation. See DTX 182, transmittal letter of original Complaint and Answer from Ms. St. John to Mr. Naka; DTX 770, Complaint, Papst-Motoren GmbH & Co. KG v. Seagate Tech., Inc. (September 28, 1990); 2/4/03 Naka Dep. Tr. at 17:8-19:6. Mr. Naka was concerned that Papst had sued an important customer of the Joint Venture. See id. at 32:20-33:3, 33:13-34:7.

48. In October, 1992, Georg Papst and Papst Motoren attorney Richard Smith traveled to Japan for a meeting with Minebea. Mr. Mizukami, Mr. Naka, and a number of Minebea engineers attended the meeting. See 8/3/05 (p.m.) Trial Tr. at 12:8-19 (Smith testim.); 7/28/05 (a.m.) Trial Tr. at 71:7-9 (G. Papst testim.); 12/4/03 Naka Dep. Tr. at 29:9-30:8, 31:11-34:7. At the meeting, Mr. Smith made a presentation in which he explained the lawsuit then pending between Papst Motoren and Seagate concerning the '702 patent. See 8/3/05 (p.m.) Trial Tr. at 12:24-13:5 (Smith testim.). He explained why Papst Motoren brought the suit, what the accused infringing equipment was, and what he thought about the prospects of the litigation. See id. at 13:6-16.

49. According to Minebea General Counsel Takuya Naka, who was in attendance, the Seagate lawsuit was discussed at the meeting. See 12/4/03 Naka Dep. Tr. at 29:9-30:8, 31:11-34:7. According to Mr. Naka, it was discussed that it would violate the joint venture for a partner of the joint venture to sue the joint venture's most important customer (or that it would "constitute infringement on the joint venture agreement"), so the suit would have to be withdrawn. See id. at 33:15-18, 33:21-34:7.

4. Termination of the Joint Venture

50. In June, 1992, Papst Motoren was sold to a third party, a company called Electrobau Mulfingen GmbH & Co. ("EBM"). Papst Motoren became a wholly-owned subsidiary of EBM, which did not want to proceed with the Joint Venture. See 7/28/05 (a.m.) Trial Tr. at 74:23-75:4 (G. Papst testim.); 7/7/05 (a.m.) Trial Tr. at 74:17-21 (Mizukami testim.).

51. Georg Papst founded defendant Papst Licensing GmbH on January 1, 1993 and purchased the patent portfolio of Papst Motoren. 7/28/05 (p.m.) Trial Tr. at 26:13-14 (G. Papst testim.). Mr. Papst was and is the president of Papst Licensing. 7/29/05 (p.m.) Trial Tr. at 33:11-13 (G. Papst testim.).

52. On April 27, 1993, Minebea and Papst Licensing entered into the Loan Agreement and Agreement Concerning Alterations of License Agreements ("Loan Agreement"), under which Minebea lent Papst Licensing 1.5 million Deutsche Marks. 7/6/05 (p.m.) Trial Tr. at 43:13-46:5 (Mizukami testim.); PTX 1467, 1993 Loan Agreement (Apr. 27, 1993) § 5. Mr. Mizukami and Mr. Naka represented Minebea in negotiating the 1993 Loan Agreement. See 12/5/03 Naka Dep. Tr. at 182:18-185:12.

53. The Loan Agreement stated, in part:

It is understood between the parties that such license shall not apply to the so called drive patents (US-Pats: B1 Re. 32,702 and 4,337,491 and Jap. Pat. Appl. 142 123/1979 and German Patent 29 44 212), so called Drive Patents, which are not licensed under the Intangible Assets Agreement and are not licensed under this present agreement. It is understood that purchasers of products from Minebea, PMDM-G and PMDM-T are not licensed under such Drive Patents, notwithstanding the use of such purchased products in disk drives or other produkts [sic] made, used or sold by such purchasers.

PTX 1467, 1993 Loan Agreement (Apr. 27, 1993) § 4(3).

54. On May 26, 1993, Papst Licensing acquired all of the patents of Papst Motoren. See 7/28/05 (p.m.) Trial Tr. at 26:16-27:4 (G. Papst testim.); PTX 487, Purchase Contract between Papst Motoren and Papst Licensing (May 26, 1993) §1.

55. In April 1993, Papst-Motoren, at EBM's direction, sold its 50% interest in PMDM to Minebea. 7/6/05 (p.m.) Trial Tr. at 37:17-39:15, 40:21-41-25 (Mizukami testim.).

56. In connection with EBM's sale of Papst-Motoren's interest in PMDM to Minebea, Minebea and EBM agreed to terminate the joint venture between Papst-Motoren and Minebea. 7/6/05 (p.m.) Trial Tr. at 40:2-43:9. (Mizukami testim.).

57. During calendar year 1993 there were a number of meetings between Georg Papst and representatives of Minebea to discuss the termination of the joint venture. The parties discussed which patents would be licensed to PMDM after the joint venture ended. Georg Papst testified that he told Minebea that he intended to continue to grant Minebea a license under the motor patents and that he also agreed to grant Minebea a license for two specific drive patents, namely, the integrated baseplate patents. See 7/28/05 (p.m.) Trial Tr. at 5:21-6:2, 7:13-19 (G. Papst testim.).*fn14 While the licensing of other drive patents also was discussed, Georg Papst testified that he did not agree to grant to Minebea a license to any drive patents other than the integrated baseplate patents. See id. at 12:18-13:15.

58. On May 3, 1993, Papst-Motoren and Minebea entered into an Agreement Concerning the Termination of Joint Venture (the "Termination Agreement"). PTX 470, 1993 Termination Agreement (May 3, 1993); see 7/6/05 (p.m.) Trial Tr. at 40:2-43:9 (Mizukami testim.).

59. The Termination Agreement recognized in its preamble that "P [Papst Motoren] has sold to M [Minebea] certain intangible assets and in particular, has granted to M [Minebea] the right to use all patents in the field of HDD motors which are required and necessary for the operation and business of PMDM-G [PMDM Germany] and PMDM-T [PMDM Thailand]". PTX 470, Termination Agreement (May 3, 1993) at 2.

60. The Termination Agreement specified that most of the agreements that the parties had entered into to establish their joint venture would cease to be effective; certain agreements and portions of agreements, however, would remain in force. See PTX 470, Termination Agreement (May 3, 1993), Article 9.1.

61. The Termination Agreement provided that, following termination, Minebea would continue to have patent rights as follows:

Continued Granting of licenses by P [Papst] to M [Minebea] for all patents and patent applications required and necessary in the field of HDD motor R, manufacturing, engineering, use and sale of such motors in as far as such patents and patent applications are available to P at the time this TA [Termination Agreement] becomes effective[.]

PTX 470, Termination Agreement (May 3, 1993), Article 1.2(c). It also provided:

P shall continue to grant to M the right to use all the patents and patent applications, as defined in article 1.2. c) above and as they have arisen or were acquired by P during the life of the I.A. [Intangible Assets Agreement] and in accordance with its terms and conditions. A list of the latter ones (i.e. those arisen or acquired by P during the life of the I.A.) is hereto attached as Exhibit B, provided however that if there is any such patent not listed in Exhibit B the forgoing provision nevertheless shall apply to such patents.

Id., Article 7.

62. The Termination Agreement called upon the members of the board of directors of PMDM-Germany, as well as the Papst-nominated members of the board of PMDM-Thailand, to resign as of the effective date of the Agreement. See PTX 470, Termination Agreement (May 3, 1993), Article 5.3.

63. Georg Papst continued to serve as Managing Director of PMDM Germany until his resignation on August 5, 1993. See 5/8/03 G. Papst Dep. Tr. at 383:12-15, 385:19-386:9; 7/28/05 (p.m.) Trial Tr. at 25:22-27:4 (G. Papst testim.); 7/6/05 (p.m.) Trial Tr. at 37:17-39:15, 40:21-41-25 (Mizukami testim.). The same day, the Board of Directors of PMDM unanimously passed a resolution accepting Georg Papst's resignation, and stating that "Herr Georg Friedrich Papst is no longer Managing Director of the Company. He will be discharged from his responsibility." DTX 308, PMDM Shareholder Resolution (Aug. 5, 1993).

64. In August 1993, PMDM became a wholly-owned subsidiary of Minebea. When PMDM became a wholly-owned subsidiary, the name was changed from Papst Minebea Disk Motor GmbH to Precision Motors Deutsche Minebea GmbH. 7/5/05 (p.m.) Trial Tr. at 72:14-74:3 (Kuwert testim.).

5. Post-termination Communications

65. On November 14, 1994, there was a meeting at the headquarters of Minebea in Japan. See DTX 383, Letter from G. Papst to R. Mizukami (Dec. 13, 1994); 7/21/05 (p.m.) Trial Tr. at 44:6-11 (Schnayer testim.). Mr. Mizukami and Mr. Naka attended the meeting on behalf of Minebea, and Mr. Papst and Mr. Schnayer attended on behalf of Papst Licensing. See 7/21/05 (p.m.) Trial Tr. at 41:5-42:25 (Schnayer testim.). During the meeting, Georg Papst offered to grant Minebea a non-exclusive license for all patents and patent application rights currently filed, but not including the so-called drive patents (aside from the two integrated baseplate patents). See id. at 41:18-21, 43:1-10; 7/28/05 (p.m.) Trial Tr. at 42:8-21 (G. Papst testim.).

66. According to Mr. Papst, this offer was confirmed in a letter, dated December 13, 1994, from Georg Papst to Mr. Mizukami. 7/28/05 (p.m.) Trial Tr. at 39:22-42:21 (G. Papst testim.); see DTX 383, Letter from G. Papst to R. Mizukami (Dec. 13, 1994). Mr. Mizukami did not respond to Mr. Papst's December 13, 1994 letter. See 7/28/05 (p.m.) Trial Tr. at 42:28-25 (G. Papst testim.).

67. On February 9, 1995, at Georg Papst's request, Richard Smith, an attorney representing Papst Licensing, sent a letter to Mr. Oswald Kuwert, then managing director of PMDM, regarding the licensing arrangement between Papst and PMDM. DTX 409, Letter from R. Smith to O. Kuwert re: licensing rights (Feb. 9, 1995); DTX 409A, English translation of DTX 409; 7/28/05 (p.m.) Trial Tr. at 43:1-44:10 (G. Papst testim.). The letter stated, in part:

Except for the base plate integration patents, PM-DM and Minebea are not licensed in the field of Disk Drives and therefore cannot make or sell Disk Drives using the PL Disk Drive patents. Similarly, PM-DM's customers do not obtain a license to use PL Disk Drive patents, other than the base plate integration patents, when they purchase a PM-DM motor. If PM-DM's customers make disk drives using PL's Disk Drive Patents they must obtain a Disk Drive license from PL.

As you know, Nippon Densan (NIDEC) is also licensed under Papst Patents. NIDEC's license also excludes the field of Disk Drives. NIDEC and its customers cannot use PL's Disk Drive patents without obtaining a Disk Drive license from PL.

DTX 409A, English translation of DTX 409 at 2.

68. Mr. Smith attached to his February 9, 1995 letter a list of patents that he said were not licensed to Minebea. The patents identified in this list include all of the patents later listed on Appendix III of the 1995 Settlement Agreement. DTX 409, Letter from R. Smith to O. Kuwert re: licensing rights (Feb. 9, 1995); PTX 771, DTX 567, 1995 Settlement Agreement (June 19, 1995), App. III.*fn15

69. On February 20, 1995, PMDM president Oswald Kuwert forwarded Mr. Smith's letter of February 9, 1995 to Mr. Mizukami, and a number of other individuals at Minebea along with a cover letter containing Mr. Kuwert's comments. See DTX 418, Letter from O. Kuwert to R. Mizukami (Feb. 20, 1995). The subject heading of the cover letter is "Patent License Agreement Between Papst KG and Minebea." In it, Mr. Kuwert requests that Mr. Mizukami "verify" the positions taken by Mr. Smith in his February 9, 1995 letter:

But Mr. Smith clearly stated that PM-DM and Minebea are not licensed in the field of disk drives using the Papst Licensing Disk Drive patents. Our understanding is now, as an example, that we have the right to use:

1. Motors with labyrinth seal - all rights.

2. Motors with labyrinth seal integrated into base plates - all rights.

3. Motors with labyrinth seal integrated into base plates used in disk drives - no rights.

It is now unclear, what this exactly means because all our motors are finally built into disk drives and all the patents, Papst Licensing is claiming for, are related to motors upgraded for disk drive use. Therefore this is a very serious problem for us. Please, could you verify what Minebea's agreement and understanding is with Papst patents?

DTX 418, Letter from O. Kuwert to R. Mizukami (Feb. 20, 1995). Mr. Mizukami did not respond to Mr. Kuwert. 7/7/05 (p.m.) Trial Tr. at 28:21-22 (Mizukami testim.).

70. Mr. Kuwert's letter of February 20, 1995 was referred to Minebea's General Counsel, Mr. Naka, for reply, as evidenced by a copy of the letter with an additional Japanese notation reading (in English translation): "Mr. Naka, manager, please take care of this matter, February 22 note -- Sato, Planning department." DTX 420, Annotated copy of February 20, 1995 letter from O. Kuwert to R. Mizukami (Feb. 22, 1995); see also 7/7/05 (p.m.) Trial Tr. at 27:16-28:6 (Mizukami testim.). Mr. Mizukami testified that he has been head of the corporate planning department for 23 years and that Mr. Sato worked for him. 7/7/05 (p.m.) Trial Tr. at 27:24-28:1-20 (Mizukami testim.).

71. On February 22, 1995, Mr. Kainuma responded to Mr. Kuwert by fax, asserting that Papst's position that PMDM did not have rights to the drive patents amounted to "a re- interpretation of the contract" between Papst and Minebea, and that Minebea should have rights to the drive patents. DTX 421, Letter from Y. Kainuma to O. Kuwert by facsimile (Feb. 22, 1995). Mr. Kainuma directed a copy of this fax to Mr. Mizukami's attention. Mr. Naka also received copies of Mr. Kuwert's February 20, 1995 letter and Mr. Kainuma's February 22 fax. See 2/23/05 Naka Dep. Tr. at 133:4-134:3 (referring to Dep. Ex. 59, now DTX 420 and Dep. Ex. 4, now DTX 421). Despite Mr. Kainuma's reaction, Mr. Naka testified that when he read Mr. Smith's letter, he thought that Smith's explanation of the prior Papst-Minebea licensing agreement was "basically correct." See 2/23/05 Naka Dep. Tr. at 139:19-141:2.

72. Despite receiving a copy of the letter from Mr. Kuwert, Mr. Mizukami did not initiate any communications with Papst to challenge its position regarding drive patent rights. See 7/7/05 (p.m.) Trial Tr. at 33:5-9 (Mizukami testim.). Nor did he direct Mr. Naka or any other Minebea employee to do so. See id. at 33:10-21.

73. On March 13, 1995, there was a meeting at Minebea's Tokyo headquarters. 7/28/05 (p.m.) Trial Tr. at 52:24-53:3 (G. Papst testim.). Georg Papst and Jerold Schnayer attended the meeting for Papst and Mr. Mizukami and Douglas Hymas attended for Minebea. Id. at 53:4-13; 7/21/05 (p.m.) Trial Tr. at 103:12-104:6 (Schnayer testim.).

74. During the meeting, Mr. Mizukami told Mr. Papst and Mr. Schnayer that Minebea had been approached by its HDD manufacturer customers who told Minebea that Papst Licensing had charged the customers with infringement of the Papst drive patents, that the patents concerned Minebea products, and that the customers wanted Minebea to accept liability for these charges of infringement by Papst Licensing. See 7/28/05 Trial Tr. at 54:19-55:16 (G. Papst testim.); 7/21/05 (p.m.) Trial Tr. at 105:7-106:5, 117:19-118:11 (Schnayer testim.). According to the testimony of both Mr. Papst and Mr. Schnayer, Mr. Mizukami told Mr. Papst at the meeting that he, Mr. Mizukami, had told Minebea's HDD manufacturer customers that Minebea only had licensing rights under the spindle motor patents, not the drive patents, and that when they purchased Minebea motors, they did not purchase rights to Papst drive patents other than the integrated baseplate patents. See 7/28/05 (p.m.) Trial Tr. at 54:22-55:1, 55:6-16, 55:25-56:19; (G. Papst testim.) 7/21/05 (p.m.) Trial Tr. at 118:3-19 (Schnayer testim.).

75. Mr. Schnayer testified that at the March 13, 1995 meeting he drew a diagram and showed it to everyone at the meeting it to illustrate the relative costs of licensing a motor versus licensing an entire hard disk drive assembly (including a motor). He stated, by way of example, that if it cost ten dollars to license a motor, it might cost one hundred dollars to license the hard disk drive. Schnayer testified that he showed the diagram to everyone in the room. See 7/21/05 (p.m.) Trial Tr. at 107:6-15, 108:12-23, 109:18-110:6, 110:11-113:5 (Schnayer testim.); DTX 445, Handwritten notes and diagram by Schnayer re: meeting with Minebea (Mar. 13, 1995).*fn16 Schnayer said he used this drawing to explain why a license to the drive patents would be much more expensive than a license to the motor patents. 7/21/05 (p.m.) Trial Tr. at 108:14-23, 118:25-19:4 (Schnayer testim.); see also 7/28/05 (p.m.) Trial Tr. at 55:18-24, 56:2-25, 57:6-22 (G. Papst testim.). Mr. Mizukami, who attended the March 13, 1995 meeting and was present at counsel table throughout the trial, was not called as a rebuttal witness to refute this testimony.

76. At the March 13, 1995 meeting, Mr. Papst, on behalf of Papst Licensing, offered the Papst drive patent rights to Minebea. See 7/21/05 (p.m.) Trial Tr. at 107:6-15, 108:12-23, 113:6-11 (Schnayer testim.). According to both Mr. Papst and Mr. Schnayer, Mr. Mizukami stated that Minebea was not interested in obtaining licensing rights to the drive patents, that they had anticipated this issue when they first negotiated with Papst Licensing, and that they had told Minebea's sales people that customers purchasing motors from Minebea would not have an advantage in this respect over customers purchasing from Nidec. 7/28/05 (p.m.) Trial Tr. at 58:5-18 (G. Papst testim.); 7/21/05 (p.m.) Trial Tr. at 113:6-17, 120:6-20 (Schnayer testim.). According to Mr. Papst, Mr. Mizukami "said that Minebea, as a matter of principle, never wanted drive patents." 7/28/05 Trial Tr. at 58:17-18 (G. Papst testim.). Mr. Mizukami was not called to the witness stand to rebut this testimony.

77. At the March 13, 1995 meeting, the parties agreed in principle on a global license agreement for Minebea of Papst Licensing's patent rights, excluding Papst Licensing drive patents. 7/28/05 (p.m.) Trial Tr. at 57:24-58:4 (G. Papst testim.); 8/2/05 (a.m.) Trial Tr. at 47:2-10 (Hymas testim.). The parties further discussed the price Minebea would pay to Papst Licensing for the proposed licensing rights. It was agreed that Mr. Hymas would prepare the first draft of the global agreement, and that a meeting to sign the final agreement would occur on June 19, 1995. See 7/28/05 (p.m.) Trial Tr. 59:5-21 (G. Papst testim.); 7/21/05 (p.m.) Trial Tr. at 115:2-116:8 (Schnayer testim.).

78. There was no testimony from any witness that Mr. Mizukami or Mr. Hymas ever said to Mr. Papst or Mr. Schnayer at the March 13, 1995 meeting, in words or substance, "What are you talking about? Minebea already has rights to the drive patents." 7/21/05 (p.m.) Trial Tr. at 113:14-17 (Schnayer testim.); 8/1/05 (p.m.) Trial Tr. at 69:19-25 (Hymas testim.).

79. Douglas Hymas, Minebea's in-house lawyer, took notes during the March 13, 1995 meeting. PTX 662, Handwritten notes of Douglas Hymas (Mar. 13, 1995); 8/1/05 (p.m.) Trial Tr. at 29:7-30:24 (Hymas testim.). These contemporaneous notes state, in part:

Papst distinguishes between motor patents and drive patents

Minebea has licensed the motor patents only, with the exception of the base plate integration HDD motors, which is separately stated in a loan agreement?

-- but were not covered under drive patents unrelated to motors.

PTX 662. Handwritten notes of Douglas Hymas (Mar. 13, 1995); see also 8/1/05 (p.m.) Trial Tr. at 64:17-68:17 (Hymas testim.). Mr. Hymas testified that at the meeting:

Mr. Papst mentioned that Minebea had already licensed all the rights to any patents within the portfolio that related to the manufacture or sale of motors. He also mentioned that we had not, we meaning Minebea, had not licensed the rights to hard disk drives except with respect to baseplate integrated patents.

8/01/05 (p.m.) Trial Tr. at 28:14-19 (Hymas testim.). According to Mr. Hymas, Papst "distinguished between those patents that related to the manufacture and sale of motors and those patents that related to what was then called drives." Id. at 30:16-19 ¶ 81.

80. Mr. Hymas's testimony and notes corroborate the testimony of Mr. Papst and Mr. Schnayer that the subject of motor patents and drive patents was discussed at the March 13, 1995 meeting, and that Mr. Mizukami and Mr. Hymas were advised by Papst that Minebea only had licensing rights to motor patents, except for the integrated baseplate patents, and that it did not have rights under drive patents. See PTX 662, Handwritten notes of Douglas Hymas (Mar. 13, 1995); 8/1/05 (p.m.) Trial Tr. at 27:22-30:24 (Hymas testim.).

81. During his deposition in this case, Mr. Hymas was asked numerous simple questions that he did not answer in a straightforward manner, or professed not to understand. See 8/1/05 (p.m.) Trial Tr. at 39:20-40:23, 44:18-48:25, 49:1-50:6 (Hymas testim.) (discussing deposition); 8/2/05 (a.m.) Trial Tr. at 39:21-42:12 (proffer); 8/2/05 (p.m.) Trial Tr. at 20:7-22:2 (Hymas testim.).

82. At trial the Court found that Mr. Hymas' credibility as a witness was seriously at issue because of his attitude and performance at his deposition. The Court stated:

Mr. Sweetland, you had to know that this was going to happen as soon as you called Mr. Hymas to testify, particularly after you read his deposition. His credibility -- I don't know why you called him at all, but his credibility is at issue, at serious issue. And anything that goes to his credibility is going to be permitted for that purpose.

8/2/05 (a.m.) Trial Tr. at 27:13-18 (comments by the Court).

6. The 1995 Settlement Agreement

83. The written provisions of the 1995 Settlement Agreement were negotiated primarily between Mr. Schnayer representing Papst Licensing and Mr. Hymas representing Minebea. The parties exchanged correspondence and drafts of the agreement, see DTX 527; DTX 529; DTX 566; DTX 559; DTX 561; and discussed various provisions of the agreement between June 1, 1995 and June 19, 1995. See DTX 545, Letter from J. Schnayer to D. Hymas enclosing appendices (June 19, 1995); 8/2/05 (a.m.) Trial Tr. at 67:16-68:17, 74:5-75:16 (Hymas testim.); 7/22/05 (p.m.) Trial Tr. at 56:1-59:12 (Schnayer testim.).

84. On June 2, 1995, Mr. Schnayer sent Mr. Hymas a letter and a revised draft Settlement Agreement. DTX 529, Letter from J. Schnayer to D. Hymas re: draft of 1995 Settlement Agreement (June 2, 1995). The letter states in part: "[W]e have made extensive changes to accurately reflect the difference between hard disk drive patents and hard disk drive spindle motor patents." See id.; 7/22/05 (a.m.) Trial Tr. at 46:12-48:4, 54:6-23 (Schnayer testim.).

85. On June 9, 1995, Mr. Schnayer sent a fax to Mr. Hymas which included the appendices to the 1995 Settlement Agreement. DTX 546, Letter from J. Schnayer to D. Hymas re: appendices to 1995 Settlement Agreement (June 9, 1995).

86. Appendix I to the 1995 Settlement Agreement lists patents defined as "Papst Patents" under the Agreement. Appendix II lists patents defined as the "Papst Integrated Baseplate Patents." Appendix III lists patents defined as "Papst Drive Patents." PTX 771, DTX 567, 1995 Settlement Agreement (June 19, 1995), App. III.

87. Appendix III to the 1995 Settlement Agreement identifies the "Papst Drive Patents" referred to in Paragraph 1.4 of the 1995 Settlement Agreement. Appendix III contains the same patents listed in the attachment to Richard Smith's February 9, 1995 letter, except that the two integrated baseplate patents were deleted. See DTX 409, Letter from R. Smith to O. Kuwert re: licensing rights (Feb. 9, 1995); DTX 545, Letter from J. Schnayer to D. Hymas enclosing appendices (June 19, 1995); 7/21/05 (p.m.) Trial Tr. at 94:3-95:21, 96:6-98:11 (Schnayer testim.); 5/29/05 Smith Dep. Tr. at 90:10-12.

88. Mr. Hymas had a number of discussions with Mr. Schnayer between June 9, 1995 and June 19, 1995, when the Settlement Agreement was signed. Some of these were by telephone and some of them were face to face. Mr. Hymas does not recall saying to Mr. Schnayer or handing him a document that said in words or substance, "Why are you excluding the drive patents? Minebea already has rights to the drive patents." 8/2/05 (a.m.) Trial Tr. at 80:20-81:11 (Hymas testim.).

89. The settlement negotiations included a meeting on June 16, 1995 between Georg Papst, Mr. Schnayer, Mr. Mizukami and Mr. Hymas. During this meeting, the parties discussed the scope of Papst Licensing's integrated baseplate patents. 7/22/05 (a.m.) Trial Tr. at 67:23-69:18, 71:20-72:8 (Schnayer testim.); 7/28/05 (p.m.) Trial Tr. at 67:11-23 (G. Papst testim.). These patents were licensed to Minebea in 1993 when the Joint Venture was terminated, and the 1995 Settlement Agreement reflected that prior license. PTX 771, DTX 567, 1995 Settlement Agreement (June 19, 1995) App. II.

90. Georg Papst testified that he was not sure whether rights to Papst Licensing drive patents other than the integrated base plate patents were discussed at the June 16, 2005 meeting, but he was clear that, if they were, the response from Mr. Mizukami was "a clear no, Minebea was not interested in any other drive rights." 7/28/05 (p.m.) Trial Tr. at 67:24-68:7 (G. Papst testim.). He further recalled that at the March 13, 1995 meeting Minebea had made clear that it was not interested in any drive rights other than rights to the integrated base plate patents. Id. at 68:10-15. Mr. Papst testified that he had "officially" offered the drive rights to Minebea "at a minimum three times," "but they were always rejected." Id. at 71:6-9. Mr. Mizukami never contradicted this testimony.

91. The 1995 Settlement Agreement between Papst Licensing and Minebea was signed by both parties on June 19, 1995. PTX 771, DTX 567, 1995 Settlement Agreement (June 19, 1995). The relevant terms of the 1995 Settlement Agreement are discussed infra at 69-92.

7. Papst's Licensing Agreements With Minebea's Customers

92. Starting in 1998, Papst Licensing entered into license agreements with HDD manufacturers Fujitsu, Samsung Electronics Co., Ltd., Hitachi Corp., Toshiba Co., NEC Co., Epson Electronics America, Inc., Hewlett Packard Co., and Seagate, granting the manufacturers rights under Papst Licensing's so-called disk drive patents. See 7/25/05 (a.m.) Trial Tr. at 53:19-54:4; 54:20-24; 59:9-60:2; 60:9-15; 64:22-65:10; 65:22-24; 66:8-24; 77:12-79:11 (Schnayer testim.); 7/19/05 (p.m.) Trial Tr. at 12:19-24; 14:25-15:6 (Gardner testim.); PTX 1211, License agreement between Papst Licensing and Samsung Electronics Co. (Dec. 11, 1998); DTX 627, License Agreement between Papst Licensing and Fujitsu (Nov. 15, 1998); DTX 632, License agreement between Papst Licensing and Hitachi Corp. (Mar. 4, 1999); PTX 1232, License agreement between Papst Licensing and Toshiba Co. (Mar. 15, 1999); PTX 1247, License Agreement between Papst Licensing and NEC Corp. (July 13, 1999); PTX 1278, License agreement between Papst Licensing and Hewlett Packard Co. (Apr. 4, 2000); PTX 1312, License agreement between Papst Licensing and Epson Electronics America, Inc. (June 26, 2001); PTX 1345, License agreement between Papst Licensing and Seagate (Sept. 30, 2002); PTX 1387, License agreement between Papst Licensing and Hitachi (Feb. 20, 2004).

93. Fujitsu, Samsung Electronics Co., Ltd., Hitachi Corp., Toshiba Co., NEC Co., Epson Electronics America, Inc., Hewlett Packard, and Seagate agreed to pay Papst Licensing a lump sum royalty for rights under Papst Licensing's drive patents in settlement of controversies between these companies and Papst. See DTX 627, License Agreement between Papst Licensing and Fujitsu (Nov. 15, 1998); PTX 1211, License agreement between Papst Licensing and Samsung Electronics Co. (Dec. 11, 1998); DTX 632, License agreement between Papst Licensing and Hitachi Corp. (Mar. 4, 1999); PTX 1232, License agreement between Papst Licensing and Toshiba Co. (Mar. 15, 1999); PTX 1247, License Agreement between Papst Licensing and NEC Corp. (July 13, 1999); PTX 1312, License agreement between Papst Licensing and Epson Electronics America, Inc. (June 26, 2001); PTX 1278, License agreement between Papst Licensing and Hewlett Packard Co. (Apr. 4, 2000); PTX 1345, License agreement between Papst Licensing and Seagate (Sept. 30, 2002).

94. Papst Licensing entered into a second license agreement with Hitachi on January 1, 2003 for rights under all existing and future claims (including claims of all related patents, reissues, and reexaminations), and claims of patent applications anywhere in the world that cover inventions relating to disk drive products including U.S. Patent Nos. 5,216,557, 5,424,887, 5,446,610, 5,557,487, 5,661,351, 5,801,900, 5,864,443, 5,887,916, 6,271,988, Re 34,412, Re 35,792, Re 37,058, and Re 38,178. See PTX 1387, License agreement between Papst Licensing and Hitachi (Jan. 1, 2003); see 7/19/05 (p.m.) Trial Tr. at 12:19-24 (Gardner testim.).

8. The Instant Litigation and Consolidated Cases

95. On June 22, 1999, Hewlett-Packard filed an action against Papst Licensing and Papst Motoren in the United States District Court for the District of Delaware, seeking a declaratory judgment of non-infringement, invalidity, and exhaustion of Papst Licensing's disk drive patents, including Re 32,702; 4,535,373; 4,922,406; 5,424,887; 5,237,471; 4,519,010; Re 34,412; 4,894,738; 5,216,557; 5,446,610; 5,001,581; 5,006,943; 5,040,085; 5,173,814; 5,422,769; 5,661,351; 4,517,480; 4,667,122; 5,361,010; 5,801,900; and 5,557,487. See Hewlett-Packard Co. v. Papst Licensing GmbH, Civil No. 99-395 (D. Del. June 22, 1999); 7/25/05 (a.m.) Trial Tr. at 79:11-17 (Schnayer testim.); PTX 2816, Complaint. The case subsequently was transferred by the MDL Panel to the Eastern District of Louisiana. See Hewlett-Packard Co. v. Papst Licensing GmbH, Civil No. 99-3119 (E.D. La. Oct. 26, 1999). The parties dismissed the case voluntarily on April 12, 2000.

96. On July 15, 2002, Papst Licensing sued Western Digital Corp., Seagate Technology LLC, Veritas Software Technology Corp., Excelstor Technology Ltd., Shenzen Excelstore Technology Ltd., and Excelstore Technology Inc. in the United States District Court for the Central District of California for infringement of Papst Licensing's so-called disk drive patents, including U.S. Patent Nos. Re 32,702; B1 Re 32,702; 4,519,010; 4,535,373; 4,922,406; 5,216,557; Re 34,412; 5,424,887; 5,446,610; 5,557,487; 5,661,351; 5,708,539; 5,729,403; Re 35,792; 5,777,822; 5,796,548; 6,801,900; 5,864,443; and Re 37,058. See Papst Licensing GmbH v. Western Digital Corp., Civil No. 02-0650 (C.D. Cal. 2002); PTX 2815, Patent Infringement Complaint. That case also was transferred to the Eastern District of Louisiana by order of the MDL Panel. See Papst Licensing GmbH v. Western Digital Corp., Civil No. 2-3750 (E.D. La. 2002). It then was consolidated with the other pending related cases and stayed.

C. The Written Contracts Define the Parties' Relationship

Fundamental to the Joint Venture and to the parties' relationship after its termination was a set of contractual provisions under which Minebea -- but not its customers -- was licensed to manufacture, use and sell hard disk drive motors that would infringe certain of Papst's patents. The Court discusses this arrangement as it existed in three stages: (1) during the life of the Joint Venture; (2) after the termination of the Joint Venture; and (3) after the parties signed the 1995 Settlement Agreement.

1. Minebea's Rights During the Joint Venture

The Joint Venture between Papst and Minebea commenced on November 5, 1990, with the execution of the Joint Venture Agreement. See PTX 193, Joint Venture Agreement (Nov. 5, 1990). The Agreement for the Sale of Intangible Assets, signed the same day, provided that:

Papst as the holder of patents (for the purposes of this agreement the term "patent" is defined as patents, and patent applications) grants to Minebea the right to use all of its patents; especially the predominant German patents and the corresponding international patents, enumerated in Exhibit B [sic C] attached hereto, worldwide as far as they are required and necessary for research and development (R), manufacturing, engineering, use and sale of HDD motors. Minebea as licensee is not entitled to use the patents in other fields.

PTX 195, Agreement for the Sale of Intangible Assets (Nov. 5, 1990) ¶ 4(a) (emphasis added). With regard to patents not yet in existence at the time of the Agreement, it further provided:

Patents which arise or are acquired by Papst during the life of this agreement and which may be required and necessary for research and development (R), manufacturing, engineering, use and sale of HDD Motors shall be made available by Papst by granting licenses to Minebea with the provisions of this Article 4(a)-(c) without additional royalties.

Id. ¶ 4(d) (emphasis added). Thus, during the Joint Venture (when the Agreement for the Sale of Intangible Assets was entirely in effect), Minebea was licensed under Papst patents that either existed before the agreement was signed, or arose or were acquired during the life of the agreement, to the extent that such licenses were "required and necessary" for research and development, manufacturing, engineering, use and sale of motors. Id. Minebea was not licensed to use the patents "in other fields." Id. ¶ 4(a).

Minebea argues that Paragraphs 4(a) and 4(d) of the Intangible Assets Agreement granted it "broad rights" to many of Papst's patents, including patents that have claims on motors and disk drives. The Court finds, however, that Minebea's claims are overblown and not supported by the language of the Agreement.

a. Minebea's rights under Paragraph 4(a) of the Intangible Assets Agreement

i. "Required and Necessary" under the Intangible Assets Agreement

The phrase "required and necessary for research and development (R), manufacturing, engineering, use and sale of HDD motors" is employed in the 1990 Intangible Assets Agreement and in other agreements between the parties, but it is never defined precisely in any contract. Nor does Minebea offer its own interpretation of the term in its post-trial briefs. Its arguments, however, proceed as though the term imposed no restriction whatsoever on the scope of the rights granted to Minebea, apparently because, it argues, "the technology taught in the Papst Patents at issue was 'required and necessary' for Minebea's HDD spindle motors." Minebea Br. at 14. To the contrary, a reading of the agreements in context makes plain that this phrase explicitly limits the rights Minebea secured under the 1990 Intangible Assets Agreement and other agreements between the parties.

The language of the 1990 Intangible Assets Agreement itself is limiting: Papst grants to Minebea "the right to use all of its patents . . . as far as they are required and necessary for research and development (R), engineering, manufacturing use, and sale of HDD motors." PTX 195, Agreement for the Sale of Intangible Assets (Nov. 5, 1990) ¶ 4(a).*fn17 This is not an open-ended license grant: It is a license to use Papst patents only "as required and necessary" for manufacturing and sale of hard disk drive motors only. Minebea is expressly "not entitled to use the patents" in fields other than the manufacture, use and sale of HDD motors.

The 1990 Agreement for the Sale of Intangible Assets does not have a choice-oflaw provision, but the parties agree that the substantive law of Germany governs.*fn18 Under German law, where a contract is ambiguous, it must be interpreted to determine the real intention of the parties at the time of the conclusion of the agreement. See Expert Report of Dr. Andreas Junius (June 20, 2005) (Docket No. 1479) at 32-33. But under German law the parties' subsequent behavior also may be relevant to the interpretation of the agreement -- particularly where, after the conclusion of the agreement, the parties expressly or impliedly agree on a certain interpretation. Such subsequent behavior may be an indication of the intention of the parties at the time of the conclusion of the agreement. See id. at 33 (citing BENKARD, COMMENTARY TO THE GERMAN PATENT LAW (9th ed. 1993) § 15 n.66). Such is the case here, as reflected by the subsequent written agreements between the parties.

The Loan Agreement signed in 1993 (in connection with the termination of the Joint Venture and with Papst Licensing's acquisition of the Papst Motoren patent portfolio) affords some insight into the meaning of the term "required and necessary" as it was intended in the 1990 Agreement for the Sale of Intangible Assets, and as the term continued to be used by the parties. The Loan Agreement expressly provided that Paragraph 4(a) of the Intangible Assets Agreement remained in force. PTX 1467, 1993 Loan Agreement (Apr. 27, 1993) § 3(1). Thus, Minebea could continue to use Papst's patents to the extent they were "required and necessary" for Minebea's motor business. The Loan Agreement went on to expressly declare that certain "drive patents" -- namely, the '702 and '491 patents -- were not licensed under "this present agreement" (the 1993 Loan Agreement itself) or under the 1990 Agreement for the Sale of Intangible Assets, stating:

It is understood between the parties that such license shall not apply to the so called drive patents (US-Pats: B1 Re. 32,702 and 4,337,491 and Jap. Pat. Appl. 142 123/1979 and German Patent 29 44 212), so called Drive Patents, which are not licensed under the Intangible Assets Agreement and are not licensed under this present agreement. It is understood that purchasers of products from Minebea, PMDM-G and PMDM-T are not licensed under such Drive Patents, notwithstanding the use of such purchased products in disk drives or other produkts [sic] made, used or sold by such purchasers.

PTX 1467, 1993 Loan Agreement (Apr. 27, 1993), § 4(3) (emphasis added). This provision, while specifically identifying certain specific "so called drive patents," when viewed in the context of all these agreements, makes clear that the parties did not consider drive patents in general to be "required and necessary" for the HDD motor business: Minebea was licensed under all patents "required and necessary" for the motor business, but specifically was not licensed under the '702 patent and U.S. Patent No. 4,337,491, both of which were drive patents (Re '702 is actually a reissue of the '491 patent).

The Loan Agreement also stated that Minebea's customers were not licensed under the drive patents. PTX 1467, 1993 Loan Agreement (Apr. 27, 1993) § 4(3). ("It is understood that purchasers of products from Minebea [or the Joint Venture] are not licensed under such Drive Patents . . ."). The agreement that these specific drive patents were not licensed under the 1993 Loan Agreement and were "not licensed" under the 1990 Intangible Assets Agreement is evidence that drive patents in general are not "required and necessary" to engage in the manufacture and sale of HDD motors.

Under German law, a license grant is construed narrowly because it is always assumed that the owner of the intellectual property intends to grant "only the minimum rights necessary for the fulfillment of the purposes of the license agreement." Junius Expert Report at 34. The purpose of the 1990 Agreement for the Sale of Intangible Assets was to facilitate Papst and Minebea's cooperation in the "research and development (R), manufacturing, engineering, use and sale of HDD motors." PTX 195, Agreement for the Sale of Intangible Assets (Nov. 5, 1990) ¶ 4(a). As a practical matter, rights under the drive patents are not needed in the motor business -- that is, they are not "required and necessary" for the research and development, manufacturing, engineering, use and/or sale of motors, because (among other reasons) a motor manufacturer does not directly infringe such patents. See infra at 89-92, 95-99.

Objective evidence from the marketplace confirms that rights under drive patents are not "required and necessary" to engage in the motor business. The Court already has indicated that the negotiations between Mr. Smith and Mr. Schnayer with Nidec are not directly relevant because Papst's agreement with Nidec was a different agreement containing different language and different terms. See 8/3/05 (p.m.) Trial Tr. at 67:25-68:9, 68:22-25, 73:11-16 (oral ruling by the Court). Furthermore, what was in Mr. Schnayer's mind about the Nidec negotiations when he negotiated with Minebea is not directly relevant unless he communicated his thoughts to the Minebea representatives with whom he was negotiating. Id. at 69:1-23. Nevertheless, the evidence at trial showed that Nidec was the market leader in the manufacture of HDD motors at the time that Minebea and Papst created the joint venture. See supra at 24; infra at 264. In fact, the motivation for entering into the joint venture for both Minebea and Papst was to allow this new entity to compete effectively in the spindle motor market with Nidec, which at the time dominated that market. See supra at 24; 7/6/05 (a.m.) Trial Tr. at 76:13-77:17 (Mizukami testim.). Thus, while the terms of Nidec's license are not directly relevant, this evidence does tend to show that when Nidec, the market leader, sells its motors in the marketplace, it does not pass on a license to its customers to infringe Papst's drive patents -- and therefore that a motor manufacturer need not have the right to give its customers sublicenses to drive patents to successfully participate in the motor business. Such a right is not "required and necessary" to engage in the manufacture and sale of HDD motors.

In light of this interpretation of the term "required and necessary," the Court finds that under Paragraphs 4(a) and 4(d) of the 1990 Agreement for the Sale of Intangible Assets, Minebea was authorized to sell motors under (1) those Papst patents which Minebea's motors would directly infringe (that is, the motor patents), and (2) certain drive patents which might be contributorily infringed by Minebea's motors (or which Minebea's sale of motors might induce infringement of), but only to the extent required and necessary to protect Minebea from patent infringement lawsuits brought by Papst against Minebea itself. In other words, Minebea's license under Papst patents claiming a motor plus other drive elements is limited to contributory infringement and inducement of infringement, since nothing more is "required and necessary" for Minebea's participation in the motor business. Any other interpretation of the Intangible Assets Agreement strains logic and would afford Minebea rights it did not bargain for.

ii. Corresponding International Patents

Minebea also argues that under Paragraph 4(a) of the Intangible Assets Agreement it obtained rights to various drive patents because they are the "corresponding international patents" of German patents and patent applications enumerated in Exhibit C to the 1990 Agreement for the Sale of Intangible Assets. According to Minebea, any U.S. patent claiming priority based on a particular patent earlier is by definition a "corresponding international patent," so long as at least one claim in the later U.S. patent is supported by the earlier foreign application. See Minebea Br. at 9-10.

Minebea relies for this proposition primarily on the testimony of its patent law expert, Martin Adelman. See Written Direct Testimony of Martin J. Adelman (July 4, 2005) (Docket No. 1237) ¶ 11. Professor Adelman says that a United States patent filed within one year of an earlier German patent "corresponds" to that earlier German patent if there is even one claim of priority. See id. ¶¶ 9, 10. Papst's patent law expert, George Gerstman, disagrees. In Mr. Gerstman's opinion, there must be more than a claim of priority for two patents to be considered "corresponding." While priority may be one factor to consider in making this determination, priority alone is not enough. In Mr. Gerstman's view, the allegedly corresponding patent must have a similar subject matter to the earlier patent in order to be a corresponding patent. 8/2/05 (p.m.) Trial Tr. at 63:11-18 (Gerstman testim.). Similar disclosures in the two patents are more important than priority alone; there must be "a lot of similar subject matter" for the later patent to be considered a corresponding patent. Id. at 70:21. Priority alone is insufficient because a patent can request priority based on an earlier patent even where the two patents have only "a minute amount of similar disclosure" -- that is, the two patents may disclose vastly different inventions, despite what is -- in Mr. Gerstman's view -- an improper claim of priority. Id. at 65:25-66:3, 70:12-18.

After Mr. Gerstman testified, Professor Adelman did not attempt to refute this view or reinforce the statement in his written direct testimony. Rather, he seemed in his supplemental declaration to accept the notion that common subject matter is important. See Supplemental Declaration of Martin J. Adelman (Aug. 9, 2005) (Docket No. 1573) ¶ 5 ("the claim of foreign priority can only be made where one or more claims of the subsequent application are supported by an adequate disclosure in the foreign priority document."). The Court accepts Mr. Gerstman's expert opinion over that of Professor Adelman and finds that, in the absence of proof by Minebea that a later filed patent has substantially similar subject matter as the earlier patent, Minebea has failed to prove that any single patent at issue here is the "corresponding international patent" of any German patent.*fn19

Paragraph 4(a) of the Intangible Assets Agreement granted Minebea the rights to all of Papst's patents that existed or had been applied for on the date the Intangible Assets Agreement was executed, but only insofar as such rights were "required and necessary" for the research and development, manufacturing, engineering, use and sale of HDD motors. The Court finds that Minebea's rights included the right not to be sued for contributory infringement of the drive patents, but did not include either a license to directly infringe the drive patents or the right to provide Minebea's customers with sublicenses to those patents. Furthermore, Minebea has not demonstrated that it was licensed to any particular patent by virtue of its being the "corresponding international patent" of the German patents or patent applications listed in Exhibit C of the Intangible Assets Agreement.

b. Minebea's rights under Paragraph 4(d) of the Intangible Assets Agreement

Paragraph 4(d) of the Intangible Assets Agreement is clear on its face, and requires little interpretation. Under this provision, Minebea acquired license rights to all patents which "arose" or "were acquired" during the life of the Joint Venture -- that is, between November 5, 1990 and May 3, 1993 -- to the extent that such licenses were "required and necessary." The parties agree that a patent "arose" during this time if it was issued or applied for during this period. See Minebea Br. at 16; Papst Opp. at 18; Minebea's Prop. Concl. of Law ¶¶ 2.3; 1.9.*fn20

The Court therefore finds that, during the period of the Joint Venture Minebea was licensed under all of Papst's patents that existed at the start of the Joint Venture or were issued, applied for, or acquired during the Joint Venture, but only to the extent that such a license was required and necessary to Minebea's participation in the HDD motor business.

There are 31 patents at issue in Minebea's patent exhaustion claim. See infra note 50. Among these are fifteen that existed at the start of the Joint Venture or that were issued, were applied for, or were acquired during the Joint Venture.*fn21 Sixteen arose or were acquired after the Joint Venture was terminated. See infra note 23. Minebea had rights with respect to the former groups of patents to the extent a license to use them was "required and necessary" to Minebea's participation in the Joint Venture before it was terminated. And, as discussed infra at 66-68, even after termination, Article 1.2(c) of the Termination Agreement specifically provided for the "continued granting of licenses by [Papst] to [Minebea] for all patents and patent applications required and necessary in the field of HDD motor R, manufacturing, engineering, use and sale of such motors in as far as such patents and patent applications are available to [Papst]" at the time of termination. PTX 470, Termination Agreement (May 3, 1993), Article 1.2(c); see also id., Article 7.

2. Minebea's Rights After Termination of the Joint Venture

The termination of the Joint Venture on May 3, 1993, did not extinguish all of Minebea's rights under Papst's patents. Some provisions of the earlier contracts remained in effect, while others ceased. As a consequence, Minebea continued to enjoy some but not all of the patent rights it had secured under those agreements. As before, with the exception of the precise meaning of the term "required and necessary," the terms of the contracts ending the Joint Venture are clear and unambiguous.

The 1993 Termination Agreement provided that several of the prior agreements, including the General Business Agreement and the German Joint Venture Agreement, would cease to be legally binding as of the date of termination. See PTX 470, Termination Agreement (May 3, 1993), Article 2(b), 2(c). Some provisions of the 1990 Agreement for the Sale of Intangible Assets, however, remained in effect: Paragraphs 4(a), 4(b) (partially), 4(c) (partially), 5(b) (partially), 8, 9(a) (partially), and 9(b). See id., Article 9.1. All other provisions of the Intangible Assets Agreement -- including, significantly, Paragraph 4(d) -- ceased to be effective when the Termination Agreement was signed. See id., Article 9.2.*fn22

The Termination Agreement provided that, following termination of the Joint Venture, Minebea would continue to have patent rights as follows:

Continued Granting of licenses by P [Papst] to M [Minebea] for all patents and patent applications required and necessary in the field of HDD motor R, manufacturing, engineering, use and sale of such motors in as far as such patents and patent applications are available to P at the time this TA [Termination Agreement] becomes effective[.]

PTX 470, Termination Agreement (May 3, 1993), Article 1.2(c).*fn23 It also provided:

P shall continue to grant to M the right to use all the patents and patent applications, as defined in article 1.2. c) above and as they have arisen or were acquired by P during the life of the I.A. [Intangible Assets Agreement] and in accordance with its terms and conditions. A list of the latter ones (i.e. those arisen or acquired by P during the life of the I.A.) is hereto attached as Exhibit B, provided however that if there is any such patent not listed in Exhibit B the forgoing provision nevertheless shall apply to such patents.

Id., Article 7 (emphasis added). Thus, although Paragraph 4(d) of the Agreement for the Sale of Intangible Assets ceased to have effect on termination, the Termination Agreement itself expressly provided that Minebea would retain the rights it had acquired under that provision to patents that had arisen or had been acquired by Papst during the life of the Joint Venture.

As the Court has discussed, supra at 32-33, 57-62, under Paragraph 4(a) of the 1990 Intangible Assets Agreement Minebea is licensed only to patents and pending patent applications already in existence at the time of the 1990 Intangible Assets Agreement, and only insofar as license rights are "required and necessary" to Minebea's motor business. Paragraph 4(d) of the Intangible Assets Agreement similarly gave Minebea the "required and necessary" rights to patents that arose or were acquired by Papst during the life of that Agreement, which rights were preserved by Article 1.2(c) and Article 7 of the Termination Agreement.

In sum, after termination of the Joint Venture Minebea was licensed under all Papst patents "required and necessary" to the motor business that either had been filed by the time the Intangible Assets Agreement was executed on November 5, 1990, or that arose or were acquired by Papst between that date and the execution of the Termination Agreement on May 3, 1993. Minebea had no rights to any patents that "arose" or were "acquired" by Papst after termination of the Joint Venture.*fn24 Minebea also was not licensed to directly infringe Papst's drive patents, and explicitly was not granted the right to give its customers sublicenses to Papst's patents. See PTX 195, Agreement for the Sale of Intangible Assets (Nov. 5, 1990) ¶ 4(c).

3. Minebea's Rights Under the 1995 Settlement Agreement

On June 19, 1995, Papst and Minebea entered into a Settlement Agreement "to amicably resolve in a full, final and complete manner" claims by Papst that Minebea was infringing certain patents owned by Papst. See PTX 771, 1995 Settlement Agreement (June 19, 1995) at 1. Another goal of the Agreement was "to ensure that no such dispute arises in the future in relation to past, current or future intellectual property rights of Papst[.]" Id.

The 1995 Settlement Agreement preserved some of Minebea's existing rights to Papst's patents, while redefining its rights with respect to others. The Agreement defined four classes of patents (which the Court later discusses) -- "Papst Patents," "Papst Drive Patents," "Future Patents," and "Integrated Baseplate Patents" -- and, in Paragraph 3.1, stated:

This Agreement supersedes and extinguishes all obligations of Minebea under agreements previously entered into between the parties in regards to the license of any Papst Patent. . . (hereinafter referred to as "Prior Agreements"), and the parties acknowledge that from the Effective Date hereof [June 19, 1995] this Agreement shall govern the relationship between them.*fn25 Nothing herein shall be construed as limiting or abridging the rights of Minebea under such agreements, and any such rights are incorporated herein and preserved hereby. However, with regard to the rights and obligations of the parties to this Agreement concerning Papst Drive Patents and Papst Integrated Baseplate Patents, such rights and obligations shall be governed only by the provisions of this Agreement. See PTX 771, DTX 567, 1995 Settlement Agreement (June 19, 1995) ¶ 3.1 (emphasis added) (footnote added).*fn26

The plain meaning of Paragraph 3.1 is that the 1995 Settlement Agreement relieves Minebea of all its "obligations" under all prior agreements with respect to all Papst Patents, but preserves all its "rights" under the prior agreements; except that the parties' rights and obligations concerning Papst Drive Patents and Papst Integrated Baseplate Patents are governed exclusively by the terms of the 1995 Settlement Agreement. Indeed, the Court already has held it to be clear from this language that "[t]he rights and obligations of all parties to the 1995 Settlement Agreement, with respect to the Papst Drive Patents, are limited to those expressly enumerated in the 1995 Settlement Agreement." Minebea Co. v. Papst, 374 F. Supp. 2d 202, 206 (D.D.C. 2005).*fn27 It is also clear, however, that the Settlement Agreement preserved Minebea's pre-existing rights with respect to all patents other than the Papst Drive Patents and Integrated Baseplate Patents -- for example, the Papst Patents, including but not limited to those listed in Appendix I of the Settlement Agreement.*fn28

Having discussed Minebea's rights under the prior agreements, the Court now turns to the other terms of the 1995 Settlement Agreement, and to the rights Minebea secured thereunder.

a. Definitions

The 1995 Settlement Agreement sets forth two definitional terms of importance here: "Disk Drives" and "Counterparts." The term "Disk Drive" is defined as follows:

"Disk Drive" shall mean an assembly including a spindle motor, a clean room chamber, one or more data storage disks mounted on the spindle, and data heads mounted to access data on the disk(s), but shall not mean the separate constituent components of such assembly.

PTX 771, 1995 Settlement Agreement (June 19, 1995) ¶ 1.9. The term "Counterparts" is defined as follows:

"Counterparts" shall mean any and all patents which arise from any (i) reissue, reexamination or extension of a patent, (ii) foreign patents and foreign patent applications based on or corresponding to such patent and (iii) continuations, divisionals and continuations-in-part.

PTX 771, 1995 Settlement Agreement (June 19, 1995) ¶ 1.6. Because it includes continuations-in-part, the term "Counterparts" includes even patents that add new matter to the original patent. See id.; MANUAL OF PATENT EXAMINING PROCEDURE, § 201.08 ("A continuation-in-part is an application filed during the lifetime of an earlier nonprovisional application, repeating some substantial portion or all of the earlier nonprovisional application and adding matter not disclosed in the said earlier nonprovisional application.") (emphasis in original).

The 1995 Settlement Agreement also sets forth three categories of patents that are relevant here: "Papst Patents," "Papst Drive Patents," and "Future Patents."*fn29 What rights Minebea secured with respect to particular patents depends largely on which of the categories each patent falls into.

"Papst Patents" are defined as follows:

"Papst Patents" shall mean any and all patents and patents pending, including Counterparts thereof, naming Georg Papst as an inventor (including those in which he is named as a joint inventor with another), or which is owned, controlled, licensed or licensable, whether in whole or in part, by Papst as of the date of execution of this Agreement. Papst Patents shall include without limitation, the patents and patents pending set forth in APPENDIX I and II attached hereto and incorporated herein by reference (the patents listed in APPENDIX II are referred to as "Papst Integrated Baseplate Patents"). Provided, however, that Papst Patents shall not include the patents and patent applications set forth in APPENDIX III (hereinafter referred to as the "Papst Drive Patents"), or Counterparts thereof.

PTX 771, 1995 Settlement Agreement (June 19, 1995) ¶ 1.4. By definition, then, "Papst Patents" includes all patents and patents pending (and Counterparts thereof): (1) naming Georg Papst as sole or joint inventor, or (2) owned, controlled, licensed or licensable by Papst as of June 19, 1995, when the 1995 Settlement Agreement was executed; but not including those patents listed in Appendix III (which are the Papst Drive Patents) or Counterparts thereof -- basically, Papst's entire patent portfolio at the time of the Settlement Agreement, with the exception of the Papst Drive Patents and their Counterparts. "Papst Patents" includes the patents and patents pending in Appendices I and II of the Settlement Agreement.

"Papst Drive Patents" includes only the patents set forth explicitly in Appendix III of the 1995 Settlement Agreement. The parties do not contest which patents belong in this category.

The category of "Future Patents" is defined in the Settlement Agreement as:

any and all patents and patents pending, including Counterparts thereof, other than Papst Patents, which at any time during the term of this Agreement (i) name Georg Papst as an inventor (including those in which he is named as a joint inventor with another) and/or (ii) are owned, licensed or licensable by Papst. Provided, however, that Future Patents shall not include patent claims on Disk Drives (as defined herein).

PTX 771, 1995 Settlement Agreement (June 19, 1995) ¶ 1.5 (emphasis added). It appears that this category was meant to encompass patents that arose after the Settlement Agreement, except claims on Disk Drives or, as explained infra at 81-86, 92-94, so-called "drive patents."*fn30

b. Scope of rights under the 1995 Settlement Agreement

The 1995 Settlement Agreement grants to Minebea:

a non-exclusive, paid-up license to manufacture, distribute, use and sell Minebea Products under the claimed subject matter of the Papst Patents and the Future Patents without any further payment of royalties (hereinafter referred to as "Patent License").*fn31 This Patent License shall apply to each Papst Patent and Future Patent for as long as such Papst Patent or Future Patent remains valid. The expiration of any Papst Patent or Future Patent shall not affect the Patent License in respect of any other valid Papst Patent or Future Patent. However, no license is granted hereunder to any Minebea customer with regard to any product of the customer which directly infringes a Papst Patent if acts of the customer or any subsequent purchaser or user first results in the direct infringement of the Papst Patent. Also, no license is granted hereunder to any Minebea customer with respect to any of the Papst Drive Patents other than the Papst Integrated Baseplate Patents.

PTX 771, 1995 Settlement Agreement (June 19, 1995), ¶ 4.1 (footnote added) (emphasis added). The Agreement also expressly provided:

In consideration for the Settlement Amount to be paid hereunder, Papst . . . hereby and forever release[s] and discharge[s] Minebea . . . from any and all past and future actions, causes of action, . . . liabilities and any and all other claims whatsoever, at law or in equity, for infringement of the Papst Patents or the Future Patents arising out of the manufacture, distribution, use or sale of Minebea Products in whatever country, up to the Effective Date. This release extends to all customers, distributors and end-users of Minebea Products or components thereof. Provided, however, that this release does not extend to any Minebea customer for any act of infringement of Papst Patents or Papst Drive Patents performed where the customer combines or authorizes another to combine a Minebea Product with any component, material or process not produced by Minebea; provided, however, that this exclusion shall not apply to acts of infringement of Papst Integrated Baseplate Patents.

Id. ¶ 2.2 (emphasis added). The Agreement further provided:

Papst . . . agree[s] not to assert any claim or prosecute any action, suit or proceeding against Minebea . . . for infringement of any Papst Patent as of the Effective Date.

Id. ¶ 2.3 (emphasis added).

The 1995 Settlement Agreement also provided:

Papst . . . agree[s] not to assert any claim or prosecute any action, suit or proceeding against Minebea . . . for contributory infringement or inducement of infringement of any Papst Patent or Papst Drive Patent; provided, however, that this provision shall not bar Papst from the legal right to assert an infringement claim against a Minebea customer or subsequent purchaser or user for direct infringement of a Papst Drive Patent, other than a Papst Integrated Baseplate Patent, or for direct infringement of a Papst Patent if acts of such customer or subsequent purchaser or user first result in the direct infringement.

PTX 771, 1995 Settlement Agreement (June 19, 1995) ¶ 2.4 (emphasis added). The Agreement further provided:

Minebea's manufacture, distribution, use or sale of motors by themselves do not directly infringe the claims in the Papst Drive Patents. Papst . . . agree[s] not to assert any claim or initiate any proceeding against Minebea . . . for contributory infringement or inducement of infringement of any Papst Drive Patent.

Id. ¶ 5.2.

Thus, under the 1995 Settlement Agreement it is clear that Minebea received:

1. An explicit license to manufacture, use, and sell its motors under the Papst Patents and Future Patents. PTX 771, 1995 Settlement Agreement (June 19, 1995) ¶ 4.1.

2. A release from any claims of infringement of the Papst Patents or Future Patents based on Minebea's manufacture, use, or sale of motors before the effective date of the 1995 Settlement Agreement, as well as a promise not to sue Minebea for direct infringement of Papst Patents going forward. Id. ¶¶ 2.2, 2.3.

3. Papst's promise not to sue Minebea for indirect infringement or contributory infringement of any Papst Patent or Papst Drive Patent. Id. ¶¶ 5.2, 2.4.

4. A warranty that Minebea's manufacture, use, or sale of its motors did not, by themselves, directly infringe the Papst Drive Patents. Id. ¶ 5.2.

At the same time, it is clear under the 1995 Settlement Agreement that:

1. No license is granted to any Minebea customer with regard to any product of the customer that directly infringes a Papst Patent. PTX 771, 1995 Settlement Agreement (June 19, 1995) ¶ 4.1.

2. No license is granted to any Minebea customer with respect to any of the (Appendix III) Papst Drive Patents. Id. ¶ 4.1.

3. Minebea customers are not released from liability for any act of infringement of Papst Patents or Papst Drive Patents performed where the customers combines or authorizes another to combine a Minebea product with any component, material or process not produced by Minebea. Id. ¶ 2.2.

4. Papst preserves the legal right to assert an infringement claim against a Minebea customer or subsequent purchasers or users for direct infringement of a Papst Drive Patent or a Papst Patent. Id. ¶ 2.4.

By waiving its right to sue Minebea in the 1995 Settlement Agreement -- while at the same time reserving the right to sue Minebea's customers for infringement -- Papst authorized Minebea to manufacture and sell motors that would otherwise contribute to, or induce, the infringement of the Papst Patents or the Papst Drive Patents. Minebea is thus authorized by the Settlement Agreement to sell, without fear of suit, its motors to customers who will combine those motors into products that directly infringe the Papst Patents or the Papst Drive Patents.

The Agreement explicitly does not, however, provide a license to Minebea's customers for any acts of direct infringement of the Papst Patents or Papst Drive Patents where the customer is the first direct infringer. See id. ΒΆΒΆ 2.2, 2.4. If, therefore, Minebea sells a motor to a customer which incorporates the motor into a product that infringes a Papst Drive Patent, Minebea would not be liable for contributing to or inducing ...


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