Opinion
N22C-11-145 SKR CCLD
09-25-2024
LG ELECTRONICS INC., Plaintiff, v. INVENTION INVESTMENT FUND I, L.P., INVENTION INVESTMENT FUND II, LLC, INTELLECTUAL VENTURES I LLC, and INTELLECTUAL VENTURES II LLC, Defendants.
Jeremy D. Anderson, Esquire, Fish &Richardson P.C., Wilmington, Delaware. Attorney for Plaintiff. Brian E. Farnan, Esquire, and Michael J. Farnan, Esquire, Farnan LLP, Wilmington, Delaware, Jonathan K. Waldrop, Esquire, Marcus A. Barber, Esquire, John Downing, Esquire, and ThucMinh Nguyen, Esquire, Kasowitz Benson Torres LLP, Redwood Shores, California, Howard Bressler, Esquire, Kasowitz Benson Torres LLP, New York, New York, Attorney for Defendants.
Submitted: August 28, 2024
Upon Plaintiff's Motion for Summary Judgment, DENIED
Upon Defendants' Motions for Summary Judgment, GRANTED in part and DENIED in part.
Jeremy D. Anderson, Esquire, Fish &Richardson P.C., Wilmington, Delaware. Attorney for Plaintiff.
Brian E. Farnan, Esquire, and Michael J. Farnan, Esquire, Farnan LLP, Wilmington, Delaware, Jonathan K. Waldrop, Esquire, Marcus A. Barber, Esquire, John Downing, Esquire, and ThucMinh Nguyen, Esquire, Kasowitz Benson Torres LLP, Redwood Shores, California, Howard Bressler, Esquire, Kasowitz Benson Torres LLP, New York, New York, Attorney for Defendants.
MEMORANDUM OPINION AND ORDER
Sheldon K. Rennie, Judge
I. INTRODUCTION
Plaintiff LG Electronics Inc. ("LG" or "Plaintiff") sued Defendants Invention Investment Fund I, L.P.; Invention Investment Fund II, LLC; Intellectual Ventures I LLC; and Intellectual Ventures II LLC (together "IV" or "Defendants") for indemnification under the parties' 2019 patent license agreement ("License Agreement"). This indemnification claim arose out of a patent infringement suit ("Patent Litigation") between IV and LG's non-party customers GM and Toyota based on products LG sold to GM and Toyota. IV raises several contractual defenses and arguments to contest that any indemnification is due.
Plaintiff's Opening Brief in Support of their Partial Motion for Summary Judgement (hereafter "Pl. MSJ"), D.I. 244, Ex. A.
Id. Ex. G; Ex. H.
Defendants' Opening Brief in Support of their Motion for Summary Judgment on Damages (hereafter "Defs. MSJ Damages"), D.I. 241, at 1-4.
Before the Court are LG's Motion for Partial Summary Judgment and Defendants six Motions for Summary Judgment. After oral argument on August 28, 2024, the Court ruled on several of these matters. As such, all that remains for the Court to decide is: (1) IV's Motion for Summary Judgment on LG's Declaratory Judgment claim, (2) IV's Motion for Summary Judgment on LG's Breach of Contract claim, (3) IV's Motion for summary Judgment on Damages, and (4) LG's Motion for Partial Summary Judgment.
Judicial Proceeding Worksheet for Aug. 28, 2024 (hereafter "Judicial Proceeding Worksheet"), D.I. 319.
Defendants' Opening Brief in Support of their Motion for Summary on Plaintiff's Declaratory Judgment Claim (hereafter "Defs. MSJ DJ"), D.I. 234.
Defendants' Opening Brief in Support of their Motion for Summary on Plaintiff's Breach of Contract Claim (hereafter "Defs. MSJ Breach"), D.I. 238.
Defs. MSJ Damages.
Pl. MSJ.
Because future patent lawsuits between IV and LG's customers related to LG's products are not a certainty, a Declaratory Judgment would function as an advisory opinion. Accordingly, the Court GRANTS IV's Motion for Summary Judgment on LG's Declaratory Judgment claim. Genuine issues of material fact exist regarding some of IV's damage contentions. Therefore, the Court DENIES IV's Motion for Summary Judgment on Damages. However, there is no genuine dispute about whether the LG products at issue are Foundry Products under the License Agreement. They are not. Because IV fundamentally relies on the Foundry Product argument, the Court DENIES IV's Motion for Summary Judgment on LG's Breach of Contract claim. And for the reasons discussed below, the Court DENIES LG's Motion for Partial Summary Judgment.
II. FACTUAL BACKGROUND
A. The Parties
Plaintiff LG is a company organized under the laws of the Republic of Korea, with its principal place of business in Seoul, Korea.
Am. Compl. ¶ 6.
Invention Investment Fund I, L.P. ("IF I") is a Delaware limited partnership with its principal place of business in Bellevue, Washington.
Amended Compl. ¶ 7.
Invention Investment Fund II, LLC ("IF II") is a Delaware limited liability company with its principal place of business in Bellevue, Washington.
Id. ¶ 8.
Intellectual Ventures I LLC ("IV I") is a Delaware limited liability company with its principal place of business in Bellevue, Washington. IV I is a subsidiary and acts as an agent of IF I.
Id. ¶ 9.
Id.
Intellectual Ventures II LLC ("IV II") is a Delaware limited liability company with its principal place of business in Bellevue, Washington. IV II is a subsidiary and acts as an agent of IF II.
Id. ¶ 10.
Id.
B. The License Agreement
After IV sued various LG customers in 2016 and 2017 for patent infringement, LG and IV entered into the License Agreement in 2019. LG paid IV $12.8 million for rights to IV's entire patent portfolio. Specifically, LG was given a nonexclusive license to use IV's intellectual property to make and sell "Licensed Offerings." The License Agreement covered all "Licensed Patents" defined as "any patents, patent applications and patent rights" for which IV "has obtained the right to grant the licenses and other rights set forth." The License Agreement defines "Licensed Offerings" as "all" of the "current and future products, processes, services or technologies that are made or used by" LG or any of its subsidiaries."Foundry Products" are specifically exempted from the definition of Licensed Offering. The License Agreement defines "Foundry Products" as:
Pl. MSJ Ex. A; Ex. B 106:7-24.
Id. at Ex. A.; Ex. B 103:10-14, 106:13-24, 120:4-121:9.
Id. at Ex. A §§ 2.1, 5.1.
Pl. MSJ Ex. A § 1.
Id.
Id.
products manufactured by Licensee or any Licensee Subsidiary for or on behalf of a third party, solely according to such third party's design specifications . . . whereby such third party sells or distributes such products as its own product under its own mark or trade indica.
Id.
As part of the License Agreement, IV agreed to not "take any action or omit to take any action that would prevent or hinder the exercise by [LG] of the license rights granted under this Agreement."
Id. at Ex. A § 9.4.6.
Because of IV's patent infringement suits preceding the License Agreement, the contract contained a release of liability for LG's customers "to the extent of such customers' use of Licensed Offerings prior to the Effective Date and during the Term" of the License Agreement. The LG representative who negotiated the License Agreement stated that he "requested that IV include a release provision that would protect LGE's customers from future patent infringement lawsuits by IV with respect to LGE's products."
Id. at Ex. A § 4.3(b).
Pl. MSJ Ex. D, ¶ 2.
C. IV's 2021 Patent Infringement Suit and the Current Litigation
In October 2021, IV sued LG's customers Toyota and GM in Texas federal court alleging patent infringement. The products at issue in these cases were telematic units manufactured by LG. Both of LG's customers settled with IV and sought indemnification from LG. Toyota sought JPY 342,231,953 (about $2.2 million)and GM sought $14,933,844. The parties dispute the extent to which these indemnification claims were asserted against LG or their subsidiaries. LG has not paid either of these indemnification claims.
Id. at Ex. G; Ex. H.
Id. at Ex. 1 54-131; Answer to Am. Compl., D.I. 107, ¶¶ 48-49, 53.
Id. at Ex. O ¶ 24; Ex. P art. 27.4; Ex. Q; Ex. R.
Id. at Ex. R.
Id. at Ex. Q.
Defs. MSJ Damages. at 4,7; Plaintiff LG Electronic Inc.'s Omnibus Answering Brief in Opposition to Defendants' Motions for Summary Judgment (hereafter "Pl. Opp'n MSJ"), D.I. 268, at 55-56.
Pl. MSJ Ex. At 10 ("LG has not yet paid, these debts to GM and Toyota."
When LG became aware of the Patent Litigation in 2022, it informed IV of its belief that the telematic units in dispute were Licensed Offering covered by the License Agreement release. During negotiations from April-July 2022, IV maintained that the telematic were Foundry Products exempt from the definition of Licensed Offerings. The parties were unable to settle their dispute and LG filed this suit alleging that IV breached the License Agreement. Specifically, LG alleges that IV breached Section 2.1, 4.3(b), and 9.4.6 of the License Agreement.
Id. at Ex. L; Ex. I at 18-21.
Pl. MSJ Ex. at Ex. L.
Am. Compl.
Pl. MSJ Ex. A § 2.1 (granting LG a license to use IV's IP).
Id. Ex. A § 4.3(b) (granting LG's customers a release from patent infringement suits for their use of products made by LG).
Id. Ex. A § 9.4.6 (IV promises to not "hinder the exercise by Licensee . . . of their license rights granted under this agreement.").
D. Procedural History
LG filed its Amended Complaint on December 15, 2023. IV answered the Amended Complaint on January 2, 2024. At the close of discovery, IV filed six Motions for Summary Judgment on discrete issues and claims in the case on June 7, 2024. On the same day, LG filed a Motion for Partial Summary Judgment on its breach of contract claims related to Sections 4.3(b) and 9.4.6 of the License Agreement. The Court heard oral argument on August 28, 2024. Immediately following argument, the Court ruled on three of IV's Summary Judgment Motions and took the rest under advisement. Accordingly, all that remains pending is: (1) IV's Motion for Summary Judgment on LG's Declaratory Judgment claim, (2) IV's Motion for Summary Judgment on LG's Breach of Contract claim, (3) IV's Motion for Summary Judgment on Damages, and (4) LG's Motion for Partial Summary Judgment.
Am. Compl.
Answer to Am. Compl.
Defs. MSJ DJ; Defendants' Opening Brief in Support of their Motion for Summary Judgment on Plaintiff's Tortious Interference Claim D.I. 235; Defendants' Opening Brief in Support of their Motion for Summary Judgment for Lack of Jurisdiction D.I. 236; Defendants' Opening Brief in Support of their Motion for Summary Judgment Regarding Patent Exhaustion and Bad Faith D.I. 237; Defs. MSJ Damages.
Pl. MSJ.
Judicial Proceeding Worksheet.
Id.
III. STANDARD OF REVIEW
Summary judgment is warranted "if the pleadings, depositions, answers to interrogatories, and admission on file, together with the affidavits" show "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." The Court only determines whether genuine issues of material fact exist, and does "not decide such issues." To achieve summary judgment, the movant must carry its burden to demonstrate its motion is supported by undisputed material facts. If the movant is successful, then the burden shifts to the non-movant to demonstrate that a "genuine issue for trial" still exists.The Court views the facts and draws all reasonable inferences in the light most favorable to the non-movant. When the issue before the Court concerns contract interpretation, "summary judgment is appropriate only if the contract in question is unambiguous."
Del. Super. Ct. Civ. R. 56(c).
Merrill v. Crothall-American Inc., 606 A.2d 96, 99 (Del. 1992) (citation omitted).
Envolve Pharmacy Sols., Inc. v. Rite Aid Headquarters Corp., 2023 WL 2547994, at *7 (Del. Super. 2023) (citing Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979)).
Del. Super. Ct. Civ. R. 56(e).
Judah v. Del. Tr. Co., 378 A.2d 624, 632 (Del. 1977) (citations omitted).
Active Day OH, Inc. v. Wehr, 2024 WL 3201167, at *3 (Del. Super. June 27, 2024).
IV. DISCUSSION
The Court addresses each pending Motion for Summary Judgment in turn.
A. A Declaratory Judgment would be an Impermissible Advisory Opinion.
IV asks the Court to grant summary judgment stating that LG's claim for a declaratory judgment is unripe. Contractual parties can seek declaratory judgment to determine "any question of construction or validity and can seek a declaration of rights, status or other legal relations thereunder." LG seeks a declaratory judgment stating, "its telematics units are licensed to practice the patents asserted against LG's customers." LG argues that a declaratory judgment is needed to prevent IV from suing other LG customers for patent infringement, the way they sued Toyota and GM.
Defs. MSJ DJ at 4-6.
Goyal v. Cognosante, LLC, 2023 WL 8525128, at *7 (Del. Ch. Nov. 29, 2023).
Am. Compl. ¶ 85.
See id. ¶¶ 85-87.
When determining whether to issue a declaratory judgment, "courts will not entertain suits seeking an advisory opinion or an adjudication of hypothetical questions." Accordingly, Delaware applies a four-prong test to determine if there is an "actual controversy" such that a declaratory judgment could be granted. For a declaratory judgment request to be justiciable:
Rollins Intern., Inc. v. Internation Hydronics Corp., 303 A.2d 660, 662 (Del. 1973).
Id. at 662-63.
(1) It must be a controversy involving the rights or other legal relations of the party seeking declaratory relief; (2) it must be a controversy in which the claim of right or other legal interest is asserted against one who has an interest in contesting the claim; (3) the controversy must be between parties whose interests are real and adverse; (4) the issue involved in the controversy must be ripe for
judicial determination.
Id.
A dispute is not ripe, "where the claim is based on uncertain and contingent events that may not occur, or where future events may obviate the need for judicial intervention."
Lima USA, Inc. v. Mahfouz, 2021 WL 5774394, at *8 (Del. Super. Aug. 31, 2021) (citing XL Specialty Ins. Co. v. WMI Liquidating Trust, 93 A.3d 1208, 1217-18 (Del. 2014)) (emphasis in original).
Here, the parties only dispute the fourth factor. IV claims that future lawsuits against LG's customers are not unavoidable and therefore, the issue is unripe for declaratory judgment. Additionally, IV argues that a declaratory judgment would not necessarily resolve any future patent litigation because each suit would depend on case-specific facts. LG responds that future litigation by IV is sufficiently certain because IV has already threatened litigation against LG's customers, Volkswagen and BMW. LG also asserts that any argument about a case-by-case need to determine the applicability of IV's Foundry defense is invalid.
Defs. MSJ DJ at 4-6; Pl. Opp'n MSJ 41-45.
Defs. MSJ DJ at 4-5.
Defs. MSJ DJ at 5-6.
Pl. Opp'n MSJ 43-45.
Id.
The Court is persuaded by IV's argument that the controversy is not ripe for a declaratory judgment. Currently, IV has no pending patent litigation against LG's customers based on any patent covered by the License Agreement. Any argument about litigation that might be filed in the future is speculative. While the record shows that IV actively defends its patents, it does not establish that future suits against LG's customers over LG's products are unavoidable. Future events may remove the need for judicial intervention, including the possibility that LG's customers may reach agreement with IV,or IV may change its position based on this lawsuit. Hence, the material facts are not sufficiently "static" such that "the rights of the parties are presently defined rather than future or contingent." Accordingly, the Court GRANTS IV's Motion for Summary Judgment on LG's Declaratory Judgment claim.
Pl. Opp'n MSJ 41-45; Ex. 22 at 21:3-22:16; Ex. 10 at 214:6-8, 215:23-216:2; Ex. 33 at 9.
This happened with LG's customer Honda. Pl. Opp'n MSJ Ex. 22 at 21:3-22:16.
VT Shareholder Representative, LLC v. Edwards Lifesciences Corporation, 2023 WL 8597956, at *6 (Del. Ch. Dec. 12, 2023).
B. The Telematic Products at Issue in the Patent Litigation are not Foundry Products.
IV next asks the Court to grant summary judgment on LG's breach of contract claims. To prevail on a breach of contract claim a plaintiff must prove: "(1) the existence of a contract; (2) that the contract was breached; and (3) that damages were suffered as a result of the breach." Here, neither party disputes that the License Agreement is a valid contract binding all parties. Defendants' arguments regarding damages are addressed in a separate Motion for Summary Judgment. Accordingly, this Motion for Summary Judgment is controlled by the parties' arguments regarding the second factor.
Defs. MSJ Breach.
Cartel Media Group LLC v. Barone, 2021 WL 3673215, at *2 (Del. Super. 2021).
Defs. MSJ Breach at 1-2; Pl. Opp'n MSJ at 1.
Defs. MSJ Damages.
IV argues that the Patent Litigation and related events did not breach the License Agreement, because the telematic products at issue are Foundry Products and therefore, are excluded from the definition of Licensed Offerings. If true, this would mean that such products were also excluded from the License Agreement's customer release clause. To support its Foundry Products argument, IV highlights discovery documents showing that LG regularly consulted with Toyota and GM on the design specifications for their respective telematic units. The documents demonstrate that each telematic unit is sufficiently customized so that a GM unit would not work in a Toyota and vice-versa. Additionally, IV notes that the telematic units at issue bear the customer's trade insignia.
Defs. MSJ Breach at 5-8.
Id. at 6.
Id. at 6-9.
Id.
Id. at 9.
LG concedes that its products are highly customized for each of its customers. LG argues, however, that the evidence does not show that the telematic units were made "solely" based on its customers' design specifications such that the Foundry Product exemption applies. LG points to numerous documents and deposition testimony which demonstrate that LG independently designs significant portions of the telematic units. These documents include communications where LG rejected, rather than blindly applied, customers' design specifications. On the issue of trade insignia, LG produced photos showing that the telematic units contain both the customer's and LG's branding.
Pl. Opp'n MSJ at 34-38.
Id.
Id.
Id. at 36; Ex. 22 at 90:12-91:12.
Id. at 39-40.
The Court is persuaded by LG's argument. Courts give words their "ordinary meaning" when interpreting contractual language The U.S. Supreme Court has stated that the ordinary meaning of "solely" in interpretive matters means "alone," i.e. to the exclusion of all else. Accordingly, the License Agreement's definition of Foundry Products as those manufactured "solely according to such third party's design specifications," requires that the customer alone controls design. IV's attempts to muddy the waters by introducing expert opinion on the meaning of the definition of Foundry Products, does not alter this conclusion. The Court will only turn to extrinsic evidence of industry custom when the contractual terms are ambiguous. Here, the definition of Foundry Products is clear on its face.
Flagler Holdings VI Beta, Inc. v. Airline Accommodations Solutions, LLC, 2023 WL 9053669, at *3 (Del. Ch. Dec. 19, 2023).
Husted v. A. Philip Randolph Institute, 584 U.S. 756, 768 (2018).
Pl. Opp'n MSJ Ex. A § 1.
Defs. MSJ Breach at 5-11.
See Goyal, 2023 WL 8525128, at *8.
Documents produced in discovery show that Toyota and GM did not "solely" control the design of the telematic units. Though technical in nature, the documents generally show that LG controlled the design of the base telematic unit and then worked with Toyota and GM to modify them according to customer specifications.Rather than blindly follow the design specifications of Toyota and GM, LG was heavily involved in all aspects of telematic unit design, exclusively controlling some aspects. Because the telematic units were not made "solely" pursuant to Toyota or GM's design specifications, they are not Foundry Products. Because the Foundry Product argument is the basis for IV's Motion, the Court DENIES IV's Motion for Summary Judgment on LG's breach of contract claims.
Pl. Opp'n MSJ Ex. 22 86:7-87:19, 87:20-23, 87:24-88:2, 90:12-91:12; Ex. 6 ¶¶ 38-50, 66-73; Ex. 26 through Ex. 29.
Pl. Opp'n MSJ Ex. 6 ¶¶ 38-50, 66-73; Ex. 26 through Ex. 29.
C. There is a Genuine Issue of Material Fact Regarding whether IV's Alleged Breach Caused LG Damage.
IV asks the Court to grant summary judgment as it relates to LG's claimed damages from IV's alleged breach of the License Agreement. As noted above, proof of damages is an essential element of a breach of contract claim. IV makes seven arguments regarding damages: (1) LG cannot show causation because there is no breakdown of what indemnifiable costs are attributable to IV's alleged breaches;(2) the indemnity letter sent by GM and Toyota, used to establish LG's damages, are inadmissible hearsay; (3) LG has not actually paid anything to GM or Toyota, and only LG subsidiaries have contractual indemnity obligations; (4) the License Agreement limits LG's damages to "fees paid" i.e. $12.8 million; (5) LG did not submit adequate notice of its claims to IV; (6) LG is trying to collect damages that GM and Toyota waived; and (7) LG failed to mitigate its damages.
Cartel Media, 2021 WL 3673215, at *2.
Defs. MSJ Damages at 15-18.
Id. at 16.
Id. at 4, 7, 16.
Id. at 18.
Id. at 18-20.
Id. at 20-21.
Id. at 21-23.
None of these claims alone preclude IV's liability for breach of contract. On a Motion for Summary Judgment the Court does not require "a statement of damages with precision," only that Defendants are given "notice" of damages. Because nominal damages are sufficient to sustain a breach of contract claim, "the nonmovant need only present some credible evidence that supports a claim for damages." That "damages will be difficult to prove at trial" does not alter this result. Rather, if Plaintiff sufficiently pleads facts which, if true, show the "existence" of damages, arguments as to the "amount" of damages do not justify granting summary judgment.
Eni Holdings, LLC v. KBR Group Holdings, LLC, 2013 WL 618626, at *22 (Del. Ch. Nov. 27, 2013).
Medlink Health Solutions, LLC v. JL Kaya, Inc., 2024 WL 1192781, at *5 (Del. Super. Mar. 20, 2024).
Torrent Pharma, Inc. v. Priority Healthcare Distribution, Inc., 2022 WL 3272421, at *13 (Del. Super. Aug. 11, 2022).
Medlink, 2024 WL 1192781, at *5.
Accordingly, where a genuine dispute of material fact exists regarding any of Defendants' damage contentions, their Motion will be denied. The Court addresses each argument in turn.
1. LG's Non-Apportionment of its Claimed Indemnification Amount does Not Mean that they Failed to Assert Damages.
IV argues that LG's failure to apportion its claimed indemnification to the specific patents covered by the License Agreement means that LG has not sufficiently demonstrated its damages. This argument is legally untethered. As discussed above, where a plaintiff demonstrates the fact of damages, the Court will not grant summary judgment because of a dispute in the amount of damages.Documents identified in the record, notably the Patent Litigation itself and resulting indemnification letters, among others, demonstrate how IV's alleged breach of the License Agreement caused at least some indemnifiable costs to LG. LG has met its burden of providing proof of damages and providing "a basis to make a reasonable estimate of damages," to be proved at trial.
Defs. MSJ Damages at 11, 15-18.
Medlink, 2024 WL 1192781, at *5.
Pl. Opp'n MSJ at 53-54; see Pl. Opp'n MSJ Ex. 15 80:11-81:4.
Stone & Paper Investors, LLC v. Blanch, 2021 WL 3240373, at *36 (Del. Ch. July 30, 2021).
2. The Court Addressed the Admissibility of GM and Toyota's Indemnification Letters in a Motion in Limine .
IV argues that the indemnification letters from GM and Toyota that LG will use to prove its damages are inadmissible hearsay. Noting damages cannot be proved with hearsay, IV argues that the removal of these letters from LG's case means they will be unable to prove damages. The Court determined during the pretrial conference on September 23, 2024, that the letters are admissible pursuant to Rule 902(11) and 902(12), based on the supplied certifications, as the business records of Toyota and GM. The Court will not revisit that decision here. Accordingly the indemnification letters are admissible at trial.
Gustave v. Elysee, 2013 WL 8744694, at *2 (Del. Com. Pl. Oct. 7, 2013).
Defs. MSJ Damages at 16.
Judicial Proceeding Worksheet for Mon. Sept. 23, 2024, D.I. 329.
3. LG Cannot Voluntarily Take on the Indemnification Obligations of its Subsidiaries and Pass them on to IV; LG May Independently Owe Indemnification to Toyota and GM and Can Make a Claim for These Damages.
IV next argues that any indemnification payments that will be made by LG to Toyota and GM are to cover obligations actually owed by LG's subsidiaries. IV identifed documents produced by LG in discovery demonstrating that it was LG's subsidiaries that agreed to indemnify Toyota and GM - not LG. In response, LG points to its own set of documents showing that LG had at least some independent contractual indemnification obligations to Toyota and GM.
Pl. Opp'n MSJ Ex. 44 Intro and § 27.4; Ex. 15 34:16-19; Defs. MSJ Damages Ex. 16 LG-IV-0068754.
Defs. MSJ Damages Ex. 15 33:21-34:2, 270:12-13; Ex. 16 § 3; Ex. 21 § 24; Ex. 44 § 27.4.
These dueling documents demonstrate that there is a genuine dispute of material fact regarding the extent of LG's contractual indemnification liability to Toyota and GM. Delaware law is clear, however, that "a parent-subsidiary relationship, without more, cannot render a parent corporation liable for the obligations of its subsidiaries even where the subsidiary is wholly owned." To the extent LG voluntarily decided to assume the indemnification obligations of its subsidiaries, that is not "damage" related to IV's breach- it is a choice LG made. These obligations cannot be properly passed through to IV. Accordingly, such voluntary payments are not recoverable damages against IV.
CL Investments, L.P. v. Advanced Radio Telecom Corp., 2000 WL 1868096, at *7 (Del. Ch. Dec. 15, 2000).
4. The License Agreement Caps LG's Damages at $12.8 Million.
IV argues that the plain language of Sections 5.1 and 9.6 of the License Agreement cap LG's recoverable damages at $12.8 million. Section 9.6 states that IV's "[a]ggregate liabilities for claims arising under this agreement will not exceed the License Fee received by a party." The "Licensing Fee" is defined in Section 5.1 as $12.8 million. LG does not seriously dispute this reading of the plain language. Rather, it argues that because IV did not assert the damage cap in their answer, any argument related to it is waived. Yet, a damage limitation imposed by clear contractual language is not an affirmative defense. Thus, failing to raise it in an Answer waives a party's right to apply the cap. The Court does not lightly set aside the clear contractual language parties' have negotiated, and LG has provided no basis for doing so here. Hence, the License Agreement's plain language applies, and LG's maximum recoverable damages from IV under the License Agreement are $12.8 million.
Defs. MSJ Damages at 18.
Pl. MSJ Ex. A § 9.6.
Id. § 5.1.
Pl. Opp'n MSJ at 57-58; Zaman v. Amedeo Holdings, Inc., 2008 WL 2168397, at *15 (Del. Ch. 2008).
Cartel Media, 2021 WL 3673215, at *2.
5. There is a Genuine Dispute of Material Fact Regarding the Sufficiency of LG's Notice.
Section 9.6 of the License Agreement states that recovery under the agreement is measured from the "date that such party has been notified of a claim." IV argues that LG failed to comply with the notice requirements detailed in Section 9.15 of the License Agreement and is, therefore, barred from recovery. LG makes two arguments in response. First, LG claims that the notice requirement does not bar its recovery as a matter of law because the notice provision does not show an intent to prohibit suit absent notice. Second, as a factual matter, LG argues that its pre-suit negotiation efforts gave notice of IV's alleged breach.
Pl. MSJ Ex. A § 9.6; see Pl. MSJ Ex. A § 9.15 (laying out the procedure for notice).
Pl. MSJ Ex. A § 9.15; Defs. MSJ Damages at 18-20.
Pl. Opp'n MSJ at 60-61; See VoterLabs, Inc. v. Ethos Group Consulting Services, LLC, 2021 WL 11959616, at *2 n.2 (D. Del. Nov. 10, 2021) (applying Delaware Law).
Pl. Opp'n MSJ at 62-64.
LG's legal argument has merit. Delaware courts generally enforce pre-suit notice provisions. However, where the contract has no language that "clearly evidence an intent that litigation be pursued only after notice and an opportunity to cure," a breach claim will not fail for lack of notice." The case IV relies upon does not compel a different result, because the contract there contained a clear statement that a failure to give notice "shall terminate and wave any right" to remedy for breach. The License Agreement has no equivalent clear statement of the parties' intent that failure to give proper notice waives any right to sue for breach. Accordingly, even if LG failed to properly give notice under Sections 9.15 and 9.6, that does not preclude its ability to recover. The sufficiency of LG's notice, however, may go to other issues such as mitigation. Accordingly, discussion of LG's notice is not precluded from the case but, the sufficiency of that notice is a matter of fact for trial.
U.S. Bank Nat. Ass'n v. U.S. Timberlands Klamath Falls, L.L.C., 2004 WL 1699057, at *3 n.24 (Del. Ch. July 29, 2004).
WyPie Investments, LLC v, Homschek, 2018 WL 1581981, at *13 (Del. Super. Mar. 28, 2018); see Anvil Holding Corp. v. Iron. Acq. Co., 2013 WL 2249655, at *10 (Del. Ch. May 17, 2013).
Ophrys LLC v. OneMain Financial Inc., 846 Fed.Appx. 133, 135 (3d. Cir. 2021).
6. IV Implicitly Waived their Argument that GM and Toyota Waived any Damages Due to LG.
In their Opening Brief in Support of their Motion to Dismiss on Damages, IV originally asserted that LG sought to collect damages that GM and Toyota previously waived. In response, LG argued that IV's position was incorrect as both a factual and legal matter, because LG was not a party to the IV-Toyota/GM settlement agreements. IV's reply in support of their Motion to Dismiss does not respond to or reassert this portion of the argument. Thus, the argument can be considered implicitly waived. Even if not waived, IV's position is unconvincing. As a nonparty, LG's claims against IV for breach of contract could not be released by the settlement agreements between IV and GM and Toyota.
Defs. MSJ Damages at 20-21.
Pl. Opp'n MSJ at 64-66.
See Gone GB LTD. v. Intel Services Division, LLC, 2022 WL 17494811, at *4 (Del. Super. Dec. 8, 2022).
See Jones v. Elliott, 551 A.2d 62, 65 (Del. 1988); Delmarva Power & Light Co. v. First S. Util. Const., Inc., 2008 WL 495739, at *4 (Del. Super. Feb. 21, 2008) (applying that general position of law to an attempted release of claims).
7. Whether LG Properly Mitigated its Damages is an Issue of Fact for Trial.
It is a basic principle of contract law that a party suing for breach of contract must mitigate damages once a breach occurs. Where a party fails to mitigate, their damages are limited to what they would have been had mitigation occurred. A parties' duty to mitigate "is subject to reasonableness and whether the loss is mitigable." Accordingly, whether a party met its duty to mitigate is a factual issue best resolved at trial.
Cadles of West Virginia LLC v. CTE Healthcare, Communications LLC, 2022 WL 17684769, at *2 (Del. Super. Dec. 13, 2022).
SLH General Contractors, Inc. v. Ambience Inc., 2020 WL 1130325, at *6 (Del. Comm. Pl. Mar. 4, 2020).
Cadles, 2022 WL 17684769, at *2.
See Christiana Mall LLC v. Feet First, LLC, 2023 WL 605924, at *2 (Del. Super. Jan. 23, 2023).
Here, both LG and IV identify documents supporting their position on the mitigation issue. The Court will not weigh the credibility of this dueling evidence on a motion for summary judgment. Accordingly, whether LG met its obligation to mitigate damages after IV's alleged breach is an issue of fact for trial.
Defs. MSJ Damages at 8-11, 21-23; Ex. 23 at ¶¶ 80-165; Exs.5-6, 8-9; Pl. Opp'n MSJ Ex. 40; Ex. 43; Ex. 5 at 142-143; Ex. 60.
While several of IV's arguments regarding damages have merit and do not present a genuine issue of material fact, other damage contentions remain in dispute. At this stage LG need only show a genuine issue of material fact exists regarding its ability to prove even nominal damages. The Court is satisfied that burden has been met, hence IV's Motion for Summary Judgment on Damages is DENIED.
D. There is a Genuine Dispute of Material Fact that IV Breached Sections 9.4.6 and 4.3(b) of the License Agreement.
LG asks the Court to grant summary judgment holding that IV breached Sections 9.4.6 and 4.3(b) of the License Agreement. As discussed above, the elements of breach of contract are "(1) the existence of a contract; (2) that the contract was breached; and (3) that damages were suffered as a result of the breach." Only the second prong is addressed by this motion. The Court addresses each contractual provision in term.
Cartel Media, 2021 WL 3673215, at *2.
1. Section 9.4.6 of the License Agreement
Section 9.4.6 of the License Agreement states that IV will not "hinder the exercise by Licensee . . . of their license rights granted under this agreement." LG claims that IV breached this provision in two ways: first, by suing LG's customers and extracting settlements based on patents covered by the License Agreement; and second, by refusing to dismiss the Patent Litigation after LG's 2022 letter.
Pl. MSJ Ex. A § 9.4.6.
Pl. MSJ at 12.
The core of the Section 9.4.6 dispute is whether that clause adds substantive obligations under the License Agreement or merely restates the parties' intent to be bound by the other provisions. IV adopts the later position, arguing that Section 9.4.6 does not add any new contractual obligations. LG argues that the provision broadens its other rights under the License Agreement, prohibiting IV from acting in a way that "hinder[s] the exercise" of LG's rights but does not constitute a breach of another section of the contact. LG contends that the purpose of this provision was to ensure "patent peace," though the License Agreement does not use that term, based on the litigation between IV and LG preceding the License Agreement.
Defendants Opposition to Plaintiff's Motion for Entry of Partial Summary Judgment, D.I. 271 (hereafter "Defs. Opp'n MSJ") at 15-17.
Pl. MSJ at11-13.
LG MSJ at 2-3.
LG's argument carries the day. Delaware courts strongly disfavor reading a contract such that any provision is superfluous. IV's position would make Section 9.4.6 superfluous. Conversely, LG's asserted interpretation is consistent with both the License Agreement's language and the preexisting litigious relationship between LG and IV. A prohibition of a party taking any action to "hinder the exercise" of its counterparty's rights under the contract is most naturally read as an expansion of the preexisting rights under the agreement.
Intel Corp. v. American Guarantee & Liability Ins. Co., 51 A.3d 442, 451 (Del. 2012).
IV argues that even if Section 9.4.6 does confer additional rights under the License Agreement, there is a genuine dispute of material fact regarding if they breached that provision. Much of IV's argument is a restatement of their Foundry Product's discussion in their own Motion for Summary Judgment. For the reasons already discussed, the Foundry Product's exception does not apply to telematic units LG sold to Toyota and GM. Whether IV's initiation of the Patent Litigation breached Section 9.4.6, however, remains a genuine issue of material fact for the jury. LG has not shown that no reasonable jury could find IV did not breach Section 9.4.6 under its interpretation of that provision.
Defs. Opp'n MSJ 17-21.
Defs. Opp'n MSJ 15, 17-21.; see Defs. MSJ Breach at 5-12.
2. Section 4.3(b)
Section 4.3(b) of the License Agreement states:
[t]he releases in this Section 4 will not operate to release any third party or customers of Licensee .... However, such releases will operate to release customers of Licensee and Licensee Subsidiaries to the extent of such customers' use of Licensed Offering prior to the Effective Date and during the Term.
Id.
LG argues that the telematic units it sold to Toyota and GM were Licensed Offerings, whereby Toyota and GM's use of the units was covered by the release.
Pl. MSJ at 19-24.
IV responds first by reasserting their argument that the telematic units are not Licensed Offerings because they are Foundry Products. For the reasons discussed above, this argument is contrary to the License Agreement's text. IV also argues that Section 4.3(b) is "inapplicable" because, that section only covers suits pertaining to products LG's customers bought prior to the License Agreement's effective date.This argument disregards Section 4.3(b)'s plain language. The provision releases LG customers who use LG products "prior to the Effective Data and during the Term." The "Term" is defined as the length of IV's patent rights. Hence, the plain language of the release covers products bought by LG's customers before and after the parties signed the License Agreement. As a matter of contractual interpretation LG's argument prevails. However, a genuine issue of material fact exists regarding whether IV breached Section 4.3(b) under that interpretation. As with Section 9.4.6, LG has not shown that no reasonable jury could find that IV did not breach Section 4.3(b). Accordingly, granting LG's Motion for Partial Summary Judgment on Breach is improper.
Defs. Opp'n MSJ at 24-25.
Id.
Pl. MSJ Ex. A § 4.3(b).
Pl. MSJ Ex. A § 1.
No genuine dispute of material fact exists regarding the meaning of Sections 9.4.6 and 4.3(b). For both Sections, LG has demonstrated that the plain language supports its asserted interpretation. Hence, the Court adopts LG's interpretations of Sections 9.4.6 and 4.3(b). However, summary judgment is DENIED, because genuine issues of material fact remain regarding whether IV breached Sections 9.4.6 and 4.3(b). Plaintiff's Motion for Partial Summary Judgment is DENIED.
V. CONCLUSION
For the foregoing reasons, IV's Motion for Summary Judgment on LG's declaratory judgment claim is GRANTED. IV's Motion for Summary Judgment on LG's breach of contract claim is DENIED. IV's Motion for Summary Judgment on damages is DENIED. LG's Motion for Partial Summary Judgment is DENIED.
IT IS SO ORDERED.