Sherwin-Williams Co. v. PPG Indus., Inc., CIVIL ACTION NO. 17-1023

THE SHERWIN-WILLIAMS COMPANY, Plaintiff/Counterclaim-defendant, v. PPG INDUSTRIES, INC., Defendant/Counterclaimant.

CIVIL ACTION NO. 17-1023

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

March 18, 2020

JUDGE JOY FLOWERS CONTI

OPINION

I. Introduction

On November 11, 2019, the special master entered a comprehensive, 22-page report and recommendation ("R&R") on cross-motions for summary judgment with respect to the existence of an implied license ("R&R #490") (ECF No. 490). On November 12, 2019, the special master entered a thorough, 32-page R&R on motions for summary judgment on the issues of "no anticipation" and "no non-infringing alternatives" ("R&R #491") (ECF No. 491). The special master's R&Rs addressed the parties' summary judgment motions at ECF Nos. 351, 366, 371 and 374.

The special master's R&Rs were issued after extensive briefing and oral argument, which the court attended. (Transcript, ECF No. 486). The special master and court also reviewed the parties' post-argument filings regarding the Federal Circuit Court of Appeals' Appeal No. 18-1462 (ECF Nos. 487-489). Numerous objections to the special master's R&Rs (accompanied by more extensive briefing) are pending. (ECF Nos. 492, 495-497, 499-503, 505-513, 515-516, 519). PPG objects to R&R #490 and objects in part to R&R #491 regarding the "no noninfringing alternatives" issue. Sherwin Williams objects in part to R&R #490, and objects in part to R&R #491, regarding the "no anticipation" issue.¹ Also pending is PPG's motion for entry of final judgment pursuant to Rule 54(b) and stay pending interlocutory appeal, which is fully briefed. (ECF Nos. 493, 494, 508, 522). On March 16, 2020, the court heard oral argument on the parties' objections to the R&Rs in accordance with Federal Rule of Civil Procedure 53(f). The objections will be reviewed de novo and addressed seriatim. Finally, PPG's motion for entry of a final judgment and a stay will be addressed.

II. Objections to the R&Rs

A. R&R # 490 -- Implied License

The parties filed cross-motions for summary judgment regarding the effect of a unilateral covenant not to sue² issued by Sherwin Williams on November 15, 2016, that mooted an appeal of a reexamination of the '047 and '876 patents (the "Parent Patents") in the Court of Appeals for the Federal Circuit. The disputes between Sherwin Williams and PPG involve a "family" of related patents involving BPA Non-Intent ("BPA-NI") interior beverage can coatings. The '047 and '876 patents at issue in the Court of Appeals for the Federal Circuit are "parent" patents. The "child" patents at issue in this case are '663, '012, '763, '900 and '854 (the "Asserted Patents").

As the special master explained, this litigation involving the Asserted Patents was ongoing at the time Sherwin Williams issued the covenant not to sue. Sherwin Williams sent the covenant not to sue to PPG and in the cover letter to PPG enclosing the covenant not to sue, Sherwin Williams expressly stated: "no license rights to the Asserted Patents are being conveyed to PPG." R&R #490 at 4-5. Sherwin Williams informed the Court of Appeals for the FederalCircuit about the covenant not to sue and noted that it wanted to keep the litigation on the Asserted Patents "moving forward on its current schedule" and had decided not to include the Parent Patents in this litigation. R&R #490 at 4 & n.5.

The special master recommended that Sherwin Williams' motion (ECF No. 374) be granted and PPG's motion (ECF No. 351) be denied. The special master thoroughly reviewed the convoluted procedural history and the decisions relied upon by the parties, including TransCore LP v. Electric Transaction Consultants Corp., 563 F.3d 1271 (Fed. Cir. 2009) ("TransCore"), General Protecht Group v. Leviton Manufacturing Co., 651 F.3d 1355 (Fed. Cir. 2011) ("General Protecht"), and ICOS Vision Systems Corp. N.V. v. Scanner Technologies Corp., No. 10 CIV. 0604 PAC, 2012 WL 512641 (S.D.N.Y. Feb. 15, 2012) ("ICOS"). The special master reasoned that no implied license was granted because there was no bargained-for consideration between PPG and Sherwin Williams. The special master explained that the doctrine of implied license would not be extended under a promissory estoppel theory to cover the circumstances of this case, in which the parties did not participate in any settlement negotiations and PPG did not act in reliance on an alleged implied license. In the alternative, the special master recognized that even if PPG could meet its burden, Sherwin Williams could defeat the presumption of an implied license by demonstrating a "clear indication of mutual intent" that it was not granting an implied license for the patents at issue in this litigation. The special master observed that determining "mutual intent" was difficult because the decisions that analyzed that concept arose in the context of a bilateral agreement, rather than an unilateral covenant not to sue. The special master concluded that Sherwin Williams could not meet its burden to show mutual intent based on PPG's conduct in meeting deadlines in this litigation. R&R #490 at 19.

PPG objects to the R&R and contends that it obtained an implied license by legal estoppel as a result of the issuance of the unilateral covenant not to sue. Sherwin Williams objects to the alternative portion of the R&R regarding mutual intent.

PPG's objections to R&R #490 essentially reiterate the arguments it presented to the special master, with more emphasis on consideration. In addition, at the oral argument on March 16, 2020, PPG emphasized its view that any limits on the scope of the implied license must be contained in the covenant itself, rather than the cover letter or contemporaneous statements to the Court of Appeals for the Federal Circuit. See General Protecht, 651 F.3d at 1361 (if the parties intend to vary the scope of an implied license, "it is their burden to make such intent clear in the license.").

The court concludes that the circumstances clearly show that no license, whether express or implied, was granted for the Asserted Patents. License agreements can be drafted to convey different scopes of promises not to sue. General Protecht, 651 F.3d at 1361. If an express license is granted on a parent patent, a presumption arises that those products are impliedly licensed under continuation patents as well, absent clear mutual intent to the contrary. Id. The parties' intent is controlling and they are free to contract around an interpretive presumption that does not reflect their intentions. Id. The decisions examine "mutual intent" to determine whether a presumption of an implied license can be overcome because, in the context of a negotiated agreement, the contract provides the best evidence of the parties' mutual intent. See id. at 1362 (discussing TransCore).

Here, the court must determine what is the "contract," i.e., the license, at issue. Does it include the cover letter, which is a clear expression by the grantor that no license is being granted for the Asserted Patents? The answer to that question is "yes." It is a basic principle of interpretation that "[a] writing is interpreted as a whole, and all writings which are part of thesame transaction are interpreted together." Restatement (Second) of Contracts § 202(2); accord CCA Assocs. v. United States, 667 F.3d 1239, 1250 (Fed. Cir. 2011) (recognizing that the Federal Circuit Court of Appeals acknowledges the Restatement (Second) of Contracts § 202(2) rule that "all writings that are part of the same transaction are interpreted together."); Kroblin Refrigerated Xpress, Inc. v. Pitterich, 805 F.2d 96, 107-08 (3d Cir. 1986) ("[W]here two writings are executed at the same time and are intertwined by the same subject matter, they should be construed together and interpreted as a whole, each one contributing to the ascertainment of the true intent of the parties."). The Third Circuit Court of Appeals has commented: "As an additional aid to proper construction [of a contract], the court should consider the situation of the parties, the attendant circumstances and the ends they sought to achieve." Williams v. Metzler, 132 F.3d 937, 947 (3d Cir. 1997) (discussing Restatement (Second) of Contracts § 202(2)).

The text of Sherwin Williams' covenant not to sue refers only to the Parent Patents.³ Sherwin Williams' contemporaneous writing to PPG, i.e., the cover letter, makes it abundantly clear that there was no license granted for the Asserted Patents. Sherwin Williams stated in the cover letter to PPG which enclosed the covenant: "no license rights to the Asserted Patents are being conveyed to PPG." (ECF No. 74-1). The contemporaneous cover letter must be construed and interpreted together with the covenant not to sue. The cover letter is a writing executed at the same time as the covenant not to sue and is intertwined with the same subject matter as thecovenant not to sue. The court must construe the contemporaneous writings - the cover letter and the covenant not to sue -- as a whole. See Kroblin Refrigerated, 805 F.2d at 107-08.

The attendant circumstances also reflect Sherwin Williams' intent and the ends it sought to achieve by issuing the covenant not to sue. Sherwin Williams stated in writing to the Federal Circuit Court of Appeals on November 15, 2016, that it was issuing a covenant not to sue limited to the Parent Patents. Sherwin Williams explained it decided not to include the Parent Patents in this litigation so it could keep the litigation about the Asserted Patents "moving forward on its current schedule."⁴ (ECF No. 74-1). The continuation of this litigation is further compelling evidence that supports Sherwin Williams' position. Spindelfabrik Suessen-Schurr, Stahlecker & Grill GmbH v. Schubert & Salzer Maschinenfabrik Aktiengesellschaft, 829 F.2d 1075, 1081-82 (Fed. Cir. 1987) (that a lawsuit was ongoing indicates strongly that there was no intent to forfeit rights under the patents involved...