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MATSUSHITA ELECS. CORP. v. LORAL CORP.

August 22, 1997

MATSUSHITA ELECTRONICS CORP., Plaintiff,
v.
LORAL CORP. and LORAL FAIRCHILD CORP., Defendants.



The opinion of the court was delivered by: JONES

 BARBARA S. JONES

 UNITED STATES DISTRICT JUDGE

 In September 1991, defendants Loral Corporation and Loral Fairchild Corporation (collectively, "Loral") brought suit in the Eastern District of Virginia (the "Eastern District Litigation") *fn1" against Matsushita Electronics, Inc. ("MEI") and other major electronics manufacturers for infringing upon patents owned by Loral (the "patents-in-suit"). The patents-in-suit cover certain charged coupled devices ("CCDs"), which are the semiconductor chips used as the "seeing-eye" in video cameras and facsimile machines. Plaintiff Matsushita Electronics Corporation. ("MEC") *fn2" was not a named defendant, but sold at least some of the allegedly infringing CCDs to the named defendants.

 In July 1992, while the Eastern District Litigation was still pending, MEC brought the instant action (1) seeking a declaratory judgment that it had a valid sublicense for the patents-in-suit and (2) claiming that Loral's refusal to recognize the sublicense and to discontinue the Eastern District Litigation harmed MEC's business relations with customers, as certain electronics companies had refused to purchase MEC's CCDs for fear of incurring patent infringement liability.

 Judge John S. Martin, Jr. granted summary judgement from the bench in favor of MEC on its claim that it holds a valid sublicense to use the patents-in-suit. The Court of Appeals for the Federal Circuit affirmed. See Matsushita Electronics Corp. v. Loral Corp., et al., 1994 U.S. App. LEXIS 25449, 93 Civ. 1435 (Fed. Cir. Sept. 13, 1994).

 In July 1996, this Court conducted a six-day bench trial on MEC's remaining tortious interference with business relations claim. *fn3" The parties gave their summations on October 7, 1996.

 Loral asserts that the Eastern District Litigation was at all times a reasonable and good faith effort to enforce its rights to the patents-in-suit. As such, Loral argues that it is immune from suit under the Noerr-Pennington doctrine, which shields litigants from liability for maintaining "genuine" litigation, which is litigation that is either objectively reasonable or brought in good faith (or both), and that, in any event, MEC has failed to prove the elements of its claim for tortious interference with business relations.

 Having considered the volumes of trial testimony and exhibits, and the thoughtful arguments advanced by both sides, this Court finds (1) that the Eastern District Litigation was not an objectively baseless suit and (2) that Loral genuinely believed in the merits of the litigation. As such, MEC has failed to prove by a preponderance of the evidence that the Eastern District Litigation constituted the kind of "improper means" needed to establish the tort intentional interference with business relations. Accordingly, the Court grants judgment in favor of Loral.

 FINDINGS OF FACT

 The following constitutes this Court's findings of fact pursuant to Fed.R.Civ.P. 52(a).

 I. The Patents-In-Suit

 In 1989, Loral acquired the ownership rights to the patents-in-suit from Fairchild Weston, which had acquired them from Fairchild Semiconductor, a successor company of Fairchild Camera & Instrument Company ("Fairchild").

 In late 1990, Loral began investigating whether manufacturers of camcorders and fax machines were infringing the patents. Loral representatives purchased camcorders and fax machines, disassembled them, and discovered that they used CCDs covered by the patents-in-suit.

 Additionally, Loral -- through Loral Fairchild Corporation's General Counsel Stephen Wahl ("Wahl") -- retained the law firm of Skjerven, Morrill, MacPherson, Franklin & Friel (the "Skjerven firm") to investigate primarily technical and legal issues related to the patents-in-suit. Several Skjerven firm attorneys were former Fairchild patent attorneys, including Allan MacPherson, a Skjerven partner who had been involved with Fairchild's licensing activities in the late 1970s and early 1980s. According to Wahl, MacPherson informed him that licenses were issued, but had expired. *fn4"

 Wahl also conducted his own documentary search for possible outstanding licenses. In August 1991, he contacted John M. Clark III ("Clark"), counsel to National Semiconductor Corporation ("National Semiconductor"), which had acquired certain patents (not including the patents-in-suit) and licensing files from Fairchild Semiconductor. Clark told Wahl that (1) he was not aware of any unexpired licenses issued to Japanese companies such as MEC and (2) he would review the files to confirm that there were no such licenses. Based on this information, Wahl advised Anthony Karembelas ("Karembelas") a Loral patent attorney, in a written memorandum that any issued licenses had expired. *fn5"

 Based on its pre-suit investigation, Loral genuinely believed that certain companies were using CCDs that infringed on the patents-in-suit. It then hired the law firm of Wiley, Rein & Fielding ("Wiley Rein") to enforce its rights in the patents-in-suit.

 One of Wiley Rein's attorneys, James Wallace, was informed that MacPherson had advised Loral that licenses to the patents-in-suit had been issued but had expired; Wallace knew MacPherson to be an experienced semiconductor lawyer. Based on these representations and others by Wahl and Karambelas, Wallace concluded that there was no deficiency in the pre-suit investigation.

 Accordingly, on September 12, 1991 Loral filed the complaint initiating the Eastern District Litigation. The complaint named MEI and Matsushita Electronics Corporation of America (a wholly owned subsidiary of MEI) (collectively, the "Eastern District Matsushita defendants") and various entities that had purchased CCDs from MEC, alleging that they were manufacturing or using CCDs that infringed the patents-in-suit. *fn6"

 On the same day it filed the complaint in the Eastern District Litigation, Loral sent letters to each of the named defendants, informing them of the case and inviting them to engage in "discussions of possible license arrangements" in order to avoid the expense of litigation.

 A. The Eastern District Matsushita Defendants Proffer A "Sublicense"

 On September 27, 1991, MEI's Intellectual Property Center in Japan wrote to Morton Amster ("Amster") and Michael Berger ("Berger"), counsel for the Eastern District Matsushita defendants, of the possible existence of an "old, expired" letter agreement that might be relevant to the patents-in-suit. At this point, neither Amster nor Berger knew if any sublicense, in fact, existed. Amster, however, recognized that "if indeed there was a license... there could be a huge economic advantage to MEC if they could get that license confirmed quickly and then turn around and tell everyone in the industry... that we are a license source for their CCDs"; Amster recognized that the Eastern District Litigation presented an opportunity for MEC to prove that its CCDs were licensed and thus to convince potential customers to purchase CCDs from it. *fn7"

 Roughly one month later, Amster received documents which MEI claimed established MEC's sublicense. On October 30, 1991, Amster and Berger telephoned Loral Corporation General Counsel Michael B. Targoff ("Targoff") and told him that MEC had a sublicense from N.V. Philips Gloeilampenfabriken ("Philips") pursuant to (1) a 1969 agreement between Fairchild and Philips (the "Technical Exchange Agreement") whereby the signatories cross-licensed to each other hundreds of patents, including the patents for the patents-in-suit and (2) a letter agreement dated December 15, 1969 (the "December 15, 1969 Letter Agreement") between Philips and MEC.

 By letter that same day, Amster confirmed his conversation with Targoff and elaborated on the basis for the claimed sublicense. Specifically, Amster explained: CCDs manufactured by MEC were sold to MEI and other Eastern District Litigation named defendants; MEC was a joint venture between Philips and MEI; Fairchild and Philips concluded two broad cross-licensing arrangements involving semiconductor technology, including the November 1969 Technical Exchange Agreement; *fn8" and the December 15, 1969 Letter Agreement gave MEC a sublicense to the patents-in-suit as an affiliated company. Additionally, Amster told Targoff that Philips notified Fairchild, by letter dated April 3, 1970 (the "Designation Letter"), that it had designated MEC a Philips' affiliate pursuant to the Technical Exchange Agreement. Amster did not, however, attach to his letter any of the documents that he referenced.

 Next, on November 6, 1991, Amster and Berger met with Targoff and furnished only the Technical Exchange Agreement (with the financial terms redacted) and the Designation Letter, which was not on letterhead and was undated. They directed Targoff to certain provisions in the Technical Exchange Agreement and stated their conclusion that it, along with the Designation Letter, proved that MEC had a sublicense to the patents-in-suit.

 From Amster's perspective, MEC had supplied Targoff at this point with enough information to prove the existence of a sublicense to the patents-in-suit; he stated at trial that the two documents he provided were a "slam dunk" that clearly showed the sublicense. He expected Targoff to trust his November 6, 1991 representation that MEC was sublicensed to use the patents-in-suit and believed that Targoff did not necessarily need to see all of the relevant, authentic documents: "I think when lawyers who have been around this business for 35, 40 years say something on behalf of a client and their credibility is at stake that serious lawyers on the other side ought to respect that and I thought that Mr. Targoff full well understood that we would not misrepresent knowingly what we understood to be the agreement between two major companies to counsel for another company."

 B. Loral Remains Unconvinced That MEC Has A Sublicense

 From Loral's viewpoint, the Eastern District Matsushita defendants' warranties and representations were not enough to convince it that others ...


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