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Electronics and Telecommunications Research Institute v. Acacia Research Group, LLC

United States District Court, S.D. New York

June 1, 2017

ELECTRONICS AND TELECOMMUNICATIONS RESEARCH INSTITUTE, Plaintiff,
v.
ACACIA RESEARCH GROUP, LLC, Defendant.

          David G. Ebert Evan T. Raciti Ingram Yuzek Gainen Carroll & Bertolotti, LLP New York, New York Counsel for Plaintiff

          Marc J. Schneider Douglas Q. Hahn Travis P. Brennan Stradling, Yocca, Carlson, & Rauth, P.C.

          Newport Beach, California Michael L. Lasky Neal H. Klausner Davis & Gilbert LLP New York, New York Counsel for Defendant

          MEMORANDUM & OPINION

          VERNON S. BRODERICK, United States District Judge

         Plaintiff Electronics and Telecommunications Research Institute (“Plaintiff” or “ETRI”) brings this action against Defendant Acacia Research Group, LLC (“Defendant” or “Acacia”) asserting claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and fraud in the inducement. Before me is ETRI's motion for partial summary judgment as to liability solely with respect to its breach of contract claim. Because ETRI has not demonstrated that it is entitled to judgment as a matter of law with respect to liability on its breach of contract claim, ETRI's motion for partial summary judgment, (Doc. 53), is DENIED.

         I. Background

         A The Parties

         Acacia and its subsidiaries are in the business of licensing and enforcing patent rights acquired from inventors and other patent holders, (Def.'s 56.1 ¶¶ 1, 2), [1] and Acacia and its subsidiaries presently own or control approximately 9, 912 patents, (Vella Decl. ¶ 5).[2] These patents span a wide range of technologies and industries including ceramic hip replacements utilized in orthopedic surgery, smartphone components utilized in consumer electronics, as well as numerous other technologies in fields including wireless networking, communications, aviation, automotive navigation and diagnostics, and super resolution microscopy. (Id.)

         ETRI is a research institute based in, funded by, and organized under the laws of South Korea. (Def.'s 56.1 ¶ 3.) Many of ETRI's patents relate to software engineering, video encoding, and various types of communications including optical, radio, cable and satellite. (Ebert Aff Ex. A at Ex. B.)[3]

         B. The ETRI/Acacia Agreements

         The ETRI/Acacia Agreements have effective dates of January 14, 2010 and May 7, 2010, respectively. (Def.'s 56.1 ¶ 4.) The two agreements relate to distinct sets of patents, but contain identical substantive provisions. (See ETRI Mem. 1 n.2.)[4] Pursuant to the ETRI/Acacia Agreements, Acacia acquired “all substantial rights” in approximately fifty-four U.S. patents and ninety-two foreign patents that were owned by ETRI (collectively, the “ETRI Patents”). (Def.'s 56.1 ¶¶ 4, 5; Vella Decl. ¶ 7.) The ETRI Patents relate to optical, radio, cable and satellite communications systems, and also video encoding technology. (Vella Decl. ¶ 7.)

         Section 1.1 of the ETRI/Acacia Agreements, which is titled “Exclusive License”, states in pertinent part that

[ETRI] grants to [Acacia] all substantial rights in and to the [ETRI] Patents including the worldwide, exclusive right and license under the [ETRI] Patents to make, have made, use, import, offer or sell products or services covered by the [ETRI] Patents, including the exclusive right to grant sublicenses, to sue for and collect past, present and future damages and to seek and obtain injunctive or any other relief for infringement of the [ETRI] Patents.

(Agmts. § 1.1.) Section 1.5 of the ETRI/Acacia Agreements is titled “Exclusivity to [Acacia]” and states that ETRI grants to Acacia “the sole and exclusive right under the [ETRI] Patents to deal with one or more Exclusive Parties in any and all matters relating to the [ETRI] Patents.” (Agmts. § 1.5.) The term “Exclusive Parties”, in turn, is defined as:

(a) a declaratory judgment plaintiff or an infringement defendant under any of the [ETRI] Patents; or
(b) a party infringing any claim from any of the [ETRI] Patents; or
(c) a party with which [Acacia] has initiated or undertaken licensing communications, discussions and/or negotiations or otherwise asserted any of the [ETRI] Patents against, provided that an Exclusive Party shall be deemed to include any and all of its affiliates.

(Id.)

         In consideration for ETRI's grant of the exclusive license in the ETRI Patents to Acacia as set forth at Section 1 of the ETRI/Acacia Agreements, ETRI was entitled to receive from Acacia 50% of Net Proceeds which the ETRI/Acacia Agreements define as “Total Recoveries less [Acacia's] Costs.” (Def.'s 56.1 ¶¶ 6-8; Agmts. § 3.1.) The term “Total Recoveries” is defined as “all amounts actually received by [Acacia] from the licensing and enforcement of the [ETRI] Patents including all licensing proceeds and recoveries from any lawsuits or settlements.” (Id.) “[Acacia's] Costs” are defined as “all costs and expenses incurred with third parties by [Acacia] in connection with prosecuting, maintaining, licensing, enforcing or defending the [ETRI] Patents . . . .” (Id.)

         Section 6 of the ETRI/Acacia Agreements is titled “ENFORCEMENT OF PATENT RIGHTS AND COOPERATION”, and Section 6.1, which is titled “Good Faith”, states in pertinent part that

Subject to the terms and conditions of this Agreement, [Acacia] will use its good faith efforts to pursue licensing and enforcement of the [ETRI] Patents at its expense. Subject to the limitations with respect to the Excluded Parties and Existing Agreements as set forth in Exhibit A and Exhibit C hereto, [Acacia] will attempt to negotiate ...

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