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SMARTMATIC INTERNATIONAL CORPORATION, ET AL., v. DOMINION VOTING SYSTEMS INTERNATIONAL CORPORATION, ET AL. Sca-7844-Vcp
SMARTMATIC INTERNATIONAL CORPORATION, ET AL., v. DOMINION VOTING SYSTEMS INTERNATIONAL CORPORATION, ET AL. Sca-7844-Vcp
SMARTMATIC INTERNATIONAL )
CORPORATION, ET AL., )
)
Plaintiffs, )
)
v. )
)
DOMINION VOTING SYSTEMS ) C.A. No. 7844-VCP
INTERNATIONAL CORPORATION, ET AL., )
)
Defendants. )
)
DOMINION VOTING SYSTEMS )
INTERNATIONAL CORPORATION, ET AL., )
)
Counterclaim-Plaintiffs, )
)
v. )
)
SMARTMATIC INTERNATIONAL )
CORPORATION, ET AL., )
)
Counterclaim-Defendants. )
)
DOMINION VOTING SYSTEMS )
INTERNATIONAL CORPORATION, ET AL., )
)
Third-Party Plaintiffs, )
)
v. )
)
SMARTMATIC TIM CORPORATION, )
)
Third-Party Defendant. )
)
MEMORANDUM OPINION
R. Judson Scaggs, Jr., Esq., Megan Ward Cascio, Esq., Matthew R. Clark, Esq.,
MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; Richard A.
Johnston, Esq., Peter C. Mulcahy, Esq., WILMER CUTLER PICKERING HALE AND
DORR LLP, Boston, Massachusetts; Attorneys for Defendants Dominion Voting Systems
International Corporation, Dominion Voting Systems Corporation and Dominion Voting
Systems, Inc.
United States,‖ as used in an October 2009 license agreement, includes Puerto Rico. The
license agreement grants the plaintiffs a worldwide (other than the United States and
plaintiffs from selling the licensed products ―in the United States.‖ The plaintiffs
attempted to sell such products in Puerto Rico. In response, the defendants purported to
terminate the license agreement for breach of the noncompetition provision. The
defendants also ceased performing their obligations under the agreement. This lawsuit
followed.
The motion before me is the plaintiffs‘ motion for partial summary judgment on
the meaning of the term ―in the United States.‖ For the reasons stated in this
Memorandum Opinion, I find that the license agreement is ambiguous and that the
ambiguity cannot be resolved on the limited record before me. I therefore deny the
plaintiffs‘ motion.
I. BACKGROUND
A. Parties
―Smartmatic‖ or ―Plaintiffs‖).
1
There are two sets of defendants. The first set includes: Dominion Voting
Mountain Intellectual Property Management, Inc., a Delaware corporation, did not brief
Philippines corporation.
B. Facts
United States and Canada) nonexclusive license to certain precinct count optical scan
(―PCOS‖) voting systems that Dominion had developed (the ―License Agreement‖ or the
―Agreement‖). The License Agreement granted Smartmatic rights to certain patents and
patent applications that Dominion owned or controlled (the ―Licensed Patent Rights‖)
and to ―all know-how, trade secrets, methodologies and other technical information
1
Clark Aff. Ex. A, PCOS Framework License Agreement (―License Agreement‖),
§§ 1.2 & 1.4. The full definition of Licensed Patent Rights, Licensed Products,
and Licensed Technology is set forth infra Part II.B.4.a.
2
rights to develop, market, or sell2 products that embody the Licensed Technology (the
Smartmatic‘s right to sell both Licensed Products (i.e., Dominion PCOS voting systems)
different parts of the world. The section of the noncompetition provision that gives rise
to this dispute is Section 3.4(b), which states in relevant part that ―Smartmatic shall not
When the parties entered into the License Agreement, Dominion intended to focus
its efforts on Canada and the United States.4 Smartmatic would focus on emerging
international markets.5 In fact, before entering the License Agreement and based on prior
agreements with Dominion, Smartmatic contracted with the Republic of the Philippines
to provide certain technology and services to modernize and automate the Philippines‘
national elections.6
The parties‘ relationship hit a snag in June 2011 after the Puerto Rico State
Elections Commission issued a request for proposals. The Commission sought to acquire
2
Each relevant subsection in the noncompetition provision refers to limitations on
Smartmatic‘s right to ―develop, market, or sell‖ certain types of products. In the
interest of brevity, I use the shorthand ―sell‖ to refer to this group of actions.
3
License Agreement § 3.4(b) (emphasis added).
4
Answer, Verified Countercl., and Verified Third Party Compl. of the Dominion
Defs. (―Answer‖) ¶ 24.
5
Compl. ¶ 24.
6
Compl. ¶ 14.
3
products to implement a uniform electronic vote-counting system using optical scanning
voting technology like Dominion‘s. Both Smartmatic and Dominion submitted bids. On
May 23, 2012, Dominion notified Smartmatic by letter that Smartmatic was in breach of
the License Agreement because it submitted a bid to the Government of Puerto Rico to
sell Licensed Products ―in the United States‖ in violation of Section 3.4(b). Dominion
Puerto Rico is not ―in the United States.‖ The parties now contest, among other things,
the validity of Dominion‘s purported termination. Since the termination, Dominion has
C. Procedural History
October 29, Plaintiffs moved for partial summary judgment on the issue of whether
Puerto Rico is ―in the United States‖ for purposes of the License Agreement. Defendants
responded to Smartmatic‘s motion by requesting in their answering brief that the Court
deny the motion and instead declare ―that[:] (i) Puerto Rico is ‗in the United States‘ for
7
Section 7.2 of the License Agreement allows for termination by either party if the
other party is ―in default of any of its obligations hereunder and shall fail to
remedy any such default within sixty (60) days after notice‖ to the defaulting
party. Dominion maintained that Smartmatic‘s breach could not be remedied.
Clark Aff. Ex. K.
4
Smartmatic violated the relevant non-competition provision by competing against
Dominion and/or marketing Dominion‘s voting systems in Puerto Rico; (iii) Dominion
was entitled to terminate the license agreement as a result of such competition; and (iv)
Dominion validly terminated the license agreement.‖8 Although Defendants did not cross
move for partial summary judgment, they requested the opportunity to submit a cross
motion if the Court finds it necessary. I do find Defendants‘ request for summary
declaratory relief to be overly broad, but I do not consider it productive for Defendants to
cross move for partial summary judgment at this time.9 Smartmatic understandably has
briefed and argued only the issue that is the subject of their motion for partial summary
judgment.10 Thus, I will treat the motion before me and Dominion‘s response as the
equivalent of a cross motion for partial summary judgment on the issue of whether Puerto
Rico is ―in the United States‖ for the purposes of the noncompetition provision in the
License Agreement.
depends on the resolution of this threshold issue. Whether the License Agreement
8
Dominion Defs.‘ Answering Br. in Opp‘n to Pls.‘ Mot. for Partial Summ. J.
(―Defs.‘ Opp‘n Br.‖) 2.
9
The Court of Chancery has ―the inherent authority to grant summary judgment sua
sponte against a party seeking summary judgment.‖ Stroud v. Grace, 606 A.2d
75, 81 (Del. 1992).
10
Id. (―[T]he Court of Chancery should only sua sponte grant summary judgment
against a party seeking summary judgment when the state of the record is such that
the non-moving party is clearly entitled to such relief.‖ (citations omitted)).
5
properly was terminated will affect whether Dominion owes Smartmatic continuing
obligations under the Agreement. Moreover, such obligations are important to other
claims the parties have against each other that are not relevant to the motion now before
me.
The parties argued Plaintiffs‘ motion on December 21, 2012. Shortly after the
argument, I requested that the parties submit additional briefing to address whether, in
construing the License Agreement, I should consider the fact that, under 35 U.S.C.
§ 100(c), Dominion‘s United States patents would apply to actions taken by Smartmatic
in Puerto Rico. The parties completed briefing on this issue on January 14, 2013. This
judgment.
D. Parties’ Contentions
Both parties argue that the License Agreement is unambiguous and should be
interpreted in their favor. Smartmatic asserts that the ordinary meaning of ―in the United
States‖ does not include Puerto Rico. In support of this assertion, they rely on dictionary
definitions, case law, and statutes that explicitly distinguish between Puerto Rico and the
United States. Plaintiffs also argue that because the term at issue appears in the License
Dominion counters that the ordinary meaning of ―in the United States‖ includes
Puerto Rico. To support their interpretation, Defendants assert that Puerto Rico is
considered to be part of the United States under most federal laws. They also rely on
6
address the question of competition ―in the United States,‖ in Section 3.4(b), and ―in any
country other than the Unites States,‖ in Section 3.4(c). Dominion argues that because
Puerto Rico is not a ―country other than the United States,‖ it must be included in the
contract language ―in the United States.‖ Thus, according to Defendants, the plain
language of the License Agreement demonstrates the parties‘ intent that the term ―in the
United States‖ would include Puerto Rico. In addition, Defendants emphasize that the
statute most relevant to the Agreement, the Help America Vote Act, treats Puerto Rico as
part of the United States.11 They also dispute that dictionary definitions and case law
support Smartmatic‘s argument that the ordinary meaning of United States excludes
Puerto Rico. Lastly, Dominion contends that the canons of construction noscitur a sociis
II. ANALYSIS
The parties chose Delaware law to govern the License Agreement.12 In Delaware,
and admissions on file, together with the affidavits, show that there is no genuine issue as
to any material fact and that the moving party is entitled to a judgment as a matter of
11
See 42 U.S.C. § 15541 (defining ―State‖ to include ―the District of Columbia, the
Commonwealth of Puerto Rico, Guam, American Samoa, and the United States
Virgin Islands‖).
12
License Agreement § 8.2.
7
law.‖13 When considering a motion for summary judgment, the evidence and the
inferences drawn from the evidence are to be viewed in the light most favorable to the
nonmoving party.14 As noted supra, at Defendants‘ request, I have treated the parties‘
submissions as presenting cross motions for partial summary judgment. Thus, I draw no
inferences in Dominion‘s favor based on its technical status as the nonmoving party.
Furthermore, although the parties agree that the issue before me can be resolved as a
matter of law, the Court ―maintains the discretion to deny summary judgment if it decides
that a more thorough development of the record would clarify the law or its
application.‖15
When the issue being presented for summary judgment is one of contractual
interpretation, summary judgment may be appropriate where ―the dispute centers on the
said to exist ―when the provisions in controversy are reasonably or fairly susceptible of
13
Twin Bridges Ltd. P’ship v. Draper, 2007 WL 2744609, at *8 (Del. Ch. Sept. 14,
2007) (citing Ct. Ch. R. 56(c)).
14
Id.; see also Judah v. Del. Trust Co., 378 A.2d 624, 632 (Del. 1977).
15
Tunnell v. Stokley, 2006 WL 452780, at *2 (Del. Ch. Feb. 15, 2006) (quoting
Cooke v. Oolie, 2000 WL 710199, at *11 (Del. Ch. May 24, 2000)).
16
Seidensticker v. Gasparilla Inn, Inc., 2007 WL 4054473, at *2 (Del. Ch. Nov. 8,
2007) (citing HIFN, Inc. v. Intel Corp., 2007 WL 1309376, at *9 (Del. Ch. May 2,
2007)); see also AHS N.M. Hldgs., Inc. v. Healthsource, Inc., 2007 WL 431051, at
*3 (Del. Ch. Feb. 2, 2007).
17
United Rentals, Inc. v. RAM Hldgs., Inc., 937 A.2d 810, 830 (Del. Ch. 2007).
8
different interpretations or may have two or more different meanings.‖18 Ambiguity does
not exist, however, simply because the parties disagree about what the contract means.19
When interpreting a contract, the court will give effect to the parties‘ intent based
on the parties‘ words and the plain meaning of those words.20 The Court will give
disputed terms their ordinary and usual meaning.21 Of paramount importance is what a
reasonable person in the position of the parties would have thought the language of the
contract meant.22 If either party demonstrates that their construction of the contract ―is
the only reasonable interpretation,‖ that party will be entitled to summary judgment.23 In
interpretation better comports with the remaining contents of the document or gives effect
to all the words in dispute, the court may, as a matter of law and without resorting to
18
Rhône-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1196
(Del. 1992).
19
United Rentals, Inc., 937 A.2d at 830.
20
Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 739 (Del. 2006).
21
AHS N.M. Hldgs., Inc., 2007 WL 431051, at *3.
22
Id. (citing Rhône-Poulenc Basic Chems. Co., 616 A.2d at 1195–96).
23
United Rentals, Inc., 937 A.2d at 832 n.104 (noting that a party seeking summary
judgment effectively bears the burden to demonstrate that its interpretation is the
only reasonable interpretation as a matter of law).
9
extrinsic evidence, resolve the meaning of the disputed term in favor of the superior
interpretation.‖24
contract that facially has only one reasonable meaning.‖25 If the words of a contract,
however, ―can only be known through an appreciation of the context and circumstances
in which they are used[,] a court is not free to disregard extrinsic evidence of what the
parties intended.‖26 In this regard, the Delaware Supreme Court stated in Eagle
24
Wills v. Morris, James, Hitchens & Williams, 1998 WL 842325, at *2 (Del. Ch.
Nov. 6, 1998) (accepting one party‘s interpretation where the other party‘s
interpretation resulted in an internal redundancy).
25
United Rentals, Inc., 937 A.2d at 830.
26
City Investing Co. Liquidating Trust v. Continental Cas. Co., 624 A.2d 1191, 1198
(Del. 1993) (citing Klair v. Reese, 531 A.2d 219, 223 (Del. 1987)) (internal
quotation marks omitted). In Klair, the Supreme Court stated that ―the court is not
free to exclude or disregard extrinsic evidence; for the meaning of words used in
an agreement can only be known through an appreciation of the context and
circumstances in which they were used.‖ Klair, 531 A.2d at 223. Since 1993,
however, the Supreme Court has limited this language: ―Klair should be construed
narrowly to conform to the principle that, where contract language is
unambiguous, extrinsic evidence may not be used to interpret the intent of the
parties, to vary the terms of the contract or to create ambiguity.‖ Cincinnati SMSA
Ltd. P’ship v. Cincinnati Bell Cellular Sys., 708 A.2d 989, 993 n.19 (Del. 1998);
see also Capital Mgmt. Co. v. Brown, 813 A.2d 1094, 1097 n.1 (Del. 2002)
(reiterating disapproval of Klair).
10
the parties, to vary the terms of the contract, or to create an
ambiguity].27
The Supreme Court cautioned that ―the trial court must be careful in entertaining
background facts to avoid encroaching on the basic principles set forth [in Eagle
Industries, Inc.].‖28 Thus, to the limited extent the License Agreement‘s language can
is used, I may consider undisputed background facts to place the Agreement in its
historical setting.
The narrow issue before me is whether the term ―in the United States,‖ as used in
Section 3.4(b) of the License Agreement, includes or excludes Puerto Rico. Section
3.4(b) states in relevant part: ―Smartmatic shall not develop, market or sell any Licensed
Products in the United States at any time during the term of this Agreement.‖29 I
consider first the plain and ordinary meaning of the term ―United States.‖30
27
702 A.2d 1228, 1232 n.7 (Del. 1997).
28
Id.
29
License Agreement § 3.4(b). Section 3.4 is set forth in its entirety infra Part
II.B.4.
30
Sassano v. CIBC World Mkts. Corp., 948 A.2d 453, 462 (Del. Ch. Jan. 17, 2008)
(stating that to determine the parties‘ shared intent, the court first reviews the
words in the contract and ―ascribes to the words their ‗common or ordinary
meaning,‘ and interprets them as would an ‗objective reasonable third-party
observer‘‖ (citations omitted)).
11
1. Dictionary definitions of the term “United States”
Delaware courts ―will look to dictionaries for assistance in determining the plain
meaning of terms which are not defined in a contract.‖31 The Random House Webster‘s
Unabridged Dictionary defines the United States as ―a republic in the N[orth] Western
North America, and Hawaii in the N[orth] Pacific.‖32 Black‘s Law Dictionary defines the
United States as ―a federal republic formed after the War of Independence and made up
of 48 coterminous states, plus the state of Alaska and the District of Columbia in North
America, plus the state of Hawaii in the Pacific.‖33 Webster‘s New World Dictionary
provides that the United States of America is a ―country made up of the N[orth]
American area extending from the Atlantic Ocean to the Pacific Ocean between Canada
and Mexico, together with Alaska & Hawaii.‖34 Similarly, the New Oxford American
Dictionary defines the Unites States as ―a country that occupies most of the southern half
of North America as well as Alaska and the Hawaiian Islands.‖35 The American Heritage
Absent a termination for breach, the term of the Agreement was from October 19,
2009 until April 3, 2014, or approximately four years and six months. License
Agreement preamble & § 7.1.
31
Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 738 (Del. 2006).
32
Pls.‘ Mot. for Partial Summ. J. 15 (citing Random House Webster‘s Unabridged
Dictionary 2077 (2d ed. 2001)).
33
Black‘s Law Dictionary 1675 (9th ed. 2009).
34
Webster‘s New World Dictionary 1552–53 (2d ed. 1986).
35
New Oxford American Dictionary 1892 (3d ed. 2010).
12
College Dictionary of the English Language, however, provides this definition of the
United States: ―A country of central and northwest North America with coastlines on the
Atlantic and Pacific Oceans. It includes the non-contiguous states of Alaska and Hawaii
and various island territories in the Caribbean Sea and Pacific Ocean.‖36
suggest that the ordinary meaning of the United States includes only the forty-eight
contiguous states, the District of Columbia, Alaska, and Hawaii. I consider next how the
Although no Delaware court squarely has addressed whether Puerto Rico is ―in the
United States,‖ courts in other jurisdictions have considered this question. Most notably,
Appeals for the Eighth Circuit considered the scope of a settlement agreement that
covered ―[a]ll travel agencies in the Unites States who, at any time from February 10,
1995, to the present, issued tickets . . . for travel on any of the defendant airlines within
and between the continental United States, Alaska, Hawaii, Puerto Rico and the U.S.
Virgin Islands.‖37 The Eighth Circuit applied Missouri law, but the Delaware Supreme
36
Am. Heritage College Dictionary of the English Language 1895 (5th ed. 2011).
As Smartmatic notes, this dictionary also includes a depiction of the United States
that does not show Puerto Rico. Pls.‘ Reply in Supp. of Their Mot. for Summ. J.
(―Pls.‘ Reply Br.‖) 5–6 & Ex. A.
37
In re Airline Ticket Comm’n Antitrust Litig., 268 F.3d 619, 621 (8th Cir. 2001).
13
Court has observed that Missouri law comports with Delaware law.38 The court affirmed
the district court‘s finding that the settlement agreement‘s reference to ―all travel
agencies in the United States‖ did not include travel agencies in Puerto Rico. The court
of appeals approved of the district court‘s reliance on a lay person‘s understanding and a
dictionary definition of the term ―United States.‖ Notably, the Eighth Circuit rejected the
appellant‘s argument that the district court should have considered the following
definition of the ―United States‖ from the Federal Aviation Act: ―the States of the United
States, the District of Columbia, and the territories and possessions of the United States,
including the territorial sea and the overlying airspace.‖ 39 Instead, the Eighth Circuit
found that ―the [district] court correctly gave the contract language its plain and ordinary
meaning. Indeed, it heeded the admonition that a court should not ignore the common
and popular usage of a contract term.‖40 In addition, the court relied on the language of
the agreement in question that referred first to the ―United States‖ and then later to
―travel . . . within and between the continental United States, Alaska, Hawaii, Puerto
Rico, and the U.S. Virgin Islands.‖41 To give effect to all the terms of the agreement, the
38
AT&T Corp. v. Lillis, 953 A.2d 241, 253 n.35 (Del. 2008) (―Missouri law
comports with Delaware law requir[ing] contractual terms be given their plain and
ordinary meaning, absent a specific definition provided in the contract.‖ (citations
omitted)).
39
In re Airline Ticket Comm’n Antitrust Litig., 268 F.3d at 623.
40
Id.
41
Id. at 622.
14
court reasoned that the first reference to the ―United States‖ must have excluded Puerto
Rico.
Several courts, including Delaware courts, have noted that Puerto Rico is ―part of‖
the United States. First, the Delaware Supreme Court stated that Puerto Rico is ―part of‖
the United States in State of Sao Paulo v. American Tobacco Co.42 In this case, two
foreign governments appealed a Superior Court decision that the governments lacked
standing to assert their claims as parens patriae. Parens patriae standing allows U.S.
states, but not foreign sovereigns, to assert claims on behalf of their citizens in certain
limited circumstances. In considering this issue, the Supreme Court summarized a prior
case that had accorded Puerto Rico parens patriae standing because ―Puerto Rico, like
the fifty American States, had given up certain sovereign rights to become part of the
United States.‖43 The Court noted that ―[f]oreign governments . . . on the other hand,
retained the full array of sovereign rights that the American States and Puerto Rico had
In addition, the Delaware Family Court held that travel to Puerto Rico is not
considered travel outside of the United States in a ruling on visitation rights to a child.45
In that case, the child‘s paternal grandmother petitioned to take the child to Puerto Rico
42
919 A.2d 1116, 1122 (Del. 2007).
43
Id. (emphasis added).
44
Id.
45
See J.A. v. I.A., 2005 WL 3560810, at *1 (Del. Fam. 2005).
15
and his mother asked to take him to Ecuador. The court permitted the mother to take the
International Child Abduction and, if the child were wrongfully retained in Ecuador, the
mother could be required to return him to Delaware. The court, however, would not
allow the paternal grandmother to take the child to Puerto Rico without the mother‘s
consent because ―Puerto Rico is a territory of the United States,‖ and such a trip ―would
not be considered travel outside of the United States and The Hague Convention would
not apply.‖46
The United States Court of Appeals for the First Circuit also has stated that Puerto
Rico is ―part of‖ the United States. Dominion avers that First Circuit cases are
particularly authoritative on issues involving Puerto Rico because the First Circuit‘s
jurisdiction includes Puerto Rico. In Lopez Lopez v. Aran, the First Circuit considered a
basis for the plaintiff‘s claims, the First Circuit noted that ―[a]s Puerto Rico is part of the
United States, it is not an immigration threshold, and the only excuse for the INS
procedure is that illegal aliens find Puerto Rico an especially facile location to obtain
46
Id.
47
Lopez Lopez v. Aran, 894 F.2d 16, 17 (1st Cir. 1990).
16
The second First Circuit case Defendants rely on is Uffner v. La Reunion
Francaise, S.A.48 According to Defendants, the First Circuit found that the District Court
of Puerto Rico was a proper venue for a dispute between parties who had agreed by
United States of America.‖ Even considering Dominion‘s gloss on the court‘s decision,49
this case is not particularly helpful to them. In setting forth the case background, the
Uffner court mentioned that the underwriting agent ―places yacht policies in the United
States (including Puerto Rico).‖50 By specifically mentioning Puerto Rico, the First
Circuit implicitly recognized that the term ―in the United States‖ does not categorically
48
244 F.3d 38 (1st Cir. 2001).
49
The court considered whether venue was proper under 28 U.S.C. § 1391(a) which
states, in relevant part, that a civil action may be brought in ―a judicial district in
which a substantial part of the events or omissions giving rise to the claim
occurred.‖ Id. at 41–42. The dispute at issue in Uffner was an insurance claim for
a vessel that sunk in Puerto Rico. The court concluded that ―in a suit against an
insurance company to recover for losses resulting from a vessel casualty, the
jurisdiction where that loss occurred [(i.e., Puerto Rico)] is ‗substantial‘ for venue
purposes.‖ Id. at 43. The court added that its conclusion did not run contrary to
the statute‘s purpose ―to protect the defendant against the risk that a plaintiff will
select an unfair or inconvenient place of trial‖ for several reasons. One of those
reasons was that the parties broadly had agreed to submit to the jurisdiction of a
court of competent jurisdiction within the United States of America. Id. at 43 &
n.7.
50
Id. at 40.
17
An additional case relied upon by Smartmatic is of only marginal relevance. In
Iberia Foods Corp. v. Romeo,51 the sole statement on point appears in a footnote in which
the Third Circuit agreed ―with the district court‘s conclusion that the [license] agreement
transferred to Iberia only those trademark rights relating to the continental United
States.‖52 The district court, however, partly based its decision on extrinsic evidence that
the parties intended contract language granting trademark rights that ―relate to the United
States‖ to grant rights only with respect to the continental United States.53
Thus, a review of the cases reveals that courts have engaged in a case-by-case
determination with no consensus on whether the term ―in the United States‖ has only one
reasonable meaning. The Delaware Supreme Court recognized that Puerto Rico is ―part
of‖ the United States, but Puerto Rico‘s status was not the question before the Court.
Thus, the statement in State of Sao Paulo is neither controlling nor very probative on the
issue presented here. Likewise, the Delaware Family Court did not analyze whether the
ordinary meaning of ―in the United States‖ includes Puerto Rico. Rather, it simply noted
51
150 F.3d 298 (3d Cir. 1998).
52
Id. at 301.
53
In another case relied on by Plaintiffs, Bolen International, Inc. v. Medow, 191 So.
2d 51 (Fla. Dist. Ct. App. 1966), the Florida court interpreted the term ―the area of
the United States‖ in a noncompetition agreement. That court considered the term
in ―a geographical sense‖ and held that ―the Commonwealth of Puerto Rico is not
within the United States.‖ Id. at 53. Dominion criticizes the Bolen case because,
among other things, it relies on authority from 1827 and 1930 and has never been
cited for the proposition that the United States does not include Puerto Rico. It is
unnecessary to evaluate those criticisms, however, because the different language
at issue in Bolen renders it distinguishable.
18
the fact that travel between the United States and Puerto Rico generally is not considered
to be international travel.
The Eighth Circuit‘s decision in In re Airline Ticket is the most apposite to this
case. There, the Eighth Circuit upheld the district court‘s holding that the ordinary
meaning of ―in the United States‖ excludes Puerto Rico. In addition, the court noted that
―if the parties intended to include Puerto Rico and the U.S. Virgin Islands, they knew the
language to do so.‖54 The Agreement at issue in that case, however, expressly addressed
travel ―within and between the continental United States, Alaska, Hawaii, Puerto Rico
and the U.S. Virgin Islands.‖55 That fact alone renders the decision in In re Airline Ticket
The parties take a different approach in assessing the relevance of federal statutes.
Dominion focuses on the fact that many statutes treat Puerto Rico as part of the United
States or as the equivalent of a state. Indeed, the statutes most relevant to the parties‘
dispute define the ―United States‖ to include Puerto Rico. These statutes include federal
laws that regulate voting,56 federal patent and trademark laws,57 and the Help America
54
In re Airline Ticket Comm’n Antitrust Litig., 268 F.3d 619, 623 (8th Cir. 2001).
55
Id. at 621 (emphasis added).
56
See 42 U.S.C. § 1971(a)(1).
57
See 35 U.S.C. § 100(c).
19
Vote Act.58 In addition, federal courts presume that federal statutes apply to Puerto Rico
as though it were a state unless specific evidence otherwise indicates.59 Defendants also
highlight that Puerto Rico is integrated into the United States‘ judicial system,60
economy,61 political system,62 legal system,63 and national defense regime.64 In addition,
Dominion cites nearly twenty provisions of the Delaware Code that include Puerto Rico
within the definition of the terms ―United States‖ and ―State.‖ These facts, according to
Defendants, bolster their argument as to the interpretation of the License Agreement, i.e.,
that the only reasonable meaning of ―in the United States‖ includes Puerto Rico.
Moreover, they contend that this Court may consider this evidence of the context of the
58
See 42 U.S.C. § 15541.
59
Defs.‘ Opp‘n Br. 32 (citing Antilles Cement Corp. v. Fortuno, 670 F.3d 310, 322
(1st Cir. 2012) (―[A]lthough we now generally presume that Congress intends its
laws to have the same effect on Puerto Rico as they do on any state, that
presumption can be overcome by ‗specific evidence‘ to the contrary or by ‗clear
policy reasons embedded in‘ a statute.‖)).
60
Id. at 19 (Puerto Rico is a U.S. judicial district and has a federal district court).
61
Id. (Puerto Rico uses American currency and the same postal system); id. at 19–20
(goods passing between the United States and Puerto Rico are not subject to duties
or tariffs).
62
Id. at 18 (Puerto Ricans are U.S. citizens and are represented in the U.S. House of
Representatives by a non-voting delegate); id. at 21 (the Puerto Rico constitution
was approved by the U.S. Congress and signed into law by the President of the
United States).
63
Id. at 20 (Puerto Ricans are subject to U.S. securities laws, federal patent and
trademark laws, environmental laws, and food and drug safety laws, and they
benefit from Medicare, Social Security, and federal unemployment insurance).
64
Id. at 21 (Puerto Ricans serve in the U.S. armed forces).
20
License Agreement because Delaware‘s objective theory of contract requires a
determination of what ―a reasonable person in the position of the parties would have
thought [the agreement] meant.‖65 The parties to the License Agreement in question here
relevant federal laws, especially the laws governing U.S. patents and the voting system
industry.
Smartmatic counters that the fact that the statutes Defendants rely on contain
express language extending the laws of the United States to Puerto Rico affirms their
position that the plain and ordinary meaning of ―in the United States‖ does not include
Puerto Rico. According to Plaintiffs, ―if Puerto Rico were actually in the United States,
the laws would apply there by their own force.‖66 In this regard, the Help America Vote
Act supports Plaintiffs‘ interpretation. This statute governs the parties‘ business of
developing and selling voting systems. In this context, when the drafters intended to
include Puerto Rico within the definition of ―State,‖ they did so expressly: ―In this Act,
the term ―State‖ includes the District of Columbia, the Commonwealth of Puerto Rico,
Guam, American Samoa, and the United States Virgin Islands.‖67 Additionally,
Smartmatic points out that the reason federal courts presume that federal statutes apply to
65
Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 740 (Del. 2006)
(emphasis added).
66
Pls.‘ Reply Br. 13.
67
42 U.S.C. § 15541.
21
Puerto Rico is not because Puerto Rico is ―in the United States,‖ but because the U.S.
Code explicitly provides that ―[t]he statutory laws of the United States not locally
Additionally, Plaintiffs argue that the United States Constitution supports their
the United States, and subject to the jurisdiction thereof, are citizens of the United States
and of the State wherein they reside.‖69 Puerto Ricans are not citizens of the United
States by virtue of the Fourteenth Amendment.70 Rather, citizenship has been extended
conclusion that the ordinary meaning of ―in the United States‖—the same term that the
Puerto Rico.
68
48 U.S.C. § 734; see also United States v. Acosta-Martinez, 252 F.3d 13, 18 (1st
Cir. 2001) (―[T]he default rule for questions under the Puerto Rican Federal
Relations Act is that, as a general matter, a federal statute does apply to Puerto
Rico pursuant to 48 U.S.C. § 734.‖)
69
U.S. Const. amend. XIV, § 1 (emphasis added).
70
See Nolos v. Holder, 611 F.3d 279, 282 (5th Cir. 2010) (―The courts of appeals
explained that the term ‗United States‘ as it is used in the Citizenship Clause of the
Fourteenth Amendment did not, without more, include ‗United States territories
simply because the territories [were] ‗subject to the jurisdiction‘ or ‗within the
dominion‘ of the United States.‘‖ (citing Second, Third, and Ninth Circuit cases)).
71
Jones Act, Pub. L. No. 64-368, § 5, 39 Stat. 951, 953 (1917).
22
4. Use of the term “United States” in the noncompetition provision
meaning‖ arguments, Dominion‘s main contention is that the Agreement itself supports
3.4 Non-Compete.
72
License Agreement § 3.4 (emphasis added). The provision also contains a
subsection (d) that is not relevant here.
23
According to Dominion, the language and organization of Section 3.4 restricting
a. Restrictive covenant
extent the term ―in the United States‖ does not clearly include Puerto Rico, therefore, I
generally would construe the term in its most narrow sense, i.e., as including only the
fifty U.S. states and the District of Columbia.74 In the License Agreement, however, the
term ―in the United States‖ appears not only in the noncompetition provision but also in
the license-granting provisions. For example, Section 2.1 states in part: ―Dominion
hereby grants to Smartmatic a worldwide (other than the United States and Canada),
nonexclusive license under all of the Licensed Patent Rights and Licensed Technology, to
relevant part: ―The licenses granted to Smartmatic in Section 2.1 also do not include the
right to authorize resale of any Licensed Products in the United States and Canada.‖75
Because the term ―in the United States‖ is used in other parts of the Agreement, besides
73
Concord Steel, Inc. v. Wilm. Steel Processing Co., 2008 WL 902406, at *6 (Del.
Ch. Apr. 3, 2008); Equitable Trust Co. v. O’Neill, 420 A.2d 1196, 1201 (Del.
Super. 1980) (―It is no surprise that restrictive covenants which act to restrain
trade, are strictly construed.‖).
74
See Allied Cap. Corp. v. GC-Sun Hldgs., L.P., 910 A.2d 1020, 1024 (Del. Ch.
2006); see also Concord Steel, Inc., 2008 WL 902406, at *6 (―Delaware courts
construe restrictive covenants narrowly as written.‖ (emphasis added)).
75
License Agreement § 2.3 (emphasis added).
24
the noncompetition provision, I do not find it appropriate to rely as heavily as Smartmatic
suggests on the canon that calls for narrowly interpreting terms in a noncompetition
example, would create an internal inconsistency within the Agreement. In Section 2.1,
―Dominion . . . grants to Smartmatic a worldwide (other than the United States and
Canada), nonexclusive license under all of the Licensed Patent Rights and Licensed
Technology, to make, have made, use, import, offer for sale, lease and sell Licensed
Products.‖ The Agreement defines Licensed Patent Rights, Licensed Products, and
76
Id. §§ 1.2–1.4.
25
Thus, Licensed Products include both PCOS voting systems made by Dominion and
PCOS voting systems produced by Smartmatic that embody the Licensed Technology,
patents. The plain and ordinary meaning of the license grant in Section 2.1 is that
Dominion did not grant Smartmatic a license under any Dominion U.S. patent. U.S.
patent rights extend to Puerto Rico.77 Thus, assuming Dominion has U.S. patents or in
the future may have U.S. patent rights, those patents would give Dominion the right to
exclude Smartmatic from, among other things, selling products embodying Dominion‘s
Smartmatic were to sell a product embodying the patented invention in Puerto Rico.
3.4(b) that excludes Puerto Rico, that provision would not prevent Smartmatic from
selling Licensed Products in Puerto Rico. Thus, Smartmatic could compete in Puerto
Rico without breaching the terms of the noncompetition provision, but potentially would
77
See 35 U.S.C. § 100(c).
78
See id. (defining United States to include Puerto Rico); id. § 271(a) (―[W]hoever
without authority makes, uses, offers to sell, or sells any patented invention, within
the United States . . . during the term of the patent . . . infringes the patent.‖).
26
such inconsistency between the scope of Smartmatic‘s license and the geographic area in
Based on the apparent inconsistency that could result from accepting a narrow
rights in different areas of the world in which the party receiving a license to the other
party‘s technology could compete against that party. In this case, therefore, I consider it
preferable to determine the parties‘ intent, through extrinsic evidence if necessary, before
construction.
interpretation: (1) that a word in a contract is to be read in light of the words around it
(noscitur a sociis); and (2) that the last, catch-all term in a list of terms is limited in scope
79
In this scenario, there also would be no internal conflict with Section 2.3 of the
License Agreement. In Section 2.3, the parties agreed that ―[t]he licenses granted
to Smartmatic in Section 2.1 also do not include the right to authorize resale of any
Licensed Products in the United States or Canada, and Smartmatic shall use its
best efforts to enter into an agreement with each of its customers to which it sells
or otherwise distributes Licensed Products in which each such customer agrees not
to resell any Licensed Products into the United States or Canada.‖ Thus, for
example, if Dominion had a patented invention covered by patents in Mexico and
the United States, Smartmatic would be licensed to sell a product that included
that invention in Mexico, but the purchaser would not be authorized to resell that
product in the United States, including Puerto Rico.
27
by the terms that come before it (ejusdem generis). Defendants contend that to
understand Section 3.4(b), the Court must read it in the context of the entire
noncompetition provision. Specifically, Defendants aver that, based on the words used in
Section 3.4(c), the only reasonable interpretation of Section 3.4(b)‘s term ―in the United
general. Second, it addresses Licensed Products, which are defined to ―mean[] a product
which embodies the Licensed Technology.‖80 Such products would include Dominion‘s
own PCOS products and others embodying Dominion‘s Licensed Technology. Lastly,
the provision addresses ―any PCOS voting systems other than the Licensed Products,‖
which could include both Smartmatic systems and third party systems. I will refer to
of product as follows:
80
―Licensed Technology,‖ in turn, is defined to ―mean[] all know-how, trade secrets,
methodologies and other technical information owned or possessed by Dominion
as of the date of this Agreement and thereafter, whether patentable or
otherwise . . . .‖ License Agreement § 1.4 (emphasis added).
28
PCOS voting system ―in the United States,‖ and, (iii) for four
years and six months, it cannot sell its own PCOS voting
systems in the United States; and
During the period before 2014, the noncompetition provision can be summarized as
follows: (1) Smartmatic cannot compete with Dominion at all in Canada (Dominion‘s
home state), (2) (i) Smartmatic cannot compete with Dominion in the United States at all
using Licensed Products, but after twelve months it may compete using third party PCOS
voting systems, and (3) Smartmatic can compete with Dominion in any country other
―any country other than the United States‖ is a ―catch-all.‖ According to Defendants, the
Agreement carves the world into three zones: Canada, the United States, and any country
other than the United States. Thus, Dominion argues that any place that is not a country
other than the United States is ―in the United States.‖ Because Puerto Rico is not a
country but a territory of the United States, Defendants aver that the agreement must be
interpreted to include Puerto Rico in the meaning of the term ―in the United States.‖
81
See id. § 3.4 (emphasis added). In this regard, I note that the four year six month
period roughly corresponds to the term of the License Agreement. Id. § 7.1.
29
Smartmatic denies that the parties intended the terms used in Sections 3.4(b) and
3.4(c) to be ―flip sides of the same coin.‖82 They contend that these subsections address
two distinct limitations on Smartmatic‘s use of PCOS voting systems: one limiting
Smartmatic‘s use of Licensed Products in subsection (b) and the other limiting
asserts that ―[o]ne [subsection] does not spring from the other, and the two do not
Smartmatic maintains that the language of subsection (b) is what is important and urges
the Court to reject Dominion‘s focus on the language of subsection (c) as a red herring.
ejusdem generis canons of construction more persuasive, but they are not dispositive in
the circumstances of this case. First, I agree with Dominion that Section 3.4(b) must be
read in the context of the entire noncompetition provision. In that regard, Smartmatic‘s
contention that subsections (b) and (c) address two distinct limitations on its ability to sell
various PCOS voting systems that do not complement each other is strained. Unlike
Smartmatic, I consider it more appropriate to focus on the way those two sections treat
Licensed Products. Section 3.4(b) precludes Smartmatic from selling Licensed Products
in the United States, while 3.4(c) provides that, in any country other than the United
82
Pls.‘ Reply Br. 17.
83
Id. at 18.
30
States, Smartmatic may sell only Licensed Products for four years and six months after
Thus, I am inclined to accept Dominion‘s argument that Sections 3.4(a), (b), and
(c) should be read as a list and that, under the principles of nocsitur a sociis and ejusdem
generis, Section 3.4(c)‘s reference to ―any country other than the United States‖ informs
the definition of the terms that come before it. In applying these canons of construction
The purpose of ejusdem generis, therefore, is to limit the general language following a
list of related things to things of the same general kind or class as the things previously
specified.85 Here, however, it is not particularly relevant what the scope of ―any country
other than the United States‖ is in Section 3.4(c). In addition, the second sentence of
Section 3.4(c) sets forth a ―clarification‖: ―For clarification, Smartmatic shall only have
the right to develop, market and sell other PCOS voting systems (its own or third party
systems) in markets outside the United States after the four (4) year six (6) months non-
84
See Del. Bd. of Nursing v. Gillespie, 41 A.3d 423, 427–28 (Del. 2012).
85
See 17A Am. Jur. 2d Contracts § 364 (2013).
31
compete provision has ended.‖86 This suggests that the parties considered the phrases
―any country other than the United States‖ and ―markets outside the United States‖ to be
synonymous. One reasonable inference from this usage is that the parties were not
focused on defining ―United States‖ with precision, and that their intention in using the
words ―any country other than the United States‖ in Section 3.4(c) was not deliberately to
include Puerto Rico in the scope of the term ―in the United States‖ in Section 3.4(b).
Notably, however, if Puerto Rico is not ―in the United States‖ and is not covered
by the phrase ―any country other than the United States,‖ then the noncompetition
to Dominion, this result is unreasonable and does not harmonize the entire agreement.87
That conclusion finds some support in the use of ―the United States‖ elsewhere in the
License Agreement.
In construing the term ―in the United States‖ in the noncompetition provision, I
consider, lastly, whether reference to ―the United States‖ elsewhere in the License
Importantly, this disputed term appears in a license agreement. As mentioned, the license
86
License Agreement § 3.4(c) (emphasis added).
87
Defs.‘ Opp‘n Br. 39 (citing Axis Reins. Co. v. HLTH Corp., 993 A.2d 1057, 1063
(Del. 2010) (―Where a contract provision lends itself to two interpretations, a court
will not adopt the interpretation that leads to unreasonable results, but instead will
adopt the construction that is reasonable and that harmonizes the affected contract
provisions.‖)).
32
grant in Section 2.1 of the Agreement explicitly states that its scope is ―worldwide (other
than the United States and Canada).‖ The plain and ordinary meaning of that license
grant is that it does not grant Smartmatic a license under any of Dominion‘s U.S. or
Canadian patents. In this regard, I note that Dominion‘s U.S. patents extend, as a matter
of law, to the United States‘ territories and possessions.88 Under patent law, therefore,
Smartmatic would infringe Dominion‘s U.S. patent rights if it ―makes, uses, offers to sell,
or sells any patented invention‖ in the United States or its territories and possessions,
which include Puerto Rico.89 Thus, one reasonable interpretation of the license grant
provision excluding the United States from the scope of Smartmatic‘s license is that the
Patent Rights in Puerto Rico could infringe Dominion‘s U.S. patent rights. The same
logic also could be extended to mean that the parties intended to impose the same
geographic limitation on Smartmatic‘s right to compete ―in the United States‖ by way of
selling Licensed Products.90 Based on this possibility, I asked the parties to submit
additional briefing on the issue of whether the definition of ―United States‖ under federal
patent law affects the definition of that term in the License Agreement.
88
See 35 U.S.C. § 100(c) (―The terms ―United States‖ and ―this country‖ mean the
United States of America, its territories and possessions.‖).
89
35 U.S.C. § 271(a).
90
Evidence of the parties‘ intent to limit Smartmatic‘s right to compete in the United
States also appears in Section 2.3. See supra note 79.
33
Smartmatic maintains that this Court cannot consider the definition of ―United
States‖ under federal patent law for three reasons. First, they argue that the Eighth
Circuit‘s In re Airline Ticket decision91 addressed and rejected a similar argument that the
Federal Aviation Act should be used to inform the interpretation of United States in the
applying Missouri law which the Delaware Supreme Court has said ―comports with
Delaware law‖ 92—applied a ―lay person‖ standard to give the contract language its plain
and ordinary meaning. Second, Plaintiffs assert that federal patent law is extrinsic
evidence that should not be used to create ambiguity. Third, Smartmatic contends that,
even if reading the specialized meaning of a term under patent law were appropriate in a
license agreement, the term United States does not qualify as a term with specialized
meaning.
Dominion argues that Smartmatic has no license to sell Licensed Products covered
by the Licensed Patent Rights in Puerto Rico. Specifically, Defendants assert in their
supplemental briefing that they hold one U.S. Patent: No. 8,195,505. Defendants also
contend that their U.S. patent and the federal patent law are appropriate evidence for the
Court to consider in construing the term ―in the United States‖ in the noncompetition
provision, because Delaware law requires an inquiry into ―what a reasonable person in
91
See In re Airline Ticket Comm’n Antitrust Litig., 268 F.3d 619, 621 (8th Cir.
2001).
92
See AT&T Corp. v. Lillis, 953 A.2d 241, 253 n.35 (Del. 2008).
34
the position of the parties would have thought [the agreement] meant.‖93 Emphasizing
that the parties to the License Agreement are sophisticated technology firms, Dominion
maintains that a reasonable person in the position of the parties would have understood
the definition of United States under U.S. patent law. It also avers that the phrase ―in the
United States‖ in the noncompetition provision must be read in context with the usage of
―United States‖ elsewhere in the Agreement to give effect to every term and reconcile all
provisions.94 According to Defendants, such a reading compels the conclusion that the
Having carefully considered the parties‘ supplemental briefs, I conclude that the
definition of United States under federal patent law is extrinsic evidence that the Court
This is not a case where the definition of United States ―can only be known through an
appreciation‖ of federal patent law.95 The Agreement defines the Licensed Technology
to include not only patentable technology but also Dominion‘s ―know-how, trade secrets,
93
Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 740 (Del. 2006)
(emphasis added).
94
See Dominion Defs.‘ Opening Supplemental Mem. of Law 4 (citing Stonewall Ins.
Co. v. E.I. du Pont de Nemours & Co., 996 A.2d 1254, 1260 (Del. 2010) (―[A]
single clause or paragraph of a contract cannot be read in isolation, but must be
read in context.‖)); see also Whittington v. Dragon Gp. L.L.C., 2011 WL 1457455,
at *10 (Del. Ch. Apr. 15, 2011).
95
City Investing Co. Liquidating Trust v. Continental Cas. Co., 624 A.2d 1191, 1198
(Del. 1993).
35
methodologies and other technical information.‖96 The Agreement is governed by state
law.97 The parties do not refer to U.S. patent law in their agreement. The Agreement
does not identify any Dominion patent. Rather, it defines ―Licensed Patent Rights‖ in
I recognize that excluding Puerto Rico from the definition of ―in the United
and the noncompetition provision. I am not convinced, however, that the parties ever
focused on this point. The Agreement is silent on federal patent law and how it defines
the United States. At the same time, Section 2.1 indicates that Smartmatic is not licensed
under Dominion‘s U.S. patents, which would give Dominion the right to preclude
Smartmatic from selling the patented invention in Puerto Rico.98 Presumably, therefore,
Dominion U.S. patent, however, is not the issue before this Court. The question before
me relates to the meaning of the term ―in the United States‖ in the noncompetition
96
License Agreement § 1.2.
97
See Pfizer Inc. v. Elan Pharm. Research Corp., 812 F. Supp. 1352, 1359 (D. Del.
1993) (determining that state law governs the interpretation of a patent license
agreement).
98
Conceivably, Dominion could grant Smartmatic a limited license to practice
Dominion‘s U.S. patented technology solely in the territories and possessions of
the United States. Nothing in the License Agreement, however, suggests that the
parties intended to enter into such a license.
36
provision. In this context, I cannot decide on the limited record before me whether the
parties intended that the definition of ―United States‖ under U.S. patent law would be
judgment is appropriate. If I conclude that the provision is subject to more than one
reasonable interpretation, then the contract is ambiguous and I must consider extrinsic
evidence to determine what meaning the parties intended to give the noncompetition
existence of a genuine issue of material fact and the need for a more thorough
meaning of ―in the United States‖ could be said to exclude its territories and possessions
such as Puerto Rico. Dictionaries almost universally define United States to include only
the fifty U.S. states and the District of Columbia. Case law and statutory support also
exist for a definition of the United States that excludes Puerto Rico. Several cases have
recognized the noncontroversial proposition that Puerto Rico is not a foreign country and
99
See Cooke v. Oolie, 2000 WL 710199, at *11 (Del. Ch. May 24, 2000) (―The
Court . . . maintains the discretion to deny summary judgment if it decides that a
more thorough development of the record would clarify the law or its
application.‖).
37
is ―part of‖ the United States. These determinations, however, do not address whether
Puerto Rico is encompassed by the term ―United States,‖ or more specifically, the term
―in the United States.‖ Statutes, including the Help America Vote Act and federal patent
law, expressly include Puerto Rico in the definition of United States when it is their
intention to extend the definition of ―United States‖ to include its territories. This
suggests that the ordinary meaning of United States excludes Puerto Rico and the United
States‘ other territories. Thus, Smartmatic has adduced sufficient evidence to support a
finding that the plain and ordinary meaning of ―in the United States‖ excludes Puerto
Rico and that it was the parties‘ intent to incorporate this plain meaning into the License
Agreement.
must interpret contractual provisions in a way that gives effect to every term of the
instrument, and that, if possible, reconciles all of the provisions of the instrument when
read as a whole.‖100 Thus, even faced with substantial evidence that the plain meaning of
―in the United States‖ would exclude Puerto Rico, I must interpret that term in a way that
reconciles all the provisions of the License Agreement, if possible. In that regard, I
conclude that Dominion‘s interpretation of ―in the United States‖ as including Puerto
Defendants‘ position rests on two main theories. First, that the Court should
consider the language of the entire noncompetition provision and reconcile how the
100
Council of Dorset Condo. Apartments v. Gordon, 801 A.2d 1, 7 (Del. 2002).
38
parties divided the world up among independent sovereign countries. Second, Dominion
argues that I should consider undisputed background information to place this License
Agreement in context. Specifically, they highlight that the Agreement was entered into
to take advantage of the 2002 Help America Vote Act, that Dominion was formed in
2003 after this Act was passed, that the definition of United States in the Help America
Vote Act includes Puerto Rico, that Puerto Rico is eligible for aid under the Act, and that
Dominion intended to focus its efforts on Canada and the United States while Smartmatic
however, primarily on the language used in the noncompetition provision and in the
license grant. At this preliminary stage of the litigation, I have not relied on the historical
information that Dominion presented. In the noncompetition provision, the use of the
term ―any country other than the United States‖ in Section 3.4(c) reasonably could inform
how the parties intended to define the term ―in the United States‖ in Section 3.4(b).
that regard, it is reasonable to infer that the geographical scopes they address are related.
Puerto Rico from the term ―in the United States‖ would mean that virtually the only areas
of the world not addressed by the noncompetition provision would be Puerto Rico and the
Agreement as a license agreement that grants Smartmatic certain rights under, among
39
other things, Dominion‘s patents. The Agreement does not grant Smartmatic a license to
Dominion‘s U.S. patents. This fact supports a reading of the term ―in the United States‖
United States under U.S. patent law, i.e., as including Puerto Rico. In addition, this fact
counsels against a mechanical application in the context of this case of the canon of
Supreme Court has instructed courts to be cautious when entertaining background facts
and to avoid using extrinsic evidence to vary the terms of a contract or to create
wholesale the definition of ―United States‖ under federal patent law to avoid any
such evidence to the license grant in Sections 2.1 and 2.3 as to the Licensed Patent
In sum, the parties have advanced two mutually exclusive, but reasonable
interpretations of the disputed phrase ―in the United States‖ in the noncompetition
provision. Therefore, I find that the term is ambiguous and deny the parties‘ cross
motions for summary judgment in favor of a more thorough development of the record on
101
See Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232–33 &
n.7 (Del. 1997).
40
III. CONCLUSION
For all of these reasons, I deny Smartmatic‘s motion for partial summary judgment
and Dominion‘s implicit cross motion for summary judgment because both Smartmatic
and Dominion have presented reasonable, albeit mutually exclusive, interpretations of ―in
IT IS SO ORDERED.
41