Federal Circuit Finds No Breach of Settlement Agreement Where Accused Device Neither Same As Product Defined in the Agreement Nor Covered Under Patent

Case:Panduit Corp. v. HellermannTyton Corp., Case No. 05-1337 (Fed. Cir. 6/12/06)

The One Sentence Summary: The Federal Circuit affirmed summary judgment in favor of Defendant HellermannTyton Corporation ("HellermannTyton") finding that there was no genuine issue of material fact that HellermannTyton breached a Settlement Agreement prohibiting it from making or selling a product covered by a patent owned by Plaintiff Panduit Corporation ("Panduit").

What They Were Fighting About: In 2001, Panduit sued HellermannTyton alleging that HellermannTyton's power box product sold under the label "Part No. MCR-SEB" infringed on Panduit's U.S. Patent No. 5,998,732 ("the '732 patent"). Shortly thereafter, the parties agreed to a settlement of the dispute and entered into a Settlement Agreement ("Agreement"). Under the Agreement, HellermannTyton agreed not to make or sell "Subject Products." The Agreement defined "Subject Products" as: (1) the HellermannTyton product known as "Part No. MCR-SEB" (¶ 1(b)(i)); and (2) as "all products, existing now or in the future, covered by any claim of [the '732 patent]" (¶ 1(b)(ii)). Some time later, HellermannTyton began selling a redesigned power box product. Panduit sued HellermannTyton for breach of contract (for violating the terms of the Agreement) and for infringement of the '732 patent based on HellermannTyton's sale of what Panduit claimed was a redesigned version of the "Subject Products." HellermannTyton filed for summary judgment arguing that it did not violate the Agreement because its new product was not "Part No. MCR-SEB" and was different from the product covered by the '732 patent.

Federal Circuit Holdings:

• Upon de novo review, the Federal Circuit determined there was no genuine issue of material fact that HellermannTyton's revised product was not the "Subject Product" as defined in ¶1(b)(i) and ¶ 1(b)(ii) of the Settlement Agreement, and thus affirmed the district court's grant of summary judgment that HellermannTyton did not breach the Agreement.
• The Court explained that the question of whether HellermannTyton had breached the Agreement required it to assess whether HellermannTyton's redesigned product infringed the '732 patent. The '732 patent involved a "modular offset power box and communication extension" for "a multi-channel power and communication wiring and raceway system" used when installing power and communication conductors through the walls of an office building. The system was described in claim 1 as having "an opening formed in the abutment portion of the projection...in communication with an aperture formed in a side wall of the offset power box adjacent the duct." The only difference between HellermannTyton's "Part No. MCR-SEB" product and the revised product was that the wall abutting the trunking duct in the revised product was solid with no cutaway (i.e. no opening).
• The Court began its analysis by noting that the Agreement clearly defined the "Subject Product" as "Part No. MCR-SEB." Panduit argued that even though the revised product was not identical to "Part No. MCR-SEB," it nonetheless infringed on the '732 patent because it had only "colorable changes" or "changes unrelated to the '732 patent." In the alternative, Panduit argued that the Agreement was ambiguous and urged the Court to interpret ¶ 1(b)(i) to include HellermannTyton's redesigned product in order to effectuate the parties' intent when settling the litigation. The Court rejected Panduit's arguments, concluding that the district court and HellermannTyton were correct in interpreting ¶ 1(b)(i) to cover only the specific product known as "Part No. MCR-SEB." Because there was no dispute that the revised product was not the same as "Part No. MCR-SEB," the Court held that the district court did not err in granting summary judgment that the accused device was not a "Subject Product" as defined in ¶ 1(b)(i).
• The Court next analyzed whether the district court erred in finding that HellermannTyton did not breach ¶ 1(b)(ii) of the Agreement. The district court had ruled that the revised product did not infringe the '732 patent because the wall abutting the trunking duct in HellermannTyton's revised product was solid and had no "opening," "projection," and "abutment portion" limitations of claim 1 of the '732 patent. The district court had determined that the "opening" in the claim had to descend in a particular manner and because HellermannTyton's revised product had no such opening, there was no breach of ¶ 1(b)(ii) of the Agreement (prohibiting HellermannTyton from making or selling all products covered by any claim of the '732 patent). The parties disputed the interpretation of the opening limitation. The Court looked to the claim language itself, the written description and the prosecution history to determine the meaning of the disputed claim limitation and found that HellermannTyton's interpretation of the opening limitation was correct -- the "opening" had to be in "an area that extended downward from the top portion of the projection and needed to provide a passage through which wires could pass." HellermannTyton's revised product had no such opening and therefore was not covered under the '732 patent. The Court thus held that HellermannTyton did not breach ¶ 1(b)(ii).
• The Court also rejected Panduit's argument that HellermannTyton's revised product infringed the '732 patent under the doctrine of equivalents finding that if it were to apply that doctrine to find that HellermannTyton's revised product infringed the '732 patent, it would vitiate the opening limitation of the claim. Because HellermannTyton's product did not have an "opening in an abutment portion through which wires may pass from a trunking duct into an offset power box," the doctrine of equivalents could not be applied, and therefore the district court did not err in granting summary judgment that the revised product did not qualify as a "Subject Product" as defined in ¶ 1(b)(ii) of the Agreement.