Broken down by type

(DE 214-2 at 33-34 (Stock Purchase Agreement, Section 6.17)) (underlining in original). The term "Intellectual Property Rights" is defined in the Stock Purchase Agreement as follows:

rights in and to United States and non-United States (a) patents, patent applications, statutory invention registrations and similar protections for inventions and discoveries, (b) trademarks, service marks, trade names, trade dress and other identifiers of source or goodwill, together with the goodwill associated therewith, (c) copyrights, including rights in software and data, (d) designs, (e) inventions (whether patentable or not), including invention disclosures, technology and discoveries, (f) trade secrets, know-how and other confidential information, and (g) registrations and applications for registration of the foregoing.

(DE 214-1 at 16 (Stock Purchase Agreement, Section 1.1)).

Before and for a short time after entry into the Stock Purchase Agreement, Siemens and the Members offered for sale, sold, and used a Hydrotech disc filter, the HSF 2200 series disc [*9] filter, as part of their business of providing customer solutions for major water filtration and treatment facilities. Prior to the Stock Purchase Agreement, Hydrotech filed patent applications for inventions embodied in the HSF 2200 series disc filter. These patent applications issued as the '508 and '805 patents in the United States, and the '508 and '805 patents were assigned to plaintiff.

Also prior to the Stock Purchase Agreement, Hydrotech entered into an exclusive distribution agreement with Kruger, whereby Kruger acquired the right to distribute Hydrotech disc filters in North America. Kruger extensively marketed and sold the HSF 2200 series disc filter prior to the Stock Purchase Agreement, and the Members had access to the HSF 2200 series disc filter through Kruger prior to the Stock Purchase Agreement. For example, in June 2004, a Member submitted a purchase order to Kruger for two HSF 2200 series disc filters, based on a quotation issued by Kruger in December, 2003.

DISCUSSION

A. Standard of Review

"A party may move for summary judgment, identifying each claim or defense . . . on which summary judgment is sought." Fed. R. Civ. P. 56(a). "The court shall grant summary judgment if the movant shows that there is no genuine [*10] dispute as to any material fact and the movant is entitled to judgment as a matter of law." Id. A factual dispute is "material" only if it might affect the outcome of the suit and "genuine" only if there is sufficient evidence for a reasonable jury to find for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986).

The party seeking summary judgment "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). Once the moving party has met its burden, the non-moving party must then "set forth specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). There is no issue for trial unless there is sufficient evidence favoring the non-moving party for a jury to return a verdict for that party. Anderson, 477 U.S. at 250. In making this determination, the court must view the inferences drawn from the underlying facts in the light most favorable to the nonmoving party. United States v. Diebold, Inc., 369 U.S.654, 655, 82 S. Ct. 993, 8 L. Ed. 2d 176 (1962).

B. Analysis

Plaintiff seeks a ruling by the court that the covenant not to sue does not bar an action for infringement of the '805 and '508 patents. Plaintiff asserts the covenant does not apply for two main reasons. First, plaintiff [*11] argues that defendants have not met an initial condition to application of the covenant, because the Members were not in the business of making and selling the accused infringing product at the time of the Stock Purchase Agreement. Second, plaintiff argues that an exclusion in the covenant applies because the technology disclosed in the '805 and '508 patents was historically marketed by Kruger and available to the Members through Kruger. Because the court agrees with plaintiff's second argument that the exclusion in the covenant applies, the court need not reach plaintiff's first argument.

The legal standards governing interpretation of the Stock Purchase Agreement and the covenant not to sue contained therein are well-established. Under New York law,4 "written agreements are construed in accordance with the parties' intent and the best evidence of what parties to a written agreement intend is what they say in their writing." Schron v. Troutman Saunders LLP, 20 N.Y.3d 430, 986 N.E.2d 430, 433, 963 N.Y.S.2d 613 (N.Y. 2013) (internal quotations omitted). "As such, a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms." Id. (internal quotations omitted).

"Parol evidence — evidence outside the four corners of the document — is admissible only if a court finds an ambiguity in the contract." Id. "Whether an agreement is ambiguous is a question of law for the courts." Riverside S. Planning Corp. v. CRP/Extell Riverside, L.P., 13 N.Y.3d 398, 920 N.E.2d 359, 363, 892 N.Y.S.2d 303 (N.Y. 2009) (quotations omitted). "The entire contract must be reviewed and particular words should be considered, not as if isolated from the context, but in the light of the obligation as a whole and the intention of the parties as manifested thereby." Id. (quotations omitted). "Where the language chosen by the parties has a definite and precise meaning, there is no ambiguity." Id. (internal quotations omitted).

In addition to these general principles of contract interpretation, under New York law, "a covenant not to sue must be strictly construed against the party asserting it," and "its wording must be clear and unequivocal" to absolve the promissee from liability. Schneider v. Revici, 817 F.2d 987, 993 (2d Cir. 1987) (quotations omitted); see Kaufman v. Am. Youth Hostels, Inc., 6 A.D.2d 223, 177 N.Y.S.2d 587, 593 (N.Y. App. Div. 1958). Covenants not to sue "are not looked upon with favor by New York courts, [*13] are strictly construed against the party relying upon then [sic], and require clear and explicit language in the agreement." Bridgeport Music, Inc. v. Universal Music Grp., Inc., 440 F. Supp. 2d 342, 345 (S.D.N.Y. 2006) (internal quotations omitted).

The covenant in the Stock Purchase Agreement bars actions for infringement of "any Retained Shared IP against Buyer and the Members in connection with the business of the Members as such business is conducted as of the date [of the Stock Purchase Agreement]." (DE 214-2 at 33 (Stock Purchase Agreement, Section 6.17)). This initial sentence in the covenant includes the first condition identified by plaintiff, namely that the alleged infringement of "Retained Shared IP" be in connection with the business of the Members. In defining the term "Retained Shared IP," the covenant further informs the contours of this first condition, and it also introduces the Kruger exclusion. In particular, the term "Retained Shared IP" means:

"any Intellectual Property Rights (other than trademark type rights), including any future patents that may issue from inventions that exist as of the date hereof, . . . which buyer demonstrates to be used in a bona fide manner by the Members in the conduct of their business immediately prior to the date hereof to the exclusion [*14] however of any Intellectual Property Right which has historically been marketed by I. Kruger Inc. or to which the Members historically had access from or through I. Kruger Inc."

(Id. at 33-34 (Stock Purchase Agreement, Section 6.17)) (emphasis added). In turn, the term "Intellectual Property Rights" is defined to mean "rights in and to . . . (a) patents, patent applications, statutory invention registrations and similar protections for inventions and discoveries, . . . (d) designs, [and] (e) inventions (whether patentable or not), including invention disclosures, technology and discoveries . . . ." (DE 214-1 at 16 (Stock Purchase Agreement, Section 1.1)) (emphasis added).

For purposes of the present analysis, the court accepts defendants' contention that the first condition of the covenant is satisfied, particularly that Members used "Intellectual Property Rights" in the conduct of their business when they "made, used, sold, and offered for sale" the Hydrotech disc filter, an embodiment of the patents in suit. (Response at 5; see, e.g., sealed DE 215-5 at 2 (DAVCO Purchase Order)). Where the first condition of the covenant is satisfied as defendants contend, however, it follows that the exclusion for any "Intellectual [*15] Property Right" marketed by Kruger also applies. In the same manner that Members used "Intellectual Property Rights" by selling the Hydrotech disc filter to their customers, so did Kruger also market "Intellectual Property Rights" by selling the Hydrotech disc filter.

In particular, the covenant excludes from its scope "any Intellectual Property Right which has historically been marketed by I. Kruger Inc. or to which the Members historically had access from or through I. Kruger Inc." (DE 214-2 at 34 (Stock Purchase Agreement, Section 6.17)). It is undisputed that Kruger extensively marketed and sold the Hydrotech disc filter, specifically the HSF 2200 series disc filter, prior to the Stock Purchase Agreement, and that the Members had access to this Hydrotech disc filter through Kruger. (See sealed DE 215-4 (Kruger sales contracts); sealed DE 215-5 at 2 (DAVCO Purchase Order)). By virtue of selling the Hydrotech disc filter, Kruger was marketing an "Intellectual Property Right," as that term is defined in the Stock Purchase Agreement, specifically the right to the "invention" or "technology" that is an embodiment of the patents in suit. The Members thus also historically had gained access to an [*16] "Intellectual Property Right," i.e., the right to use the invention and technology, through Kruger.

Defendants argue that the exclusion related to Kruger does not apply because Kruger did not market the patents in suit but only marketed the Hydrotech disc filter product. But, the exclusion in the covenant is not limited to the marketing of the patents in suit. Instead, it excludes marketing of "Intellectual Property Rights," which in turn are defined in the Stock Purchase Agreement much more broadly than just rights to "patents." As noted above, the term "Intellectual Property Rights" is defined to include rights to "inventions (whether patentable or not)" and "technology," which are terms understood to mean not just the patents but also the products embodying the patents. See, e.g., Abbott Labs. v. Geneva Pharms., Inc., 182 F.3d 1315, 1319 (Fed. Cir. 1999) ("If a product that is offered for sale inherently possesses each of the limitations of the claims, then the invention is on sale, whether or not the parties to the transaction recognize that the product possesses the claimed characteristics."); Pfaff v. Wells Electronics, Inc., 525 U.S. 55, 65, 119 S. Ct. 304, 142 L. Ed. 2d 261 (1998) (discussing historical on-sale bar to patent issuance "if the invention had been placed on sale at any time before the patent application was filed"); Steinberg v. Seitz, 517 F.2d 1359, 1364 (C.C.P.A. 1975) (in examining [*17] meaning of term "invention," noting "it means any embodiment of the claimed subject matter").