National Institute for Strategic Technology Acquisition and Commercialization v. Ford Motor Company

NOTE: This disposition is nonprecedential.
United States Court of Appeals for the Federal Circuit
2008-1467
NATIONAL INSTITUTE FOR STRATEGIC TECHNOLOGY
ACQUISITION AND COMMERCIALIZATION,
Plaintiff-Appellant,
v.
FORD MOTOR COMPANY,
Defendant-Appellee.
Warren S. Huang, Fulbright & Jaworski, L.L.P., of Houston, Texas, argued for
plaintiff-appellant. With him on the brief was Robert M. Chiaviello, Jr., of Dallas, Texas.
Eric A. Buresh, Shook, Hardy & Bacon, L.L.P., of Kansas City, Missouri, argued
for defendant-appellee.
Appealed from: United States District Court for the Eastern District of Texas
Judge David J. Folsom

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NOTE: This disposition is nonprecedential.
United States Court of Appeals for the Federal Circuit
2008-1467
NATIONAL INSTITUTE FOR STRATEGIC TECHNOLOGY
ACQUISITION AND COMMERCIALIZATION,
Plaintiff-Appellant,
v.
FORD MOTOR COMPANY,
Defendant-Appellee.
Appeal from the United States District Court for the Eastern District of Texas in
case no. 5:08-CV-84, Judge David J. Folsom.
__________________________
DECIDED: April 23, 2009
__________________________
Before RADER, BRYSON, and MOORE, Circuit Judges.
Opinion for the court filed by Circuit Judge MOORE. Dissenting opinion filed by Circuit
Judge BRYSON.
MOORE, Circuit Judge.
The National Institute for Strategic Technology Acquisition and
Commercialization (NISTAC) appeals the grant of Ford Motor Company’s (Ford) motion
to dismiss NISTAC’s patent infringement claims under Federal Rule of Civil Procedure
12(b)(6). The United States District Court for the Eastern District of Texas determined
that NISTAC’s claims were barred by paragraph 3.3 of an October 31, 2000 agreement
(the donation agreement) by which the patents–in–suit were assigned to NISTAC’s

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predecessor. Because we conclude that the language of the donation agreement
unambiguously releases Ford from any and all claims arising from NISTAC’s
enforcement of the patents at issue, we affirm the district court’s grant of Ford’s motion
to dismiss.
BACKGROUND
Ford originally assigned four U.S. patents, Nos. 5,239,955, 5,319,919, 5,469,777,
and 5,554,020 (collectively, the patents–in–suit), to Ford Global on March 1, 1997.1 On
October 31, 2000, Ford Global and the MidAmerica Commercialization Corporation
(MACC) executed the donation agreement under which Ford Global assigned thirty
patents (the donated patents), including the patents–in–suit, to MACC. Ford Global
also agreed to pay MACC $184,000 to cover the maintenance fees of the donated
patents. MACC agreed to the disclaimers listed in article 3 of the donation agreement.
Based on MACC’s status as a not–for–profit company, Ford claimed its assignment as a
charitable donation having a value of $26,950,000 for tax purposes.
In March 2006, NISTAC2 decided to offer the donated patents for sale via a live
auction. In response, Ford demanded that NISTAC withdraw two of the patents–in–suit
from the auction. NISTAC agreed not to auction the donated patents and granted Ford
a non-exclusive license. In exchange, Ford paid NISTAC a $1,000,000 signing fee and
agreed to pay reasonable royalties. Less than six months later, Ford notified NISTAC
that it was unilaterally terminating the license agreement.
1 Ford Global is a wholly owned subsidiary of Ford that manages Ford’s
intellectual property.
2 MACC changed its name to NISTAC in 2004.
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Following the termination, NISTAC filed this infringement action. Ford
subsequently moved to dismiss the action pursuant to Federal Rule of Civil Procedure
12(b)(6), asserting that paragraph 3.3 of the donation agreement constituted a release
that barred NISTAC’s claims. The district court granted Ford’s motion to dismiss.
NISTAC timely appealed.
DISCUSSION
The parties agree that Michigan law governs the donation agreement. Under
Michigan law, “[t]he proper interpretation of a contract is a question of law, which this
court reviews de novo. . . . Accordingly, we examine the language in the contract, giving
it its ordinary and plain meaning if such would be apparent to a reader of the
instrument.” Wilkie v. Auto-Owners Ins. Co., 664 N.W.2d 776, 780 (Mich. 2003). “If the
contractual language is unambiguous, courts must interpret and enforce the contract as
written, because an unambiguous contract reflects the parties’ intent as a matter of law.”
In re Smith Trust, 745 N.W.2d 754, 758 (Mich. 2008). “A contract is ambiguous if its
provisions may reasonably be understood in different ways.” Universal Underwriters
Ins. Co. v. Kneeland, 628 N.W.2d 491, 494 (Mich. 2001).
We review the grant of a dismissal under Rule 12(b)(6) by applying the law of the
regional circuit. Phonometrics, Inc. v. Hospitality Franchise Sys., Inc., 203 F.3d 790,
793 (Fed. Cir. 2000).
In the Sixth Circuit, a dismissal under Fed. R. Civ. P. 12(b)(6) raises a
question of law that is subject to de novo review. Bovee v. Coopers &
Lybrand C.P.A., 272 F.3d 356, 360 (6th Cir. 2001). The court must
construe the complaint in the light most favorable to the plaintiff, accept its
factual allegations as true, and determine whether the plaintiff can prove a
set of facts in support of its claims that would entitle it to relief. Mayer v.
Mylod, 988 F.2d 635, 637-38 (6th Cir. 1993).
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Polymer Indus. Prod. Co. v. Bridgestone/Firestone, Inc., 347 F.3d 935, 937 (Fed. Cir.
2003).
We must first determine whether the language of the agreement—specifically,
the language of paragraph 3.3—is ambiguous. Paragraph 3.3 of the donation
agreement states:
3.3 For its part, [NISTAC]3 hereby agrees to release [Ford], its officers,
directors, employees and agents, and each of them, from any and all
claims which [NISTAC] might otherwise have against any of them by
reason of the practice of [Ford’s] Patent Rights by [NISTAC], its licensees
or transferees.
While it is somewhat awkward to base a waiver on NISTAC’s practice of Ford’s patent
rights, it does not render the terms of the donation agreement ambiguous. Paragraph
2.1 explains:
2.1 [Ford] hereby assigns and contributes to [NISTAC], at no cost to
[NISTAC], [Ford’s] entire right, title and interest in the Donated Technology
(hereinafter “[Ford’s] Patent Rights”). Such assignment and contribution
includes [Ford’s] right to enforce [Ford’s] Patent Rights and to recover
damages for any infringement retroactively to the issue date of any patent
included in [Ford’s] Patent Rights.
According to the plain reading of these provisions, Ford assigned to NISTAC all of
Ford’s rights in the patents—including the right to enforce the patents. Further, NISTAC
agreed to release Ford from any and all claims arising from NISTAC’s “practice” of
these assigned patent rights. Because the patent rights are defined as including both
the right to enforce and the right to recover damages for patent infringement, NISTAC
therefore agreed to release Ford from any claims for patent infringement—exactly the
claims that NISTAC asserted before the district court. The district court acknowledged
3 Where appropriate, we have replaced the terms “the DONOR” and “the
DONEE” with “[Ford]” and “[NISTAC]”, respectively.
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this waiver, holding that “under the plain meaning of the release of paragraph 3.3 the
Court finds that Ford is released from NISTAC’s enforcement of the Patent Rights.” We
agree; the language of paragraph 3.3 is subject to only one reasonable interpretation,
and is thus unambiguous. See Universal Underwriters, 628 N.W.2d at 494.
NISTAC further argues that even if the language of paragraph 3.3 is
unambiguous, it should be construed to limit the release to NISTAC’s “making, using, or
selling of the donated technology.” NISTAC asserts that the term “practice”—as used in
paragraph 3.3—has a specialized meaning in patent law—to make, use, or sell. While
we agree that “practice the invention”—a term used in paragraph 2.6 of the donation
agreement—could be interpreted as making, using, or selling a claimed invention, that
term is not used in paragraph 3.3. Instead, paragraph 3.3 concerns “the practice of
[Ford’s] patent rights.” Paragraph 2.1 of the contract defines Ford’s patent rights as
including the right to enforce the donated patents, thus by the terms of the contract,
NISTAC agreed not to enforce the donated patents against Ford.
To the extent that NISTAC argues that the district court’s construction of the
contract’s terms renders paragraph 3.3 surplusage, we do not agree. Paragraph 3.1
provides that Ford will not indemnify NISTAC from infringement suits by third parties;
paragraph 3.2 provides that Ford disclaims any responsibility for NISTAC’s use of the
patent rights; and paragraph 3.3 provides that Ford is released from any infringement
claims by NISTAC based on the donated patents. There is no conflict among the
properly construed provisions of the donation agreement.
Finally, NISTAC argues that the district court’s construction of paragraph 3.3
must be incorrect because it would be contrary to the parties’ stated intentions.
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2008-1467 6
Specifically, NISTAC asserts that if paragraph 3.3 gave Ford a de facto license to the
donated patents, then Ford would have been prohibited from claiming a charitable
donation—the purpose of the assignment as set forth in paragraph 2.4 of the donation
agreement. NISTAC supports its arguments by noting that I.R.S. Notice 2004-7 and
Revenue Ruling 2003-28 prohibit the claiming of charitable donations when patent
rights are retained.
The district court refused to consider this issue, opining that “[t]he court further
does not consider the tax implications as that issue is not before the Court.” Similarly,
we decline to express any view on the tax consequences to Ford. Even if we were to
accept as true NISTAC’s assertions regarding the tax consequences, such evidence—
extrinsic evidence—cannot be used to alter the plain language of the contract under
Michigan law. Mich. Chandelier Co. v. Morse, 297 N.W. 64, 67 (Mich. 1941). We have
considered all arguments raised by NISTAC in this appeal and find them unpersuasive.
CONCLUSION
Because the plain language of the donation agreement bars NISTAC’s claims,
we affirm the district court’s grant of Fords motion to dismiss under Fed. R. Civ. P.
12(b)(6).

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NOTE: This disposition is nonprecedential.
United States Court of Appeals for the Federal Circuit
2008-1467
NATIONAL INSTITUTE FOR STRATEGIC TECHNOLOGY
ACQUISITION AND COMMERCIALIZATION,
Plaintiff-Appellant,
v.
FORD MOTOR COMPANY,
Defendant-Appellee,
Appeal from the United States District Court for the Eastern District of Texas in case no.
5:08-CV-84, Judge David J. Folsom.
BRYSON, Circuit Judge, dissenting.
I respectfully dissent. Under Michigan law, which controls here, the interpretation
of a contract is a question of law if the contract language is unambiguous, but if the
language is ambiguous, the interpretation of the contract is a question of fact for the trier
of fact. Klapp v. United Ins. Group Agency, Inc., 663 N.W.2d 447, 451, 453-54 (Mich.
2003). Because I believe the phrase “practice of [Ford’s] Patent Rights” is ambiguous, I
would reverse the district court’s judgment and remand this case for factual resolution of
the ambiguity, including the consideration of extrinsic evidence.
The majority is correct that the term “Patent Rights” is unambiguous, as that term
is explicitly defined in the donation agreement to encompass not only the right to make,
use and sell the donated technology, but also the right to enforce the patents (although

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the agreement ineptly defines the “Patent Rights” in circular fashion as including the
right to enforce the “Patent Rights”). The problem with paragraph 3.3 of the agreement,
however, is that while the meaning of the term “Patent Rights” is clear, the meaning of
the term “practice” is not. And the meaning of “practice” is critical to defining the scope
of the release effected by paragraph 3.3. For example, if paragraph 3.3 released Ford
from any claims based on NISTAC’s “exercise” of the patent rights, then paragraph 3.3
would clearly bar NISTAC from enforcing the patents against Ford. If, on the other
hand, paragraph 3.3 released Ford from claims based on NISTAC’s “employment” or
“performance” of the patent rights, then the release would shield Ford only from claims
based on NISTAC’s manufacture, use or sale of the donated technology. It is unclear in
this context whether the verb “practice” has a meaning more like “exercise” or more like
“employ” or “perform”; each of those interpretations of “practice” finds support in
standard dictionaries. Thus, the phrase “practice of [Ford’s] Patent Rights” is
ambiguous.
The word “practice” is a term of art in patent law that ordinarily refers to a party’s
manufacture, use, or sale of a claimed invention, but not a party’s enforcement of the
rights conferred by the patent. It is true that paragraph 3.3 does not refer to “practicing
the invention” or “practicing the patent,” which are the more typical formulations in
patent law. But in light of the fact that the disputed agreement is an agreement
concerning patents, it is reasonable to interpret the term “practice” consistently with the
use of that term in the patent field. I submit that no patent lawyer, if presented with the
sentence “I intend to practice my patent rights” as a way of expressing an intention to
sue for infringement, would be able to resist the compulsion to strike out the sentence
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and rewrite it. Yet the court is in effect saying that the parties to this agreement
unambiguously demonstrated their understanding that NISTAC agreed not to sue Ford
for infringement by using just such an expression: that NISTAC agrees to release Ford
from claims arising “by reason of [NISTAC’s] practice of [Ford’s] Patent Rights.”
The context of paragraph 3.3 adds support to NISTAC’s interpretation.
Paragraph 3.1 protects Ford against liability to NISTAC for infringement suits by third-
party patentees. Paragraph 3.2 refers to “applications and uses” of the donated
technology as well as “future developmental and commercial activities” associated with
the donated technology, and in that context states that Ford assumes no responsibility
in connection with or arising from NISTAC’s practice of Ford’s patent rights. That
paragraph protects Ford from suit based on a claim arising from the post-transfer
development or use of the technology. Paragraph 3.3 then states, using language
similar to that in paragraph 3.2, that NISTAC releases Ford from claims based on the
practice of Ford’s patent rights. In that context, the meaning of paragraph 3.3 that best
accords with the parallel language of paragraph 3.2 is that it protects Ford against any
claims by NISTAC arising from NISTAC’s acts of making, using, or selling the
technology. Thus, for example, paragraph 3.3 would bar NISTAC from seeking
indemnification from Ford in the event that a third party, injured in the course of
NISTAC’s use of the donated technology, sued NISTAC on a products liability theory.
While that interpretation of paragraph 3.3 may not be the only one, it is at least a
reasonable one.
Conspicuous by its absence from the agreement is a provision, simple enough to
draft, that would protect Ford against suit for infringement of the donated patents. In
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fact, what Ford has been required to do to extract such a covenant from paragraph 3.3
is to give that paragraph a 180 degree spin. In a nutshell, Ford argues that a provision
that by its terms protects against claims arising from NISTAC’s practice of Ford’s patent
rights actually protects against claims arising from Ford’s practice of NISTAC’s patent
rights.
The parties knew how to draft a provision granting Ford a license so that Ford
would be free to practice the patented inventions without fear of being sued by NISTAC
for infringement: Paragraph 2.6 of the donation agreement refers to the “royalty-free
and non-transferable license to the Donated Technology with rights to practice the
inventions thereof” that was granted to another party, Visteon Global Technologies, Inc.
Yet the parties failed to use similarly direct language in paragraph 3.3, which at least
casts doubt on whether that was their intention. Perhaps, as NISTAC alleges, Ford had
an eye to claiming a tax deduction for its donation, and therefore wanted to avoid the
appearance that it was retaining an interest in the patents, even in the form of a non-
exclusive license. But at the very least, the exercise in circumlocution that is necessary
to give paragraph 3.3 the meaning that Ford assigns to it makes it reasonable to
conclude that the parties intended paragraph 3.3 to be something other than a simple
license-back provision.
Because the term “practice of [Ford’s] Patent Rights” is ambiguous, the
interpretation of the agreement is a question of fact that, under governing Michigan
contract law principles, should not have been disposed of as a matter of law. I would
reverse and remand this case so that the agreement can be interpreted by the finder of
fact in light of all the available evidence bearing on the parties’ intent.
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