Free Statement - District Court of Arizona - Arizona

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

PETER E. HEUSER, admitted pro hac vice ELIZABETH A. TEDESCO, admitted pro hac vice Kolisch Hartwell, P.C. 200 Pacific Building, 520 SW Yamhill Street Portland, OR 97204 Telephone: (503) 224-6655 Facsimile: (503) 295-6679 [email protected] [email protected] DANIEL R. MALINSKI (#005911) Burch & Cracchiolo, P.A. 702 East Osborn, Suite 200 Phoenix, Arizona 85014 Telephone: (602) 274-7611 Facsimile: (602) 234-0341 [email protected] Attorneys for Plaintiffs Richard G. Krauth and R.M. Wade & Co.

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA ) ) No.04-544 PHX PGR ) ) Plaintiffs, ) ) v. RESPONSE TO DEFENDANTS' ) STATEMENT OF FACTS AND ) Phelps Dodge Corporation, a New York STATEMENT OF FACTS IN SUPPORT ) corporation; Phelps Dodge Bagdad Inc., a OF PLAINTIFFS' RESPONSE IN ) Delaware corporation; Phelps Dodge Chino OPPOSITION TO DEFENDANTS' ) MOTION FOR SUMMARY JUDGMENT Inc., a Delaware corporation; Phelps Dodge Morenci Inc., a Delaware corporation; Phelps ) ENFORCING SETTLEMENT Dodge Sierrita Inc., a Delaware corporation; ) AGREEMENT ) Phelps Dodge Tyrone Inc., a Delaware corporation; and Phelps Dodge Miami Inc., a ) ) Delaware corporation, ) ) Defendants. Richard G. Krauth, an individual; and R.M. Wade & Co., an Oregon corporation,

Page 0

STATEMENT OF FACTS SUPPORTING PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

Case 2:04-cv-00544-PGR

Document 66

Filed 03/31/2006

Page 1 of 6

1 2 3 4 5 6 7 8 9 10

Plaintiffs Richard G. Krauth and R.M. Wade & Co. respond to the Statement of Facts in Defendants' Motion for Summary Judgment Enforcing Settlement Agreement as follows: 1. Plaintiffs dispute Paragraph 1 of Defendants' Statement of Facts, as it appears the

parties never agreed that the one-time paid-up license of $ *** would be only as to the patentsin-suit. See ¶¶ 4-7 below. 2. Plaintiffs dispute Paragraph 2 because the drafts of the settlement agreement

added many material terms, and included much negotiation of the terms theoretically agreed to, although the parties did agree to all terms by October 2005. See ¶¶ 4-7, 12-15 below. 3. As to Paragraph 3, Plaintiffs dispute that the draft emailed on September 7, 2005

contained plaintiffs' "final" proposed revisions. See ¶¶ 15, 16 below. 4. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 As to Paragraph 4, Plaintiffs do not dispute that Defendants' transmitted a final

draft of the proposed agreement on October 9, 2005. See ¶ 16 below. 5. Plaintiffs dispute Paragraph 5 only as to the term "written agreement" as opposed

to the "final draft of the settlement agreement." See ¶ 16 below. 6. Plaintiffs do not dispute Paragraph 6. * * * Plaintiffs submit the following Statement of Facts in support of their Opposition to Defendants' Motion for Summary Judgment Enforcing Settlement Agreement, and incorporate the concurrently filed Declaration of Peter E. Heuser in Support of Plaintiffs' Summary Judgment Briefing ("Heuser Decl.") and Declaration of Elizabeth A. Tedesco in Support of Plaintiffs' Summary Judgment Briefing ("Tedesco Decl.") by reference: 1. On August 16, 2004, the Court stayed this action pending the result of a

reexamination of the patents-in-suit, and plaintiffs filed the Request for Reexamination on September 30, 2004. [Heuser Decl. at ¶ 2]. 2. On January 11, 2005, counsel for plaintiffs, Peter E. Heuser ("Heuser"), left a

voicemail message for counsel for Phelps Dodge, C. Mark Kittredge ("Kittredge") stating that his client would "settle this case for a *** dollar, prompt cash payment," with "the terms to be confidential," for what "would in effect be a paid-up license for Phelps Dodge Company." [Id. at ¶¶ 4, 5, Exh. B]. On January 12, 2005, Kittredge told Heuser that Phelps Dodge would agree to settle on those terms, and did not supply any additional terms of settlement. [Id. at ¶ 6].
Page 1 STATEMENT OF FACTS SUPPORTING PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

Case 2:04-cv-00544-PGR

Document 66

Filed 03/31/2006

Page 2 of 6

1 2 3 4 5 6 7 8 9

3.

On January 18, 2005, the parties agreed that Heuser would prepare a "simple"

draft agreement with a paid-up license in return for a dismissal with prejudice and that Kittredge would draft the release provisions. [Id. at ¶ 7, Exh. C]. The parties did not discuss a license as to any other patents or for any other parties at that time. [Id.] 4. Heuser emailed a draft agreement to Kittredge on January 19, 2005 with a license

for only the Phelps Dodge companies named in the complaint and disclaiming any warranty of noninfringement "with respect to other patents." [Id. at ¶ 8, Exh. D]. Heuser's email stated, "As I indicated to you, neither of my clients has seen this document, so this should not be considered an offer that is in condition to be accepted." [Id.]. 5. Kittredge emailed Heuser a draft of the agreement containing Phelps Dodge's

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

revisions on February 7, 2005. [Id. at ¶ 9, Exh. E]. Without discussing the revisions in advance, Phelps Dodge broadened the scope of the license as to the patents licensed, the parties included, and provided a broad release for suppliers and manufacturers that were Wade's direct competitors in the sale of drip tubing and emitters. [Id.] Phelps Dodge also contradicted the language of plaintiffs' original draft by adding a warranty that Phelps Dodge (and its "Affiliates") did not infringe any patent of which plaintiffs were aware. [Id.] 6. Wade owns U.S. Patent No. 6,817,548 ("the `548 patent"), which plaintiffs did

not wish to license to Phelps Dodge and never intended to license to competing drip tube and emitter manufacturers. [Id. at ¶ 3, Exh. A]. Heuser brought this patent to Kittredge's attention on February 14, 2005. [Id. at ¶ 10, Exh. F]. Heuser told Kittredge that plaintiffs were not willing to license the patent to Phelps Dodge and were reluctant to agree to warrant that Phelps Dodge was not currently infringing the patent. [Id.] 7. On March 24, 2005, plaintiffs sent Phelps Dodge a proposed settlement

agreement that had been revised to account for the `548 patent. [Heuser Decl. at ¶ 11, Exh. G]. The draft agreement expressly disclaimed any license to Phelps Dodge under the `548 patent. [Id.] It provided a covenant not to sue Phelps Dodge for any past infringement of the `548

patent, but provided no future assurances. [Id.] The agreement only stated that "Wade is not aware of any infringement of the `548 patent by the Phelps Dodge Companies." [Id.] 8. Heuser called Kittredge on April 5, 2005. [Id. at ¶ 12]. Kittredge asked Heuser

if plaintiffs had heard anything from the PTO. [Id., Exh. I]. Heuser and Kittredge agreed that if
Page 2 STATEMENT OF FACTS SUPPORTING PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

Case 2:04-cv-00544-PGR

Document 66

Filed 03/31/2006

Page 3 of 6

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

the PTO rejected the claims of the patents-in-suit, it would not change the settlement they were working on. [Id.] Heuser stated, however, that if the PTO did not reject all of the claims of the patents-in-suit, the settlement negotiations would change directions entirely. [Id.] 9. Heuser then called Edward Newbegin, president of R.M. Wade & Co.

("Newbegin") to report this conversation with Kittredge. [Id. at ¶ 13]. Newbegin told Heuser that Wade wished to sell product to Phelps Dodge and asked Heuser to be more positive with Kittredge about the progress of the negotiations. [Id.] As a result of this conversation, Heuser sent an email to Kittredge asking, to be encouraging, if it would be appropriate for Wade to contact Phelps about doing business in the future "now that we have been able to put the case to bed." [Id., Exh. H]. 10. Heuser emailed Kittredge on May 10, 2005 asking whether he was obtaining

information about the emitters Phelps Dodge was using. [Id. at ¶ 15, Exh. J]. Kittredge called Heuser soon after the email was sent. [Id.] The parties discussed the reexamination of the patents-in-suit, and Heuser told Kittredge the longer they waited the more likely it became that there would be a ruling by the PTO. [Id.] Heuser said that if the PTO does any other than reject all the claims before the agreement was signed, it "could entirely change the direction of the negotiation." [Id.] Kittredge said he felt the parties had a deal and Heuser said he did know that that was so clear. [Id.] After speaking with Kittredge, Heuser recounted the conversation in an email to Newbegin. [Id.] 11. Kittredge remembers a single conversation "at no time prior to late summer

2005" in which "Heuser told Kittredge that if the Patent Office issued a favorable Office Action before the written settlement agreement was signed, then he thought his clients' position would be that all bets would be off." [Tedesco Decl., Exh. A at 7; Exh. B at 3]. Kittredge has no notes, emails or other memoranda to help him place the date. [Id., Exh. C at 88:8-90:18]. 12. On June 17, 2005, Kittredge emailed Heuser revisions to the draft settlement

agreement he received on March 24, 2005. [Heuser Decl. at ¶ 16, Exh. K]. Although the parties had not discussed any such provision, the draft also included a license to Phelps Dodge under the `548 patent as to the products identified in Exhibit C. [Id.] The draft further included, for the first time, a signature line for Krauth's wife, whom Kittredge indicated he believed to "own[] an

Page 3

STATEMENT OF FACTS SUPPORTING PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

Case 2:04-cv-00544-PGR

Document 66

Filed 03/31/2006

Page 4 of 6

1 2 3 4 5 6 7 8

interest in the patents" which were obtained in and were sought to be licensed from two community property states, California and Arizona. [Id.] 13. On June 22, 2005, Heuser responded in an email that the plaintiffs could not agree

to the addition of Paragraph 2b because a license under the `548 patent could be seriously prejudicial to plaintiffs and would not be necessary to the intellectual property rights Phelps Dodge would receive under the proposed agreement. [Id. at ¶ 17, Exh. L]. On June 24, 2005, Heuser further asserted that plaintiffs could not warrant that Phelps Dodge did not infringe any patent of which they were "aware." [Id.] 14. The parties worked to obtain emitter information for Exhibit C and continued to

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

negotiate the contract language releasing Phelps Dodge from liability for infringing the `548 patent. [Id. at ¶ 18]. On August 12, 2005, Heuser received a voicemail message from Kittredge stating that he was not comfortable with plaintiffs' "whittling away" at each term relating to rights under the `548 patent previously discussed by the parties, including the license term. [Id. at ¶ 19, Exh. M; Tedesco Decl., Exh. D at 63:25-64:20]. 15. In early September, plaintiffs momentarily thought the parties had reached

agreement on contract language and signed a draft of the agreement. [Heuser Decl. at ¶ 20]. Before Heuser received the signed copies, he received a voicemail from Kittredge stating in pertinent part: "I wanted to chat with you briefly, and make sure we don't get ahead of ourselves, because it looks like you're already gathering signatures. There is going to be a review process that I need to go through here with my client to make sure we are comfortable with this, because Exhibit C looks a lot different than what we had before." [Id. at ¶ 21, Exh. N]. The document plaintiffs had signed was never transmitted to Phelps Dodge, and--prior to discovery in this case--Phelps Dodge was never told the draft had been signed. [Id. at ¶ 20]. 16. October 9, 2005, Kittredge sent by email what would be a final draft of the

proposed settlement agreement, and stating, "Now that we are finally here, I would really like to see what we can do to get the agreement executed this week." [Id. at ¶ 22, Exh. O]. 17. On October 19, 2005, Kittredge reported that Phelps Dodge had signed the final

draft of the agreement. [Id. at ¶ 23, Exh. P]. Plaintiffs had not yet signed it. [Id.] 18. On October 20, 2005, Heuser called Kittredge to inform him that plaintiffs had

just received an Office Action from the PTO confirming the validity of both patents-in-suit. [Id.
Page 4 STATEMENT OF FACTS SUPPORTING PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

Case 2:04-cv-00544-PGR

Document 66

Filed 03/31/2006

Page 5 of 6

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

at ¶ 24, Exh. Q]. During the conversation, Kittredge acknowledged that Heuser had said the agreement needed to be executed before Wade received a favorable ruling from the PTO or the parties would be back to negotiating. [Id.] As the conversation concluded, Heuser and Kittredge agreed that they wanted to "resolve the issue of the disputed settlement" before proceeding with other aspects of the case. [Tedesco Decl., Exh. A at 8]. 19. Phelps Dodge contends that an oral contract was formed when plaintiffs

"manifested assent to settle this Action through the voice mail message left by Heuser on the evening of January 11, 2005" and "Defendants manifested assent to be bound during the January 12, 2005 telephone conversation" between Heuser and Kittredge in which "Kittredge told Heuser that the offer made by plaintiffs in that voicemail message was accepted by Phelps Dodge." [Id., Exh. B at 3]. 20. Phelps Dodge contends that an oral "modification" to the purported January 12,

2005 oral agreement took place "sometime between February 14, 2005 and April 5, 2005" to "take into consideration the Plaintiff's newly issued `548 patent." [Id.] The "modification" included the parties' agreement "that (i) defendants would identify the subject emitters; (ii) plaintiffs would review that information with respect to the new patents; and (iii) all emitters that do not infringe the new patent would be expressly identified in and covered by the agreement." [Id., Exh. A at 6]. Dated: March 31, 2006.

By

s/Elizabeth A. Tedesco PETER E. HEUSER ELIZABETH A. TEDESCO Kolisch Hartwell, P.C. 520 SW Yamhill Street, Suite 200 Portland, Oregon 97204 Telephone: (503) 224-6655 Facsimile: (503) 295-6679

DANIEL R. MALINSKI Burch & Cracchiolo, P.A. 702 East Osborn, Suite 200 Phoenix, Arizona 85014 Telephone: (602) 274-7611 Facsimile: (602) 234-0341

Page 5

STATEMENT OF FACTS SUPPORTING PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

Case 2:04-cv-00544-PGR

Document 66

Filed 03/31/2006

Page 6 of 6