Tuesday, April 28, 2009

Dismissal Reversed Because Contractual Language Not Clearly Unambiguous

In Novoneuron, Inc. v. Addiction Research Institute, Inc. (08-12028), released today by the Eleventh Circuit,  the Eleventh Circuit reversed a decision from the Southern District of Florida. The district court dismissed an action with prejudice that related to a patent disputed settled in a prior action.  The prior dispute resulted in a settlement that precluded the defendant from using the plaintiff's patent rights a patent registered in the United States. The plaintiff sought to enforce the settlement agreement and argued it precluded defendant from using the patent rights anywhere in the world. Concluding the settlement agreement only applied to the United States, the district court dismissed with prejudice.

The plaintiff argued in the Eleventh Circuit argued that the district court erred by (1) not sua sponte granting plaintiff leave to amend its complaint; (2) not allowing plaintiff to argue there was a unilateral mistake when the agreement was signed because plaintiff believed it applied everywhere in the world; and (3) by finding the agreement unambiguous on its face.  

As to the first two issues, the district courts do not have an obligation to sua sponte allow a party to amend a complaint when a plaintiff that is represented by counsel does not seek leave to amend.  Therefore, there was no error committed. 

While the court did not error in not granting leave to amend on its own accord, the Eleventh Circuit held the district court did error in finding the agreement ambiguous. Ambiguous is defined by the Eleventh Circuit as:
A contract is ambiguous where it is susceptible to two different interpretations, each one of which is reasonably inferred from the terms of the contract. If the interpretation urged by one party is unreasonable in light of the contract’s plain language, the contract is not ambiguous, and the court may not use extrinsic evidence to vary the terms of the contract. In determining whether a contract is ambiguous, we must first look at the words on the face of the contract.
Construing the issue in the light most favorable to the plaintiff, the Eleventh Circuit held the following contractual language could not be found clearly unambiguous on the face of the complaint: “all right, title, and interest in the patent and patent application known as U.S. Patent Number 5,591,738 (‘Method of Treating Chemical Dependency Using Betacarboline Alkaloids Derivatives and Salts Thereof’) and U.S. Patent Application Serial Number 08/280,187, including any claimed interest in these intellectual properties.”  Therefore, the decision was reversed.


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