[00:00:27] Speaker 00:
The next case is number 14, 1267, Maloon Corporation Trust against GE Lighting Solutions.

[00:00:36] Speaker 00:
Mr. Ferrell.

[00:00:48] Speaker 03:
Good morning.

[00:00:49] Speaker 03:
May I please record?

[00:00:50] Speaker 03:
Dan Ferry on behalf of the Appellant Rulum Corporation Trust and the proposed additional appellant, Charles L. Wells, the trustee for the bankruptcy estate of Rulum Corporation.

[00:01:00] Speaker 03:
There are a few issues before the court.

[00:01:02] Speaker 03:
There is the motion to substitute parties.

[00:01:04] Speaker 00:
Yes, we have the motion.

[00:01:05] Speaker 00:
We will handle it after the argument.

[00:01:08] Speaker 03:
So turning to the issue on appeal, which is the license issue.

[00:01:11] Speaker 03:
The appeal concerns a settlement agreement entered into by Rulum Corporation

[00:01:15] Speaker 03:
and ECOLUX, the predecessor of GE Lighting Solutions.

[00:01:19] Speaker 03:
As one part of that agreement, we're loom granted to ECOLUX a non-exclusive patent license.

[00:01:26] Speaker 03:
The question is whether the parties intended for the license to be assignable.

[00:01:30] Speaker 03:
Unless the agreement unambiguously expresses the intent of the parties for the license to be assignable, then the case should be remanded to the district court.

[00:01:41] Speaker 01:
What does Section 14 mean if it isn't an assignment?

[00:01:45] Speaker 03:
I think that's the question that this report focused on and is the question that needs to be resolved on appeal.

[00:01:51] Speaker 03:
The most reasonable interpretation of Section 14 is that a name is the intended third-party beneficiaries of the agreement, the parties' respective affiliates, successors, and assigns.

[00:02:03] Speaker 03:
Unless Section 14 has this meeting, the affiliates, successors, and assigns could not maintain an action for breach of contract under Michigan law.

[00:02:11] Speaker 03:
In any event, Section 14 does not unambiguously mean that all of the rights granted within the agreement are assignable.

[00:02:21] Speaker 01:
I guess I don't understand.

[00:02:23] Speaker 01:
It doesn't have a limitation.

[00:02:25] Speaker 01:
It says this agreement shall enter into the benefit of affiliate successors and assigns.

[00:02:30] Speaker 01:
This agreement in its entirety, it doesn't say

[00:02:33] Speaker 01:
certain sections, it seems like a general assignability clause.

[00:02:40] Speaker 01:
Can you try explaining your answer to me again?

[00:02:42] Speaker 03:
Yes, sure.

[00:02:44] Speaker 03:
The Section 14 does not say that, expressly, does not say that any rights are assignable, or anything in the agreement is assignable.

[00:02:53] Speaker 03:
Section 14 also says that it endures to the benefit of the parties and their respective affiliate successors and assigns.

[00:03:00] Speaker 03:
By the use of the term assigns,

[00:03:03] Speaker 03:
Section 14 clearly contemplates that the agreement itself is assignable.

[00:03:08] Speaker 03:
We don't dispute that.

[00:03:10] Speaker 03:
But it by no means follows that the license itself was intended to be assignable.

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The agreement can be assignable as it is written, in which the license is explicitly granted only to Ecolux.

[00:03:26] Speaker 03:
The intent of Section 14, we think, with the most reasonable interpretation, is that it names the intended third-party beneficiaries.

[00:03:33] Speaker 03:
which is the affiliates, successors, and signs.

[00:03:36] Speaker 04:
If this was simply... Let me ask you a hypothetical.

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Suppose we had a two-clause agreement.

[00:03:42] Speaker 04:
The first clause says these patent rights are licensed to Equal Lux.

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And the second clause was this agreement is assignable by Equal Lux to anybody.

[00:03:54] Speaker 04:
Does that assign the patent rights in the first clause or not?

[00:03:59] Speaker 03:
In that case, Your Honor,

[00:04:01] Speaker 03:
from understanding what you're saying, I think that it would.

[00:04:04] Speaker 04:
So you agree that the assignment clause doesn't have to specifically reference the patent rights to make the patent rights assignable?

[00:04:13] Speaker 03:
I would agree with that.

[00:04:14] Speaker 04:
The question is... So the question here then is whether 14 assigns the agreement or not?

[00:04:20] Speaker 03:
No, the question is whether the agreement as a whole expresses the intent for the license to be assignable.

[00:04:28] Speaker 03:
In section 14,

[00:04:30] Speaker 03:
The specific question, yes.

[00:04:34] Speaker 04:
Why you would read that as intending for the patent rights to be assignable, or not assignable whether the agreement intended by it doesn't here.

[00:04:44] Speaker 04:
It's the same thing except whether 14 means what the assignment clause in my hypothetical means, isn't it?

[00:04:52] Speaker 03:
In your hypothetical, there's only two provisions in the agreement, correct?

[00:04:54] Speaker 04:
Well, that can't be the basis for your argument that there's a lot of other

[00:04:58] Speaker 04:
I mean, I just threw out all the other provisions to make it simple.

[00:05:01] Speaker 04:
But that can't be the basis for your argument that the agreement's complicated.

[00:05:04] Speaker 04:
So it's not clear that the patent rights couldn't be assigned.

[00:05:09] Speaker 03:
Our basis for our arguments, if you look at the agreement.

[00:05:11] Speaker 04:
I mean, I can make the hypothetical more complicated if you want.

[00:05:14] Speaker 04:
Say there are four clauses.

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Three of them are completely unrelated.

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The fourth one says the patent rights are assigned to EqualX.

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And then there's the fifth one that says disagreement can be assigned.

[00:05:24] Speaker 04:
Under that hypothetical, are the patent rights assigned?

[00:05:29] Speaker 03:
with the presumption of the non-assignability patent rights, or patent licenses rather, patent license rights must be... That was really a yes or no question.

[00:05:39] Speaker 04:
I mean, I'm trying to determine what the basis for your argument that it can't be assigned is.

[00:05:44] Speaker 04:
Is it because if there's a lot of clauses, they have to be specific, but if there's only one clause, it's that they don't...

[00:05:51] Speaker 03:
The basis for our argument that they can't be assigned is that if you look at the agreement as a whole, it does not express an intent for license to be assignable.

[00:05:58] Speaker 03:
Section 14 does not say... If you look at Section 2 and you look at Section 5, Section 2 grants a license to equal explicitly.

[00:06:07] Speaker 04:
But Section 2 and Section 5 aren't the assignment clause.

[00:06:10] Speaker 04:
Section 14 is the assignment clause.

[00:06:12] Speaker 03:
Section 14 is not necessarily an assignment clause.

[00:06:15] Speaker 04:
So I'm trying to get what we disagree about and it seems to me that you say Section 14 does not assign the agreement.

[00:06:23] Speaker 04:
If we disagree with you and we find that Section 14 assigns the agreement, are you done?

[00:06:29] Speaker 03:
No, you're not.

[00:06:30] Speaker 03:
Because the agreement can be assignable in itself as is written.

[00:06:34] Speaker 03:
but does not mean that the license, which is explicitly granted in isolated provision.

[00:06:37] Speaker 00:
But it says the agreement is binding.

[00:06:40] Speaker 00:
Whether the agreement is assigning or not, you still have to overcome the plain language that says the agreement is binding on the assigns.

[00:06:48] Speaker 00:
That's the word in the contract.

[00:06:51] Speaker 03:
The agreement is binding on the assigns.

[00:06:52] Speaker 03:
I think the question on appeal is, what is meant by it goes to the benefit of the assigns and successors.

[00:07:00] Speaker 00:
That is what is meant by binding.

[00:07:02] Speaker 03:
If it's binding on the assigns.

[00:07:04] Speaker 00:
That's what it says.

[00:07:06] Speaker 00:
Not if.

[00:07:06] Speaker 00:
It says it is.

[00:07:07] Speaker 00:
The agreement is binding on the assigns.

[00:07:10] Speaker 03:
No doubt, Your Honor.

[00:07:11] Speaker 00:
The agreement shall, in your view, to the benefit of and be binding upon the parties and their assigns.

[00:07:18] Speaker 03:
We do not disagree that the agreement is assignable.

[00:07:23] Speaker 03:
I think a hypothetical I would propose is this.

[00:07:25] Speaker 00:
It's not hypothetical.

[00:07:26] Speaker 00:
It's the plain language of the contract.

[00:07:28] Speaker 03:
To explain our position may propose a hypothetical.

[00:07:32] Speaker 03:
Consider a large contract with 100 pages.

[00:07:38] Speaker 03:
In one provision of that contract, it grants a patent license.

[00:07:42] Speaker 03:
There's no successor in the Science Clause.

[00:07:45] Speaker 03:
Does the inclusion of that patent license, which is presumptively non-assignable, render the entirety of the rest of the contract?

[00:07:53] Speaker 03:
Non-assignable?

[00:07:54] Speaker 04:
No, the patent license must be... Wait, let me make sure I understand your hypothetical.

[00:07:59] Speaker 04:
In this entire huge contract, it has a bunch of provisions, including a patent license, but it has no assignment clause whatsoever.

[00:08:07] Speaker 03:
Correct, Your Honor.

[00:08:08] Speaker 04:
Well, that's not even remotely applicable to this situation, because assuming 14 is an assignment clause, we have an assignment clause.

[00:08:17] Speaker 03:
My hypothetical shows

[00:08:18] Speaker 04:
If you don't have an assignment clause, you can't assign the agreement, even if by... I don't believe that's correct, Your Honor.

[00:08:27] Speaker 03:
If the agreement was freely assigned, you could have signed the agreement.

[00:08:29] Speaker 03:
I think many of the cases cited by the parties... Okay, I understand.

[00:08:33] Speaker 04:
But we do have an assignment clause here.

[00:08:35] Speaker 04:
You're section 14, and I think the question is... Is your position basically that in order to say a patent license is assignable, it has to say the patent license is assignable?

[00:08:48] Speaker 04:
It can't be part of a bigger agreement.

[00:08:50] Speaker 03:
I don't think our position is not that bold, Your Honor.

[00:08:53] Speaker 03:
Our position is that you must look at the contract as a whole to ascertain the intent of the parties.

[00:08:59] Speaker 03:
Here, where Section 2 grants license explicitly to Ecolux, and Section 5 grants more limited patent rights explicitly to Ecolux as successor to the Center.

[00:09:08] Speaker 04:
I still don't understand.

[00:09:09] Speaker 04:
You're referring to this broad look at the intent of the agreement.

[00:09:12] Speaker 04:
We only have three provisions to look at, I assume you agree.

[00:09:15] Speaker 04:
There's nothing else we're looking at.

[00:09:16] Speaker 04:
We're looking at 2, 5, and 14.

[00:09:18] Speaker 04:
If you know what 2 says, if 14 says all of the rights in this agreement are assigned to the parties and their assigns or whatever, that's good enough, right?

[00:09:30] Speaker 03:
If section 14 says that, that would be good enough.

[00:09:33] Speaker 04:
So we are really talking about what section 14 means?

[00:09:38] Speaker 04:
Yes.

[00:09:39] Speaker 00:
Because section 14 also says it's binding on the successors.

[00:09:43] Speaker 00:
Correct.

[00:09:43] Speaker 00:
Even if they're not assigned, explicitly.

[00:09:48] Speaker 00:
So that's, and there's no dispute as to the succession, is there?

[00:09:53] Speaker 03:
There is no dispute as to the succession, but it's essentially, it goes to whether it was assigned.

[00:10:00] Speaker 04:
And the question is whether... So you're saying, despite the fact that 14 uses the word assigned, it's not really an assignment clause.

[00:10:08] Speaker 03:
That's correct, Your Honor.

[00:10:09] Speaker 03:
Certainly it's not an assignment clause unambiguously for all the rights within the agreement.

[00:10:15] Speaker 00:
It says affiliates, successors, and assignees.

[00:10:18] Speaker 03:
That's correct.

[00:10:19] Speaker 00:
So you have to overcome all of that.

[00:10:21] Speaker 03:
If the section 14 was intended to, the intention of section 14 was to make all the rights in the agreement assignable, what would be the purpose of mentioning affiliates?

[00:10:32] Speaker 03:
This is named the intended third party beneficiaries.

[00:10:37] Speaker 00:
Okay.

[00:10:37] Speaker 00:
let's hear from the other side.

[00:10:48] Speaker 00:
Mr. Rainey.

[00:10:49] Speaker 02:
May it please the court.

[00:10:50] Speaker 02:
Good morning, Your Honors.

[00:10:51] Speaker 02:
Richard Rainey here on behalf of GE Lighting.

[00:10:53] Speaker 02:
With me at the council table is Robert McGone with the Sutton-Lagone firm.

[00:10:59] Speaker 02:
If I can start with a question Judge Hughes raised, which is what the intent of Section 14 is, I think the case law makes it very clear this is a

[00:11:07] Speaker 02:
a common contract provision that is designed to enable the holder of the contract to assign it in its entirety.

[00:11:18] Speaker 02:
There's not a case that either party has cited in which a contract was found assignable, but somehow a right was carved out of it.

[00:11:27] Speaker 02:
And that's, we think,

[00:11:30] Speaker 02:
dispositive in this case.

[00:11:31] Speaker 02:
They've conceded it's an assignable contract.

[00:11:33] Speaker 02:
They've conceded it's been assigned.

[00:11:35] Speaker 02:
There's no dispute GE Lighting is a successor, and we think it's very clear that the license flows with the assignment.

[00:11:43] Speaker 02:
This notion that Section 14 is there for intended third-party beneficiaries we submit, as we've pointed out, our briefing is just not correct.

[00:11:50] Speaker 01:
In fact, if it's read that way, it would create a conflict with Section 5, which names a whole host of other entities, such as... Apparently you agree that even with Section 14's general assignment clause, Section 2 had expressly indicated that that license was not assignable.

[00:12:10] Speaker 01:
14 wouldn't trump that otherwise specific and clear language, right?

[00:12:13] Speaker 02:
That would create, at the very least, an ambiguity, which we don't have in this case.

[00:12:17] Speaker 02:
Section 2 is very clear.

[00:12:18] Speaker 02:
It's not limited in any way, and Section 14 is broad.

[00:12:21] Speaker 01:
I think their argument is, as I understand it, since Section 5 expressly lists all the third-party beneficiaries that are possible and Section 2 doesn't, that Section 2 is meant to indicate that those beneficiaries are not possible for Section 2.

[00:12:38] Speaker 02:
That is the argument, and our position on that is

[00:12:41] Speaker 02:
There is some redundancy between Section 5 and Section 2, but to read the contract according to its plain terms, that's all you have is some redundancy.

[00:12:51] Speaker 02:
To take it their direction, read Section 14.

[00:12:54] Speaker 01:
We submit entirely out of the agreement.

[00:12:58] Speaker 01:
Would you then agree that Section 2 and 5 on their face, if Section 14 weren't present, that 5 would allow for assignment of that right, but 2 would not allow for assignment under those circumstances?

[00:13:13] Speaker 02:
That is correct, and we made that clear below as well.

[00:13:16] Speaker 02:
And, you know, I think, you know, our position is at the, you know,

[00:13:23] Speaker 02:
What their argument boils down to, I think Judge Hughes hit on this, is that they are asking this court to hold there some special magic words in order to find the signability of an agreement.

[00:13:33] Speaker 02:
And they essentially say that in the briefing where they say, there's no case that we point to that uses language to show transfer of licensing rights.

[00:13:50] Speaker 02:
We fully accept that a patent license is a personal right.

[00:13:52] Speaker 02:
But the state courts and the federal courts have dealt with this commonly confront personal rights and agreements.

[00:13:57] Speaker 02:
And we've cited many cases where there are agreements that are personal which require express consent to assign.

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And there's no reason to treat patent license rights any different from those rights.

[00:14:11] Speaker 02:
So for those reasons, we think the district court judge here undoubtedly got this correct in his ruling on the license.

[00:14:20] Speaker 02:
It requires no further questions.

[00:14:22] Speaker 00:
Any questions for Mr. Wren?

[00:14:28] Speaker 00:
Okay.

[00:14:28] Speaker 00:
Thank you, Mr. Wren.

[00:14:29] Speaker 00:
Is there anything else you need to tell us?

[00:14:33] Speaker 03:
Yes, I'd like to address a couple of points made by Ippoli.

[00:14:37] Speaker 03:
Regarding his comments about the case law, there is no case law, if you look at the case side of the briefs, that say that the intention of a successor's and assigns clause was to make all the rights granted within the agreement assignable.

[00:14:51] Speaker 03:
Nor is there any case that says the intention of the Successors in the Science Clause or the inclusion of the Successors in the Science Clause makes presumptively non-assignable rights within the context of the whole agreement assignable.

[00:15:05] Speaker 03:
I would also like to address another point that Council made.

[00:15:12] Speaker 03:
And that is that if the intention of Section 14

[00:15:17] Speaker 03:
was to make every right within the agreement assignable.

[00:15:23] Speaker 03:
That would render meaningless the use of the words successors and assigns within Section 5.

[00:15:31] Speaker 03:
Simply put, the agreement does not say that the patent license wasn't assignable, nor does it say that all the rights within the agreement were assignable.

[00:15:41] Speaker 03:
In the absence of any such language, where the parties explicitly granted the patent license

[00:15:46] Speaker 03:
to Ecolux and explicitly granted more limited patent rights to Ecolux and successors and signs, it was error for the district court to conclude that the agreement unambiguously expresses intent for license to be assignable.

[00:16:02] Speaker 00:
Thank you.