Plasmacam, Inc. v. Cncelectronics, LLC ( 2022 )

Case: 21-1689 Document: 39 Page: 1 Filed: 02/03/2022
United States Court of Appeals
for the Federal Circuit
______________________
PLASMACAM, INC.,
Plaintiff-Appellee
v.
CNCELECTRONICS, LLC, FOURHILLS DESIGNS,
LLC, THOMAS LEE CAUDLE, MARTHA JANE
CAUDLE,
Defendants-Appellants
______________________
2021-1689
______________________
Appeal from the United States District Court for the
Eastern District of Texas in No. 4:19-cv-00037-ALM, Judge
Amos L. Mazzant, III.
______________________
Decided: February 3, 2022
______________________
MARIA CRIMI SPETH, Jaburg & Wilk, P.C., Phoenix, AZ,
argued for plaintiff-appellee. Also represented by AARON
KEITH HAAR.
CHARLES JOHN ROGERS, Conley Rose, P.C., Houston,
TX, argued for defendants-appellants. Also represented by
THOMAS WARDEN.
______________________
Before NEWMAN, DYK, and REYNA, Circuit Judges.
Case: 21-1689 Document: 39 Page: 2 Filed: 02/03/2022
2 PLASMACAM, INC. v. CNCELECTRONICS, LLC
Opinion for the court filed by Circuit Judge DYK.
Dissenting opinion filed by Circuit Judge NEWMAN.
DYK, Circuit Judge.
PlasmaCAM, Inc. (“Plasmacam”) sued CNCElectron-
ics, LLC, Fourhills Designs, LLC, and Thomas and Martha
Caudle (collectively “CNC”) in the Eastern District of Texas
for infringing U.S. Patent No. 7,071,441 (“the ’441 patent”)
for which Plasmacam has an exclusive license. In Decem-
ber 2019, the parties notified the district court that they
had settled the case. However, when the parties met to
draft a formal agreement, it became evident that they in-
terpreted the settlement differently, and further negotia-
tions resulted. The parties eventually advised the district
court that they had reached a complete agreement. The
district court granted the motion to enforce Plasmacam’s
version of that agreement and ordered CNC to execute it.
CNC appeals. We hold that this court has jurisdiction
over CNC’s appeal. We also reverse the district court’s
judgment ordering CNC to execute Plasmacam’s version of
the settlement agreement and conclude that CNC’s version
of the agreement accurately reflects the parties’ under-
standing. We remand for further proceedings not incon-
sistent with this opinion.
BACKGROUND
This appeal arises out of a disputed settlement agree-
ment. Plasmacam sued CNC in January 2019 for infring-
ing the ’441 patent, which claims a plasma cutting system
and as to which Plasmacam has an exclusive license. The
parties eventually agreed to settle the case. This agree-
ment was reflected in an exchange of emails.
Email from Plasmacam’s counsel:
The parties will enter into mutual releases which
will include releasing CNCElectronics’s
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PLASMACAM, INC. v. CNCELECTRONICS, LLC 3
downstream customers from liability for infringing
the patent at issue.
Email from CNC’s counsel:
Provided that the release also covers future claims,
then it looks like we have a settlement. I.e., the
agreement includes a covenant not to sue (or li-
cense or similar) to cover Defendants and their
downstream customers/users, from future infringe-
ment claims.
J.A. 730.
The parties then notified the district court that they
had settled the case, and the court ordered them to submit
final, closing paperwork by January 23, 2020. During that
window, Plasmacam and CNC discussed the specific terms
of the settlement agreement, but they disagreed as to the
terms of the mutual release and as to the products that
would be covered by the covenant not to sue (“Covered
Products”). With respect to the release, the parties primar-
ily disagreed on its scope. Plasmacam advocated for sepa-
rate release obligations for it and CNC, requiring CNC to
release Plasmacam from any causes of action that arose out
of or related to the lawsuit, whereas Plasmacam would re-
lease CNC only for past and future claims for infringement
of the ’441 patent arising from the Covered Products. Con-
versely, CNC proposed a broad release, applying equally to
each party, which released all past claims of any nature
and appeared to cover claims not related to the ’441 patent.
With respect to the definition of Covered Products in
paragraph 2 of the draft agreement, Plasmacam proposed
Covered Products be defined as “the components currently
manufactured, sold or offered for sale by CNC which incor-
porate digital height control.” J.A. 737. On January 7,
2020, CNC responded with a draft that defined Covered
Products as “all past, present, and future components man-
ufactured, sold, or offered for sale by CNC which
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4 PLASMACAM, INC. v. CNCELECTRONICS, LLC
incorporate digital torch height control.” J.A. 745.
Plasmacam replied on January 15, and proposed to limit
Covered Products to “components previously or currently
manufactured, sold or offered for sale by CNC which incor-
porate digital torch height control.” J.A. 754.
On January 17, CNC objected on the basis that its
“products are very frequently revised or updated” so the
limited definition “would be practically meaningless.”
J.A. 779. Plasmacam then agreed to “one additional com-
promise to address [CNC’s] concern about routine updates
and bug fixes,” J.A. 760–61, and apparently proposed that
Covered Products be defined as “(1) all components previ-
ously or currently manufactured, sold or offered for sale by
CNC which incorporate digital torch height control; and
(2) updates and bug fixes to the currently manufactured
products,” J.A. 1061. CNC rejected this “compromise” and
proposed that Covered Products be “all components manu-
factured, sold or offered for sale by CNC which incorporate
digital torch height control.” J.A. 771. (At oral argument,
Plasmacam agreed that this definition covered future prod-
ucts. Oral Arg. 19:22–19:55, available at https://oralargu-
ments.cafc.uscourts.gov/default.aspx?fl=21-
1689_10072021.mp3.) On January 21, Plasmacam stated
that it “agreed to [CNC’s] change in paragraph 2 (the defi-
nition of covered products).” J.A. 777.
However, the parties continued to disagree as to the
terms of the mutual release and advised the district court
that they “ha[d] a dispute regarding the scope of the mu-
tual release.” J.A. 522. As a result, the district court au-
thorized each side to brief separate motions to enforce their
respective interpretations of the settlement agreement. In
the course of briefing, the parties came to an agreement
regarding the mutual release. This agreement was re-
flected in Plasmacam’s reply brief, which stated that the
parties no longer disagreed, and that the mutual release
should apply to claims that “were brought or should have
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PLASMACAM, INC. v. CNCELECTRONICS, LLC 5
been brought, arising out of or relating to the Litigation.”
J.A. 1061. CNC’s brief referenced the January 21 agree-
ment with respect to Covered Products, stating
“[Plasmacam] accepted [CNC’s] correction to paragraph
2. . . that [Covered Products] should not be limited to cur-
rent products.” J.A. 568. However, Plasmacam’s reply
brief departed from the parties’ January agreement in de-
fining Covered Products as “(1) all components previously
or currently manufactured, sold or offered for sale by CNC
which incorporate digital torch height control; and (2) up-
dates and bug fixes to the currently manufactured prod-
ucts.” J.A. 1061. CNC did not raise this issue at a June 5
status conference set by the district court.
Thereafter, the district court granted Plasmacam’s mo-
tion to enforce the settlement agreement and adopted
Plasmacam’s version of the agreement without addressing
the January 21 agreement as to the definition of Covered
Products.
CNC filed a motion for reconsideration urging the dis-
trict court that Plasmacam’s reply brief definition was not
what the parties agreed to on January 21. Plasmacam filed
a competing motion to enforce the court’s order, contending
that the parties never reached an agreement on January
21 because “that compromise was in exchange for the re-
quest that [CNC] compromise on the release paragraph.”
J.A. 1077. The district court denied CNC’s motion for re-
consideration and upheld its interpretation of Covered
Products, explaining that the January 21 exchange showed
that Plasmacam “did not agree to [CNC’s] proposed Cov-
ered Products language in a vacuum.” J.A. 10. Instead,
Plasmacam made its compromise contingent on “other pro-
posed changes” to the release. J.A. 10. The district court
ordered CNC to execute the settlement agreement and
promissory note and pay any unpaid settlement funds.
CNC appeals.
Case: 21-1689 Document: 39 Page: 6 Filed: 02/03/2022
6 PLASMACAM, INC. v. CNCELECTRONICS, LLC
DISCUSSION
I
We first address our jurisdiction to hear the case. The
parties agree that the court has jurisdiction, but disagree
as to whether it arises from 28 U.S.C. §§ 1292(a)(1), (c)(1)
(as an injunction), or 28 U.S.C. § 1295(a)(1) (as a final judg-
ment). Notwithstanding the parties’ agreement, we are in-
dependently obligated to determine our jurisdiction. See
Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541
(1986). We conclude that the district court order to execute
the settlement agreement constitutes either an appealable
injunction or a final judgment.
A
Section 1292(a)(1) confers appellate jurisdiction over
interlocutory district court orders “granting, continuing,
modifying, refusing or dissolving injunctions, or refusing to
dissolve or modify injunctions.” Whether an order consti-
tutes an injunction does not turn on whether the district
court labeled it as such, but instead on “the substantial ef-
fect of the order made.” Hewlett-Packard Co. v. Quanta
Storage, Inc., 961 F.3d 731, 742 n.7 (5th Cir. 2020) (quoting
McCoy v. La. State Bd. of Educ., 345 F.2d 720, 721 (5th Cir.
1965)); see also Union Oil Co. of Cal. v. Leavell, 220 F.3d
562, 566 (7th Cir. 2000) (“The district judge did not use the
magic word ‘injunction,’ but his order is injunctive in na-
ture, requiring the [defendants] to perform enumerated
steps under threat of the contempt power.”).
Section 1292(a)(1) thus “applies to ‘orders that are di-
rected to a party, enforceable by contempt, and designed to
accord . . . some or all of the substantive relief sought in the
complaint in more than a temporary fashion.’” Police Ass’n
of New Orleans v. City of New Orleans, 100 F.3d 1159, 1166
n.5 (5th Cir. 1996) (quoting 16 Charles A. Wright et
al., Federal Practice & Procedure § 3922, at 29 (1977)). To
Case: 21-1689 Document: 39 Page: 7 Filed: 02/03/2022
PLASMACAM, INC. v. CNCELECTRONICS, LLC 7
be sure, an order to pay money pursuant to an agreement,
including a settlement agreement, alone does not consti-
tute an appealable injunctive order. See Saber v. Fi-
nanceAmerica Credit Corp., 843 F.2d 697, 702–03 (3d Cir.
1988). But an order granting specific performance on non-
monetary terms is appealable as an injunction. Resolution
Tr. Corp. v. Ruggiero, 994 F.2d 1221, 1225 (7th Cir. 1993);
see also Cohen v. Bd. of Trs. of the Univ. of Med. and Den-
tistry of N.J., 867 F.2d 1455, 1468 (3d Cir. 1989) (“[S]pecific
enforcement of contractual undertakings by an order
against the person has been regarded as a classic form of
equitable relief . . . and if it is granted the order falls within
section 1292(a)(1).”). Thus, for example, in Supreme Fuels
Trading FZE v. Sargeant, the Eleventh Circuit held that it
did not have jurisdiction to review an order requiring a de-
fendant to “pay $5 million to [a plaintiff] pursuant to a set-
tlement agreement,” 689 F.3d 1244, 1245 (11th Cir. 2012),
but the concurrence had “little doubt that the district court
could have crafted an order” that conferred jurisdiction un-
der § 1292(a)(1) by ordering specific performance apart
from paying money, id. at 1247 (Pryor, J., concurring).
Here, the order required that CNC “[e]xecute the Set-
tlement Agreement and Promissory Note.” J.A. 12–13.
Even if we do not have appellate jurisdiction over the order
to pay money, the district court’s order effectually man-
dated specific performance in requiring CNC to execute the
settlement agreement.
B
Alternatively, we have jurisdiction over the district
court’s order because it is a final judgment. Section
1295(a)(1) confers jurisdiction to the Federal Circuit over
“an appeal from a final decision of a district court . . . in any
civil action arising under . . . any Act of Congress relating
to patents.” Final decisions are those that “end[] the liti-
gation on the merits and leave[] nothing for the court to do
Case: 21-1689 Document: 39 Page: 8 Filed: 02/03/2022
8 PLASMACAM, INC. v. CNCELECTRONICS, LLC
but execute the judgment.” Firestone Tire & Rubber Co. v.
Risjord, 449 U.S. 368, 373 (1981) (citations omitted); see
also Negron Gaztambide v. Hernandez Torres, 145 F.3d
410, 415 (1st Cir. 1998) (noting that a district court’s deci-
sion is final for purposes of appeal even if it leaves “some
subsidiary matters undecided”); Olcott v. Del. Flood Co.,
327 F.3d 1115, 1117 n.1 (10th Cir. 2003) (explaining that
court will have jurisdiction over appeal when unresolved
issues “affect the court’s execution of the judgment rather
than the merits” of the judgment). Whether an order is fi-
nal does not depend on the specific “form of words” that it
uses but instead on whether the order evinces the district
court’s clear intent to end the case. Pandrol USA, LP v.
Airboss Ry. Prods., Inc., 320 F.3d 1354, 1362–63 (Fed. Cir.
2003) (quoting United States v. F. & M. Schaefer Brewing
Co., 356 U.S. 227, 232 (1958) (citation omitted)).
Here, the record reveals that the parties did not con-
template further proceedings regarding any substantial
matters. The district court’s order enforcing the settlement
agreement evinces the court’s clear intent to end the case
by requiring the defendants to execute the settlement
agreement and pay the funds owed under that agreement.
Any future action required—either of the parties or the dis-
trict court—was merely subsidiary and concerned the exe-
cution of the judgment, not the scope of the district court’s
decision.
We therefore have jurisdiction over this appeal.
II
CNC contends that the district court erred in its en-
forcement of the settlement agreement because the en-
forcement order improperly limited the scope of the
Covered Products to “(1) all components previously or cur-
rently manufactured, sold or offered for sale by CNC which
incorporate digital torch height control; and (2) updates
and bug fixes to the currently manufactured products.”
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PLASMACAM, INC. v. CNCELECTRONICS, LLC 9
J.A. 4. Interpretation and enforcement of “a settlement
agreement is not an issue unique to patent law” despite
“arising in the context of a patent infringement suit.” No-
vamedix, Ltd. v. NDM Acquisition Corp., 166 F.3d 1177,
1180 (Fed. Cir. 1999) (citing Gjerlov v. Schuyler Labs., Inc.,
131 F.3d 1016, 1020 (Fed. Cir. 1997)). The parties dispute
whether federal common law or Texas state law applies,
but they nonetheless agree that the two are largely indis-
tinguishable. The Fifth Circuit reviews construction of an
unambiguous contract’s terms de novo, Cedyco Corp. v.
PetroQuest Energy, LLC, 497 F.3d 485, 490 (5th Cir. 2007),
but ascertaining whether the parties mutually assented to
contract terms is a factual question reviewed for clear er-
ror, see Woodson v. Surgitek, Inc., 57 F.3d 1406, 1416 (5th
Cir. 1995).
Here, the district court committed clear error when it
limited Covered Products to “(1) all components previously
or currently manufactured, sold or offered for sale by CNC
which incorporate digital torch height control; and (2) up-
dates and bug fixes to the currently manufactured prod-
ucts.” J.A. 4. The record reflects that during negotiations
after the initial agreement, the parties disagreed regarding
which products the covenant not to sue would cover. How-
ever, the record also establishes that Plasmacam ulti-
mately agreed to CNC’s proposed Covered Products
definition on January 21. J.A. 777 (“PlasmaCAM has
agreed to your change in paragraph 2 (the definition of cov-
ered products.)”). That definition applied the covenant not
to sue to “all components manufactured, sold or offered for
sale by CNC which incorporate digital torch height con-
trol.” J.A. 771.
The district court’s sole basis for disregarding this ex-
plicit agreement was that Plasmacam “‘gave’ [CNC] the
Covered Products language in exchange for other proposed
changes,” i.e., the Covered Products concession was contin-
gent on CNC’s agreement to Plasmacam’s proposal
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10 PLASMACAM, INC. v. CNCELECTRONICS, LLC
regarding the mutual release. J.A. 10. There is no support
in the record for any such qualification of the agreement.
To be sure, the agreement concerning the definition of Cov-
ered Products was contingent on reaching an agreement
with respect to the mutual release language. But the par-
ties after January 21 advised the court that the only re-
maining dispute concerned “the scope of the mutual
release,” J.A. 522, and the record shows that following the
January 21 agreement concerning Covered Products, the
parties continued negotiations over the mutual release,
and eventually reached an agreement. Nothing in
Plasmacam’s January 21 acceptance email made its assent
to the Covered Products term contingent on adopting
Plasmacam’s version of the mutual release. At the June
hearing on the parties’ competing motions to enforce the
settlement agreement, Plasmacam told the district court
that the parties were “on the same page” regarding the
agreement, and CNC confirmed that an agreement on the
mutual release meant the parties did “not have an issue.”
J.A. 1335–36. Plasmacam also stated that the covenant
not to sue was “not and has never been in dispute.”
J.A. 1076. The only possible agreement on the Covered
Products term was the January agreement. In ordering
that the parties sign an agreement including a different
definition of “Covered Products,” the district court commit-
ted clear error.
CONCLUSION
The court has jurisdiction to hear this appeal. We re-
verse the district court’s order concerning the Covered
Products term; hold that the parties reached an agreement
regarding the term on January 21; and remand for the dis-
trict court to enter an appropriate order utilizing the Jan-
uary 21 agreed definition of Covered Products.
REVERSED AND REMANDED
Case: 21-1689 Document: 39 Page: 11 Filed: 02/03/2022
United States Court of Appeals
for the Federal Circuit
______________________
PLASMACAM, INC.,
Plaintiff-Appellee
v.
CNCELECTRONICS, LLC, FOURHILLS DESIGNS,
LLC, THOMAS LEE CAUDLE, MARTHA JANE
CAUDLE,
Defendants-Appellants
______________________
2021-1689
______________________
Appeal from the United States District Court for the
Eastern District of Texas in No. 4:19-cv-00037-ALM, Judge
Amos L. Mazzant, III.
______________________
NEWMAN, Circuit Judge, dissenting.
I respectfully dissent. There was no “January agree-
ment” of litigation settlement. Nor was there agreement
at any other time on all the terms of settlement.
PlasmaCAM and CNC negotiated and exchanged several
draft agreements, but no final understanding was reached,
no meeting of the minds and no signed agreement.
To the contrary: after the parties in December 2019
agreed in principle to settle this litigation, there followed
extensive negotiations and draft agreements, until the par-
ties told the district court that “despite their best efforts,
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2 PLASMACAM, INC. v. CNCELECTRONICS, LLC
they have been unable to finalize and execute a written set-
tlement agreement.” Joint Notice of Non-Settlement and
Req. for Telephonic Conference at 1, PlasmaCAM, Inc. v.
CNCElectronics, LLC, No. 419-cv-00037-ALM, (E.D. Tex.
Jan. 23, 2020), ECF No. 51.
Nonetheless, my colleagues now hold that there was an
enforceable binding settlement agreement that they call
“the January agreement,” although both sides and the dis-
trict court agree that there was no such agreement. My
colleagues’ holding is contrary to the law of contracts, and
contrary to the principles of negotiation. See Crowell v.
CIGNA Grp. Ins., 410 F. App’x 788 (5th Cir. 2011):
To form a binding contract, the parties must have
a meeting of the minds [.] ... All of the parties must
assent to the same thing in the same sense at the
same time, and their assent must comprehend the
proposition as a whole.
Id. at 792 (quoting 14 Tex. Jur. 3d § 68).
The record is contrary to the panel majority’s holding.
Neither side argues for a “January agreement;” such an
agreement is the unique creation of the panel majority.
DISCUSSION
Contract formation requires mutuality. “To form ‘an
enforceable contract, there must be a meeting of the minds
on the essential terms of the agreement.’” O’Shaughnessy
v. Young Living Essential Oils, L.C., 810 F. App’x 308, 311
(5th Cir. 2020) (quoting Trans-Western Petroleum v. United
States Gypsum Co., 830 F.3d 1171, 1176 (10th Cir. 2016)).
Both CNC and PlasmaCAM consistently refused to accept
certain terms of the other’s draft settlement proposals. The
persistent sticking-point related to the issue of release and
covenant not to sue for infringement by any and all un-
known future CNC products. The panel majority errone-
ously states that “CNC’s version of the agreement
accurately reflects the parties’ understanding.” Maj. Op.
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PLASMACAM, INC. v. CNCELECTRONICS, LLC 3
at 2. The district court correctly found that CNC’s argu-
ment had no support in the record.
During the settlement negotiations both sides continu-
ally revised the other’s draft agreement, until they reached
an impasse and informed the district court that they could
not agree. To demonstrate that no agreement was reached,
contrary to the holding of the panel majority, I outline the
exchange of drafts in the record of settlement negotiations.
A
The settlement negotiations
This infringement suit was filed by PlasmaCAM in
January 2019, and the record in the Joint Appendix starts
with an email from PlasmaCAM’s counsel dated December
20, 2019, stating:
PlasmaCAM proposes:
CNCElectronics, LLC pays PlasmaCAM, Inc.
$25,000 upon execution of a settlement agreement.
[CNC will make a second payment of $25,000, and
there is a penalty of $10,000 if certain dates are not
met.]
The parties will enter into mutual releases which
will include releasing CNCElectronics’s down-
stream customers from liability for infringing the
patent at issue.
(email from PlasmaCAM’s counsel, Dec. 20, 2019). That
same day, CNC’s counsel responded as follows:
Provided that the release also covers future claims,
then it looks like we have a settlement. I.e., the
agreement includes a covenant not to sue (or li-
cense or similar) to cover Defendants and their
downstream customers/users, from future infringe-
ment claims.
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4 PLASMACAM, INC. v. CNCELECTRONICS, LLC
(email from CNC’s counsel, Dec. 20, 2019). The district
court recites that on December 23, 2019, PlasmaCAM by
telephone told the court that the case had been settled, and
the court issued an Order requiring the parties by January
23, 2020 to “file all papers necessary for the closing of this
case.” Mem. Op. & Order at 1, PlasmaCAM, Inc. v.
CNCElectronics, LLC, No. 419-cv-00037-ALM, (E.D. Tex.
June 22, 2020), ECF No. 66.
On December 30, 2019, PlasmaCAM sent CNC a draft
settlement agreement, which contained, inter alia, the fol-
lowing provisions:
2. Covered Products. For purposes of this
Agreement, the term: “Covered Products” shall
mean the components currently manufactured,
sold or offered for sale by CNC which incorporate
digital height control.
7. Release by PlasmaCAM. Subject to
PlasmaCAM’s timely receipt of, and in partial con-
sideration of the Settlement Payment,
PlasmaCAM, on behalf of itself and its licensor,
hereby releases CNC [and its customers, end users,
…] from any and all actions, judgments, indebted-
ness, damages, losses, claims, demands, costs, ex-
penses, attorneys’ fees and liabilities of an nature
whatsoever, whether known or unknown, sus-
pected or unsuspected, for infringement … of the
Patent that arose prior to the Effective Date, solely
if and to the extent the alleged infringement arose
from the making, use, sale, offer for sale, import, or
export of the Covered Products. For the avoidance
of doubt, the foregoing release of CNC distributors,
customers and end users does not apply to, and
PlasmaCAM is not restricted from taking any ac-
tion regarding, any such person having made, sell-
ing, offering for sale, using or importing any
product that is not a Covered Product. This release
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PLASMACAM, INC. v. CNCELECTRONICS, LLC 5
is intended to bar claims for infringement of the
Covered Products through the remainder of the life
of the Patent.
On January 7, 2020 CNC sent PlasmaCAM a revised
draft agreement, with the explanation:
I have attached a revised draft of the settlement
agreement and promissory note. … In the settle-
ment agreement
● I modified section 2 to make sure the release and
covenant not to sue applies to past, present, and fu-
ture products.
***
● I also tried to clarify the release in section 7 of
the settlement agreement.
(email from CNC’s counsel, Jan. 7, 2020). CNC revised sec-
tion 2 to include future products, as follows:
2. Covered Products. For purposes of this
Agreement, the term: “Covered Products” shall
mean all past, present, and future components
manufactured, sold or offered for sale by CNC
which incorporate digital torch height control.
CNC revised section 7 to delete the limitation to infringe-
ment of “the Patent” (the patent in litigation), and to apply
the release and covenant to CNC’s new definition of Cov-
ered Products:
7. Release by PlasmaCAM. [Subject to
PlasmaCAM’s timely receipt of the Settlement
Payment] PlasmaCAM … hereby releases and cov-
enants not to sue CNC … for patent infringe-
ment … that arose prior to the Effective Date, or
that will arise thereafter at any time during the re-
mainder of the life of the Patent … of the Covered
Products.
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6 PLASMACAM, INC. v. CNCELECTRONICS, LLC
A few other changes were also made in the draft agree-
ment.
On January 15, 2020 PlasmaCAM rejected CNC’s
changes to sections 2 and 7, and accepted some other
changes. PlasmaCAM explained:
The reason for the change to Paragraph 2 is that
although it is my client’s intention to release your
client for patent infringement on all products that
they offer now or have offered in the past, if, after
the settlement, your clients begin offering a new
product that uses digital height control that is not
currently offered and that design is even closer to
the claims of the patent, PlasmaCAM reserves its
right to enforce its patent rights as against that
new product.
My change back to “The Patent” in paragraph 7 is
self‐explanatory.
(email from PlasmaCAM’s counsel, Jan. 15, 2020).
PlasmaCAM’s Jan. 15, 2020 changes are reflected in an-
other draft agreement, with paragraphs 2 and 7 again lim-
ited to past and present CNC products:
2. Covered Products. For purposes of this
Agreement, the term: “Covered Products” shall
mean all components previously or currently man-
ufactured, sold or offered for sale by CNC which in-
corporate digital torch height control.
For paragraph 7, PlasmaCAM restored its prior text
that limited the license/covenant to “the Patent” in litiga-
tion, and to release only past and present infringing prod-
ucts as defined in Covered Products.
On January 17, 2020, CNC wrote: “your changes create
two problems”, referring to CNC’s requested release from
infringement of “PlasmaCAM’s other patent”, and also
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PLASMACAM, INC. v. CNCELECTRONICS, LLC 7
stating that CNC’s products are “frequently revised or up-
dated.” That same day PlasmaCAM’s counsel replied:
Those changes are not acceptable and were not part
of our negotiated agreement. We agreed to settle
this patent litigation, not all future potential pa-
tent infringement claims related to different pa-
tents and different products. Both of your changes
attempt to expand the scope of our agreement to
include releases never agreed to.
I spoke with Jason, and we are willing to make an
additional compromise to address your concern
about routine updates and bug fixes. See attached.
If this version is not acceptable, we are at a stand-
still and will need to make a motion to enforce the
settlement as negotiated.
(email from PlasmaCAM’s counsel, January 17, 2020).
CNC replied later the same day, disputing
PlasmaCAM’s position and stating:
I strongly disagree with any suggestion that these
standard terms change the scope of an agreement,
if a complete agreement was actually reached. No
one ever remotely suggested that a covenant not to
sue would be limited to only current existing prod-
ucts as you proposed. … The mutual release as be-
tween the parties to the lawsuit was not limited to
just one of PlasmaCAM’s patents. That would be
nonsensical and an open invitation for new in-
fringement claims.
(email from CNC’s counsel, January 17, 2020).
On January 20, 2020 CNC sent PlasmaCAM a revised
draft agreement, stating “I have taken a slightly different
approach … .” CNC amended paragraph 2 to remove
PlasmaCAM’s limitation to past and present products, as
follows:
Case: 21-1689 Document: 39 Page: 18 Filed: 02/03/2022
8 PLASMACAM, INC. v. CNCELECTRONICS, LLC
2. Covered Products. For purposes of this
Agreement, the term: “Covered Products” shall
mean all components manufactured, sold or offered
for sale by CNC which incorporate digital torch
height control.
CNC converted paragraph 7 to a “mutual release” for
infringement “that arose prior to the Effective Date,” and
added a new paragraph 8, as follows:
8. Covenant Not to Sue By PlasmaCAM. Sub-
ject to PlasmaCAM’s timely receipt of, and in mu-
tual consideration of the Settlement Payment,
PlasmaCAM, on behalf of itself and its licensor,
hereby covenants not to sue CNC or any of CNC’s
distributors, customers, suppliers, or end users, for
any infringement of the Patent that arises from the
making, use, sale, offer for sale, import or export of
any Covered Products.
(email from CNC’s counsel, Jan. 20, 2020).
In response PlasmaCAM sent CNC “a new draft,” ex-
plaining:
[A]fter much discussion and review of the email
correspondence and notes of settlement discus-
sions, we are confident that it was never the inten-
tion to release your client from claims that are
unrelated to the claims pending in this case. Our
proposal was to resolve this case, not to give up the
right to pursue an entirely different claim that was
never raised in this case.
PlasmaCAM agreed to CNC’s change in paragraph 2, re-
jected CNC’s revision of paragraph 7, and deleted CNC’s
new paragraph 8. PlasmaCAM rewrote paragraph 7 to
limit the release to the patent in suit, as follows:
7. Release by PlasmaCAM. Subject to
PlasmaCAM’s timely receipt of, and in partial
Case: 21-1689 Document: 39 Page: 19 Filed: 02/03/2022
PLASMACAM, INC. v. CNCELECTRONICS, LLC 9
consideration of the Settlement Payment,
PlasmaCAM, on behalf of itself and its licensor,
hereby releases and covenants not to sue CNC and
their respective officers, agents, servants, employ-
ees, and attorneys, and CNC’s distributors, cus-
tomers, suppliers, and end users from any and all
actions, judgments, indebtedness, damages, losses,
claims, demands, costs, expenses, attorneys’ fees
and liabilities of any nature whatsoever, whether
known or unknown, suspected or unsuspected, for
infringement (whether direct, contributory, in-
ducement of infringement, or otherwise) of the Pa-
tent that arose prior to the Effective Date, or that
will arise thereafter at any time during the remain-
der of the life of the Patent, provided that such in-
fringement or alleged infringement arises from the
making, use, sale, offer for sale, import, or export
of the Covered Products. For the avoidance of
doubt, the foregoing release of CNC distributors,
customers and end users does not apply to, and
PlasmaCAM is not restricted from taking any ac-
tion against any such person for any infringement
that does not arise from the making, selling, offer-
ing for sale, using or importing any Covered Prod-
uct.
(email from PlasmaCAM’s counsel, Jan. 21, 2020).
On January 22, 2020 CNC rejected PlasmaCAM’s new
draft agreement, stating that it “would limit the mutual
release for past claims to only those claims that were as-
serted in the lawsuit.” CNC stated: “we cannot agree to the
narrow release as proposed in your latest draft.” (email
from CNC’s counsel, Jan. 22, 2020).
On January 23, 2020, PlasmaCAM and CNC filed the
Joint Notice of Non-Settlement and Request for Telephonic
Conference, stating that “despite their best efforts, they
have been unable to finalize and execute a written
Case: 21-1689 Document: 39 Page: 20 Filed: 02/03/2022
10 PLASMACAM, INC. v. CNCELECTRONICS, LLC
settlement agreement”, and requesting “a telephonic con-
ference with the Court for guidance in this matter.” Joint
Notice of Non-Settlement and Req. for Telephonic Confer-
ence, supra, at 1.
B
The district court’s decision
The district court held the requested telephonic confer-
ence on February 7, 2020. See Telephonic Hr’g Tr.,
PlasmaCAM, Inc. v. CNCElectronics, LLC, No. 419-cv-
00037-ALM, (E.D. Tex. Feb. 7, 2020), ECF No. 15. The
court then invited the parties to file motions elaborating
their positions. The record shows further briefing and ar-
gument and apparently further negotiations; but on June
19, 2020 PlasmaCAM’s counsel wrote the district court
that “despite efforts of the Parties, the Parties were unable
to reach an agreement.”
On June 22, 2020, the district court issued its decision,
finding that PlasmaCAM’s sections 2, 7, and 8 stated “the
parties’ objective understanding of the disputed settlement
terms,” as follows:
2. Covered Products. For purposes of this
Agreement, the term “Covered Products” shall
mean (1) all components previously or currently
manufactured, sold, or offered for sale by CNC
which incorporate digital torch height control; and
(2) updates and bug fixes to the currently manufac-
tured products.
7. Mutual Release. Subject to PlasmaCAM’s
timely receipt of the Settlement Payment, the Par-
ties each hereby release the other Party … from
any and all actions, judgments, indebtedness, dam-
ages, losses, claims, demands, costs, expenses, at-
torney fees and liabilities, whether known or
unknown, that were brought or should have been
brought arising out of or relating to the Litigation.
Case: 21-1689 Document: 39 Page: 21 Filed: 02/03/2022
PLASMACAM, INC. v. CNCELECTRONICS, LLC 11
8. Covenant Not to Sue. Subject to
PlasmaCAM’s timely receipt of the Settlement
Payment, PlasmaCAM, on behalf of itself and its
licensor, hereby covenants not to sue CNC or any
of CNC’s distributors, customers, suppliers, or end
users for any infringement of the Patent that arises
from the making, use, sale, offer for sale, import, or
export of any Covered Products.
Mem. Op. & Order, supra at 4.
CNC declined to sign the settlement agreement con-
taining these terms, and requested reconsideration. The
district court on reconsideration confirmed its ruling. Re-
cons. Mem. Op. & Order, PlasmaCAM, Inc. v. CNCElec-
tronics, LLC, No. 419-cv-00037-ALM, (E.D. Tex. Dec. 9,
2020), ECF No. 81. Responding to CNC’s argument that
PlasmaCAM had agreed that the covenant not to sue would
not be limited to past and present CNC products, the dis-
trict court stated:
Plaintiff did not agree to Defendants’ proposed
Covered Products language in a vacuum. Plaintiff
“gave” Defendants’ the Covered Products language
in exchange for other proposed changes. When De-
fendants rejected those proposed changes, it re-
jected Plaintiff’s counterproposal. Defendants
cannot now claim the settlement terms were final-
ized back in January.
Id. at 5–6. Clear error has not been shown in the district
court’s finding. To the contrary, nowhere in the record is
there even a remote suggestion of agreement by
PlasmaCAM to yield to CNC’s demands for immunity from
suit for all possible new infringing CNC products—for this
was the persistent unresolved issue throughout the parties’
attempts to settle the pending litigation.
“Contract formation is a question of fact under Texas
law.” J.D. Fields & Co., Inc. v. U.S. Steel Int’l, Inc., 426
Case: 21-1689 Document: 39 Page: 22 Filed: 02/03/2022
12 PLASMACAM, INC. v. CNCELECTRONICS, LLC
F. App’x 271, 277 (5th Cir. 2011). Clear error has not been
shown in the district court’s finding that PlasmaCAM did
not agree to CNC’s proposed terms of release and covenant
not to sue. My colleagues’ contrary finding is devoid of sup-
port in fact and law. “To state a claim for an enforceable
contract, a plaintiff must allege … mutual assent or ‘meet-
ing of the minds’ about the subject matter ….” Motten v.
Chase Home Fin., 831 F. Supp. 2d 988, 1003 (S.D. Tex.
2011) (citing Baylor Univ. v. Sonnichsen, 221 S.W.3d 632,
635 (Tex. 2007)).
CNC now appeals the district court’s ruling.
C
The panel majority’s decision
The district court found there was no meeting of the
minds with respect to all the conditions of settlement, and
the parties do not state otherwise. Throughout this nego-
tiation the parties never reached final agreement. My col-
leagues ignore the record, for it is not disputed that the
parties never came to terms. The district court so recog-
nized, and neither party argues otherwise.
The panel majority now holds not only that agreement
was not reached on PlasmaCAM’s terms, but the majority
holds that agreement was reached on CNC’s terms. The
majority finds a mysterious “January agreement,” hereto-
fore hidden from the parties and the district court, for in
January the parties jointly told the district court that they
“are unable to agree.”
The majority also finds an agreement on December 20,
2019, despite CNC’s explicit caveat that settlement is
“[p]rovided that the release also covers future
claims … I.e., the agreement includes a covenant not to sue
(or license or similar) to cover Defendants and their down-
stream customers/users, from future infringement claims.”
Appx730. The parties never agreed on “future infringe-
ment claims.” The Restatement states the truism that:
Case: 21-1689 Document: 39 Page: 23 Filed: 02/03/2022
PLASMACAM, INC. v. CNCELECTRONICS, LLC 13
§ 59. A reply to an offer which purports to
accept it but is conditional on the offeror’s
assent to terms additional to or different
from those offered is not an acceptance but
is a counter-offer.
Restatement (Second) of Contracts § 59 (1981). See In re
Golden Oil Co., 262 F. App’x 625, 627 (5th Cir. 2008)
(“Where the essential terms of an agreement are left open
for future negotiations, there is no mutual assent, and no
binding contract.” (citing Sweeney v. Cross, 476 S.W.2d
464, 465 (Tex. Civ. App. 1972)).
Agreement was never reached on CNC’s proviso. None-
theless, my colleagues now hold that final agreement was
reached on December 20, 2019, despite the ensuing ex-
change of multiple agreement drafts, and despite the joint
notice to the district court that the parties were unable to
agree. The record is contrary to the panel majority’s hold-
ing that the parties mutually agreed to CNC’s terms. For
an enforceable contract, there must be mutual assent to the
formation of the contract. See T.O. Stanley Boot Co. v.
Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992) (“The ma-
terial terms of the contract must be agreed upon before a
court can enforce the contract. Where an essential term is
open for future negotiation, there is no binding contract.”
(citing Gerdes v. Mustang Exploration Co., 666 S.W.2d 640,
644 (Tex. App. 1984)).
Mutual contractual assent is expressed by the parties’
signatures and delivery, with the intent to be obli-
gated. See Angelou v. African Overseas Union, 33 S.W.3d
269, 278 (Tex. App. 2000). PlasmaCAM and CNC recog-
nized the need for an executed settlement agreement, and
they pursued negotiations to that end. It is not disputed
that no agreement was reached. My colleagues’ finding
that settlement was reached on CNC’s terms that were re-
jected by PlasmaCAM, is contrary to fundamental contract
law.
Case: 21-1689 Document: 39 Page: 24 Filed: 02/03/2022
14 PLASMACAM, INC. v. CNCELECTRONICS, LLC
This litigation is for the infringement by CNC of the
PlasmaCAM patent. The issue on which the parties did
not agree was whether CNC would be released from all pos-
sible future charges of infringement by unknown new CNC
products. PlasmaCAM never agreed to this speculative
condition, stating that they did not know what new prod-
ucts CNC might produce during the life of the patent.
PlasmaCAM sought to limit the settlement to the pre-
sent litigation and the present products. CNC well under-
stood that this was the area of disagreement. Yet the
majority holds that PlasmaCAM agreed to the very issue
on which this negotiation foundered. Indeed, the majority
acknowledges that “[t]o be sure, the agreement concerning
the definition of Covered Products was contingent on
reaching an agreement with respect to the mutual release
language.” Maj. Op. at 10.
Nonetheless, the majority rules that PlasmaCAM
agreed to CNC’s demands in “the January 21 agreement.”
There is no January 21 agreement. The district court cor-
rectly dealt with this aspect. See Hallmark v. Hand, 885
S.W.2d 471, 476 (Tex. App. 1994) (an enforceable contract
generally requires “execution and delivery of the contract
with an intent that it become mutual and binding on both
parties” (quoting McCulley Fine Arts Gallery, Inc. v. “X”
Partners, 860 S.W.2d 473, 477 (Tex. App. 1993)). From my
colleagues’ flawed ruling, I respectfully dissent.