Taiwan Semiconductor Manufacturing Company Limited v. Longhorn IP LLC

Background

Taiwan Semiconductor Manufacturing Company Limited (TSMC) brought a contract action against Longhorn IP LLC (LIP) and Hamilcar Barca IP LLC. The dispute arose from a March 2020 Intellectual Property Collaboration and Services Agreement concerning the acquisition of patents of mutual interest.

The agreement required LIP to identify and present patent portfolios to TSMC. If the parties agreed on TSMC’s contribution amount and LIP acquired the portfolio, LIP was required to execute a license agreement with TSMC. The agreement also contained a standstill provision under which the parties agreed to forgo certain proceedings or assertions involving LIP patents and technology or services provided by TSMC during the standstill period.

TSMC alleged that LIP presented a portfolio of patents acquired from MediaTek, that TSMC accepted LIP’s offer to contribute a fixed sum, and that LIP later acquired the patents through Hamilcar. TSMC alleged that LIP did not provide the required license agreement. TSMC also alleged that LIP and Hamilcar violated the standstill provision by sending an April 2023 letter stating that TSMC might be infringing and inducing infringement of three patents.

TSMC sought declaratory relief, specific performance, and damages. In the alternative, it sought declarations that it did not infringe certain patents. The defendants moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss claims 1–4, concerning entitlement to a license, and claims 6–7, concerning breach of the standstill provision.

Legal Standard

A Rule 12(b)(6) motion tests whether a complaint states a plausible claim for relief. At this stage, the court accepts the complaint’s factual allegations as true and views the pleadings in the light most favorable to the nonmoving party. A court may resolve a contract claim on a motion to dismiss when the contract is unambiguous. But when the contract language is reasonably open to more than one interpretation, the parties’ intent is a factual question that generally cannot be resolved on that motion.

Entitlement-to-License Claims

The defendants argued that TSMC could not establish an agreement on the required contribution amount. TSMC argued that the agreement’s reference to the form and terms of an earlier license agreement showed that tax withholding applied to the contribution, and that the parties therefore reached agreement when TSMC accepted the fixed-sum offer.

The court found that both sides offered reasonable interpretations of the agreement. The parties agreed on the total amount at issue but disagreed about whether that amount was subject to tax withholding. Because the agreement and the surrounding circumstances left doubt about the parties’ intent and whether they reached a meeting of the minds, the court held that TSMC had sufficiently pleaded breach-of-contract claims entitling it to a license. The court denied the motion to dismiss claims 1–4.

Standstill Claims

The defendants argued that their April 2023 letter was not an “assertion” prohibited by the standstill provision. TSMC argued that the provision covered assertive conduct that could precede a judicial proceeding. The defendants argued that the provision applied only to legal actions initiated in a particular jurisdiction and that their private letter was merely a notice letter.

The court concluded that the standstill provision was not sufficiently clear and unambiguous to resolve the issue on a motion to dismiss. The parties’ competing interpretations created factual questions about the meaning of “assertions” and whether the April 2023 letter violated the provision. The court therefore held that TSMC had sufficiently pleaded breach of the standstill provision and denied the motion to dismiss claims 6–7.

Disposition

Judge P. Casey Pitts denied the defendants’ motion to dismiss claims 1–4 and 6–7. The order resolved only whether those claims were adequately pleaded; it did not decide whether TSMC ultimately proved that the defendants breached the agreement or that TSMC was entitled to the requested relief.