Au New Haven, LLC v. YKK Corporation

Background

Au New Haven, LLC and Trelleborg Coated Systems US, Inc. sued YKK Corporation and affiliated defendants, alleging patent infringement and breach of a licensing agreement. The parties’ February 13, 2002 Exclusive License Agreement gave YKK an exclusive, worldwide license to manufacture and sell products using specified patented technology, but excluded zippers placed in finished goods in the “high end outerwear, marine, military and luggage” markets.

The opinion addressed only whether “high end outerwear” was ambiguous. The court had previously determined that the relevant agreement provision created a license to use the patented technology and was not a promise not to compete.

Parties’ Positions and Legal Standard

The defendants asked the court to decide whether “high end outerwear” was ambiguous. The plaintiffs had previously taken the position that the term required outside evidence to interpret, but later argued that it was unambiguous and that the phrase could not include a geographic limitation. The plaintiffs were concerned that a factfinder might determine that the phrase included only outerwear made in North America, which they said would significantly reduce their damages claim.

The agreement was governed by New York law. Under that law, a court first decides as a legal matter whether contract language is ambiguous. A term is ambiguous when it reasonably supports more than one meaning in the context of the agreement and the relevant business practices. If the term is ambiguous, a factfinder may consider outside evidence—evidence beyond the contract’s text—about the parties’ intentions when they formed the agreement.

Analysis

The court found that the phrase “high end outerwear” had more than one reasonable meaning. Contemporary dictionaries defined “high-end” in different ways, including as expensive and high quality, appealing to sophisticated customers, the most expensive in a product range, or the most expensive and technically sophisticated. Depending on the definition, a product could qualify because of its price, technical features, customer appeal, or a combination of those factors.

The court also noted that testimony from the parties’ representatives suggested additional possible meanings based on price, manufacturer, quality, product use, and geographic origin. Because the term was ambiguous, the court declined to rule as a matter of law that it could not include a geographic limitation. The court stated that the factfinder must determine the term’s meaning from the available outside evidence.

The court further noted that the plaintiffs’ expert testimony did not address the parties’ intentions when they made the agreement. The court left for later consideration whether that testimony would be useful if the expert’s definition differed from the meaning determined by the factfinder.

Disposition

The court concluded that “high end outerwear,” as used in the agreement, is ambiguous and that its meaning must be determined by a factfinder using outside evidence of the parties’ intentions at the time of contract formation. The clerk was directed to terminate the motion pending at docket number 656. The opinion does not expressly state that the motion was granted or denied.