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Linear Technology Corp v. Tokyo Electron

November 22, 2011

LINEAR TECHNOLOGY CORP., PLAINTIFF AND APPELLANT,
v.
TOKYO ELECTRON, LTD., ET. AL., DEFENDANTS AND RESPONDENTS.



Trial Court: Santa Clara County Superior Court Trial Judge: Hon. Gregory H. Ward (Santa Clara County Super. Ct. No. 1-02-CV-806004)

The opinion of the court was delivered by: Elia, J.

CERTIFIED FOR PUBLICATION

After a jury trial, appellant Linear Technology Corporation (Linear) lost its suit for breach of statutory warranty against respondents Novellus Systems, Inc. (Novellus) and Tokyo Electron Ltd (TEL). Linear's motion for judgment notwithstanding the verdict was unsuccessful, and the trial court awarded respondents attorney fees. Linear appeals from both the judgment and the postjudgment order, contending that (1) it proved breach of statutory warranty as a matter of law, and (2) respondents were not entitled to attorney fees. We will affirm the judgment and the postjudgment order.

Background

Linear designs, manufactures, and sells semiconductors and integrated circuit products. Between July 1996 and August 2000 Linear purchased semiconductor processing equipment from Novellus and TEL, a Concept One machine from Novellus and a Mark Vz from TEL. During 2001 Texas Instruments, Inc. (TI) filed multiple lawsuits against Linear in the United States District Court, alleging patent infringement and seeking injunctive relief, damages, and attorney fees arising from the use and sale of products made by processes covered by TI's patents. One of the lawsuits, filed in January of that year, pertained to TI's "Head patents." In that action, TI alleged infringement of the " '613 patent," the " '168 patent," and the " '674 patent." TI noted in the complaint that a jury had already found the '674 and '613 patents to have been infringed by its prior lawsuit against Hyundai Electronics Industries Co., Ltd. (Hyundai), and the '168 patent allegedly "originated from the same chain of applications."

Linear filed third-party complaints in federal court against Applied Materials, Inc., TEL, and Novellus, all suppliers of semiconductor wafer manufacturing equipment. The district court granted a defense motion to sever those claims from TI's lawsuit, and in March 2002 Linear proceeded against these three defendants in superior court, alleging that its use of these companies' tools in its manufacturing processes had led to the patent infringement claims by TI. The superior court sustained the defendants' demurrers to Linear's fifth amended complaint, dismissed claims of fraud and unfair competition, and dismissed the four contract-related causes of action on the ground that it lacked subject matter jurisdiction to adjudicate these claims. We reversed the judgment and remanded for further proceedings solely on the contract-related claims. (Linear Technology v. Applied Materials, et. al. (2007) 152 Cal.App.4th 115.)

Meanwhile, in September 2002 TI's lawsuits against Linear were settled. Linear agreed to pay TI $70 million and the parties agreed to grant access to each other's patents.

Trial began on Linear's remaining claims against respondents TEL and Novellus in January 2010.*fn1 The jury received special verdict forms asking whether each defendant had breached "the statutory warranty incorporated into its contract with Linear." For both TEL and Novellus, the jury answered no to the first question and therefore did not reach the issues of harm and monetary damages. The verdict forms also asked whether each defendant had breached the covenant of good faith and fair dealing implied in its contract with Linear. The jury answered no to this question as well. On March 24, 2010, the court entered judgment for respondents.

Linear moved for judgment notwithstanding the verdict (JNOV) and for a new trial. In the JNOV motion, Linear argued that as a matter of law both respondents had breached the warranty provided by Commercial Code section 2312, subdivision (3), because they had delivered tools that were subject to TI's "rightful," meritorious claim of infringement. According to Linear, there was no substantial evidence presented that TI's claims against it were frivolous or meritless; in fact, Linear "proved" they were not. It was undisputed, Linear argued, that TI's lawsuit arose from the use of the tools supplied by TEL and Novellus rather than Linear's own processes or any specifications it had made for the products delivered. Indeed, "Linear's evidence was unrebutted that it used the Novellus and TEL machines precisely in the manner in which they were built, delivered, and intended by defendants to operate." In short, "the evidence was uncontroverted that at least some of [the TI litigation and settlement] was due to Novellus' and TEL's machines." In addition, the Hyundai verdict "also demonstrate[d] that TI's infringement claims were rightful."

The trial court, however, denied the motion on May 24, 2010. Linear filed its first notice of appeal on June 21, 2010. The court subsequently considered motions for attorney fees brought by respondents. Novellus sought $8,616,415.37, while TEL claimed $3,250,747 plus costs. On August 2, 2010, the court granted attorney fees of $5,200,931.62 to Novellus and $3,154,498.00 to TEL. Linear filed its notice of appeal from this order on August 16, 2010.

Discussion

On appeal, Linear renews its contention that it was entitled to JNOV because it presented "uncontested facts" at trial that established breach of statutory warranty as a matter of law, and because the jury lacked substantial evidence to find that the warranty had not been breached. Linear further contends that the grant of attorney fees to respondents was unauthorized by the parties' contracts or Civil Code section 1717.

1. JNOV Motion

"A motion for judgment notwithstanding the verdict of a jury may properly be granted only if it appears from the evidence, viewed in the light most favorable to the party securing the verdict, that there is no substantial evidence to support the verdict." (Brandenburg v. Pacific Gas & Elec. Co. (1946) 28 Cal.2d 282, 284.) "The trial judge cannot weigh the evidence . . . or judge the credibility of witnesses. [Citation.] If the evidence is conflicting or if several reasonable inferences may be drawn, the motion for judgment notwithstanding the verdict should be denied." (Hauter v. Zogarts (1975) 14 Cal.3d 104, 110.) On appeal, we review the motion de novo. "[W]e determine whether substantial evidence supported the verdict, viewing the evidence in the light most favorable to the party who obtained the verdict. [Citation.] We resolve all conflicts in the evidence and draw all reasonable inferences in favor of the verdict, and do not ...


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