United States District Court, N.D. California, San Jose Division
ST. PAUL MERCURY INSURANCE COMPANY, Plaintiff,
TESSERA, INC., Defendant.
ORDER RE CROSS-MOTIONS FOR PARTIAL SUMMARY JUDGMENT
RE: DKT. NOS. 74-3, 78
M. Whyte United States District Judge
April 12, 2012, plaintiff St. Paul Mercury Insurance Company
filed this action against defendant Tessera, Inc. Dkt. No. 1.
Plaintiff seeks a declaratory judgment that St. Paul had no
duty to defend Tessera in an underlying action, Powertech
Technology Inc. v. Tessera, Inc., Case No. 11-06121, and
reimbursement of the amounts that St. Paul paid in defending
Tessera pursuant to a reservation of rights. Id.
Tessera asserts counterclaims against St. Paul, seeking for
declaratory judgment that St. Paul had a duty to defend and
damages for breach of the insurance contract and breach of
the implied covenant of good faith and fair dealing in the
insurance contract. Dkt. No. 11.
October 26, 2012, the parties filed cross-motions for partial
summary judgment on the question of whether St. Paul had a
duty to defend. Dkt. Nos. 29, 30. The court granted partial
summary judgment for St. Paul, holding that none of PTI's
allegations in the underlying action could possibly give rise
to any “personal injury” claim covered by the
insurance policy. Dkt. No 48. Finding no duty to defend, the
court did not reach the issue of whether the intellectual
property exclusion in the St. Paul policy relieved St. Paul
of a defense obligation. Tessera appealed the ruling, and the
Ninth Circuit reversed and remanded the case to this court
“to consider in the first instance whether the
intellectual property exclusion applies. Id.
13, 2016, the parties filed partial cross-motions for summary
judgment. Dkt. Nos. 74-3, 78. St. Paul moves for summary
judgment on St. Paul's claim for declaratory judgments,
as well as Tessera's counterclaims for declaratory
judgment, Tessera's counterclaim for breach of contract,
and Tessera's counterclaim for breach of implied covenant
of good faith and fair dealing. Dkt. No. 74-3 at 1. Tessera
moves for summary judgment on St. Paul's claim for
declaratory judgment and Tessera's counterclaim for
declaratory judgment. Dkt. No. 78 at 1. The court heard
argument on June 17, 2016. Having considered the submissions
of the parties, the court finds that the intellectual
property exclusion does not negate an obligation of St. Paul
to defend Tessera against PTI's claims in
Powertech. The court grants Tessera's motion for
partial summary judgment and denies St. Paul's motion for
partial summary judgment.
October 20, 2003, PTI and Tessera entered into the Tessera
Compliant Chip License Agreement (“TCC License”).
See Dkt. No. 79-2, Stipulation Regarding Undisputed
Facts (“SUF”) Ex. D, Appendix A at
T-UND000095-123. In exchange for royalty payments, Tessera
granted PTI “a world-wide, non-exclusive,
non-transferable, non-sublicensable, limited license”
to certain Tessera semiconductor packaging patents so that
PTI could assemble, use, and sell semiconductor integrated
circuit packages. Id. at T-UND000100.
December 2007, Tessera initiated an ITC Investigation
337-TA-630, accusing several companies of infringing
Tessera's patents by importing and selling semiconductor
packages. See SUF Ex. D, Appendix B at
T-UND0000124-238. PTI was not named as a respondent in the
ITC action. Id. at T-UND000128-30. The parties do
not dispute, however, that PTI customers were among the
December 6, 2011, PTI filed suit against Tessera in the
Northern District of California, Powertech Technology
Inc. v. Tessera, Inc., Case No. 4:11-cv-06121-CW,
asserting three causes of action: 1) declaratory judgment
concerning PTI's right to terminate the TCC license, 2)
breach of the TCC License, and 3) breach of the implied
covenant of good faith and fair dealing. See SUF
¶ 4, Ex. D. In the complaint, PTI alleged that Tessera
breached the TCC License “by requesting, participating
in, and maintaining an ITC investigation accusing
PTI-packaged products” and by seeking “exclusion
orders that would have excluded PTI-packaged products from
the United States.” SUF Ex. D ¶¶ 5-8. PTI
also alleged that Tessera had “interfered with,
disrupted, and frustrated PTI's relationship with
PTI's customers by accusing PTI-packaged products and
naming PTI's customers as respondents” in the ITC
action. SUF Ex. D ¶ 15.
February 12, 2012, Tessera tendered the defense and indemnity
of the Powertech to St. Paul. SUF ¶ 5. Tessera
was insured by St. Paul for the period between May 1, 2007
and August 15, 2009. See SUF ¶¶ 1-3, Exs.
A-C. The policy includes a duty to defend “against any
claim or suit for injury or damage covered” by the
agreement. SUF Ex. A at ¶ 000000075-76. Among the
“personal injury” offenses covered by the policy
is “[m]aking known to any person or organization
covered material that disparages the business, premises
products, services, work, or completed work of others.”
Id. at P000000075. The policy also includes an
intellectual property exclusion clause:
won't cover injury or damage or medical expenses that
result from any actual or alleged infringement or violation
of any of the following rights or laws:
• Trade dress.
• Trade name.
• Trade ...