United States Court of Appeals for the Federal Circuit

1 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, , Phoenix, AZ, argued for plaintiff-appellee. Also represented by AARON KEITH HAAR. CHARLES JOHN ROGERS, Conley Rose, , Houston, TX, argued for defendants-appellants. Also represented by THOMAS WARDEN. _____ Before NEWMAN, DYK, and REYNA, Circuit Judges. Case: 21-1689 Document: 39 Page: 1 Filed: 02/03/2022 PLASMACAM, INC. v. CNCELECTRONICS, LLC 2 Opinion for the Court filed by Circuit Judge DYK. Dissenting opinion filed by Circuit Judge NEWMAN.

2 DYK, Circuit Judge. PlasmaCAM, Inc. ( Plasmacam ) sued CNCE lectron-ics, LLC, Fourhills Designs, LLC, and Thomas and Martha Caudle (collectively CNC ) in the Eastern District of Texas for infringing 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.

3 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 CNCE lectronics s Case: 21-1689 Document: 39 Page: 2 Filed: 02/03/2022 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 . , 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.

4 730. 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.

5 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. 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 Case: 21-1689 Document: 39 Page: 3 Filed: 02/03/2022 PLASMACAM, INC. v. CNCELECTRONICS, LLC 4 incorporate digital torch height control. 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. 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.

6 779. Plasmacam then agreed to one additional com-promise to address [CNC s] concern about routine updates and bug fixes, 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, 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. 771. (At oral argument, Plasmacam agreed that this definition covered future prod-ucts. Oral Arg. 19:22 19:55, available at ) On January 21, Plasmacam stated that it agreed to [CNC s] change in paragraph 2 (the defi-nition of covered products). 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.

7 522. 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 Case: 21-1689 Document: 39 Page: 4 Filed: 02/03/2022 PLASMACAM, INC. v. CNCELECTRONICS, LLC 5 been brought, arising out of or relating to the Litigation. 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. 568.

8 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. 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.

9 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. 10. Instead, Plasmacam made its compromise contingent on other pro-posed changes to the release. 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: 5 Filed: 02/03/2022 PLASMACAM, INC. v. CNCELECTRONICS, LLC 6 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 1292(a)(1), (c)(1) (as an injunction), or 28 1295(a)(1) (as a final judg-ment). Notwithstanding the parties agreement, we are in-dependently obligated to determine our jurisdiction.

10 See Bender v. Williamsport Area Sch. Dist., 475 534, 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., 961 731, 742 (5th Cir. 2020) (quoting McCoy v. La. State Bd. of Educ., 345 720, 721 (5th Cir. 1965)); see also Union Oil Co. of Cal. v. Leavell, 220 562, 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.)