Case: 22-2046 Document: 75 Page: 1 Filed: 02/28/2024
NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
ALEXSAM, INC.,
Plaintiff-Appellant
v.
MASTERCARD INTERNATIONAL
INCORPORATED,
Defendant-Appellee
______________________
2022-2046
______________________
Appeal from the United States District Court for the
Eastern District of New York in No. 1:15-cv-02799-ILG-
VMS, Senior Judge Israel Leo Glasser.
______________________
Decided: February 28, 2024
______________________
HUNTER T. CARTER, Arent Fox LLP, New York, NY, ar-
gued for plaintiff-appellant. Also represented by
JACQUELINE KNAPP BURT, Heninger Garrison Davis, LLC,
Atlanta, GA; TIMOTHY C. DAVIS, W. LEE GRESHAM, III, Bir-
mingham, AL; STEVEN RITCHESON, Insight, PLC, Marina
del Rey, CA.
ELIOT DAMON WILLIAMS, Baker Botts LLP, Washing-
ton, DC, argued for defendant-appellee. Also represented
Case: 22-2046 Document: 75 Page: 2 Filed: 02/28/2024
2 ALEXSAM, INC. v.
MASTERCARD INTERNATIONAL INCORPORATED
by MICHAEL HAWES, Houston, TX; EMILY ROSE PYCLIK,
Austin, TX; ROBERT C. SCHEINFELD, JENNIFER COZEOLINO
TEMPESTA, New York, NY.
______________________
Before LOURIE, CHEN, and STOLL, Circuit Judges.
STOLL, Circuit Judge.
This case involves interpretation of a patent license
agreement. The district court granted summary judgment
dismissing AlexSam, Inc.’s lawsuit for breach of contract
against MasterCard International Inc., holding that the
covenant not to sue provision in the License Agreement be-
tween AlexSam and MasterCard prohibited AlexSam’s
claim for breach of the Agreement’s royalties provision. See
AlexSam, Inc. v. MasterCard Int’l Inc., No. 15-CV-2799,
2022 WL 2541433 (E.D.N.Y. July 7, 2022) (Summary
Judgment Op.).
This case illustrates the importance of carefully re-
viewing the language in a covenant not to sue when enter-
ing a license agreement. AlexSam reads the covenant to
prohibit it from suing for patent infringement only, while
MasterCard reads the covenant much more broadly to pro-
hibit suits not just for patent infringement, but also for
breach of contract for failure to pay royalties due under the
contract. We conclude that MasterCard has the better in-
terpretation given the language in the license agreement
at issue. That said, we hold that the covenant not to sue
does not survive the termination of the License Agreement.
Because the License Agreement has terminated, we re-
verse the district court’s summary judgment in favor of
MasterCard and remand for further proceedings consistent
with this opinion.
BACKGROUND
AlexSam owns U.S. Patent Nos. 6,000,608 and
6,189,787 (Licensed Patents), which are both titled
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MASTERCARD INTERNATIONAL INCORPORATED
“Multifunction Card System.” The patents are generally
directed to pre-paid cards that can be used with point-of-
sale devices. See, e.g., ’608 patent, Abstract. The patents
expired on July 10, 2017.
In 2005, AlexSam and MasterCard negotiated and en-
tered into the License Agreement at issue. J.A. 212–28.1
AlexSam granted MasterCard “a worldwide, non-exclusive,
non-transferable . . . license under the Licensed Patents to
process and enable others to process Licensed Transac-
tions.” J.A. 213–14 ¶¶ 2.1, 1.3 (defining Licensed Transac-
tions). In exchange, MasterCard agreed to pay ongoing
royalties in the amount of “a fee per Licensed Transaction.”
J.A. 215 ¶ 4.1.
Relevant here, the License Agreement includes a “Cov-
enant Not to Sue,” which reads in full:
Alex[S]am hereby agrees and covenants to not at
any time initiate, assert, or bring any claim (in any
court, administrative agency, or other tribunal, an-
ywhere in the world) against MasterCard, for any
claim or alleged liabilities of any kind and nature,
at law, in equity, or otherwise, known and un-
known, suspected and unsuspected, disclosed and
undisclosed, relating to Licensed Transactions aris-
ing or occurring before or during the term of this
Agreement.
J.A. 214 ¶ 2.2 (emphases added). The License Agreement
also includes a “Term and Termination” section which re-
cites, in relevant part:
[T]his Agreement shall remain in full force and ef-
fect for the life of the Licensed Patents unless . . .
1 The License Agreement was amended in 2006 and
2007. J.A. 229–32. These amendments do not affect our
interpretation of the covenant not to sue.
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4 ALEXSAM, INC. v.
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(iv) either party breaches any material provision of
this Agreement, including but not limited to Sec-
tions 4 [consideration, including royalties], 5 (last
sentence only), 6, 8, 9, 11 and 18 and the other
party gives written notice of such breach and the
alleged breaching party fails to cure such breach
within 30 days of its receipt of such notice, in which
case the non-breaching party shall have the right
to terminate the Agreement by giving a termina-
tion notice within sixty (60) days following the re-
ceipt of such written notice of breach. . . . The
provisions of paragraphs 4 [royalties] (but only as
to activities prior to the termination date), 8-10, 12,
14 and 15 shall survive termination of this Agree-
ment.
J.A. 219–21 ¶ 7 (emphases added).
In May 2015, AlexSam filed suit against MasterCard
for breach of contract in the U.S. District Court for the
Eastern District of New York. J.A. 204–10. Specifically,
AlexSam claimed that MasterCard “has under-reported
the number of ‘Licensed Transactions,’” has not paid
AlexSam for each “Licensed Transactions,” and has there-
fore “substantially breached material provisions of the Li-
cense Agreement.” J.A. 208. Mastercard raised several
affirmative defenses and counterclaims.
Separately, on March 10, 2017, MasterCard petitioned
for covered business method (CBM) review of the Licensed
Patents. AlexSam opposed institution, arguing that Mas-
terCard lacked standing under 37 C.F.R. § 42.302(a),
which states: “A petitioner may not file with the Office a
petition to institute a covered business method patent re-
view of the patent unless the petitioner . . . has been sued
for infringement of the patent or has been charged with in-
fringement under that patent.” Specifically, AlexSam ar-
gued that it had not sued MasterCard for patent
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ALEXSAM, INC. v. 5
MASTERCARD INTERNATIONAL INCORPORATED
infringement and, moreover, that the covenant not to sue
prevented it from doing so.
The Board denied institution, determining that Mas-
terCard lacked standing to bring the CBM review. See
MasterCard Int’l Inc. v. AlexSam, Inc., No. CBM2017-
00041, 2017 WL 4221401 (P.T.A.B. Sept. 21, 2017) (CBM
Decision). 2 It concluded that “the broad language of the
covenant not to sue provision in the License Agreement re-
moves any imminent possibility that Patent Owner could
bring an infringement action against Petitioner,” id. at *5,
and that they “need not, and do not, address the question
of whether [AlexSam’s] breach of contract claim in the New
York Action itself violates the covenant not to sue,” id. at *5
n.3.
MasterCard then moved for summary judgment in the
district court, arguing that AlexSam’s assertions to the
Board about the covenant not to sue judicially estopped
AlexSam from asserting its breach of contract claims in the
district court. The district court agreed with MasterCard
and dismissed AlexSam’s complaint with prejudice.
AlexSam, Inc. v. MasterCard Int’l Inc., No. 15-CV-2799,
2020 WL 3286785 (E.D.N.Y. June 17, 2020). We reversed.
AlexSam, Inc. v. MasterCard Int’l Inc., No. 2021-1785,
2022 WL 621374, at *1 (Fed. Cir. Mar. 3, 2022) (AlexSam
I).
In AlexSam I, we held that the district court abused its
discretion in crediting AlexSam with a position it never ac-
tually took before the Board, which led the district court to
incorrectly determine that judicial estoppel prevented
2 The Board issued a nearly identical decision for the
’608 patent. See MasterCard Int’l Inc. v. AlexSam, Inc.,
No. CBM2017-00042, 2017 WL 4221130 (P.T.A.B.
Sept. 21, 2017). For brevity, we only cite to the decision
denying institution for the ’787 patent.
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6 ALEXSAM, INC. v.
MASTERCARD INTERNATIONAL INCORPORATED
AlexSam from pursuing its breach of contract claims. Id.
We did not opine on whether the “broadly worded covenant
not to sue ‘prohibits a claim for royalties under the license
agreement,’” and we remanded for the district court to de-
termine whether the covenant not to sue prohibits a claim
for royalties, a question of contract interpretation. Id. at *5
& n.3.
MasterCard again moved to dismiss for lack of subject-
matter jurisdiction and judgment on the pleadings, and for
summary judgment. Summary Judgment Op., 2022 WL
2541433, at *1. The district court granted MasterCard’s
motion for summary judgment, holding that the broadly
worded covenant not to sue bars AlexSam’s claim for un-
paid royalties. Id. at *3.
AlexSam appeals. We have jurisdiction under
28 U.S.C. § 1295(a)(1).
DISCUSSION
We review a district court’s grant of summary judg-
ment under the law of the regional circuit, here, the Second
Circuit. See Unwired Planet, LLC v. Apple Inc., 829 F.3d
1353, 1356 (Fed. Cir. 2016). The Second Circuit reviews a
grant of summary judgment de novo. McBride v. BIC Con-
sumer Prods. Mfg. Co., Inc., 583 F.3d 92, 96 (2d Cir. 2009).
“In a contract dispute[,] a motion for summary judg-
ment may be granted only where the agreement’s language
is unambiguous and conveys a definite meaning.” Sayers
v. Rochester Tel. Corp. Supplemental Mgmt. Pension Plan,
7 F.3d 1091, 1094 (2d Cir. 1993). The Second Circuit views
its task as determining whether a clause is ambiguous
when read in the context of the entire agreement. Id.
at 1095. Determining whether writing is ambiguous is a
question of law that we review de novo. See id. at 1094.
In our view, the plain language of the covenant is ex-
tremely broad and covers AlexSam’s suit to recover royal-
ties for Licensed Transactions under ¶ 4.1 of the
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ALEXSAM, INC. v. 7
MASTERCARD INTERNATIONAL INCORPORATED
Agreement. AlexSam agreed to not “at any time” bring
“any claim (in any court . . . anywhere in the world) against
MasterCard, for any claim or alleged liabilities of any kind
and nature” whether known or unknown “relating to Li-
censed Transactions arising or occurring before or during
the term of this Agreement.” J.A. 214 ¶ 2.2. This language
is not limited to suits for patent infringement.
AlexSam asserts that, when read in light of other sec-
tions of the License Agreement, the covenant not to sue
cannot be understood to bar a suit for breach for nonpay-
ment of royalties. Relatedly, AlexSam faults the district
court for reading the covenant in isolation without consid-
ering the remainder of the License Agreement. Specifi-
cally, AlexSam asserts that the district court’s
interpretation of the covenant not to sue renders the re-
quirement that MasterCard pay a fee per Covered Trans-
action superfluous because AlexSam has no recourse when
MasterCard fails to pay. Continuing, AlexSam contends
that interpretating the covenant to only bar patent in-
fringement suits is the only reading that “would preserve
the clear intent of the parties as expressed in the License
Agreement taken as a whole” and not render the agree-
ment illusory. Appellant’s Br. 21.
We are not persuaded. The language of the covenant
not to sue does not even mention patent infringement.
Moreover, we read the agreement as providing an alterna-
tive option that would allow AlexSam to first terminate the
agreement, which would then terminate the covenant not
to sue, allowing AlexSam to sue for breach of contract
based on MasterCard’s nonpayment of royalties during the
term of the agreement. Accordingly, we do not agree with
AlexSam’s argument that the district court’s interpretation
of the covenant not to sue renders the royalty payment re-
quirement or any other provisions of the License Agree-
ment illusory.
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8 ALEXSAM, INC. v.
MASTERCARD INTERNATIONAL INCORPORATED
To elaborate, the License Agreement includes a section
titled “Term and Termination,” which states that the
agreement “shall remain in full force and effect for the life
of the Licensed Patents unless . . . (iv) either party
breaches any material provision of this Agreement, includ-
ing but not limited to Sections 4 [duty to pay royalties for
Licensed Transactions] . . . and the other party gives writ-
ten notice of such breach and the alleged breaching party
fails to cure such breach within 30 days of its receipt of such
notice, in which case the non-breaching party shall have
the right to terminate the Agreement by giving a termina-
tion notice within sixty (60) days following the receipt of
such written notice of breach.” J.A. 219–20 ¶ 7(emphasis
added). The License Agreement states that certain sec-
tions “shall survive termination” of the agreement, and for
paragraph 4, dealing with royalties to Licensed Transac-
tions, the duty to pay royalties survives “only as to activi-
ties prior to the termination date.” J.A. 221 ¶ 7. In other
words, the duty to pay royalties for Licensed Transactions
during the life of the agreement does not go away with the
termination of the agreement. On the other hand, the cov-
enant not to sue is not listed as a provision that survives
termination of the License Agreement. Thus, the covenant
not to sue terminates with the License Agreement, leaving
AlexSam free to “bring a[] claim . . . relating to Licensed
Transactions.” J.A. 214 ¶ 2.2. While we understand that
this requirement to terminate the License Agreement prior
to bringing suit for breach of contract has some drawbacks,
it is the procedure that AlexSam agreed to.
Citing Colton v. New York Hospital, 385 N.Y.S.2d 65,
66 (App. Div. 1st Dep’t 1976) (Colton I), AlexSam further
argues that, under New York law, a covenant not to sue
does not bar suit; rather, if breached, it may give rise to a
damages remedy. The Colton I case cited by AlexSam ex-
plains: “A covenant not to sue is not a release since it is
not a present abandonment of a right or claim, but merely
an agreement not to enforce an existing cause of action. . . .
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Thus, the party possessing the right of action is not pre-
cluded thereby from thereafter bringing suit . . . .”
385 N.Y.S.2d at 66. But, contrary to AlexSam’s suggestion,
this case is consistent with our reading of the covenant not
to sue and termination provisions in the License Agree-
ment; AlexSam agreed to not “bring a[] claim . . . relating
to Licensed Transactions,” but once the License Agreement
terminates, so too does the covenant.
AlexSam next asserts that under New York law, a cov-
enant not to sue “must be strictly construed against the
party asserting it . . . [and] its wording must be clear and
unequivocal.” Appellant’s Br. 20–21 (alteration in original)
(emphasis omitted) (quoting LG Elecs. Inc. v. Saint Law-
rence Commc’ns, LCC, No. 18-CV-11082, 2019 WL
1595861, at *2 (S.D.N.Y. Apr. 15, 2019)). Here, we view
the words of the covenant (and how it interacts with the
rest of the provisions in the agreement) as clear and une-
quivocal, even if the result is in some ways harsh.
Finally, AlexSam asserts that the covenant terminated
with the License Agreement more than five years ago when
the patents expired and hence cannot bar the present suit
for breach of contract for failure to pay royalties prior to
the expiration of the License Agreement. MasterCard
counters that that covenant itself includes the words “at
any time,” thus barring AlexSam from bringing a claim for
Licensed Transactions in perpetuity. See J.A. 214 ¶ 2.2
(“Alex[S]am hereby agrees and covenants to not at any time
initiate, assert, or bring any claim . . . against Master-
Card . . . relating to Licensed Transactions arising or oc-
curring before or during the term of this Agreement.”
(emphasis added)). We disagree that the covenant bars
AlexSam in perpetuity. Instead, we read the termination
clause to provide that the covenant not to sue terminates
with the termination of the License Agreement. As such,
we think the most reasonable interpretation (and, indeed,
the only one that makes sense in light of AlexSam’s “illu-
sory contract” argument above) is that the entire covenant
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10 ALEXSAM, INC. v.
MASTERCARD INTERNATIONAL INCORPORATED
not to sue (including the language “at any time”) expires
with the expiration of the License Agreement. Stated dif-
ferently, we interpret the language “at any time” to not
mean in perpetuity, but rather “at any time” means at any
time during the term of the License Agreement. This is
consistent with Colton I, 385 N.Y.S.2d at 66, ensures that
the consideration (i.e., payment of royalties) in exchange
for the license was not illusory, and is consistent with Mas-
terCard’s contention that AlexSam’s recourse for nonpay-
ment of royalties (i.e., filing suit for breach of contract)
required AlexSam to first terminate the License Agree-
ment.
MasterCard next argues that even if the covenant ter-
minates with the License Agreement after expiration of the
patents, AlexSam represented to the PTO that the cove-
nant not to sue barred a patent infringement suit even af-
ter expiration of the patents and this representation bars
AlexSam from now arguing otherwise. But as explained
below, the parties never discussed the impact of expiration
of the patents on the term of the covenant not to sue during
the CBM proceedings before the PTO. Nor did AlexSam
cite or otherwise rely on the “at any time” language to sug-
gest that the covenant not to sue exists forever. Rather,
review of the CBM submissions suggests that AlexSam was
responding to a different, more specific argument pre-
sented by MasterCard.
In March 2017, MasterCard petitioned the PTAB for
CBM review of AlexSam’s patents. On appeal now, Mas-
terCard cites AlexSam’s statements made to convince the
PTO to deny institution of the CBM after the Licensed Pa-
tents (and the License Agreement) expired on July 10,
2017. Appellee’s Br. 37 (citing J.A. 1628–31). The PTAB
had asked for supplemental briefing on “the effect of the
covenant not to sue provision on Petitioner’s standing
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under 37 C.F.R. § 42.302(a).” 3 CBM Decision, 2017 WL
4221401, at *5. MasterCard told the PTO that the cove-
nant not to sue was void as a result of AlexSam’s filing of
this lawsuit. In response, on August 30, 2017, after expi-
ration of the patents, AlexSam stated:
The payment of royalties is Petitioner’s obligation
under the License Agreement – not a condition of
the [covenant not to sue]. Petitioner’s intentional,
and admitted, refusal to pay royalties it owes sup-
ports a claim for breach, not patent infringement.
Further, the [covenant not to sue] provides no ex-
plicit means for its revocation. . . . The facts do not
support the conclusion that the [covenant not to
sue] was, or could be, revoked by the filing of Pa-
tent Owner’s breach of contract claim.
...
Petitioner has not been sued for infringement and
the [covenant not to sue] is further evidence that
Patent Owner cannot sue Petitioner, who is a licen-
see, for infringement.
J.A. 1629–30 (emphasis omitted). AlexSam did not specif-
ically quote or mention the “at any time” language, alt-
hough it did argue that the covenant “provides no explicit
means for its revocation.” J.A. 1629.
The PTAB subsequently held:
We also find no basis to conclude that the covenant
was, or could be, revoked based on Petitioner’s
3 As noted above, 37 C.F.R. § 42.302(a) states: “A peti-
tioner may not file with the Office a petition to institute a
covered business method patent review of the patent un-
less the petitioner . . . has been sued for infringement of the
patent or has been charged with infringement under that
patent.”
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12 ALEXSAM, INC. v.
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alleged breach and Patent Owner’s filing of the
breach of contract claim in the New York Action.
The covenant prohibits Patent Owner from bring-
ing an infringement claim for Licensed Transac-
tions at “any time,” which would include now or at
any point in the future.
CBM Decision, 2017 WL 4221401, at *6 (emphasis omit-
ted).
The doctrine of judicial estoppel serves to prevent liti-
gants from asserting claims in a court proceeding that are
directly contrary to or inconsistent with a prior statement
made in a previous proceeding. See New Hampshire
v. Maine, 532 U.S. 742, 750–51 (2001) (outlining several
factors to inform the decision of whether to apply judicial
estoppel). The Second Circuit has explained that judicial
estoppel “is properly invoked where: (1) a party’s later po-
sition is clearly inconsistent with its earlier position, and
(2) the party’s former position has been adopted in some
way by the court in an earlier proceeding.” Ashmore v. CGI
Grp., Inc., 923 F.3d 260, 272 (2d Cir. 2019) (citing New
Hampshire, 532 U.S. at 750–51). Also, the Second Circuit
“often, but not always, require[s] a showing that the party
asserting the two inconsistent positions would derive an
unfair advantage against the party seeking estoppel.” Id.
(citing New Hampshire, 532 U.S. at 751).
Contrary to MasterCard’s assertion, we view
AlexSam’s current position as not directly contrary to or
inconsistent with its statements made to the PTO regard-
ing the covenant not to sue. Here, review of the supple-
mental briefs and the PTAB’s decision shows that the issue
there was whether the filing of this breach of contract ac-
tion rendered the covenant not to sue void. That is the is-
sue on which AlexSam spoke and the issue on which the
PTAB ruled. That the PTAB relied on the “at any time”
language to reach its conclusion does not mean that
AlexSam argued as much.
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This mirrors, and is consistent with, our decision in
AlexSam I. There, MasterCard also argued that AlexSam
took inconsistent positions. See AlexSam I, 2022 WL
621374, at *1. And it argued inconsistency based on a sin-
gle sentence (without context) in AlexSam’s supplemental
briefing before the Board—the same section of the supple-
mental briefing that MasterCard invokes in this appeal.
Compare AlexSam I, 2022 WL 621374, at *4–5, with Appel-
lee’s Br. at 37 (citing J.A. 1628–31). Like our decision in
AlexSam I, we analyze whether judicial estoppel applies
not by analyzing an isolated sentence or section of a brief,
but by considering the context, bearing in mind not only
the arguments made but also what the arguments were in
response to. In doing so here, we view AlexSam as main-
taining consistent positions in its arguments before the
Board and its arguments before the district court.
Finally, MasterCard argues that we should hold that
AlexSam lacked standing at the time that it filed suit in
this case, asserting that “even if the [covenant not to sue]
expired with the patents in 2017, because Alex[S]am’s com-
plaint was filed in 2015 when the [covenant] was alive un-
der Alex[S]am’s interpretation, Alex[S]am’s suit for
royalties was precluded.” Appellee’s Br. 36. MasterCard
argues that we should dismiss AlexSam’s complaint for
failure to state a claim for the same reasons. Appellee’s
Br. 38–39. We do not reach these issues, which were not
addressed by the district court, and instead remand for the
district court to address one or both in the first instance.
CONCLUSION
We have considered MasterCard’s remaining argu-
ments and find them unpersuasive. For the reasons above,
we reverse the district court’s summary judgment, which
hinged on whether the covenant barred AlexSam’s claim
for breach of the agreement’s royalty provision. Because
we hold that the covenant not to sue terminated when the
License Agreement terminated, thus allowing AlexSam to
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14 ALEXSAM, INC. v.
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sue for failure to pay royalties prior to that time, we reverse
and remand.
REVERSED AND REMANDED
COSTS
No costs.