IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT Case No ) ) ) ) ) ) ) ) ) ) ) ) ) ) APPELLANT S OPENING BRIEF

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1 Case: - 0//0 ID: DktEntry: - Page: of IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT Case No. - MARVEL ENTERTAINMENT, LLC Plaintiff/Appellee, vs. STEPHEN KIMBLE, Defendant/Appellant. APPEAL FROM THE UNITED STATES DISTRICT COURT FOR DISTRICT OF ARIZONA D.C. NO.: :0-cv-00-DCB DISTICT OF ARIZONA, TUCSON APPELLANT S OPENING BRIEF Stephen Kimble 0 N. Dodge Blvd. Studio F Tucson, Arizona (0-00 kimblelaw@aol.com and Robert Grabb E. Broadway Tucson, Arizona (0-00 rgrabb@aol.com Attorneys for Defendant/Appellant Stephen Kimble

2 Case: - 0//0 ID: DktEntry: - Page: of ABBREVIATIONS Kimble Marvel Stephen Kimble Marvel Entertainment, LLC (including predecessors and successors in interest 0 ER CR Excerpts of Record filed concurrently here with. Page reference citations within ER citations are to the consecutively numbered pages of the Excerpts of Record. Clerk s Record, as reflected on the trial court docket Sheet. Patent U.S. Patent No.,0, Original Action Lawsuit between Kimble and Marvel 0 Second Action Settlement Agreement 00 Lawsuit between Kimble and Marvel The settlement agreement dated September, 00, between Kimble and Marvel executed in settlement of the Original Action. i

3 Case: - 0//0 ID: DktEntry: - Page: of TABLE OF CONTENTS ABBREVIATIONS TABLE OF CONTENTS TABLE OF AUTHORITIES Page i ii iv 0 0 STATEMENT OF JURISDICTION (a District Court Jurisdiction (b Court of Appeals Jurisdiction (c Timeliness of Appeal STATEMENT OF ISSUES PRESENTED FOR REVIEW.... STATEMENT OF THE CASE The Nature of the Case The Course of the Proceedings Below The Disposition Below STATEMENT OF RELEVANT FACTS SUMMARY OF THE ARGUMENT ARGUMENT I. Standard of Review II. Appellant s Contention: The Lower Court Erred in Granting Marvel Summary Judgment on the Basis that the Settlement Agreement Cannot be Construed as Appellant Suggests and that no questions of facts exist... 0 ii

4 Case: - 0//0 ID: DktEntry: - Page: of CONCLUSION STATEMENT OF RELATED CASES I CERTIFICATE OF SERVICE II 0 0 CERTIFICATE OF COMPLIANCE II iii

5 Case: - 0//0 ID: DktEntry: - Page: of CASES: TABLE OF AUTHORITIES Page 0 0 Eskimo Pie Corp. v. Whitelawn Dairies, Inc., F.Supp., (S.D.N.Y.. Excess Ins. Co. Ltd. v. Factory Mut. Ins. Co., N.Y.d,, N.E.d (00. Hernandez v. Hughes Missile Systems Co., F.d (th Cir Kass v. Kass, N.Y.d, N.E. d, N.Y.S. d 0 (. 0 Matter of Westmoreland Coal Co. v. Entech, Inc., 00 N.Y.d,, N.E.d (00. Reeves v. Sanderson Plumbing Products, Inc., 0 U.S., 0-, 0 S.Ct. 0, L.Ed.d 0 ( RJE Corp. v. Northville Industries Corp., F.d 0, (nd Cir. (N.Y. 00. Sayers v.rochester Telephone Corp. Supplemental Management Pension Plan, F.d 0, 0 (nd Cir. (N.Y.., Walk In Medical Centers, Inc. v. Breuer Capital Corp., F.d 0, (d Cir. (N.Y.. Warren v. City of Carlsbad, F.d, (th Cir.. 0 STATUTES: U.S.C. U.S.C. iv

6 Case: - 0//0 ID: DktEntry: - Page: of U.S.C. (a U.S.C. (a RULES: F.R.A.P. (a((a F.R.A.P. (a((c II Ninth Circuit Rule - II 0 0 v

7 Case: - 0//0 ID: DktEntry: - Page: of 0 0 STATEMENT OF JURISDICTION (a The District Court had jurisdiction on the subject matter of this action, based on diversity of citizenship, pursuant to U.S.C. (a and (a. (b The District Court entered an Order granting Marvel s Motion for Summary Judgment that disposed of all parties claims. The Ninth Circuit Court of Appeals has jurisdiction to entertain this appeal pursuant to U.S.C. and. (c The District Court s Order rendering a Declaratory Judgment was entered on January 0, 0. Kimble s Notice of Appeal was timely filed on February, 0, pursuant to F.R.A.P. (a((a. STATEMENT OF THE ISSUES PRESENTED FOR REVIEW The single issue on appeal is whether the District Court erred in ruling on summary judgment that there is no ambiguity in the Settlement Agreement, that Appellee Marvel, by entering into the Settlement Agreement, fulfilled all its obligations under the Verbal Agreement and that Appellee was therefore entitled to Summary Judgment. STATEMENT OF THE CASE The Nature of the Case This case involves both a verbal and a written agreement. Appellant Kimble invented a role-play web-shooting toy, described in U.S. Patent No.,0,. (ER In 0, he met with Toy Biz, predecessor of

8 Case: - 0//0 ID: DktEntry: - Page: of 0 0 Appellee Marvel, and discussed his patent application and related ideas. (ER Toy Biz agreed not to use the ideas disclosed by Kimble without first negotiating a reasonable royalty payment for their use (the Verbal Agreement. (ER Subsequently, Toy Biz made and sold a Web Blaster toy, which, like Kimble s, is a role-play toy that allows the user to adopt the web-shooting aspect of Marvel s Spider-Man character by shooting foam string. (ER In, Kimble sued Toy Biz in CV - TUC RCC (the Original Action, alleging patent infringement and breach of contract based on the 0 Verbal Agreement. (ER The patent claim was resolved against Kimble on summary judgment but Kimble prevailed at trial on his claim for breach of the Verbal Agreement. (ER, Judgment was entered finding that the Web Blaster toy was covered by the Verbal Agreement. (ER Kimble was awarded full damages to be.% of net product sales, past, present and future excluding refill royalties. (ER Both parties appealed. (ER On September, 00, while the case was on appeal, the parties entered into a settlement agreement (the Settlement Agreement (ER, pursuant to which the parties agreed to:. a reduction of royalties for the toy that was litigated from.% to %,. a sale of the patent and. dismissal of the appeals. (ER ; ER 0,

9 Case: - 0//0 ID: DktEntry: - Page: of 0 0 During the negotiation of the Settlement Agreement, the parties could not agree on a definition of what future versions of the toy, if any, would be covered by the Settlement Agreement. (ER ; ER Kimble wanted all future toys covered and Marvel wanted none. (ER ; ER A compromise was struck and the language of Paragraph was added to the Settlement Agreement (ER ; ER, which states:. Except for the obligations undertaken by Marvel in this Agreement and except for those obligations under the alleged verbal agreement that was the subject of the Action, the Patent Holders hereby release (Emphasis added(er In 00, Marvel stopped paying royalties for sales of the Web Blaster and Kimble sued Marvel for breach of the Settlement Agreement in CV 0-TUC DCB (the Second Action. (ER One of Marvel s arguments was that the royalty provision of the 00 Settlement Agreement was unenforceable after May, 00, the expiration date of the Patent. (ER The court adopted the recommendation of the magistrate judge to the extent that he found Marvel s royalty obligations under the Settlement Agreement ended with the patent. (ER On February, 0, the parties stipulated to a dismissal of CV 0- TUC DCB and preserved Kimble s right to appeal the District Court s Order granting summary judgment for Marvel that its obligation under the royalty

10 Case: - 0//0 ID: DktEntry: - Page: 0 of 0 0 provision in the Settlement Agreement terminated when the patent expired. (ER, Kimble appealed that decision to this Court, case No. -0. District Court s ruling on the Settlement Agreement, however, did not resolve the issue of Marvel s obligation to Kimble under the Verbal Agreement. In a separate action, Marvel filed suit for declaratory judgment in the Southern District of New York seeking a ruling that it had no remaining obligations under the Verbal Agreement. (ER The case was transferred to Arizona as CV 0- TUC DCB. (ER The Marvel filed a motion for summary judgment asking the court to declare that it has no remaining obligations to Kimble under the 0 Verbal Agreement. Kimble filed a cross-motion for summary judgment asking the court to find that Marvel continues to have obligations to him under the Verbal Agreement. (ER The 00 Settlement Agreement contains two provisions that are at the heart of the present dispute:. Except for the obligations undertaken by Marvel in this Agreement and except for those obligations under the alleged verbal agreement that was the subject of the Action, the Patent Holders hereby release and discharge Marvel... from all actions, causes of action, suits, debts, sums of money, accounts, covenants, contracts, controversies, agreements, promises, damages, claims and demands whatsoever,..., which against Releasee [Marvel], the Patent Holders..., now have or hereafter can, shall

11 Case: - 0//0 ID: DktEntry: - Page: of 0 (ER or may, have for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of this Agreement.. This Agreement contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous arrangements or understandings with respect hereto. Kimble argues that Paragraph of the Settlement Agreement excepts from the release those continuing obligations Marvel has under the 0 Verbal Agreement. Marvel argues that Paragraph of the Settlement Agreement released it from any obligations it owed Kimble under the 0 Verbal Agreement. The Course of the Proceedings Below Both parties filed motions for summary judgment as to whether Marvel continues to have any obligations to Kimble under the Verbal Agreement. 0 The Disposition Below Without oral argument, the District Court found no ambiguity in the Settlement Agreement, granted Marvel s motion for Summary Judgment and denied Kimble s cross-motion for Summary Judgment.

12 Case: - 0//0 ID: DktEntry: - Page: of STATEMENT OF RELEVANT FACTS 0 0 In 0 Kimble invented a web shooting toy and filed a patent application that later issued as U.S. Patent No.,0,. (ER In 0, Kimble met with Toy Biz, Inc. (now known as Marvel to discuss his patent application and related ideas not covered by the patent application. (ER Toy Biz agreed it would not use the ideas disclosed by Kimble without first negotiating a reasonable royalty payment for their use (the Verbal Agreement. (ER Toy Biz subsequently made and sold a toy, the Web Blaster, that incorporates ideas disclosed by Kimble, but refused to pay Kimble any royalty. (ER In, Kimble sued Toy Biz for patent infringement and breach of contract based on the Verbal Agreement entered into with Toy Biz at the 0 meeting (CV - TUC RCC, the Original Action. (ER In the Original Action the District Court ruled as a matter of law that the Web Blaster did not infringe the Patent, but that there were disputed questions of fact as to the Verbal Agreement between the parties. (ER, After a jury trial and verdict in his favor, the Court entered judgment for Kimble finding that the Web Blaster was covered by the Verbal Agreement and awarded damages

13 Case: - 0//0 ID: DktEntry: - Page: of 0 0 to be.% of net product sales, past, present and future excluding refill royalties. (ER, Both parties appealed. (ER While the appeal was pending, the parties entered into a settlement agreement dated September, 00 (the Settlement Agreement. (ER The parties then withdrew their appeals and agreed to vacate the Judgment of the Original Action. (ER Robert Grabb and Stephen Kimble participated in negotiations on behalf of Kimble and David Fleischer negotiated the Settlement Agreement on behalf of Marvel. (ER ; ER In the course of the negotiations, there were concerns regarding royalties to be paid for future versions of Web Blasters. (ER ; ER Robert Grabb sent an to David Fleischer dated August, 00, expressing his concerns on this issue. (ER Messrs. Kimble and Grabb proposed to define the Web Blasters covered by the Settlement Agreement as any toy that shot silly string from the wrist area. (ER ; ER Mr. Fleischer was unwilling to agree to that language and instead proposed that the Settlement Agreement state that royalties would be paid only for patented toys and for the toy that was litigated. (ER ; ER

14 Case: - 0//0 ID: DktEntry: - Page: of 0 0 Kimble, Grabb and Fleisher finally reached a compromise by adding Paragraph. (ER ; ER (ER Paragraph states: Except for the obligations undertaken by Marvel in this Agreement and except for those obligations under the alleged verbal agreement that was the subject of the Action, the Patent Holders hereby release.. The express purpose of Paragraph was to preserve Kimble s right to claim compensation for any new Web Blaster produced in the future that was not covered by either the patent or the judgment in the Original Action but was nonetheless covered by the Verbal Agreement. This interpretation of Paragraph is supported by Magistrate Ferraro s Report and Recommendation in the Second Action wherein he stated, Although Plaintiffs may have reserved non-patent rights, the Agreement does not clearly transfer any of these non-patent rights. Paragraph nine more reasonably suggests that Plaintiffs reserved the non-patent rights from the verbal agreement and did not transfer them to Marvel. (Emphasis added (ER 0, lines - (ER The Settlement Agreement also provides:. This Agreement contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous arrangements or understandings with respect hereto.

15 Case: - 0//0 ID: DktEntry: - Page: of The Settlement Agreement is subject to New York law. (ER 0 SUMMARY OF THE ARGUMENT This case involves only a question of contract interpretation; whether or not the Settlement Agreement relieves Marvel of all of its obligations under the Verbal Agreement. The only question on appeal is whether a reasonable person could construe the Settlement Agreement to mean that Marvel is not entirely relieved of its obligations under the Verbal Agreement. Kimble believes that the explicit language of Paragraph of the Settlement Agreement answers that question. It provides Except for the obligations 0 undertaken by Marvel in this Agreement and except for those obligations under the alleged verbal agreement that was the subject of the Action, the Patent Holders hereby release.. The Appellant contends that the above language leaves intact Marvel s obligations under the Verbal Agreement with regard to Web Blasters that were not the subject of the Original Action. The Appellant is not alone in his understanding of the language in question. Magistrate Ferraro looked at the same language and came to the same conclusion. (ER 0, lines - The fact that Magistrate Ferraro and Judge Bury looked at the same language and came to opposite conclusions is strong evidence that an issue of fact exists and summary judgment should not have been granted.

16 Case: - 0//0 ID: DktEntry: - Page: of I. Standard of Review ARGUMENT 0 0 The standard of review is de novo. Hernandez v. Hughes Missile Systems Co., F.d (th Cir. 00, and cases cited therein. We review a grant of summary judgment de novo and must view the evidence in the light most favorable to the petitioner, drawing all reasonable inferences in his favor. Reeves v. Sanderson Plumbing Products, Inc., 0 U.S., 0-, 0 S.Ct. 0, L.Ed.d 0 (000; Warren v. City of Carlsbad, F.d, (th Cir.. Hernandez, at. II. Appellant Kimble s Contention: The Lower Court Erred in Granting Marvel Summary Judgment on the Basis that the Settlement Agreement Cannot be Construed as Appellant Suggests The Settlement Agreement, by its own terms, is subject to New York law. (-, page Under New York Law, [w]hether an agreement is ambiguous is a question of law for the courts. Kass v. Kass, N.Y.d, N.E. d, N.Y.S. d 0 (. Marvel argues that it satisfied its obligations under the Verbal Agreement by entering into the 00 Settlement Agreement. It argues this despite the plain, clear and unambiguous language of Paragraph : 0

17 Case: - 0//0 ID: DktEntry: - Page: of 0 0 Except for the obligations undertaken by Marvel in this Agreement and except for those obligations under the alleged verbal agreement that was the subject of the Action, the Patent Holders hereby release and discharge Marvel... from all actions, causes of action, suits, debts, sums of money, accounts, covenants, contracts, controversies, agreements, promises, damages, claims and demands whatsoever,..., which against Releasee [Marvel], the Patent Holders..., now have or hereafter can, shall or may, have for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of this Agreement. Kimble contends that this language excepts from the release those obligations under the alleged verbal agreement, and respectfully suggests there is no other way to interpret this paragraph. Significantly, in the Second Action, the Magistrate who was tasked with interpreting the Settlement Agreement agreed and stated: Although Plaintiffs may have reserved non-patent rights, the Agreement does not clearly transfer any of these non-patent rights. Paragraph nine more reasonably suggests that Plaintiffs reserved the non-patent rights from the verbal agreement and did not transfer them to Marvel. (Emphasis added (ER 0, lines - Citing applicable law, the District Court stated: Contract language is ambiguous if it is capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business. Sayers v.rochester Telephone Corp. Supplemental Management Pension Plan, F.d 0, 0 (nd Cir. (N.Y. (quoting Walk In Medical Centers, Inc. v. Breuer Capital Corp., F.d 0, (d Cir. (N.Y. (quoting Eskimo Pie Corp. v. Whitelawn Dairies, Inc., F.Supp., (S.D.N.Y..

18 Case: - 0//0 ID: DktEntry: - Page: of 0 0 (ER It then ruled in effect that a reasonably intelligent person... could not interpret the Settlement Agreement the way Magistrate Ferraro did, the way Kimble does and the way Kimble respectfully suggests this Court should. In fact, survival of the obligations under the Verbal Agreement was specifically contemplated by the parties. During the negotiations, Grabb sent an to Fleischer setting forth concerns regarding future versions of the toy. If Toy Biz were to make a new toy, different from the Web Blaster, but covered by either the patent or the disclosures made to Toy Biz by Kimble, then Kimble would no doubt have a new claim against Toy Biz. (ER Because the parties could not agree on language that would define every future version of the toy that would be covered by the Settlement Agreement, Paragraph was added. (ER ; ER. Not only was the survival of the obligations under the Verbal Agreement contemplated, it was insured by Paragraph. Marvel next argues that Paragraph means the Settlement Agreement supersedes the Verbal Agreement. Paragraph states: This Agreement contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous arrangements or understandings with respect thereto. (Emphasis added. (ER

19 Case: - 0//0 ID: DktEntry: - Page: of 0 The subject matter hereof is the Settlement Agreement. It is not the Verbal Agreement. In fact, the Verbal Agreement was specifically excepted from the Settlement Agreement. (ER The District Court also recognized that [i]n assessing ambiguity, we consider the entire contract to safeguard against adopting an interpretation that would render any individual provision superfluous. RJE Corp. v. Northville Industries Corp., F.d 0, (nd Cir. (N.Y. 00 (quoting Sayers, F.d at 0..The court should construe the agreements so as to give full meaning and effect to the material provisions Id. (quoting Excess Ins. Co. Ltd. v. Factory Mut. Ins. Co., N.Y.d,, N.E.d (00. A reading of the contract should not render any portion meaningless, id. (citations omitted, and a contract should be read as a whole, and every part will be interpreted with reference to the whole; and if possible it will be so interpreted as to give effect to its general purpose Id. at - (quoting Matter of Westmoreland Coal Co. v. Entech, Inc., 00 N.Y.d,, N.E.d (00. Yet by its ruling, the District Court did exactly the opposite of what the law requires. It rendered Paragraph superfluous and meaningless. 0 Conclusion The Settlement Agreement cannot be construed any way other than as Kimble suggests. Marvel still has obligations to Kimble under the Verbal Agreement. Paragraphs and are not incompatible because the Settlement Agreement does not supersede the Verbal Agreement. If they were incompatible,

20 Case: - 0//0 ID: DktEntry: - Page: 0 of 0 then the Settlement Agreement would be ambiguous. In either event, the District Court erred in granting Marvel s Motion for Summary Judgment. For the foregoing reasons, Kimble respectfully requests this Court to reverse the District Court s decision on both parties Motions for Summary Judgment and remand the case for judgment in Kimble s favor. Respectfully Submitted this th day of May, 0. s/robert Grabb Robert Grabb Attorney for Appellant 0

21 Case: - 0//0 ID: DktEntry: - Page: of STATEMENT OF RELATED CASES This case is related to Case Number -0, Kimble v. Marvel Enterprises, Inc., currently pending in this Court. 0 0 CERTIFICATE OF SERVICE I hereby certify that I electronically filed the foregoing with the Clerk of the Court for the United States Court of Appeals for the Ninth Circuit by using the appellate CM/ECF system on May, 0. I certify that all participants in the case who are registered CM/ECF users will be served by the appellate CM/ECF system. I hereby certify that I filed four copies of the Excerpts of Record with the Clerk of the Court for the United States Court of Appeals for the Ninth Circuit by mailing via U.S. Regular Mail, to the Clerk of the Court at P.O. Box ; San Francisco, California, -, on this th day of May, 0. I also certify that a copy of the Excerpts of Record was served, by U.S. Regular mail, on the persons and on the dates listed below. Name Address Date Served Andrew Jacobs Snell & Wilmer, LLP Esq. One S. Church Ave. #00 // I

22 Case: - 0//0 ID: DktEntry: - Page: of Tucson, AZ 0 David Fleischer Haynes Boone LLP Esq. 0 Rockefeller Plaza // th Floor New York, NY 0 0 s/robert Grabb Robert Grabb CERTIFICATE OF COMPLIANCE Based on a word count performed with Word for Windows, this Brief of Appellant contains, words, in compliance with F.R.A.P. (a((c and Ninth Circuit Rule -. 0 s/robert Grabb Robert Grabb II