Wednesday, November 1, 2017
Court finds terms are not ambiguous when their dictionary definitions are consistent with the contract
We just finished talking about contractual ambiguity in my contracts class, so I was happy to see this recent case out of the Fourth Circuit, SAS Institute, Inc. v. World Programming Ltd. ("WPL"), No. 16-1808 No: 16-1857 (behind paywall), discussing that very issue in the context of a software license agreement. This is actually part of a much larger case with important copyright implications for computer software code, but, given the subject matter of this blog, I'm focusing on the contract claims. You can read the opinion of the Court of Justice of the European Union on the copyright questions here.
Among other things, the parties were fighting over the interpretation of a few of the contractual terms between them. However, the court reminded us that mere disputes over the meaning of a contract does not automatically mean that language is ambiguous. In fact, the court found here based on ordinary dictionary definitions that none of the terms were ambiguous.
First, the parties were fighting over a prohibition on reverse engineering. The court looked to dictionary definitions of "reverse engineering" to arrive at a definition that also made sense in the context of the contract. WPL tried to introduce extrinsic evidence on the meaning of the term but the court found there was no reason to turn to extrinsic evidence since the term was not ambiguous.
The parties were next fighting over the meaning of the license being for "non-production purposes only." The court construed this to have its "ordinary meaning" as forbidding "the creation or manufacture of commercial goods." WPL argued that the phrase had a technical meaning in the software industry, but the court did not find that the parties had intended to use this technical meaning. The dictionary definitions supported the court's construction of the phrase as unambiguous.