[Cite as Meeker R&D, Inc. v. Evenflo Co., Inc,

.]

IN THE COURT OF APPEALS

ELEVENTH APPELLATE DISTRICT

PORTAGE COUNTY, OHIO

MEEKER R&D, INC. : OPINION

Plaintiff-Appellee/ : Cross-Appellant, : CASE NOS. 2014-P-0060 - vs - and 2015-P-0017 : EVENFLO COMPANY, INC., : Defendant-Appellant/ Cross-Appellee.

Civil Appeals from the Portage County Court of Common Pleas, Case No. 2011 CV 00685.

Judgment: Affirmed.

David P. Bertsch, Stark & Knoll Co., L.P.A., 3475 Ridgewood Road, Akron, OH 44333 (For Plaintiff-Appellee).

Jude B. Streb, and Merle D. Evans, III, Day Ketterer LTD., Millennium Center, Suite #300, 200 Market Avenue North, Canton, OH 44701-4213 (For Defendant-Appellant).

THOMAS R. WRIGHT, J.

{¶1} This appeal arises following a bench trial regarding royalty and breach of

contract claims involving a stationary play center for infants and toddlers, known as the

ExerSaucer, which rocks, bounces, and spins. Meeker R&D, Inc. (Meeker) filed suit

seeking damages for breach of contract and fraud against Evenflo Company, Inc.

(Evenflo) for its failure to pay royalties it allegedly owed Meeker. Evenflo

counterclaimed seeking declaratory judgment of the parties’ respective agreements. Evenflo also asserted claims for unjust enrichment, breach of contract, and breach of

the implied duty of good faith and fair dealing based on its alleged overpayment of

royalties to Meeker.

{¶2} Evenflo argues that the trial court was without jurisdiction to hear this case

because it arises under federal patent law; the trial court erred in failing to grant partial

summary judgment in its favor; the trial court erred in its patent infringement analysis;

the trial court failed to apportion royalties; and the trial court erred in not holding Meeker

responsible for royalty overpayments.

{¶3} Appellee cross-appellant, Meeker, timely filed a cross appeal and claims

the trial court erred in finding that one of Evenflo’s products, the ExerSaucer Bounce &

Learn, was not covered by the ExerSaucer patent and that it erroneously held that

Meeker was not entitled to royalties for another product, the Johnny Jump Up, for the

duration of its twenty-year patent. For the following reasons, we affirm.

{¶4} Evenflo’s five assigned errors state:

{¶5} “The trial court committed reversible error in denying Defendant/Appellant

Evenflo Company, Inc.’s, Motion to Dismiss Plaintiff’s Amended Complaint for lack of

subject matter jurisdiction for the reason that Plaintiff/Appellee Meeker R&D, Inc.’s

breach of contract claim arises under federal patent laws over which federal courts have

exclusive jurisdiction.

{¶6} “The trial court committed reversible error in denying Defendant/Appellant

Evenflo Company, Inc.’s Motion for Partial Summary Judgment because the undisputed

facts demonstrate that Meeker is not entitled to royalties on the Triple Fun Product.

{¶7} “The trial court’s decision finding Meeker was entitled to royalty damages

on the Triple Fun and Portable Fun is against the manifest weight of the evidence.

2 {¶8} “The trial court committed reversible error in failing to apportion the

damages awarded for sales of the Triple Fun because Plaintiff/Appellee Meeker R&D,

Inc. admitted both that it had no involvement in the development of two stages of this

three-stage product, and that neither of those stages is covered by the ‘246 Patent.

{¶9} “The trial court committed reversible error in not finding that

Defendant/Appellant Evenflo Company, Inc., is entitled to judgment on its counterclaim

for unjust enrichment and breach of contract and/or royalty recoupment against

Plaintiff/Appellee Meeker R&D, Inc., for royalty overpayments that resulted from

accounting mistakes made by employees of Defendant/Appellant Evenflo Company,

Inc.”

{¶10} Evenflo first challenges the trial court’s jurisdiction to consider this case

alleging that the issues are governed by the application of federal patent law, which is

exclusively limited to federal courts, and as such, cannot be decided by a state court.

{¶11} The United States Supreme Court has thoroughly outlined the limited

ways in which federal courts have exclusive jurisdiction over a claim involving patent

law in Gunn v. Minton,

,

(2013):

{¶12} “‘Federal courts are courts of limited jurisdiction,’ possessing ‘only that

power authorized by Constitution and statute.’ * * * There is no dispute that the

Constitution permits Congress to extend federal court jurisdiction to a case such as this

one, * * *; the question is whether Congress has done so * * *.

{¶13} “As relevant here, Congress has authorized the federal district courts to

exercise original jurisdiction in ‘all civil actions arising under the Constitution, laws, or

treaties of the United States,’

, and, more particularly, over ‘any civil

action arising under any Act of Congress relating to patents,’ §1338(a). Adhering to the

3 demands of ‘[l]inguistic consistency,’ we have interpreted the phrase ‘arising under’ in

both sections identically, applying our §1331 and §1338(a) precedents interchangeably.

* * * For cases falling within the patent-specific arising under jurisdiction of §1338(a),

however, Congress has not only provided for federal jurisdiction but also eliminated

state jurisdiction, decreeing that ‘[n]o State court shall have jurisdiction over any claim

for relief arising under any Act of Congress relating to patents.’ §1338(a) (2006 ed.,

Supp. V). To determine whether jurisdiction [is] proper in [a state] court * * *, therefore,

we must determine whether it would have been proper in a federal district court--

whether, that is, the case ‘aris[es] under any Act of Congress relating to patents.’

(Emphasis added.)

{¶14} “For statutory purposes, a case can ‘aris[e] under’ federal law in two ways.

Most directly, a case arises under federal law when federal law creates the cause of

action asserted. See American Well Works Co. v. Layne & Bowler Co.,

,

,

(1916) (‘A suit arises under the law that creates the

cause of action’). As a rule of inclusion, this ‘creation’ test admits of only extremely rare

exceptions * * * and accounts for the vast bulk of suits that arise under federal law * * *

[A] * * * patent infringement suit * * *, for example, ar[ises] under federal law in this

manner because it was authorized by

, 281.’” (Citations omitted.)

{¶15} When a claim involving federal patent analysis arises in a state law claim,

however, as in this breach of contract suit filed by Meeker, there is a small category of

cases under which federal courts still retain jurisdiction.

citing Empire

HealthChoice Assurance, Inc. v. McVeigh,

,

(2006).

Evenflo bases its jurisdictional argument on this narrow category.

4 {¶16} At issue in Gunn, was a Texas-based legal malpractice lawsuit that was

founded on an attorney’s alleged failures in an underlying patent infringement suit. The

result of the malpractice claim in Gunn was wholly contingent on the application and

construction of federal patent law. Id. at 1060. The Texas Supreme Court held that the

state court lacked jurisdiction based on the pivotal role that federal patent law played in

the state court’s decision. The United States Supreme Court granted certiorari and

applied the four-part test for assessing whether federal courts have exclusive

jurisdiction over a state law claim that involves a federal issue:

{¶17} “Does the ‘state-law claim necessarily raise a stated federal issue, actually

disputed and substantial, which a federal forum may entertain without disturbing any

congressionally approved balance of federal and state judicial responsibilities’? * * *

That is, federal jurisdiction over a state law claim will lie if a federal issue is: (1)

necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in

federal court without disrupting the federal-state balance approved by Congress.

Where all four of these requirements are met, we held, jurisdiction is proper because

there is a ‘serious federal interest in claiming the advantages thought to be inherent in a

federal forum,’ which can be vindicated without disrupting Congress's intended division

of labor between state and federal courts.” (Citations omitted.) Id. at 1065 citing Grable

& Sons Metal Products, Inc. v. Darue Engineering & Mfg.,

,

(2005).

{¶18} In applying this test to the facts before it, Gunn held that the malpractice

suit did not satisfy the third prong, i.e., the federal issue was not substantial in the

“relevant sense.” Id. at 1066. Gunn explained that although the federal patent legal

analysis was substantial and important to the parties and to the resolution of the case,

5 “it is not enough that the federal issue be significant to the particular parties in the

immediate suit.” Id. Instead, the “substantial inquiry * * * looks * * * to the importance of

the issue to the federal system as a whole.” (Emphasis added.) Id. Thus, the inquiry’s

focus is on the broader significance to the federal government, not on the litigants.

Gunn also explained that the case before it likewise presented no significant impact on

the development of a consistent body of federal patent law and lacked any precedential

value in subsequent patent cases based on the retrospective nature of a malpractice

case. Id. at 1067.

{¶19} Gunn also held that the malpractice case also failed to satisfy the fourth

prong of the test, i.e., the balance of state versus federal responsibilities, explaining that

“[w]e have no reason to suppose that Congress—in establishing exclusive federal

jurisdiction over patent cases—meant to bar from state courts state legal malpractice

claims simply because they require resolution of a hypothetical patent issue. * * *

[A]lthough the state courts must answer a question of patent law to resolve [the] legal

malpractice claim, their answer will have no broader effects. It will not stand as binding

precedent for any future patent claim; it will not even affect the validity of [the] patent.”

Id. at 1068.

{¶20} Other courts have considered comparable cases involving state court

jurisdiction over royalty claims arising from federal patents. In Mirowski Family

Ventures, LLC v. Boston Scientific Corp.,

(S.D. Ind. 2013), the

Southern District of Indiana addressed this federal jurisdictional issue in a case

involving a dispute of royalties arising via a breach of contract claim. The district court

in Mirowski dismissed the case finding that it lacked jurisdiction to proceed. It explained

6 that the patent in issue before it was expired and that its application would have no

future impact and had no importance to the federal patent system as a whole.

{¶21} In Univ. of Ky. Research Found., Inc. v. Niadyne, Inc.,

, the Eastern District of Kentucky remanded the case back to state court

since the request for removal to federal court was beyond the 30-day rule. However,

before remanding, it analyzed the pleadings in issue and explained that the complaint

was not one “arising under federal law,” but that it instead sought payments for royalties

and an accounting for the transactions involving the technology in issue. Thus, it opined

that the suit did not appear to be a case arising under federal patent law for

jurisdictional purposes “‘merely because questions of patent law may arise in the course

of interpreting a contract.’” Id. at 11-12. However, Niadyne believed the counterclaim

asserting an actual patent infringement claim implicated a substantial federal issue.

However, it remanded the case to state court based on the untimely removal.

{¶22} In applying Gunn to the facts before us, we agree with Meeker. This is a

breach of contract case that relies on the application of patent law principles to

determine whether Evenflo breached the parties’ agreements. As in

although the application of patent law is critical to the resolution of this case, this case

does not impact the federal system as a whole. In addition, and as in Mirowski Family

Ventures,

the patent infringement analysis has no prospective application

because the patents in issue here are expired, and Meeker is seeking payment for

royalties it should have received. Further, Evenflo counterclaimed for royalties it

allegedly already overpaid. Thus, the trial court did not err in rejecting Evenflo’s motion

to dismiss based on a lack of subject matter jurisdiction.

7 {¶23} In its second assigned error, Evenflo challenges the trial court’s denial of

its motion for summary judgment arguing that Meeker was not entitled to royalties on

the ExerSaucer Triple Fun because it claims that the Triple Fun did not result from

Meeker’s consultation with Evenflo. Thus it claims that the Triple Fun did not satisfy the

parties’ license agreement governing Evenflo’s obligation to pay Meeker royalties.

{¶24} We review this argument arising from the trial court’s denial of Evenflo’s

motion for summary judgment de novo as delineated in Civ.R. 56. Comer v. Risko,

,

,

, ¶7-8 citing Albain v. Flower Hosp.,

,

(1990). Summary judgment is appropriate when

construing the evidence most strongly in favor of the nonmoving party, (1) there is no

genuine issue of material fact, (2) the moving party is entitled to judgment as a matter of

law, and (3) reasonable minds can come to but one conclusion, which is adverse to the

nonmoving party. Zivich v. Mentor Soccer Club, Inc.,

,

(1998), citing Horton v. Harwick Chem. Corp.,

,

, paragraph three of the syllabus (1995).

{¶25} The parties agree that Evenflo’s obligation to pay Meeker royalties is

governed by Sections 3.1 and 1.2 of the parties’ License Agreement, which is attached

to both their 1991 and 1994 Consulting Agreements as appendix A. The license

agreements state in pertinent part:

{¶26} “Section 3.1 Royalty Payable by EVENFLO

{¶27} “For the rights granted to EVENFLO hereunder, EVENFLO shall pay

MEEKER royalty upon all sales of all Licensed Articles. * * * Royalties shall be payable

on Licensed Articles until the respective patent expires (for patented products), or until

8 the expiration of seventeen (17) years from the date of the first commercial sale (for

unpatented products).

{¶28} “* * *

{¶29} “Section 1.2 Licensed Articles

{¶30} “The term ‘Licensed Article’ shall mean new products which result from

Meeker’s consultation for Evenflo as a result of a Consulting Agreement dated October

1, 1991 [and/or October 1, 1994], and which are covered by Licensed Patents or new

products which both parties agree in writing are included within the term ‘Licensed

Articles.’

{¶31} “* * *

{¶32} “This Agreement shall be from the Effective Date until EVENFLO stops

selling Licensed Articles. Termination shall not effect [sic] the obligation of EVENFLO to

pay all royalties accrued under Section 3.1 of this Agreement.”

{¶33} Thus, Evenflo must pay Meeker royalties for “new products which result

from Meeker’s consultation for Evenflo” that are “covered by” a “Licensed Patent,” or for

“new products which both parties agree in writing are included within the term ‘Licensed

Articles.’” Neither party claims that the parties have agreed in writing to include the

ExerSaucer Triple Fun as a “Licensed Article.” Thus, we must determine if the

ExerSaucer Triple Fun is a new product resulting from Meeker’s consultation for Evenflo

and whether it is covered by a Licensed Patent.

{¶34} Evenflo alleges that the evidence clearly established that Meeker was not

entitled to royalties resulting from the ExerSaucer Triple Fun since it did not “result from”

Meeker’s consultation in 1996 because the Triple Fun was a new product that was

conceptualized six years after Meeker’s consultation with Evenflo ended and since the

9 product changed from simply a three-legged activity center to a four-legged activity

center that converts to a toddler’s table.

{¶35} Meeker counters that the ExerSaucer Triple Fun was indeed

encompassed by the parties’ License Agreement because it was essentially a modified

or enhanced version of its patented product and based on and evolved from Meeker’s

original Licensed Article, i.e. the ExerSaucer. We agree.

{¶36} The ExerSaucer Triple Fun was advertised as a new version of the

ExerSaucer, which encompasses the patented rock, spin, and bounce innovation that

was the basis for the product’s success. Evenflo’s ExerSaucer Triple Fun is one of

many subsequent modifications of this stationary play center based on the ExerSaucer

foundation. Although the ExerSaucer Triple Fun includes the new feature of converting

to a play table, it nonetheless is an ExerSaucer, a new product that “result[ed] from

Meeker’s consultation for Evenflo * * *.” And as testified to by Meeker’s expert, the

ExerSaucer Triple Fun was also still “covered by” the ExerSaucer patent ‘246 and

during the patent period at the time.

{¶37} Evenflo attempts to exclude the ExerSaucer Triple Fun from its agreement

arguing that it is a new product that was released approximately 12 years after the

original ExerSaucer. However, Evenflo fails to acknowledge that the ExerSaucer Triple

Fun is still an ExerSaucer, which meets the parties’ agreed-upon definition of a

“Licensed Article.” The fact that this subsequent version of the ExerSaucer

incorporated design ideas and innovations that improved the product does not alter the

fact that the product continued to be an ExerSaucer that was “covered by” its ‘246

patent. Accordingly, the trial court appropriately denied Evenflo’s partial motion for

summary judgment, and Evenflo’s second assigned error lacks merit.

10 {¶38} Evenflo’s third assignment of error asserts that the trial court’s decision

finding Meeker entitled to royalty damages on the ExerSaucer Triple Fun and

ExerSaucer Portable Fun is against the manifest weight of the evidence.

{¶39} The civil manifest weight of the evidence standard of review mirrors the

criminal standard:

{¶40} “‘The [reviewing] court * * * weighs the evidence and all reasonable

inferences, considers the credibility of witnesses and determines whether in resolving

conflicts in the evidence, the [finder of fact] clearly lost its way and created such a

manifest miscarriage of justice that the [judgment] must be reversed and a new trial

ordered.’” * * * Moreover, “[e]very reasonable presumption must be made in favor of the

judgment and the findings of facts [of the trial court].” * * * Furthermore, “if the evidence

is susceptible of more than one construction, we must give it that interpretation which is

consistent with the verdict * * * and judgment, most favorable to sustaining the trial

court's verdict and judgment.” (Citations omitted.) Pelmar USA, LLC v. Mach. Exch.

Corp.,

,

, ¶10 (9th Dist.), quoting Tewarson v. Simon,

,

(9th Dist. 2001).

{¶41} In a breach of contract claim, the plaintiff must prove the existence of a

contract, the plaintiff's performance under the contract, the defendant's breach, and

damages. Doner v. Snapp,

,

(2d Dist. 1994).

{¶42} As spelled out under Evenflo’s second assignment of error, this dispute is

governed by the parties’ License Agreements. The parties and their experts agree that

in order to prove that the subsequent ExerSaucers are “covered by” the original

ExerSaucer patents, Meeker must prove that the products in issue “resulted from”

11 Meeker’s consultation and that they were “covered by” a licensed patent, which is

essentially patent infringement.

{¶43} It is undisputed that Mr. Meeker and his associate devised the concept for

the ExerSaucer in response to concerns about the dangers surrounding children’s

walkers. He and his associate invented the concept of placing a walker-type product on

top of a saucer, like a child’s sled, as a child’s stationary activity center during the

parties’ License Agreement. They wanted the product to bounce and rock. Thereafter,

an Evenflo employee, in collaborating with Meeker, suggested that the product should

also spin like a lazy Susan. Evenflo retained an outside marketing firm that coined the

signature ExerSaucer name. The parties obtained eight patents as a result of Meeker’s

work on the ExerSaucer.

{¶44} Meeker continued to contribute to the further enhancement of the

ExerSaucer pursuant to its consulting agreement through 1997. Meeker continued to

receive royalty payments until 2010 when the ExerSaucer royalty checks stopped, even

though the ExerSaucer patents had not expired and in spite of the fact that Evenflo

continued to sell ExerSaucers.

{¶45} Meeker’s expert, Ray Weber, explained that both the ExerSaucer Triple

Fun and the ExerSaucer Portable Fun were covered by patent ‘246, which is one of the

eight patents obtained as a result of Meeker’s work on the original ExerSaucer. Weber

testified that the lazy Susan portion of the ExerSaucer Triple Fun and the ExcerSaucer

Portable Fun were covered by the ‘246 patent. He likewise testified that the patent

covered the height adjustment mechanism and the location of the legs in the peripheral

area on both the ExerSaucer Triple Fun and the ExcerSaucer Portable Fun.

12 {¶46} Evenflo’s expert, on the other hand, concluded that neither the

ExerSaucer Triple Fun, nor the Portable Fun ExerSaucer, nor the Bounce & Learn

ExerSaucer were “covered by” the ‘246 Meeker patent. The Evenflo expert explained

that Evenflo’s specific alterations in these subsequent versions of the ExerSaucer

rendered the ‘246 patent inapplicable. Weber disagreed, and was subject to lengthy

cross-examination regarding his opinion. Although Evenflo’s enhanced versions of the

ExerSaucer encompassed by the Portable Fun and Triple Fun made changes to the

original ExerSaucer, these enhancements were nonetheless built upon the signature,

foundational product that result from Meeker’s consultation with Evenflo and that were

covered by the ExerSaucer ‘246 patent.

{¶47} The trial court agreed with Meeker and noted that the experts’ testimony

was conflicting, but that it believed the two products were “covered by” the ‘246 patent

in accordance with Weber’s testimony. The trial court simply found Meeker’s expert

more credible and persuasive than Evenflo’s expert’s testimony. Accordingly, Meeker

established that Evenflo breached the parties’ written agreements by failing to pay it the

royalties due.

{¶48} Evenflo also argues under this assigned error that the trial court

improperly excluded Evenflo’s patent counsel’s written legal analysis regarding the

ExerSaucer patent, which bolstered its position. However, its arguments in this regard

are conclusory and fail to explain why this report should have been admitted or how it

would have changed the outcome of the trial.

{¶49} Evenflo also argues that the trial court should have conducted a pretrial

hearing to construe the patent claims as a federal court would have done in advance of

the parties’ trial and set forth a written decision detailing its patent analysis in advance

13 of trial. However, this is not a federal patent infringement case, but a state law case

asserting breach of contract, and the parties agreed to have the agreement governed by

Ohio law. Thus, these federal procedural requirements do not apply. Furthermore,

Evenflo’s counsel requested this claim construction hearing only two weeks before the

trial. Thus, this argument lacks merit.

{¶50} Based on the foregoing, there is competent, credible evidence on the

essential elements of Meeker’s claim, i.e., the ExerSaucer Portable Fun and the

ExerSaucer Triple Fun resulted from Meeker’s consultation with Evenflo and were

“covered by” the ExcerSaucer ‘246 patent. The trial court did not lose its way, and

Evenflo’s third assigned error lacks merit.

{¶51} Evenflo’s fourth alleged error argues that the trial court committed

reversible error in failing to apportion the damages awarded for sales of the ExerSaucer

Triple Fun because Mr. Meeker admitted that Meeker had no involvement in the

development of two stages of this three-stage product and since neither of those two

stages is covered by the applicable patent.

{¶52} “[T]he appropriate standard of review in contract cases is whether the trial

court erred as a matter of law. * * * Accordingly, we ‘must determine whether the trial

court’s order is based on an erroneous standard or a misconstruction of the law.’

Continental W. Condo. Unit Owners Assn. v. Howard E. Ferguson, Inc. (1996),

,

,

. In so doing, we must keep in mind

that ‘an appellate court gives due deference to the trial court's findings of fact, so long

as they are supported by competent, credible evidence.’” (Citations omitted.) Fine v.

U.S. Erie Islands Co., 6th Dist. Ottawa No. OT-07-048,

.

14 {¶53} Meeker agreed in his testimony that the ExcerSaucer Triple Fun was

different from the original ExerSaucer in that it had four legs instead of three and

because it converted into a play table. Further, Meeker’s expert witness, Weber,

confirmed that the first and third stages of the ExerSaucer Triple Fun did not employ the

hallmark rock, spin and bounce features of the original ExerSaucer, but were instead a

play mat and table. Thus, Evenflo contends that the damages award should have been

apportioned according to the divisible portion of the product. We disagree.

{¶54} The parties agreed to the following terms under Section 3.1 Royalty

Payable by Evenflo:

{¶55} “For the rights granted to Evenflo hereunder, Evenflo shall pay Meeker

royalty upon all sales of all Licensed Articles. The rate or royalty shall be two percent of

the Net Sales Price of said Licensed Articles until the earned royalties exceed the total

prepaid royalties, which were paid in accordance with the consulting Agreement, then

the royalty rate shall drop to one and a half percent (1-1/2%.) Royalties shall be

payable on Licensed Articles until the respective patent expires (for patented products),

or until the expiration of seventeen (17) years from the date of the first commercial sale

(for unpatented products.)”

{¶56} The parties defined “Net Sales Price” as:

{¶57} “[T]he term ‘Net Sales Price’ shall mean the price charged for Licensed

Articles sold by Evenflo, or its subsidiaries or sublicensees, and not returned as

defective, less such quantity, trade and cash discounts, allowances for freight, and

taxes as are specified on the invoices of Evenflo or its subsidiaries.”

{¶58} The amount of damages in this breach of contract case is dictated by the

parties’ agreement. When terms of a contract are clear and unambiguous, the

15 interpretation is a matter of law. Durick v. Ebay, Inc., 7th Dist. Mahoning No. 05-MA-

198,

, ¶14 citing Inland Refuse Transfer Co. v. Browning-Ferris

Industries of Ohio, Inc.,

,

,

(1984).

{¶59} Here, the parties did not agree to apportion damages upon Evenflo’s

development of successive, enhanced ExerSaucers, yet that is what Evenflo is

requesting. Instead, the parties’ License Agreement specifies the percentage amount

that Meeker is to receive minus costs and expenses for the life of the product’s patent.

The parties are bound to the unambiguous terms of their agreement. Tillotson &

Wolcott Co. v. Scottdale Mach. & Mfg. Co.,

,

(8th

Dist. 1926). If Evenflo wanted to limit its percentage of royalties upon its development of

enhanced ExerSaucers, “it was incumbent upon it to employ the language necessary to

convey such intentions.” First Natl. Bank v. Heine,

,

(M.C. 1988). The fact that Evenflo failed to negotiate for a smaller percentage of

royalties upon the issuance of subsequent, enhanced ExerSaucer products does not

warrant rewriting the parties’ agreement. Accordingly, Evenflo’s fourth assignment of

error lacks merit.

{¶60} Evenflo’s fifth assignment of error argues that the trial court erred in failing

to grant it judgment on its counterclaim for its erroneous overpayment of royalty

payments to Meeker. It contends that the trial court erroneously rejected its claim on

the basis that Evenflo had made a mistake of law in reading the parties’ agreements

and in calculating Meeker’s royalties. It seeks return of money it overpaid Meeker on

the bases of unjust enrichment, breach of contract, and/or recoupment arising from its

16 accounting employees’ continuous mistake of fact, which allegedly resulted in these

overpayments.

{¶61} Evenflo asserts that the trial court erroneously found that its overpayments

were a result of its mistake of law in reading the parties’ agreement governing royalties.

To the contrary, Meeker asserts that the voluntary payment doctrine precluded the

return of the alleged overpayments. The trial court agreed with Meeker.

{¶62} Our standard of review is de novo because this alleged error presents a

purely legal question. Terry v. Bishop Homes of Copley, 9th Dist. Summit No. 21244,

, ¶11. Thus, we give no deference to the trial court’s decision.

{¶63} “A mistake of fact is defined as:

{¶64} “‘Mistake of fact is a mistake not caused by the neglect of a legal duty on

the part of the person making the mistake, and consisting in (1) an unconscious

ignorance or forgetfulness of a fact, past or present, material to the contract; or (2) belief

in the present existence of a thing or material to the contract which does not exist, or in

the past existence of such thing which has not existed.’ Black's Law Dictionary, Fifth

Edition

{¶65} “Money paid under mistake of fact, without consideration is generally able

to be recovered. 73 Ohio Jurisprudence 3d (1986) 71. The Supreme Court followed this

view in Firestone Tire & Rubber Co. v. Central National Bank, (1953)

,

, which stated in its syllabus:

{¶66} “‘In the absence of fraud, duress, compulsion or mistake of fact, money

paid under the mistaken supposition of the existence of a specific fact which would

entitle the payee to the money, which would not have been paid had it been known to

the payor that the fact did not exist, may be recovered.’ 73 Ohio Jurisprudence 3d

17 (1986) 71. Firestone Tire & Rubber Co. vs. Central National Bank, (1953)

,

.

{¶67} “Conversely, a mistake of law is defined as:

{¶68} “‘A mistake of law happens when a person, having full knowledge of the

facts comes to an erroneous conclusion as to their legal effect. It is a mistaken opinion

or inference, arising from an imperfect or incorrect exercise of judgment on facts as they

are real.’ 73 Ohio Jurisprudence 3d (1986) 74.

{¶69} “Money paid as a result of mistake of law is not recoverable as recited by

73 Ohio Jurisprudence 3d 74:

{¶70} “‘Money voluntarily paid on a claim of right with full knowledge of all the

facts, in the absence of fraud, duress, or compulsion, cannot be recovered back merely

because the party, at the time of payment, was ignorant of, or mistook, the law as to his

liability. . .’

{¶71} “‘Also, a payment made by reason of erroneous construction of the terms

of a contract or one made by reason of a mistake as to the legal sufficiency of the title

conveyed by the payee is not made under a mistake of fact but under a mistake of law,

and if voluntarily made cannot be recovered back.’ 73 Ohio Jurisprudence 3d (1986)

74.

{¶72} “The Supreme Court followed this principle in a series of cases which

have reiterated that money paid under a mistake of law may not be recovered. The

Court stated in its syllabus as follows in Cincinnati v. Gas Light and Coke Co., (1895)

,

:

{¶73} “‘A payment made by reason of a wrong construction of the terms of a

contract, is not made under a mistake of fact, but under a mistake of law, and if

18 voluntarily made cannot be recovered back.’ Cincinnati v. Gas Light and Coke Co.,

(1985)

, 279,

.

{¶74} “The Court more recently stated:

{¶75} “‘In the absence of fraud, duress, compulsion or mistake of fact, money

voluntarily paid by one person to another on a claim of right to such payment, cannot be

recovered merely because the person who made the payment mistook the law as to his

liability to pay.’ State ex rel. Dickman v. Defenbacher, (1949)

,

.”

{¶76} “* * *

{¶77} “Absent evidence to show a mistake of fact, we cannot infer the parties

have erred.” (Emphasis added.) Consolidated Mgmt. v. Handee Marts,

,

(8th Dist. 1996).

{¶78} Evenflo also claims to be entitled to repayment based on the doctrine of

unjust enrichment, which requires: "(1) a benefit conferred by a plaintiff upon a

defendant; (2) knowledge by the defendant of the benefit; and (3) retention of the

benefit by the defendant under circumstances where it would be unjust to do so without

payment (i.e., the 'unjust enrichment' element)." L & H Leasing Co. v. Dutton,

,

(3rd Dist. 1992); Hambleton v. R.G. Barry Corp.,

,

(1984).

{¶79} Evenflo insists that it erroneously overpaid Meeker on four different bases.

First, it claims that it overpaid Meeker by $133,956 based on its employees’ failure to

deduct the amount of product returns. Second, Evenflo claims that it overpaid Meeker

by $84,721 as a result of its accounting employees’ failure to deduct trade discounts

that it extended to certain retailers. Third, Evenflo alleges to have overpaid Meeker by

19 $56,144 resulting from its employees’ error in calculating Meeker’s royalty based on its

Canadian affiliate’s sales to Canadian’s retailers, instead of based on the sales by

Evenflo directly to its Canadian affiliate.

{¶80} Finally, Evenflo also claims to have overpaid Meeker royalties on the

Johnny Jump Up for approximately one and a half years beyond the product’s patent

expiration because its accounting department simply failed to stop making the payments

upon the patent’s expiration. Evenflo asserts that these overpayments resulted from its

accounting department’s mistakes. The trial court disagreed.

{¶81} The parties’ 1991 and 1994 License Agreements govern Evenflo’s

counterclaim, which provide that Meeker is entitled to a percentage of the “Net Sales

Price.” The agreements define “Net Sales Price” as “the price charged for Licensed

Articles sold by Evenflo * * * and not returned as defective, less such quantity trade and

cash discounts, allowances for freight, and taxes as are specified on the invoices of

Evenflo or its subsidiaries.”

{¶82} Meeker correctly argues that a plain reading of the parties’ agreements

establish that in order to reduce the amounts for discounts, freight, and taxes, these

amounts must be reflected on the Evenflo invoices. Thus, its claim for $84,721 for trade

discounts lacks merit on this basis.

{¶83} Anthony Bruzzese, a certified public accountant and attorney, testified on

behalf of Evenlfo. Bruzzese was hired by Evenflo in 2011 as its associate general

counsel. He testified that Meeker’s lawsuit against Evenflo prompted him to look at the

payment history to Meeker under their agreements. As a result of his “review,” he

identified the alleged errors by Evenflo that form the basis for its counterclaim. He

described the foregoing “mistakes” as caused by “the person in the finance group that

20 was responsible for calculating these, in essence, passed down this error from person

to person to person over many years.” Meeker repeatedly objected to this line of

testimony based on Bruzzese's lack of foundation. Bruzzese believed that Evenflo’s

accounting employees had been paying Meeker’s royalty percentage based on gross

sales, not on net sales as the agreements specify.

{¶84} Bruzzese testified as to the amounts of the returned products and trade

discounts that should have been deducted from Evenflo’s royalty payments to Meeker,

but were not. However, Bruzzese acquired his numbers from gross sales reports, not

the retailers’ invoices as specified in the parties’ agreements. Evenflo did not produce

the product invoices in discovery or at trial. Thus, consistent with the terms of the

parties’ agreements, Evenflo was unable to prove that it overpaid based on any

discounts, freight, and taxes, because discounted amounts had to be reflected on the

Evenflo invoices per the agreements.

{¶85} Additionally, although Bruzzese opined as to the reasons underlying

Evenflo’s overpayments, he did not know who originally calculated Meeker’s royalty

payments that resulted in the original alleged overpayment that was subsequently

perpetuated by subsequent Evenflo accounting employees. In fact, Evenflo failed to

present any testimony evidencing the reasons for the alleged overpayments and alleged

miscalculations resulting in the same.

{¶86} Bruzzese testified that he believed one Evenflo employee started the

Meeker royalty reports and that her procedure for generating those reports was passed

down to two subsequent employees. He testified, “I don’t know [if] the accounting folks

reviewed the contract. * * * But I don’t think they knew what it required or provided for.”

Bruzzese conceded on cross-examination that he does not know who the person was in

21 the 1990’s that was employed by Evenflo who was in charge of making the Meeker

royalty determinations or whether they reviewed the agreements. He stated “there was

an error made in calculating that [Meeker] royalty at that time. I don’t know the

circumstances around it * * *.” He went on to state that the prior Evenflo accounting

employees either misunderstood the Meeker royalty provisions or just did not read it.

{¶87} Bruzzese also opined that the Evenflo employees likewise did not read the

agreement with regard to the alleged Canadian overpayments to Meeker and that it was

overpaid based on a mistake of fact.

{¶88} Laura Pederson testified that she was a financial analyst for Evenflo from

2008 to the present. She was trained by her predecessor, Matt Dolson. She generated

Meeker’s royalty payments based on the ExerSaucers that Dolson told her to include,

but she did not know why one type of ExerSaucer was included and another was not

included in the Meeker royalty calculations. In early 2011, she was told to stop paying

all royalties to Meeker for ExerSaucers sales.

{¶89} Further, Evenflo’s references to and reliance on Dolson’s testimony are

improper since his deposition testimony was excluded at the trial.

{¶90} Based on the foregoing limited evidence, we agree that Evenflo failed to

establish the basis for all of its alleged overpayments to Meeker. Evenflo did not come

forward with evidence demonstrating the actual basis for its calculations and alleged

overpayments to Meeker. Thus, we are unable to assess whether the “mistakes” were

one of law or fact. For these same reasons, Evenflo also failed to meet its burden of

proof on its unjust enrichment claim since it did not establish that it conferred a benefit

on Meeker that was not due, and failed to prove that Meeker had knowledge of this

alleged benefit that it was not owed.

22 {¶91} As for Evenflo’s claimed overpayment on the Johnny Jump Up, this claim

fails for the same reasons. The parties agree that this product was first manufactured in

1993 and was a result of Meeker’s consulting agreement with Evenflo. However,

Evenflo permitted the patent to expire before the 20-year term as a result of its failure to

pay associated patent fees. Notwithstanding, Evenflo contends that it continued to pay

Meeker royalties for one and a half years beyond the 17 years it was obligated to pay

under the agreements. Bruzzese’s conjecture as to how the errors in calculating

Meeker’s royalty payments occurred is insufficient to support Evenflo’s counterclaim.

Because Evenflo has not come forward with evidence demonstrating its alleged mistake

of fact, it is not entitled to relief for alleged overpaid royalties. Thus, this assignment of

error lacks merit in its entirety.

{¶92} Meeker asserts two cross assignments of error. Its first alleged error

asserts:

{¶93} “Did the trial court err in concluding that the ExerSaucer Bounce & Learn

was not covered by the ExerSaucer patent where its features were the same as those

of the ExerSaucer Portable Fun and Triple Fun?”

{¶94} “[T]he appropriate standard of review in contract cases is whether the trial

court erred as a matter of law. * * * Accordingly, we ‘must determine whether the trial

court's order is based on an erroneous standard or a misconstruction of the law.’

Continental W. Condo. Unit Owners Assn. v. Howard E. Ferguson, Inc. (1996),

,

,

. In so doing, we must keep in mind that

‘an appellate court gives due deference to the trial court's findings of fact, so long as

they are supported by competent, credible evidence.’” (Citations omitted.) Fine v. U.S.

Erie Islands Co., 6th Dist. Ottawa No. OT-07-048,

.

23 {¶95} As set forth previously, to establish breach of contract, Meeker first

needed to establish that the product in question arose as a result of Meeker’s

consultation with Evenflo and for a patented product, that it was also “covered by” a

Meeker patent. Both parties agreed that this “covered by” determination essentially

required the trial court to engage in a patent infringement analysis.

{¶96} However, as Evenflo points out, Meeker’s expert, Weber, was prohibited

from providing his opinion on whether the ExerSaucer Bounce & Learn was “covered

by” the ‘246 patent. The trial court excluded Weber’s testimony on this issue alone

because it was not included in his expert report in accordance with the trial court’s

deadline. Although Weber was permitted to analyze the ‘246 patent and give his

opinion that the ExerSaucer Triple Fun and the ExerSaucer Portable Fun were “covered

by” this patent, he was precluded from giving testimony on the ExerSaucer Bounce &

Learn.

{¶97} Contrary to Meeker’s claims, Evenflo’s expert’s testimony does not

establish that the ExerSaucer Bounce & Learn was “covered by” the ‘246 patent. He

testified to the contrary. Accordingly, there was no evidence before the court reflecting

that the ExerSaucer Bounce & Learn was covered by the applicable patent, and as

such, Meeker’s first cross-assignment of error lacks merit.

{¶98} Meeker’s second cross-assignment of error asserts: “The trial court erred

in holding that Meeker was not entitled to royalties on the Johnny Jump Up for the full

twenty-year period of its patent.” Meeker claims that Evenflo had a contractual

obligation to maintain the applicable Johnny Jump Up patent, which would result in its

continued receipt of royalties for the 20-year life of the patent.

24 {¶99} The parties’ agreement provides under Section 3.1 of the License

Agreement that “[r]oyalties shall be payable on Licensed Articles until the respective

patent expires (for patented products), or until the expiration of seventeen (17) years

from the date of first commercial sale (for unpatented products).” (Emphasis added.)

{¶100} The parties agree that Johnny Jump Up was a patented product that was

first sold in 1993. Evenflo then unilaterally allowed the patent to lapse in 2003 based on

its nonpayment of patent maintenance fees. It nonetheless continued to pay Meeker

royalties for the Johnny Jump Up until 2011.

{¶101} Meeker now asserts that Evenflo had an obligation to notify it that the

patent was expiring so that Meeker could have paid the patent maintenance fee and

continued to receive its royalty benefits for the full 20-year period. Meeker also asserts

that Evenflo had a duty to maintain the patent for its fullest possible term, and that this

was a “condition precedent” to the parties’ agreement.

{¶102} A plain reading of the governing contractual language does not support

Meeker’s arguments. There is simply no contractual obligation for Evenflo to maintain

the applicable Meeker patents for their fullest possible lifespan. The agreement likewise

does not require Evenflo to notify Meeker if an applicable patent is expiring. Further, a

plain reading of Section 3.1 does not support the trial court’s conclusion that “royalties

shall be paid on a licensed article until a respective patent expires or until the expiration

of 17 years.” Although this may be what the parties intended, this is not what the clear

language of the contract provides. Absent an ambiguity, we are not at liberty to rewrite

the parties’ contractual obligations based on conjecture. Shifrin v. Forest City Ent., Inc.,

,

(1992).

25 {¶103} “Generally, courts presume that the intent of the parties to a contract

resides in the language they chose to employ in the agreement. * * * Only when the

language of a contract is unclear or ambiguous, or when the circumstances surrounding

the agreement invest the language of the contract with a special meaning will extrinsic

evidence be considered in an effort to give effect to the parties' intentions. * * * When

the terms in a contract are unambiguous, courts will not in effect create a new contract

by finding an intent not expressed in the clear language employed by the parties.”

(Emphasis added.) (Citations omitted.)

{¶104} The parties specifically agreed that their written agreement encompassed

their entire agreement and that it supersedes the parties’ agreements or understandings

to the contrary. Accordingly, Evenflo had no duty to pay beyond the expiration of the

applicable Johnny Jump Up patent.

{¶105} Evenflo’s continued payment of royalties on this product beyond the

applicable expiration date of the patent was in error. Again, however, as we found

under Evenflo’s fifth assigned error, there was insufficient evidence demonstrating

whether this was a mistake of fact or one of law. Thus, Evenflo is not entitled to a return

of its royalty overpayments on the Johnny Jump Up.

{¶106} Finally, a condition precedent is something that must occur before a

contractual obligation becomes effective, and when a condition precedent is not

satisfied, the parties to a contract are not obligated to the terms of the agreement.

Campbell v. George J. Igel & Co.,

,

, ¶13 (4th Dist.) Thus,

contrary to Meeker’s contentions, there was no condition precedent in the parties’

agreement obligating Evenflo to maintain the patents for a full 20-year term. Based on

the foregoing, Meeker’s second cross-assignment of error lacks merit in its entirety.

26 {¶107} Accordingly, the judgment of the Portage County Court of Common Pleas

is affirmed.

CYNTHIA WESTCOTT RICE, P.J.,

DIANE V. GRENDELL, J.,

concur.

27