THE BABCOCK & WILCOX COMPANY, ET AL.
AREVA NP, INC., F/K/A FRAMATOME ANP, INC.
THE CIRCUIT COURT OF THE CITY OF LYNCHBURG Mosby G. Perrow,
PRESENT: Lemons, C.J., Goodwyn, Mims, McClanahan, Powell, and
Kelsey, JJ., and Lacy, S.J.
ARTHUR KELSEY JUSTICE
appeal concerns a royalty dispute over the use of nuclear
technology, which resulted in a jury verdict in favor of
Areva NP, Inc. ("Areva") against Babcock &
Wilcox Company ("B&W") and affiliated companies
(collectively, the "B&W defendants") for breach
of contract and violation of the Virginia Uniform Trade
Secrets Act, Code §§ 59.1-336 to -343.
B&W defendants appeal on various grounds, claiming that
the trial court misconstrued the governing agreements and
that the alleged use of the nuclear technology did not
violate these agreements, properly construed, as a matter of
law. The B&W defendants also contend that Areva failed to
prove a prima facie violation of the Trade Secrets Act. In
one of its two assignments of cross-error, Areva contends
that, in the event that we reverse and remand for a new
trial, we should correct an alleged error in the finding
trial court, Areva filed a two-count complaint against
B&W and three affiliated companies, Babcock & Wilcox
Power Generation Group, Inc.; Babcock & Wilcox Nuclear
Energy, Inc. ("B&W Nuclear"); and Babcock &
Wilcox Canada, Ltd. ("B&W Canada"). This suit
was filed on the heels of earlier litigation between the
parties in federal court, which the parties settled after the
issuance of a preliminary injunction against Areva's
parent company in favor of B&W Canada and BWX
Technologies, Inc. See Babcock & Wilcox Canada Ltd.
v. Framatome ANP, Inc., No. 6:02CV00049 (W.D. Va. Feb.
13, 2003) (Moon, J.) (unpublished opinion granting the
B&W affiliates' motion for a preliminary injunction);
9 J.A. at 3465 (2003 Settlement Agreement's recital
referencing the federal suit). The present dispute arose
primarily out of one of several agreements related to the
settlement of the litigation in federal court.
Count I – Breach of Sub-License
of Areva's complaint alleged that B&W and B&W
Canada ("B&W sublicensees") breached a 2004
agreement titled "Sub-License of Nuclear
Technology" ("Sub-License"). 19 J.A. at
8507. According to Areva, the B&W
defendants had breached the Sub-License by failing to notify
Areva of qualifying contracts under Section II.A and "to
pay Areva a [corresponding] royalty of four percent (4.0%) of
the gross amount paid under any such contracts." 1 J.A.
parties agreed on the relevant terms of the Sub-License. It
included several prefatory clauses acknowledging prior
agreements between the parties and defining various terms of
the Sub-License by reference to these agreements. The first
"WHEREAS" clause stated that, in an agreement
titled "Technology Transfer Agreement" entered into
in 1989 and restated in 1991 ("1991 License
Agreement"), B&W had transferred to B&W Nuclear
Service Company, Areva's predecessor in interest,
"an exclusive license to apply the Once Through Steam
Generator ('OTSG') nuclear technology in the field of
commercial nuclear services." 19 J.A. at
8507. The second through fourth
recitals stated that Areva could sublicense back to the
B&W sublicensees "all Nuclear Technology" as
that term was understood in the 1991 License Agreement and
various other prior contracts between the parties.
I of the Sub-License, titled "LICENSE GRANT, "
provided that Areva's predecessor granted to the B&W
sublicensees "a perpetual, worldwide, sub-license to
practice and use the Nuclear Technology which is exclusive to
[Areva] . . . for all purposes, without restriction, in the
field of or relating to the supply of commercial nuclear
services to OTSG plants." Id. at 8508. Section
II, designated "ROYALTY OF 4% ON GROSS REVENUES, "
For the use as defined in this Sub-License at OTSG plant
sites described in Exhibit "A" by a Grantee of the
Nuclear Technology, but excluding the first contract, which
is covered under paragraph D, below, the Grantee agrees to
pay to [Areva] a royalty of four percent (4.0%) of the
Grantee's gross contract amounts to the extent such
amounts are actually paid to the Grantee by the Grantee's
customer(s) . . . as calculated and on the terms and
conditions as set out below . . . .
Id. The "below" terms and conditions
included paragraph A, a notice provision, and paragraph B,
which clarified that the actual "receipt" of any
portion of contract revenue would trigger the obligation to
pay "the royalty applicable to such payment."
addition, paragraph D recognized a one-time royalty waiver
for the "first contract, " which Section II
[The B&W sublicensees] shall pay [Areva] a one-time only
lump sum payment of U.S. $250, 000 within thirty days of the
first contract to be entered into by either [B&W
sublicensee] greater than U.S. $100, 000 for commercial
nuclear service projects performed using the Nuclear
Technology as licensed herein at an OTSG site described in
Exhibit "A", or by December 31, 2004, whichever
occurs first. If payment is not received by [Areva] by
December 31, 2004, this Sub-License Agreement will be
considered null and void.
their counterclaim for declaratory judgment, the B&W
defendants agreed that the Sub-License governed B&W and
B&W Canada, see 1 J.A. at 65, 67, but they
denied that they had entered into any customer contracts that
triggered the royalty obligation. Their customer contracts,
they contended, did not require the use of Areva's
exclusive technology or constitute the specific type of use
specified in the royalty provision.
Count II – Trade Secrets
II of Areva's complaint alleged that the B&W
defendants had misappropriated Areva's trade secrets by
using its exclusive technology, which was "subject
to" the Sub-License, without obtaining Areva's
authorization to do so and "without compensating
Areva" for the unauthorized use. 1 J.A. at 9-10. In a
bill of particulars, Areva added that B&W Nuclear was
"neither a signatory to nor a Grantee under" the
Sub-License. Id. at 14; see also id. at 27.
their answer, the B&W defendants denied Areva's
allegation that B&W Nuclear was not a party to the
Sub-License. Instead, they claimed, all B&W subsidiaries,
including B&W Nuclear, were "authorized under the
License and Sub-License Agreements." Id. at 52;
see also id. ("[T]he [Sub-License] allows use
of the intellectual property in issue by the referenced
Cross-Motions for Summary Judgment
sides of the dispute filed cross-motions for summary
judgment. Among the issues in contest was the B&W
defendants' assertion that the royalty provisions of the
Sub-License were unambiguous and should be interpreted by the
court as a matter of law according to their plain meaning.
The trial court agreed and found, based on the record
available upon summary judgment, that the plain meaning of
those provisions precluded any royalty liability for customer
contracts involving the off-site design, manufacture, and
sale of heavy components known as ROTSGs, an acronym for
replacement once-through steam generators installed at
nuclear power plants. The court held,
as a matter of law that the four percent (4%)
royalty provisions in Art. II of the [Sub-License Agreement]
between the parties is unambiguous; that the royalty
applies to gross contract amounts involving the use of
nuclear technology exclusive to Areva in the field of
commercial nuclear services at OTSG plant sites identified in
Exhibit A of the Agreement, whether such use was substantial
or "insubstantial"; and that the royalty does
not apply to gross contract amounts for off site design,
manufacture and sale of ROTSG[s].
Id. at 234-35 (emphases added). On this ground, the
court granted "Defendants' Motion for Summary
[J]udgment That The Services Sublicense Does Not Apply To
Contracts For The Design, Manufacture And Sale Of
ROTSGs." Id. at 236.
case proceeded to a jury trial. In Areva's opening
argument, counsel stated that this was a "contract
case and [that the B&W defendants] should be paying
us 4 percent, and that's it in a nutshell." 2 J.A.
at 737 (emphasis added). Areva's counsel later affirmed
this position in closing argument, suggesting to the jurors:
"[A]s to every one of these contracts [listed
on the verdict form] the answer that you should give in your
jury verdict form is yes . . . ." 8 J.A. at 3239
(emphasis added). Significantly,
Areva had taken this position even though two of these
contracts - verdict form contract numbers 10 and 14 -
involved only B&W Nuclear, which was not
specifically identified by name in the Sub-License as a
B&W defendants responded by asserting that three of these
contracts, which were for the "off site design,
manufacture and sale of ROTSG[s], " were excluded from
the royalty obligation as a matter of law pursuant to the
court's letter opinion on the cross-motions for summary
judgment. Id. at 235. All but one of the remaining
contracts, they argued, did not involve exclusive technology
of Areva and, in any event, did not involve any
"use" of such technology "at OTSG plant sites
described in Exhibit 'A, '" as the Sub-License
required. 19 J.A. at 8508. In their view, the one contract
that would trigger the royalty obligation qualified for the
"first contract" exclusion under Section II.D of
the Sub-License. Id.
end of Areva's case-in-chief and again at the close of
the evidence, the B&W defendants moved to strike, arguing
that the evidence, when reviewed against the unambiguous
contractual terms, did not prove Areva's claims as a
matter of law. "This is the plain language on the face
of the contract, your Honor, " B&W counsel argued. 5
J.A. at 2145. "There's no jury issue here."
Id. The trial court took the first motion to strike
"under advisement, " noting that it wanted "a
complete record" for review on appeal. Id. at
the B&W defendants' renewal of their motion to strike
at the conclusion of all the evidence, the trial court again
took the motion "under advisement" without
restating its purpose for doing so. 7 J.A. at 2970. The trial
court later clarified its reasoning: "[W]hat I am trying
to do, and since we have gone this far for this long, is to
get a verdict and then set portions of it aside or not,
depending on how I rule on the motions." Id. at
3004. "I want to get it to the jury, subject to all the
objections. I know the defendants feel like it shouldn't
go to the jury at all. And the reasons are well stated on the
record." Id at 3006.
jury returned a $16, 075, 000 general verdict for Areva
against the B&W defendants. The verdict form, which was
offered by Areva over the B&W defendants' objection,
recorded the jury's finding that on each of the 15
contracts at least one of the B&W defendants owed the
contractual 4% royalty under the Sub-License. The jury
accepted Areva's argument that all 15 customer contracts
triggered the contractual duty to pay royalties. See
1 J.A. at 360-62 (verdict form indicating breach of contract
for each of the 15 contracts). The verdict form also
indicated that the jury found that the B&W defendants had
misappropriated Areva's trade secrets.
B&W defendants moved to set aside the verdict and filed a
written motion for judgment notwithstanding the verdict or,
alternatively, a new trial on various grounds. Those relevant
to our resolution of this appeal include the contentions
■ The court should have enforced its ruling on the
cross-motions for summary judgment, which, when applied to
the facts at trial, categorically excluded three ROTSG
contracts from the royalty obligation.
■ On all contracts other than one (the Duke Master
Services Contract), the evidence failed to prove as a matter
of law that the B&W defendants used Areva's exclusive
technology "at OTSG plant sites, " as the royalty
provision expressly required. 19 J.A. at 8508.
■ The court should enter judgment notwithstanding the
verdict on Areva's royalty claim applicable to the Duke
Master Services Contract because the "first
contract" exclusion applied as a matter of law.
Alternatively, the court should set aside the verdict on this
claim and order a retrial after giving a proper jury
■ Finally, the court erred by submitting the trade
secrets claim to the jury because any use of Areva's
exclusive technology was governed exclusively by contract
(the Sub-License), and no evidence demonstrated a prima facie
claim for damages under the Virginia Uniform Trade Secret
See 8 J.A. at 3342-50 (oral motion to set aside the
verdict); 18 J.A. 8361-405, 8474-505 (brief and reply brief
in support of motion for judgment notwithstanding the
verdict). The trial court denied all post-trial motions and
entered final judgment on the jury verdict.
address the principal issues on appeal, we must first
determine if the relevant contract provisions have a meaning
discernible from the words alone, and if so, whether the
trial court correctly interpreted these provisions. On these
questions, we do not defer to either the trial court or the
jury. "The interpretation of a contract presents a
question of law subject to de novo review." School
Bd. of Newport News v. Commonwealth, 279 Va. 460, 467,
689 S.E.2d 731, 735 (2010) (citation omitted).
case, Areva and the B&W defendants both assert that the
Sub-License's provisions, while highly technical, have a
plain meaning and, thus, should be considered
unambiguous. Even so, they offer very
different interpretations favoring their respective views.
Their opposing interpretations, however, do not necessarily
render the contract ambiguous. Bartolomucci v. Federal
Ins., 289 Va. 361, 370-71, 770 S.E.2d 451, 456 (2015).
As we have often said, "[a] contract is not ambiguous
simply because the parties to the contract disagree about the
meaning of its language." Pocahontas Mining L.L.C.
v. Jewell Ridge Coal Corp., 263 Va. 169, 173, 556 S.E.2d
769, 771 (2002). We concede the possibility that the
parties' interpretative deadlock implies the possibility
that the correct meaning may be somewhere between the two.
Even so, we neither presume this to be the case nor discount
the possibility that it might be so.
to the Sub-License and the prior contracts it incorporated by
reference, we must first determine whether the plain meaning
of the contractual terms can be discerned with sufficient
precision to render the Sub-License unambiguous, and, if so,
whether that meaning favors the B&W defendants or Areva.
We organize our analysis around three contractual benchmarks:
(a) the nuclear technology "exclusive" to Areva,
which defines the scope of the Sub-License; (b) use of
Areva's exclusive technology "at OTSG plant sites,
" which triggers the obligation under the Sub-License to
pay royalties; and (c) the "first contract"
exclusion, which the Sub-License exempts from any royalty
obligation. 19 J.A. at 8508.
determine whether these provisions have a plain meaning,
"words used are given their usual, ordinary, and popular
meaning." Pocahontas Mining L.L.C., 263 Va. at
173, 556 S.E.2d at 772; see also City of Chesapeake v.
States Self-Insurers Risk Retention Grp., 271 Va. 574,
578, 628 S.E.2d 539, 541 (2006). In addition, "when
considering the meaning of any part of a contract, we will
construe the contract as a whole, " Doctors Co. v.
Women's Healthcare Assocs., 285 Va. 566, 572-73, 740
S.E.2d 523, 526 (2013) (citations omitted), striving not to
"place emphasis on isolated terms" wrenched from
the larger contractual context, Quadros & Assocs. v.
City of Hampton, 268 Va. 50, 54, 597 S.E.2d 90, 93
is a temptation, regrettably natural to the adjudicative
task, to allow complex draftsmanship to discourage the search
for the plain meaning of words used in technical agreements.
But complexity should not be confused with convolution, and
agreements are not ambiguous simply because they deal
"with a technical subject that may be considered complex
to the uninformed lay person who is not familiar with the
topic." Westmoreland-LG&E Partners v.
Virginia Elec. & Power Co., 254 Va. 1, 11, 486
S.E.2d 289, 294 (1997) (quoting Doswell Ltd.
P'ship v. Virginia Elec. & Power Co., 251
Va. 215, 223, 468 S.E.2d 84, 89 (1996)). As Professor
Costello perceptively said:
As modern life becomes more complex, and commerce becomes
increasingly dependent on law, arcane business arrangements
will come before the courts in increasing numbers. It will
not do that judges be deprived of their control over
contracts by the assertions of a party that her technical
agreement is ambiguous because she says it is, or that her
agreement cannot be understood by persons not schooled in her
Costello, Virginia Remedies § 18.11 (4th ed. 2012).
Nuclear Technology "Exclusive to Areva"
Sub-License expressly granted to B&W and B&W Canada,
the B&W sublicensees, the right to
use the Nuclear Technology which is exclusive to
[Areva], for all purposes, including without limitation the
supply of Licensed Products and Services as such term is
defined in Article 1.13 of the License Agreement and
generally for all purposes, without restriction, in the
field of or relating to the supply of commercial nuclear
services to OTSG plants.
19 J.A. at 8508 (emphases added). For the definition of
"Nuclear Technology, " a prefatory recital
incorporated relevant portions of the 1991 License Agreement,
contemporaneous agreements, and "all technology which
was at issue in [the federal litigation]." Id.
at 8507. Another of the
Sub-License's recitals explained the source and meaning
of this "exclusive" technology by recognizing that
the 1991 License Agreement granted to Areva "an
exclusive license to apply the Once Through Steam Generator
('OTSG') nuclear technology in the field of
commercial nuclear services." Id.
prefatory recitals "shed light on the circumstances the
parties wished to have considered in the interpretation of
the contract." 2 E. Allan Farnsworth, Farnsworth on
Contracts § 7.10, at 289 (3d ed. 2004). So read, the
recitals confirmed that the exclusivity of Areva's
original license depended on the terms of the 1991 License
Agreement and was limited to the "field of commercial
nuclear services." 19 J.A. at 8507; see also
id. at 8508. The 1991 License Agreement separated the
relevant nuclear technology into three categories: technology
exclusive to B&W, technology shared by B&W and Areva,
and technology exclusive to Areva.
first category, technology exclusive to B&W, included
nuclear technology used to "perform the manufacture or
Manufacturing Detailed Design of Heavy Components." 9
J.A. at 3562 (Art. 8.1.3(ii)). This included "the design
activities to detail manufacturing drawings, processes,
procedures, sequencing, quality control procedures,
tolerances, weld location and technology, inspection
requirements and any other details needed to manufacture the
component to meet the Component Design requirements." Id. at
3532. Article 8.6 expressly "reserved" to B&W
"[a]ll rights in" the nuclear technology that were
"not granted" to Areva. Id. at 3566.
respect, the 1991 License Agreement maintained B&W's
exclusive right to use the nuclear technology to manufacture
and sell "Heavy Components, " which were defined as
"complete components for a Nuclear Reactor System,
" including "reactor vessels; reactor vessel heads;
reactor vessel internals; steam generators or portions
thereof which includes tube bundles; primary system heat
exchangers; pressurizers; accumulators (core floor tanks);
control rod drive mechanisms; and main reactor coolant piping
[i.e., hot and cold legs]." Id. at 3531.
second category, technology shared by B&W and Areva,
included functional design of heavy components and component design, as well as other
activities not at issue here. Id. at 3560-61, 3565;
see id. at 3531-32 (defining "Licensed Products
and Services"). Functional design included "design
activities which establish the design parameters of the
component and the specific applicable design requirements
such as design codes, safety and quality levels,
physical interfaces, working fluids, electrical requirements
and any other parameters needed to define the form, fit
and function of an acceptable component."
Id. at 3529 (emphasis added). "[C]hange-out of
steam generators or other heavy components" was also
nonexclusive. Compare id. at 3565 (Art. 8.2(d) of
1991 License Agreement) with 28 J.A. at 13394
(Section 5.05(f) of BWNS Coordination
third category, technology exclusive to Areva, included the
right to "design and sell (i) Nuclear Reactor
Engineering Services; and (ii) Specialized Nuclear
Maintenance, Inspection and Field Services" and to
"design, manufacture, sell and use: (i) Specialized
Service Tools and Inspection Equipment and (ii) Specialized
Equipment and Spare Parts." 9 J.A. at 3559. The tw
categories relevant to this case are nuclear reactor
engineering services and specialized nuclear maintenance,
inspection, and field services.
reactor engineering services were defined as "services
for Nuclear Reactor Systems or parts thereof which require a
specialized knowledge of the functional design,
operation, or safety and regulatory requirements of or
related to Nuclear Reactor Systems." Id. at
3533 (emphasis added). Such services consist "of
designing, providing requirements for, specifying and
procuring equipment for, performing engineering studies . . .
relating to, or implementing modifications . . . to, Nuclear
Reactor Systems or parts thereof" but expressly exclude
the same activities when they "do not require a
specialized knowledge of Nuclear Reactor System functional
design, operation, safety or regulatory requirements."
Id. at 3533-34. Specialized nuclear maintenance,
inspection, and field services were broadly defined as
"services for Nuclear Reactor Systems or parts thereof,
" when performance of such services requires: "a)
specialized knowledge of the functional design, operation or
safety of Nuclear Reactor Systems, or b) nuclear related
analyses and/or regulatory licensing support, or c) the use
of Specialized Service Tools and Inspection Equipment."
Id. at 3538-39.
1991 License Agreement appended two exhibits of
"illustrative" activities, one describing nuclear
reactor engineering services and the other describing
specialized nuclear maintenance, inspection, and field
services. The illustrations of nuclear reactor engineering
services included, among other things, "[c]onduct[ing]
safety, reliability and probabilistic risk analyses" and
"[d]esign[ing], specify[ing], procur[ing], and
provid[ing] regulatory licensing support, for new" - but
not replacement - "equipment or components (including
Heavy Components), and perform[ing] design/engineering
activities for their installation." Id. at
3605-07. Illustrative specialized maintenance, inspection,
and field services included various services for complete
nuclear reactor systems, hot and cold legs, and other
components. See id. at 3609-12. Some of these
services were characterized as "on-site, " others
as "off-site, " and others were not designated
either way, though it was often implicit in the nature of the
work to be done. Id.
three categories of nuclear technology described in the 1991
License Agreement confirm the B&W defendants' view
that Areva's exclusive license was limited, as the
Sub-License states, to nuclear technology "in the
field of or relating to the supply of commercial nuclear
services, " 19 J.A. at 8508 (emphasis added), and
not in the field of manufacture and sale of complete heavy
components. Equally clear is that the shared-use category of
nuclear technology, when applicable, protected the B&W
defendants from any royalty liability under the Sub-License.
separate category of nuclear technology pertains solely to
the TVA Bellefonte plant. Exhibit B to the TVA Agreement,
executed one day after the 1991 License Agreement, amended
the 1991 License Agreement to include Article 8.1.6, in which
B&W granted to Areva an exclusive, "non-assignable
license . . . to make, use, sell, design or take any other
action (but not including manufacture of Heavy Components)
necessary or desirable to perform Bellefonte NSS
Completion." 26 J.A. at 12106. By inserting the phrase
"but not including manufacture of Heavy Components,
" id., B&W expressly reserved for itself
the exclusive right to manufacture ROTSGs and any other heavy
components for the TVA Bellefonte plant.
read separately and together, these interlocking contractual
provisions provided a clear contractual meaning to the
Sub-License's grant of "Nuclear Technology which is
exclusive to [Areva] . . . in the field of or
relating to the supply of commercial nuclear
services to OTSG plants." 19 J.A. at 8508 (emphases
added). On the issue of technology exclusive to Areva,
therefore, the Sub-License has a plain, albeit intricate and
of Areva's Exclusive Technology "at OTSG Plant
Sub-License limited royalty liability to use of Areva's
exclusive technology "at OTSG plant sites" by the
B&W sublicensees. Id. The governing paragraph
For the use as defined in this Sub-License at
OTSG plant sites described in Exhibit "A"
by a Grantee of the Nuclear Technology, but
excluding the first contract, which is covered under
paragraph D, below, the Grantee agrees to pay to [Areva] a
royalty of four percent (4.0%) of the Grantee's gross
contract amounts to the extent such amounts are actually paid
to the Grantee by the Grantee's customer(s) . . . as
calculated and on the terms and conditions as set out
below . . . .
Id. (emphases added). The "below" terms
and conditions included paragraph A, a notice provision that
repeated that the royalty must be paid only for
"use" of the technology "at an
OTSG site described in Exhibit A." Id.
(emphasis added). Also included was paragraph D, which
recognized the "first contract" exclusion for
"commercial nuclear service projects performed
using the Nuclear Technology as licensed herein
at an OTSG site." Id. (emphases
provisions break down to a simple statement with three
essential predicates: No matter the scope of Areva's
exclusive technology, the B&W sublicensees were obligated
to pay a 4% royalty only when (i) they, not their
customers or anyone else, (ii) used Areva's
exclusive technology, not shared technology, (iii) at a
covered OTSG site, not at some off-site location. Thus,
under the plain meaning of the royalty provision, no royalty
was owed if only the customers of the B&W
sublicensees used Areva's exclusive technology at their
own OTSG sites. Nor was the royalty owed if the B&W
sublicensees used this technology at some non-OTSG,
reject Areva's contrary interpretation, which would
impose the royalty obligation whenever the B&W
sublicensees used the technology at their own facilities in
Canada or, for that matter, when they used the technology for
any other reason anywhere in the world - so long as the
technology was ultimately put into operational use at an OTSG
site by one of their OTSG customers. This expansive interpretation not only
contradicts, but ...