Intervisual Communications, Inc. v. Volkert

MEMORANDUM OPINION AND ORDER

This matter is before the Court on Plaintiffs Complaint, seeking declaratory judgment, injunctive relief, and damages for interference with prospective economic advantage and for lost profits. Additionally, Defendants have counterclaimed for de *1095 claratory judgment, injunctive relief, and damages based on patent infringement as well as Plaintiffs alleged failure to use its “best efforts” to market Defendants’ goods. For the following reasons, the Court enters declaratory judgment in favor of Plaintiff and against Defendants. Accordingly, the Court awards $567,667 to Plaintiff for damages. Plaintiffs claims for interference with prospective economic advantage and injunctive relief fail, as do Defendants’ counterclaims.

FINDINGS OF FACT 1

Plaintiff, Intervisual Communications, Inc., (“Intervisual”), is a Delaware corporation with its principal place of business in California. (Compl. at 2.) Intervisual markets interactive advertising devices, such as hand-assembled and machine-made “pop-ups” 2 and talking advertisements to marketing firms. (Compl. at 2.) Intervisual contracts with third parties to manufacture its advertising devices. (Compl. at 3.) Intervisual, under a succession of names, has operated in the hand-assembled pop-up market since 1962. 3 (R. at 20.)

Defendant John Volkert is an Illinois resident. (Compl. at 2.) Mr. Volkert is the president of One-Up, Inc., (“One-Up”), a separately-named defendant. One-Up is a corporation with its principal place of business in Illinois. 4 (Compl. at 2.) Mr. Volkert is an inventor and a salesman, with many years of experience designing and manufacturing machine-made pop-ups. (R. at 217; Compl. at 3.) He began working for F.N. Volkert and Company, his family’s bookbinding business, in 1958. (R. at 216.) Starting out as a factory worker, Mr. Volkert rose through the ranks and eventually became president of the company. (R. at 216.) In 1982, Mr. Volkert began working for Paper-masters, Inc., and One-Up, developing and licensing patents relating to creative advertising concepts. (R. at 216.) Mr. Volkert, through One-Up, currently owns as many as fifteen patents involving pop-up products and methods for making pop-ups. 5 (R. at 265; PL’s 12(m) Statement, ¶ 6.)

Intervisual and Mr. Volkert first developed a business relationship in 1987, when Messrs. Volkert and Richwine met and talked about merging Intervisual and One-Up. (R. at 36.) However, according to Mr. Richwine, Mr. Volkert was “having some other legal problems” at that time, so talk of merging their companies “went away.” (R. at 36.) Merger discussion resumed in 1990, and, even though Mr. Volkert was still involved in litigation, Intervisual and Mr. Volkert entered into an exclusive license agreement on October 21, *1096 1991. 6 (R. at 36.)

This exclusive license agreement, which was amended on January 24,1992, and renegotiated on January 20, 1993, is the focus of the dispute between Intervisual and Mr. Vol-kert. The essence of the 1991 agreement was that Mr. Volkert granted Intervisual the exclusive right to use and market his patents, 7 in exchange for annual royalties on the sale of any products using one of his patents. Additionally, Mr. Volkert agreed to provide his expertise to help design and manufacture pop-ups, assist in training Intervisual’s sales force, develop new concepts utilizing pop-ups, attend trade shows with Intervisual, and participate in sales presentations with Intervisual. (Joint Ex. 2, Art. II.)

Specifically, the contract required Mr. Vol-kert to devote at least 1,380 hours per year to providing consulting services to Intervisual to support the exclusive license agreement. (Joint Ex. 2, Art. II.) In exchange, Intervisual would pay Mr. Volkert a nonrefundable sum of $50,000 upon signing the agreement. (Joint Ex. 2, Art. III.) Twenty-five thousand dollars of this $50,000 advance was to be paid directly to Mr. Volkert, and $25,000 was to be escrowed to pay for Mr. Volkert’s legal costs relating to pending litigation. 8 (Joint Ex. 2, Art. III-IV.) In addition, Intervisual agreed to pay Mr. Volkert a $100,000 ad-vanee against future royalty payments and an annual license fee of $5,000 for the duration of the agreement. (Joint Ex. 2, Art. III.) Intervisual also agreed to pay Mr. Vol-kert annual royalties in the amount of 7% for the first $3,000,000 of annual revenue for patented pop-ups, and 5% for all such revenues thereafter. (Joint Ex. 2, Art. III.) After the fifth anniversary of the agreement, the annual royalty rate dropped to 5% on all patented pop-up revenue. (Joint Ex. 2, Art. III.)

The exclusive license agreement provided for termination, by either party, under a variety of circumstances. Mr. Volkert could terminate the agreement, upon 30-days’ notice, if Intervisual did not meet a minimum level of annual sales of patented pop-ups for two consecutive years. 9 (Joint Ex. 2, Art. IV.) Intervisual had the right to terminate the agreement, upon giving Mr. Volkert twelve months’ notice, after the tenth anniversary of the effective date of the agreement. (Joint Ex. 2, Art. IV.) Both parties could rightfully terminate the agreement “on thirty (30) days prior written notice if the other party is in breach of this Agreement,” provided that the breaching party failed to cure “to the nonbreaching party’s reasonable satisfaction during such thirty (30) day period.” 10 (Joint Ex. 2, Art. IV.) Otherwise, the *1097 agreement would last until the expiration of the last patent involved in the agreement. 11 (Joint Ex. 2, Art. IV.)

After signing the 1991 agreement with Mr. Volkert, Intervisual was “excited” by the prospect of marketing in-line pop-ups, and planned to “aggressively sell them.” (R. at 49.) Intervisual moved its office from Chicago to Northbrook, where Mr. Volkert was headquartered, in an effort to give its sales staff an opportunity to learn about machine-made pop-ups from Mr. Volkert. (R. at 54.) Not long after signing the agreement, however, the relationship between Mr. Volkert and Intervisual began to deteriorate. Mr. Vol-kert was displeased that Intervisual was “selling other products instead of just in-line pop-ups.” (R. at 54.)

As a result, Messrs. Richwine and Vol-kert negotiated, and signed, an amendment to the 1991 agreement on January 24, 1992. (R. at 57.) That amendment waived the previous requirement that Mr. Volkert completely resolve the pending litigation with lb Penick and Weberaft before Intervisual would exercise its option to add the two patents at issue to the exclusive license agreement. (Joint Ex. 3.) Pursuant to the renegotiated agreement, Intervisual exercised its option to incorporate the two patents into its agreement with Mr. Volkert, and paid a $50,000 advance to Mr. Volkert immediately. (R. at 57.)

Despite over $2,000,000 in sales of his patented pop-ups in 1992, Mr. Volkert continued to be “unhappy with Intervisual.” (R. at 58-59.) According to Mr. Richwine, Mr. Volkert complained that Intervisual should be “putting all of [its] efforts ... on selling in-line pop-ups.” (R. at 59.) Eventually, Mr. Vol-kert’s dissatisfaction grew to such an extent that he forced Intervisual to leave his office space in Northbrook. (R. at 59.) Again, as a result of Mr. Volkert’s displeasure, Messrs. Volkert and Richwine negotiated another amended agreement on January 20, 1993. (R. at 61.)

The 1993 agreement reduced the number of hours per year that Mr. Volkert was expected to devote to consulting services from 1,380 to 920. (Joint Ex. 1, Art. II.) The $100,000 and $50,000 advances against future royalties paid by Intervisual to Mr. Volkert pursuant to the 1991 and 1992 agreements, respectively, were deemed “non-refundable.” (Joint Ex. 1, Art. III.) As a result, Mr. Volkert did not have to count those amounts against sales. (Joint Ex. 1, Art. III.) According to Mr. Richwine, “it was basically giving him another $150,000.” (R. at 63.)

Mr. Volkert’s royalty schedule was altered such that Intervisual was required to pay him royalties at a rate of 6% on the first $1,000,000 in annual patented pop-up revenue, and 5% for all patented pop-up sales thereafter. (Joint Ex. 1, Art. III.) A provision was added to pay Mr. Volkert a royalty if non-pop-up pieces were sold that he had a role in developing. (Joint Ex. 1, Art. III.) Another provision was added allowing Mr. Volkert to terminate the agreement if Inter-visual did not pay him a minimum royalty of $110,000 per year. (Joint Ex. 1, Art. IV.)

Relations between Mr. Volkert and Inter-visual remained strained, despite having amended the exclusive license agreement twice. On February 29, 1996, Mr. Volkert delivered a letter to Mr. Richwine, serving notice that he found Intervisual to be in breach of the exclusive license .agreement. (Defs.’ Answer and Countercl. at 6.) Mr. Vol-kert alleged, in his letter and subsequent pleadings, that Intervisual had breached the agreement by failing to use its “best efforts” to sell machine-made pop-ups, failing to pay royalties on a monthly basis, failing to provide access to verify invoice amounts, failing to subcontract with him on certain retail *1098 sales, failing to mark patented pieces, failing to pay royalties on particular jobs, failing to use him in sales presentations, and failing to deal in good faith where it maintained a minimum purchase contract for hand-made pop-ups with Carvajal, a manufacturer in Mexico. 12 (Joint Ex. 13; R. at 87-105.)

On March 25, 1996, Intervisual’s Director of Finance, Bruce Shiney, sent a letter to Mr. Volkert, addressing each of the breaches alleged in the February 29, 1996, letter. (PL’s Ex. 102.) On April 2, 1996, Mr. Volkert replied with a letter to Mr. Riehwine, officially terminating the exclusive license agreement. (PL’s Ex. 103.) Mr. Volkert insisted that the breaches he had alleged were not cured to his reasonable satisfaction, as was required by the exclusive license agreement. (PL’s Ex. 103.)

On September 24,1996, Mr. Volkert, operating under the assumption that the agreement with Intervisual had been officially terminated, negotiated a non-exclusive license agreement between One-Up and The Lehigh Press, Inc., Cadillac Commercial Products Division (“Lehigh Press”). (Pl.ls Ex. 118.) One-Up granted Lehigh Press a non-exclusive license to many of the same patents 13 included in Mr. Volkert’s agreement with Intervisual. (PL’s Ex. 118.) In exchange, Lehigh Press agreed to pay Mr. Volkert royalties of $45,000. (PL’s Ex. 118.) This amount was an advance against future royalties, expected to be earned by Mr. Volkert at a rate of 15% for the first $4 million in annual sales of patented pieces, and 10% for all such sales thereafter. (PL’s Ex. 118.)

As a result of Mr. Volkert’s attempted termination of the exclusive license agreement, Intervisual was quite reluctant to sell patented pop-ups. According to Mr. Ri-ehwine, Intervisual was leery of selling patented pop-ups because its “customers could get into a patent infringement lawsuit, because John Volkert owns the patents.” (R. at 108.) As a result, Intervisual sold no patented pop-ups from April 1, 1996, through May 28,1997. (R. at 108.) Even so, Intervi-sual attempted to uphold its end of the exclusive license agreement by placing Mr. Vol-kert’s minimum annual royalty payment of $110,000 for 1996 “in escrow.” (R. at 111— 12.)

Intervisual brought this action for a declaratory judgment that it did not breach its exclusive license agreement with Mr. Vol-kert, and that the agreement, therefore, remains in full force and effect. Further, In-tervisual maintains that Mr. Volkert has tortiously interfered with its prospective economic advantage, and seeks damages for lost sales, as well as an injunction to prevent future interference. Mr. Volkert counterclaims for a declaratory judgment that Intervisual has breached the exclusive license agreement and that his termination of the agreement was rightful. Mr. Volkert also counterclaims for lost royalties and for an injunction against Intervisual’s further use of his patents. Both parties plead for any additional relief the Court may deem fair and just.

ANALYSIS

I. Legal Standard for Entry of Judgment Under Declaratory Judgment Act

The Declaratory Judgment Act, 28 U.S.C. § 2201(a) allows “any court of the United States, upon the filing of an appropriate pleading,” to “declare the rights and legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” Any plea for declaratory judgment must satisfy the case or controversy requirement of Article III of the United States Constitution. In re: VMS Sec. Litig., 103 F.3d 1317, 1327 (7th Cir.1996). Federal courts have discretion regarding whether to hear a declaratory judgment matter, even when jurisdictional requirements have been met. Id. However, *1099 the Declaratory Judgment Act should be construed to effectuate the purpose of the Act, which is “to afford relief from uncertainty and insecurity with respect to legal relations.” Imperial Cas. and Indem. Co. v. Chicago Hous. Auth., 759 F.Supp. 446, 448 (N.D.Ill.1991) (quoting Sears, Roebuck and Co. v. American Mut. Liab. Ins. Co., 372 F.2d 435, 438 (7th Cir.1967)). Thus, if the declaratory judgment will clarify and settle the legal relations at issue and afford parties relief from insecurity and uncertainty, the declaratory judgment action is usually heard. Nucor Corp. v. Aceros Y Maquilas de Occidente, S.A. de C.V., 28 F.3d 572, 578 (7th Cir.1994).

In the instant case, it is clearly proper for this Court to render a judgment under the Declaratory Judgment Act. That there exists a ease or controversy that satisfies the requirement of Article III of the Constitution is evidenced by the fact that injury and damages are claimed by both Intervisual and Mr. Volkert. Further, a ruling by this Court will serve to clarify the rights and obligations of all parties under the exclusive license agreement. Having determined that the Court may properly hear this case under the Declaratory Judgment Act, the Court turns to the gravamen of this action, which is whether Intervisual breached its contract with Mr. Volkert, as Mr. Volkert has alleged.

A. Legal Standard for Breach of Contract

For Intervisual to succeed in this declaratory judgment action, it must prove that it has not breached' the exclusive license agreement with Mr. Volkert, and that, therefore, Mr. Volkert’s allegations of breach of contract are without merit. For Mr. Volkert to prove a prima facie breach of contract claim, he would have to show that: 1) a valid contract with definite and certain terms exists between him and Intervisual; 2) he has performed his obligations under the contract; 3) Intervisual has failed to perform its contractual duties; and 4) he has suffered damages as a result of Intervisual’s breach. See Hoopla Sports and Entertainment, Inc. v. Nike, Inc., 947 F.Supp. 347, 356 (N.D.Ill.1996).

The first element of a breach of contract claim, the existence of a valid contract, is not in dispute here. Both parties agree, at the very least, that the exclusive license agreement was in force and effect from October 21,1991, through February 29,1996. Hence, Intervisual cannot disprove Mr. Volkert’s allegation of breach of contract by claiming that a valid contract did not exist.

The second element of a breach of contract claim, the requirement that Mr. Volkert perform his obligations under the contract, is very much in dispute. Hoopla Sports, 947 F.Supp. at 356. Intervisual maintains that Mr. Volkert has improperly terminated the exclusive license agreement. In so doing, Intervisual implicitly argues that Mr. Volkert cannot satisfy this second element of a breach of contract action and that, therefore, Mr. Volkert’s breach of contract claim must fail. However, proof that Mr. Volkert has improperly terminated the exclusive license agreement and, therefore, has not performed his obligations under the contract, is dependent on the third element of a breach of contract — whether Intervisual has breached the exclusive license agreement.

Hence, the success or failure of Intervisual’s plea for declaratory judgment turns on the third element of the breach of contract formula. To satisfy the third element necessary to maintain a breach of contract action, Mr. Volkert must show that Intervisual has failed to perform its contractual duties. Thus, if Intervisual can prove that it has not breached its contractual duties, Mr. Volkert’s allegations of breach of contract must fail, and Intervisual will be granted declaratory judgment. 14

To prove that it has performed its contractual duties, Intervisual must repudiate the breaches alleged by Mr. Volkert in *1100 his termination letter of February 29, 1996, according to Illinois’ standard for determining a contractual “breach.” It is well-settled that only a material breach will justify the non-breaching party’s failure to perform its contractual duties. Arrow Master, Inc. v. Unique Forming Ltd., 12 F.3d 709, 714 (7th Cir.1993). A minor, non-material breach will not preclude specific performance. Id. The Arrow Master court considered a breach to be “material” when “the matter, in respect to which the failure of performance occurs, is of such a nature and of such importance that the contract would not have been made without it.” Id. at 715 (quoting Haisma v. Edgar, 218 Ill.App.3d 78, 161 Ill.Dec. 36, 578 N.E.2d 163 (1991)). With these standards in mind, the Court next examines each of the breaches alleged by Mr. Volkert in his termination letter of February 29,1996.

B. Intervisual’s Alleged Contractual Breaches

1. Failure to Use “Best Efforts” to Market Patented Pop-Ups

Mr. Volkert argues that Intervisual failed to use its “best efforts” to market his patented pop-ups, even though there is no express term in the exclusive license agreement requiring Intervisual to use its “best efforts” to market Mr. Volkert’s pop-ups. (Joint Ex. 1.) By failing to use its “best efforts,” Mr. Volkert argues, Intervisual has breached the exclusive license agreement. However, a party is not required to use its “best efforts” where an explicit “best efforts” term is absent from the contract, and consideration, in the form of substantial advance royalties, already exists to satisfy the mutuality requirement of the otherwise valid contract. Dan Beraha, M.D. v. Baxter Health Care Corp., 956 F.2d 1436, 1440 (7th Cir.1992).

In Beraha, a case relied upon by both parties, the plaintiffdicensor of a patent for a biopsy needle, urged the court to find an implied “best efforts” clause in its license agreement with the defendant/lieensee. Id. The Beraha court, however, declined to find such an implied “best efforts” clause because the licensor was receiving substantial advance royalties. Id. Such advance royalties provided a sufficient incentive for the licensee to aggressively market the licensed patent. The advance royalties also provided the licensor a degree of security, in the event that the patent proved to be unmarketable.

Beraha is instructive in the instant case. Here, Mr. Volkert argues that Intervisual failed to use its best efforts, and in so doing, breached the exclusive license agreement. However, the exclusive license agreement does not include an express “best efforts” clause. Following the rationale of Beraha, because Mr. Volkert negotiated for substantial advance royalties, and failed to include an express “best efforts” provision, a “best efforts” provision cannot be implied. 15 Accordingly, Mr. Volkert’s first alleged breach of the exclusive license contract, that Intervisual failed to use its “best efforts” to market patented pop-ups, is rejected. 16

2. Failure to Pay Royalties on a Monthly Basis

Mr. Volkert next argues that Intervisual breached the exclusive license agreement by failing to pay royalties on a monthly basis, as is required by the contract. (Joint Ex. 1.) Intervisual, though, did not receive payments every month for jobs that involved Mr. Vol-kert’s products. According to Mr. Shiney, Intervisual usually paid Mr. Volkert within thirty days after receiving payment for a job in which he was involved. (R. at 210.) In-tervisual argues that, by accepting all payments that he now complains of as being late, *1101 Mr. Volkert has impliedly waived his right to assert late payment as a breach of contract. There is ample authority for this view.

Waiver is the intentional relinquishment of a right. Cole Taylor Bank v. Truck Ins. Exch., 51 F.3d 736, 739 (7th Cir.1995). A waiver of contractual rights may be express, or it may be implied by words or actions inconsistent with the assertion of those rights. Id. In Illinois, waiver requires a showing of induced reliance, or it must be clearly inferable from the circumstances. Id. Regular acceptance of late payments has been held to serve as an implied waiver to a claim of breach of contract for late payments. Lang v. Parks, 19 Ill.2d 223, 226, 166 N.E.2d 10 (1960). A party is barred from making a claim for breach in such situation until he or she has given the tendering party reasonable notice that late payment will no longer be accepted. Id.

In Lang, a vendor who regularly accepted late payments for a period of four years, despite a “time is of the essence” provision in a contract of sale, was required to give reasonable notice to the vendee before tardy payments could legally be considered grounds for a breach of contract claim. Id. Here, Mr. Volkert accepted all royalty payments made to him by Intervisual. Even if he complained of their lateness, Mr. Vol-kert never put Intervisual on notice that late payments would be considered a breach of contract. (R. at 276.) Mr. Volkert’s conduct impliedly waives his right to assert late payments as a breach of contract. Further, Mr. Volkert’s ownership of several patents, and his years of experience in the business world, militate against a finding that he was unaware that he was waiving his right by accepting late payments. 17 (R. at 216.) According to the foregoing analysis, Mr. Vol-kert’s second alleged breach fails.

3.Failure to Provide Access to Verify Invoice Amounts

Mr. Volkert also argues that Intervi-sual breached the exclusive license agreement by failing to allow him access to its financial books, in order to verify invoices involving his patents. However, both the 1991 and the 1993 version of the exclusive license agreement contain an explicit provision giving Mr. Volkert’s accountant access to Intervisual’s financial books, upon Mr. Volkert’s request. Mr. Volkert has never requested that his accountant be given access to Intervisual’s books. (R. at 93.) Because Mr. Volkert did not use the proper procedure to inspect Intervisual’s books, Intervisual has not breached by failing to allow Mr. Volkert access to its financial records. Therefore, Mr. Volkert’s third alleged breach is rejected.

4.Failure to Subcontract with Mr. Volkert to Produce Pop-Ups for Retail Sale

Mr. Volkert alleges that Intervisual produced the “Silly Time Songs Pop-up Book” for retail sale, but refused to subcontract with him for work on the book. However, Mr. Richwine testified that Intervisual had “nothing whatsoever” to do with the production of the children’s book. (R. at 94, Amended Final Pretrial Order, Exhibit A, Stipulation of Uncontested Facts at § 12.) Instead, Techweb, a subsidiary of Donnelly, was responsible for producing the book. (R. at 94.) On cross-examination, Mr. Volkert admitted that he had no evidence that Inter-visual had anything to do with the production of the “Silly Time Songs Pop-up Book.” (R. at 321.) Having put forth no evidence whatsoever to support the vague implication that, because both Techweb and Intervisual are affiliated with Donnelly, Intervisual is somehow responsible for producing the “Silly Time Songs Pop-up Book,” Mr. Volkert’s fourth alleged breach of the exclusive license contract fails.

5.Failure to Mark Mr. Volkert’s Patent Numbers on Patented Pop-Ups Produced by Intervisual

Mr. Volkert alleges that Intervisual breached the exclusive license agreement by *1102 failing to mark his patent numbers on patented pop-ups it produced. Specifically, Mr. Volkert charges Intervisual with responsibility for failing to properly mark the “Devon Direct/Primestar,” “American Tobacco,” and “Camel” jobs. (PL’s Ex. 102.) However, neither the “Devon Direct/Primestar” nor the “American Tobacco” jobs were produced by Intervisual. (R. at 97, Amended Final Pretrial Order, Exhibit A, Stipulation of Uncontested Facts, at §§ 15-16.) Mr. Richwine admitted that Intervisual made a “mistake” by failing to put the proper patent mark on the “Camel” job. (R. at 99.) Mr. Richwine confirmed that this was the only job where Intervisual omitted Mr. Volkert’s patent mark. (R. at 99.)

It is clear that Intervisual should have included Mr. Volkert’s patent mark on the “Camel” job. However, Intervisual’s omission is not a “material” breach, when examined under the Arrow Master test for materiality. 12 F.3d at 715. The “Camel” job was one of many jobs in which Mr. Volkert’s patents were involved. The single incident of inadvertent omission does not rise to the level of a material breach of contract, and therefore, Mr. Volkert’s fifth alleged breach is rejected.

6. Failure to Pay Royalties on Certain Jobs

Mr. Volkert alleges that Intervisual breached the exclusive license agreement by failing to pay him royalties for the “Discover,” “Nokia,” and “Blue Cross/Blue Shield” jobs. In support of this contention, Mr. Vol-kert offered some paperwork from Webcraft purporting to show that Intervisual received royalty payments for these jobs. (R. at 100.) However, Mr. Richwine testified that Intervi-sual had nothing to do with these jobs, and received no monies for any of them. (R. at 100-01.) While there is some confusion regarding royalty payments on these jobs, the Court is satisfied that, based on Mr. Ri-chwine’s credible testimony, Intervisual received no monies related to Mr. Volkert’s patents for the aforementioned jobs. As a result, Mr. Volkert’s sixth alleged breach of the exclusive license agreement fails. 18

7. Failure to Use Mr. Volkert in Sales Presentations, and Intervisual’s Alleged Lack of Incentive to Sell Machine-made Pop-Ups Due to its Contractual Arrangement with Carvajal

Mr. Volkert alleges that Intervisual’s failure to utilize his expertise during sales presentations constitutes a breach of the exclusive license agreement. However, a reading of the plain language of the agreement reveals that Intervisual is not required to use Mr. Volkert for sales presentations. (Joint Ex. 1.) Rather, Intervisual has the discretion to determine whether or not to use Mr. Volkert for sales presentations. (Joint Ex. 1.) Accordingly, Intervisual has not breached this discretionary provision of the agreement.

Mr. Volkert further alleges that Intervisual has dealt with him in bad faith by maintaining a minimum purchase contract for hand-made pop-ups with Carvajal, a manufacturer in Mexico. 19 Although Intervisual had a minimum purchase contract with Carvajal, from 1991 through 1993, Intervisual typically invoiced four or five times the required minimum level of sales with Carvajal. (R. at 103-04.) As Mr. Richwine testified, “I don’t think [Intervisual] had ever done less than ... $800,000 ... [in yearly business] ... with Carvajal.” (R. at 104.) Hence, for all practical purposes, the contractually-required minimum invoice of $12,500 per month was superfluous. Recognizing this, Intervi-sual and Carvajal eliminated the minimum purchase requirement provision from then-business relationship in 1993. (R. at 103-04.) Mr. Volkert’s argument, that Intervisual’s contractual relationship with Carvajal impacted Intervisual’s willingness to sell Mr. *1103 Volkert’s patented machine-made pop-ups, is unpersuasive. 20 Accordingly, Mr. Volkert’s seventh alleged breach of the exclusive license agreement is rejected.

C. Intervisual has Committed No Material Breaches

Based on all of the testimony during the trial, as well as close scrutiny of the Record, the Court finds that all of the breaches of the exclusive license agreement alleged by Mr. Volkert have been satisfactorily rebutted. Therefore, the Court finds that: Intervisual has not breached its exclusive license agreement with Mr. Volkert; Mr. Volkert’s attempted termination of the agreement was wrongful; and the exclusive license agreement remains in full force and effect. The Court will next consider Intervisual’s claim that Mr. Volkert tortiously interfered with its prospective economic advantage.

II. Legal Standard for Tortious Interference with Prospective Economic Advantage

To prove a prima facie case of tortious interference with prospective economic advantage, a plaintiff must show: 1) the plaintiffs reasonable expectation of entering into a valid business relationship; 2) the defendant’s knowledge of the plaintiff’s expectancy; 3) purposeful interference by the defendant that causes the plaintiff’s expectations to remain unfulfilled; and 4) that the defendant’s interference has resulted in damages to the plaintiff. Delloma v. Consolidation Goal Co., 996 F.2d 168, 170-171 (7th Cir.1993). The first element of a claim for tortious interference with prospective economic advantage, the existence of a “reasonable expectation” of entering into a valid business relationship, requires the plaintiff to specifically identify third parties who “actually contemplated entering into a business relationship with [him].” Celex Group, Inc. v. The Executive Gallery, 877 F.Supp. 1114, 1126 n. 19 (N.D.Ill.1995) Simply offering proof of a past customer relationship is not sufficient to prove a “reasonable expectation” of a future business relationship. Id. at 1124. If a plaintiff were not required to specifically identify parties who actually contemplated entering into a business relationship with him, “liability under a theory of tortious interference with prospective business expectancies would be virtually without limit and impossible to calculate.” Id. at 1125-26 n. 19.

Here, Intervisual alleges that Mr. Volkert has tortiously interfered with Inter-visual’s prospective economic advantage by telling its potential customers that the agreement between Mr. Volkert and Intervisual no longer existed, and that Mr. Volkert would soon be licensing his patents to new entities. (Compl. at 7.) In support of its allegations, however, Intervisual fails to specifically identify any particular third party with whom Mr. Volkert interfered. Intervisual merely offers proof of past customer relationships by demonstrating that its annual in-line pop-up sales averaged $1,800,000 between 1992 and 1995. (R. at 109.) However, such figures are insufficient to prove a “reasonable expectation” of entering into a valid business relationship. Celex, 877 F.Supp. at 1125. In light of Intervisual’s failure to prove the first element necessary to make out a prima facie ease for interference with prospective economic advantage, analysis of the remaining three elements is unnecessary. Intervisual’s claim for tortious interference with prospective economic advantage fails.

III. Intervisual’s Prayer for Permanent Injunctive Relief

Intervisual next seeks to permanently enjoin Mr. Volkert from: contacting Intervisu *1104 al’s current or prospective customers for the purpose of alleging that Intervisual breached the exclusive license agreement; licensing Intervisual’s exclusive patent rights to third parties; and soliciting customers to sell pop-ups for the life of the exclusive license agreement. (Compl. at 8.)

For a permanent injunction to issue from the court, Intervisual must prevail on the merits of its claim and establish that equitable relief is appropriate. Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 506-07, 79 S.Ct. 948, 954-55, 3 L.E.2d 988 (1959). In the Seventh Circuit, “[a] party seeking a permanent injunction must establish that (1) he has succeeded on the merits, (2) no adequate remedy at law exists, 21 (3) irreparable harm will arise absent injunctive relief, (4) the balance of harms favors entry of an injunction, and (5) the entry of the injunction will not harm the public interest.” Nicholas Knapp v. Northwestern University, 942 F.Supp. 1191, 1194 (N.D.Ill.1996), rev’d on other grounds, 101 F.3d 473 (7th Cir.1996); Smith Barney, Harris, Upham & Co., Inc. v. St. Pierre, 1994 WL 11600 *3 (N.D.Ill.1994).

A. Intervisual’s Success on the Merits

The first element necessary for a permanent injunction to issue, success on the merits, has been satisfied by the Court’s finding that Intervisual did not breach the exclusive license agreement, and that said exclusive license agreement remains in full force and effect. Implicitly, the Court’s judgment prohibits Mr. Volkert from contacting Intervisual’s prospective customers for the purpose of alleging that Intervisual breached the exclusive license agreement, to sell pop-ups, or to license the patent rights included in the exclusive license agreement. As Intervisual has fulfilled the first requirement for a permanent injunction — success on the merits— the Court next considers the second element necessary for a permanent injunction to issue: that there is no adequate remedy at law.

B. No Adequate Remedy at Law

In order for an injunction to issue, Intervisual must show that no adequate remedy at law exists. “When ... the issue is whether to grant a permanent injunction, ... the burden is to show that damages are inadequate” for a particular situation. Walgreen Co. v. Sara Creek Property Co., 966 F.2d 273, 275 (7th Cir.1992). Determination of the adequacy of damages as opposed to injunctive relief requires a balancing of the costs and benefits of the alternatives. Id.

Here, an analysis of the costs and benefits of enjoining Mr. Volkert from contacting Intervisual’s prospective customers to allege that Intervisual breached the exclusive license agreement, to sell pop-ups, or to license the patent rights contained in the exclusive license agreement, weighs against issuing any injunctive relief. By entering a declaratory judgment that the exclusive license agreement is in full force and effect, the Court is implicitly requiring Mr. Volkert to refrain from the very conduct for which Intervisual is seeking a permanent injunction. Indeed, the exclusive license agreement includes express terms prohibiting Mr. Volkert from licensing the patents at issue to third parties, and from becoming “engaged in the sale or manufacture” of patented pop-ups. (Joint Ex. 1, Art. I, § 2, Art. V, §§ 3-4.)

To, in addition, specifically enjoin Mr. Vol-kert from activities that are already implicitly “prohibited” by the exclusive license agreement would be unnecessarily cumulative. The costs of issuing and enforcing an injunction outweigh the marginal benefit to Intervisual of having an injunction issue against Mr. Volkert. Any violation of the injunction being sought by Intervisual could be properly brought in a breach of contract action. In short, there is a sufficient remedy at law to warrant a finding that the issuance of an injunction against Mr. Volkert is unnecessary. Thus, the second element necessary for a permanent injunction to issue is not satisfied, thereby foreclosing analysis of the third and fourth elements necessary for a *1105 permanent injunction to issue. Accordingly, Intervisual’s prayer for injunctive relief is denied.

IV. Mr. Volkert’s Counterclaims

Most of Mr. Volkert’s counterclaims have been disposed of, as they turn on the same factual disputes as Intervisual’s successful action for declaratory judgment. Nonetheless, they will be addressed briefly. Mr. Volkert’s first counterclaim alleges a host of breaches of the exclusive license agreement, including: fraudulent inducement to contract; failure to use “best efforts” to market patented pop-ups; failure to exercise reasonable supervision over third-party licensee Web-craft; failure to include patented pop-ups in proposals to potential customers; proposing patented pop-ups to customers at artificially high prices; and failure to pay royalties. 22 (Defs.’ Answer and Countercl. at 12-14.) Mr. Volkert’s second counterclaim alleges patent infringement. 23 (Defs.’ Answer and Countercl. at 15.) Further, Mr. Volkert seeks a declaration that Intervisual breached the exclusive license agreement, damages for lost royalties, termination of the exclusive license agreement, and an injunction against further patent infringement.

A. Mr. Volkert’s First Counterclaim

Mr. Volkert alleges that Intervisual’s failure to exercise reasonable supervision over a third party sub-licensee constitutes a breach of the exclusive license agreement. However, a reading of the plain language of the text of the agreement reveals that the agreement contains no such provision requiring Intervi-sual to supervise third party sub-licensees. 24 The Court finds that this alleged failure does not constitute a breach of the exclusive license agreement.

Mr. Volkert further alleges that Intervisual failed to include machine-made pop-ups in “proposals to potential customers such as Procter & Gamble,” and that Intervisual submitted inflated prices for “pop-ups made under Patent Rights to caus