The 2002 settlement agreement between Mag-Nif and Royal Sovereign stipulated:

ROYAL SOVEREIGN agrees that i[t] shall not make, ship, use, sell, offer for sale, or import in the United States any coin sorting apparatus that has two or more coin tubes corresponding to each denomination of coin sorted by the apparatus and that permits coins to flow from a first coin tube to another coin tube . . . .

Here's how the FS-3D works -

The FS-3D has three coin tubes for each of four denominations (pennies, nickels, dimes, and quarters). The coin tubes proximate to the coin chute are for accepting the flow of coins from the chute, while the front row holds empty coin tubes that the operator is to manually place in position when tubes in the sorting row become filled with coins. The FS-3D has a coin sensor that keeps track of the number of coins in each denomination that pass through the coin chute. This coin counting mechanism is designed to ensure that only a certain number of coins are released from the coin chute at a time so that there is no overflow of coins. Once a fixed amount of coins is channeled through the coin chute (fifty for pennies and dimes; forty for nickels and quarters), the machine automatically stops. The operator must then pull out the tray holding the full coin tube and replace it with an empty tube from the front row.

So far so good. But things can go wrong, either through misfire, which happens less than 1% of the time, or through operator malfunction.

[A] coin could enter an incorrect tube is when the operator intervenes to cause the machine to malfunction. [Royal Sovereign's expert witness] Prahl testified and demonstrated to the district court that if the operator—in contravention of the machine’s instructions—pulls out the coin tube tray and then pushes it back without removing the full tube, the FS-3D will resume dispensing coins because the machine “does not know that [the] tube is filled and . . . will continue to fire coins out trying to fill what it thinks is that tube . . . .” App. at 87. In this, as Prahl put it, “contrived” state, coins will “flow over the top of that [full] tube and go to the next tube.” App. at 87, 94. Royal Sovereign explains that when a full coin tube is placed where the machine expects to find an empty coin tube, the machine dispenses a round of coins which cannot enter the full tube and therefore “spill[ ] out in all directions, including the adjacent tube of the same denomination.” Royal Sovereign’s Br. at 10. Prahl described this operator-induced overflow as a “malfunction of the design.”

The district court (Chief Judge Paul R. Matia) held that Royal Sovereign did not violate the Settlement Agreement because the “overflow possibility of the FS-3D is not commercially useable” and therefore FS-3D “does not ‘permit[ ] coins to flow from a first coin tube to another coin tube’ in contravention of the Settlement Agreement.”

Mag-Nif appealed.

Whether a party has violated a settlement agreement is a mixed question of fact and law. Gilbert v. Dep’t of Justice, 334 F.3d 1065, 1071 (Fed. Cir. 2003). A settlement agreement is simply a contract; therefore, we review the district court’s interpretation of the settlement agreement without deference. Augustine Med., Inc. v. Progressive Dynamics, Inc., 194 F.3d 1367, 1370 (Fed. Cir. 1999).

The district court’s construction of the Settlement Agreement requiring that the overflow possibility be “commercially usable” is incorrect. There is nothing in the language of the agreement establishing any such standard, and, on appeal, Royal Sovereign barely makes an effort to defend this particular interpretation—though it urged this interpretation on the district court in the first place. Nevertheless, because the accused device clearly falls outside the scope of the Settlement Agreement, we agree with the district court’s ultimate conclusion.

In interpreting contract language, it is well established that we may appropriately look to dictionary definitions.

The CAFC figured that neither random misfiring nor operator malfunction constituted a "flow".