JT IP and its member and manager, Jeffery Eldredge, filed suit against FloPack, LLC and its members and managers Thomas Florence and his daughter, Kimberly Perry. According to the complaint, Florence approached Eldredge in 2016 about going into business together. The two subsequently formed JT IP Holdings, with Florence’s contribution to the company to include the development of a new product, as well as to set up the business, which Eldredge contends Florence failed to do. In the summer of 2019, Florence was issued U.S. Patent No. 10,364,563 entitled “Runoff Water Management System.” Eldredge asserts that this patent was the result of his working with Florence to update and improve upon a previous Florence patent to a similar system. He says that he relied upon Florence’s assertion that he need not be named an inventor, and that the ‘563 patent was assigned to JT IP, protecting his rights. Eldredge asserts that Florence has hindered JT IP’s ability to obtain necessary additional funding, and subsequently that Florence purported to assign the ‘563 patent to new entity, FloPack, LLC, that was set up in the name of Kimberly Perry, in violation of the operating agreement of JT IP. Eldredge brings claims for correction of inventorship. violation of the Lanham Act in misrepresenting ownership of the ‘563 patent, infringement of the ‘563 patent, declaratory judgment that the assignment of the ‘563 patent to FloPack is null and void, conversion, breach of fiduciary duty, unjust enrichment, fraud and misrepresentation, tortious interference with a contract and with prospective economic advantage, and violation of 93A.
Closing out this dispute, at least at the District Court, Final Judgement was entered awarding SiOnyx:
- $1,377,109 in contractual and unjust enrichment damages plus $1,752,017 in pre-judgment interest for a total of $3,129,126;
- post-judgment interest at 2.4% pursuant to 28 U.S.C. §1961, with an accounting of post-verdict sales to occur;
- judgment that the ‘467 patent was willfully infringed;
- addition of Dr. James Carey as co-inventor of the ‘467 patent;
- ownership of nine U.S. patents; and
- a permanent injunction barring infringement of all ten patents by Hamamatsu.
Let the appellate process begin…
Following trial, Judge Saylor dealt with a number of post-trial motions. He granted SiOnyx’s motion for equitable relief, awarding ownership of the nine patents in dispute to SiOnyx and ordering Hamamatsu to take all necessary steps to correct ownership of the patents. This was based on the non-disclosure agreement that a jury found to have been violated, that provided for ownership of all patent rights arising from the confidential information SiOnyx disclosed to Hamamatsu when exploring a possible business relationship. While the SiOnyx employee who took part in the disclosure was found to be only a con-inventor (along with Hamamatsu personnel), Judge Saylor noted that the non-disclosure agreement expressly provided ownership in the resulting ideas to SiOnyx. Judge Saylor further granted an injunction prohibiting Hamamatsu from making, using, selling, offering for sale, or importing accused products based on language in the NDA that explicitly provided for injunctive relief in the event of breach as well as on SiOnyx’s ownership of the patents, one of which the jury found to be infringed.
Judge Saylor denied Hamamatsu’s motion for judgment as a matter of law, finding that the statute of limitations did not bar suit on the NDA. He noted that this is generally a jury decision, and that there was no reason to overturn the jury’s verdict on this issue. He further refused to modify the unjust enrichment award to stop damages from accruing after the NDA expired, finding that the jury reasonably concluded that post-expiration damages flowed from pre-expiration conduct in designing the accused products.
The rulings were not all bad for Hamamatsu. Judge Saylor treated SiOnyx’s motion to amend the judgement to have their employee deemed the sole inventor on the patents in suit (filed prematurely) as a motion for judgment as a matter of law and denied it. SiOnyx contended that a jury instruction erroneously stated that the method of forming a claimed aspect of the invention was irrelevant, but Judge Saylor determined that, having failed to object to the instruction prior to the jury retiring under Fed. R. Civ. P. 51, SiOnyx had waived the argument, and further that SiOnyx could not raise the issue because it was not argued in SiOnyx’s motion for a directed verdict. Accordingly, Hamamatsu employees remain co-inventors.
Judge Saylor also denied SiOnyx’s motion for fees for an exceptional case. He noted that, while SiOnyx alleged Hamamatsu’s invalidity and non-infringement defenses to be substantively too weak to merit litigating, SiOnyx did not seek summary judgment on either issue. He further found no evidence that Hamamatsu deliberately sought to increase the cost and complexity of the litigation for an improper purpose.
Finally, Judge Saylor denied SiOnyx’s motion for enhanced damages pursuant to 35 U.S.C. 284, which allows the court to assess damages when not found by the jury. Here, the jury awarded damages for breach of contract and unjust enrichment, but awarded $0 in patent damages despite finding willful infringement. SiOnyx contended that the $0 award was, in effect, the jury not “finding” damages pursuant to the statute, permitting the judge to do so. Judge Saylor disagreed, noting that SiOnyx’s damages expert told the jury that there may be overlap between the breach of contract damages and infringement damages, and that the jury might need to choose between the two. Given this, and given the fact that the jury was told not to award duplicative damages, it is reasonable to interpret the $0 infringement award to mean that the infringement damages were covered by the breach of contract damage award. Judge Saylor further refused to treble the damages, since there was no way to accurately determine the level of damages attributable to infringement.
If anyone is wondering why patent litigation is so expensive, note that this case was filed in November 2015, and included significant motion practice and discovery disputes to get to this point, including 70 docket entries just to get to the filing of an answer to the complaint (with motions to dismiss, contesting adequacy of service, and for a preliminary injunction intervening). The case took almost two years to get to a claim construction order, and almost another two years to get to trial, and the matter is just now coming due for appeal. While this case involved additional issues beyond mere patent claims, this is not an unusual time-frame for patent litigation, and helps explain the costs involved.
This case involves allegations that Cisco infringed patents related to configuring, deploying and maintaining enterprise and application servers. Earlier in the litigation, the court determined that one of the patents was directed to ineligible subject matter, and Egenera dismissed a second without prejudice following institution of inter partes review. The court held a three day bench trial on the sole issue of whether Peter Schulter, an Egenera employee, should have remained listed as an inventor of the sole remaining patent-in-suit. Schulter was removed as an inventor after Egenera relied on an internal document that predated his being hired to swear behind prior art in the IPR (which, as it turns out, was not instituted with respect to the patent). Judge Stearns found that his removal was improper. He noted that none of the named inventors, including Schulter, reviewed the internal document before signing the declarations that accompanied the change of inventor petition, instead relying on Egenera’s management and counsel that the removal of Schulter was proper.
Later, the court construed the term “logic to modify said receiver to transmit said modified messages to the external communication network and to the external storage network” as a means-plus-function limitation. After reviewing internal documentation, including reviews of Schulter, the court determined that Schulter contributed to the means identified in the specification that were swept into the claim by means of 112(6). Judge Stearns identified passages in the specification that were taken from a state-of-development document authored by Schulter that post-dated Schulter’s employment and to which he contributed. Judge Stearns further considered testimony from one of the other inventors that the last-state-of-development document that pre-dated Schulter’s employment did not include information contained in the patent. Further, Egenera hired Schulter specifically to work on the servers covered by the patent This evidence was sufficient to overcome Schulter’s testimony that he was not an inventor, which was not corroborated by any contemporaneous evidence. As the court had already determined that judicial estoppel prevented Egenera from seeking to re-add Schulter as an inventor, the patent was deemed invalid, closing the case.
The jury returned a verdict in this long-running saga over black silicon technology that SiOnyx disclosed to Hamamtsu under a nondisclosure agreement, finding that Hamamatsu breached the NDA and was unjustly enriched and awarding $1,377,109 in damages for these claims. They rejected Hamamatsu’s statute of limitations and equitable estoppel defenses. They further determined that SiOnyx employee Dr. Carey should be named as a co-inventor on the Hamamatsu patents-in-suit under 35 U.S.C. § 256. Finally, they determined that Hamamatsu willfully infringed SiOnyx’s patent and that the patent is valid, but awarded no damages for the infringement.
Egenera accused Cisco of infringing the ‘430 patent, which names Egenera employee Peter Schulter as one of the inventors. When Cisco sought inter partes review on the basis of a 2000 reference, Egenera sought to swear behind the reference (under the first-to-invent rule, as the invention predates the AIA’s first-to-file system). Egenera relied on a document authored by inventor Max Smith, that Egenera asserts fully described the claimed invention. This document, however, pre-dates Schulter’s employment with Egenera. Egenera successfully petitioned to have Schulter removed as an inventor, and filed a declaration from Schulter stating that he was erroneously named. Cicso contended that Schulter should have been named as an inventor, and that by his removal the patent is invalid.
Judge Stearns agreed with Cisco that, should Schulter be determined to have contributed to the invention, Egenera could not petition to have him restored as an inventor under the doctrine of judicial estoppel, as such a claim would be inconsistent with Egenera’s assertion that he was incorrectly named. Judge Stearns determined, however, that while Schulter authored a pre-critical date document on a virtual LAN proxy that potentially read on a means-plus-function term in the claims, his authorship alone was not enough to determine, as a matter of law, that he conceived of the virtual LAN proxy or that the virtual LAN proxy was claimed via the means-plus-function limitation. Accordingly, he denied the cross motions for summary judgment on inventorship.
SiOnyx alleged that Hamamatsu, following an aborted attempt to form a business partnership involving devices that improve the detection of near-infrared light, had violated a non-disclosure agreement and obtained patents on SiOnyx technology without naming SiOnyx personnel as inventors. Hamamatsu filed twelve motions for partial summary judgment. Judge Saylor granted three of these, denied three, and deferred judgment on the remaining six.
Hamamatsu’s bid to prevail on breach of contract and unjust enrichment claims on statute of limitations grounds was denied. While the relevant events occurred longer ago than the six-year time period provided by the statute of limitations on these types of claims, Massachusetts law follows the discovery rule, by which the cause of action arises not when the events occurred, but when the plaintiff discovers or should reasonably have discovered. Here, there were issues of fact as to when SiOnyx should reasonably have become aware of these claims, brought about by Hamamatsu’s repeated assurances that it had developed the relevant technology on its own, independent from any knowledge acquired under the NDA. Judge Saylor denied summary judgment of breach of contract, finding issues of fact as to the scope of use of confidential information, while granting Hamamatsu’s motion with respect to the unjust enrichment claims of both SiOnyx and co-plaintiff Harvard, because under Massachusetts law, unjust enrichment cannot be found where there is a valid contract defining the rights of the parties. Applying First Circuit law, Judge Saylor denied Hamamatsu’s motion with respect to consequential damages on the grounds that the testimony offered in support of this theory, SiOnyx’s recollection of statements as to why a third-party agreement was terminated made by an executive of the third party, constituted an exception to hearsay under Rule 803(3) as a statement of intent or motive. Finally, he granted Hamamatsu’s motion that a SiOnyx employee was not a co-inventor on Hamamatsu’s patents, as the testimony of the employee was not sufficiently corroborated by documentary evidence.