CAFC Finds District Court Erred, Abused Discretion in Declining to Transfer Ownership of Foreign Patents

By Eileen McDermott
December 11, 2020

“It is well established that courts have authority to compel parties properly before them to transfer ownership of foreign patents, just as they would any other equitable remedy.” – CAFC

Federal CircuitOn December 7, the U.S. Court of Appeals for the Federal Circuit held that a district court erred in its assessment that it lacked authority to compel the transfer of ownership of foreign patents from Hamamatsu Photonics, K.K. to SiOnyx LLC, and that the court abused its discretion in distinguishing between the U.S. and foreign patents at issue in the case. The CAFC affirmed the district court on most other issues, including that Hamamatsu breached its non-disclosure agreement (NDA) with SiOnyx, and that SiOnyx was entitled to co-inventorship and sole ownership of the U.S. patents, as well as damages and an injunction.

Black Silicon Patents

In 1998, Professor Eric Mazur and his student, James Carey, discovered a novel process for creating “black silicon.” The two inventors filed a provisional patent application on May 25, 2001, from which U.S. Patent 8,080,467 ultimately issued, among other patents. Carey and Mazur founded SiOnyx together in 2005 and met with Hamamatsu – a company that in part produces silicon-based photodetector devices – in 2006. The two companies entered into an NDA to share confidential information on “evaluating applications and joint[] development opportunities of pulsed laser process doped photonic devices.”

The NDA stipulated that a party receiving confidential information “shall maintain the information in strict confidence for seven years after the expiration of the agreement, after which the receiving party may use or disclose the confidential information.” The NDA also said that the receiving party of confidential information acknowledged that the disclosing party claims ownership of the information and all patent rights “in, or arising from” the information. The agreement also required that all confidential information received must be returned within 30 days of the termination of the agreement.

Hamamatsu and Sionyx worked together for about two years, at which time Hamamatsu said it wished to develop its products alone. Th NDA expired in 2008 and SiOnyx did not request the return of any confidential information from Hamamatsu. Hamamatsu began developing its own products and emailed SiOnyx in 2009 to alert the company that it would be releasing a new photodiode at an upcoming exhibition that it did not believe infringed SiOnyx’s IP or breached the confidentiality obligations. Hamamatsu then filed Japanese patent applications for photodetector devices and later filed in several other countries, including the United States, claiming priority to the Japanese patents. One of SiOnyx’s customers alerted the company to Hamamatsu’s U.S. patents five years later, in 2014, and when discussions failed, SiOnyx sued Hamamatsu in the District of Massachusetts for (1) breach of contract; (2) unjust enrichment; (3) infringement of the ’467 patent; and (4) change of inventorship of the Disputed U.S. Patents.

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District Court Declines to Transfer Foreign Patents

A jury found in favor of SiOnyx, awarding $796,469 for breaching the NDA in February 2009, when it first referred to SiOnyx’s confidential information in an internal report, and $580,640 in damages for unjust enrichment. The jury also found that Carey should be added as a co-inventor to the U.S. patents. After post-trial motions were filed by both parties, the district court granted SiOnyx sole ownership of the disputed U.S. patents, injunctions on accused products practicing those patents and the ’467 patent, pre- and post-judgment interest on damages for breach of contract, and pre-judgment interest on damages for unjust enrichment. However, the court denied SiOnyx’s motions for ownership of the disputed foreign patents because it was uncertain that it had jurisdiction to grant ownership of foreign patents and because it said SiOnyx had failed to adequately identify the foreign patents for which it was requesting ownership.

The CAFC agreed with SiOnyx, holding that “the evidence that established SiOnyx’s right to sole ownership of the Disputed U.S. Patents also applies to the Disputed Foreign Patents.” The decision added:

As we discussed above with respect to the Disputed U.S. Patents, we agree that the jury’s findings compel the conclusion that those patents arose from SiOnyx’s confidential information and that Hamamatsu has not shown that it contributed confidential information entitling it to joint ownership. And because the Disputed U.S. Patents claim priority from Hamamatsu’s Japanese patent applications, the Japanese applications must be for the same inventions as the Disputed U.S. Patents. See 35 U.S.C. § 119(a). Thus, Hamamatsu’s Japanese patent applications and any applications claiming priority from the Japanese applications in other countries must also have arisen from SiOnyx’s confidential information.

Abuse of Discretion

Thus, the CAFC said that SiOnyx was entitled to sole ownership of the Japanese applications and any foreign applications claiming priority therefrom. The court further explained that “it is well established that courts have authority to compel parties properly before them to transfer ownership of foreign patents, just as they would any other equitable remedy,” since such an order is “an exercise of the court’s authority over the party, not the foreign patent office in which the assignment is made.” As such, the district court abused its discretion in distinguishing between the two groups of patents.

The CAFC denied SiOnyx’s motion for fees under 35 U.S.C. § 285 on cross-appeal, declined to address the issue of willfulness, and affirmed the district court’s findings that Hamamatsu breached the NDA; that SiOnyx is entitled to the damages and pre-judgment interest awarded by the jury, as well as post-judgment interest at the statutory rate for its breach of contract and unjust enrichment claims; that Carey is a co-inventor of the U.S. Patents; that SiOnyx is entitled to an injunction prohibiting Hamamatsu from practicing the U.S. Patents for breach of the NDA; and that SiOnyx is entitled to an injunction prohibiting Hamamatsu from practicing the ’467 patent for infringement.

 

The Author

Eileen McDermott

Eileen McDermott is the Editor-in-Chief of IPWatchdog.com. Eileen is a veteran IP and legal journalist, and no stranger to the intellectual property world, having held editorial and managerial positions at several publications and industry organizations. She has acted as editorial consultant for the International Trademark Association (INTA), chiefly overseeing the editorial process for the Association’s twice-monthly newsletter, the INTA Bulletin. Eileen has also served as a freelance editor for the World Intellectual Property Organization (WIPO); as senior consulting editor for the Intellectual Property Owners Association (IPO) from 2015 to 2017; as Managing Editor and Editor-in-Chief at INTA from 2013 to 2016; and was Americas Editor for Managing Intellectual Property magazine from 2007 to 2013.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

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