Troy & Schwartz Attorneys-At-Law

On Dec. 16, 2020 in Attia, et al.  v. Google, LLC, et al.,  the Ninth Circuit Court of Appeals held that a misappropriation claim under the Defend Trade Secrets Act of 2016, §18 U.S.C. 1836, et seq. (“DTSA”) may be brought for misappropriation that started prior to the DTSA’s enactment as long as the claim also arises from post-enactment misappropriation or from the continued use of the same trade secret.

The DTSA mirrors the Uniform Trade Secrets Act (“UTSA”) and also expands the Economic Espionage Act, which criminalizes misappropriation of certain trade secrets. Many states, including Florida, have based their trade secrets laws on the UTSA.  Until the enactment of the DTSA in 2016, trade secret misappropriation claims were generally brought under state statutes, e.g., Florida’s Uniform Trade Secret Act (“FUTSA”).

The DTSA allows plaintiffs to bring a federal claim for any trade secret misappropriation that occurred on or after May 11, 2016.   In Attiva v. Google, LLC, the Ninth Circuit decided that a claim under the DTSA can still be brought, even if the misappropriation actually started before the enactment of the DTSA, as long as the misappropriation continued through the DTSA’s enactment date (May 11, 2016) and involved the same trade secret.  In reaching its decision, the Ninth Circuit explained that the Uniform Trade Secrets Act (“UTSA”), includes an anti-continued use provision while the DTSA lacks a similar provision.  Noting that Congress was aware of the UTSA at the time the DTSA was enacted, the court concluded that the apparently deliberate omission of an anti-continued use provision indicated that the DTSA was not intended to be limited in this way.  In its reasoning, the Ninth Circuit pointed out that the DTSA language discussing “a continuing misappropriation constitutes a single claim of misappropriation” relates only to a statute of limitations argument and does not intrinsically prohibit DTSA misappropriations claim from being brought on the basis of continued use.

Although the DTSA is a relatively new statute and has not “seen” much litigation, the Attiva decision clearly expands the DTSA’s reach and is expected to be relied on by other federal courts asked to rule along the same lines.   Additionally, the decision represents a significant shift in trade secrets law which may cause more plaintiffs to commence trade secrets misappropriation actions in federal court because:

• it allows for claims of trade secrets misappropriation to be brought under the DTSA at least in district courts “under” the Ninth Circuit even if the misappropriation began before the 2016 enactment of the DTSA;
• it expands potential liability for defendants of trade secret claims under the DTSA;
• it provides plaintiffs with protection where state statutes following the UTSA may not.

WE THANK YOU FOR READING THIS BLOG AND HOPE YOU FOUND IT INFORMATIVE.  HOWEVER, THE CONTENT IS PROVIDED FOR INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE.  If you have any questions about trade secret misappropriation as either a potential plaintiff or defendant, contact us for a consultation.  Also contact us for a complimentary trade secret checklist to ensure you or your company are taking the appropriate steps to protect your trade secrets.

©2021

Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship™

(305) 279-4740

On Jan 8, 2021, the U.S. Supreme Court granted certiorari in Minerva Surgical, Inc. v. Holigic, (Fed. Cir. 2020), a case dealing with patent law’s doctrine of assignor estoppel.  The doctrine applies when a patent assignor is sued for patent infringement by the assignee of the previously assigned patent in federal district court.  The assignor (the defendant) is estopped from claiming as a defense that the assigned patent is invalid.

On the other hand, assignor estoppel apparently does not currently apply to a post-grant administrative proceeding before the Patent Trial & Appeal Board (“PTAB”) brought by an assignor to invalidate the assigned patent.  Indeed, 35 U.S.C. § 311(a) provides that “a person who is not the owner of a patent” may file an inter partes review (IPR) proceeding to address validity issues.  The commentator opines that a straight-forward reading of the statutory language can hardly be interpreted to mean that “non-owner” includes a patent assignor.  Unfortunately, the statute does define “owner.”  Nevertheless, the Federal Circuit Court of Appeals has held that “assignor estoppel has no place in IPR proceedings.”   That is, an assignor is free to seek patent invalidation in an IPR proceeding. Arista Networks, Inc. v. Cisco Sys., Inc.  (Fed. Cir. 2018).

Currently, assignor estoppel as used by the federal courts does not preclude reliance by the assignor-defendant on a prior invalidity decision by the PTAB.  In Minerva, alleged infringer Minvera Surgical, Inc. (a company later started by the patent assignor), which sold a surgical procedure system competing with Plaintiff-Assignee Holigic’s own system, managed to invalidate one of the patents originally assigned to Holigic’s predecessor-in-interest in an IPR administrative proceeding.   Although the district court could not itself invalidate the patent under the doctrine of assignor estoppel, it could rely on the IPR’s invalidation.  At the district court level, the PTAB’s earlier invalidation prevented the possibility of on-going royalties payable to Holigic by Minerva and an injunction blocking sales of Minerva’s system.

The Federal Circuit Court of Appeals reluctantly affirmed the district court’s judgement in April 2020, mindful of the seeming unfairness to Holigic.  For example, Judge Kara Stoll’s opinion stated: “Given the odd circumstances created in this case, I suggest that it is time for this court to consider en banc the doctrine of assignor estoppel as it applies in the district court and in the Patent Office.”

The Federal Circuit did not take up her suggestion, but the Supreme Court now has.

This commentator is on the side of the Assignee’s successor-in-interest (Hologic) and would argue an Assignor should not be eligible to invalidate a patent in an IPR proceeding.  For good and valuable consideration, the patent inventor sold his patent rights, originally assigned to the company he founded (Novacept), to Cytyc Corp. for $325 million in 2004.  Cytyc was in turn acquired by Holigic.  Presumably the valuation was based on the value of the patents being acquired and the inventor’s company was adequately compensated through arms’ length dealing.  Also, good faith and fair dealing are supposed to be “built in to” any contract.   In fact, assignment is a way for many inventors to receive good and valuable monetary consideration when they do not have the financial resources or desire to commercialize their invention.  The ability to assign patent rights also encourages innovation.

Then, after collecting a lot of money, and, instead of developing a patently distinct system, the inventor started Minerva Surgical to sell the very system disclosed in the assigned patents.  Patent Owners, and by extension Patent Assignees, ought to be entitled to stability in patent law during the patent’s lifetime.    Unfortunately, this stability is being routinely eroded through both IPR proceedings and the courts particularly with respect to lawsuits stemming from the infamous Alice v. CLS decision and its progeny.

Allowing patent assignors to invalidate assigned patents would only further erode patent stability.  It is one thing for an invalidation IPR proceeding to be commenced by an infringer with no former contractual relationship with the patent owner as in an assignor-assignee relationship; it’s quite another situation where the alleged infringer is the original assignor as in the Minerva Surgical v. Holigic case.  Even Judge Stoll opined that the IPR’s invalidation of the assigned patent was unfair.  Additionally, potential acquirers of patents may well question whether the assignor will behave nefariously and may have information (e.g., knowledge of prior art) that could be used to invalidate the patent he is assigning for a “pretty” sum whether by the assignor or a third party.

Although “tight” assignment contracts can be written, any contract is only as good as the fair-dealing of the contracting parties.   Accordingly, the commentator hopes that the Supreme Court concludes that the doctrine of assignor estoppel is found to be applicable to both IPR proceedings and patent infringement lawsuits brought in a court of law.   Common sense should tell us that Congress was not intending that the word “non-owner” includes the assignor of a patent who would later turn against the assignee and seek patent invalidation of the assigned patent.  If the Court concludes otherwise, perhaps patent assignment contracts should start including a provision that for good and valuable consideration received, the Assignor/successor in interest will not seek to invalidate the patent being assigned in an IPR proceeding.

WE THANK YOU FOR READING THIS BLOG AND HOPE YOU FOUND IT INFORMATIVE.   HOWEVER, THE CONTENT IS PROVIDED FOR INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE.

©2021

Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship™

(305) 279-4740

These days, Non-Disclosure Agreement (NDA) templates are readily available on-line, often free-of-charge, making them an attractive alternative for many.  The problem with these templates is they are not necessarily applicable to the contracting parties’ unique circumstances and/or do not properly anticipate dealings between the parties. A poorly drafted, one-size-fits-all NDA can make or break a patent-infringement case many years into the future.   These assertions are supported by the Dec. 7, 2020 decision in Sionyx, LLC v. Hamamatsu Photonics K.K. by the Court of Appeals for the Federal Circuit (CAFC).

In Sionyx, the CAFC concluded that the district court mistakenly concluded that it lacked authority to compel the transfer of ownership of foreign patents from Hamamatsu Photonics, K.K. (Hamamatsu) to Sionyx, LLC (Sionyx).  Moreover, the lower 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.

The decision is largely based on the NDA signed by the parties in 2006.  This blog discusses the decision and emphasizes that an NDA can have consequences years later.  As the decision demonstrates, had the NDA lacked certain wording, Sionyx may well not have prevailed.

Background

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. Four years later in 2005, the inventors founded Sionyx and met with Hamamatsu – a company that produces silicon-based photodetector devices – a year later.  The two companies entered into an NDA to share confidential information for the purpose of “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.”  Commentator’s emphasis. 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 confidential information.  Commentator’s emphasis.   The NDA also required that all confidential information received must be returned within 30 days of the termination of the agreement.  The term of the NDA was three years.

Hamamatsu and Sionyx worked together for about two years, at which time Hamamatsu said it wished to develop its products alone. Surprisingly, 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 Simony’s customers alerted the company to Hamamatsu’s U.S. patents five years later, in 2014.  When discussions between the two company’s 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) the equitable relief to transfer the foreign to Sionyx and name Carey as an inventor.

District Court Declines to Transfer Foreign Patents

A jury found in favor of Sionyx, awarding almost $800K for breaching the NDA in February 2009, when it first referred to Sionyx’s confidential information in an internal report, and almost $600K in damages for unjust enrichment. The jury also found that Carey should be added as a co-inventor to the U.S. patents. At the post-trial motion stage, the district court then granted Sionyx sole ownership of the disputed U.S. patents, injunctions on Hamamatsu’s 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. 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 Sionyx had failed to adequately identify the foreign patents for which it was requesting ownership.

Sionyx appealed the district court’s decision to refrain from transferring the foreign patents.  The CAFC agreed with Sionyx, holding that “the evidence that established Sionyx’s right to sole ownership of the Disputed (Hamamatsu) U.S. Patents also applies to the Disputed Foreign Patents.” The decision added:

As we discussed above with respect to the Disputed (Hamamatsu) 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 [its own] 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.

Simply put, the CAFC found that Hamamatsu’s Japanese and U.S. patents emanated from Sionyx’s confidential information which Hamamatsu became privy to under the terms of the 2005 NDA.  According to the court, Hamamatsu itself never provided its own confidential information to Sionyx, which might have justified joint inventorship of the patent with Cary as the jury had concluded.

Abuse of Discretion Standard

Accordingly, Sionyx was entitled to sole ownership of the Japanese applications and any foreign applications claiming priority therefrom. The CAFC 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 following findings by the district court: a) Hamamatsu breached the NDA; b) 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; c) Carey is a co-inventor of Hamamtsu’s U.S. Patents; Sionyx is entitled to an injunction prohibiting Hamamatsu from practicing its U.S. Patents for breach of the NDA; and d) Sionyx is entitled to an injunction prohibiting Hamamatsu from practicing its 467 patent.

Conclusions

The outcome may well have been different had the NDA not “directed” the ownership of all future patents emanating from Sionyx’s confidential information to Sionyx.   Furthermore, any resulting patent relying on confidential information emanating from both parties should have designated both Cary and an Hamamtsu inventor as joint inventors no matter where the patent applications were filed.  Inventorship does not, however, mean that the inventor(s) is also the owner(s) of the patent.  Generally, R&D and engineering personnel who work for companies assign any patent rights they may have over to their employer-company (e.g., Hamamtsu).  Or, where inventors establish a business entity, the inventors often assign their patent-related interests over to the company as part of their capital contribution.  (e.g., Sionyx).

As this case illustrates, an NDA can be a critical factor in determining patent (and other IP) ownership.  An NDA should be tailor-made for the particular situation at hand with particular emphasis on protecting the disclosing party which is often an individual inventor or a small start-up company.  Anticipate problems into the future since patents in particular can take several years to issue meaning that infringement lawsuits, patent ownership disputes, etc. may occur many years down the road.  It is also important that the disclosing party take steps consistent with protecting its confidential information upon early termination of the NDA or expiration by time.  For example, it is not clear why Sionyx did not insist on the return of all its confidential information when Hamamatsu indicated negotiations were over.

Take Home Points

1. Do not presume a generic NDA template will adequately protect your interests.  An NDA should reflect the parties’ particular situation and the nature of their business relationship under which confidential information may be disclosed.

2. Know and follow the procedures required of you and your company in the NDA as the Disclosing or Receiving Party.

Contact Susan at 305-279-4740 on matters related to your NDA to ensure it addresses potential scenarios consistent with the particular circumstances involving the contracting parties.   We are here to serve you and answer your questions related to intellectual property & business law in both transactional matters and litigation.  Check her reviews at AVVO.com where she has received Client’s Choice Badges for both 2019 and 2020.  She is a registered patent attorney.

WE THANK YOU FOR READING THIS BLOG AND HOPE YOU FOUND IT INFORMATIVE.  HOWEVER, THE CONTENT IS PROVIDED FOR INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE.

©2021

Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship™

(305) 279-4740

THE CASE ACT OF DECEMBER 2020 CREATES A SIMPLER COPYRIGHT INFRINGEMENT CLAIMS PROCESS FOR PHOTOGRAPHERS & OTHER CREATIVES

The Copyright Alternative in Small-Claims Act (the CASE Act) became law on Dec. 27, 2020 and is a welcome alternative to expensive federal court lawsuits by individual creators and small businesses (Creators) across the country who all too frequently have their copyrighted works infringed.   Prior to the Act, all copyright right infringement claims had to be brought in federal court, effectively discouraging many Creators from suing infringers due to the high costs involved.  Additionally, federal court copyright cases are generally very complex and can go on for a long time, further adding to the legal costs and plaintiffs’ frustration.   As a result, infringements regularly went unchallenged, leading many Creators or the small business owners of the Creators’ works to feel disenfranchised by the copyright system.  In effect, these individuals/businesses had rights but no reasonable remedies.

Rather than file a federal court lawsuit, Creators will now be able to bring their infringement claims before a Copyright Claims Board (“CCB”) within the U.S. Copyright Office – a three-member panel of experts on copyright law.   The panel will have the right to award, e.g., photographers, up to $15,000.00 per work and $30,000.00 per claim, assuming the works have been registered with the office.  For unregistered photos, the amount of the award is reduced by fifty percent.  In addition to monetary penalties, the Board could also issue a notice to the infringer to cease the infringement.

The commentator notes that a copyright infringement action brought in federal court requires that the work has actually been registered with the U.S. Copyright office.   See the March 4, 2019 decision by the U.S. Supreme Court in Fourth Estate Public Benefit Corp. v. Wall-Street.com. It is not clear why this requirement is not required for a CCB proceeding.  The commentator still recommends that a creator secure a registered copyright by filing for copyright registration within 90 days of publication to take advantage of the potentially greater monetary award provided by the CCB for registered works, or, in the alternative to have the option of a proceeding in federal court.

The CCB officers are appointed by the Library of Congress.  The candidates must have demonstrated expertise in copyright law.  For example, they must have represented or presided over a diversity of copyright interests, including those of both owners and users of copyrighted works.   This helps to ensure that the officers are fair and unbiased.

Another problem with federal copyright infringement cases is that the judges cannot usually be expected to be subject matter experts in this complex area of the law.  This lack of consistency in judicial background and experience has led to inconsistent copyright infringement decisions across jurisdictions or even within the same jurisdiction.  Since the CCB experts will be subject matter experts, the expectation is that the decisions will lead to more consistently correct decisions than in federal courts.  Hopefully, the CCB’s decisions will be published so they can be relied on in federal court cases.

There are numerous other provisions in the CASE Act beyond the scope of this Law Update.   Contact us to discuss your options in bringing a copyright infringement claim under the CASE Act.  We would be honored to represent creatives in their quest to protect the fruits of their creativity at a one-time flat fee.

WE THANK YOU READING THIS BLOG AND HOPE YOU FOUND IT INFORMATIVE.  HOWEVER, THE CONTENT IS PROVIDED FOR INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE.  IF YOU ARE CONTEMPLATING ANY ACTION THAT MAY HAVE LEGAL CONSEQUENCES, CONSULT WITH AN ATTORNEY.

©2021

Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship™

(305) 279-4740