In SiOnyx LLC v. Hamamatsu Photonics K.K., --F.3d__ (Fed. Cir. Dec. 7, 2020), the U.S. Court of Appeals for the Federal Circuit (Judges Lourie, Reyna, and Wallach) affirmed-in-part and reversed-in-part the district court's decision regarding ownership of the disputed U.S. and foreign patents, finding that sole ownership was proper even though co-inventors came from both parties. The decision presents facts dictating that ownership and inventorship are separate issues. The part of this post on SiOnyx will focus on the ownership issues.
There are nine "Disputed U.S. Patents" in this case. The "Disputed Foreign Patents" are the Japanese patent applications from which the Disputed U.S. Patents claim priority and all other foreign patents claim priority.
Two scientists, Mazur and Carey, discovered a process for creating black silicon. They filed a U.S. provisional patent application on May 25, 2001, and later formed SiOnyx to commercialize black silicon. The provisional patent application was followed by a non-provisional application and eventually issued as U.S. Patent 8,080,467 ("the '467 patent").
In November 2006, SiOnyx met with Hamamatsu, a producer of silicone-based photodetector devices. In January 2007, the parties entered into a Non-Disclosure Agreement (NDA) to facilitate a collaboration. Importantly for this case, the NDA included a clause, "[t]he Receiving Party acknowledges that the Disclosing Party . . . claims ownership of the Confidential Information disclosed by the Disclosing Party and all patent, copyright, trademark, trade secret, and other intellectual property rights in, or arising from, such Confidential Information." Id. at *17, Paragraph 5 of the NDA. There was collaboration for a year, but then the NDA was allowed to expire on Jan. 12, 2008, after Hamamatsu indicated it wanted to develop products alone.
In February 2008, Hamamatsu prepared a report referring to a SiOnyx prototype, and emailed SiOnyx its plans to exhibit a device, noting it "it did not believe that the new product infringed SiOnyx's intellectual property or breached Hamamatsu's confidentiality obligations." Id. at *5. SiOnyx did not agree: "SiOnyx did not consider the product to be meaningfully different from the devices the parties developed together in 2007." Id.
As things progressed, Hamamatsu filed a Japanese patent application in February 2009, followed by applications in several countries, including the U.S. (These applications became the Disputed U.S. and Foreign Patents at issue in the litigation.) Hamamatsu began selling its products in 2010. SiOnyx began selling its own products in 2013. In 2014, the parties met to discuss the ownership of the Disputed U.S. and Foreign Patents, but there was no agreement.
District Court Decision
A jury returned a verdict, reciting in relevant part that:
- Hamamatsu breached its Non-Disclosure Agreement ("NDA") with SiOnyx;
- Carey is a co-inventor of the Disputed U.S. Patents;
- SiOnyx is entitled to sole ownership of the Disputed U.S. Patents, but the district court did not rule on the Disputed Foreign patents.
According to the district court, since the jury decided that "Hamamatsu breached the NDA by using SiOnyx's confidential information and . . . Carey should be named a co-inventor of the Disputed U.S. Patents[,]" the jury must have believed that the "patents arose, at least in part, from SiOnyx's confidential information." Id. at *18.
The district court denied several post-trial motions. In particular, the district court denied SiOnyx's motion for sole ownership of the Disputed Foreign Patents.
Federal Circuit Decision
The Federal Circuit began with the standard of review for a district court decision on post-trial motions, stating "this appeal largely, but not entirely, resolves itself on the fact that most of the determinations were made by a jury." Id. at *7. As noted, the ownership issues are the focus of this article.
With respect to the award of sole ownership of the Disputed U.S. Patents to SiOnyx, the court affirmed the district court decision, explaining that ownership is determined by the NDA and Hamamatsu failed to show that any Hamamatsu confidential information undergirded the patents at issue:
while Hamamatsu employees may be co-inventors, and their rights transferred to their employer, Hamamatsu, Hamamatsu is the contracting party in the NDA, and the NDA provides that ownership of patents arising from confidential information exchanged under the agreement is claimed by the disclosing party. But Hamamatsu has not established that any of the patents arose from confidential information disclosed under the agreement and therefore has failed to show that it is entitled to joint ownership. (emphasis added)
Id. at *19.
The Federal Circuit held, moreover, that the district court erred in failing to grant SiOnyx sole ownership of the Disputed Foreign Patents and reversed the district court's denial of SiOnyx's motion to compel Hamamatsu to transfer ownership of those patents to SiOnyx. The Federal Circuit agreed with SiOnyx that "the evidence that established SiOnyx's right to sole ownership of the Disputed U.S. Patents also applies to the Disputed Foreign Patents." Id. at *22. "[B]ecause 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." Id. The district court erred when it concluded that it lacked authority to compel the transfer of ownership; "it was an abuse of discretion to distinguish between the two groups of patents." Id.
So, even though both parties ended up with co-inventors on the disputed US and foreign patents, SiOnyx ended up as the sole owner of all those patents. The proofs established that confidential information relating to the patents came solely from SiOnyx. Hence, the terms of the NDA led to SiOnyx being the sole owner of all disputed patents.
A case exemplifying licensing/standing issues is Chromadex, Inc. v. Elysium Health, Inc., Civil No. 18-cv-1434 (D. Del. Dec. 15, 2020), a district court decision by Judge Connolly partially granting Elysium's motion to dismiss for lack of subject matter jurisdiction. This decision turns on whether an exclusive licensee has standing in litigation.
Dartmouth College owns both asserted patents. In 2012, "Dartmouth granted ChromaDex and ChromaDex's subsidiaries an 'exclusive' license to (1) 'make, have made, use and/or sell' products or processes covered by the asserted patents, (2) sue others who infringed the patents; and (3) grant with Dartmouth's consent sublicenses to third parties to 'make, have made, use and sell' products or processes covered by the asserted patents" ("the Original License Agreement"). Id. at *1. On March 12, 2017, ChromaDex's parent company acquired Healthspan Research LLC. On September 10, 2019, Dartmouth and ChromaDex executed a Restated License Agreement that "clarif[ied] that ChromaDex' s 'Affiliates,' rather than just 'Subsidiaries,' were exclusive licensees to the patents-in-suit." The Restated License Agreement was made effective as of March 13, 2017. Id. at *2.
In 2018, Dartmouth and ChromaDex sued Elysium for infringement starting no later than July 2017. Elysium answered that ChromaDex lacked standing to bring the case and there was no subject matter jurisdiction because, as of March 13, 2017, the Agreement granted both ChromaDex and Healthspan the ability to sublicense the asserted patents, and therefore ChromaDex was deprived of exclusionary rights in the patents as of that date." Id.
District Court Decision
Judge Connolly began by noting the difference between the right to exclude under 35 U.S.C. § 154 (every patent issued by the PTO "grant[s] to the patentee, his heirs or assigns . . . the right to exclude others from making, using, offering for sale, or selling [an] invention,") and the right to sue for infringement under 35 U.S.C. §271 ("[W]hoever without authority makes, uses, offers to sell, or sells any patented invention . . . infringes the patent.") and the cause of action created by §281 ("[a] patentee shall have remedy by civil action for infringement of his patent."). "Thus, in a patent infringement case, the actual or threatened injury required [for standing] by Article III exists solely by virtue of the Patent Act." Id. at *4.
Whether a party constitutes a patentee for purposes of §281 is a different question than whether a party is a patentee for purposes of §154:
281 is, at least in theory, a different question than whether a party is a patentee for purposes of § 154 or otherwise has a legally protected interest, the invasion of which constitutes the injury required for Article III standing. There is no natural or common law right to exclude others from practicing a party's invention. A party alleging infringement has constitutional standing only because of statutory rights.
Id. at *FN1.
The district court cited WiAV Solutions LLC v. Motorola, Inc., 631 F.3d 1257, 1267 (Fed. Cir. 2010) as controlling authority in this case:
the key question in determining whether [a plaintiff] has standing to assert the [patents] against the Defendants is not ... whether [the plaintiff] has established that it has the right to exclude all others from practicing the patent. The question is whether [the plaintiff] has shown that it has the right under the patents to exclude the Defendants from engaging in the alleged infringing activity and therefore is injured by the Defendants' conduct.
Id. at *8.
Applying WiAV to this case, the district court determined that
in cases involving an express grant of an exclusive patent license, the "exclusive licensee lacks standing to sue a party who has the ability to obtain such a license from another party with the right to grant it."
Both ChromaDex and Healthspan had the legal right to grant Elysium a license; their willingness or not to do so is irrelevant. Because Elysium could have obtained a license from another party with a right to grant it, in this case Healthspan, ChromaDex lacked standing to sue Elysium for infringement from May [sic] 13, 2017, on. Id. at *11-12.
In the U.S., initially inventorship determines ownership. But ownership rights may be subject to contracts and laws. Care must be taken to not overlook language that may result in a loss of patent rights. This may come in an internal portfolio review, in a due diligence situation, or, as in these cases, litigation. And we see in ChromaDex, it is important to verify standing before an exclusive licensee brings an action for patent infringement.
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