DC erred in denying ownership of foreign patents arising from non-disclosure agreement

SiOnyx LLC et al. v. Hamamatsu Photonics K.K. et al.

Docket No. 2019-2359, 2020-1217 (http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/19-2359.OPINION.12-7-2020_1697100.pdf)

LOURIE, REYNA, WALLACH

December 7, 2020

Brief Summary:  DC erred in failing to transfer ownership of foreign patents arising from confidential information disclosed under an NDA.

Summary:  Hamamatsu appealed from DC judgment after a jury verdict finding Hamamatsu breached a Non-Disclosure Agreement (NDA) with SiOnyx and willfully infringed US 8,080,467 relating to processes for creating “black silicon”; that SiOnyx is entitled to damages, pre-judgment interest and post-judgment interest; Dr. James Carey is a co-inventor of several US patents (the “Disputed U.S. Patents”) which SiOnyx is entitled to solely own; and, SiOnyx is entitled to an injunction preventing Hamamatsu from practicing the Disputed Patents for breach of the NDA and the ‘467 patent for infringement.  SiOnyx cross-appealed the DC decisions denying it sole ownership of the Japanese patent applications from which the Disputed Patents and other ex-US (foreign) patents (“Disputed Foreign Patents”) claim priority and its motion for fees under section 285 as an “exceptional case” (Octane Fitness, US 2014).  The FC panel opinion explains that the NDA requires confidentiality for seven years, “that a party receiving confidential information acknowledges that the disclosing party claims ownership of the information and all patent rights ‘in, or arising from’ the information”, and that the receiving party returns all confidential information (CI) to the disclosing party within 30 days of termination of the NDA.  During the term of the NDA, SiOnyx disclosed “architectures and a manufacturing process for a photodetector device, which were marked as confidential” and the parties worked together until “Hamamatsu represented that it wished to develop its products alone ‘without further reference to proprietary information of SiOnyx’”.  After expiration of the NDA on Jan. 12, 2008, SiOnyx did not request that Hamamatsu return its CI.  Hamamatsu then developed a product including black silicon, informed SiOnyx it did not believe infringed SiOnyx’s intellectual property or breached the NDA, and filed the Japanese patent applications that led to the Disputed U.S. and Foreign Patents.  SiOnyx learned of those patents from a customer in 2014 after launching its own products in 2013.  The FC panel first rejected Hamamatsu’s statute of limitations arguments, finding that a reasonable jury could have concluded that Hamamatsu’s failure to return CI to SiOnyx was “immaterial and did not cause SiOnyx’s claims to accrue”, and that Hamamatsu made “multiple statements” that its “products did not make use of SiOnyx’s” CI, such that “the running of a statute of limitations” was not triggered.  The FC panel also found the damages award for unjust enrichment and breach of contract, as well as granting of the injunction, to be proper (products are competitive, irreparable harm to SiOnyx, money damages inadequate; re post-NDA damages:  “Hamamatsu continued to benefit”).  The FC panel also agreed with the DC’s grant of sole ownership of the Disputed U.S. Patents to SiOnyx to be an “equitable remedy” under MA law, even though both parties have inventors named on those patents, since, e.g., Hamamatsu did not show it “contributed [CI] to the patents under the NDA” (Beech Aircraft, FC 1993 (“inventorship and ownership are separate issues”)).   The FC panel also concluded SiOnyx is entitled to sole ownership of the Disputed Foreign Patents because the DC “erroneously perceived it lacked authority to compel the transfer of ownership” (separate from authority over “the foreign patent office in which the assignment is made”) and that the evidence showed that the patent applications “must also have arisen from SiOnyx’s” CI.  The FC panel also agreed with the DC’s denial of fees under section 285 as an “exceptional case” (Octane Fitness, US 2014) since, e.g., SiOnyx did not “demonstrate[] that Hamamatsu’s defenses were so weak as to be exceptional” or that its litigation “conduct was unreasonable”.