
    ADAPTIX, INC. v. ALCATEL-LUCENT USA INC., et al. Adaptix, Inc. v.. T-Mobile USA, Inc., et al.
    No. 6:12cv22, No. 6:12cv369
    United States District Court, E.D. Texas, Tyler Division.
    Signed September 22, 2015
    Anthony Louis Miele, Christopher Milli-kin, Daniel McGonagle, James John Foster Jason* Clarence Williams, Joseph P. Messina, Michael James Ercolini, Robert R. Gilman, Thomas R. Fulford, Hayes Messina Gilman & Hayes LLC, Boston, MA, Paul J. Hayes, Kevin Gannon, Sami-yah Diaz, Hayes Messina Gilman & Hayes LLC, Andover,' MA, Anthony Kyle Brus-ter, Bruster PLLC, ■ Southlake, TX, Charles Craig Tadlock/ Keith Bryan Smiley, Tadlock Law Firm, Plano, TX, Eric M. Albritton, Shawn A. Latchford, Albritton Law Firm, Longview, TX, Todd Ian Blu-menfeld, Friedman Suder & Cooke, Fort Worth, TX, for Adaptix, Inc.
    
      Allen Franklin Gardner, John Frederick Bufe, Michael E. Jones, Patrick Colbert Clutter, IV, Potter Minton, a Professional Corporation, Herbert A. Yarbrough, III, Yarbrough Wilcox, PLLC, ■ Tyler, TX, Brianne McNicholas Straka, David Aaron Nelson, Lauren Hillemann, Marc L. Kap-lan, Robyn M. Bowland, Stephen Andrew Swedlow, Thomas W. Cushing, Quinn Emanuel Urquhart & Sullivan, Edward H. Rice, Jeffery M. Cross, Marina N. Saito, Richard T. Kienzler, Freeborn & Peters, LLP, Chicago, IL, for Alcatel-Lucent USA, Inc., et. al.
   MEMORANDUM ORDER ADOPTING THE REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

ROBERT W. SCHROEDER III, UNITED STATES DISTRICT JUDGE

These above consolidated cases were referred to United States Magistrate Judge Caroline M. Craven pursuant to 28 U.S.C. § 636. The Report of the Magistrate Judge which contains her proposed findings of fact and recommendations for the disposition of the case has been presented for consideration. ■ Plaintiff Adaptix, Inc. (“Adaptix”) filed objections to the July 16, 2015 Report and Recommendation regarding Adaptix’s Motion for Partial Summary Judgment that Pursuant to 35 U.S.C. § 103(c), United States Patent No. 7,072,-315 is Not Prior Art to the '808 Patent. The Court conducted a de novo review of the Magistrate Judge’s findings and conclusions.

BACKGROUND

Defendants allege United States Patent No. 7,072,315 (the “ '315 patent”) is prior art to the '808 patent-in-suit. Adaptix moves for partial summary judgment, asserting the '315 patent is not prior art to the '808 patent under 35 U.S.C. § 103(c).

REPORT AND RECOMMENDATION

The Magistrate Judge issued a Report and Recommendation on July 16, 2015, recommending. Adaptix’s motion for partial summary judgment be denied. The Magistrate Judge found disputed issues for trial regarding whether the claimed inventions in the '315 and '808 patents “were automatically assigned to the University of Washington [“UW”] by virtue of Dr. Liu’s employment with” the University of Washington.

OBJECTIONS

In its objections, Adaptix asserts for the first time that resolution of the “automatic assignment” issue is one of contract interpretation; thus, whether the '315 patent is prior art turns on a purely legal issue. During the briefing before the Magistrate Judge, Adaptix argued at length that given the course of conduct between Dr. Liu, one of the named inventors of the '808 patent, and the University of Washington (“UW”), UW had expressed no interest in the Adaptix patents. In its response to the objections, Defendants assert this is a factual dispute that must be resolved at trial.

DE NOVO REVIEW

Broadstorm Telecommunications, Inc. (“Broadstorm”), predecessor to Adaptix, filed the application for the '808 patent on October 18, 2000. Dr. Liu was employed by UW when he claimed inventorship of the both the '808 and '315 patents. Dr. Liu joined UW as an assistant professor in 1998, signing his employment agreement on August 3, 1998. The agreement has the following clause:

As a condition of my employment with the University of Washington, I hereby agree to disclose to the University all discoveries and inventions made while I am employed by the University, and assign to the University all discoveries and inventions in which the University has an interest..

(Dkt No. 302-5).

Defendants argue any invention Dr. Liu developed for Broadstorm in’ 2000 was automatically assigned to UW by the above provision of the 1998 agreement. Adaptix argues “I hereby agree to assign” does not reflect an immediate transfer of an expectant interest in the future invention, but rather a mere promise to transfer rights in the future. According to Adaptix, although the inventor is required to assign the invention, the assignment itself does not occur until the inventor executes a separate assignment document. . In the Report and Recommendation, the Magistrate Judge stated the employment agreement at issue states “agree to disclose ..., and assign____” It does not state “agree to assign” as argued by Adaptix.

Although the Magistrate Judge construed the employment agreement consistent with Defendants’ position, she did not conclude that Dr. Liu’s claimed inventions in the '315 and '808 patents were automatically assigned to UW by virtue of the employment agreement. Rather, she found fact issues exist regarding this issue. Importantly, pursuant to the employment' agreement, the only inventions automatically assigned would be those in which the University of Washington has “an interest.”

In the Report and Recommendation, the Magistrate Judge considered evidence submitted by Adaptix that UW knew of Dr. Liu’s work at Broadstorm and never claimed an interest in the work. However, the Magistrate Judge also considered the language of the employment agreement quoted above as well as the related “University Patent, Invention, and Copyright Statement,” which provides that “the University has a valid interest” in Dr. Liu’s discovery or invention of patentable items. Dkt. No. 407 at 5. The Magistrate Judge considered Dr. Liu’s employment history, noting the various full and partial leaves of absence from UW (some paid, some, unpaid). The Magistrate Judge further noted that Dr. Liu was expected to continue his research duties for UW during the period when he claims to have conceived the purported inventions.

Viewing all of the evidence in the light most favorable to Defendants and drawing all inferences in Defendants’ favor, the Court does not And the issue is purely one of contract interpretation. The Court agrees with the Magistrate Judge there are disputed issues of fact on this issue. The Court, having reviewed the relevant briefing, the Report and Recommendation, the objections, and the response to the objections, finds Adaptix’s objections without merit and adopts the Report and Recommendation of the Magistrate Judge as the findings and conclusions of the Court, Accordingly, it is hereby

ORDERED that Plaintiff Adaptix, Inc.’s Motion for Partial Summary that Pursuant to 35 U.S.C. § 103(c) United States Patent No. 7,072,315 in Not Prior Art to United States Patent No. 6,870,808 (Dkt Nos. 270 & 171) is DENIED.

REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

CAROLINE M. CRAVEN, UNITED STATES MAGISTRATE JUDGE

The above-referenced lead cases were referred to the undersigned United States Magistrate Judge for pre-trial purposes in accordance with 28 U.S.C. § 636. Before the Court is the following pending motion:

Plaintiffs Motion for Partial Summary Judgment that Pursuant to 35 U.S.C. § 103(c), United States Patent No. 7,072,315 is Not Prior Art to United States Patent No. 6,870,808 (Docket Entry # s 270,171).

The Court, having reviewed the relevant briefing and hearing arguments of counsel in consolidated case 6:12cv22 June 2, 2015, recommends the motion be DENIED.

I. BACKGROUND

Plaintiff Adaptix, Inc. (“Adaptix”) accuses Defendants of infringing the three patents remaining in the above cases (the '172, '283, and '808 patents). In response, as one of their defenses and/or counterclaims, Defendants argue the Asserted Patents are invalid as anticipated or rendered obvious in light of the prior art identified by Defendants. Of relevance here, Defendants allege United States Patent No. 7,072,315 (“the '315 patent”) is prior art to the '808 patent-in-suit. Adap-tix moves for partial summary judgment, asserting the '315 patent is not prior art to the '808 patent under 35 U.S.C. § 103(c).

II. STANDARDS

The Court uses familiar standards to resolve Adaptix’s motion for partial summary judgment. Summary judgment is appropriate when the movant is able to demonstrate that the pleadings, affidavits, and other evidence available to the court establish there are no genuine issues of material fact, and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c). Defendants, as the mov-ants, bear the initial burden to demonstrate the absence of any material fact. Celotex v. Catrett, 477 U.S. 317, 332, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If Defendants meet that burden, Adaptix must point to admissible evidence demonstrating there is a-genuine issue for trial. Fed. R.Civ.P. 56(e). In assessing the proof, the court views the evidence in the light most favorable to the nonmovant. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

III.DISCUSSION

A. 35 U.S.C. § 103(c)

Adaptix has moved for summary judgment that the '808 patent cannot be found obvious under 35 U.S.C. § 103(c) in light of the '315 patent. According to Adaptix, the only provision of the patent statute under which the '315 patent may possibly qualify as prior art is 35 U.S.C: § 102(e). The reach of this provision is limited by 35 U.S.C. § 103(c)(1), which provides as follows:

Subject matter developed by another person, which qualifies as prior art only under one or more of subsections (e), (f), and (g) of section 102 of this title, shall not preclude patentability under this section where the subject matter and the claimed invention were, at the time the claimed invention was made, owned by the same person or subject to an obligation of assignment to the same person.

35 U.S.C. § 103(c).

The ownership or obligation to assign must have existed at the time the invention was made. Id. For purposes of 35 U.S.C. § 103(c), a “person” may be a corporation. See, e.g., Netgear, Inc. v. Ruckus Wireless, Inc., 5 F.Supp.3d 592 (D.Del.2013).

B. The parties’ positions

Adaptix does not argue the same person “owned” the '315 and '808 patents. It argues the patents were “subject to an obligation of assignment to the same person.” According to Adaptix, at the time the inventions claimed in the '315 and '808 patents were made, the inventors named on those patents were under an obligation to assign their patent rights to Broad-storm Telecommunications, Inc. (“Broad-storm”), and did in fact assign those patent rights to Broadstorm. Therefore, Adaptix argues the '315 patent does not qualify as prior art per 35 U.S.C. § 103(c).

In support, Adaptix states, as follows. The '315 patent application was filed oh October 10, 2000, naming Hui Liu, Xiao-dong Li, and Fuqi Mu as inventors. The '808 patent application was filed on October 18, 2000, naming Hui Liu, Hujun Yin, Xiaodong Li, and Fuqi Mu as inventors. The '808 patent issued on March 22, 2005. In June of 2006, Liu, Li, and Mu co-founded Broadstorm. (Liu Decl., ¶ 2). The '315 patent issued on July 4, 2006.

Relying on a declaration from Dr. Liu, one of the named inventors of both patents, Adaptix asserts (1) all employees of Broadstorm were obligated to assign to Broadstorm any and all of their inventions and patent rights arising out of their employment (Liu Decl., ¶ 3); (2) Hui Liu, Hujun Yin, Xiaodong Li, and Fuqi Mu were all employees of Broadstorm in and before October 2000 (Liu Decl., ¶ 4); and (3) Hui Liu, Xiaodong Li, and Fuqi Mu had an obligation to, and did, assign their rights under the '315 patent to Broad-storm. (Liu Dec. ¶¶3-5). Adaptix also cites assignment documents filed with the U.S. Patent and Trademark Office, which establish the '315 and '808 patents were later assigned to Broadstorm.

In response, Defendants assert Adaptix has not provided any evidence (other than inadmissible hearsay) that any inventor had an obligation to assign the inventions to Broadstorm at the time of the purported invention. According to Defendants, Adaptix has not relied on any employment agreement between Broadstorm and its employees to support its summary judgment motion, and Dr. Liu’s declaration as to the truth of provisions in any employment agreeménts is inadmissible hearsay.

Even assuming some of the inventors had an obligation to assign! the inventions to Broadstorm, Defendants assert named inventor Dr. Hui, Liu did not have an obligation to assign his rights to the same company (Broadstorm) as the other inventors. According to Defendants, upon coming into being, the invention was automatically assigned to Dr. Liu’s employer, the University of Washington. Thus, even assuming Adaptix is correct that the other inventors had an obligation to assign to Broadstorm, Defendants submit there is no unity of invention, and § 103(c) does not apply.

C. Analysis

Dr. Liu was employed by the .University of Washington when he claimed inventor-ship of the '315 and '808 patents. Dr. Liu-joined the University of Washington as an assistant professor in 1998, signing his employment agreement on August 3, 1998. (Employment Agreement at 47-48) (7/1/14 Liu Tr. at 74:7-11, 94:3-8). He was promoted to an associate professor in either 2001 or 2002, and he became a-fully tern ured professor at the same time. (7/1/14 Liu Tr. at 74:18-75:2).

The employment agreement required Dr. Liu to agree to the University’s Patent, Invention, and Copyright Statement. (Employment Agreement at 49) (7/1/14 Liu Tr. at 94:24-95:9.) In pertinent part, this statement provides that the University “has a valid interest” in Dr. Liu’s discovery or invention of patentable items. (Employment Agreement at 49). Further, Dr. Liu’s employment agreement explicitly required him to disclose all discoveries and inventions to the University and assign all inventions to the University. (Id. at 48-49) (“I hereby [agree to disclose my inventions], and assign to the University all discoveries and inventions.... ”)).

Dr. Liu testified that he believed !he did assign all inventions to the University of Washington in which it had an interest:

Q. Did you understand that if you were doing research work for Washington using their facilities, that they would own the patents resulting from that work?
A. Yes.
* * *
Q. Was it your—although you didn’t read this document, was. it your understanding that you had assigned to the University all discoveries and inventions in which the University has an interest?
A. Yés. -

(7/1/14 Liu Tr. at 97:9-12; 98:14-18).

According to Defendants, Dr. Liu’s employment agreement constitutes an “automatic” assignment that, upon conception, immediately assigned his inventions to the University of Washington with no further required action on his part. See Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1253 (Fed.Cir.2000) (holding agreement stating inventions' “shall belong,” and that employee “hereby conveys, transfers and assigns” to its employer, constitutes an automatic assignment); see also SiRF Tech., Inc. v. Int’l Trade Comm’n, 601 F.3d 1319, 1326 (Fed.Cir.2010) (holding that the contractual language “employee assigns [his inventions]” has the effect of “expressly granting] rights with no further action needed on the part of the employee[ ]”). '

Adaptix asserts Dr. . Liu was on a partial leave of absence from the University of Washington at the time the inventions claimed in the '315 and '808 patents were made in October of 2000. According to Adaptix, in June of 2001, Dr. Liu requested a one-year unpaid extension of his leave of absence, to “help Broadstorm—a company developing 4G broadband wireless networks, complete its first generation [sic] product.” Dr. Liu stated he would continue supervising his graduate students during his leave. (Docket Entry #313, Ex. 3). The University of Washington approved he extension of Dr. Liu’s partial leave of absence for the 2001-2002 academic year. Id., Ex. 4

In June of 2002, Dr. Liu requested approval for part-time leave for Fall Quarter 2002, which would “serve as a transition from [his] current -responsibilities at Broadstorm Telecom to full-time back at University of Washington, starting January 1, 2003.” Id., Ex. 5. Dr. Liu’s stated intent was to work 20 ours per week at the Electrical Engineering Department during he Fall Quarter (receiving 50% of his salary from the department) while also serving as a consultant for Broadstorm. Id.

The Chair of University of Washington’s Department of Electrical Engineering, Professor Howard Chizeck, supported Dr. Liu’s request, stating it would allow Dr. Liu “to gracefully be replaced at Broad-storm, while rebuilding his research activities at UW.” Id., Ex. 6. Professor Chizeck stated there was a “strong possibility that Hui will become he wireless ‘leader’ at UW____” He further recommended the University establish an oversight mechanism to insure that intellectual property generated by Dr. Liu at UW (or using UW resources) during the Autumn 2002 quarter be identified and segregated from “existing intellectual property that he developed at Broadstorm.” Id.

The Associate Vice Provost of the University approved Dr. Liu’s request for an extension of his partial leave and concurred that such an oversight mechanism should-be established. Id., Ex. 7. Based on his conversations with Dr. Liu regarding questions raised regarding his possible consulting activity with Broadstorm, Professor Chizeck reported the following as his understanding of the issues: Given these clarifications, Professor Chi-zeck recommended approval of -Dr. Liu’s request “under the condition that all new intellectual property developed by Professor Hui Liu during the Fall 2002 quarter be considered to be UW intellectual property (unless specifically excluded by other agreements).” Id., Ex. 8.

1. Before the beginning of the Fall 2002 quarter, Professor Liu will cease to be involved in new technology or. product development for Broadstorm.
2. During the Fall 2002 quarter he will provide advice to the company-particularly with regards to technology promotion, business development and fund-raising activities.
3. There will be no technology transfer between Broadstorm and UW, unless there is a specific mutual agreement to do so.

Five years later, in 2007, Dr. Liu requested he be granted a sabbatical for the academic year 2008-2009. Id., Ex. 9. Dr. Liu sought to spend time at the Chinese Academy of Science and at Intel Communication Technology Lab, hoping “access to world-class R & D facilities [would] allow [him] to- broaden [his] research activities beyond the academic boundary.” Id. Dr. Liu’s request was “enthusiastically” supported by Leung Tsang, the Chair of the Department of Electrical Engineering, who noted Dr. Liu had published more than forty journal articles, had sixteen awarded or' pending patéñts; and had “pioneered the development of OFDMA-based mobile broadband access solution____” Id., Ex. 10. ' ‘ .

According to Adaptix, Professor Tsang and the University of Washington, were aware of Dr. Liu’s patents. At the time of Professor Tsang’s letter, Dr. Liu was named on seven issued patents and fourteen pending patents, all of which Adaptix asserts are assigned to Adaptix (formerly Broadstorm). Two of the patents issued at that time were the '315 and '808 patents. According to Adaptix, although it was aware of Dr. Liu’s .patents and was also served with subpoenas related to the Adaptix patents in this, case and the prior Clecmvire litigation (see id., Ex, 15), the University of Washington has- never made a claim of ownership in the '315 or '808 patent. For these reasons, Adaptix argues Defendants have failed to show by clear'and convincing evidence that the ’315 patent is prior art.

As urged by. Defendants, they do not have to prove the '315 patent is prior art by clear and convincing evidence at this stage of the litigation. Assuming Adaptix meets its initial burden of demonstrating no material dispute exists for trial, Defendants need only show that issues of material fact exist in order to defeat summary judgment.

To do this, Defendants assert Dr. Liu was. an employee of the University of Washington while consulting for Broad-storm. Although Dr. Liu took a partial leave of absence from the university* Defendants submit Dr. Liu’s employment agreement with the University of Washington was still effective during that.time, and it covered inventions in which the university had an “interest.” According to Defendants, Dr. Liu was paid by the university during this period and was expected to continue with his research duties. (7/1/14 Liu Tr. at 100:3-8; 102:8-12). Defendants take issue with Adaptix’s assertion that the University of Washington had no interest in the Adaptix patents, stating Dr. Liu and others at the university were, at the time of the invention, researching and publishing on “precisely the technical topics described in the '808 Patent.” (Docket Entry # 328 at 4).

Dr. Liu’s employment agreement with the University of Washington provides as follows: “As a condition of my employment with the University of Washington, I hereby agree to disclose to the University all discoveries and inventions made while I am employed by the University, and assign to the University all discoveries and inventions in which the Úniversity has an interest.” (Docket Entry #302, Ex. 3)(emphasis added).

Adaptix is correct that the Federal Circuit has held contract language “agree to assign” reflects a mere promise to assign rights in the future, not an immediate transfer of expectant interests. Bd. of Trustees of Stanford Univ. v. Roche Molecular Systems, Inc., 583 F.3d 832, 841 (Fed.Cir.2009)(citing IpVenture, Inc. v. Prostar Computer, Inc., 503 F.3d 1324, 1327 (Fed.Cir.2007) (interpreting “agree to assign” as “an agreement to assign,” requiring a subsequent written instrument). However, the employment agreement at issue states “agree to disclose ..., and assign.... ” It does not state “agree to assign” as argued by Adaptix at the hearing. Viewing the evidence in the light most favorable to the nonmovants, Defendants have established there are disputed issues for trial regarding whether Dr. Liu’s claimed inventions in the '315 and '808 patents were automatically assigned to the University of Washington by virtue of Dr. Liu’s employment agreement with the University of Washington, and not, to Broadstorm.

Accordingly, it is

RECOMMENDED that Plaintiffs Motion for Partial Summary Judgment that Pursuant to 35 U.S.C. § 103(c), United States Patent No. 7,072,315 is‘'Not'Prior Art to United States Patent No. 6,870,808 (Docket Entry # s 270, 171) be DENIED.

Within fourteen (14) days after receipt of the magistrate judge’s report, any party may servé and file written objections to the findings and recommendations of the magistrate ' judge. 28 U.S.C.A. 636(b)(1)(C).

Failure to file written objections to the proposed findings and recommendations contained in this report within fourteen days after service shall bar an aggrieved party from de novo review by the district court of the proposed findings and recommendations and from appellate review of factual findings accepted or adopted by the district court except on grounds, of plain error or. manifest injustice. Thomas v. Arn, 474 U.S. 140, 148, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985); Rodriguez v. Bowen, 857 F.2d 275, 276-77 (5th Cir.1988). . SIGNED this 15th day of July, 2015. 
      
      . According to Adaptix, the Court must now decide which inventions UW has an interest in at a bench trial because this issue raises standing concerns. Dkt. No. 440 at 5, n. 4. (citing DDB Techs, v. MLB Advanced Media, L.P., 517 F.3d 1284, 1290-92 (Fed.Cir.2008)). The Court will hear such arguments at the scheduled evidentiary hearing on standing issues, which is currently.set for November 18, 2015,
     
      
      , The issue still remains whether the '315 patent can be considered prior art based on the same inventive entity arguments raised by Adaptix in Adaptix's objection to Judge Craven’s ruling. See Docket No. 500.
     
      
      . Although Adaptix believes the '315 patent does not qualify as prior art under 35 U.S.C. § 102(e), Adaptix bases its motion solely upon § 103(c).
     
      
      . Specifically, the assignment agreements produced by Adaptix (Qannon Decl., Exs. C, D) were signed months after thp '315 and '808 patents were filed. Defendants assert the assignments do not support the proposition that the named inventors had an obligation to assign at the time of the invention. See 35 U.S.C. § 103(c). Adaptix disagrees, asserting the fact that the inventors' later assigned the inventions to Broadstorm is consistent with Dr. Liu's testimony that since the beginning of their employment by Broad-storm, the inventors were under ah obligation to assign their inventions to the company.
     
      
      . Adaptix ásserts the University has made it clear that it holds no interest in the Adaptix patents, "via the letter from the OAG [in the Clearwire litigation] and its own conduct.”
     