IP Law Daily $3.1M in damages, ownership transfer of disputed ‘black silicon’ patents upheld
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Tuesday, December 8, 2020

$3.1M in damages, ownership transfer of disputed ‘black silicon’ patents upheld

By John W. Scanlan, J.D.

However, district court abused discretion by treating foreign patents in dispute differently from U.S. patents. The district court could decide ownership of foreign patents because it had authority over parties that were properly before it.

An American company that had been awarded sole ownership of certain disputed United States patents in litigation against a Japanese integrated photonics company also should have been awarded ownership of disputed foreign patents because the district court had the authority to compel the parties before it to transfer ownership of the patents, the U.S. Court of Appeals for the Federal Circuit ruled in reversing in part a decision by a federal district court in Massachusetts. Declining to address the issue of willfulness with respect to the patent infringement claims, the Federal Circuit affirmed the lower court’s decision in all other respects (SiOnyx LLC v. Hamamatsu Photonics K.K., December 7, 2020, Lourie, A.).

SiOnyx LLC was founded in 2005 by Eric Mazur, a Harvard professor, and James Carey, his doctoral student, to develop and commercialize "black silicon," which has properties different from traditional silicon. Mazur and Carey had discovered these properties and potential uses in 1998 and filed U.S. Provisional Patent Application 60/293,590 in 2001. Several patents arose out of this application, including U.S. Patent No. 8,080,467 (the ’467 patent). Hamamatsu Photonics is a Japanese company that researches, develops, and manufactures optical devices and image sensors. In 2006, SiOnyx gave Hamamatsu a presentation on black silicon, and the two companies entered a non-disclosure agreement (NDA) in January 2007, and SiOnyx provided Hamamatsu with technical information to produce experimental devices. Although the devices produced favorable results, Hamamatsu said that it wanted to develop products alone, and the NDA expired in February 2008. Hamamatsu did not return SiOnyx’s confidential information and SiOnyx did not request it.

In February 2009, Hamamatsu emailed SiOnyx that it intended to introduce a new photodiode product that included a black silicon surface that it believed did not violated SiOnyx’s intellectual property or breach the NDA. Hamamatsu subsequently filed a number of Japanese patent applications for photodetector devices and additional patent applications in other countries that claimed priority from these applications, including several U.S. patents. Hamamatsu started to release products based upon these patents in 2010 and SiOnyx began releasing its own products in 2013. After SiOnyx was informed of Hamamatsu’s patents, the companies met to discuss ownership of Hamamatsu’s U.S. and foreign patents (the Disputed U.S. Patents and the Disputed Foreign Patents). The companies failed to reach an agreement, and SiOnyx brought claims for infringement of the ’467 patent, change of inventorship for the Disputed U.S. Patents, breach of contract, and unjust enrichment.

The jury found in favor of SiOnyx, finding that Hamamatsu had breached the NDA and awarding SiOnyx nearly $800,000 in damages and almost $1.1 million in pre-judgment interest, that Hamamatsu was unjustly enriched and awarding SiOnyx about $580,000 in damages and about $660,000 in pre-judgment interest, and that Carey was the co-inventor of the Disputed U.S. Patents. It also found that the asserted claims of the ’467 patent were valid and willfully infringed by Hamamatsu but awarded no damages for infringement. Both parties filed post-trial motions; Hamamatsu’s motion was denied. The district court granted SiOnyx sole ownership of the Disputed U.S. Patents but denied it sole ownership of the Disputed Foreign Patents. It also granted SiOnyx an injunction against accused products practicing the Disputed U.S. Patents and the ’467 patent. Hamamatsu appealed and SiOnyx cross-appealed.

Statute of limitations. SiOnyx’s breach of contract and unjust enrichment claims were not barred by Massachusetts’ six-year statute of limitations, the court said in upholding the district court. Hamamatsu argued that SiOnyx knew of the breach in February 2008 when Hamamatsu did not return SiOnyx’s confidential information and of the misuse of confidential information in February 2009 when Hamamatsu sent the email containing a diagram of a Hamamatsu photodiode product that SiOnyx believed to be identical to their 2007 work. These dates were prior to six years before the filing date of the suit. However, the Federal Circuit agreed that a reasonable jury could have determined that Hamamatsu’s failure to return the confidential information was not material; similarly, a reasonable jury could have found that the limitations period did not begin to run when the 2009 email was sent because the jury also was presented multiple statements by Hamamatsu to SiOnyx that its products did not use SiOnyx’s confidential material.

The district court’s award of damages for breach of contract and unjust enrichment after the 2015 expiration of the NDA was upheld. Although Hamamatsu argued that it was no longer in breach after that time, the jury reasonably could have found that it continued to benefit from the earlier breach.

Injunctions. The Federal Circuit agreed with SiOnyx that the district court had not erred in granting a permanent injunction prohibiting Hamamatsu from marketing, selling, importing, or using products that infringe the ’467 patent because SiOnyx had shown it would be irreparably harmed without an injunction. Hamamatsu had argued that the accused products did not compete with SiOnyx’s products and, therefore, money damages would be adequate. The district court relied upon the testimony of SiOnyx’s expert that CMOS and CCD sensors could be used in some applications in determining that SiOnyx’s laser-processed CMOS sensors were competitive with Hamamatsu’s CCD sensors. While Hamamatsu’s CEO had testified to the contrary, the existence of contrary testimony did not make the district court’s finding clearly erroneous. Furthermore, Hamamatsu’s development of the accused products was aided by its misuse of SiOnyx’s confidential information and SiOnyx would have had sole access to the markets for itself without that misuse. As a result, the district court did not abuse its discretion in finding that it would be difficult to quantify the harm to SiOnyx.

The district court’s injunction for breach of contract also was upheld. Hamamatsu argued that the injunction punished it for its past conduct because the NDA period had expired and the information had become public, but the Federal Circuit determined that it was not an abuse of discretion for the district court to find that Hamamatsu’s early entry into the market was irreparable and inadequately remedied by money damages.

Ownership of the Disputed Patents. The district court had not erred in granting SiOnyx’s post-trial motion giving it sole ownership of the Disputed U.S. Patents because the patents arose from SiOnyx’s confidential information and because Hamamatsu had not shown that it contributed confidential information that would entitle it to joint ownership, the Federal Circuit said in denying Hamamatsu’s motion. At trial, SiOnyx had requested correction of inventorship of these patents, and the jury had found that Carey should be added as a co-inventor. In its post-trial motion, SiOnyx asked the court to grant it sole ownership of all the disputed patents, both U.S. and foreign, as a remedy for the breach of contract claim pursuant to the terms of the NDA. The court granted it sole ownership with respect to the Disputed U.S. Patents, finding that the jury’s rulings necessarily implied that these patents arose at least in part from SiOnyx’s confidential information. Although the same reasoning applied to the Disputed Foreign Patents, the district court did not believe it had the authority to grant ownership of them to SiOnyx.

Hamamatsu argued that the jury’s finding of co-inventorship of the Disputed U.S. Patents necessarily implied that Hamamatsu employees also had contributed to these patents and, therefore, it was equally entitled to ownership under the NDA. However, inventorship and ownership were distinct concepts, the Federal Circuit stated. While Hamamatsu employees may have been co-inventors, their inventorship rights transferred to their employer, and Hamamatsu was the contracting party to the NDA and was subject to the NDA’s provisions for ownership of patents. Hamamatsu did not show that any of these patents arose from information disclosed under the NDA and, therefore, did not show that it was entitled to joint ownership pursuant to its provisions. To the extent that the jury’s finding implied that Hamamatsu had contributed its own information to the patents, the company had not shown that any of the information it had contributed was confidential Hamamatsu information within the meaning of the NDA.

However, the Federal Circuit reversed the district court’s denial of SiOnyx’s request to grant it sole ownership of the Disputed Foreign Patents, which included Hamamatsu’s Japanese patents and other foreign patents that claimed priority from them. As with the Disputed U.S. Patents, these patents arose from SiOnyx’s confidential information and Hamamatsu had not shown that it contributed confidential information that would entitle it to joint ownership under the NDA. Because the Disputed U.S. patents claimed priority from Hamamatsu’s Japanese patent applications, any foreign applications claiming priority from the Japanese applications also must have arisen from confidential SiOnyx information. Furthermore, the district court erred in finding that it lacked authority to compel transfer of ownership of the foreign patents because the court’s order would be based upon its exercise of power over the parties rather than over foreign patent offices. The Federal Circuit noted that it was not passing judgment upon the validity of any foreign patents.

Other issues. The Federal Circuit declined to address the issue of willfulness with respect to Hamamatsu’s infringement of the ’467 patent. The district court did not award SiOnyx enhanced damages for infringement based upon the jury’s finding of willfulness because the jury had awarded zero damages for infringement. The appellate court said that it could not determine what effect the jury’s willfulness findings had on the lower court’s judgment or what effect a reversal would have.

Additionally, the district court did not err in awarding pre-judgment interest or unjust enrichment based on disgorged profits or in awarding interest for breach of contract from the date of the first breach. Finally, the Federal Circuit declined to overrule the district court’s decision not to award attorney fees to SiOnyx because it did not find the case exceptional.

This case is No. 19-2359.

Attorneys: William D. Belanger (Troutman Pepper Hamilton Sanders LLP) for SiOnyx LLC and President and Fellows of Harvard College. John David Simmons (Panitch Schwarze Belisario & Nadel LLP) for Hamamatsu Photonics K.K. and Hamamatsu Corp.

Companies: SiOnyx LLC; President and Fellows of Harvard College; Hamamatsu Photonics K.K.; Hamamatsu Corp.

MainStory: TopStory Patent TradeSecrets FedCirNews GCNNews

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