Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_04-cv-03843/USCOURTS-cand-5_04-cv-03843-32/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

MAG

E-FILED on 9/20/07

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

MEMRY CORPORATION,

Plaintiff,

v.

KENTUCKY OIL TECHNOLOGY, N.V.,

PETER BESSELINK, MEMORY METALS

HOLLAND, B.V.,

Defendants.

No. C-04-03843 RMW

ORDER DENYING MEMRY'S MOTION TO

DISQUALIFY EXPERT KENNETH PERRY;

DENYING STC'S MOTION FOR PARTIAL

SUMMARY JUDGMENT THAT STC DID

NOT MISAPPROPRIATE ANY TRADE

SECRETS; DENYING STC'S MOTION FOR

PARTIAL SUMMARY JUDGMENT THAT

KOT'S CLAIM FOR CORRECTION OF

INVENTORSHIP BE DISMISSED

[Re Docket Nos. 339, 345, 616] 

KENTUCKY OIL TECHNOLOGY, N.V.,

Counterclaimant,

v.

MEMRY CORPORATION and 

SCHLUMBERGER TECHNOLOGY

CORPORATION,

Counterdefendants.

On May 25, 2007, the court heard seven motions for partial summary judgment: two motions

filed by counterdefendant Memry Corporation ("Memry"); five motions filed by counterdefendant

Schlumberger Technology Corporation ("STC"). Memry joined in STC's five motions. This order

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1 In conjunction with those motions for summary judgment, the parties have filed

requests for judicial notice and objections to evidence submitted by the other party. The requests for

judicial notice are not opposed and are granted. The parties' evidentiary objections will be addressed

as necessary to the evidence considered by the court.

ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

MAG 2

addresses (1) STC's Motion for Partial Summary Judgment That STC Did Not Misappropriate Trade

Secrets, Docket No. 345 and (2) STC's Motion for Partial Summary Judgment That KOT's Claim for

Correction of Inventorship Be Dismissed, Docket No. 339. This order also addresses Memry's Motion

to Disqualify the Expert Testimony and Declaration of Kenneth E. Perry Ph.D, Docket No. 616, upon

which defendant and counterclaimant Kentucky Oil Technology, N.V. ("KOT") in part bases its

opposition to STC's misappropriation motion.1

I. BACKGROUND

A. Trade Secrets at Issue

In its supplemental identification of trade secrets submitted to STC and Memry on July 5, 2005,

KOT identified 26 trade secrets, which can be generally grouped as follows: (1) detailed explanation

of the principles and theory of operation of bistable and multistable cells; (2) various design techniques

and exemplary cell patterns for creating bistable cells; (3) electronic files developed at LPL for laser

cutting specific bistable cell patterns; (4) the suggestion that bistable cells could be used as support

structures in other than medical applications, specifically for wellbore support; (5) certain know-how

and techniques for modeling, evaluating, designing, testing, and manufacturing and laser cutting bistable

cell structures and related to locking mechanisms for retaining bistable structures in locked and

unlocked states; (6) metrics for evaluating bistable cell structure performance from prototype testing;

(7) criteria for selecting materials suitable for use in bistable cell structures; (8) techniques, experience,

analysis, know-how and performance evaluation metrics for scaling up a bistable cell design when

resizing the cell pattern for a tube of a different diameter. Declaration of William Cass Supp. Memry

Mot. Summ. J. That KOT Estopped from Asserting Loss of Trade Secrets ("Cass Decl."), Ex. 4,

Supplemental Identification of Trade Secrets at 2-15; id., Ex. 6, KOT's Further Supplemental Responses

to STC's Interrogatory Nos. 3, 5 and 9. 

 

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ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

MAG 3

B. Factual Background

Peter Besselink ("Besselink") allegedly invented the Biflex technology that is at issue in this

case. He assigned the Biflex technology to Memory Metals Holland ("MMH") which contracted with

United Stenting ("U.S. Inc."), a company affiliated with Dr. Wilfried van Moorleghem, to develop

prototypes of small diameter tubes using Biflex technology. MMH and U.S. Inc. worked with LPL

Systems, a company that specialized in laser cutting, to manufacture the prototypes. 

Besselink filed U.S. provisional application Serial No. 60/036,359 on January 24, 1997,

describing and claiming the bistable and multistable cells for use in expandable structures for medical

and non-medical applications. Id. Besselink filed U.S. patent application Serial No, 09/012,843 ("the

'843 application") and PCT International Application PCT/US98/01310 ("the '310 application") on

January 23, 1998, claiming the benefit of priority of the U.S. provisional patent application. Id. On

December 3, 2002, U.S. Patent No. 6,488,702 entitled "Bistable Spring Construction for a Stent and

Other Medical Apparatus," issued from Besselink's '843 application. Each claim of the '702 patent

claims a stent. RJN Supp. STC's Mots. Summ. J. ("STC RJN"), Ex. F. (claim 1: "A stent having a

plurality of stable configurations. . ."; claim 7: "A tubular stent having a surface comprising a plurality

of cells. . ."). 

In 1998, Besselink began discussing with Memry the possibility of making prototype devices

of the bistable cell expandable tubes for medical applications. On October 28, 1998, MMH and Memry

executed a secrecy agreement that required Memry to keep material disclosed in connection with the

parties' collaboration confidential for three years. The agreement recites that "MMH has developed

secret and confidential knowledge and information relating to a proprietary stent system, as described

by patent application US09/012,843."

In June 1999, U.S. Inc. executed a collaboration agreement with a Memry subsidiary under

which Memry was to "scale up" previous expandable tube designs to develop at least two stents, both

based on the Biflex principle to demonstrate the principle for use in larger diameter stents. Thereafter,

Besselink, MMH, and U.S. Inc. began sharing confidential information with Memry employees in

Menlo Park, California ("Memry West employees"). The "scale up" work essentially ceased after

engineer Minh Dinh left Memry's employment in November 1999. Moyer Decl., Ex. C, Besselink Dep.

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ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

MAG 4

at 134:9-15; Ex. E, van Moorleghem Dep. at 210:1-8; Ex. K, van Moorleghem Dep. at 69:8-11, 120:5-

15. None of the Memry West employees who participated in Memry's work for Besselink had any oral

or communications with any STC employee. Declaration of Scott Carpenter ¶ 10; Declaration of Joseph

Pasqualucci ¶ 6; Declaration of Minh Dinh ¶ 11; Declaration of Philippe Poncet ¶ 13; Declaration of

Ming Wu ¶ 22; Declaration of James Binch ¶ 16.

Starting in early 1999, Memry's then-Chief Scientist, L. MacDonald Schetky was in

communication with Besselink and van Moorleghem regarding the Shape Memory and Superelastic

Technologies Conference to be held in September 1999 in Antwerp, Belgium. Declaration of L.

MacDonald Schetky Supp. STC's Mots. Summ J. ("Schetky Decl.") ¶ 9. As part of their preparations

for the conference, Schetky reviewed drafts of the paper presented and published by Besselink and van

Moorleghem at that conference titled "Biflex Stents" (the "Besselink Article"). Id. Besselink and van

Moorleghem disclosed detailed information regarding the trade secrets at issue in this case to Schetky

in Belgium on September 4-10, 1999, during a three-day meeting at Dr. Schetky's home on December

6-9, 1999; on a trip in Belgium and Switzerland on January 25-27, 2000; and at other meetings. See,

e.g., Declaration of Jeffrey Wexler Supp. Mot KOT's Opp'n STC's Mot. Summ. J. re: Misapprop. Trade

Secrets ("Wexler Decl. (misapprop trade secrets)"), Ex. F, van Moorleghem Dep. (Day 1) at 74:15-99:2,

116:24-118:8, 140:20-142:20; id., Ex. E, van Moorleghem Dep. (Day 2) at 287:22-288:2, 324:10-326:2.

On June 26, 2000, Schetky met with STC employee Craig Johnson and consultant Barrie Hart

at STC's research facilities in the United Kingdom. Schetky Decl. ¶ 18. Johnson had an idea for

developing an expandable sand screen using shape memory alloy ("SMA") that could be actuated to

expand by geothermal or electrical heat. Decl. of Craig Johnson ("Johnson Decl.") ¶¶ 11-12. Schetky

and Johnson concluded that the SMA idea was not possible and Schetky proposed using a bistable cell

design as a component of an expandable sandscreen that could snap open with input of mechanical

force. Johnson Decl. ¶ 11. Schetky gave Johnson a copy of the Besselink Article. Johnson faxed the

Besselink Article to his supervisor at STC, Patrick Bixenman. Decl. of Patrick Bixenman ("Bixenman

Decl.") ¶ 12. Thereafter, other STC employees received the Besselink Article. 

In July 2000, Schetky asked Besselink to provide samples of the medical stent prototypes for

demonstration to STC. Besselink responded by proposing that he and van Moorleghem team up with

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2 On March 10, 2004, Besselink filed a petition seeking to have STC's '637 patent

withdrawn from issue to seek an interference with an application based on Besselink's original

provisional application. STC RJN, Ex. H. The petition was rejected as "filed for an improper

purpose." Id. at 5.

ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

MAG 5

Memry to work on the project. He asked Memry to propose terms for their participation in the project.

On October 17, 2000, Schetky wrote to Besselink offering him a consultancy on the project to be paid

from a portion of what Memry would realize "in the event that the program progresses to

commercialization." Moyer Decl., Ex. P. As presented by Schetky, Besselink was offered a consultant

position on the sand screen project but would not be listed as an inventor on any of the patent

applications that were to be filed as part of the project, drafts of which had already been prepared. Id.

Besselink did not pursue this opportunity.

The STC sand screen project commenced. Schetky participated meetings held during the

conceptual phase of the project during the fall and winter of 2000. Memry employees James Binch and

Ming Wu drafted the development agreement and negotiated the intellectual property terms between

Memry and STC. STC and Memry formally entered into a development agreement on January 2001

the stated purpose of which was to "determine the feasibility of using bi-stable cell techniques and

technology for creating expandable conduits and other devices in wells." Griffin Decl., Ex. B,

Development Agreement. As provided in that Development Agreement, in 2000 and 2001, STC filed

a number of patent applications for inventions related to applying the Biflex technology by Besselink

in oil well applications. These patent applications have matured into the following patents:

• U.S. Patent No. 6,648,071 issued November 10, 2003: ("the '071 patent") titled

"Apparatus Comprising Expandable Bistable Tubulars And Methods for Their Use in

Wellbores" lists as inventors Hackworth, Johnson, Bixenman

• U.S. Patent No. 6,688,397 issued February 10, 2004: ("the '397 patent) titled

"Techniques for Expanding Tubular Structures" which lists as inventors McClurkin,

Mills, Johnson

• U.S. Patent No. 6,695,054 issued February 24, 2004: ("the '054 patent") titled

"Expandable Sand Screen And Methods for Use" which lists as inventors Johnson,

Hackworth, Bixenman

• U.S. Patent No. 6,772,836 issued August 10, 2004: ("the '836 patent") titled "Expandable

Tubing and Method" which lists as inventors Schetsky, Johnson, Hackworth, Bixenman

• U.S. Patent No. 6,799,637 issued October 5, 2004: ("the '637 patent") titled "Expandable

Tubing And Method" which lists as inventors Schetsky, Johnson, Hackworth, Bixenman2

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3 Even were the court to consider Dr. Perry's supplemental report, his conclusion that

Mr. Hart's design files are incomplete is inadmissible. Because Perry has not established that he

possesses design experience in the oil well industry, there is no foundation for his opinion as to what

the files of an engineer working in the oil industry should include.

ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

MAG 6

STC RJN, Exs. A-E. These are known collectively as the "STC patents." Although STC admits that

each of the STC patents "included certain text and figures explaining the background of 'bistable'

concepts that are similar to the text and figures" the '310 application and the '702 patent, none of the

claims of these patents recites a stent. STC's Mot. Summ. J. on Correction of Inventorship at 6. 

In about October 2000, STC engineers Craig Johnson, Patrick Bixenman and Matthew

Hackworth, along with consultants Barrie Hart and Altair Engineering Ltd. began cell design work on

the STC project. Decl. Barrie Hart ("Hart Decl.") ¶ 7. Schetky provided Hart a copy of the Besselink

Article, but no information regarding Memry's prior work on bistable stents. Hart Decl. ¶ 10-15; see

also Reply Decl. of Craig Johnson Supp. STC's Mot's Summ. J. ("Johnson Reply Decl.") ¶ 10.3

 Martin

Kemp, an employee of Altair since October 2000 when Altair was engaged by STC to provide

engineering services for the bistable sand screen, states that the starting point of the STC bistable cell

design is the "simple bi-flex design" depicted at page ST036025 of a document entitled "Design

analysis, Schlumberger Bi-Stable Expandable Casing, 27 February 2001. Reply Decl. of Martin Kemp

Supp. STC's Mot's Summ. J. ("Kemp Reply Decl.") ¶ 7, Ex. A at ST036025; see Johnson Reply Decl.

¶ 6. The "simple bi-flex design" depicts a single cell with a thin upper strut and a thick lower strut. This

depiction is identical to the drawing in the Besselink Article published in September 1999. See Johnson

Decl., Ex. C at ST00214. This "simple bi-flex design" was the basis for several test specimens in

November and December 2000. Johnson Reply Decl. ¶¶ 11-12.

After designing and testing several cell design iterations in November and December 2000, it

became apparent that it would be difficult to obtain bistable spring action in cells made from steel

because there was unacceptable deformation at hinges. Id. ¶ 12-13. After experimentation with thicker

vertical bars at the end points of the cell, Altair, using its computer systems, concluded that a bar linkage

in the shape of a "horn" would most effectively store and release energy during expansion of the cell.

Id. ¶ 14. Between January and March 2001, the sand screen design team studied various horn

configurations, including a "double horn" configuration suggested by Johnson. Id. ¶ 16-17. The double

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ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

MAG 7

horn configuration continued to evolve through March 12, 2001 to include a second spring element.

Id. ¶ 17, Ex. C. Past 2001, it would appear that the design continued to evolve to attempt to reduce

deformation and increase collapse resistence, with additional design elements being added. Id. ¶ 21-22.

STC states that throughout the project it used third party vendors to manufacture and cut the

prototypes for STC's sand screen project, one of which, Laser Fare, was suggested by Memry. Neither

STC nor Memry received any of the computer files or code for cutting machinery from these vendors.

Johnson Decl., ¶ 24, 31; Hackworth Decl. ¶ 17-18; Bixenman Decl., ¶ 27. Memry performed some

testing of the prototypes directed toward expanding the bistable cell prototypes, but those tests provided

only incomplete and unreliable data. Johnson Decl., ¶ 26; Hackworth Decl. ¶ 19; Bixenman Decl., ¶

22. Other testing was performed by STC employees or third party consultant TerraTek at either STC

or TerraTek facilities. Johnson Decl., ¶ 27; Hackworth Decl. ¶ 20; Bixenman Decl., ¶ 23. 

Schetky observed tests being conducted by STC, but did not make any usable suggestion as to

how to perform the tests or interpret their results. According to the counterdefendants, neither Schetky

nor any other Memry employee (1) participated in any numerical modeling or finite element analysis

of any designs during the STC sand screen project; (2) made any usable suggestions regarding selection

of materials to be used in the project; (3) made any usable contribution to the design of the cells or the

patterns that were cut in the steel base pipe in the project; or (4) participated in the development of the

cutting machinery used to cut steel base pipes (the specifications for which were written by LAI

International, Inc. and which was built by Concepts 4 Progress). Johnson Decl., ¶ 27-31; Hackworth

Decl. ¶ 20-24; Bixenman Decl., ¶ 23-27. 

STC allegedly did not receive documents, electronic files or information identified as belonging

to Besselink, MMG, U.S. Inc., LPL Systems, Jomed or Abbott. Johnson Decl., ¶ 18; Hackworth Decl.

¶ 14; Bixenman Decl., ¶ 36. Although they received the Besselink Article from Schetky and other

Memry employees, neither Schetky nor any other Memry employee or officer showed a demonstration

of a bistable stent to STC, nor did any STC employee ever see one except for the image included in the

Besselink Article. Johnson Decl., ¶ 22; Hackworth Decl. ¶ 15; Bixenman Decl., ¶ 19. Schetky testifies

that he does not recall ever receiving from Besselink or van Moorleghem any written or oral disclosure

of information relating to Memry's scale up project with Besselink. Schetky Decl. ¶ 21.

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4 Although Dr. Perry does not explain the significance of the development of the

"double horn" design, it would appear that the STC cell design went from the "simple bi-flex

design" depicted at page ST036025 of a document entitled "Design analysis, Schlumberger BiStable Expandable Casing, 27 February 2001 to a more complex "double horn" design.

ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

MAG 8

In opposition, KOT presents the expert opinion of Dr. Kenneth Perry, a mechanical engineer

with expertise in the mechanics of materials. In his opinion, at least some of the people who were

involved in developing the bistable cell design for the STC sand screen project optimized the design by

using at least some of the trade secrets claimed by KOT. His opinion is that these trade secrets must

have been used based on the advanced starting point of the STC bistable design and the short period of

time from the beginning of the work for STC on the bistable design to the time STC's "double horn"

design was developed.4

 Declaration of Dr. Kenneth Perry ¶ 4.

II. ANALYSIS

A. Motion to Disqualify Expert Kenneth Perry

Federal Rule of Evidence 702 permits testimony by experts qualified by "knowledge, skill,

expertise, training, or education" to testify "in the form of an opinion or otherwise" based on "scientific,

technical, or other specialized knowledge" if that knowledge will "assist the trier of fact to understand

the evidence or to determine a fact in issue." In Daubert v. Merrell Dow Pharmaceuticals, Inc., 509

U.S. 579 (1993), the Supreme Court set out the relevant standard by which courts should determine

whether to admit expert testimony into evidence. The Court held that the guiding factors in this

determination are whether the expert testimony reflects "(1) scientific knowledge that (2) will assist the

trier of fact to understand or determine a fact in issue." Id. at 592; see also United States v. Vallejo, 237

F.3d 1008, 1019 (9th Cir.), amended by 246 F.3d 1150 (9th Cir. 2001) (to be admissible, "expert

testimony must . . . address an issue beyond the common knowledge of the average layman.").

STC seeks to disqualify KOT's expert, Kenneth Perry, PhD, from offering expert testimony on

technical issues relating to the development of oil well components and the application of bi-stable cell

designs in oil well components because he lacks experience, training or education in the field of oil well

technology. There is no dispute that Dr. Perry has never worked in the oil service industry or studied

any device used in an oil well prior to his retention as an expert witness in the present case. Declaration

of William Cass Supp. Mot. Disqualify Expert ("Cass Decl. (disqual. expert)"), Ex. 4, Dep. Kenneth

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ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

MAG 9

Perry 47:24-48:3. STC argues that he should be disqualified from providing expert opinion that STC

and Memry could not have independently developed a bi-stable oil well casing based on publicly

available technical information, because he is unqualified to testify as to the state of the art in oil well

component engineering or development protocols and methods used in the oil industry. 

Dr. Perry's CV states that his "technical expertise is in the mechanics of materials" and that he

"has extensive practical experience working with companies to design and develop medical devices."

It also states that "Dr. Perry has developed a strong reputation for using advanced finite element analysis

to address issues of product performance and reliability and has worked with a range of materials

including ceramics, biopolymers, Nitinol and other advanced engineering alloys." He testifies that his

expertise in designing expandable tubular structures, general engineering background, and experience

with product development, design and finite element analysis of tubular stents in the medical fields are

relevant expert opinion in this case. Cass Decl. (disqual. expert), Ex. 4, Dep. Kenneth Perry 48:4-25.

Here, Dr. Perry is an engineer with experience in the field of mechanical engineering in

expandable tubular devices in the medical field. While he may not be a specialist in the field of oil well

applications or have experience in oil well structure engineering, he does have experience with

expandable metal tubes in the medical device context and the trade secrets at issue here involve

information regarding how to apply the technology originally disclosed for use in medical devices to

larger oil well structures. Further, his opinion is based upon an analysis of cell designs set forth in Altair

engineering reports. The engineering reports include finite element analysis, which is one of Dr. Perry's

areas of experience. Overall, his lack of experience in the oil well industry goes to the weight of his

testimony, not to its admissibility, therefore the court declines to disqualify him as an expert or to strike

his expert testimony as a whole. 

STC also asserts that Dr. Perry's expert report is unreliable because it is incomplete because he

did not consider design documents by Barrie Hart (designated M1260-M1648) in rendering his expert

report or reply declarations submitted by the STC engineers involved in the sand screen project. KOT

attempts to remedy this deficiency by submitting a declaration analyzing the omitted Hart files.

Although the court rejects STC's argument that these omissions from Dr. Perry's report render it

unreliable, particularly in light of his analysis of the finite element analysis in the Altair engineering

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ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

MAG 10

reports, this additional report was produced after the cutoff for submitting expert reports and was

submitted without leave of the court. Therefore the court strikes Dr. Perry's Declaration in Support of

KOT's Opp'n to Memry's Mot. to Disqualify Expert but does not strike Dr. Perry's testimony in its

entirety. 

B. STC's Motion for Partial Summary Judgment that it Did Not Misappropriate KOT

Trade Secrets

1. Title to the Disputed Trade Secrets

STC renews its assertion, originally set forth in its Motion for Partial Summary Judgment that

KOT Lacks Standing to Assert Trade Secret Misappropriation, that no trade secrets were transferred

through the chain of title to KOT. Based on STC's present motion, the court sees no reason to

reconsider its determination regarding the transfer of trade secrets as set forth in the court's December

18, 2006 Order Denying Counterdefendants' Motion for Partial Summary Judgment Contingent on Proof

of Authentication ("December 18, 2006 Order"), Docket No. 228. 

2. Misappropriation

 STC seeks to establish that the undisputed facts show that STC did not misappropriate KOT's

trade secrets because STC had no access to the trade secrets. STC contends that it did not receive the

asserted trade secrets from Memry through Schetky or otherwise. According to STC, the only

information STC had from Besselink was the published Besselink Article. First, STC seeks to

demonstrate that Schetky only had access to the Besselink Article and not to any information produced

by the project to "scale up" of Besselink's stent demos undertaken by Memry West or to any information

received directly from Besselink or van Moorleghem. Second, STC presents the declarations of

engineers involved in the STC sand screen project to demonstrate that Memry's involvement was only

de minimis, with the bulk of the research, development, design, testing and prototype manufacturing

done by STC and its contractors. 

California Civil Code § 3426.1 defines misappropriation as the acquisition of a trade secret by

someone who knows or has reason to know that it was acquired through improper means, or the

disclosure or use of a trade secret without consent by a person who, at the time of disclosure or use,

knew or had reason to know that knowledge of the trade secret was acquired under circumstances giving

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5 The California Uniform Trade Secrets Act defines misappropriation in full as

follows:

(1) Acquisition of a trade secret of another by a person who knows or

has reason to know that the trade secret was acquired by improper

means; or

(2) Disclosure or use of a trade secret of another without express or

implied consent by a person who:

(A) Used improper means to acquire knowledge of the trade

secret; or

(B) At the time of disclosure or use, knew or had reason to

know that his or her knowledge of the trade secret was:

(i) Derived from or through a person who had utilized

improper means to acquire it;

(ii) Acquired under circumstances giving rise to a duty

to maintain its secrecy or limit its use; or

(iii) Derived from or through a person who owed a duty

to the person seeking relief to maintain its secrecy or

limit its use; or

(C) Before a material change of his or her position, knew or had

reason to know that it was a trade secret and that knowledge of it had

been acquired by accident or mistake.

Cal. Civ. Code § 3426.1 

ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

MAG 11

rise to a duty to maintain its secrecy.5 A plaintiff has the burden of establishing that defendants

misappropriated the alleged trade secrets.

It does not appear to be disputed that the Memry West engineers in Menlo Park involved in

Besselink's scale up project did not have direct contact with STC, nor did STC have contact with those

engineers or any of the vendors used in the project. Nevertheless, KOT asserts that Schetky provided

the path from Besselink to Memry to STC.

STC has submitted declarations of the Memry West engineers that they did not provide

information to Schetky, as well as declarations of STC engineers that worked on the sand screen project

stating that they did not receive usable information from Schetky. However, the uncontradicted

evidence does not establish that Schetky had access only to the Besselink Article. For example, it is

undisputed that Besselink and van Moorleghem were in contact with Schetky prior to the Antwerp

conference in September 1999 at which the Besselink Article was presented. Although Schetky sets

forth in his declaration that he does not recall receiving information directly from Besselink and van

Moorleghem, Schetky Decl. ¶ 21, both Besselink and van Moorleghem have testified that they discussed

the alleged trade secrets with him before, during and after the Antwerp Conference. See, e.g., Wexler

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6 KOT also seeks to assert that the demonstration stents produced for Memry's use

during the "scale up" project or stents sent to Memry for electropolishing may have been transmitted

to Memry or STC employees or consultants working on the STC sandscreen project (from which

Memry or STC could have gained detailed information about the Biflex trade secrets asserted). 

Opp'n STC's Mot. Summ. J. re: Misapprop. Trade Secrets at 5. The evidence it presents in support

of this argument is wholly unconvincing. Philippe Poncet of Memry West testified that he never

took the samples out of the box in his office. Wexler Decl. (misapprop. trade secrets), Ex. B, Dep.

of Philippe Poncet at 35:16-40:1. Although KOT argues that there is a picture of one of these stents

on the STC's website, the evidence it presents to confirm that the depiction on the website is one of

the stents in Poncet's possession does not do so.

7 The parties devote portions of their briefing to arguing whether the circumstantial

evidence of trade secret misappropriation presented by Dr. Perry is negated by the direct

declarations of the STC sand screen project engineers that they had no contact with Memry West

employees, received no usable information from Schetky and conducted the research and

development independent of any trade secrets KOT asserts. The court agrees that the verbal

testimony of interested witnesses cannot entirely counter the circumstantial evidence of trade secret

misappropriation presented by KOT. Droeger v. Welsh Sporting Goods Corp., 541 F.2d 790, 793

(9th Cir. 1976) ("[D]isclosure of the secret to the defendant, followed by manufacture of a closely

similar device by the defendant, shifts to the defendant the burden of going forward with evidence to

prove, if it can, that it arrived at the process by independent invention. There is substantial authority

for the proposition that the defendant in such a case ought to offer more than the verbal testimony of

interested witnesses.").

ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

MAG 12

Decl. (misapprop. trade secrets), Ex. F, van Moorleghem Dep. (Day 1) at 74:15-99:2, 116:24-118:8,

140:20-142:20; id., Ex. E, van Moorleghem Dep. (Day 2) at 287:22-288:2, 324:10-326:2.6

KOT also presents the expert testimony of Dr. Perry, discussed in further detail above, who

states that it is more probable than not that STC's bistable tube was developed using KOT's trade secrets.

His opinion "is based on the relatively advanced starting point of the STC bistable cell design and the

relatively short period of time from the beginning of the work for STC on the bistable design to the time

that the 'double horn' design was developed." Perry Decl. ¶ 4. For the reasons set forth above, Dr.

Perry's opinion carries less weight because he is not a mechanical engineer in the oil industry, and the

court finds his testimony to be somewhat conclusory, but it provides some circumstantial evidence that

STC may have had access to the trade secrets KOT asserts.7

Finally, STC seizes upon an argument made by KOT in opposition to the counterdefendants'

motions for partial summary judgment that the trade secret misappropriation is time-barred: KOT argued

that van Moorleghem authorized Memry to pitch biflex to STC in April 2000. In the context of the

motion that the trade secret misappropriation claim was time-barred, KOT argued that this authorization

prevented the statute of limitations from running. The court rejected that argument in the order

addressing that motion. The court likewise rejects STC's argument that because misappropriation is

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ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

MAG 13

a disclosure or use of a trade secret without express or implied consent, this purported authorization

"eviscerates [KOT's] principal trade secret misappropriation claim against STC". STC argues that van

Moorleghem's authorization would have extended to any trade secret asserted in this case because he

did not place any restrictions as to what Memry could disclose to STC about the Biflex technology. But

even assuming that van Moorleghem made such a far-reaching authorization, it is unclear how this

would have constituted authorization from Besselink to use the trade secret information. As set forth

in further detail below, KOT has presented evidence that demonstrates that STC was aware of the fact

that Besselink claimed inventorship in the Biflex technology and internally questioned their rights to

use the technology even after van Moorleghem supposedly authorized use of the trade secrets at issue.

Overall, because KOT has presented evidence that trade secret information may have been

transmitted to STC via Schetky and some evidence that the STC sand screen may have been developed

using the trade secrets asserted by KOT, the court cannot conclude as a matter of law that STC did not

misappropriate trade secrets.

3. Reliance on the Development Agreement

STC also contends that its reliance on Memry insulates it from KOT's misappropriation claim.

Arguing that it had an innocent state of mind, it contends that the terms of the Development Agreement

along with Schetky's assurances that Besselink was aware that his patent did not cover oil well

applications establish as a matter of law that STC did not knowingly misappropriate KOT's alleged trade

secrets. 

First, any reliance on the "No Conflicts" clause of the Development Agreement is misplaced.

That clause reads as follows:

Each Party represents and warrants that it, respectively, is under no

obligation or restriction, nor will it assume any such obligation or

restriction that does or would in any way interfere with, conflict with, or

present a conflict of interest concerning the work to be performed under

this Agreement.

Griffin Decl., Ex. C, Development Agreement § 6.1. Contrary to STC's urged reading, this is not a

warranty that a party disclosing information under the Development Agreement has the intellectual

property rights to disclose third party information – this section merely provides a representation and

warranty that a party is not under an obligation or restriction that would interfere with the work under

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ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

MAG 14

the Development Agreement. Thus, because the next section provides that "Except as provided in

Section 6.1, neither Party makes any warranty of any kind under this Agreement . . .", that section makes

it clear that there is no warranty as to Memry's rights to disclose upon which STC may reasonably rely.

Second, even assuming the Development Agreement did include some sort of representation or

warranty by Memry, the evidence presented does not establish as a matter of law that STC's reliance

would have been reasonable. KOT points out that Johnson at STC was aware that Besselink was the

inventor of the Biflex stent. Wexler Decl. (misapprop. trade secret), Ex. Q (email from Johnson to

Schetky stating "I assume Peter Besselink is unaware of our meeting and our interest in such devices?").

After Schetky responded that Besselink was aware and had indicated that his patent "does not cover

anything other than medical stents," id., Johnson wrote to his colleague at STC Patrick Bixenman

questioning the status of STC's use of Besselink's technology:

Memry Corp have an agreement with the biflex stent inventor – Peter

Besselink. Besselink is aware that Memry is talking to SLB about a biflex casing system. We have an agreement in place with Memry Corp,

but I do not know where this puts us with Besselink if he decides to

patent the idea.

Id., Ex. R. KOT also presents an October 7, 2000 email commenting on a draft patent application in

which Schetky cautioned Johnson "to avoid copying figures and numbers which have been used in

Besselink's papers or patents" and advised him to create new drawings. Id., Ex. W. In 2002, Memry

cautioned STC against using the term "biflex" in an article being prepared by STC for the Society of

Petroleum Engineers, urging the use of "bistable" or some other wording. Id., Ex. CC (December 13,

2002 email from Binch to Schetky); id. Ex. DD (December 21, 2000 email from Schetky to Johnson).

In April 2003, Schetky continued to offer suggestions for terminology that would not "conflict with the

medical stent." Wexler Decl., Ex. EE (April 2, 2003 email from Schetky to Johnson). 

As STC argues, the concerns expressed by Schetky, Binch and Johnson regarding the use of the

term "biflex" and copying figures from Besselink's documents could reasonably be interpreted as the

trademark and copyright concerns of authors preparing to publish an article discussing the application

of medical device technology to a new industry. However, they could also just as reasonably be

interpreted by a jury as concern by STC that Besselink had conflicting rights in the Biflex technology

that Memry had not secured. Thus, based on the evidence presented, a finder of fact might also

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8 KOT also contends that STC is attempting to assert a reasonable reliance on counsel

defense because it has offered the supporting declaration of Jeffrey Griffin, the STC intellectual

property attorney in charge of the STC sandscreen project. In that declaration, Griffin states "STC

believed that STC could lawfully acquire, use and disclose any information, technology or knowhow that it would receive from Memry so long as it avoided infringing upon any copyright interest

int eh Besselink Article or other publications and any patent claims issuing from the 1998 Besselink

PCT Application or other patent applications." Griffin Decl. ¶ 14. The court does not find that this

assertion constitutes a reliance on counsel defense.

ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

MAG 15

reasonably determine that STC knew or reasonably should have known that the information received

from Memry constituted trade secrets misappropriated from Besselink, even if the Development

Agreement otherwise suggested that Memry had rights to everything it disclosed to STC. Accordingly,

the court cannot conclude as a matter of law that STC's reliance on the Development Agreement

precludes a finding that STC misappropriated the trade secrets asserted by KOT.8

C. STC's Motion for Partial Summary Judgment That KOT's Claim for Correction

of Inventorship Be Dismissed

Although KOT has not sued for patent infringement on Besselink's '702 patent, KOT asserts that

Besselink should be named as a joint inventor of the '071, '397, '054, and '637 STC patents. STC

presents two primary arguments why the court should grant summary judgment as to KOT's claim for

correction of inventorship: (1) Besselink did not collaborate with anyone at STC because STC's

applications and issued patents were based solely upon Besselink's published PCT application and (2)

correcting inventorship under 35 U.S.C. § 256 would result in the invalidity of the STC patents.

1. Collaboration

The court begins with a presumption that the named inventors of the STC patents are the true

and only inventors. Trovan, Ltd. v. Sokymat SA, Irori, 299 F.3d 1292, 1301 (Fed. Cir. 2002). Besselink

may, however, overcome this presumption by clear and convincing corroborating evidence that he

contributed to the conception of the invention. Id. at 1302. 

A patented invention may be the work of two or more joint inventors. "Because 'conception is

the touchstone of inventorship,' each joint inventor must generally contribute to the conception of the

invention." Ethicon, Inc., v. U.S. Surgical Corp., 135 F.3d 1456, 1460 (Fed. Cir. 1998) (citing

Burroughs Wellcome Co. v. Barr Lab., Inc., 40 F.3d 1223, 1227-28 (Fed. Cir. 1994)). Thus, a joint

invention is the product of "collaboration of the inventive endeavors of two or more persons working

toward the same end and producing an invention by their aggregate efforts." Kimberly-Clark Corp. v.

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ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

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Proctor & Gamble Co., 973 F.3d 911, 916 (Fed. Cir. 1992). "Joint inventorship under section 116 can

only arise when collaboration or concerted effort occurs – that is, when the inventors have some open

line of communication during or in temporal proximity to their inventive efforts." Eli Lilly and Co. v.

Aradigm Corp., 376 F.3d 1352, 1359 (Fed. Cir. 2004). 

"An inventor 'may use the services, ideas and aid of others in the process of perfecting his

invention without losing his right to a patent.'" Shatterproof Glass Corp. v. Libbey-Owens Ford Co., 758

F.2d 613, 624 (Fed. Cir. 1985). It is therefore unsurprising that "the alleged joint inventor seeking to

be listed on a patent must demonstrate that his labors were conjoined with the efforts of the named

inventors." Eli Lilly, 376 F.3d at 1359. STC asserts that Besselink's refusal to accept the consulting

position on the STC sand screen project offered by Schetky in October 2000 and the lack of evidence

that Besselink collaborated with STC precludes the correction of inventorship KOT seeks. 

In opposition, KOT asserts that Besselink collaborated with STC by virtue of their common

collaboration with Schetky. KOT presents evidence that Besselink communicated non-public details

regarding the use of bistable technology in well-bore applications with the Memry West employees

involved in Besselink's stent scale up project, Pasqualucci, Poncet and Dinh. See Declaration of Jeffrey

Wexler ("Wexler Decl."), Exs. F, G, L (emails between Messrs Besselink and van Moorleghem and

Messrs Paqualluci and Poncet from June and July 1999); Exs. I, J, K (emails and faxes between Dinh

and van Moorleghem from June 1999). As set forth above, KOT has not established that these nonpublic details made their way from the Memry West employees to Schetky. But, although the

declarations of the Memry West employees indicate that they did not affirmatively communicate details

of the scale up project that are asserted by KOT as trade secrets, Schetky's declaration does not

necessarily establish that he did not receive such information from Memry West by way of another

source. See Schetky Decl. ¶ 21. KOT also presents evidence that Besselink and van Moorleghem

themselves communicated the disputed information to Schetky. See, e.g., Wexler Decl. (misapprop

trade secrets), Ex. F, van Moorleghem Dep. (Day 1) at 74:15-99:2, 116:24-118:8, 140:20-142:20; id.,

Ex. E, van Moorleghem Dep. (Day 2) at 287:22-288:2, 324:10-326:2. .

Besselink's refusal to participate as a consultant on the STC sand screen project does not

necessarily lead to the conclusion that he did not collaborate in the invention of the STC patents that

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ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

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arose from that project. It is possible to reasonably infer that he was refusing to participate as a

consultant on the terms offered – for example, it is clear that Besselink felt that he was an inventor of

the Biflex technology but Schetky's offer of a consultancy was explicit that Besselink would not be

named as an inventor on any of the patents that would be filed as part of the project. Further, the

evidence in the record could reasonably suggest that Besselink collaborated with Schetky who then

collaborated with STC: KOT has presented evidence that Schetky had discussed the STC project with

Besselink and van Moorleghem before the patent applications were drafted, and that Schetky

subsequently participated in the design meetings with STC and communicated with Johnson at STC

throughout the sand screen project. Thus, because the evidence suggests it is possible that Besselink

collaborated in the inventive contributions provided by Schetky and other Memry personnel, the court

denies STC's motion for partial summary judgment that KOT's claim for correction of inventorship must

be dismissed. 

2. Invalidity Resulting from Correction of Inventorship

 STC contends that because 35 U.S.C. § 256 is designed to save a patent from invalidity, if

correcting inventorship would result in invalidity, the court cannot correct inventorship. It asserts that

adding Besselink as an inventor would invalidate the STC patents because, among other things, his prior

PCT application would be invalidating prior art because it was published (and thus constructively

reduced to practice) more than two years before the earliest filing date of the STC patents.

"If nonjoinder of an actual inventor is proved by clear and convincing evidence, a patent is

rendered invalid." Pannu v. Iolab Corp., 155 F.3d 1344, 1349 (Fed. Cir. 1998) (citations omitted). 35

U.S.C. § 256 is designed to save a patent that is otherwise invalid for nonjoinder of an inventor. Id. at

1350 ("[I]f a patentee can demonstrate that inventorship can be corrected as provided by [35 U.S.C. §

256], a district court must order correction of the patent, thus saving it from being rendered invalid.")

The Federal Circuit sets forth the following approach to invalidity challenges for nonjoinder of a coinventor:

When a party asserts invalidity under § 102(f) due to nonjoinder, a

district court should first determine whether there exists clear and

convincing proof that the alleged unnamed inventor was in fact a

co-inventor. Upon such a finding of incorrect inventorship, a patentee

may invoke section 256 to save the patent from invalidity. Accordingly,

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ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

MAG 18

the patentee must then be given an opportunity to correct inventorship

pursuant to that section.

Id. Courts have declined to correct inventorship where such a correction would necessarily require the

court to make a finding that the patents are invalid. See Oregon Health & Science Univ. v. Vertex

Pharmaceuticals, Inc., 233 F. Supp. 2d 1282, 1285 (D. Or. 2002) ("Congress has conferred no

jurisdiction on the federal courts to adjudicate a patent's validity in a Section 256 action to correct

inventorship."); see also Britesmile, Inc. v. Discus Dental, Inc., 2005 WL 1083194 at *4 (N.D. Cal.

2005) (White, J.) ("[T]o name Dr. Nathoo as an inventor on the patents at issue would necessarily

require the Court to make a finding that the patents are invalid. Thus, Dr. Nathoo may not bring claims

to correct the inventorship of the patents at issue pursuant to Section 256.").

In both Oregon Health and Britesmile, the purportedly omitted inventor communicated his

invention after the patent application was filed, but before the patent was issued. Thus, naming him as

an inventor on the patent would have necessarily required the court to make a "finding that the defendant

was not in possession of the claimed subject matter at the time it filed the application or, in other words,

that the patent [was] invalid [for failure to meet the 35 U.S.C. § 112 written description requirement]."

Oregon Health, 233 F. Supp. 2d at 1285; Britesmile, 2005 WL 1083194 at *4. Unlike those cases, KOT

does not assert that Besselink disclosed the invention claimed in the STC after the filing date of the

disputed patents. STC asserts that the court should be concerned about the potential that Besselink's

PCT application may be invalidating prior art. But assuming that Besselink is added as an inventor, the

existence of a published patent by him does not necessarily result in invalidating the STC patents.

Contrary to STC's argument, it does not appear that Besselink is claiming to be the sole inventor of the

subject matter claimed by the STC patents, rather that he contributed to the inventions claimed therein.

As STC pointed out, the Patent Office has previously rejected claims for a wellbore as unsupported by

Besselink's patent application, see RJN Supp. STC Reply, Ex. A at 5, thus, it is possible that the prior

applications would not be considered to have constructively reduced to practice the inventions relating

to the expandable tubular devices claimed in the STC patents.

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ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

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III. ORDER

For the reasons set forth above, the court:

1. denies Memry's motion to disqualify the expert testimony of Dr. Kenneth Perry;

2. denies STC's motion for summary judgment that STC did not misappropriate trade

secrets; and

3. denies STC's motion for summary judgment that KOT's claim for correction of

inventorship be dismissed.

DATED: 9/20/07

RONALD M. WHYTE

United States District Judge

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ORDER RE: STC'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT—C-04-03843 RMW

MAG 20

Notice of this document has been electronically sent to:

Counsel for Memry:

Andrew C. Ryan ryan@cantorcolburn.com 

William J. Cass wcass@cantorcolburn.com 

Thomas Mango tmango@cantorcolburn.com 

Benjamin J. Holl benjamin.holl@dbr.com 

Charles A. Reid, III charles.reid@dbr.com 

Counsel for STC:

Nancy J. Geenen ngeenen@foleylaw.com 

David B. Moyer dmoyer@foley.com 

Kimberly K. Dodd kdodd@foley.com 

Counsel for KOT:

Michael H. Bierman mbierman@luce.com 

Nicola A. Pisano napisano@JonesDay.com 

Jeffrey David Wexler jwexler@luce.com 

Counsel are responsible for distributing copies of this document to co-counsel that have not registered

for e-filing under the court's CM/ECF program.

Dated: 9/20/07 /s/ MAG

Chambers of Judge Whyte

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