Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-00586/USCOURTS-caed-2_09-cv-00586-7/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 28:1338 Patent Infringement

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

EXPERT MICROSYSTEMS, INC.,

Plaintiff,

 v.

UNIVERSITY OF CHICAGO and ARCH

DEVELOPMENT CORPORATION,

Defendants. /

NO. CIV. 2:09-586 WBS JFM

MEMORANDUM AND ORDER RE:

MOTION FOR SUMMARY JUDGMENT

----oo0oo----

Plaintiff Expert Microsystems (“EM”) brought this

action against defendants the University of Chicago (“UC”) and

ARCH Development Corporation (“ARCH”) for correction of

inventorship, 35 U.S.C. § 256, and ownership of United States

Patents Numbers 5,987,399 (“‘399 patent”) and 6,202,038 (“‘038

patent”). Defendants now move for summary judgment pursuant to

Federal Rule of Civil Procedure 56(c). 

I. Factual and Procedural Background

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1 On May 1, 1996, ExperTech incorporated in California as

“Expert Microsystems, Inc.,” and the successor entity acquired

ExperTech’s property rights and assumed the obligations of

ExperTech. (FAC ¶¶ 37-38.) In addition, on September 27, 1996,

EM was assigned all of ExperTech’s rights and obligations under

the joint venture’s NASA contracts. (Id. ¶ 42.)

2

Plaintiff EM is a small California corporation that

provides systems for monitoring assets and equipment as well as

related consulting services. (First Am. Compl. (“FAC”) ¶ 1.) EM

is the successor entity to ExperTech--a sole proprietorship of

current EM President Randall L. Bickford--which was part of a

joint venture created to obtain prime contracts with NASA.1

 (Id.

¶ 25.) From 1995 through 1996, as part of the process of

preparing the proposal for the NASA contract, Bickford allegedly

disclosed proprietary information to UC employees Stephan W.

Wegerich and Kenneth C. Gross concerning Bickford’s concept for a

method of performing a regression sequential possibility ratio

testing (“regression SPRT”) procedure for a pair of sensors with

signals that are linearly or non-linearly related. (Id. ¶¶ 32-

33, 35, 44.) One such disclosure occurred in January 1996 when

Wegerich and Gross traveled to Roseville, California, to meet

with Bickford at ExperTech’s offices. (Id. ¶ 32.) 

Plaintiff alleges that at least part of the embodiments

of Bickford’s regression SPRT procedure are claimed in one or

both of the ‘399 and ‘038 patents, which are directed to a method

and apparatus for monitoring a source of data for determining an

operating state of a working system. (Id. ¶¶ 23, 36, 45.) The

‘399 and ‘038 patents--issued on November 16, 1999, and March 13,

2001, respectively--list only Wegerich, Gross, and another

person, Kristin K. Jarman, as inventors without naming Bickford

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as an inventor. (Id. ¶¶ 16, 19, 46.) The listed inventors

assigned ownership of the ‘399 and ‘038 patents to ARCH, an

affiliate of UC tasked with commercializing intellectual property

produced by UC scientists. (Id. ¶¶ 17, 20.) 

In 1996, ExperTech/EM’s joint venture applied for and

was ultimately awarded a prime contract for a project entitled

“Dynamics Sensor Data Validation for Reusable Launch Vehicle

Propulsion” that involved UC as a subcontractor. (Id. ¶¶ 34;

41.) The relationship between ExperTech/EM and UC continued for

a number of years and involved at least two cooperative research

and development agreements. (Id. ¶ 47.) On March 2, 2001,

plaintiff and UC entered into a license agreement (the “203

contract”) by which plaintiff acquired the rights to use software

products that contained embodiments of the ‘399 patent. (See id.

¶ 47; Bickford Decl. ¶¶ 4-5.) The 203 contract, signed by

Bickford, specifically mentioned that the ‘399 patent was being

licensed as part of the agreement but did not mention the ‘038

patent. (See Carpenter Decl. Ex. A-A § 1.3, Ex. A-C; Bickford

Decl. ¶ 6.) 

On February 19, 2002, Bickford made an electronic prior

art search in the United State Patent and Trademark Office

(“USPTO”) on behalf of plaintiff to find prior art to an

invention plaintiff was trying to get patented--a Surveillance

System and Method Having an Adaptive Sequential Probability Fault

Detection Test. (Bickford Decl. ¶ 10.) The prior art search

came up with eighteen patents, including the ‘399 and ‘038

patents at issue in this litigation. (Id. ¶¶ 14-16.) Plaintiff

purchased copies of the prior art patents and Bickford printed

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each from the USPTO website. (Id. ¶¶ 17-18.) Bickford alleges

that he only saw the front page of each patent and did not review

their contents at that time. (Id. ¶¶ 18-23.) These copies were

then provided by Bickford to Dennis DeBoo, plaintiff’s patent

agent, to use in preparing an Information Disclosure Statement

for plaintiff’s patent application (“the ‘835 application”). 

(Id. ¶¶ 24-25; DeBoo Decl. ¶ 5.) DeBoo filed the Information

Disclosure Statement for the ‘835 application on July 24, 2002. 

(DeBoo Decl. ¶ 8.) 

On November 8, 2008, plaintiff received a letter from

UC that terminated the 203 contract. (FAC ¶ 49.) Plaintiff

alleges that neither it nor Bickford read the contents of the

‘399 or ‘038 patents until after advised to do so by counsel

after the termination of the 203 contract. (Bickford Decl. ¶¶

28-30; Pl.’s Opp’n at 9:17-22.) Plaintiff contends that it was

only after reading the patents in December 2008 that Bickford

became aware that he should have been listed as an inventor of

the ‘038 and ‘399 patents. (Bickford Decl. ¶¶ 31-33.) Plaintiff

filed the instant action on March 2, 2009, alleging that Bickford

invented or co-invented at least part of the various embodiments

of the ‘399 and ‘038 patents. (See FAC ¶¶ 24, 55.)

II. Discussion

Summary judgment is proper “if the pleadings, the

discovery and disclosure materials on file, and any affidavits

show that there is no genuine issue as to any material fact and

that the movant is entitled to judgment as a matter of law.” 

Fed. R. Civ. P. 56(c). A material fact is one that could affect

the outcome of the suit, and a genuine issue is one that could

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permit a reasonable jury to enter a verdict in the non-moving

party’s favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

248 (1986). The party moving for summary judgment bears the

initial burden of establishing the absence of a genuine issue of

material fact and can satisfy this burden by presenting evidence

that negates an essential element of the non-moving party’s case. 

Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). 

Alternatively, the moving party can demonstrate that the

non-moving party cannot produce evidence to support an essential

element upon which it will bear the burden of proof at trial. 

Id.

Once the moving party meets its initial burden, the

non-moving party “may not rely merely on allegations or denials

in its own pleading,” but must go beyond the pleadings and, “by

affidavits or as otherwise provided in [Rule 56,] set out

specific facts showing a genuine issue for trial.” Fed. R. Civ.

P. 56(e); Celotex Corp., 477 U.S. at 324; Valandingham v.

Bojorquez, 866 F.2d 1135, 1137 (9th Cir. 1989). In its inquiry,

the court must view any inferences drawn from the underlying

facts in the light most favorable to the nonmoving party, but may

not engage in credibility determinations or weigh the evidence. 

Anderson, 477 U.S. at 255; Matsushita Elec. Indus. Co., Ltd. v.

Zenith Radio Corp., 475 U.S. 574, 587 (1986).

Defendants argue they are entitled to summary judgment

because plaintiff’s patent claims are barred by laches. Laches

is an equitable defense that may bar an inventorship claim. See

Lane & Bodley v. Locke, 150 U.S. 193, 201 (1893); see also A.C.

Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1028-29

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(Fed. Cir. 1992). “The laches defense has two underlying

elements: first, the [plaintiff’s] delay in bringing suit must be

‘unreasonable and inexcusable,’ and second, the [defendant] must

have suffered ‘material prejudice attributable to the delay.’”

Intirtool, Ltd. v. Texar Corp., 369 F.3d 1289, 1297 (Fed. Cir.

2004) (citation omitted). 

The court must also consider a plaintiff’s proffered

justifications for delay and whether a defendant has unclean

hands such that she is not entitled to an equitable defense. 

Aukerman, 960 F.2d at 1033. Courts have found a number of

excuses for delay justified, including the presence of other

litigation, ongoing negotiations with defendant, poverty,

illness, wartime conditions, dispute over ownership of the

patent, and a limited amount of infringement. Id. When

evaluating a laches defense the court must therefore weigh and

consider “the length of delay, the seriousness of prejudice, the

reasonableness of excuses, and the defendant’s conduct or

culpability.” Id. at 1034.

“[A] delay of more than six years after the omitted

inventor knew or should have known of the issuance of the patent

will produce a rebuttable presumption of laches.” Serdarevic v.

Advanced Med. Optics, Inc., 532 F.3d 1352, 1358 (Fed. Cir. 2008)

(quoting Advanced Cardiovascular Sys., Inc. v. Scimed Life Sys.,

Inc., 988 F.2d 1157, 1163 (Fed. Cir. 1993)). If the presumption

applies, unreasonable delay and prejudice are automatically

inferred. Serdarevic, 532 F.3d at 1359; see also Hall v. Aqua

Queen Mfg., Inc., 93 F.3d 1548, 1554 (Fed. Cir. 1996). Once a

defendant establishes a presumption of laches on summary

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judgment, the burden shifts to the plaintiff to “rebut the

presumption of laches ‘by offering evidence to show an excuse for

the delay or that the delay was reasonable’ or by offering

evidence ‘sufficient to place the matters of [evidentiary]

prejudice and economic prejudice genuinely in issue.’”

Serdarevic, 532 F.3d at 1359-60 (quoting Aukerman, 960 F.2d at

1038). “If the [plaintiff] presents a sufficiency of evidence

which, if believed, would preclude a directed finding in favor of

the [defendant], the presumption evaporates and the accused . . .

is left to its proof.” Aukerman, 960 F.2d at 1037-38.

A. Applicability of Presumption and Reasonableness of

Delay

Plaintiff argues that a presumption of laches is

inapplicable and any delay in filing suit was reasonable because

it did not have knowledge of the contents of the ‘399 and ‘038

patents until November 2008 at the earliest. When applying the

six-year presumption of laches in an inventorship case, “the

period of delay is measured from when the claimant had actual

notice of the claim or would have reasonably been expected to

inquire about the subject matter.” Advanced Cardiovascular Sys.,

988 F.2d at 1162; see also Intirtool, 369 F.3d at 1297-98;

Wanlass v. Gen. Elec. Co., 148 F.3d 1334, 1337-38 (Fed. Cir.

1998). 

Defendants identify two plausible dates when the laches

period began to run on plaintiff’s claims. The first is on March

2, 2001, when plaintiff signed the 203 contract with UC that

licensed use of software containing embodiments of the ‘399

patent. Plaintiff contends that despite the 203 contract’s

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reference to the ‘399 patent and plaintiff’s knowledge the

patent’s issuance, it remained unaware of the patent’s content

because plaintiff had already been using the software in the

contract for several years and therefore felt no need to

investigate the ‘399 patent. (See Bickford Decl. ¶¶ 4-7.) 

Plaintiff may reasonably have failed to realize the software it

had been using for several years contained an embodiment of ‘399

patent. A disputed issue of material fact therefore exists such

that the court cannot find that the laches period began running

in March 2001.

The second date offered by defendants is February 19,

2002, when plaintiff owned copies of the ‘399 and ‘038 patents

after Bickford printed copies of each patent as part of a prior

art search for the ‘835 application. (See Englund Decl. Ex. A at

3:19-28, 5:19-28; Ex. B at 3:24-4:3, 7:19-28; Bickford Decl. ¶

17.) In his declaration, Bickford states that he saw the frontpage of each patent while he was printing the prior art patents,

but did not “read or evaluate the content or claims of the ‘399

Patent and the ‘038 Patent.” (Bickford Decl. ¶¶ 18-19.) 

Bickford then gave copies of the patents to DeBoo, who supplied

copies of them to the USPTO in the ‘835 application.

For purposes of this motion, plaintiff equates whatever

knowledge Bickford had with that of EM. Even if plaintiff is

correct and Bickford only looked at the first page of each

patent, he should have easily noticed that the ‘399 patent’s

first page states that the invention includes “activating a

second method for performing a [regression SPRT] . . . with

signals which are linearly or non-linearly related,” the exact

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invention plaintiff claims Bickford created. (Defs.’ Reply Ex. A

(‘399 Patent).) Plaintiff was sufficiently put on notice of his

potential inventorship claims by reading the first page of the

patents. “The Supreme Court has consistently imputed to parties

who failed to examine readily available information the knowledge

contained in it and the results of inquiries that the knowledge

would have motivated a reasonable man to conduct.” Wanlass, 148

F.3d at 1338-39 (collecting cases). Even though Bickford claims

he did not read the claims and specifications of each patent, the

explicit reference to the regression SPRT process which the FAC

claims contained Bickford’s invention should have lead him to

inquire as to whether he had an inventorship claim to the patents

at issue. 

Plaintiff could have easily read the prior art patents

within its possession and discovered with reasonable diligence

that it may have had an inventorship claim against defendants. 

Plaintiff’s failure to investigate its potential claim after

Bickford saw information that warranted further inquiry into its

potential ownership of the patents at issue is unreasonable and

therefore insufficient to absolve plaintiff of knowledge of the

contents of the ‘399 and ‘038 patents for purposes of laches. 

See Wanlass, 148 F.3d at 1338-39; Advanced Cardiovascular Sys.,

988 F.2d at 1162 (holding the laches period begins when the

plaintiff “would reasonably be expected to inquire about the

subject matter” of the claim at issue); Potash Co. of Am. v.

Int’l Minerals & Chem. Corp., 213 F.2d 153, 155 (10th Cir. 1954)

(“Laches will not be imputed to one who has been justifiably

ignorant of facts which create his right or cause of action. But

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ignorance will not of itself excuse delay. The party must be

diligent and make such inquiry and investigation as the

circumstances reasonably suggest, and the means of knowledge are

generally equivalent to actual knowledge.”) (citations omitted).

Defendants have also presented undisputed evidence that

Bickford previously acknowledged his awareness of the ‘399 and

‘038 patents in the Information Disclosure Statement for the ‘835

application submitted by DeBoo to the USPTO on July 24, 2002. 

The Information Disclosure Statement states that “[t]he patents

and publications listed on the appended PTO 1449 form reflect the

state of the art of which applicant [Bickford] is currently

aware.” (DeBoo Decl. Ex. A at 1.) Bickford in effect

represented to the USPTO that he had sufficient knowledge of the

‘399 and ‘038 patents to conclude that they constituted prior art

of his invention. See Glaxo, Inc. v. Novopharm Ltd., 52 F.3d

1043, 1052 (Fed. Cir. 1995) (“[T]he information disclosed in the

inventor’s patent application must be that which is actually

known to him.”). Although Bickford now declares that he did not

actually know the contents of the ‘399 and ‘038 patents at the

time, it is clear both that he was on notice that the patents may

have included his invention and that it was unreasonable for him

to be unaware of their contents when he submitted the ‘835

application to the PTO. Accordingly, the court finds that the

clock on plaintiff’s claims to ownership of the ‘399 and ‘038

patents began on February 19, 2002, when Bickford printed out

copies of the patents and plaintiff assumed ownership of these

copies. Since plaintiff filed this action over six years after

this date, the presumption of laches applies.

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Plaintiff’s arguments to rebut the presumption that its

delay in bringing this suit was unreasonable are identical to its

arguments as to why the presumption is inapplicable. For the

same reasons as articulated above, the court finds that plaintiff

has not presented any evidence indicating why its delay in

bringing suit was reasonable because it should have known of the

contents of the patents during the filing of plaintiff’s

Information Disclosure Statement for the ‘835 application,

despite its alleged failure to actually discover its claim. 

Plaintiff has not provided evidence of any extenuating

circumstances that would justify its substantial delay in filing

this action. See Aukerman, 960 F.2d at 1033 (listing excuses for

delay courts have found reasonable). Accordingly, plaintiff has

not rebutted the presumption of an unreasonable delay.

B. Prejudice

A plaintiff may also rebut a presumption of laches by

presenting evidence to put whether defendant suffered material

prejudice from the delay in filing the suit in issue. See

Serdarevic, 532 F.3d at 1359-60. Material prejudice can be

evidentiary or economic. Aukerman, 960 F.2d at 1033. To defeat

summary judgment, plaintiff must rebut the presumption of

prejudice with respect to both economic and evidentiary

prejudice. See Serdarevic, 532 F.3d at 1360; Abbott Diabetes

Care, Inc. v. Roche Diagnostics Corp., No. C05-03117 MJJ, 2007 WL

1241928, at *7 (N.D. Cal. April 27, 2007).

Economic prejudice may arise when a defendant suffers

“the loss of monetary investments or incur[s] damages which

likely would have been prevented by earlier suit.” Aukerman, 960

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F.2d at 1033. These monetary losses may not simply be the

damages that may be awarded for a finding in favor of the

plaintiff, rather the court should look for “a change in the

economic position of the alleged infringer during the period of

delay” when evaluating economic prejudice. Id. (emphasis in

original). “The change must be because of and as a result of the

delay, not simply a business decision to capitalize on a market

opportunity.” Hemstreet v. Computer Entry Sys. Corp., 972 F.2d

1290, 1294 (Fed. Cir. 1992).

Because of the presumption of prejudice, plaintiff

bears the burden of production to raise a genuine factual issue

as to whether economic prejudice exists. See Serdarevic, 532

F.3d at 1359-60. Plaintiff does not offer any evidence on this

point, outside of arguing that defendants did not suffer economic

prejudice because plaintiff paid $26,063 in royalties to

defendants under the 203 contract and defendants entered into

license agreements with third parties to practice the inventions

in the ‘399 and ‘038 patents during the delay period. (See Pl.’s

Opp’n at 13:25-16:12; Carpenter Decl. Ex. C ¶ 60.) Plaintiff’s

arguments do not demonstrate that defendants did not suffer

economic prejudice. To the contrary, the limited evidence

presented by plaintiff indicates that defendants likely did

suffer economic prejudice, since they economically invested in

the ‘399 and ‘038 patents by entering into license agreements

with third parties to use the patents. See Moore v. Broadcom

Corp., No. C06-05647 MJJ, 2008 WL 425932, at *7 fn.4 (N.D. Cal.

Feb. 14, 2008) (defendant’s evidence that it licensed the patent

at issue to third parties supported a finding of economic

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prejudice). Accordingly, plaintiff has not met its burden of

producing evidence to create a disputed material issue of fact as

to economic prejudice.

This finding is bolstered by the defendants’ submission

of evidence that plaintiff’s delay in filing suit did in fact

cause economic prejudice. Specifically, ARCH entered into a

license agreement with SmartSignal Corporation (“SmartSignal”)

for a portfolio of intellectual property rights, including the

‘399 and ‘038 patents during the delay period. (See Thomas Decl.

Ex. A.) The license agreement gave SmartSignal the exclusive

right for use of the patents and also represented that defendants

were not a party to any lawsuit over ownership of the licensed

patents. (Id. Ex. A at 2, 5.) The license agreement also has a

complicated set of royalty pay outs among the twelve different

inventors involved in the creation of the thirty-two different

patents entailed in the intellectual property rights bundle. 

(Id. at ¶ 9.) Plaintiff’s delay in filing suit allowed

defendants to enter into license agreements into which they

claimed to grant exclusive use of the ‘399 and ‘038 patents and

received additional compensation from the inclusion of these

patents in their license agreement with SmartSignal. (Id.) 

Defendants changed their economic position by making these

guarantees to SmartSignal, which may leave them open to a suit

for breach of contract if plaintiff succeeds on its claims. 

Defendants would also need to completely alter their complicated

formula for royalty payments to the inventors of the patents in

the SmartSignal license and would force these inventors to

disgorge portions of the royalty payments they received for the

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last eleven years, not knowing they were being overpaid. (Id.)

Defendants’ evidence supports the position that it made

investments in licensing the ‘399 and ‘038 patents during

plaintiff’s delay in filing suit such that it may suffer economic

prejudice were the case allowed to proceed. Since plaintiffs

have failed to present evidence to rebut the presumption of

economic prejudice, the court need not reach the issue of

evidentiary prejudice and will apply the doctrine of laches to

plaintiff’s claims. See Serdarevic, 532 F.3d at 1360; Abbott

Diabetes Care, 2007 WL 1241928, at *7. 

C. Unclean Hands

Under the unclean hands doctrine, “[e]ven if unable to

overcome the presumption, a [plaintiff] may be able to preclude

application of the laches defense with proof that the [defendant]

was itself guilty of misdeeds towards the [plaintiff].” 

Aukerman, 960 F.2d at 1038. To succeed on an unclean hands

defense, a plaintiff must show that the defendant has “engaged in

particularly egregious conduct which would change the equities

significantly in plaintiff’s favor.” Id. at 1033 (citing Bott v.

Four Star Corp., 807 F.2d 1567, 1576 (Fed. Cir. 1986)). In an

inventorship action, “a plaintiff relying on the unclean hands

doctrine to defeat a defense of laches must show not only that

the defendant engaged in misconduct, but moreover that the

defendant’s misconduct was responsible for the plaintiff’s delay

in bringing suit.” Serdarevic, 532 F.3d at 1361.

In this case, plaintiff argues that it is entitled to

an unclean hands defense because defendants engaged in egregious

conduct when they failed to name Bickford as the inventor of the

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two patents, thereby defrauding Bickford and the USPTO. (See

Pl.’s Opp’n 17:3-8.) Plaintiff’s unclean hands defense fails

because it simply rehashes the basis of its inventorship claims

and does not indicate why any of defendants’ alleged misconduct

is responsible for plaintiff’s delay in filing suit. In

Serdarevic, the Federal Circuit rejected an unclean hands defense

almost identical to plaintiff’s argument, noting that, “[i]f the

failure to name an inventor were sufficiently ‘egregious conduct’

to give rise to an unclean hands claim, then laches would never

be available as a defense to an inventorship claim.” 532 F.3d at

1361. Since plaintiff has not provided evidence that defendants’

alleged misconduct was responsible for its delay in filing suit,

defendants’ laches defense is not precluded by unclean hands.

IT IS THEREFORE ORDERED that defendants’ motion for

summary judgment be, and the same hereby is, GRANTED. 

DATED: April 1, 2010

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