General Electric Company, et al. v. Wilkins

Filing 237

ORDER RE: 192 Motion to Dismiss Counterclaims, signed by Judge Oliver W. Wanger on 7/26/2011. (Kusamura, W)

1
2
3
4
UNITED STATES DISTRICT COURT
5
EASTERN DISTRICT OF CALIFORNIA
6
7
8

GENERAL ELECTRIC COMPANY,

9

Plaintiff,

10

1:10-cv-00674–OWW-JLT
ORDER RE: MOTION TO DISMISS
COUNTERCLAIMS (Doc. 192)

v.

11
12

THOMAS WILKINS,
Defendant.

13

I. INTRODUCTION.

14

Plaintiff General Electric Company(“Plaintiff”) proceeds with

15
16

an

17

damages and injunctive relief. On March 1, 2011, the court granted

18

the motion to intervene filed by Mitsubishi Heavy Industries Ltd.

19

and Mitsubishi Power Systems America, Inc. (“Mitsubishi”) pursuant

20

to Federal Rule of Civil Procedure 24(a)(2).

21

action

against

Defendant

Thomas

Wilkins

(“Defendant”)

for

(Docs. 161, 166).1

Plaintiff filed its fist amended complaint (“FAC”) on October

22

13, 2010.

(Doc. 76).

Defendant filed an answer to the FAC and a

23

counterclaim against Plaintiff on March 29, 2011.

24

Mitsubishi filed an answer to the FAC and a counterclaim against

25

Plaintiff on March 29, 2011.

(Doc. 177).

(Doc. 178).

26
27
28

1
Plaintiff and Mitsubishi are currently litigating infringement actions concerning
some of the technology at issue in this case before the United States International Trade
Commission ("ITC") and the U.S. District Court for the Southern District of Texas.

1

1

Plaintiff filed a motion to dismiss Defendant’s counterclaim

2

and Mitsubishi’s counterclaim on May 17, 2011.

3

Defendant filed opposition to the motion to dismiss on June 13,

4

2011.

5

dismiss on June 13, 2011. (Doc. 219).

6

June 20, 2011.

(Doc. 220).

(Doc. 192).

Mitsubishi filed opposition to the motion to
Plaintiff filed a reply on

(Doc. 230).
II. FACTUAL BACKGROUND.

7
8

Plaintiff is a developer of energy technologies and the holder

9

of U.S. Patent Nos. 6,921,985 (“‘985 Patent”) and 6,924,565,

10

(“the’565

11

Defendant is listed as one of seven inventors of the ‘565 Patent

12

and asserts that he is an unnamed co-inventor of the ‘985 Patent.

13

Defendant claims an ownership interest in both patents.

14

patent”)

(collectively

“the

subject

technology”).

Defendant was employed as an electrical engineer by Enron Wind

15

Corp.

16

intermittently

17

Defendant’s job responsibilities while employed by Enron included

18

the design, development, installation and testing of wind turbine

19

generators.

20

(“Enron”),
from

Plaintiff’s

predecessor

approximately

April

1998

in
to

interest,
May

2002.

As a condition of his employment with Enron, Defendant signed

21

a Confidentiality and Inventions Agreement (“C&I Agreement”).

22

C&I Agreement provided, inter alia, that Defendant agreed

23

The

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“upon the Company’s request and without the need for
further consideration, to execute any and all documents
and take such actions which may be necessary in the
Company’s judgment to assign all rights to any Invention
Idea to the Company and to obtain patent or other
intellectual property protections for any Invention
Idea.”

27

Under the terms of the C&I Agreement, Defendant was obligated to

28

assign any interest in inventions created within the scope of his

24
25

2

1

employment duties to Enron.

2

in 2002. In May 2002, Plaintiff purchased Enron’s assets, including

3

its intellectual property.

4

Enron filed for bankruptcy protection

Defendant became Plaintiff’s employee in May of 2002.

A

5

requirement of employment was that Defendant sign Plaintiff’s

6

Employee Innovation and Proprietary Information Agreement (“EIPI

7

Agreement”).

8

Defendant agreed “to disclose and assign to the Company (or as the

9

Company may direct) as its exclusive property, all inventions,

10

discoveries, innovations, improvements, trade secrets and technical

11

or business information which [he] may solely or jointly develop,

12

conceive, reduce to practice or author during the period of [his]

13

employment.”

14

obligated to assign any interest in inventions created within the

15

scope of his employment to Plaintiff.

16

to sign an acknowledgment that he was required to comply with the

17

policies described in the guide: “GE Policies. Integrity: The

18

Spirit the Letter of our Commitment” (“GE Policy Guide”), which

19

specified

20

intellectual property Defendant worked on or invented in the course

21

of his work for Defendant.

22

During

The

EIPI

Agreement

provided,

inter

alia,

that

Under the terms of the EIPI Agreement, Defendant was

Defendant’s

the

term

obligations

of

his

Defendant was also required

to

employment,

protect

and

Defendant

assign

served

as

23

Plaintiff’s lead power systems electrical engineer in California.

24

His job was to develop new designs for wind turbine equipment.

25

May 31, 2002, Defendant first conceived the invention underlying

26

the ‘565 Patent.

27

underlying the ‘985 Patent was first conceived, or who first

28

thought of it. Defendant voluntarily resigned from Plaintiff’s

On

Plaintiff does not allege when the invention

3

1
2

employ in December 2002.
Plaintiff

applied

for

the

‘565

and

‘985

Patents

after

3

Defendant terminated his employment with Plaintiff.

4

2004,

5

connection with Plaintiff’s application for the ’565 Patent, but

6

Defendant refused.

7

expressly transferring his rights in the ’565 Patent to Plaintiff,

8

despite Plaintiff’s requests that he do so. Plaintiff did not seek

9

an assignment from Defendant in connection with the ‘985 Patent.

Plaintiff

requested

that

Defendant

sign

In February
documents

in

Defendant has never signed an assignment

10

In 2009, Defendant purported to license his interest in the

11

‘985 Patent to Mitsubishi; Mitsubishi and Plaintiff are currently

12

litigating infringement actions concerning the ‘985 patent before

13

the ITC and the U.S. District Court for the Souther District of

14

Texas. In May 2010, Defendant informed Plaintiff that he was

15

offering to license the ‘565 Patent to others.

16

Plaintiff’s request to cease and desist such conduct.
III. LEGAL STANDARD.

17
18

Defendant refused

Dismissal

under

Rule

12(b)(6)

is

appropriate

where

a

19

complaint or counterclaim lacks sufficient facts to support a

20

cognizable legal theory.

21

901 F.2d 696, 699 (9th Cir.1990). To sufficiently state a claim to

22

relief and survive a 12(b) (6) motion, the pleading "does not need

23

detailed factual allegations" but the "[f]actual allegations must

24

be enough to raise a right to relief above the speculative level."

25

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

26

and conclusions" or a "formulaic recitation of the elements of a

27

cause of action will not do." Id.

28

facts to state a claim to relief that is plausible on its face."

See Balistreri v. Pacifica Police Dep't,

4

Mere "labels

Rather, there must be "enough

1

Id. at 570. In other words, the "complaint must contain sufficient

2

factual matter, accepted as true, to state a claim to relief that

3

is plausible on its face." Ashcroft v. Iqbal, --- U.S. ----, ----,

4

129 S.Ct. 1937, 1949 (2009) (internal quotation marks omitted).

5

The Ninth Circuit has summarized the governing standard, in

6

light of Twombly and Iqbal, as follows: "In sum, for a complaint to

7

survive a motion to dismiss, the nonconclusory factual content, and

8

reasonable

9

suggestive of a claim entitling the plaintiff to relief." Moss v.

10

U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir.2009) (internal

11

quotation marks omitted). Apart from factual insufficiency, a

12

complaint is also subject to dismissal under Rule 12(b)(6) where it

13

lacks a cognizable legal theory, Balistreri, 901 F.2d at 699, or

14

where the allegations on their face "show that relief is barred"

15

for some legal reason, Jones v. Bock, 549 U.S. 199, 215 (2007).

inferences

from

that

content,

must

be

plausibly

16

In deciding whether to grant a motion to dismiss, the court

17

must accept as true all "well-pleaded factual allegations" in the

18

pleading under attack. Iqbal, 129 S.Ct. at 1950. A court is not,

19

however, "required to accept as true allegations that are merely

20

conclusory,

21

inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988

22

(9th Cir.2001). "When ruling on a Rule 12(b)(6) motion to dismiss,

23

if a district court considers evidence outside the pleadings, it

24

must normally convert the 12(b)(6) motion into a Rule 56 motion for

25

summary

26

opportunity to respond."

27

907 (9th Cir. 2003). "A court may, however, consider certain

28

materials-documents

unwarranted

judgment,

and

deductions

it

must

of

give

fact,

the

or

unreasonable

nonmoving

party

an

United States v. Ritchie, 342 F.3d 903,

attached

to
5

the

complaint,

documents

1

incorporated by reference in the complaint, or matters of judicial

2

notice-without converting the motion to dismiss into a motion for

3

summary judgment." Id. at 908.
IV. DISCUSSION.

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5

A. Statute of Limitations

6

1. The 565' Patent

7

Plaintiff contends that Defendant’s co-ownership claims are

8

time-barred.

9

August 2, 2005 “identifying General Electric as the sole owner,”

10

and invokes the four-year statute of limitations set forth in

11

California Code of Civil Procedure § 343.

12

Dismiss at 7).

13

incorrect.

14

Accordingly, Defendant has been a presumed owner of the ‘565 patent

15

since its issuance. 37 C.F.R. § 3.73("an inventor is presumed to be

16

the owner of a patent application, and any patent that may issue

17

therefrom, unless there is an assignment").

18

attempted to extinguish Defendant’s interest in the ‘565 patent

19

with

20

Defendant’s co-ownership claim to the ‘565 Patent is not time

21

barred.

the

Plaintiff contends that the ‘565 patent issued on

(Doc. 192, Motion to

Plaintiff’s contention is factually and legally

The ‘565 patent lists Defendant as an inventor.

commencement

of

this

action

on

Plaintiff first

April

15,

2010.

22

In its reply, Plaintiff argues that “Wilkins had clear reason

23

to suspect that GE viewed itself as...[the] sole owner” of the ‘565

24

patent when it issued, because GE had sought an assignment from

25

him.

26

contention is correct, the fact remains that Defendant was a

27

presumed owner of the ‘565 patent upon its issuance even if he

28

“suspected”

(Doc. 230, Reply at 6).

that

Plaintiff

Assuming arguendo Plaintiff’s

believed
6

he

was

not

entitled

to

1

ownership

rights.

Plaintiff

further

contends

that

Defendant

2

“suffered actual and appreciable harm due to his inability to

3

practice or license the patent without ownership rights,” but

4

offers no legal or factual support of this contention. (Id. at 7).

5

As a presumed owner, Defendant could have exercised his rights in

6

the ‘565 Patent at any time after its issuance. Plaintiff’s motion

7

to dismiss on statute of limitations grounds is DENIED as to

8

Defendant’s co-ownership claim to the ‘565 patent.
2. The ‘985 Patent

9
10

Pursuant

to

California’s

“discovery

rule,”

as

a

general

11

matter, a cause of action does not accrue until the point in time

12

at which a party knew, or should have known, all material facts

13

essential to show the elements of her cause of action.

14

Hebrew Academy of San Francisco v. Goldman, 42 Cal. 4th 883, 890-91

15

(Cal.

16

principal purpose of the discovery rule is to protect aggrieved

17

parties who, with justification, are ignorant of their right to

18

sue.

19

principle that statutes of limitations should not be interpreted so

20

as to bar a victim of wrongful conduct from asserting a cause of

21

action before he could reasonably be expected to discover its

22

existence.

23

See, e.g.,

2007) (discussing an exception to the discovery rule).

Id. at 894.

The

California’s discovery rule embodies the

Id.

Unlike the ‘565 patent, Defendant is not named as an inventor

24

in the ‘985 patent.

Defendant avers that he did not discover the

25

basis for his claims arising out of the ‘985 patent upon the

26

patent’s issuance.

27

constructive knowledge of his supposed co-ownership rights when the

28

‘985 patent issued on July 26, 2005, with GE again listed on the

Plaintiff

contends

7

that Defendant “had

1

face of the patent as sole assignee and owner.”

(Doc. 192, Motion

2

to Dismiss at 7). Plaintiff cites Bd. of Trustees of Leland

3

Stanford Jr. Univ. v. Roche Molecular Sys., Inc., 583 F.3d 832,

4

838, 839-40 (Fed. Cir. 2009) and Wise v. Hubbard, 769 F.2d 1, 1-3

5

(1st Cir. 1985) for the proposition that issuance of the ‘985

6

patent established Defendant’s constructive knowledge of his claim

7

for relief in 2005.

(Doc. 192, Motion to Dismiss at 7).2

8

Defendant notes that Plaintiff’s authorities stand for nothing

9

more than the proposition that Defendant had constructive notice of

10

the

11

distinguished from notice of the facts giving rise to his cause of

12

action.

13

F.2d 1395, 1398 (9th Cir. 1991) for the proposition that knowledge

14

of a patent’s existence is not the same as knowledge of a cause of

15

action based on conduct underlying issuance of the patent.

16

220, Def.’s Opp. at 4).

17

Ninth Circuit reasoned:

18
19
20
21
22
23
24

existence

of

the

‘985

Patent

upon

its

issuance,

as

Defendant cites General Bedding Corp. v. Echevarria, 947

General Bedding is persuasive.

(Doc.
As the

Issuance of a patent and recordation in the Patent Office
constitute notice to the world of its existence.
Appellant does not dispute that the issuance of the
patent in 1980 gave it constructive notice of that
patent. Appellant contends, however, that knowledge of
the patent does not constitute constructive notice of
appellant's claims against the defendants.
Appellant argues that because Brandau's name was not on
the patent, a reasonable person might not infer from the
patent's existence that fraud had occurred. The patent
could instead be the result of an independent discovery
by Echevarria. We find this argument compelling, given

25
26
27
28

2

In a footnote, Plaintiff contends that Plaintiff’s state law tort claims
are also time-barred.
Plaintiff cannot carry the burden of establishing its
affirmative defense in a single, conclusory footnote. Further, because the court
is unable to discern the nature of Defendant’s tort claims due to pleading
deficiencies discussed below, resolving Plaintiff’s statute of limitations
defense to such claims at this stage in the proceedings is inappropriate.

8

1
2
3
4
5
6
7
8
9
10
11
12
13

appellant's allegation that Brandau was involved in the
fraud. Brandau was apparently the only employee of
General Bedding involved in the investigation of the
application of tubes to waterbeds. Viewing the evidence
in the light most favorable to appellant, only Brandau
knew the details of his research and cooperation with
Echevarria. In that case, only Brandau could have known
if the patent was for the same design. Because only
Brandau would have been alerted by the design, arguably
only Brandau should have been alerted by this patent.
What was most likely to alert the other employees of
General Bedding -- Brandau's name - was absent from the
patent.
The patent may also have put General Bedding on
constructive notice if it should have alerted General
Bedding of the need to inquire further...Yet, for the
reasons discussed above, it is not clear that a
reasonable person would investigate merely because this
patent was issued. Although the patent application was
filed soon after Brandau worked with Echevarria,
Brandau's name was not on it. It was not necessarily
unusual for Echevarria to patent such a design. Many
inventions
and
discoveries
are
made
soon
after
unsuccessful research. Thus, a reasonable person might
not suspect fraud and investigate.

14
15
16

The fact that the evidence would also support an
inference that General Bedding was on constructive
notice, even if such an inference is stronger, is not a
sufficient basis for granting summary judgment.

17
General Bedding Corp., 947 F.2d at 1398 (citations omitted).
18
Plaintiff has not carried its burden of establishing that
19
Defendant had reason to know of his claims concerning the ‘985
20
Patent by virtue of its issuance.

Unlike Plaintiff’s conduct with

21
respect to the ‘565 patent, Plaintiff did not seek an assignment
22
from Defendant in connection with the ‘985 patent.

In order for

23
Defendant to have known the basis for his claims arising out of the
24
‘985 patent, Defendant would have had to scour the Patent Office’s
25
records for all patents issued to Plaintiff each year and then
26
review the substance of each patent to determine whether he should
27
have been named as an inventor.
28
9

Based on the current record,

1

imposition

of

such

an

onerous

burden

on

Defendant

is

not

2

reasonable. Plaintiff’s motion to dismiss Defendant’s co-ownership

3

claims arising out of the ‘985 Patent is DENIED, without prejudice.

4

B. Preemption

5

The preemptive scope of federal patent law is governed by the

6

decisional law of the United States Supreme Court and the United

7

States

8

Ultra-Precision Mfg. v. Ford Motor Co., 411 F.3d 1369, 1376 (Fed.

9

Cir. 2005) ("Federal Circuit law governs whether federal patent law

10

preempts a state law claim"); see Bonito Boats v. Thunder Craft

11

Boats, 489 U.S. 141, 146 (1989) (landmark Supreme Court case

12

discussing preemptive scope of federal patent law). State law tort

13

claims that frustrate the objectives embodied in the federal patent

14

scheme are subject to conflict preemption.

15

F.3d at 1376; Bonito Boats, 489 U.S. at 146; Aronson v. Quick Point

16

Pencil Co., 440 U.S. 257, 266 (1979) (state law preempted if it

17

"stands as an obstacle to the accomplishment and execution of the

18

full

19

objectives of Congress reflected in federal patent law include

20

seeking to foster and reward invention, promoting disclosure of

21

inventions to stimulate further innovation and to permit the public

22

to practice the invention once the patent expires, promoting the

23

stringent requirements for patent protection to assure that ideas

24

in the public domain remain there for the free use of the public,

25

providing a clear federal demarcation between public and private

26

property, and promoting nationwide uniformity in patent law.

27

Ultra-Precision, 411 F.3d at 1378.

28

///

Court

purposes

of

and

Appeal

for

objectives

the

of"

10

Federal

federal

Circuit.

E.g.,

Ultra-Precision, 411

patent

law).

The

1

A state law tort claim is preempted by federal patent law if,

2

in light of the claim's elements and the remedy sought, University

3

of Colo. Found., Inc. v. American Cyanamid Co., 196 F.3d 1366, 1371

4

(Fed. Cir. 1999) (examining state law tort claim's elements and

5

remedy sought in adjudicating preemption defense), the claim seeks

6

patent-like protection for an intellectual creation that would

7

otherwise remain unprotected as a matter of federal patent law,

8

Bonito Boats, 489 U.S. at 146.3

9

state law tort claim is an important factor in preemption analysis.

10

See, e.g., Cyanamid, 196 F.3d at 1371; see also Smith v. Healy, 744

11

F. Supp. 2d 1112, 1128 (D. Oregon 2010) (holding quasi-contract

12

claim preempted due to the nature of damages sought under claim).

The type of relief sought under a

13

1. Unjust Enrichment

14

The elements of unjust enrichment under California law are

15

(1) the receipt of a benefit; (2) the unjust retention of the

16

benefit; (3) at the expense of another.

17

Partnership, 164 Cal. App. 4th 1583, 1593 (Cal. Ct. App. 2008).

18

Because California’s unjust enrichment cause of action covers a

19

wide

20

policies,

21

enrichment

range

of
see

conduct
Cyanamid,

claim

under

Peterson v. Cellco

that

does

not

bear

on

federal

patent

196

F.3d

at

1371

(discussing

unjust

Colorado

law),4

Defendant’s

unjust

22
3

23
24
25
26
27
28

Defendant cites Dow Chem. Co. v. Exxon Corp., 139 F.3d 1470, 1473 (Fed.
Cir. 1999) for the proposition that state law tort claims are not preempted by
federal patent law provided the state law cause of action includes additional
elements not found in the federal patent law. (Doc. 220, Opp. at 9-10). As Dow
Chem. expressly recognized, the paramount preemption inquiry is whether a tort
cause of action seeks patent-like protection. Id.
4
Unjust enrichment under Colorado law entails the following elements: “(1)
at plaintiff's expense (2) defendant received a benefit (3) under circumstances
that would make it unjust for defendant to retain the benefit without paying”)
Id. (citing DCB Constr. Co. v. Central City Dev. Co., 965 P.2d 115, 19-20 (Colo.
1998).

11

1

enrichment claim is not necessarily preempted, see Ultra-Precision,

2

411 F.3d at 1378, 1380 (holding that claim was preempted “as pled”

3

while noting that party could have pled an unjust enrichment claim

4

not subject to preemption). Whether Defendant’s claim is preempted

5

by federal patent law depends on the nature of Defendant’s theory

6

of recovery.

7
8
9
10

See, e.g., id.

Defendant’s unjust enrichment claim is set forth in three
sentences:
240. Upon information and belief, GE has wrongfully
claims, and continues to wrongfully claim, that it is the
sole and exclusive owner and assignee of the ‘565 patent
and the ‘985 patent.

11
12
13
14
15

241. Upon information and belief, GE has derived, and
will continue to derive, substantial benefits, including
licensing revenue, from its wrongful claims of sole and
exclusive ownership...
242. GE unjustly retained, and will continue to retain,
those benefits at the expense of Mr. Wilkins, injuring
him in an amount not yet determined.

16
(Doc. 177, Def.’s Answer at 24).

The nature of Defendant’s unjust

17
enrichment claim is unclear, but it appears that at least a portion
18
of Defendant’s claim is preempted.
19
The only benefit identified in Defendant’s unjust enrichment
20
claim is “licensing revenue.”

To the extent Defendant seeks to

21
obtain a patent-like royalty from Plaintiff based on licensing
22
revenue attributable to the ‘565 and ‘985 Patents, Defendant’s
23
unjust enrichment claim is preempted.

E.g., Ultra-Precision, 411

24
F.3d at 1382; 35 U.S.C. § 262 (2010) (“each of the joint owners of
25
a patent may make, use, offer to sell, or sell the patented
26
invention

within

the

United

States,

or

import

the

patented

27
invention into the United States, without the consent of and
28
12

1

without accounting to the other owners”).

2

has

3

discernible from the four corners of Defendant’s counterclaim.

4

cognizable

In

his

unjust

enrichment

opposition,

To the extent Defendant

claims,

Defendant

no

clarifies

such

that

claims

his

are

unjust

5

enrichment claim is based on incremental benefits “attributable to

6

[Plaintiff’s] misbehavior...including the false exclusivity it

7

created.”

8

the proposition that “if Mr. Wilkin’s co-ownership claims succeed,

9

then he may recover from GE damages...for the payments he would

(Doc. 220, Opp. at 10).

Defendant cites Cyanamid for

10

have received from GE to secure his cooperation at the PTO.”

11

220,

12

university professors provided the basis for a patent obtained by

13

a company for a reformulated prenatal vitamin. The Federal Circuit

14

explained:

15
16
17
18
19
20
21
22

Opp.

at

11).5

In

Cyanamid,

research

conducted

(Doc.

by

two

[E]ven assuming that the Doctors were the sole inventors
of the Materna reformulation (a fact to be determined
upon remand), the only financial opportunity that the
University could have lost was the payment for an
assignment of ownership rights in the '634 patent or a
license from the University to sell the reformulated
product at the time the patent issued.
If the court finds that the Doctors jointly invented the
reformulated product with Dr. Ellenbogen, the financial
opportunity that the University could have lost was the
payment that Cyanamid would have made to secure the
Doctors' cooperation in filing the required documents
with the PTO, such as oaths and declarations. Because
federal patent law allows joint owners to practice a
patented technology without accounting to the other

23
24
25
26
27
28

5
Defendant
avers
that
this
category
of
damages
is
"distinct
from...disgorgement of any incremental benefits [Plaintiff] derived by wrongfully
asserting that [Defendant] had no ownership interest." However, under the unjust
enrichment theory articulated in Defendant's opposition, it appears that the
measure of damages attributable to any alleged "false exclusivity" is the cost
of obtaining either an assignment of the Defendant's ownership interests in the
subject patents or an exclusive license thereunder.
(See Doc. 220, Opp. at
10-11) (discussing benefits attributable to "false exclusivity"); Cyanamid, 196
F.3d at 1373 (discussing benefit patent holder obtained in the market by omitting
co-inventor from patent).

13

1

co-owners, Cyanamid would not have needed to acquire
ownership of the patent or licenses thereunder. See 35
U.S.C. § 262 (1994). However, in that case, the
University would have been within its rights to license
others under the '634 patent or to produce and sell
products thereunder. See id. Thus, the district court
could find that Cyanamid would have also paid the
University for either an assignment of the University's
ownership interest in the '634 patent or an exclusive
license thereunder. Either arrangement would have assured
Cyanamid the exclusivity, which they enjoyed during the
life of the '634 patent.

2
3
4
5
6
7

Cyanamid, 196 F.3d at 1373.
8
Defendant's

unjust

enrichment

claim

makes

no

distinction

9
between the general licensing revenue Plaintiff has obtained from
10
the

‘585

and

‘985

Patents

and

any

portion

of

such

revenues

11
attributable to "false exclusivity."

Compare Shum v. Intel Corp.,

12
630 F. Supp. 2d 1063, 1079 (N.D. Cal. 2009) (unjust enrichment
13
claim not preempted where theory of recovery was based on a
14
discrete transaction allegedly tainted by misrepresentation of sole
15
ownership

of

patent)

with

Smith,

744

F.

Supp.

2d

at

1128

16
(quasi-contract claim preempted where party sought only "general
17
damages for Defendants' sales of either Plaintiffs' product or
18
copies of the product without a license from Plaintiffs and without
19
paying royalties to Plaintiffs"). Because Defendant's counterclaim
20
does not suggest the nature of the incremental benefits underlying
21
Defendant's unjust enrichment theory, but instead appears to seek
22
patent-like royalties pertaining to all licensing revenue Plaintiff
23
has obtained from the ‘585 and ‘985 Patents, Defendant's unjust
24
enrichment claim is preempted as currently pled. See, e.g., Smith,
25
744 F. Supp. 2d at 1128 (claim seeking general damages preempted);
26
Ultra-Precision,

411

F.3d

at

1382

("In

the

absence

of

an

27
incremental benefit conferred, any attempt to obtain a patent-like
28
14

1

royalty for the making, using, or selling of a product in the

2

public domain under the rubric of state unjust enrichment law is

3

preempted").

4

Defendant's counterclaim also fails to distinguish between

5

licensing revenue attributable to the ‘585 Patent and licensing

6

revenue attributable to the ‘985 Patent.

7

inventor and presumed owner of the ‘585 Patent.

8

3.73(a) (an "inventor is presumed to be the owner of a patent

9

application, and any patent that may issue therefrom, unless there

Defendant is a named
37 C.F.R. §

10

is an assignment").

Because the market has been on notice of

11

Defendant's status as an inventor and presumed co-owner of the ‘585

12

Patent since the date it issued, Defendant's unjust enrichment

13

claim does not allege sufficient facts to state a plausible claim

14

based on a "false exclusivity" theory with respect to the ‘585

15

Patent.

16

list Defendant as a co-inventor.

17

enrichment

18

benefits attributable to the ‘985 Patent and unjust benefits

19

attributable to the ‘585 Patent.

20

enrichment

21

discernible.

22

without prejudice.

23

2. Conversion

24

The elements of a conversion under California law are (1) the

25

plaintiff's ownership or right to possession of the property at the

26

time of

27

wrongful act or disposition of property rights; and (3) damages.

28

Plummer v. Day/Eisenberg, LLP, 184 Cal. App. 4th 38, 45 (Cal. Ct.

In contrast to the ‘585 Patent, the ‘985 Patent does not

claim

makes

applicable

the

no

to

However, Defendant's unjust

distinction

both

between

alleged

unjust

No cognizable theory of unjust
the

‘585

and

‘985

Patents

is

Defendant's unjust enrichment claim is DISMISSED,

conversion; (2)

the defendant's

15

conversion

by

a

1

App. 2010).

Even where patented subject matter is involved, it is

2

possible to state a claim for conversion that does not implicate

3

the interests underlying the federal patent scheme.

4

Inc. v. Yung Shin Pharms. Indus. Co., 600 F.3d 1347, 1354 (Fed.

5

Cir. 2010) (“Because plaintiffs could establish conversion by

6

reference

7

‘experiments, pre-publication experimental data, and non-public,

8

pre-publication

9

theory exists which entitles plaintiffs to relief”).

to

the

defendants'

drafts

of

alleged

papers,’

an

See HIF Bio,

misappropriation

of

alternative, non-patent
However,

10

where a conversion claim is based on alleged misappropriation of

11

patent rights, it is preempted by federal patent law.

12

v. Healy, 744 F. Supp. 2d 1112, 1130 (D. Oregon 2010) (“Plaintiffs'

13

proposed conversion claim does not concern Plaintiffs' tangible

14

property but rather their intangible idea...therefore...Plaintiffs'

15

proposed conversion claim would be preempted by patent law.”);

16

Bonito Boats, 489 U.S. at 146 (states may not offer patent-like

17

protection).

18

E.g., Smith

As currently pled, Defendant’s claim for conversion is clearly

19

preempted.

20

part, as follows:

21
22
23
24

Defendant’s conversion claim provides, in pertinent

235. By virtue of his inventorship, Mr. Wilkins possesses
and undivided ownership interest in the ‘565 patent and
the ‘985 patent.
236. By its conduct...GE has wrongfully interfered, and
continues to interfere, with Mr. Wilkin’s ownership
interests in the ‘565 patent and the ‘985 patent.

25
(Doc. 177, Def.’s Answer at 23).

It is settled that the federal

26
patent scheme “preempts any state law that purports to define
27
rights based on inventorship.”

E.g., Cyanamid, 196 F.3d at 1372.

28
16

1

Defendant contends that its conversion claim is not preempted

2

because it seeks to recover only incremental benefits based on

3

Plaintiff’s

4

Wilkin’s rights.”

(Doc. 220, Opp. at 14).

5

legally

to

6

inventorship that is not preempted, Defendant’s counterclaim is

7

insufficient

8

Defendant’s conversion claim seeks compensation for Plaintiff’s

9

purported interference with Defendant’s inventorship interests in

10

the intellectual property embodied in the ‘565 and ‘985 patents; in

11

other words, Defendant seeks patent-like protection under the guise

12

of the tort of conversion.

13

creation

possible

to

Defendant

of

state

allege

also

false

a

any

contends

exclusivity

conversion

such

claim.

that,

“by

converting

Mr.

Assuming arguendo it is
claim

As

because

predicated

currently

the

on

pled,

counterclaim

14

contains conclusory allegations of “oppressive, malicious, willful

15

and/or fraudulent action by GE,” Plaintiff’s conversion claim falls

16

outside the ambit of patent law and is not preempted.

17

Opp. at 14, n.13) (citing Zenith Elecs. Corp. V. Exzec, Inc., 182

18

F.3d 1340, 1351 (Fed. Cir. 1999).6

19

Plaintiff’s argument, as the portion of the opinion cited by

20

Defendant stands only for the unremarkable proposition that “there

21

is no conflict-type preemption of various state law claims based on

22

publicizing an allegedly invalid and unenforceable patent in the

23

marketplace as long as the claimant can show that the patent holder

24

acted in bad faith in publication of the patent.” Id.

25

conversion claim is DISMISSED, without prejudice.

(Doc. 220,

Zenith does not support

Defendant’s

26
27
28

6

It appears Defendant’s argument is that his conversion claim is not
preempted because it contains additional elements not required in an infringement
action. See footnote 3, supra.

17

1

C. Mitsubishi’s Counterclaims

2

1. Standing Under Section 35 U.S.C. § 256

3

Plaintiff contends that Mitsubishi lacks standing to assert a

4

correction of inventorship claim pursuant to 35 U.S.C. § 256.

5

Plaintiff cites no apposite authority.

6

slew of cases that stand for the general proposition that a third

7

party lacks standing to assert another entities’ rights.

8

192, Motion to Dismiss at 8-9).

9

pertains to the unique language of section 256, which provides:

10
11
12
13

Instead, Plaintiff cites a

(Doc.

None of Plaintiffs’s authorities

Whenever through error a person is named in an issued
patent as the inventor, or through error an inventor is
not named in an issued patent and such error arose
without any deceptive intention on his part, the Director
may, on application of all the parties and assignees,
with proof of the facts and such other requirements as
may be imposed, issue a certificate correcting such
error.

14
15
16
17

The error of omitting inventors or naming persons who are
not inventors shall not invalidate the patent in which
such error occurred if it can be corrected as provided in
this section. The court before which such matter is
called in question may order correction of the patent on
notice and hearing of all parties concerned and the
Director shall issue a certificate accordingly.

18
35. U.S.C. 256 (2011) (emphasis added).
19
In interpreting the broad language contained in section 256,
20
the Federal Circuit has held that a concerned party can pursue a
21
claim

under

section

256

provided

that

the

requirements

for

causation,

and

22
constitutional

standing--namely

injury,

23
redressability--are satisfied.

Chou v. Univ. of Chi. & Arch Dev.

24
Corp., 254 F.3d 1347, 1358 (Fed. Cir. 2001); Larson v. Correct
25
Craft, Inc., 569 F.3d 1319, 1326 (Fed. Cir. 2009).

In Chou, the

26
Federal Circuit explained:
27
28

an expectation of ownership of a patent is not a
prerequisite for a putative inventor to possess standing
18

1
2
3
4
5
6
7

to sue to correct inventorship under § 256. The statute
imposes no requirement of potential ownership in the
patent on those seeking to invoke it. We have previously
interpreted § 256 broadly as a "savings provision" to
prevent patent rights from being extinguished simply
because the inventors are not correctly listed. Pannu v.
Iolab Corp., 155 F.3d 1344, 1349, 47 U.S.P.Q.2D (BNA)
1657, 1662 (Fed. Cir. 1998). The same considerations
apply here. Chou should have the right to assert her
interest, both for her own benefit and in the public
interest of assuring correct inventorship designations on
patents. The interest of both inventors and the public
are thus served by a broad interpretation of the statute.

8
254 F.3d at 1358.

In light of the broad construction the Federal

9
Circuit has afforded section 256, and in light of the fact that
10
Mitsubishi is an assignee of the ‘985 patent that has satisfied
11
constitutional standing requirements, Mitsubishi has standing to
12
pursue a section 256 claim.

See id., see also Ethicon v. United

States Surgical

F.3d

13
Corp.,

135

1456,

1459

(Fed.

Cir.

1998)

14
(licensee of purported unnamed inventor permitted to pursue section
15
256 claim); Xechem Int'l., Inc. v. Univ. of Tex. M.D. Anderson
16
Cancer Ctr., 382 F.3d 1324, 1332 (Fed. Cir. 2004) (noting that
17
assignee

may

be

necessary

party

to

section

256

action).

18
Plaintiff's

motion

to

dismiss Mitsubishi's

counterclaim under

19
section 256 for lack of standing is DENIED.
20
2. 28 U.S.C. § 1659
21
Plaintiff seeks dismissal of Mitsubishi’s counterclaim for
22
declaratory judgment concerning ownership of the ‘985 patent based
23
on 28 U.S.C. § 1659.

Section 1659 provides:

24
25
26
27
28

In a civil action involving parties that are also parties
to a proceeding before the United States International
Trade Commission under section 337 of the Tariff Act of
1930 [19 USCS § 1337], at the request of a party to the
civil action that is also a respondent in the proceeding
before the Commission, the district court shall stay,
until the determination of the Commission becomes final,
proceedings in the civil action with respect to any claim
19

1
2
3
4

that involves the same issues involved in the proceeding
before the Commission, but only if such request is made
within-(1) 30 days after the party is named as a respondent
in the proceeding before the Commission, or
(2) 30 days after the district court action is filed,
whichever is later.

5
Plaintiff complains that Mitsubishi is precluded from alleging that
6
Wilkins is a co-owner of the ‘985 patent because
7
8
9
10
11
12
13
14
15
16

that claim is already pending in earlier-filed litigation
pending between GE and MHI in the Southern District of
Texas. To date, however, the parties have not litigated
those allegations in Texas because MHI invoked the
automatic stay afforded by 28 U.S.C. § 1659—and as
recently as September 2010, MHI refused to respond to an
offer from GE to lift that stay. The Texas action will,
therefore, remain stayed until the ITC concludes its
investigation involving the ’985 patent, including
through any appeals.
Having secured a stay of the Texas action under § 1659,
MHI cannot seek to litigate its Texas noninfringement
defenses in this case—one in which GE has not, and
cannot, press its stayed infringement claims under the
’985 patent. It would be both extremely unfair, a
violation of the claim-splitting doctrine, and in
violation of § 1659, to permit MHI to do so.

17
(Doc. 192, Motion to Dismiss at 9-10) (citations omitted).
18
Section 1659 does not authorize dismissal of a claim that
19
involves the same issues involved in a proceeding before the ITC.
20
The remedy contemplated by section 1659 is a stay.

Plaintiff has

21
not sought a stay under section 1659 and is precluded from doing so
22
at this point in time pursuant to section 1659's own terms.
23
Plaintiff’s citation to Adams v. Cal. Dept. of Health Servs.,
24
487 F.3d 684, 689 (9th Cir. 2007) is of no avail.

In Adams, the

25
Ninth Circuit held:
26
27
28

The district court acted within its discretion in
dismissing Adams's duplicative complaint with prejudice
and preventing her from fragmenting a single cause of
action and litigating piecemeal the issues which could
20

1

have been resolved in one action.

2
Id. at 694. Here, Mitsubishi has not filed a duplicative complaint
3
in an attempt to fragment a single cause of action into piecemeal
4
litigation.

To the contrary, Plaintiff has invited the scenario

5
currently faced by the parties by initiating a third proceeding in
6
this court that implicates Mitsubishi’s rights.
7
Nor is In re Princo Corp., 478 F.3d 1345, 1355 (Fed. Cir.
8
2007) helpful

to

Plaintiff.

Plaintiff

cites Princo

for

the

9
proposition that “the purpose of § 1659 is to prevent separate
10
proceedings on the same issues occurring at the same time.”
11
However, Plaintiff has already thwarted the purpose embodied in
12
section 1659 by initiating the instant lawsuit, which necessarily
13
requires adjudication of ownership issues already pending in at
14
least two other proceedings.
15
Plaintiff

cites

no

authority

that

requires

dismissal

of

16
Mitsubishi’s co-ownership claim.

Plaintiff’s motion is DENIED,

17
without prejudice.
18
ORDER
19
For the reasons stated, IT IS ORDERED:
20
1) Defendant’s conversion and unjust enrichment counterclaims
21
are DISMISSED, without prejudice;
22
2) Defendant shall file an amended counterclaim within fifteen
23
days following electronic service of this memorandum decision;
24
Plaintiff shall file its reply within fifteen days following
25
service of any amended counterclaim; and
26
3) Plaintiff shall file a form of order consistent with this
27
memorandum decision within five days following electronic
28
21

1

service of this decision.

2

IT IS SO ORDERED.

3

Dated:
hkh80h

July 26, 2011

/s/ Oliver W. Wanger
UNITED STATES DISTRICT JUDGE

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