The Regents of the University of California v. Chen et al

Filing 65

ORDER by Judge Edward M. Chen Denying 53 Defendants' Motion to Dismiss Plaintiff's First Amended Complaint. (emcsec, COURT STAFF) (Filed on 7/26/2017)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 THE REGENTS OF THE UNIVERSITY OF 8 Case No. 16-cv-07396-EMC CALIFORNIA, 10 ORDER DENYING DEFENDANTS’ MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT Plaintiff, 9 v. Docket No. 53 ROGER JINTEH ARRIGO CHEN, et al., 12 For the Northern District of California United States District Court 11 Defendants. 13 I. 14 INTRODUCTION 15 The Regents of the University of California (―the University‖) brought this suit alleging 16 that a former research employee, Defendant Roger Jinteh Arrigo Chen, violated his contractual 17 agreement by failing to assign his inventions to the University. See Docket No. 48 (―FAC‖) ¶ 1. 18 After leaving the University, Chen started a company, Defendant Genia Technologies, Inc. 19 (―Genia‖), which sought to commercialize the technology the University claims Chen invented 20 during his prior employment. Chen secured patents based on the disputed technology, and 21 assigned those patents to Genia. The University filed the instant suit asserting a claim for 22 Correction of Inventorship under 35 U.S.C. § 256, as well as seven state-law contract and tort 23 claims relating to Chen‘s alleged breach of his agreement. Now pending before the Court is 24 Defendants‘ motion to dismiss the University‘s First Amended Complaint. Docket No. 53. The 25 Court DENIES the motion. 26 II. FACTUAL AND PROCEDURAL BACKGROUND 27 The following facts are drawn from the University‘s FAC. In October 2005, Chen enrolled 28 in a Ph.D. program in Biochemistry at the University of California at Santa Cruz (―UCSC‖). FAC Akeson and David W. Deamer, scientists working in the field of DNA nanopore sequencing.1 3 FAC ¶ 16. As a condition of his employment in the lab, Chen was required to sign the 4 University‘s State Oath of Allegiance, Patent Policy, and Patent Acknowledgment. Id. The Patent 5 Acknowledgment provides that (1) Chen has an ―obligation to assign inventions and patents‖ that 6 he conceived or developed during the time he was employed by the University or while using the 7 University‘s research facilities, resources, or funds; (2) Chen has an ―obligation to promptly report 8 and fully disclose the conception and/or reduction to practice of potentially patentable inventions‖ 9 to the University so that it could ―determine [its] rights and equities therein‖; (3) if the University 10 determined that any such invention was patentable, Chen was required to execute any documents 11 necessary to assign all patent rights to the University; and (4) the University would provide Chen 12 For the Northern District of California ¶ 15. While at UCSC, Chen worked as a researcher in a biophysics laboratory run by Mark A. 2 United States District Court 1 with a percentage of any royalty payments obtained based on licensing Chen‘s inventions. FAC ¶ 13 17. Chen executed this agreement on September 15, 2005. During his time at the UCSC lab, Chen, along with various co-inventors, developed a 14 15 number of inventions ―relating to a computer chip containing an array of individually addressable 16 nanopores in membranes.‖ FAC ¶ 21. These inventions were recorded in a series of Disclosures 17 and Records of Invention, identifying Chen as either sole inventor or co-inventor. FAC ¶ 22. Mark Akeson co-developed with Chen two concepts relevant to the inventions: First, ―the 18 19 concept of binding a large blocking molecule to a polynucleotide molecule so that an enzyme in 20 solution . . . could not modify the polynucleotide‖; and second, ―the concept of providing an array 21 of individually addressable nanopores formed in a membrane for characterizing and/or sequencing 22 each of a plurality of polynucleotide molecules.‖ FAC ¶ 27. David Deamer, a professor at UCSC 23 working in the same lab, originally conceived the idea of ―using nanopores for sequencing of 24 polynucleotide molecules‖ and he co-developed, with Akeson, ―the use of enzymes such as 25 exonucleases and polymerases to control the movement of a polynucleotide molecule passing 26 27 28 1 Nanopore sequencing is a method of determining the precise order of nucleotides within a DNA molecule that makes use of very small holes (nanopores) whose diameter is on the order of one billionth of a meter. FAC ¶ 20. 2 1 through a nanopore so that the polynucleotide molecule could be sequenced.‖ FAC ¶ 30. 2 Additionally, two other researchers, William B. Dunbar and Noah A. Wilson, made relevant 3 contributions to the inventions, and are identified with Chen and others on other disclosures of 4 inventions. FAC ¶ 28. In particular, ―Wilson and Dunbar developed at least the use of voltage 5 feedback control and a finite state machine to control the movement of polynucleotide molecules 6 captured in nanopores and measure electrical signals across the nanopores, as well as its associated 7 computerized processor and automation equipment.‖ FAC ¶ 30. 8 9 Between 2007 and 2016, the University filed a series of related patent applications seeking protection for the inventions discussed above; each of the applications lists Chen as an inventor, Wilson each assigned their rights in the patent applications to the University. FAC ¶ 33. The 12 For the Northern District of California along with one or more of the other researchers. FAC ¶ 32. Akeson, Deamer, Dunbar, and 11 United States District Court 10 University filed the first three of these applications in 2007 while Chen was still employed at the 13 University. FAC ¶ 39. Shortly after he left his employment in January 2008, the University filed 14 two additional applications. FAC ¶ 40. Beginning in early 2009, the University asked Chen to 15 execute declarations pertaining to these patent applications, but between 2009 and 2010 ―Chen 16 either failed to respond or was evasive when the University‖ asked him to do so. FAC ¶ 42. 17 During this period, Chen was launching Genia, which was officially founded in March 2009. 18 FAC ¶ 44. 19 On October 17, 2013, the University filed an additional patent application, and 20 subsequently asked Chen to execute an Inventor‘s Oath or Declaration as to that application, and 21 also asked him to execute assignment as to the six previously filed applications. FAC ¶ 46. After 22 asking for additional information, on March 5, 2014, Chen sent a letter stating ―I do not believe I 23 contributed to material in the claims in this application. Thus, I do not believe I am an inventor on 24 this application‖ and advising the University to review his written materials from his time at 25 UCSC. FAC ¶ 48. The University was unable to locate any such materials, and allege that ―Chen 26 failed to return those materials to the University, even though he was required to do so per the 27 terms of his employment and the University‘s policy.‖ FAC ¶ 49. The University states that it 28 had no reason to look for Chen‘s materials prior to receiving his 2014 letter. 3 1 Genia‘s business model is based on nanopore sequencing. Genia has secured five patents 2 related to this technology which list Chen as one of two co-inventors, along with Randy Davis, 3 another Genia employee who never worked at UCSC. FAC ¶ 58. According to the University, 4 ―[t]he subject matter of the Genia Patents, and the claims and inventions disclosed therein, were 5 conceived and developed by Chen (and his University co-inventors) during his employment with 6 the University.‖ FAC ¶ 57. The first Genia Patent was filed on February 8, 2010. Its pre-grant 7 publication date was August 8, 2011, and it was issued on December 4, 2012. Id. Genia filed 8 additional patent applications in the following years, and its additional patents were issued on June 9 11, 2013, May 26, 2015, and June 28, 2016. Id. Most recently, Genia filed a patent application on 10 March 24, 2016, which was published on November 24, 2016, and has not yet been issued. Id. The University learned of the Genia Patents sometime shortly before June 10, 2014, when 12 For the Northern District of California United States District Court 11 it filed an additional patent application containing claims copied from Genia‘s ‗854 patent, which 13 had been issued on June 11, 2013. FAC ¶ 50. The University again asked Chen to sign inventors‘ 14 declarations and assignments regarding this application, and requested that he provide a copy of 15 his written materials. Id. Chen responded, through counsel, asking for additional information 16 regarding the University‘s claims. Over the next ―several months,‖ Chen continued to engage in 17 ―evasive tactics,‖ including requesting additional information and ―advancing various excuses as 18 to why he had not executed the requested documents.‖ FAC ¶ 53. To date, Chen has not executed 19 any declarations or assignments relating to the University‘s patent applications. FAC ¶ 55. 20 In June 2014, Roche, one of the largest healthcare companies in the world, agreed to 21 acquire Genia for $125 million, plus another $225 million contingent on achieving certain 22 milestones. FAC ¶ 62. The University states that ―[u]pon information and belief, a significant 23 portion of the Acquisition Payment is attributable to the value of the Genia Patents, which are one 24 of Genia‘s most valuable assets.‖ FAC ¶ 63. 25 Although Genia‘s first patent application was published on August 11, 2011 and issued as 26 the Genia ‗914 patent on December 4, 2012, the University alleges that it did not know of the 27 patent until sometime in 2014. The University was not aware that Chen had co-founded Genia in 28 March 2009 and had begun pursuing competing patent applications in 2010. Thus, the University 4 1 alleges that it ―had no reason to suspect that Chen was improperly using the UCSC Inventions, so 2 as to trigger a duty to investigate whether any patents or published patent applications naming 3 Chen as an inventor incorporated the UCSC Inventions.‖ FAC ¶ 68. The University alleges that 4 to the extent Chen breached his contractual obligations regarding to the University‘s 2007-2008 5 applications, those breaches were insufficient to put the University on notice that he would breach 6 his agreement with respect to the later-filed applications. FAC ¶ 66. The University further 7 alleges that Chen engaged in ―evasive conduct‖ and made ―continued representations suggesting 8 he might comply with the University‘s requests to fulfill his obligations under the Patent 9 Agreement.‖ Id. This ―misconduct induced the University into forbearing suit,‖ FAC ¶ 72, and 10 equitably estops Chen and Genia from asserting a statute of limitations defense. FAC ¶ 74. Based on the above allegations, the University brought the instant action, asserting claims 12 For the Northern District of California United States District Court 11 for (1) Correction of Inventorship Under 35 U.S.C. § 256; (2) Declaration of Patent Ownership; 13 (3) Breach of Contract; (4) Breach of the Implied Covenant of Good Faith and Fair Dealing; (5) 14 Conversion; (6) Inducing Breach of Contract; (7) Intentional Interference with Contractual 15 Relations; and (8) Constructive Trust. Defendants move to dismiss on the following grounds: (1) 16 the University‘s claim for Correction of Inventorship fails to state a claim; (2) the University‘s 17 state law claims are time-barred; (3) the University‘s state law claims are preempted by federal 18 patent law; and (4) the University‘s contract and derivative tort claims fail because the patent 19 agreement between Chen and the University unambiguously imposes no post-employment duty on 20 Chen. III. 21 22 A. DISCUSSION Standard of Review 23 Under Rule 12(b)(6), a party may move to dismiss based on the failure to state a claim 24 upon which relief may be granted. A motion to dismiss based on Rule 12(b)(6) challenges the 25 legal sufficiency of the claims alleged. See Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 26 (9th Cir. 1995). In considering such a motion, a court must take all allegations of material fact as 27 true and construe them in the light most favorable to the nonmoving party, although ―conclusory 28 allegations of law and unwarranted inferences are insufficient to avoid a Rule 12(b)(6) dismissal.‖ 5 1 Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). While ―a complaint need not contain 2 detailed factual allegations . . . it must plead ―enough facts to state a claim to relief that is plausible 3 on its face.‖ Id. ―A claim has facial plausibility when the plaintiff pleads factual content that 4 allows the court to draw the reasonable inference that the defendant is liable for the misconduct 5 alleged.‖ Ashcroft v. Iqbal, 556 U.S. 662 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. at 6 556. ―The plausibility standard is not akin to a ‗probability requirement,‘ but it asks for more than 7 sheer possibility that a defendant acted unlawfully.‖ Iqbal, 556 U.S. at 678. 8 B. 9 Count One The University‘s first claim for relief is for correction of inventorship under 35 U.S.C. § is named in an issued patent as the inventor, or though error an inventor is not named in an issued 12 For the Northern District of California 256, which permits a court to order the correction of a patent ―[w]henever through error a person 11 United States District Court 10 patent.‖ Specifically, the University asks that the Court correct the four issued Genia patents—the 13 ‗914, ‗854, ‗420, and ‗437 patents—by removing Randy Davis and adding Mark Akeson, David 14 Deamer, William Dunbar, and Noah Wilson. FAC ¶ 87. Defendants contend that the University 15 has failed to set forth sufficient facts to support this claim under Iqbal and Twombly. In particular, 16 Defendants argue that the University makes general claims that ―several UCSC employees 17 ‗contributed to the conception‘ of various concepts regarding nanopore technology . . . and that the 18 UCSC employees and Mr. Chen ‗jointly conceived‘ of certain systems allegedly ‗claimed‘ in 19 some of the Genia Patents.‖ Motion at 23. According to Defendants, the University did not make 20 sufficient ―assertions regarding what the Genia Patent claims state, or what part of those patents 21 claims is novel (i.e., inventive rather than simply part of the technological background).‖ Id. 22 The Court disagrees. As the University correctly points out, Defendants‘ selective reading 23 of the complaint entirely elides the fact that, over the course of several pages, the University‘s 24 FAC goes into considerable detail regarding specific contributions made by each of the University 25 scientists to particular methods and ideas underlying the patents, see FAC ¶¶ 80-82, and further 26 explains how these conceptions relate to specific systems claimed in each of the Genia Patents, see 27 FAC ¶¶ 83-85. Indeed, the FAC ―recite[s] specific elements from the Genia Patent claims that 28 each inventor conceived.‖ Docket No. 58 (―Opp.‖) at 10. 6 In reply, the Defendants do not effectively respond to these points; instead, they seek to 1 2 distinguish a case relied upon by the University on the ground that in that case, there were specific 3 allegations of ―corroborating evidence of conception‖ such as when and how information was 4 shared between the inventors. Docket No. 59 (―Reply‖) at 13 (quoting Quintel Tech. Ltd. v. 5 Huawei Techs. USA, Inc., No. 415CV00307GHDCMC, 2016 WL 5423178, at *18 (E.D. Tex. 6 Sept. 27, 2016)). But the University includes specific allegations about how each of the 7 researchers collaborated during their time working at the UCSC lab. These allegations are 8 sufficient to state a plausible claim under Iqbal and Twombly, and the Court therefore DENIES 9 Defendants‘ motion with respect to Count One. 10 C. Counts Two through Eight 1. 12 For the Northern District of California United States District Court 11 Statute of Limitations With respect to the University‘s state law claims, Counts Two through Eight, Defendants 13 first argue that each is time barred as a matter of law. As the parties apparently agree, the statutes 14 of limitations are two years for Plaintiff‘s claims against Genia for tortious interference with 15 contract and inducing breach of contract (Counts Six and Seven), three years for Plaintiff‘s 16 conversion claim (Count Five), and four years for Plaintiff‘s patent ownership and breach of 17 contract claims (Counts Two through Four).2 Motion at 7 (citing authorities for each of the 18 relevant limitations periods). This action was filed on December 29, 2016, which means that the 19 critical date for the longest limitations period is December 29, 2012. Defendants argue that all of 20 the University‘s claims accrued before that date, for several reasons. a. 21 Constructive Notice Defendants‘ primary argument is twofold: First, the publication, on August 11, 2011, and 22 23 issuance, on December 4, 2012, of the first Genia Patent, put the University on constructive notice 24 of its claims. Second, because the subsequent Genia Patents are continuation patents related to the 25 first, the first Genia Patent triggered the statute of limitations for all of the University‘s claims, 26 2 27 28 Defendants assert that ―Plaintiff‘s constructive trust claim (Count VIII) is a remedy, not a standalone claim, subject to the statutes of limitations for the other claims, depending on the underlying substantive right.‖ Motion at 8 (citing Davies v. Krasna, 14 Cal. 3d 502, 515-16 (Cal. 1975)). The University does not dispute this point. 7 1 even as to the subsequent patents. 2 With respect to constructive notice, the Supreme Court has long held that ―issuance of a 3 patent and recordation in the Patent Office constitute notice to the world of its existence.‖ Wine 4 Ry. Appliance Co. v. Enter. Ry. Equip. Co., 297 U.S. 387, 393 (1936). Following Wine Railway, 5 the Ninth Circuit and this Court have held that ―publication of patents (and now patent 6 applications) must be deemed, as a matter of law, to place those practicing in the same field and 7 prosecuting their own patent applications in the same field on full notice of all of the contents of 8 the publication.‖ Wang v. Palo Alto Networks, Inc., No. C 12-05579 WHA, 2014 WL 1410346, at 9 *6 (N.D. Cal. Apr. 11, 2014); see also Gen. Bedding Corp. v. Echevarria, 947 F.2d 1395, 1398 the ―need to inquire further,‖ the statute of limitations on claims arising from the patent would 12 For the Northern District of California (9th Cir. 1991) (holding that where the publication of a patent would alert a reasonable person to 11 United States District Court 10 begin to run with publication). It is undisputed that with respect to the patents at issue, the 13 University and Defendants are ―practicing in the same field,‖ i.e. the field of nanopore technology. 14 Accordingly, as Defendants argue, the issuance of the first Genia Patent, on December 4, 2012, 15 ―gave Plaintiff notice that (1) Mr. Chen and Genia sought patent protection on inventions directed 16 to nanopore technology; (2) Mr. Chen had not assigned the application or patent to Plaintiff; and 17 (3) Mr. Chen claimed the inventions set forth therein for himself and Genia.‖ Motion at 12. This 18 sufficed to put the University on notice of all claims arising out of this patent, and accordingly 19 Chen‘s failure to assign his rights to the University. 20 The University states that some courts have ―flatly rejected‖ the argument that the issuance 21 of a patent constitutes constructive notice of its existence as a matter of law. Opp. at 22. But the 22 University only cites two district court cases that have reached this conclusion, and only one of 23 them, Applera Corp.–Applied Biosystems Grp. v. Illumina, Inc., No. C-07–02845-WHA, 2008 WL 24 927963, at *1–2 (N.D. Cal. Apr. 4, 2008), is from a court within this Circuit. As Defendants 25 rightly point out, the author of the Applera order, Judge Alsup, subsequently explicitly repudiated 26 it and held to the contrary that ―publication of patents (and now patent applications) must be 27 deemed, as a matter of law, to place those practicing in the same field and prosecuting their own 28 patent applications in the same field on full notice of all of the contents of the publication.‖ Wang, 8 1 2014 WL 1410346, at *6. The Supreme Court‘s decision in Wine Railway, and the Ninth Circuit‘s 2 decision in General Bedding are binding on this Court, and the Court sees no basis for departing 3 from them. 4 That is not the end of the matter, however, as the University contends that questions of fact 5 remain that preclude the application of constructive notice in this case. First, noting its allegation 6 in the FAC that it ―had no knowledge of facts giving rise to its claims until it learned of the Genia 7 Patents in 2014 and had no reason to suspect their existence prior that that time,‖ Opp. at 23 8 (citing FAC ¶ 68), the University argues that its notice constitutes a question of fact that cannot be 9 resolved on a Rule 12 motion to dismiss. But this conclusory allegation cannot defeat the University also contends that ―Chen actively misled the University into believing that he would 12 For the Northern District of California University‘s constructive notice of the first Genia patent, for the reasons explained above. The 11 United States District Court 10 fulfill his obligations under the Patent Agreement,‖ and that this misconduct prevented the 13 University from discovering its claims earlier. This cannot be correct. The alleged misconduct 14 the University cites were communications between the parties in 2014-2016, after the University 15 became aware of the Genia Patents, see Opp. at 23-24 (citing FAC ¶¶ 45-54, 68, 71-74), and after 16 it had constructive notice of the first Genia patent. 17 Second, the University argues that Chen‘s misconduct ―induced the University into 18 forbearing suit,‖ FAC ¶ 72, and that accordingly Chen should be equitably estopped from 19 asserting a statute of limitations defense. The University contends that at the very least, ―the 20 reasonableness of the University‘s reliance on Defendants‘ wrongful conduct presents a fact issue 21 that cannot be resolved on a motion to dismiss.‖ Opp. at 25. This argument fails for two reasons. 22 First, as Defendants note, this Court has explained that equitable estoppel ―does not come into 23 play, whatever the lengths to which a defendant has gone to conceal the wrongs, if a plaintiff is on 24 notice of a potential claim.‖ Raifman v. Wells Fargo Advisors, LLC, No. C 11-02885 SBA, 2014 25 WL 12013436, at *12 (N.D. Cal. Mar. 31, 2014), aff'd sub nom. Raifman v. Wachovia Sec., LLC, 26 649 F. App'x 611 (9th Cir. 2016) (emphasis in original). By the time of Chen alleged misconduct, 27 the University was on both actual and constructive notice of its potential claims. It cannot be 28 heard to complain, therefore, that any actions on Chen‘s part prevented it from filing suit. Second, 9 1 the University‘s allegations regarding Chen‘s ―misconduct‖ are conclusory. What the University 2 characterizes as ―evasive tactics,‖ FAC ¶ 53, appear to be nothing more than Chen‘s requests for 3 additional information about the University‘s claims, and his refusal, through counsel, to sign 4 documents related to the University‘s patent applications between 2014 and 2016. See generally 5 FAC ¶¶ 45-55. 6 Defendants next argue that the issuance of the first Genia Patent triggered the limitations 7 period for all of the University‘s claims, even as to the later-issued patents, because the subsequent 8 patents were ―continuation patents‖ based on the first patent. Motion at 13. A continuation patent 9 ―is a second application that contains the same disclosure as the original application,‖ and ―may application.‖ 4 A Donald S. Chisum, Chisum on Patents § 13.03[2]; see also 4 Pat. Law 12 For the Northern District of California not contain anything that would have been considered ‗new matter‘ if inserted in the original 11 United States District Court 10 Fundamentals § 15:8 (2d ed.) (―A continuation carries forward the disclosure from a previous 13 application but adds nothing new.‖); V-Formation, Inc. v. Benetton Grp. SpA, 401 F.3d 1307, 14 1308 (Fed. Cir. 2005) (explaining that the specification and drawings of parent patents and 15 continuation patents are the same). Thus, in this case, ―all of the Genia Patents and applications 16 are directed to inventions that were originally disclosed in the initial Genia Patent application.‖ 17 Motion at 13. For that reason, Defendants argue, the University ―had notice of all causes of action 18 arising out of Mr. Chen‘s alleged failure to assign and/or disclose these inventions, including those 19 that were described in the original Genia Patent yet claimed in later-issued Genia Patents.‖ 20 Motion at 14. 21 In support of this position, Defendants principally rely on the Federal Circuit‘s holding in 22 Board of Trustees of Leland Stanford Junior University v. Roche Molecular Systems, Inc., 583 23 F.3d 832 (Fed. Cir. 2009). In Stanford, the court found that the statute of limitations barred 24 Roche‘s claims where evidence showed that it had notice of one patent that had already issued, 25 and also knew that ―continuations based on the same application ‗family‘ remain pending‖ and 26 that Stanford claimed ownership ―patents that may issue‖ based on those applications. Id. As 27 here, Roche argued that its causes of action as to later filed patents could not accrue until those 28 patents actually issued, but the Court held that Roche was on notice regarding possible ―additional 10 1 patents as to the same subject matter,‖ even though the applications at issue had not yet been filed 2 when Roche received such notice. According to Defendants, Stanford thus stands for the 3 proposition that ―the statute of limitations starts once the plaintiff is on notice that the defendant 4 asserts ownership over the inventions and is seeking patent protection—it does not matter that 5 some of those patents are applied for and issued after the critical date.‖ Motion at 14. 6 Stanford, however, is distinguishable from this case. In Stanford, the plaintiff had actual 7 notice of the issued patent, as well as of defendants‘ claim of ownership over related patents that 8 ―may issue.‖ The Court‘s holding was in part dependent on those specific facts. By contrast, in 9 this case the University alleges that it had no actual notice of the first Genia Patent, but even additional continuation patents as was the case in Stanford. Defendants argue that the University‘s 12 For the Northern District of California assuming it had constructive notice of that patent, it was not aware that Genia planned to seek 11 United States District Court 10 constructive notice of the first Genia patent should have put it on notice of the need to inquire 13 further into any additional patents, and they contend that any reasonable investigation would have 14 revealed that by the date of the first patent, Defendants were already seeking a continuation patent, 15 which had been filed on September 15, 2012.3 Reply at 6. There may well be merit to this 16 argument, but as the Ninth Circuit has explained, the determination of what a party ―discovered or 17 could have discovered with the exercise of reasonable diligence‖ is ordinarily a quintessential 18 question of fact that cannot be resolved at the motion to dismiss stage at least where, as here, the 19 University may not have had actual notice of existing and future continuation patents. General 20 Bedding, 947 F.2d at 1396 n.2; see also Beneficial Standard Life Ins. Co. v. Madariaga, 851 F.2d 21 271, 275 (9th Cir. 1988) (―Ordinarily we leave the question of whether a plaintiff knew or should 22 have become aware of a fraud to the jury.‖). Even assuming the University‘s constructive 23 knowledge of the first Genia patent, therefore, the determination of what the University should 24 have discovered through ―reasonable investigation‖ sufficiently appears to be a question of fact so 25 as to preclude a finding as a matter of law at this juncture. For that reason, the Court cannot 26 conclude that the University had constructive notice of its claims with respect to the later-filed 27 3 28 Information about continuation patents is available to the public upon inquiry into the original patent. See Manual of Patent Examining Procedure § 102; 37 C.F.R. § 1.14(a)(2)(iv). 11 1 patents for purposes of the motion to dismiss. b. 2 3 Duty to Investigate In addition to the above argument, the Defendants contend that the University‘s claims are 4 time-barred for an additional reason. As noted above, the University alleges that in 2007 and 5 2008, while Chen was still at UCSC and shortly after he left, the University filed three patent 6 applications related to nanopore technology. FAC ¶¶ 39-40. Beginning in early 2009, the 7 University asked Chen to execute declarations pertaining to these patent applications, but between 8 2009 and 2010 ―Chen either failed to respond or was evasive when the University‖ asked him to 9 do so. FAC ¶ 42. According to Defendants, ―UCSC‘s allegation that Mr. Chen repeatedly failed unaware of Chen‘s alleged breach,‖ and ―[a]t the very least, these facts triggered Plaintiff‘s duty 12 For the Northern District of California (and refused) to sign the applications . . . is therefore fatal to any assertion that UCSC was 11 United States District Court 10 to investigate possible claims.‖ Motion at 10-11. Had the University timely investigated Chen‘s 13 refusal to sign these documents, it would have discovered immediately that Chen had started 14 Genia, rather than not discovering that fact until 2014, as the University alleges. 15 As with constructive notice question, however, the question of what exactly the University 16 knew or suspected and what knowledge it should be charged with must be considered at this stage 17 to be a fact-intensive inquiry. Moreover, as the University points out, its present claims are not 18 premised on any breach during 2007-2009, but rather on Chen‘s later failure to assign the Genia 19 Patents. 20 In sum, the Court cannot conclude at this stage that the University‘s claims are time-barred 21 as a matter of law in the context of the Rule 12(b)(6) motion. Defendants‘ motion is therefore 22 DENIED as to the timeliness issue. 23 2. Federal Preemption 24 Defendants further argue that the University‘s state claims are preempted by federal patent 25 law. Motion at 18-22. Because the rules for determining inventorship are established in federal 26 law, the Federal Circuit and other federal courts have frequently explained that ――the field of 27 federal patent law preempts any state law that purports to define rights based on inventorship.‖ 28 HIF Bio, Inc. v. Yung Shin Pharm. Indus. Co., 600 F.3d 1347, 1353 (Fed. Cir. 2010) 12 1 (quoting Univ. of Colo. Found. v. Am. Cyanamid Co., 196 F.3d 1366, 1372 (Fed. Cir. 1999)). 2 Thus, a state law claim that ―turns on a determination of inventorship is preempted by federal 3 patent law.‖ Speedfit LLC v. Woodway USA, Inc., No. 13-CV-1276 (KAM), 2016 WL 7471307, 4 at *7 (E.D.N.Y. Dec. 28, 2016). By that same token, ―claims that can be established without 5 reference to patent inventorship or ownership are generally not preempted by federal patent law.‖ 6 Gerawan Farming, Inc. v. Rehrig Pac. Co., No. 1:11-CV-01273 LJO, 2012 WL 691758, at *7 7 (E.D. Cal. Mar. 2, 2012). Thus, courts have held preempted, e.g., state law conversion claims 8 based on allegations that defendants misappropriated intellectual property rights ―by securing 9 patents from the PTO for the same subject matter as Plaintiff‘s patents,‖ Lyden v. Nike Inc., No. omit[ing] [the plaintiff] as an inventor on . . . [a] patent application,‖ Brown v. Brown, No. CV 13- 12 For the Northern District of California 3:13-CV-00662-HZ, 2014 WL 2563401, at *2-3 (D. Or. June 6, 2014), or by ―improperly 11 United States District Court 10 03318 SI, 2013 WL 5947032, at *7 (N.D. Cal. Nov. 5, 2013). In each of these cases, the Court 13 was unable to resolve the state law claims without making a determination regarding the plaintiff‘s 14 claim to inventorship. 15 Defendants claim that each of the University‘s state law claims likewise requires a 16 determination of inventorship insofar as they require a determination of whether Chen and the 17 other University researchers conceived of the inventions in question while working at UCSC. But 18 as the University rightly points out, its claims are not dependent on a determination of ownership. 19 This is true because, according to the University‘s allegations, ―even if inventorship on the face of 20 the Genia Patents is correct, the University is entitled to joint ownership of those patents based at 21 least on Chen‘s obligations to assign the inventions claimed in the Genia Patents to the University, 22 as well as Chen‘s conversion of University property.‖ Opp. at 6. The key question is not who 23 invented the inventions described in the Genia Patents – it is undisputed that Chen is at least one 24 of the proper inventors – but rather when they were invented: while Chen was still at UCSC or 25 after he had left to found Genia. Whether Chen breached his contractual obligations to the 26 University, and whether he wrongfully converted property that belongs to the University, depend 27 primarily on ―factual questions of when certain of Chen‘s actions occurred rather than a more 28 complete determination of inventorship.‖ Opp. at 6. 13 1 Significantly, none of the preemption cases that Defendants cite involved a similar 2 situation, where the identity of the inventor was undisputed and the claim turned primarily on the 3 timing of the invention as such timing affects contractual rights. Similarly, as the University 4 notes, Defendants cite no cases in which state law claims for breach of contract or contract-related 5 torts were held to be preempted. The Federal Circuit has emphasized that courts ―apply state law 6 to contractual disputes and interpretations of the parties' patent assignment agreements.‖ 7 Intellectual Ventures I LLC v. Erie Indem. Co., 850 F.3d 1315, 1320 (Fed. Cir. 2017). The Court 8 therefore agrees with the University that the state claims in this case are not preempted. 9 Defendants‘ motion is DENIED as to the preemption issue. 3. 11 The Scope of the Patent Agreement Lastly, Defendants argue that the University‘s claims against Chen for breach of contract 12 For the Northern District of California United States District Court 10 and breach of the implied covenant of good faith and fair dealing (Counts Three and Four), as well 13 as the derivative tort claims against Genia for inducing breach and intentional interference with 14 contractual relations (Counts Six and Seven) ―fail as a matter of law because the Patent Agreement 15 unambiguously provides that Mr. Chen was not bound after leaving UCSC, and each of Mr. 16 Chen‘s alleged breaches occurred after Mr. Chen left UCSC.‖ Motion at 23. The basis for this 17 claim is one sentence in the Patent Agreement entered into between Chen and the University, 18 which provides that ―I acknowledge that I am bound during any periods of employment by 19 University or for any period during which I conceive or develop any invention during the course 20 of my utilization of any University research facilities, or any gift, grant, or contract research funds 21 received through the University.‖ FAC ¶ 16. Defendants argue that this language 22 ―unambiguously provides that Mr. Chen‘s duties end with his employment or use of University 23 facilities or funds,‖ and that as a result, one Chen had left UCSC he was under no continuing 24 obligation to assign inventions and patents, even if he had conceived them during his time there. 25 Motion at 24. 26 As the University explains, however, the standard industry practice for such agreements 27 requires the disclosure of all inventions developed during employment. See, e.g., 28 STMicroelectronics, Inc. v. Harari, No. C 05-4691 JF, 2006 WL 2032580, at *2 (N.D. Cal. July 14 1 18, 2006) (―Harari was required to disclose all inventions, period, as long as the temporal 2 limitation in the Inventions Agreement was met (i.e., as long as the invention was conceived 3 during Harari's term of employment.)‖). Indeed, the University argues Defendants‘ interpretation 4 would lead to an absurd result. Under Defendants‘ reading, any employee who conceived an 5 invention during his employment could immediately quit, and claim it for himself, without any 6 continuing obligation to assign rights to his employer. This would plainly have the effect of 7 rendering any similar Patent Agreement utterly powerless, making it extremely unlikely that this is 8 the interpretation of the Agreement that the parties understood themselves to be entering into. of the Agreement. The sentence upon which Defendants rely in asserting the Agreement binds the 11 employee only with respect to the activity of inventing, and not with respect to the obligation to 12 For the Northern District of California Moreover, the entire text of the Agreement undermines Defendants‘ proffered construction 10 United States District Court 9 assign rights, is read out of context. The Agreement elsewhere expressly provides that, when the 13 University makes a determination that an invention conceived during employment is patentable, 14 the employee agrees ―to execute any documents and do all things necessary . . . to assign to 15 University all rights, title, and interest therein and to assist University in securing patent or 16 analogous protection thereon.‖ FAC ¶ 16. This provision does not indicate any time limit on this 17 obligation. Defendants‘ interpretation would effectively read this central provision out of the 18 Agreement. See Cal. Civ. Code § 1641 (―The whole of a contract is to be taken together, so as to 19 give effect to every part, if reasonably practicable, each clause helping to interpret the other.‖); 20 Palmer v. Truck Ins. Exch., 21 Cal. 4th 1109, 1115 (1999). 21 The Court therefore holds that the Agreement is unambiguous as a matter of law. See Wolf 22 v. Superior Court, 114 Cal. App. 4th 1343, 1350 (2004). Chen‘s obligation to assign does not end 23 with his employment. The Court DENIES Defendants‘ motion to dismiss on this ground. 24 /// 25 /// 26 /// 27 /// 28 /// 15 IV. 1 2 3 4 CONCLUSION For the foregoing reasons, the Court DENIES Defendants‘ motion to dismiss the University‘s First Amended Complaint. This order disposes of Docket No. 53. 5 6 IT IS SO ORDERED. 7 8 9 10 Dated: July 26, 2017 ______________________________________ EDWARD M. CHEN United States District Judge 12 For the Northern District of California United States District Court 11 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 16

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