Data Speed Technology LLC v. EMC Corporation

Filing 30

MEMORANDUM. Signed by Judge Sue L. Robinson on 4/8/2014. Associated Cases: 1:13-cv-00616-SLR et al.(nmfn)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
DATA SPEED TECHNOLOGY LLC,
Plaintiff,
v.
EMC CORPORATION,
Defendant.
DATA SPEED TECHNOLOGY LLC,
Plaintiff,
v.

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XEROX CORPORATION,
Defendant.
DATA SPEED TECHNOLOGY LLC,
Plaintiff,
v.

Civ. No. 13-616-SLR

Civ. No. 13-624-SLR

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Civ. No. 13-625-SLR

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ZOHO CORPORATION,

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Defendant.

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DATA SPEED TECHNOLOGY LLC,
Plaintiff,
v.
TOSHIBA AMERICA INC.,
Defendant.

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Civ. No. 13-1 052-SLR

DATA SPEED TECHNOLOGY LLC,
Plaintiff,
v.
ALFRESCO SOFTWARE, LTO. and
ALFRESCO SOFTWARE, INC.,
Defendants.
DATA SPEED TECHNOLOGY LLC,
Plaintiff,
v.
DASSAULT SYSTEMES
SOLIDWORKS, CORP.,
Defendant.
DATA SPEED TECHNOLOGY LLC,
Plaintiff,
v.
THOMSON REUTERS
CORPORATION, THOMSON
REUTERS U.S.A. INC., and
THOMSON REUTERS U.S. LLC,
Defendants.
DATA SPEED TECHNOLOGY LLC,
Plaintiff,
v.
WOLTERS KLUWER U.S.
CORPORATION and CCH, INC.,
Defendants.

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Civ. No. 13-1443-SLR

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Civ. No. 13-1447-SLR

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Civ. No. 13-1450-SLR

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Civ. No. 13-1452-SLR

DATA SPEED TECHNOLOGY LLC,
Plaintiff,

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v.

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EGNYTE, INC.,

Civ. No. 14-33-SLR

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Defendant.

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DATA SPEED TECHNOLOGY LLC,
Plaintiff,
v.

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Civ. No. 14-34-SLR

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INTUIT INC.,
Defendant.

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DATA SPEED TECHNOLOGY LLC,
Plaintiff,
v.
PERFORCE SOFTWARE, INC.,
Defendant.

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Civ. No. 14-36-SLR

MEMORANDUM
At Wilmington this 8th day of April, 2014, having reviewed the multiple motions to
dismiss for lack of subject matter jurisdiction and the papers filed in connection
therewith, and having heard oral argument on the same; the court issues its decision
based on the following analysis:
1. Introduction.

Plaintiff Data Speed Technology LLC ("DST LLC") has

brought suit against multiple defendants asserting infringement of U.S. Patent No.
5,867,686 ("the '686 patent"). Rather than answer the complaint, the above captioned

defendants have responded by filing motions to dismiss, 1 based on their contention that
OST LLC lacks standing to sue because it has not demonstrated that it owns all rights
in the '686 patent. The court has jurisdiction to resolve the pending motions pursuant to
28 U.S.C. §§ 1331 and 1338.
2. Background. The '686 patent, entitled "High Speed Real-Time Information
Storage System," was filed on November 8, 1993 as Application Ser. No. 08/151,063
("the Application"). The inventors listed on the '686 patent are Kenneth H. Conner
("Conner"), James G. Hunter ("Hunter"), Gregory P. Spar ("Spar"), and Bruce Anderson
("Anderson"). There is no indication on the face of the '686 patent that it has ever been
assigned, let alone assigned to OST LLC. (0.1. 1, ex. A) 2
3. On October 7, 1992, prior to the filing date of the Application, inventor Conner
entered into a "Preliminary Agreement" with Peter King ("King"), whereby King agreed
to "provide the initial financing and management direction" to assist Conner "in the
startup and management of a business entity whose purpose [was] to develop, finance
and market product technology developed by Conner and others as they may be called
upon to assist in this development." (Civ. No. 13-624, 0.1. 11, ex. Bat 4) The parties
agreed that Conner would receive 25% of the common stock of such an entity "without
any financing or payment obligations," and that King would receive 75% of the common

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0.1. 8, Civ. No. 13-616; 0.1. 10, Civ. No. 13-624; 0.1. 14, Civ. No. 13-625; 0.1. 9,
Civ. No. 13-1052; 0.1. 8, Civ. No. 13-1443; 0.1. 16, Civ. No. 13-1447; 0.1. 10, Civ. No.
13-1450; 0.1. 9, Civ. No. 13-1452; 0.1. 5, Civ. No. 14-33; 0.1. 9, Civ. No. 14-34; and 0.1.
9, Civ. No. 14-36.
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This is the proper reference in all of the above-captioned cases for the
complaint with a copy of the '686 patent attached.

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stock, with "[a]ny funds advanced by King" deemed a "loan to the entity which shall be
solely obligated for any repayment." (/d.) Pursuant to the above agreement, on
November 24, 1992, Conner and King caused to be formed a Minnesota corporation
called "Data Speed Technology Corporation" ("DST Corp.").
4. In November and December 1992, each of the inventors of the '686 patent
assigned "the entire right, title and interest which [the inventors] might have in any and
all inventions, and any improvements thereof, which relate to and/or which are based
upon the subject matter disclosed to [the inventors] pursuant to the Non-Disclosure
Agreement. ... " (Civ. No. 13-1445, D. I. 17, ex. 1) More specifically: (a) Anderson
executed an assignment on October 10, 1992 to Conner and King Companies, Inc. in
connection with a non-disclosure agreement between Anderson and The King
Companies, Inc., entered "[i]n order to protect the trade secrets and other proprietary
rights of The King Companies, Inc. and Kenneth Conner;" (b) Spar executed an
assignment on November 30, 1992 to Conner and King in connection with a nondisclosure agreement between Spar and The King Companies, Inc., entered "[i] order to
protect the trade secrets and other proprietary rights of The King Companies, Inc. and
Kenneth Conner;" and (c) Hunter executed an assignment on December 21, 1992 to
Conner and King in connection with a non-disclosure agreement between Hunter and
King, entered "[i]n order to protect the trade secrets and other proprietary rights of Peter
J. King and Kenneth Conner." (/d.) Despite the above, on December 30, 1993
(following the filing of the Application with the Patent & Trademark Office ("PTO") on
November 9, 1993), Anderson, Spar and Hunter assigned their rights in the Application

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to DST Corp. 3 (Civ. No. 13-1450, D. I. 14, ex. 2) The assignment was recorded in the
Patent & Trademark Office ("PTO") on April 29, 1994. (Civ. No. 13-1450, D. I. 14, ex. 5)
5. Prior to filing the Application with the PTO, King (as President of DST Corp.,
the borrower) entered into a "Security Agreement" on April 1, 1993 whereby DST Corp.
borrowed a sum certain from King (the individual lender), with the invention of the
Application used as collateral. 4 (Civ. No. 130615, D. I. 18, ex. 2 at 3 and ex. B) After
the filing of the Application with the PTO, King (as President of DST Corp.) and King
(the individual) executed a "Security Assignment of Patents" on March 3, 1994
whereby, "in furtherance of the security interest granted under the [April 1, 1993]
Security Agreement," DST Corp. assigned to King "its entire right, title and interest in
and under all patent applications[, including the Application.] pending as of the date
hereof or at any time hereafter until the Obligations shall have been paid in full." (Civ.
No. 13-615, D.l. 12, ex. 3) Said agreement was recorded with the PTO on March 16,
1994.
6. Thereafter, King and DST Corp. challenged Conner's ownership interest in
the Application, both in the PT0 5 and in court. 6 In the PTO challenge, DST Corp.

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Conner did not execute the assignment form, arguably because he was an
owner of DST Corp ..
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More specifically, "[t]he invention entitled 'HIGH SPEED REAL TIME CROSS
SYSTEM INFORMATION STORAGE SYSTEM' consisting of an information storage
system which enables multiple users to access a data base at a speed much faster
than known information storage systems." (Civ. No. 13-615, D. I. 18, ex. 2 at 3 and ex.
B)
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(Civ. No. 13-624, D.l. 11, ex. Bat 5-6)

(Civ. No. 13-1445, D.l. 17, ex. 2 at 1)

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asserted that, "[s]ince the [April 1, 1993 Security] Agreement obligates Conner to
provide the technology of the Application exclusively to Data Speed, any rights Mr.
Conner had in the Application are now owned by Data Speed." (Civ. No. 13-624, D. I.
11, ex. B at 2)
7. By virtue of a "Partial Release from Security Assignment of Patents," entered
into by DST Corp. and King (with King executing same on December 29, 1994}, King
released DST Corp. from any and all obligations, inter alia, to prosecute the Application
"and any resulting patents, or any continuation, division, renewal, substitute or reissue
thereof." (Civ. No. 13-624, D.l. 11, ex. Bat 12) DST Corp. was further granted "an
exclusive, assignable, royalty-free and irrevocable license to use" such, as well as the
right to bring suit for infringement of such, "[p]rovided, however, that in the event of any
default by [DST Corp., its] successors and assigns, under the Security Agreement,
[King], his successors and assigns, shall have the right to take, use, sell, assign,
transfer or otherwise dispose of the" Application. (/d.)
8. On or about December 31, 1994, DST Corp., King and Conner entered into a
"Settlement Agreement" whereby: (a) DST Corp. and King agreed to assign to Conner
"the sole right and power to prosecute" the Application; (b) King, DST Corp. and "the
business entity identified as 'King Companies' will assign to Conner all rights which they
may have in certain non-disclosure agreements;" (c) King, DST Corp., Conner, "and the
business entity identified as 'King Companies'" agreed that "the assignments executed
by Mr. Anderson, Mr. Hunter and Mr. Spar to King Companies jointly with Conner and
to King jointly with Conner" were assigned to DST Corp. with an effective date of
November 9, 1993, subject to the Security Agreement and Security Assignment of

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Patents and Partial Release of Security Assignment of Patents and Obligations; and (d)
"[u]pon full performance of the Obligations,[ 7] King shall transfer and assign to Conner
all rights, title and interest in the invention assigned to King, as well as the ...
Application." (Civ. No. 13-1450, 0.1. 14, ex. 5 at 7-8)
9. On November 8, 1995, Application No. 08/555,259 was filed, which
application was a continuation of the Application, now abandoned. The '686 patent
issued on February 2, 1999 from Application No. 08/555, 259. (0.1. 1, ex. A) As noted
above, there is no indication of assignment on the face of the '686 patent.
10. On March 14, 2011, King died. According to his personal representative, at
the time of his death, King owned and held all rights, titles and interest in the
Application ("and any continuation applications and any patents issuing therefrom
(collectively the 'Patent Rights')" (Civ. No. 13-1450, 0.1. 14, ex. 6; 0.1. 22, attachments),
which Patent Rights passed immediately to the Peter J. King Revocable Trust ("the
Trust"). On February, 13, 2013, the trustee of the Trust sold, assigned, transferred and
conveyed to Conner the Trust's "entire right, title and interest in and to the Patent
Rights, including the '686 patent." (Civ. No. 13-1450, 0.1. 14, ex. 7)
12. On February 14, 2013, Conner assigned to Empire IP LLC the '686 patent,
which assignment was recorded on April 3, 2013. On April 2, 2013, Empire IP LLC
assigned to OST LLC the '686 patent, which assignment also was recorded on April 3,
2013. (/d., ex. 8; 0.1. 22, attachments 1 and 2) OST LLC filed the first of the

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Understood to be $250,000. (Civ. No. 13-1450, 0.1. 14, ex. 5 at 8)

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complaints asserting infringement of the '686 patent on April 12, 2013. (Civ. No. 13615, D.l. 1)
13. Standard of Review. Article Ill standing to sue for patent infringement
"derives solely" from 35 U.S.C. § 281, which provides that '"[a] patentee shall have
remedy by civil action for infringement of his patent."' Intellectual Prop. Dev., Inc. v. TCI
Cablevision of Cal., Inc., 248 F.3d 1333, 1346 (Fed. Cir. 2001). The term "patentee" is
defined as including "not only the patentee to whom the patent issued, but the
successors in title to the patentee." 35 U.S.C. § 1OO(d). "This has been interpreted to
require that a suit for infringement must ordinarily be brought by a party holding legal
title to the patent." Enzo APA & Son, Inc. v. Geapag A. G., 134 F.3d 1090, 1093 (Fed.
Cir. 1998). Transfers of title, otherwise known as assignments, are controlled by 35
U.S.C. § 261, which provides:
Applications for patent, patents, or any interest therein, shall be
assignable in law by an instrument in writing. The applicant, patentee,
or his assigns or legal representatives may in like manner grant and
convey an exclusive right under his application for patent, or patents,
to the whole or any specified part of the United States.
35 U.S.C. § 261. According to the Supreme Court in Waterman v. Mackenzie, 138 U.S.
252 (1891), a case characterized by the Federal Circuit as "the mainstay of Supreme
Court patent standing jurisprudence," lnt'l Gamco, Inc. v. Multimedia Games, Inc., 504
F.3d 1271, 1279 (Fed. Cir. 2007), the hallmark of standing is that an assignment must
exclude "all other persons, even the patentee," 138 U.S. at 256.
14. "A party that has been granted all substantial rights under the patent is
considered the owner regardless of how the parties characterize the transaction that

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conveyed those rights." Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1250 (Fed. Cir.
2000); see also Vaupel Textilmaschinen KG v. Meccanica Euro ltalia S.P.A., 944 F.2d
870, 875 (Fed. Cir. 1991 ). Where there is more than one owner of an interest in the
patent, "United States patent law ... requires that all co-owners normally must join as
plaintiffs in an infringement suit." lnt'l Nutrition Co. v. Horphag Research Ltd., 257 F.3d
1324, 1331 (Fed. Cir. 2001). In this regard, the court must be mindful of the "risk of
multiple suits and multiple liabilities against an alleged infringer for a single act of
infringement." lnt'l Gamco, Inc., 504 F.3d at 1278.
15. Standing is a "threshold jurisdictional question,''8 and must exist at the time
the suit is brought. See Sicom Systems v. Agilent Techs., 427 F.3d 971, 975-76 (Fed.
Cir. 2005). It is a plaintiff's burden to prove standing. See Steel Co. v. Citizens for a
BetterEnv't, 523 U.S. at 104.
16. Analysis. In the various complaints filed in the above captioned cases, DST
LLC addressed standing by the following assertions: "On November 9, 1993, the
team[ 9] filed an application for patent on the invention, and on February 2, 1999, the
U.S. Patent and Trademark Office issued" the '686 patent. ... Data Speed Tech is the
owner by assignment" of the '686 patent. (Civ. No. 13-1450, D.l. 1,

1J1J1,

9) As the

motion practice has revealed, those simple assertions do not even begin to disclose the
whole story, as related above.

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See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 102 (1998) ("Standing
to sue is part of the common understanding of what it takes to make a justiciable
case.").
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Aithough inventors Conner, Hunter, Spar and Anderson are mentioned, the
word "team" is not so defined and, therefore, not so limited.

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17. In the first instance, as is evident from the court's above citations to the
record, the chronology of ownership of the '686 patent was never provided to the court
by any one party. Indeed, DST LLC, whose burden it is to demonstrate standing and
who, theoretically, researched its title before filing suit, submitted its most helpful
recitation of facts and documents only after (and in response to) oral argument. (See
Civ. No. 13-1450, D.l. 24, 25)
18. It is hardly surprising that DST LLC so inefficiently responded to defendants'
challenge to standing when the chain of title to the '686 patent is reviewed. Long
before the Application was filed, ownership was already in a muddle. On the one hand,
inventors Anderson, Hunt and Spar assigned rights in undisclosed inventions (but
presumed to include the invention yet to be disclosed in the Application) to, variously,
Conner, King and/or The King Companies, Inc .. A year later, although arguably having
no more rights to transfer, inventors Anderson, Hunt and Spar nevertheless again
assigned their rights in the Application to DST Corp. which, in the meantime, had
borrowed money from King using the invention disclosed in the Application for
collateral. By March 1994, DST Corp. had executed an assignment of the Application
to King, which assignment was binding until such time, if ever, that DST Corp. fully paid
back its loan to King.
19. Although DST LLC glosses over much of this convoluted history, certainly
title was not clear enough to avoid litigation with Conner as early as 1994. By virtue of
the Settlement Agreement entered into between Conner, King, DST Corp. and "the

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business entity identified as "King Companies" 10 to resolve such litigation, the parties
attempted to clarify the ownership of the Application, to wit: (a) Conner was deemed to
own all rights in the various non-disclosure agreements executed by inventors
Anderson, Hunter and Spar; (b) DST Corp. was deemed to own the assignments
executed by inventors Anderson, Hunter and Spar (with an effective date of November
9, 1993); and (c) although King owned the Application by operation of the various
security agreements entered into between King and DST Corp., such ownership would
pass to Conner if Conner paid back the loan in full.
20. Apparently Conner never paid back the loan, so King's interest in the '686
patent remained intact until the day he died. According to DST LLC's time line,
"[f]ollowing King's death, his entire interest in the patent was transferred to a trust"
which, in turn, "transferred its interest to" Conner for an undisclosed consideration.
(Civ. No. 13, 1450, D .. 14, ex. 9) The last two assignments (from Conner to Empire and
from Empire to DST LLC) also were affected "for good and valuable" - but undisclosed consideration. (/d., D.l. 22, attachments 1 and 2)
22. Conclusion. Despite the decades-long history recited above, I conclude
that the record sufficiently establishes that DST LLC holds title to the '686 patent.
Unlike many of the patents that are enforced in this court, the inventors of the '686
patent were individuals not affiliated with a corporate employer and, therefore, the '686
patent was not automatically assigned to a corporate entity. As a consequence, the
efforts of these individuals to monetize their invention through yet another individual

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(Civ. No. 13-1450, D.l. 14, ex. 5 at 7)
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(King) can be charitably characterized as less than sophisticated. It was not until the
Settlement Agreement was signed in 1994 that those initial assignment efforts were
formalized and clarified in a satisfactory way, to wit: (1) All rights to the Application
were deemed assigned to DST Corp., subject to the Security Agreement and Security
Assignment of Patents and Partial Release of Security Assignment of Patents and
Obligations; and (2) If Conner satisfied the obligations imposed by the above
documents, King would transfer and assign all his rights in the Application to Conner.
Upon King's death, his interest instead passed to a trust and ultimately on to DST LLC.
20. I am satisfied that, for purposes of the pending motions to dismiss, DST LLC
has provided sufficient evidence of the chain of title. Therefore, the motions are
denied. An order shall follow.

United St es D1stnct Judge

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