Opinion
No. C-02-03262-DLJ.
September 26, 2008
ORDER
On July 25, 2008, the Court heard argument on Defendants' motions for summary judgment. Stephen E. Taylor appeared on behalf of Defendants Intel Corporation (Intel), LightLogic, Inc. (LightLogic), and Jean-Marc Verdiell (Verdiell). Paul F. Kirsch appeared on behalf of Frank Shum (Shum). Having considered the arguments of counsel, the papers submitted, the applicable law, and the record in this case, the Court GRANTS Defendants' motion in part and DENIES in part.
I. BACKGROUND
A. Factual Background
Shum and Verdiell are optical engineers. They met in 1994 when both worked at a company called SDL Technologies (SDL), a manufacturer of lasers and laser diodes. At the time, they discussed their respective ideas for the design and the construction of optoelectronic devices, as well as the possibility of forming a separate company of their own to further explore these ideas. Verdiell already had his own company, named aCADian, which was an optoelectronic software company.
In June of 1996, Shum left SDL and formed a sole proprietorship named Radiance Design, Inc. (Radiance), with the goal of developing optoelectronic devices. Radiance submitted a number of proposals for government funding of its ideas: on July 2, 1996, a pre-proposal to the Army; on August 25, 1996, a similar proposal to NASA; and on December 2, 1996, another proposal to the Army. Each proposal was signed by Shum. Although Verdiell remained employed at SDL, he worked with Shum in the preparation of these proposals. At the suggestion of Verdiell, Lumen Intellectual Property Services (Lumen), a patent firm, was engaged and began work on a patent application for Radiance.
In April 1997, Verdiell left SDL technologies and on April 22, 1997, Radiance Design Inc. was incorporated with Verdiell as President and Treasurer and Shum as Vice President and Secretary, and with each of them as the only, equal, shareholders. At the time of incorporation Shum assigned his invention and patent application rights to Radiance. On the same day, a patent application related to optoelectronic technology was filed on behalf of Radiance. Marek Alboszta (Alboszta), of Lumen, prepared this patent application, which named Shum as the sole inventor.
While the patent application filed in April was pending, Verdiell informed Alboszta that he was an inventor of the subject matter covered by the patent. Shum states that Alboszta informed him of this new information from Verdiell and stated, to Shum, that if Verdiell is an inventor the application must be withdrawn. Subsequently, Radiance withdrew the pending application on November 17, 1997.
At about this time, the relationship between Shum and Verdiell deteriorated. Both Shum and Verdiell hired lawyers to negotiate the dissolution of Radiance and a Plan of Liquidation (POL) was drafted. During the dissolution negotiations, Verdiell was represented by John C. Gorman, an attorney and partner of the Gorman Miller law firm. Shum was represented by the Coudert Brothers law firm.
A Plan of Liquidation was agreed upon and executed on January 5, 1998. Radiance was dissolved as of that date. The day after the dissolution took effect, Albostza filed a patent application, which covered the same optoelectronic technology as the withdrawn patent application. This patent application named Verdiell as the sole inventor, and indicated that the patent was assigned to LightLogic, a company newly formed by Verdiell. Verdiell had formed LightLogic, without notice to Shum, three days before the original patent application was withdrawn in November 1997. Based on this application, United States Patent No. 5,977,567 (`567) was issued on November 2, 1999, listing Verdiell as the sole inventor. After Radiance was dissolved, over the next several years, LightLogic obtained six additional patents (United States Patent Nos. 6,376,268 (`268); 6,207,950 (`950); 6,586,726 (`6726); 6,227,724 (`724); 6,585,427 (`427); and 6,252,726 (`2726)). Each patent named Verdiell as the sole inventor.
These seven patents cover three separate areas of optoelectronic technology. The first area can be referred to as "Dual Enclosure" technology and involves only a single patent — the `2726 patent. This invention describes an optoelectronic package which is comprised of two separate enclosures designed to regulate the temperature within the package in a cost-efficient manner. The second technology group is referred to by the parties as "Direct Bonded Copper" or "Step" technology and two patents, `567 and `268, are involved. These patents disclose an optoelectronic package consisting of a substrate made of an insulating ceramic material, and a layer of copper that is bonded to this substrate. The third technology group is called "Flexure" technology and four patents, `950, `724, `427, and `6726, are involved. These inventions address the problem of precisely aligning a laser diode and an optical fiber during an automated fiber-optic assembly process, and of keeping the two components aligned during use.
Shum contends that he was an inventor or co-inventor of the subject matter claimed by these seven patents while he and Verdiell worked together at Radiance.
In June 2001, Defendant Intel Corporation (Intel) acquired LightLogic along with the rights to the `567 patent and the six additional patents issued to LightLogic.
A more detailed description of this history is contained in the previous Orders of the Court filed in this case.
B. Procedural History
In 2001, Shum filed his original complaint in this action in California state court, and then filed a first amended complaint in state court in May 2002. The first amended complaint was brought against Intel, Verdiell, Lumen, Alboszta, and Gorman, and contained numerous state causes of action, essentially based on fraud related claims.
On July 9, 2002, Intel removed the case to federal district court.
On December 19, 2002, Shum filed a second amended complaint in this Court. This complaint essentially repleaded the original state causes of action and added a federal cause of action for Correction of Patent Inventorship pursuant to 35 U.S.C. § 256.
On January 21, 2003, Intel and Verdiell filed a motion to dismiss the second amended complaint. This Court entered an Order on March 25, 2003, granting in part and denying in part Defendants' motion to dismiss. Among the dismissed claims was a claim under California State Law for Unjust Enrichment. The Court dismissed this claim on the basis that it was duplicative of the causes of action for fraud.
On April 15, 2003, Shum filed a third amended complaint.
On April 27, 2004, the Court issued an Order as to the third amended complaint denying Defendants' summary judgment motions, recognizing that all of Shum's state law causes of action were primarily based on the unresolved allegation that Verdiell was not the sole true inventor of the patented technology. After a hearing on the matter, the Court decided to bifurcate the inventorship issue from the other claims of the complaint, and ordered that the § 256 trial should proceed first.
A bench trial, at which Shum contended that there should be a correction of inventorship as to multiple claims of the seven patents, began on January 10, 2005 and concluded on January 24, 2005. An order setting forth the Court's findings of fact and conclusions of law was issued on June 21, 2005. The Court concluded that Shum did not meet his burden to show that he was the inventor or co-inventor of any of the patent claims at issue and denied any correction of inventorship.
On January 12, 2006, the Court issued an Order as to a fourth amended complaint granting Defendants' summary judgment motions, concluding inter alia that, in light of the Court's findings that Shum was not an inventor of any of the claims of the patents at issue, a jury could not reasonably find for Shum on any of the state law causes of action.
Shum appealed, and on November 19, 2007, the United States Court of Appeals for the Federal Circuit reversed the inventorship ruling of June 21, 2005 as well as the January 12, 2006, summary judgment ruling. The Federal Circuit held that, because the issue of inventorship was integral to the factual basis of the state law claims, it had to be decided by a jury pursuant to the Seventh Amendment. The Court of Appeals additionally reversed the Court's March 25, 2003, dismissal of Shum's unjust enrichment claim, holding that under California law the unjust enrichment claim constituted a separate cause of action, not duplicative of the other causes of action. The relevant previous orders were vacated and the case was remanded to this Court.
Jury trial, pursuant to the mandate of the Federal Circuit, is currently scheduled for November 3, 2008. On April 4, 2008, Defendants moved for summary judgment on all the above-listed claims.
II. LEGAL STANDARD
A. Summary Judgment
The Federal Rules of Civil Procedure provide for summary adjudication when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(e).
Procedural matters not unique to patent law are decided by applying the law of the relevant regional circuit. See Transmatic, Inc. v. Gulton Indus., Inc., 53 F.3d 1270, 1278 (Fed. Cir. 1995).
In a motion for summary judgment, initially it is the moving party's burden to establish that there is "no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56; British Airways Bd. v. Boeing Co., 585 F.2d 946, 951 (9th Cir. 1978). Subsequently, "[i]f the party moving for summary judgment meets its initial burden of identifying for the court those portions of the materials on file that it believes demonstrate the absence of any genuine issues of material fact," the burden of production then shifts so that "the non-moving party must set forth, by affidavit or as otherwise provided in Rule 56, `specific facts showing that there is a genuine issue for trial.'" T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (citing Celotex Corp. v. Catrett, 477 U.S. 317 (1986)); Kaiser Cement Corp. v. Fischbach Moore, Inc., 793 F.2d 1100, 1103-04 (9th Cir. 1986).
Under Rule 56(f), where further discovery is necessary to enable a party to present evidence necessary to meet that party's burden, the court may defer ruling on the motion until such evidence has been obtained and presented to the Court.
Where the "clear and convincing" evidence requirement applies, the trial judge's summary judgment inquiry as to whether a genuine issue exists will be whether the evidence presented is such that a jury applying that evidentiary standard could reasonably find for either the plaintiff or the defendant.Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
A court is generally precluded from reconsidering an issue previously decided by the same court, or a higher court in the identical case. Securities Investor Prot. Corp. v. Vigman, 74 F.3d 932, 937 (9th Cir. 1996). For the law of the case doctrine to apply, the issue in question must have been decided explicitly or by necessary implication in the previous disposition. Id. However, a party cannot revisit theories that it raises but abandons, and by the same token, a party cannot offer up successively different legal or factual theories that could have been presented in a prior request for review. Id.
B. Breach of Fiduciary Duty
Before a person can be found to owe a fiduciary duty to another, the factual circumstances attendant to their relationship must show that he knowingly undertook to act on behalf and for the benefit of the other person, or that the relationship itself is one which imposes that undertaking as a matter of law, such as guardian and ward, trustee and beneficiary, principal and agent, or attorney and client. Comm. on Children's Television, Inc. v. General Foods Corp., 35 Cal. 3d 197, 221 (1983); Richelle L. v. Roman Catholic Archbishop, 106 Cal. App. 4th 257, 271 (2003).
In numerous cases California courts have rejected attempts to extend fiduciary obligations to relationships where the imposition of such an affirmative duty is deemed to be unwarranted. For instance, no fiduciary relationship was found to exist as between the following: (1) an attorney and his co-counsel under the theory that the former's malpractice in the handling of a mutual client's case caused damage to co-counsel in the loss of fees; (2) one shareholder and another shareholder by virtue of the fact that they were former partners in an entity that was later incorporated; (3) an unmarried cohabitant and his cohabitant concerning the operation of the former's business; (4) a movie distributor and movie producers under a distribution contract; (5) a homeowner's association and the buyer of an individual unit (with respect to disclosure of known construction defects); (6) a trade union and a union member (apart from the union's duty of fair representation); (7) a bank and its borrowers; (8) a corporation and its bondholders; (9) a clearing broker and an investment broker's customer; (10) an insurer and its insured; and (11) a manufacturer and an authorized dealer. Oakland Raiders v. Nat'l Football League, 131 Cal. App. 4th 621, 633 (2005) (internal case citations omitted).
Unless a fiduciary relationship exists, there can be no breach of fiduciary duty. See, e.g., id. at 634. Under California law, equal shareholders in a corporation do not owe one another a fiduciary duty merely by virtue of that relationship. Persson v. Smart Inventions, Inc., 125 Cal. App. 4th 1141, 1156-59 (2005). This is the case even if the equal shareholders also serve as directors and officers of the corporation. Id. at 1147.
C. Fraudulent Concealment
Fraudulent concealment is "[t]he suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead by want of communication of that fact." Cal. Civ. Code § 1710(3). A duty to disclose normally arises only where there exists a fiduciary or confidential relationship between the parties or where other special circumstances require a disclosure. Warner Constr. Corp. v. Los Angeles, 2 Cal. 3d 285, 294 (1970).
D. Inventorship
A patent is invalid if more or less than the true inventors are named. Jamesbury Corp. v. United States, 518 F.2d 1384, 1395 (Ct. Cl. 1975). Because of the presumption that a patent is valid, under 35 U.S.C. § 282, there is a parallel presumption that the named inventors on a patent are the true and only inventors. As a result, a party seeking to change the existing inventorship has a burden to prove by clear and convincing evidence the existence of an inventorship contribution to any of the patent claims. Bd. of Educ. v. Am. Bioscience, Inc., 333 F.3d 1330, 1337 (Fed. Cir. 2003).
To meet the clear and convincing burden of proof, alleged co-inventors must prove their contribution to the conception with more than their own testimony respecting the facts surrounding a claim of inventorship. Price v. Symsek, 988 F.2d 1187, 1194 (Fed. Cir. 1993). Relevant corroborating evidence generally takes the form of physical evidence, or oral testimony of someone other than the alleged inventor. Trovan, Ltd. v. Sokymat SA, Irori, 299 F.3d 1292, 1302-03 (Fed. Cir. 2002).
E. Unjust Enrichment
Under California law, unjust enrichment can be the basis of a right to restitution or quasi-contractual recovery. Cal. Med. Ass'n v. Aetna U.S. Healthcare of Cal., 94 Cal. App. 4th 151, 171 n. 23 (2001). Where one obtains a benefit which he may not justly retain, he is unjustly enriched. Id. The quasi-contract, or contract "implied in law," is an obligation created by the law without regard to the intention of the parties, and is designed to restore the aggrieved party to his former position by return of the thing or its equivalent in money. Id. However, the mere fact that a person obtains a benefit from another is not of itself sufficient to require that person to make restitution therefor. Id. (citing 1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts, § 91, ¶¶ 122-23). Thus, even when a person has received a benefit from another, he is required to make restitution only if the circumstances of its receipt or retention are such that, as between the two persons, it is unjust for him to retain it. Id. (citing Ghirardo v. Antonioli, 14 Cal. 4th 39, 51 (1996)). As a matter of law, a quasi-contract action for unjust enrichment does not lie where an express binding agreement exists and defines the parties' rights. Id. at 172.
F. Fraud
Under California law, the elements of fraud are the following: (1) a misrepresentation (false representation, concealment, or nondisclosure) of a material fact, (2) made with knowledge of its falsity, (3) with intent to defraud, (4) justifiable reliance upon the misrepresentation, and (5) damage resulting from that justifiable reliance. Cal. Civ. Code § 1709; see also Stansfield v. Starkey, 220 Cal. App. 3d 59, 72-73 (1990); Robinson Helicopter Co., Inc. v. Dana Corp., 34 Cal. 4th 979, 990 (2004).
G. Breach of Contract
Under California law, a contract must be interpreted to give effect to the mutual intention of the parties at the time of entering the contract. Cal. Civ. Code § 1636. In order to ascertain intention, the language of a contract governs its interpretation, if the language is clear and explicit and does not involve an absurdity. Cal. Civ. Code § 1638. When a contract has been reduced to writing, the intention of the parties is to be ascertained from the writing alone. Cal. Civ. Code § 1639. The words of a contract are to be understood in their ordinary and popular sense. Cal. Civ. Code § 1644.
Extrinsic evidence may be admitted if it serves to prove a meaning to which the contract is reasonably susceptible. Powers v. Dickson, Carlson Campillo, 54 Cal. App. 4th 1102, 1111 (1997). If the court decides, after considering the extrinsic evidence, that the language of the contract is reasonably susceptible to the interpretation urged on the basis of that evidence, the evidence is admitted as evidence to aid in interpreting the contract. Id. Thus, "[t]he test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible." Pac. Gas Elec. Co. v. G. W. Thomas Drayage Rigging Co. Inc., 69 Cal. 2d 33, 37 (1968).
III. SUMMARY JUDGMENT MOTION
Because the Federal Circuit vacated both the 2005 § 256 bench trial and the 2006 summary judgment order, the case is essentially reset to its status in April of 2004, when the Court denied summary judgment and bifurcated the § 256 cause of action. Given this state of the record, Shum contends that any summary judgment motion at this time is improper as it is simply a reconsideration of an existing summary judgment order without establishing the required grounds for such a reconsideration. The Court does not agree. Some matters have never been considered — for example, the unjust enrichment claim has been reinstated without ever being part of a summary judgment proceeding. Some matters have been vacated although they have always been separate from inventorship issues — for example, the question of any fiduciary relationship between Shum and Verdiell. In any event, the Court believes that given the history of the case a full pre-trial review by way of a summary judgment hearing is warranted.
A. Breach of Fiduciary Duty
In its order of March 25, 2003, the Court addressed the issue of Shum's standing to sue for a breach of fiduciary duty. The Court concluded that "the alleged wrong is personal and exclusive" to Shum as the sole stockholder (other than Veridell) of Radiance, to whom Verdiell owed multiple duties as its president. On that basis, the Court held that Shum had standing and denied Verdiell's motion to dismiss at that pleading stage.
Subsequent to that order, the Court of Appeal of California issued its decision in Persson v. Smart Inventions, Inc., 125 Cal. App. 4th 1141 (2005). In Persson, the partners, Persson and Nokes, in the business of selling consumer products, incorporated their business with both of them as fifty percent shareholders, directors, and officers. Id. at 1147. After some success, their business fell off as well as their personal relationship, and they both hired lawyers to assist them in terminating their relationship. Id. at 1147-48. Nokes proceeded to buy out Persson and remained in business. Id. at 1149. The day the buyout was executed Nokes began an advertising campaign for a new product which he had never disclosed to Persson, even though he had represented to Persson that he would "paint" him a true picture of the state of the company at the time the buyout was being considered. Id. at 1148-49. Nokes made millions on the new product and Persson sued him for fraud and breach of fiduciary duty. Id. at 1149-50. Nokes was found liable for both at trial and awarded damages. Id. at 1150-51. The trial court found that Nokes owed Persson a fiduciary duty on two theories: (1) there was still a de facto partnership, and (2) Nokes had voluntarily assumed such a duty in connection with the purchase of Persson's shares. Id. at 1151. The California appellate court found that as a matter of law neither ground supported a finding of the existence of a fiduciary duty. Id. at 1156. The court then reversed the fiduciary duty verdict and affirmed the fraud verdict. Id. at 1178.
The appellate court held that partners do owe fiduciary duties to one another, but after incorporation they have the regular obligations of shareholders, not of partners, as there is no fiduciary duty between them at that time. See id. at 1159. The appellate court further held that although a fiduciary relationship may not exist based upon the legal relationship of the partners, one may exist based on the factual circumstances of their relationship. Id. at 1159-62. California recognizes that reposing trust and confidence in another who is cognizant of that fact may support a confidential relationship, but that is not the same as a fiduciary relationship. Id. at 1160-61. The court stated that in order to find a fiduciary relationship the "essential elements" are: "1) The vulnerability of one party to the other which 2) results in the empowerment of the stronger party by the weaker which 3) empowerment has been solicited or accepted by the stronger party and 4) prevents the weaker party from effectively protecting itself." Id. at 1161.
The Persson court also recognized that the existence of a confidential relationship generating a fiduciary duty is a question of fact, but that there was no evidence of the "necessary predicate" of vulnerability and reversed the trial court finding that a fiduciary relationship existed. Id. at 1161-62. In its January 12, 2006 order, this Court analyzed thePersson decision and found: that as to the Shum-Verdiell dissolution, the facts were not distinguishable from those inPersson; that the evidence in this case does not establish that Shum was vulnerable or incapacitated; that Verdiell owed no fiduciary duty to Shum; and granted summary judgment to Verdiell. This judgment was vacated and remanded by the Federal Circuit, but that reversal was based on jury trial Seventh Amendment grounds, and there was no discussion of the fiduciary duty issue, which is clearly independent of the Seventh Amendment issue. In these circumstances it may be contended that this matter has already been resolved, but this Court has decided that all the summary judgment issues should again be considered.
Shum contends that the argument by Verdiell, that as a matter of law he did not owe Shum a fiduciary duty, has been rejected by a recent decision of the California Supreme Court. Shum argues that City of Hope National Medical Center v. Genentech, Inc., 43 Cal. 4th 375 (2008) stands for the proposition that whether a fiduciary duty arose in an agreement to commercialize intellectual property was a question of fact, with the result that the issue of fiduciary duty in this case should be a question of fact to be submitted to the jury. City of Hope had an agreement with Genentech entrusting their intellectual property in certain inventions to be developed, patented, and marketed by Genentech in return for royalties. City of Hope, 43 Cal. 4th at 380-85. City of Hope sued Genentech on the theory that Genentech owed them a fiduciary duty and breached it. Id. at 385. A jury agreed with City of Hope and awarded them compensatory damages and $200 million in punitive damages. Id. The jury had been instructed that a fiduciary duty is created when a party entrusts its secret ideas to another to be developed in return for royalties. Id. at 387. The Supreme Court held that this instruction was erroneous as those facts do not necessarily create a fiduciary duty. As that was the only thesis relied upon by City of Hope to create a fiduciary duty, the Supreme Court found that the fiduciary duty and damage awards based upon that verdict must be set aside. Id. at 392. Any suggestion by Shum that City of Hope rejects Persson in any way is not correct. Actually, City of Hope cites Persson as existing California precedent consistent with its decision inCity of Hope. Id. at 388. In addition, any suggestion by Shum that either Persson or City of Hope hold that the issue of fiduciary duty must invariably be submitted to a jury is also incorrect. In both of those cases jury verdicts finding fiduciary duty were set aside as a matter of law without remanding them for jury consideration. See id. at 399; Persson, 125 Cal. App. 4th at 1178.
Upon its further consideration of the undisputed facts and the present state of California law, the Court again finds this is a case where there is no showing that the legal relationship of the parties creates a fiduciary duty, and that it is also a case where there is no showing that the factual relationship of the parties creates such a duty. The Court finds that this case falls squarely within the California law stated in Persson, and that the California Supreme Court accepts the continued vitality of that law in its City of Hope decision. Verdiell does not owe a fiduciary duty to Shum as the evidence proffered by Shum is insufficient to permit a factual finding of vulnerability or incapacity on the part of Shum, which is required by California law in order to create a factually based fiduciary duty.
Shum also claims that his fiduciary duty claim can be supported by the fact that Verdiell breached his duty to Radiance, the corporation in which he was an officer and director. In its March 25, 2003 order, the Court denied Verdiell's motion to dismiss this claim, holding that Shum's claim was for an injury personal and exclusive to him, giving him standing to sue. This order had to do with the sufficiency of the pleadings in the case, and had nothing to do with the sufficiency of the evidence to support the existence of a fiduciary duty or the breach of any such duty. As already stated, Shum and Verdiell were the only officers, directors, and owners of Radiance during its existence. Radiance was dissolved when the Plan of Liquidation was executed on January 5, 1998. Verdiell's subsequent conduct of the prosecution of the seven patents before the PTO was done at a time Radiance did not exist. Shum complains of Verdiell's plans and activities as to LightLogic which took place before Radiance was dissolved. But plans and activities to dissolve and compete with an existing business, even though undertaken by an officer or director of the business, do not, of themselves, constitute a breach of any fiduciary duty the officer or director may owe to that business. It may be noted that it appears that Shum also engaged in similar undisclosed plans and activities to form a competing business of his own, which he called Luminance, before Radiance was dissolved.
In sum, the Court finds that on the circumstances in this case that Verdiell does not owe any fiduciary duty to Shum, or that Verdiell has breached any fiduciary duty to Radiance, and that summary judgment should be granted to Verdiell on this claim.
B. Fraudulent Concealment
Shum supports this cause of action by his contention that Verdiell had a duty to disclose to Shum, as a stockholder in Radiance, for whom Verdiell was President, that he was forming LightLogic, a competitor corporation. Shum's claim is based on the fact that Verdiell did not disclose his actions in competition with Radiance, despite his duty, and Shum was consequently defrauded because he relied, to his detriment, on Verdiell's non-disclosure.
The Court finds that Verdiell had no duty to disclose any potentially harmful facts to Shum. The undisputed facts support the conclusion that Verdiell had no fiduciary duty, as discussed above, nor any duty created by the POL, nor any duty, in the arms-length negotiations in which the parties were engaged at the time, to notify Shum of Verdiell's intent to compete. Without a duty to disclose the detrimental facts at issue, Shum cannot sustain a cause of action for fraudulent concealment. Under the circumstances, the Court must grant Verdiell's motion for summary judgment on Shum's cause of action for fraudulent concealment.
C. Inventorship
Each of the seven patents at issue in this case has multiple claims and has been issued to Defendant Verdiell as the sole inventor. Each claim is considered to be a separate invention. Shum contends that he is "at least a joint inventor" of these patents. The "at least" language leaves open the possibility that Shum is contending that he is the sole inventor of these patents, which would require him to prove that Verdiell is not the inventor of the patents issued to him. The Court will visit this issue after first considering the joint inventorship issue.
To be a joint inventor, one must "(1) contribute in some significant manner to the conception or reduction to practice of the invention, (2) make a contribution to the claimed invention that is not insignificant in quality, when that contribution is measured against the dimension of the full invention, and (3) do more than merely explain to the real inventors well-known concepts and/or the current state of the art." Pannu v. Iolab Corp., 155 F.3d 1344, 1351 (Fed. Cir. 1998). The testimony of one who claims to be a joint inventor is not, of itself, sufficient to prove any such fact — it must be corroborated. Price, 988 F.2d at 1194. In order to prove such a fact, the proponent's burden is to meet the standard of proof of clear and convincing evidence. Am. Bioscience, 333 F.3d at 1337. In order to meet the challenge of summary judgment the proponent of joint inventorship status must identify relevant, admissible evidence sufficient to meet that burden. See Fed.R.Civ.P. 56(e)(1). It is important, however, that a Court in its assessment of any such identified evidence in relation to a summary judgment motion is not permitted to make any credibility or weight of evidence determinations. See Liberty Lobby, 477 U.S. at 255.
The question of whether or not any person has made an inventive contribution to any patent claim is a mixed question of fact and law. Shum has identified an evidentiary mix of his own testimony and asserted corroboration in the form of Lab notebooks, drawings (CAD and otherwise), admissions of Verdiell, and other materials which he contends are sufficient to establish his inventive contribution to claims of the patents. Defendant contends that this mix, for various reasons, is not sufficient to clear the threshold hurdle of Rule 56 of the Federal Civil Rules, and permit the case to be presented to a fact finder. The Court must disagree. Defendant's argument necessarily requires the Court to make prohibited credibility and weight determinations. The Court made such determinations in the § 256 bench trial, where it was obligated to make such determinations in order to apply the law and find the facts, but the Court cannot make such determinations in deciding this summary judgment motion. In point of fact, the essential rationale for the Federal Circuit's decision to set aside the § 256 trial was to require that these questions must be decided by a jury. Accordingly, the Court will deny Defendant's motion, which would prevent Shum from presenting his joint inventorship claims to a jury.
The question of sole inventorship, however, requires Shum to prove that Verdiell was not "at least" a joint inventor of that invention. It appears that this issue may well be raised at a trial of this case. However, the issue has not been briefed or argued by the parties, and it is not ripe for any summary judgment decision by this Court and must be treated as any other factual trial issue.
D. Unjust Enrichment
Under California law, the elements of the tort of unjust enrichment are, (1) receipt of a benefit and (2) unjust retention of the benefit at the expense of another. Lectrodryer v. SeoulBank, 77 Cal. App. 4th 723, 726 (2000). Shum claims that when Verdiell was paid by Intel for its June 2001 purchase of LightLogic and the rights to the seven patents, he obtained a benefit based on the patent rights of Shum and that retention of that benefit is unjust.
Under California law a claim for unjust enrichment will not lie if there is an express agreement between the parties which covers the "same subject matter, existing at the same time." Wal-Noon Corp. v. Hill, 45 Cal. App. 3d 605, 613-14 (1975). Defendants claim that the POL accepted by the parties in this case is such an agreement and that the unjust enrichment claim can not be sustained. Defendants point out that the POL permits each party to exploit the Radiance intellectual property by obtaining patents on the technology. Shum responds that although that may be true, the POL does not permit Verdiell to unlawfully obtain a patent by omitting the "true inventor," which in turn means that the unjust enrichment claim and the POL do not cover the same subject matter. It appears to the Court that Shum has the better of this argument. It is at least clear that the POL does not authorize Verdiell to obtain a patent on optoelectronic technology inventions that were invented by Shum and not by Verdiell.
Defendants also argue that there is no unjust enrichment as the POL makes Shum and Verdiell "co-owners" of the Radiance Technology, and that means that Shum retains all of his economically valuable rights as a patentee. This argument has essentially the same flaw as the "same subject matter" argument already discussed. The Court does not believe that Defendant has established that the rights of a "co-owner" under the POL are co-extensive with the established rights of a patentee. The fact that the Federal Circuit restored this claim after it had been dismissed by this Court does not mean that it is not subject to summary judgment proceedings, however, for the reasons stated, it does not appear that a grant of summary judgment is warranted as to this claim.
E. Fraud
The Federal Circuit decision has essentially re-set this case to its status immediately before the inventorship trial. At that time the Court had considered and denied Defendant's motion for summary judgment on Shum's fraud claims in its April 2004 order. The allegations of misrepresentations and material omissions that Shum relies upon now are essentially the same as he relied upon in 2004. Similarly, the evidentiary support he relies upon now is essentially the same as that considered by this Court in 2004. There is one significant difference in the fact that this Court in its present order has decided that Verdiell does not owe any fiduciary duty to Shum. That decision applies, of course, to the fraud claim asserted by Shum, and he cannot rely upon the assertion of any such duty to support his fraud claim. However, that circumstance does not resolve the fraud claim as there are remaining allegations and evidentiary support which do not depend upon the existence of a fiduciary duty.
Fraud cases by their nature require the fact finder to determine the state of mind of both the asserted victim and the accused offender. Does the offender have the necessary scienter and intent to defraud? Does the victim act in reliance on the alleged misrepresentations? Some questions of fact are more difficult than others, and a state of mind as a question of fact, generally falls on the higher end of difficulty. Given the standards for summary judgment, it is frequently true that these cases are not amenable to resolution by summary judgment. As it was in 2004, this is the finding of the Court at this time. Summary judgment on the fraud cause of action is denied.
F. Breach of Contract
In its April 2004 order, this Court denied Defendant's motion for summary judgment on this cause of action. In the course of pre-trial consideration of the contract, the Court has made several rulings on the meaning of terms of the contract. The Court has not been presented with any new evidence or argument that would lead it to change any of these rulings — they remain as law of the case. Nothing in these rulings, however, serves to resolve the summary judgment issue. It appears to the Court that, as was the case in April 2004, inasmuch as the proffered evidence and the legal arguments are essentially the same now as they were then, the same ruling is called for — that summary judgment is denied.
Defendants do offer one argument that was not specifically considered in 2004. Defendants argue that in addition to the issue of breach, there is insufficient evidence to permit the jury to consider the issue of damages, if liability is established. Here again, the Court believes that the prohibition on credibility and weight findings by the Court at this summary judgment stage requires the Court to deny the motion.
IV. CONCLUSION
For the foregoing reasons, the Court GRANTS the motion for summary judgment in part, and DENIES it in part. As to each cause of action the Court finds as follows:
Breach of Fiduciary Duty — Summary Judgment is GRANTED.
Fraudulent Concealment — Summary Judgment is GRANTED.
Inventorship — Summary Judgment is DENIED.
Unjust Enrichment — Summary Judgment is DENIED.
Fraud — Summary Judgment is DENIED.
Breach of Contract — Summary Judgment is DENIED.
IT IS SO ORDERED