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Expert Microsystems, Inc. v. University of Chicago

April 1, 2010



Plaintiff Expert Microsystems ("EM") brought this action against defendants the University of Chicago ("UC") and ARCH Development Corporation ("ARCH") for correction of inventorship, 35 U.S.C. § 256, and ownership of United States Patents Numbers 5,987,399 ("'399 patent") and 6,202,038 ("'038 patent"). Defendants now move for summary judgment pursuant to Federal Rule of Civil Procedure 56(c).

I. Factual and Procedural Background

Plaintiff EM is a small California corporation that provides systems for monitoring assets and equipment as well as related consulting services. (First Am. Compl. ("FAC") ¶ 1.) EM is the successor entity to ExperTech--a sole proprietorship of current EM President Randall L. Bickford--which was part of a joint venture created to obtain prime contracts with NASA.*fn1 (Id. ¶ 25.) From 1995 through 1996, as part of the process of preparing the proposal for the NASA contract, Bickford allegedly disclosed proprietary information to UC employees Stephan W. Wegerich and Kenneth C. Gross concerning Bickford's concept for a method of performing a regression sequential possibility ratio testing ("regression SPRT") procedure for a pair of sensors with signals that are linearly or non-linearly related. (Id. ¶¶ 32-33, 35, 44.) One such disclosure occurred in January 1996 when Wegerich and Gross traveled to Roseville, California, to meet with Bickford at ExperTech's offices. (Id. ¶ 32.)

Plaintiff alleges that at least part of the embodiments of Bickford's regression SPRT procedure are claimed in one or both of the '399 and '038 patents, which are directed to a method and apparatus for monitoring a source of data for determining an operating state of a working system. (Id. ¶¶ 23, 36, 45.) The '399 and '038 patents--issued on November 16, 1999, and March 13, 2001, respectively--list only Wegerich, Gross, and another person, Kristin K. Jarman, as inventors without naming Bickford as an inventor. (Id. ¶¶ 16, 19, 46.) The listed inventors assigned ownership of the '399 and '038 patents to ARCH, an affiliate of UC tasked with commercializing intellectual property produced by UC scientists. (Id. ¶¶ 17, 20.)

In 1996, ExperTech/EM's joint venture applied for and was ultimately awarded a prime contract for a project entitled "Dynamics Sensor Data Validation for Reusable Launch Vehicle Propulsion" that involved UC as a subcontractor. (Id. ¶¶ 34; 41.) The relationship between ExperTech/EM and UC continued for a number of years and involved at least two cooperative research and development agreements. (Id. ¶ 47.) On March 2, 2001, plaintiff and UC entered into a license agreement (the "203 contract") by which plaintiff acquired the rights to use software products that contained embodiments of the '399 patent. (See id. ¶ 47; Bickford Decl. ¶¶ 4-5.) The 203 contract, signed by Bickford, specifically mentioned that the '399 patent was being licensed as part of the agreement but did not mention the '038 patent. (See Carpenter Decl. Ex. A-A § 1.3, Ex. A-C; Bickford Decl. ¶ 6.)

On February 19, 2002, Bickford made an electronic prior art search in the United State Patent and Trademark Office ("USPTO") on behalf of plaintiff to find prior art to an invention plaintiff was trying to get patented--a Surveillance System and Method Having an Adaptive Sequential Probability Fault Detection Test. (Bickford Decl. ¶ 10.) The prior art search came up with eighteen patents, including the '399 and '038 patents at issue in this litigation. (Id. ¶¶ 14-16.) Plaintiff purchased copies of the prior art patents and Bickford printed each from the USPTO website. (Id. ¶¶ 17-18.) Bickford alleges that he only saw the front page of each patent and did not review their contents at that time. (Id. ¶¶ 18-23.) These copies were then provided by Bickford to Dennis DeBoo, plaintiff's patent agent, to use in preparing an Information Disclosure Statement for plaintiff's patent application ("the '835 application"). (Id. ¶¶ 24-25; DeBoo Decl. ¶ 5.) DeBoo filed the Information Disclosure Statement for the '835 application on July 24, 2002. (DeBoo Decl. ¶ 8.)

On November 8, 2008, plaintiff received a letter from UC that terminated the 203 contract. (FAC ¶ 49.) Plaintiff alleges that neither it nor Bickford read the contents of the '399 or '038 patents until after advised to do so by counsel after the termination of the 203 contract. (Bickford Decl. ¶¶ 28-30; Pl.'s Opp'n at 9:17-22.) Plaintiff contends that it was only after reading the patents in December 2008 that Bickford became aware that he should have been listed as an inventor of the '038 and '399 patents. (Bickford Decl. ¶¶ 31-33.) Plaintiff filed the instant action on March 2, 2009, alleging that Bickford invented or co-invented at least part of the various embodiments of the '399 and '038 patents. (See FAC ¶¶ 24, 55.)

II. Discussion

Summary judgment is proper "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). A material fact is one that could affect the outcome of the suit, and a genuine issue is one that could permit a reasonable jury to enter a verdict in the non-moving party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party moving for summary judgment bears the initial burden of establishing the absence of a genuine issue of material fact and can satisfy this burden by presenting evidence that negates an essential element of the non-moving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Alternatively, the moving party can demonstrate that the non-moving party cannot produce evidence to support an essential element upon which it will bear the burden of proof at trial.


Once the moving party meets its initial burden, the non-moving party "may not rely merely on allegations or denials in its own pleading," but must go beyond the pleadings and, "by affidavits or as otherwise provided in [Rule 56,] set out specific facts showing a genuine issue for trial." Fed. R. Civ. P. 56(e); Celotex Corp., 477 U.S. at 324; Valandingham v. Bojorquez, 866 F.2d 1135, 1137 (9th Cir. 1989). In its inquiry, the court must view any inferences drawn from the underlying facts in the light most favorable to the nonmoving party, but may not engage in credibility determinations or weigh the evidence. Anderson, 477 U.S. at 255; Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

Defendants argue they are entitled to summary judgment because plaintiff's patent claims are barred by laches. Laches is an equitable defense that may bar an inventorship claim. See Lane & Bodley v. Locke, 150 U.S. 193, 201 (1893); see also A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1028-29 (Fed. Cir. 1992). "The laches defense has two underlying elements: first, the [plaintiff's] delay in bringing suit must be 'unreasonable and inexcusable,' and second, the [defendant] must have suffered 'material prejudice attributable to the delay.'" Intirtool, Ltd. v. Texar Corp., 369 F.3d 1289, 1297 (Fed. Cir. 2004) (citation omitted).

The court must also consider a plaintiff's proffered justifications for delay and whether a defendant has unclean hands such that she is not entitled to an equitable defense. Aukerman, 960 F.2d at 1033. Courts have found a number of excuses for delay justified, including the presence of other litigation, ongoing negotiations with defendant, poverty, illness, wartime conditions, dispute over ownership of the patent, and a limited amount of infringement. Id. When evaluating a laches defense the court must therefore weigh and consider "the length of delay, the seriousness of prejudice, the reasonableness of excuses, and the defendant's conduct or culpability." Id. at 1034.

"[A] delay of more than six years after the omitted inventor knew or should have known of the issuance of the patent will produce a rebuttable presumption of laches." Serdarevic v. Advanced Med. Optics, Inc., 532 F.3d 1352, 1358 (Fed. Cir. 2008) (quoting Advanced Cardiovascular Sys., Inc. v. Scimed Life Sys., Inc., 988 F.2d 1157, 1163 (Fed. Cir. 1993)). If the presumption applies, unreasonable delay and prejudice are automatically inferred. Serdarevic, 532 F.3d at 1359; see also Hall v. Aqua Queen Mfg., Inc., 93 F.3d 1548, 1554 (Fed. Cir. 1996). Once a defendant establishes a presumption of laches on summary judgment, the burden shifts to the plaintiff to "rebut the presumption of laches 'by offering evidence to show an excuse for the delay or that the delay was reasonable' or by offering evidence 'sufficient to place the matters of [evidentiary] prejudice and economic prejudice genuinely in issue.'" Serdarevic, 532 F.3d at 1359-60 (quoting Aukerman, 960 F.2d at ...

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