The opinion of the court was delivered by: Lucy H. Koh United States District Judge
United States District Court For the Northern District of California
ORDER GRANTING PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT DISMISSING INVALIDITY DECLARATORY RELIEF COUNTERCLAIM AND INVALIDITY AFFIRMATIVE DEFENSE REGARDING U.S. PATENT NOS. 7,454,500; 7,581,009; 7,558,195; AND 7,774,833 On May 3, 2012, Plaintiffs Brocade Communications Systems, Inc. ("Brocade") and Foundry Networks, LLC ("Foundry") filed a motion for partial summary judgment based on the 24 doctrine of assignor estoppel. On May 17, 2012, Defendants A10 Networks, Inc. and Defendants 25 Lee Chen, Rajkumar Jalan, Ron Szeto, and Steve Hwang (collectively, "Defendants") filed an 26 opposition. ECF No. 539. On May 24, 2012, Plaintiffs filed a reply. The Court held a hearing on 27 Plaintiffs' motion on June 8, 2012. The pretrial conference in this matter is set for June 27, 2012; 28 the trial will begin on July 16, 2012. Because the parties require a ruling on this motion on an 2 expedited basis, the Court will keep its analysis brief. 3 4 declaratory relief of invalidity, as well as the affirmative defense of invalidity interposed by A10, 5 Patent"); 7,581,009 ("'009 Patent"); 7,558,195 ("'195 Patent"); and 7,774,833 ("'833 Patent"). See 7 Plaintiffs move for partial summary judgment dismissing A10's counterclaim for Chen, and Jalan to Plaintiffs' claims for infringement of U.S. Patent Nos. 7,454,500 ("'500 6 Mot. 1-2. Plaintiffs argue that under the doctrine of assignor estoppel, Jalan is estopped from 8 challenging the validity of the '500, '009, and '195 Patents, on which he is listed as an inventor and 9 which he assigned to Foundry. Similarly, Plaintiffs argue that Szeto is estopped from challenging 10 the validity of the '833 Patent, on which he is listed as an inventor and which he assigned to Foundry. Mot. 2. Plaintiffs further argue that under the doctrine of assignor estoppel, A10 and Chen cannot assert invalidity of the '500, '009, '195, and '833 Patents because A10 and Chen are 13 in privity with both Jalan and Szeto. Id. Finally, Plaintiffs argue that Jalan cannot assert the 14 invalidity of the '833 Patent because Jalan and Szeto are in privity. Id. In short, Plaintiffs argue 15 that: (1) A10 is estopped from asserting its invalidity counterclaims and invalidity affirmative 16 defenses to Plaintiff's claims of infringement of the '500, '009, '195, and '833 Patents; and (2) 17 '195, and '833 Patents.*fn1
Having considered the submissions and arguments of the parties and the relevant law, the Court GRANTS Plaintiffs' motion for partial summary judgment. 21 23 and the Court will not repeat it at length here. The Court refers the unfamiliar reader to its Orders 24 of January 6, and June 12, 2012. See ECF Nos. 434, 438, 571. 25 26 individual defendants, including Jalan, Szeto, and A10's President, Lee Chen. ECF No. 1. 27 Chen and Jalan are estopped from asserting their affirmative invalidity defenses to the '500, '009, 18
The parties are familiar with the extensive factual and procedural background of this case, On August 4, 2010, Brocade and Foundry filed a complaint against A10 and various Currently on the Third Amended Complaint ("TAC"), Plaintiffs allege infringement of ten claims 28 in six patents, theft of twenty trade secrets, infringement of five copyrights, and various state law 2 claims. ECF No. 85. 3 4 subsidiary of Brocade), secretly began to develop a new company, Raksha Networks, while still 5 working at Foundry. See TAC ¶¶ 26-28, 30.*fn2 Raksha Networks initially developed security 6 products "in the identity-based, bandwidth management space." Opp'n 3 (citing Nguyen Decl. Ex. 7 2004, and renamed his new company A10 Networks. Id. ¶¶ 24, 30. Plaintiffs allege that Chen 9 recruited Foundry's employees Jalan, Szeto, Han, and Hwang. Id. ¶¶ 34, 38, 39. Plaintiffs further 10 allege that these former Foundry employees (including Chen) took Foundry's intellectual property with them to A10. Id. According to Plaintiffs, A10 used this intellectual property to develop a competing product, the AX Series, which allegedly infringes several Brocade patents. See id. ¶¶ 13
It is undisputed that Defendants Jalan and Szeto are former employees of Foundry. While 15 employed at Foundry, Jalan was a named inventor of the '195, '009 Patent, and '500 Patents. Jalan 16 assigned his rights to the '195, '009, and '500 Patents to Foundry. Similarly, while employed by 17 Patent to Foundry. Jalan and Szeto were subsequently hired by A10. The '195, '009, '500, and 19 Additional facts are discussed below, as necessary, in the Court's analysis. In short, Plaintiffs allege that in 2004, Chen, a co-founder of Foundry (a wholly owned 1 (Chen Dep. 116:18-118:8; 124:21-125:6; 145:2-6; 155:13-14). Chen left Foundry in August 8 31, 34, 38, 39. Brocade acquired Foundry in December 2008. Id. ¶ 3. 14 Foundry, Szeto was a co-inventor of the '833 Patent. Szeto assigned his patent rights in the '833 18 '833 Patents are now owned by Brocade. ECF No. 92 ¶ 68, 77, 86; Nguyen Decl. Ex. 23. 20 23 inferences in the light most favorable to the nonmoving party, there are no genuine issues of 24 material fact, and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); 25 "does not assess credibility or weigh the evidence, but simply determines whether there is a 27 genuine factual issue for trial." House v. Bell, 547 U.S. 518, 559-60 (2006). A fact is "material" if 28
Summary judgment is appropriate if, viewing the evidence and drawing all reasonable Celotex Corp. v. Catrett, 477 U.S. 317, 321 (1986). At the summary judgment stage, the Court 26 it "might affect the outcome of the suit under the governing law," Anderson v. Liberty Lobby, Inc., 2 477 U.S. 242, 248 (1986), and a dispute as to a material fact is "genuine" if there is sufficient 3 evidence for a reasonable trier of fact to decide in favor of the nonmoving party. Id. "If the 4 evidence is merely colorable, or is not significantly probative, summary judgment may be granted." 5
The moving party bears the initial burden of identifying those portions of the pleadings, 7 discovery, and affidavits that demonstrate the absence of a genuine issue of material fact. Celotex 8 Id. 6 Corp., 477 U.S. at 323. Where the moving party will have the burden of proof on an issue at trial, 9 it must affirmatively demonstrate that no reasonable trier of fact could find other than for the 10 moving party, but on an issue for which the opposing party will have the burden of proof at trial, the party moving for summary judgment need only point out "that there is an absence of evidence to support the nonmoving party's case." Id. at 325; accord Soremekun v. Thrifty Payless, Inc., 509 13 F.3d 978, 984 (9th Cir. 2007). Once the moving party meets its initial burden, the nonmoving 14 party must set forth, by affidavit or as otherwise provided in Rule 56, "specific facts showing that 15 there is a genuine issue for trial." Anderson, 477 U.S. at 250. 16 18 a patent (or patent application) from later contending that what was assigned is a nullity." 19
Diamond Scientific Co. v. Amrico, Inc., 848 F.2d 1220, 1224 (Fed. Cir. 1988). Absent exceptional 20 circumstances such as "an express reservation by the assignor of the right to challenge the validity 21 of the patent or an express waiver by the assignee of the right to assert assignor estoppel, one who 22 assigns a patent surrenders with that assignment the right to later challenge the validity of the 23 assigned patent." Mentor Graphics Corp. v. Quicktum Design Sys., Inc., 150 F.3d 1374, 1378 24 (Fed. Cir. 1998). The application of the assignor estoppel doctrine is within the "sound discretion" 25 of the trial court. Carroll Touch, Inc. v. Electro Mech. Sys., 15 F.3d 1573, 1579 (Fed. Cir. 1993). 26 28 validity of their respective patents. Indeed, A10 has stipulated that Jalan cannot challenge the
"Assignor estoppel is an equitable doctrine that prevents one who has assigned the rights to A.Jalan and Szeto Are Estopped From Challenging Their Own Patents A10 essentially concedes that both Jalan and Szeto are each estopped from challenging the validity of the '195, '009, and '500 Patents. ECF No. 309, at 10; ECF No. 361 ¶ 2. Moreover, 2 although Plaintiffs have not brought a patent infringement claim against Szeto, for the reasons 3 explained below, Szeto is also estopped from challenging the validity of the '833 Patent. To the 4 extent A10 challenges the application of assignor estoppel to Jalan and Szeto as to their own 5 patents, the Court addresses those arguments below. 6
As stated above, Jalan is an inventor of the inventions claimed by '195, '009, and '500 Patents. Szeto is an inventor of the invention claimed by the '833 Patent. Jalan and Szeto assigned 8 their inventions to their then-employer, Foundry, which then prosecuted these four patents. See ECF No. 85 ¶ 49. Jalan and Szeto signed standard inventor's oaths in support of their patent 10 applications, stating, "I believe I am the original, . first and joint inventor. of the subject matter 11 which is claimed and for which a patent is sought."
ECF No. 220, Exs. I and J.
To the extent A10 argues that assignor estoppel cannot equitably apply to Jalan or Szeto as 13 to their own patents, those arguments are unpersuasive. First, A10 suggests that because Jalan and 14 Szeto cannot have vouched that the assigned patent rights had any value. Opp'n 6. Therefore, A10 16 contends that Jalan and Szeto cannot have implicitly represented that the patent rights were not 17 worthless. See Diamond Scientific, 848 F.2d at 1224. This reasoning is contrary to Federal Circuit 18 precedent. An inventor who assigns rights to a pending patent application is estopped from 19 challenging the validity of the patent as ultimately granted. Id. at 1226 ("The fact is that [the 20 inventor] assigned the rights to his invention, irrespective of the particular language in the claims 21 describing the inventions when the patents were ultimately granted.") (emphasis in original). 22
Similarly, an inventor who assigns rights to all his inventions prior to the filing of a patent 23 application on any particular invention is estopped from challenging validity of any issued patents. 24 Szeto assigned their inventions to Foundry before the filing of the patent applications, Jalan and 15 Id. ("It is also irrelevant that, at the time of the assignment, [the inventor's] patent applications 25 were still pending and the Patent Office had not yet granted the patents."). 26
A10 also argues that because the United States Patent and Trademark Office ("USPTO") "has rejected all ten claims currently in issue as invalid" during ongoing reexaminations, it is 28 against the public interest to allow enforcement of these claims against the assignors, Jalan and Szeto. Op. at 1, 5-6. As an initial matter, these USPTO rejections are in the context of Office 2 Actions in ex parte reexaminations; they are not final findings of invalidity. Volterra 3 ("[P]reliminary decisions and actions by the PTO in the course of a reexamination proceeding are 5 not probative of invalidity."). Moreover, "[a]ssignor estoppel does not preclude the estopped party 6 from arguing that the patentee is itself collaterally estopped from asserting a patent found invalid in 7 a prior proceeding." Mentor at 1379 (citing Blonder-Tongue Lab., Inc. v. Univ. of Ill. Found., 402 8 Semiconductor Corp. v. Primarion, Inc., 796 F. Supp. 2d 1025, 1042 (N.D. Cal. 2011) 4 U.S. 313 (1971)). Thus, even if assignor estoppel applies to Jalan and Szeto, Jalan and Szeto 9 would not be precluded from arguing that Plaintiffs are collaterally estopped from arguing patent 10 infringement if there is a finalfinding of invalidity in another proceeding. During the pendency of 11 this action, there has been no such final finding of invalidity in another proceeding.
A10's argument based on the USPTO reexamination proceedings is unavailing. 13 Patents. Mentor Graphics, 150 F.3d at 1378. Similarly, Szeto assigned the rights to his invention, 16 as claimed in the '833 Patent. Thus, Szeto is estopped from challenging the validity of the '833 17 Patent. Id. 18 20 challenging the validity of the patent." Id. at 1379. The Federal Circuit has developed a broad test 21 for finding privity, based upon a balance of the equities. See Shamrock,903 F.2d at 793 ("If an 22 inventor assigns his invention to his employer company A and leaves to join company B, whether 23 company B is in privity and thus bound by the doctrine will depend on the equities dictated by the 24 relationship between the inventor and company B in light of the act of infringement. The closer 25 that relationship, the more the equities will favor applying the doctrine to company B."). "Whether 26 two parties are in privity depends on the nature of their relationship in light of the alleged 27 infringement." Mentor Graphics, 150 F.3d at 1379. "'The closer that relationship, the more the 28 equities will ...