The opinion of the court was delivered by: Lawrence J. O'Neill United States District Judge
ORDER ON DEFENDANT‟S MOTION FOR SUMMARY JUDGMENT (Doc. 69)
Pending before the Court is Defendant Rehrig Pacific Company‟s ("Defendant‟s" or "Rerig‟s") motion for summary judgment. Plaintiff Gerawan Farming, Inc., ("Plaintiff" or "Gerawan") has filed an opposition to the motion, and Defendant has filed a reply. Having carefully considered the parties‟ submissions and the entire record in this case, the Court GRANTS IN PART and DENIES IN PART Defendant‟s motion for summary judgment.
Plaintiff is the nation‟s largest grower of peaches, plums, and nectarines and is also one of the nation‟s largest growers of table grapes. Defendant is a manufacturer of plastic-molded containers for industrial use. This case concerns a dispute between the two over the patent and ownership interests in three containers used for harvesting fruit: (1) the Grape Lug; (2) the Harvest Tote; and (3) the Second Generation Harvest Tote.
In March 1992, Cory Phillips ("Mr. Phillips"), a Marketing Representative for Rehrig, began 3 researching and marketing a durable container for storing and transporting grapes. Mr. Phillips spoke 4 with industry experts, researched then-existing agricultural containers, and called potential users of the 5 product. In the subsequent months, Jeff Ackerman ("Mr. Ackerman"), a Design Engineer for Rehrig, 6 and William Apps ("Mr. Apps"), Head of New Product Development for Rehrig, joined Mr. Phillips 7 in the project. The three worked to market and design a mold for a grape container, which would later 8 become known as the "Grape Lug." 9
The project progressed from 1992 through 1993, and included the following notable events. In December 1992, Rehrig drafted a preliminary memorandum regarding the Grape Lug that contained general dimensions and price proposals for the product. In February and May 1993, Rehrig drafted production studies for the Grape Lug. By June 14, 1993, Rehrig had fully engineered drawings of the Grape Lug depicting the design and specific dimensions of the container. Also, on or around that date Rehrig ordered the mold for the Grape Lug. On July 1, 1993, Rehrig sent a proposal of the Grape Lug to Sun World, a potential customer.
In addition to its efforts to sell the Grape Lug, Rehrig sought to patent the product. On July 8, 1993, Rehrig authorized its patent counsel to initiate a patentability search on the Grape Lug. Rehrig ultimately filed a patent application in August 1993, identifying Mr. Ackerman as the sole inventor of the Grape Lug. However, a few months later Mr. Phillips and Mr. Apps were added to the application as inventors. On May 16, 1995, the U.S. Patent Office issued a patent for the Grape Lug. The patent, U.S. Patent No. 5415293 ("the "293 Patent"), identified three individuals as co-inventors of the Grape Lug: Mr. Ackerman, Mr. Apps, and Mr. Phillips.
At some point in 1993, Mr. Phillips contacted Gerawan and arranged a meeting to gauge the company‟s interest in the Grape Lug. The parties dispute when the meeting actually occurred; Rehrig asserts that the meeting occurred in late July 1993, while Gerawan asserts that the meeting occurred in June or early July 1993. In any event, at the meeting Mr. Phillips discussed the Grape Lug with Dave Dever ("Mr. Dever") and Ray Gerawan ("Mr. Gerawan") from Gerawan. Mr. Gerawan and Mr. Dever reviewed preliminary design drawings of the Grape Lug, but ultimately concluded that their company was not interested in the grape container. Mr. Gerawan and Mr. Dever did, however, express interest 2 in developing a picking bin for harvesting stone fruit for which Mr. Gerawan had a prior conception. 3
The picking bin would later become known as the "Harvest Tote." 4
On September 15, 1993, Gerawan and Rehrig signed a confidential disclosure agreement ("the 1993 Confidentiality Agreement") to facilitate the two companies‟ efforts in developing the Harvest 7 Tote. Under the 1993 Confidentiality Agreement, Gerawan agreed to disclose what it considered to be 8 trade secrets, patentable information, and other proprietary materials relating to the Harvest Tote. In 9 exchange, Rehrig agreed not to disclose the information to others and to use the information only to develop the Harvest Tote for Gerawan. Moreover, Rehrig agreed that the rights to any improvements or modifications to the Harvest Tote and any inventions conceived as a result of reviewing Gerawan‟s materials would be assigned to Gerawan.
In the ensuing months, from October 1993 to July 1994, Gerawan and Rehrig sought to reach an agreement over the sales and marketing of the Harvest Tote. The companies exchanged numerous drafts of an Agreement in Principle, which included various terms such as: (1) Gerawan agreed to pay for the mold of the Harvest Tote; (2) Rehrig agreed to engineer and manufacture the Harvest Tote to Gerawan‟s specifications; (3) Gerawan agreed to provide Rehrig an exclusive license to manufacture the Harvest Tote; (4) Rehrig agreed to pay Gerawan royalties from the sales of the Harvest Tote; and (5) Rehrig agreed to refrain from improving the Harvest Tote for anyone besides Gerawan. However, it is unclear whether a final and firm agreement was ever reached. Gerawan maintains that one was, while Rehrig asserts that one was not. There is no signed copy of any final "Agreement in Principle" between the two companies.
Whatever the status of an agreement was, Gerawan did agree to buy the mold and Rehrig did agree to pay royalties to Gerawan from sales of the Harvest Tote. Sales of the Harvest Tote began in the middle of 1994, but no patent was ever filed for the Harvest Tote.
3. The Second Generation Harvest Tote
In or around 2000, Rehrig began to discuss with Gerawan the possibility of producing a next generation Harvest Tote ("the Second Generation Harvest Tote"), and by 2002, Gerawan understood that Rehrig was actually preparing to begin design work on the Second Generation Harvest Tote. To 2 express its interest in participating in the designing of the Second Generation Harvest Tote, Gerawan 3 sent an email to Rehrig on January 14, 2002. However, for reasons that are still unknown, the parties 4 never met to discuss the Second Generation Harvest Tote and Rehrig proceeded to design the Second 5 Generation Harvest Tote on its own. Meanwhile, sales of the original Harvest Tote came to an end in 6 or around September 2002. 7
Rehrig began production of the Second Generation Harvest Tote in March 2003. Though it is 8 unclear which features, if any, of the Harvest Tote were carried over to the Second Generation Harvest 9 Tote, the Second Generation Harvest Tote does differ from the Harvest Tote in many significant ways. In particular, the Second Generation Harvest Tote: (1) has an exterior rib structure; (2) does not have hollow comers; (3) has exterior sliders; (4) is not made with double thick material; (5) has a contoured bottom; (6) has a stacking ledge on all four sides; (7) has an open corner design; and (8) has an option for a plastic handle.
Although Rehrig openly advertised the Second Generation Harvest Tote, there is a dispute as to whether Gerawan was actually aware that Rehrig had begun selling the Second Generation Harvest Tote. For example, on April 1, 2003, George Papangellin ("Mr. Papangellin") of Gerawan told Jon Kalin ("Mr. Kalin") at Rehrig via email that one of Gerawan‟s affiliates in Mexico, Grupo Alto, had expressed interest in the Second Generation Harvest Tote and might want to buy it the following year. Although the email makes clear that Mr. Papangellin was aware that Rehrig was designing the Second Generation Harvest Tote, there is no indication that Mr. Papangellin was aware of the fact that it was actually available for sale already.
Similarly, from 2004 to 2006, Mr. Gerawan observed harvesters using the Second Generation Harvest Tote at Reedley Farms and Wawona Packing. However, Mr. Gerawan believed the containers were the products of another company that had simply beaten Gerawan and Rehrig to the market. As such, Mr. Gerawan did not ask Reedley Farms, Wawona Packing, or Rehrig about the containers. According to Mr. Gerawan, it was not until August 2008 that he discovered the containers were made by Rehrig. Mr. Gerawan maintains that a representative at a packing company told him "Rehrig" after he asked who the container‟s manufacturer was.
Plaintiff initiated this action on July 29, 2011. After the Court granted Defendant‟s motion to 3 dismiss, Plaintiff filed an amended complaint on March 23, 2012. The amended complaint, which is 4 presently the operative complaint, asserts the following causes of action: (1) correction of inventorship 5 pursuant to 35 U.S.C. § 256; (2) false promise under California tort law; and (3) unfair competition in 6 violation of California‟s Unfair Competition Law ("the UCL"), Cal. Bus. & Prof. Code § 17200, et 7 seq., and California common law. 8
Defendant filed the instant motion for summary judgment on February 14, 2013. Plaintiff filed 9 an opposition to the motion on February 28, 2013, and Defendant filed a reply on March 7, 2013. The Court found Defendant‟s motion to be suitable for decision without oral argument and took the matter under submission pursuant to Local Rule 230(g).
Summary judgment is appropriate when the pleadings, disclosure materials, discovery, and any affidavits provided establish that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A material fact is one that may affect the outcome of the case under the applicable law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine "if the evidence is such that a reasonable trier of fact could return a verdict in favor of the nonmoving party." Id.
A party seeking summary judgment "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal quotation marks omitted). Where the movant will have the burden of proof on an issue at trial, it must "affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party." Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). "On an issue as to which the nonmoving party will have the burden of proof, however, the movant can prevail merely by pointing out that there is an absence of evidence to support the nonmoving party‟s case."
Id. (citing Celotex, 477 U.S. at 323).
If the movant has sustained its burden, the nonmoving party must "show a genuine issue of 2 material fact by presenting affirmative evidence from which a jury could find in [its] favor." FTC v. 3 Stefanchik, 559 F.3d 924, 929 (9th Cir. 2009) (emphasis in the original). The nonmoving party must 4 go beyond the allegations set forth in its pleadings. See Fed. R. Civ. P. 56(c). "[B]ald assertions or a 5 mere scintilla of evidence" will not suffice. Stefanchik, 559 F.3d at 929. Indeed, the mere presence of 6 "some metaphysical doubt as to the material facts" is insufficient to withstand a motion for summary 7 judgment. Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). "Where 8 the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there 9 is no genuine issue for trial." Id. at 587.
In resolving a summary judgment motion, "the court does not make credibility determinations or weigh conflicting evidence." Soremekun, 509 F.3d at 984. That remains the province of the jury. See Anderson, 477 U.S. at 255. Instead, "[t]he evidence of the [nonmoving party] is to be believed, and all justifiable inferences are to be drawn in [its] favor." Id. Inferences, however, are not drawn out of the air; the nonmoving party must produce a factual predicate from which the inference may reasonably, and therefore justifiably, be drawn. See Richards v. Nielsen Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985).
A. Correction of Inventorship
Plaintiff seeks to correct the "293 Patent and have Mr. Gerawan named as a co-inventor of the Grape Lug. Defendant responds that it is entitled to summary judgment on Plaintiff‟s claim for three reasons. First, Defendant argues that Plaintiff lacks standing to bring this claim. Second, Defendant contends that even if Plaintiff has standing, Plaintiff‟s claim for correction of inventorship is untimely and barred by the doctrine of laches. Third, Defendant argues that Plaintiff‟s evidence is insufficient to support its claim.
A plaintiff asserting a claim for correction of inventorship pursuant to 35 U.S.C. § 256 must establish standing. See Larson v. Correct Craft, Inc., 569 F.3d 1319, 1326 (Fed. Cir. 2009). In other words, "[the plaintiff] must show that [he] has suffered an injury-in-fact, that the injury is traceable to the conduct complained of, and that the injury is redressable by a favorable decision." Chou v. Univ. 2 of Chicago & Arch Dev. Corp., 254 F.3d 1347, 1358 (Fed. Cir. 2001) (citations omitted). A plaintiff 3 typically establishes standing to pursue a § 256 claim by showing that he has an expected ownership 4 interest in the patent at issue, or otherwise has a concrete financial interest in the patent. See Larson, 5 569 F.3d at 1326-27; Chou, 254 F.3d at 1358-59.
Defendant maintains that Plaintiff does not have an expected ownership interest in the "293 Patent. Defendant points to the general rule that absent any assignment, rights to an invention belong 8 to the inventor. Accord Bd. of Trustees. v. Roche Molecular Sys., 131 S. Ct. 2188, 2195, 180 L. Ed. 9 2d 1 (2011). Defendant further asserts that there is no evidence that Mr. Gerawan assigned any of his rights to the "293 Patent to Plaintiff prior to filing this case. Therefore, according to Defendant, even if Plaintiff is successful in proving that Mr. Gerawan is an inventor of the Grape Lug in this case, Mr. Gerawan, and not Plaintiff, will obtain an ownership interest in the "293 Patent.
Plaintiff counters that Mr. Gerawan‟s relationship with Plaintiff is so close and intertwined that Mr. Gerawan is essentially Plaintiff‟s alter ego. Thus, according to Plaintiff, any patent rights that Mr. Gerawan obtains in this action will belong to Plaintiff as well, even absent any express assignment of rights from Mr. Gerawan to Plaintiff. Plaintiff cites LeFiell v. United States, 162 Ct. Cl. 865 (1963)*fn1 as support for its argument.
In LeFiell, Cecil K. LeFiell ("Mr. LeFiell") obtained a patent for a tube tapering machine and subsequently filed suit in the name of himself and his company against the United States for allegedly manufacturing and using his invention without his prior authorization. Id. at 866-67. In response, the United States moved to dismiss the company from the case, arguing that the company did not have an ownership interest in the invention since its title belonged to Mr. LeFiell only. Id. at 867. Mr. LeFiell countered that he always considered the company as the true owner of the invention, and therefore the company was a proper party in the case. See id. at 867-68.
The Court of Claims agreed with Mr. LeFiell. The court reasoned that an inventor may have such a close and intertwined relationship with a company that the inventor is essentially the alter ego 2 of the company. Id. at 869. In those circumstances, the patent rights of the inventor belong entirely to 3 the company, even if there has been no express assignment of rights. Id. The court concluded that 4 Mr. LeFiell had alleged facts sufficient to show that he was the company‟s alter ego. According to 5 Mr. LeFiell: (1) he was the president, general manager, and principal stockholder of the company; (2) 6 he used the company‟s time and resources to develop the invention; (3) the company paid the expenses 7 associated with securing the patent for the invention; and (4) the company received all the profits from 8 the invention and patent. Id. at 870. 9
In this case, a trier of fact could reasonably conclude that Mr. Gerawan was the alter ego of Gerawan from 1993 to 1994, the time frame when the Grape Lug was allegedly invented. See Melin v. United States, 201 Ct. Cl. 748, 756 (1973) ("[I]n determining the question of ownership of a patent between a company and an employee under the "alter ego‟ theory, . . . the relationship which existed between the employer and the employee at the time when the invention was made is determinative, and not the relationship at a subsequent time."). Critically, during this time frame Mr. Gerawan was the most senior officer at Gerawan, a company owned by his family. He was also one of its directors. There is some uncertainty as to how much actual managerial control Mr. Gerawan exercised, but there is evidence from which a trier of fact could conclude that Mr. Gerawan had primary responsibility for product development at the company, which included the designing of harvest containers. Moreover, Mr. Gerawan believed that his work, and any inventions derived therefrom, belonged to the company. In fact, the company, not Mr. Gerawan, received all the royalty payments generated from his work on the Harvest Tote.
Because a trier of fact could reasonably conclude that Mr. Gerawan was the alter ego of the company, the Court cannot rule as a matter of law that Plaintiff does not have an expected ownership interest in the "293 Patent. Accordingly, Defendant is not entitled to summary adjudication on the basis that Plaintiff lacks standing.
"Laches is an equitable defense that may bar an inventorship claim." Serdarevic v. Advanced Medical Optics, Inc., 532 F.3d 1352, 1358 (Fed. Cir. 2008). To establish laches, the party raising the defense carries the ultimate burden of proving that the plaintiff‟s delay in bringing the instant action is 2 "unreasonable and inexcusable" and that the defending party has in fact suffered "material prejudice 3 attributable to the [plaintiff‟s] delay." Intirtool, Ltd. v. Texar Corp., 369 F.3d 1289, 1297 (Fed. Cir. 2004) (citation omitted). 5
"[A] delay of more than six years after the omitted inventor knew or should have known of the 6 issuance of the patent [produces] a rebuttable presumption of laches." Advanced Cardiovascular Sys. 7 v. SciMed Life Sys., 988 F.2d 1157, 1163 (Fed. Cir. 1993). Thus, if the party asserting laches is able 8 to establish that the plaintiff had actual knowledge of the disputed patent‟s issuance, or was aware of 9 facts that would have led a man of ordinary intelligence to inquire into the matter, it is presumed that the plaintiff‟s delay in bringing suit was unreasonable and the defending party suffered prejudice. See id. at 1161-62. The burden then shifts to the plaintiff to rebut this presumption by offering evidence showing that the delay was reasonable or that the ...