Google loses appeal at CAFC in PERSONALIZED USER MODEL v. Google: lessons about former employees as competitors

From the decision:


Google Inc. (“Google”) appeals from the decision of the
United States District Court for the District of Delaware
granting judgment as a matter of law in favor of Personalized
User Model, LLP (“PUM”) and Yochai Konig (“Konig”)
(collectively, “Appellees”) on Google’s breach of
contract counterclaim. Order, Personalized User Model
LLP v. Google Inc., C.A. No. 09-525-LPS (D. Del. Sept. 17,
2014), ECF No. 724. PUM cross-appeals from the district
court’s decision construing the claims of U.S. Patents
6,981,040 (“the ’040 patent”) and 7,685,276 (“the ’276
patent”). Personalized User Model LLP v. Google Inc.,
C.A. No. 09-525-LPS, 2012 WL 295048, at *15–16 (D. Del.
Jan. 25, 2012). Because the district court did not err in
granting judgment as a matter of law, we affirm the
district court’s decision appealed by Google. Moreover, we
dismiss the cross-appeal because we lack jurisdiction over
the issue as raised.



Part of the case involves an employment agreement:



Konig was employed by SRI International (“SRI”)
from April 1996 to August 1999. At the beginning of his
employment, Konig signed an Employment Agreement

(...)

In May 1999, while still employed by SRI, Konig and
a friend who was not employed by SRI started generating
documents marked confidential, relating to a personalized
information services idea that they called “Personal Web.”
J.A. 1281–1302, 1303–08. Konig and his friend then
formed a company named Utopy, incorporated in Delaware
on July 22, 1999, and Konig left SRI two weeks
later, on August 5, 1999. In 2001, while Konig was developing
the Personal Web products at Utopy, he asked a
research scientist still at SRI to test the products. Appellant’s
Br. 15.
Meanwhile, Konig filed a provisional patent application
on December 28, 1999. On June 20, 2000, Konig filed
an application based on the provisional, which issued as
the ’040 patent on December 27, 2005, and listed Utopy,
Inc. as the assignee. Utopy then assigned the ’040 patent
to another party, who in turn assigned the patent to
PUM. Konig filed another patent application in 2008,
naming PUM as the assignee, and that application issued
as the ’276 patent on March 23, 2010.
In July 2009, PUM sued Google in the District Court
for the District of Delaware, asserting infringement of the
’040 and ’276 patents.

(...)

Google asserted that
Konig owed a duty to transfer ownership to SRI of any
inventions conceived during his employment with SRI;
that Konig breached the employment agreement by
failing to assign his interest in the related patents to SRI;
and that Google (by way of SRI) therefore was a rightful
co-owner. J.A. 504–20. PUM and Konig responded that
the counterclaim was time-barred as filed more than
three years after the claim first accrued. J.A. 728, 740;
see 10 Del. C. § 8106. Before trial, the court construed
several claim terms in the ’040 and ’276 patents, including
the term “document.” Personalized User Model v.
Google, 2012 WL 295048, at *15–16.


There was an issue of a time-bar, and of SRI's duty to investigate:



The district court then held a hearing on PUM’s and
Konig’s JMOL motion on the breach of contract counterclaim.
J.A. 9–31 (transcript). The court again stated its
determination that no reasonable juror could have found
that the injury, the basis for the counterclaim, was “inherently
unknowable” and that SRI was not on inquiry
notice. J.A. 30. The court also noted that there was no
evidence that SRI exercised any diligence, finding that,
had SRI undertaken any reasonable investigation, it
would have discovered that the invention was conceived
during Konig’s employment at SRI. J.A. 30. The court
concluded that no reasonable juror could find that SRI
was “blamelessly ignorant.” J.A. 30.


Of Google's position:


Google argues that the breach of contract injury that
SRI suffered was inherently unknowable, and therefore
that SRI was not on inquiry notice to investigate a possible
claim. According to Google, Delaware precedent
requires a “red flag” that “clearly and unmistakably”
should have led a party to investigate a potential claim.
Because there were competing inferences that could have
been drawn from the evidence provided at trial, Google
asserts that a reasonable jury could have found that none
of the information available to SRI would have made SRI
suspicious of a breach of contract. Alternatively, Google
argues that SRI was blamelessly ignorant because a jury
could have reasonably inferred that any investigation that
SRI could have done would not have uncovered the conception
of the invention at SRI, which provides the basis
for the claim. (...)

Even viewing the record in the light most favorable to
Google and drawing all reasonable inferences in its favor,
we agree with the district court that Google did not provide
legally sufficient evidence for the jury to find that the
injury was inherently unknowable or that SRI was blamelessly
ignorant, and therefore could not invoke the discovery
rule to toll the limitations period.



There was a distinction from the medical malpractice area:


First, Google failed to prove that the injury was inherently
unknowable. Unlike a situation in which a
patient after surgery has virtually no way of knowing that
a surgical instrument was negligently left inside, cf.
Layton, 246 A.2d at 796, SRI knew that Konig was leaving
to immediately work at a start-up technology company.
Considering the competitiveness of companies and
institutes in the technical world and, as Google has ar-
gued, that the technology was related to Konig’s work at
SRI, his departure and new venture could well have been
a “red flag” that should have generated an inquiry whether
Konig had conceived an invention during his employment
with SRI that he might intend to develop and
commercialize with his new company.
More importantly, Google failed to show that SRI was
blamelessly ignorant of Konig’s alleged breach of contract.
Google’s attempts to dispense with its burden of proof for
the blamelessly ignorant element of the discovery rule by
arguing the futility of any inquiry do not compensate for
its failure of proof. Despite the opportunities for SRI to
have inquired about Konig’s departure and his new venture—the
obvious one being an exit interview, at which
an inquiry might have been made regarding whether
Konig had made any inventions at SRI that had not been
reported to SRI—the record is critically deficient on the
minimum quantum of evidence necessary to show that
SRI did anything to protect its interests. One might have
asked, even if an answer might not have been forthcoming,
what was Konig going to do in his new company? SRI
might have learned of the Personal Web products by
asking other SRI employees, such as the scientist who
tested the products in 2001, or by monitoring the new
start-up for a period of time after Konig’s departure.
Companies can also watch competitive patent filings.
Even if a reasonable investigation might not have given
SRI definitive proof of a breach of contract, we agree with
the district court that such actions could have uncovered
clues as to a potential claim. In fact, neither party presented
any evidence about whether a reasonable investigation
would have revealed that Konig invented the
Personal Web products during his employment at SRI.



***As to the cross-appeal, the topic of advisory opinions arose:



Google responds that there is no longer a live infringement
controversy between the parties because the
district court found the claims not infringed, PUM did not
seek any further district court proceedings on infringement,
and the U.S. Patent and Trademark Office cancelled
all asserted claims in inter partes reexamination.
Google asserts that this court lacks jurisdiction to issue a
claim construction opinion to ensure the proper construction
of PUM’s patents in the future, where such an opinion
would not resolve a present infringement controversy.
We agree with Google that we lack jurisdiction over
PUM’s cross-appeal. Article III of the U.S. Constitution
limits the jurisdiction of federal courts to “cases” and
“controversies,” neither of which is presented by PUM’s
cross-appeal relating to the district court’s alleged error in
claim construction. See Jang v. Bos. Scientific Corp., 532
F.3d 1330, 1336 (Fed. Cir. 2008) (declining to render
advisory opinion as to claim construction issues that “do
not actually affect the infringement controversy between
the parties”).



link: http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/14-1841.Opinion.8-14-2015.1.PDF