Personalized User Model and Konig v. Google (Fed. Cir. 2015)
This case involves a fascinating set of back-door dealings. While Konig was employed at the non-profit research institute SRI, he started a side project with a friend creating a personalized information service – the subject of the patent that he filed (apparently without offocially notifying SRI). It is Konig’s patent that is being allegedly infringed by Google. See U.S. Patents No. 6,981,040.
After Konig’s patent holding company sued Google for infringement, Google management then called-up SRI and obtained a quitclaim deed over “any rights” in the patent held by SRI. With those rights in-hand, Google argued in court that Konig had breached his employment agreement by failing to assign rights to the patents to SRI and that Google was now the rightful owner (of at least a right to have the patents assigned). The district court, however, found the breach-of-contract claim time-barred by its state-law statute of limitations.
Because Konig’s alleged breach-of-contract with SRI was in the 1990’s, it seems likely that the three-year statute of limitations term had passed. However, Delaware (the site of the lawsuit) has a “discovery rule” that tolls any statute of limitations for the period in which an injury is ‘inherently unknowable” and “the claimant is blamelessly ignorant of the wrongful act and the injury.” Of course, a simple search years ago of the patent database would have turned up Konig’s patent rights, but the Search Giant argued that search would have been “practically impossible.” In the appeal, the Federal Circuit agreed with the district court that Google’s arguments were not sufficient proof of the inherent unknowability of Konig’s alleged breach or proof of SRI’s blameless ignorance. In particular, SRI knew that:
Konig was leaving [SRI] to immediately work at a start-up technology company. Considering the competitiveness of companies and institutes in the technical world and, as Google has argued, 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. . . .
Employers do not need to track a former employee’s every movement for an indefinite period of time to look for potential claims, but there should be some basic level of diligence in looking after one’s interests.
Delaware also has a statutory tolling of causes of action when the would-be defendant is out of the state of Delaware. 10 Del. C. § 8117. Although not express in the statute, the district court held that the tolling did not apply when the cause of action had “no connection to Delaware.” On appeal, the Federal Circuit affirmed: “Although the statute on its face does not require any connection to Delaware, we agree with the district court’s disinclination to interpret the statute so broadly as to apply to any claim, claimant, or defendant.”
Recordation Prevents Straight Ownership Claim: Although the court does not go into it here, ownership of patent rights would not generally require proof of breach-of-contract. If SRI owns the patent rights then its sale of rights to Google should shift ownership, regardless of whether Konig was in breach of contract or not. One problem with that theory, however, is that the employment agreement does not appear an effective transfer of rights but only a promise to transfer. Thus, even under the employment agreement Konig remained owner until such time as he transferred ownership to the employer. A second problem with the theory involves the recordation statute – 35 U.S.C. 261, which suggests the recordation of the assignment to Konig’s company may be sufficient to extinguish Google’s purchased rights.