by Dennis Crouch
Steven Young and Carl Hewitt developed technology for monitoring infant biometrics. Later, they began working with Sleep Number Corp. who eventually purchased their company. The result was SleepIQ technology for Sleep Number smart beds.
Eventually Young & Hewitt decided to leave the company and start out on their own once again and founded a new venture UDP Labs–still focusing on sleep biometric data integrated into hospital/medical furniture. However, the pair had not fully exited from their Sleep Number contract. Rather, they had both signed consulting agreements with Sleep Number that included quite a broad scope. In particular, the agreement required disclosure and assignment of “any ideas, conceptions, inventions, or plans relating to sleep, mattresses, bedding, sleep monitoring, health or wellness as it relates to sleep (including biometric monitoring relating to sleep), or bedroom or sleep technologies.” The agreement expressly excluded some areas: “monitoring technologies for sudden infant death syndrome” and “blood pressure.”
UDP Labs quickly filed a provisional patent application for Young and Hewitt’s new inventions. The pair tried (unsuccessfully) to get Sleep Number to agree that their UDP work wasn’t covered by the consulting agreement; and ultimately terminated the consulting agreement. More patent applications filed rather quickly, all claiming priority back to that original application filed during the consulting agreement period. One complicating issue is that the patent applications list three other inventors who were (apparently) not subject to the agreements with Sleep Number.
Lawsuit: In 2020, Sleep Number sued Young & Hewitt along with UDP Labs seeking (1) declaration of “ownership of the inventions” as well as claims of (2) breach of contract and (3) conversion (by failing to disclose the information); (4) trade secret misappropriation; etc.
The lawsuit is ongoing, but in March 2021 Minnesota district court issued a preliminary injunction. Barring the defendants from prosecuting, amending, or abandoning any claims that claim priority to one of the early provisional applications. The order further includes a mechanism for avoiding abandonment:
Defendants shall not respond or reply to any Office Action. . . After the fifth month but prior to the six‐month deadline to respond … Defendants shall (1) pay any and all necessary fees for a three‐month extension and (2) file a continuation … that does not remove or limit any claims of priority nor alter or abandon any claims.
Sleep No. Corp. v. Young, 532 F. Supp. 3d 793 (D. Minn. 2021), aff’d, 33 F.4th 1012 (8th Cir. 2022). On appeal, the 8th Circuit has affirmed. Sleep No. Corp. v. Young, 33 F.4th 1012 (8th Cir. May 11, 2022). The appellate panel agreed that Sleep Number had a fair chance of prevailing since the contract “clearly and unambiguously places the inventions described in the patent applications within” its scope.
With regard to irreparable harm due to patent prosecution, the appellate panel agreed with the district court that the parties incentives are not aligned and, as such, UDP Labs “might respond to a future Office Action in a way that prejudices Sleep Number’s purported patent rights.”
The court noted that the potential for irreparable harm was demonstrated by “curiously timed” prosecution actions by UDP Labs to narrow certain claims and eliminate the priority claims. The district court explained:
In November 2020, after this suit was filed, UDP filed several “Request[s] for Corrected Filing Receipt” with the United States Patent and Trademark Office (“USPTO”) seeking to amend the ‘087, ‘367, ‘385, and ‘848 Applications to eliminate their claims of priority to the ‘613 Application, leaving only the claims of priority to the ‘623 Application. As a result of UDP’s amendment to the applications’ claims of priority, the ‘087, ‘367, ‘385, and ‘848 Applications now only claim priority to an application filed after Young and Hewitt terminated their Consulting Agreements. Additionally, by moving the priority date forward, the applications are now subject to several additional months’ worth of potentially invalidating prior art.
Sleep No. Corp. v. Young, 532 F. Supp. 3d 793, 798 (D. Minn. 2021).
The court considered the balance-of-harms. On UDP Labs side, it identified the only harm as “a mere delay in participation in the patent-prosecution process.” That statement omits consideration of patent term and patent term adjustment. On February 2, 2022, the USPTO issued a non-final rejection in one of the pending actions. The six-month date will come within the fortnight.
In May 2022, the district court also amended its preliminary injunction order to prohibit the defendants “from taking action-including selling, transferring, assigning, conveying, etc.-that would cause a change in ownership and/or interfere with Plaintiff’s asserted rights with respect to the Inventions-at-Issue.”