SIONYX LLC v. HAMAMATSU PHOTONICS K.K.
Oral Argument — 10/06/2020 · Case 19-2359 · 42:30
0:01
Appellant Attorney (William D. Belanger)
The United States Court of Appeals for the Federal Circuit is now opened and in session.
0:06
God save the United States and this honorable court.
0:12
Judge Lourie
Good morning, ladies and gentlemen.
0:14
We have four cases this morning, two of them being argued.
0:18
The first is Psyonix LLC versus Hamamatsu Photonics 19-2359.
0:27
Mr. Simmons, good morning.
0:30
Appellant Attorney (William D. Belanger)
Good morning, Your Honor.
0:31
Judge Lourie
Mr. Simmons, you've raised a lot of issues, and I think we need to get down to the key ones right off the bat.
0:44
Tell us what you think about ownership of patents.
0:52
Appellant Attorney (William D. Belanger)
So, Your Honor, the district court abused its discretion by transferring complete ownership of the disputed U.S. patents to Psyonix
1:00
based on an incorrect reading of the mutual nondisclosure agreement.
1:05
Psyonix and the district court treat the NBA.
1:09
As if it were a one-way NDA, even though it was specifically negotiated to be a two-way mutual NDA.
1:17
Its purpose was for both parties to exchange confidential information.
1:22
At Appendix 2881, which is the MNDA, the preamble states,
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each of the parties has developed information that each party regards as confidential.
1:32
Each party proposes to disclose certain of such confidential information to the other party.
1:38
Judge Wallach
Mr. Simmons.
1:39
Appellant Attorney (William D. Belanger)
That's an agreement.
1:40
Judge Lourie
Mr. Simmons.
1:41
Council, if you're correct, and this is getting into the cross-appeal, why shouldn't that apply to the foreign patents?
1:50
Presumably, the foreign patents provided the priority dates for the U.S. patents.
1:57
So, why isn't what's good for the goose good for the gander?
2:04
Appellant Attorney (William D. Belanger)
We would agree that it should also apply to the foreign patents, to the extent that there's evidence about the foreign patents.
2:15
So, if the finding of co-inventorship were found, then it would apply to the foreign patents.
2:20
Judge Lourie
All right.
2:21
So, you're conceding part of the cross-appeal?
2:25
Appellant Attorney (William D. Belanger)
I'm not completely conceding it, Your Honor.
2:27
I think there was a failure of proof on the cross-appeal, that the burden was on the plaintiff at the time, the cross-appellants,
2:34
to put in evidence of what was contributed to the claims of the foreign patents.
2:41
And, in fact, the only foreign patents that were put in the record were the Japanese patents.
2:46
None of the other countries were actually listed by number, even though the cross-appellants are asking you to transfer them all to them.
2:54
So, I think there's just a failure of proof with respect to the foreign patents.
2:58
Judge Lourie
I think Judge Moreno had a question.
3:02
Judge Wallach
This is Judge Wallach. I had a real question.
3:05
Not on the record, Your Honor, no.
4:03
Appellant Attorney (William D. Belanger)
That is also correct, Your Honor.
4:27
I'm sorry, I didn't understand that question, Your Honor.
4:38
Judge Wallach
Mutual non-disclosure agreement.
4:41
The disclosing party has not directed the receiving party to return or return anything to HP.
5:00
Appellant Attorney (William D. Belanger)
No, and in fact...
5:01
Your Honor, that's part of our statute of limitations argument is that the failure to return confidential information under paragraph 7,
5:10
the notwithstanding clause, was a breach of the agreement.
5:14
And Fionix was aware of that in February 2008.
5:19
So, it knew that we breached, that HPC breached.
5:23
Judge Wallach
Page 21 of the blue brief.
5:37
I don't understand the question, Your Honor.
5:59
It wasn't a question. It was a statement.
6:17
What's the basis for that statement?
6:21
Public information.
6:22
Judge Lourie
What's the relevance of it?
6:23
What's the relevance of it?
6:25
Judge Wallach
Yeah.
6:26
Do you have anything in the record?
6:35
Appellant Attorney (William D. Belanger)
Well, the argument made by Cross Appellants was that because they were a small startup company,
6:41
that we were trying to – HBK was trying to drive them out of business.
6:45
So that's the relevance of it.
6:47
Judge Wallach
Only what's publicly available, Your Honor, not what's specifically in the record.
7:04
Judge Lourie
So what about the statute of limitations?
7:08
Limitations.
7:10
The jury seemed to find that that was not a bar to all the damages to the breach claim.
7:21
Appellant Attorney (William D. Belanger)
Well, what we're – I'm sorry, Your Honor.
7:23
What we're specifically focused on here today is that the failure to return within the 30 days,
7:29
as Judge Wallace pointed out, the notwithstanding clause,
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since Psyonix did not ask for HBK to return the information within 30 days,
7:38
HBK had to.
7:39
HBK had to return the information within 30 days, and it did not.
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And that was a breach.
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And Psyonix has admitted at least three times in its red brief
7:50
that the failure to return the confidential information caused its harm.
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So our argument is the failure to return the confidential information on February 10, 2008,
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was a breach, and Psyonix was aware of it.
8:06
They knew that HBK still had its information.
8:09
In fact –
8:10
Judge Lourie
But apparently the jury found that that was not a bar.
8:14
And these are facts, are they not?
8:16
The jury found that it was immaterial, the breach was immaterial,
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or that Hamamatsu had concealed the breach.
8:29
And so this is a jury finding based on facts.
8:34
Don't we have to give a lot of deference to that?
8:37
Appellant Attorney (William D. Belanger)
No, there's two issues here.
8:39
There's one issue, there's a breach.
8:42
It's by failure to return the information within 30 days.
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And the second was in a second argument that's in our briefs, and we'll stand by it,
8:50
is in February of 2009 when Hamamatsu sent detailed drawings
8:54
that then Psyonix would be on notice that Hamamatsu was still using its confidential information,
9:01
which would be a second type of breach.
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With respect to the breach that the jury found,
9:07
they found it based upon a February 1, 2008 report that would demonstrate Hamamatsu's
9:12
was using the confidential information, but that was a different concealment argument.
9:17
With respect to not returning the information, Psyonix knew it didn't have its information back.
9:23
In fact, Dr. Terry was asked about the February 2008 email, says, did you feel at that point
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in time that you needed to tell Hamamatsu not to reference your proprietary information?
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No, I think they said they were not going to.
9:38
So that was Appendix 820, which demonstrates,
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implicitly, that Psyonix knew Hamamatsu still had its confidential information,
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and the harm could have been prevented by them asking for it back.
9:53
Judge Reyna
Counselor, this is Judge Reyna.
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It seems to me that under Massachusetts law, a jury can be charged with determining whether
10:03
a claim is barred by the statute of limitations, right?
10:06
Let's provide a fair Massachusetts law.
10:08
Okay.
10:09
So here, the jury...
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We determined that the non-return of information was not a material breach.
10:17
Why should we disturb that finding?
10:22
Appellant Attorney (William D. Belanger)
There was a lot of confusing information put in during the trial about what allegedly was lulling or defrauding of Sionics.
10:33
Judge Reyna
I understand that, Counselor.
10:36
I understand that.
10:38
And that information and those questions were put to the jury.
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And the jury deemed that the return of information, the non-return, was not a material breach.
10:51
It seems to me that that was fairly within the right of the jury to decide.
10:57
And my question is, looking at that determination, why should we disturb that jury determination?
11:03
Right.
11:04
Appellant Attorney (William D. Belanger)
So this court reviews it without deference to the district court and applies the no reasonable juror standard.
11:10
There's no dispute that the information...
11:12
was not returned by the deadline of February 10, 2008.
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That failure to return was a breach because Section 7 required the return within 30 days.
11:21
So there could have been no lulling, and no reasonable juror could have concluded that HPK returned Sionics' confidential information.
11:28
Therefore, a reasonable juror would have had to conclude that HPK breached by not returning it.
11:33
Judge Reyna
But at the same time, HPK is also making a number of assurances that it's not using Sionics' confidential information.
11:44
So, it seems to me that your arguments to the jury, that you never...you did not use Sionics' confidential information, goes against...does not help your argument concerning the jury verdict.
11:57
Appellant Attorney (William D. Belanger)
I think I understand.
11:58
One of the issues at trial was whether the information was confidential or not.
12:04
And HPK put on evidence about what it believed was not confidential.
12:08
So HPK had a good faith belief that it wasn't using Sionics' confidential information.
12:14
So had HPK returned the information, there could have been no dispute about what was confidential and what was not.
12:20
Judge Reyna
But that...again, that's a good attorney argument.
12:24
But the jury...it's an argument that was put to the jury, and the jury held against you.
12:30
Why should we disturb that finding by the jury?
12:34
Appellant Attorney (William D. Belanger)
Because no reasonable juror could have found that Alamatsu returned the information.
12:39
And Sionics basically has never argued that it did.
12:43
And that term was material.
12:44
So...
12:45
That specific...
12:47
Judge Reyna
But your argument is also that you never did use any of the confidential information.
12:54
Appellant Attorney (William D. Belanger)
Well, HPK didn't believe it was using confidential information.
12:57
Because HPK believed Sionics' technology was limited to texturing and sulfur.
13:03
And HPK textured in nitrogen, never in sulfur.
13:06
So HPK had a good faith belief that they weren't using Sionics' technology.
13:11
Okay.
13:12
Judge Lourie
Counsel, you're warning Sionics.
13:15
Sionics...
13:15
Yes.
13:16
You wanted to save eight minutes.
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And that's fine.
13:19
But if you want us to continue a little bit into your rebuttal time, that's all right.
13:25
Because probably your cross-appeal is sort of lighter than your main appeal.
13:31
Up to you.
13:34
Appellant Attorney (William D. Belanger)
I have a long one.
13:35
I'd like to answer your question, Judge Wallace.
13:39
Judge Wallach
Perfuted patents were really only in the case to determine inventorship.
14:27
Appellant Attorney (William D. Belanger)
So the only instructions about that was...
14:32
I couldn't hear you.
14:33
I'm sorry.
14:33
Judge Wallach
Your argument was a blue breeze.
15:09
Hamamatsu indefinitely...
15:32
Appellant Attorney (William D. Belanger)
Well, the district court found a permanent injunction in this case.
15:38
And the parties had specifically negotiated a seven-year confidentiality period.
15:42
And after the seven years was up, that would no longer apply.
15:47
By the district court awarding a permanent injunction, it basically read out the seven-year negotiated term.
15:53
And that's in Section 8 of Appendix 2882.
15:58
The obligation set forth in Section 2.
16:00
So it will remain in effect for a period of seven years.
16:04
So by issuing a permanent injunction...
16:08
Judge Lourie
Counsel, you're down to about five minutes of rebuttal time.
16:11
Do you want to say that?
16:12
Appellant Attorney (William D. Belanger)
Yeah.
16:12
May I reserve the five minutes, Your Honor?
16:15
Judge Lourie
Yes.
16:17
All right.
16:18
Mr. Belanger.
16:21
Appellee Attorney (John David Simmons)
Thank you, Your Honor.
16:23
So I want to just start with, if it pleases the court, the question on the ownership of the foreign patents.
16:32
Counsel, during his argument, suggested there was no evidence.
16:35
There was no evidence presented regarding ownership of the Japanese parent applications.
16:39
And that's just not the case.
16:42
There's multiple citations to the record in the gray brief at page 59 where we put in extensive evidence,
16:49
including testimony from Dr. Carey that the Japanese patent applications, the figures were identical to those in the U.S. case.
16:59
But more importantly, that Hamamatsu themselves filed the U.S.
17:03
applications under 35 U.S.
17:05
119 and they were for the same inventions as the Japanese applications.
17:10
And, in fact, HPK stipulated to that fact at trial.
17:14
So there is a stipulation as well as record evidence that amply supports finding of ownership of the patents worldwide should be joint because the parties work together.
17:41
No, Your Honor.
17:42
So we strongly dispute that.
17:45
And that argument was put in the District Court of Views.
17:52
The District Court of Views is the decision of the contract with some unidentified Hamamatsu confidential information disclosed.
18:11
And no confidential information was disclosed by Hamamatsu.
18:29
What the District Court found, we believe, is a correct reading of the contract,
18:35
but to be antithetical to the purpose of Section 5 of the agreement so that Hamamatsu could take Zionix confidential information,
18:49
misuse it to develop products without evidence of its own confidential information.
19:00
Somehow it became the co-owner.
19:01
Judge Lourie
If Hamamatsu is stated to be a co-inventor, companies aren't inventors.
19:16
Hamamatsu's scientists, engineers, and whether it's confidential or not is not relevant to inventorship.
19:27
So why, if the parties work together, wasn't Hamamatsu's inventor a contributor and therefore Hamamatsu would be entitled to co-invent, co-ownership?
19:44
Appellee Attorney (John David Simmons)
Respectfully, Your Honor, the District Court disagreed with that interpretation of the contract.
19:50
The contract states that Zionix, as the party disclosing confidential information,
19:55
would be the sole owner of any patents and evidence that Hamamatsu took the confidential information,
20:10
used it in order to co-owners based on inventors.
20:23
The contract would control and the contract states ownership information, but it would derive from that confidential information.
20:37
Thank you, Your Honor.
20:40
Thank you, Your Honor.
20:46
Judge Reyna
Thank you, Judge Arena.
20:47
Let me ask you a quick question regarding the award of the injunction.
20:53
HBK is arguing that the award was overbroad because it enjoined all the products that practiced the disputed patent,
21:00
and it did that without finding infringement.
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What's your response to that argument?
21:08
Appellee Attorney (John David Simmons)
Yes, Your Honor.
21:08
So I believe that there was evidence presented, and we said it in the brief,
21:14
that the products did practice the testimony from the fact witness
21:19
and Hamamatsu.
21:20
There was also evidence presented that the argument was a little because there never was a finding of infringement.
21:43
I would concede there was not a finding of infringement.
21:46
There was a finding of a breach of contract based on the same confidential information that made its way both into the products and the patent.
21:54
And so the court enjoined further sale of the products that used that confidential information and enjoined sale of the products that . . .
22:08
Judge Reyna
I don't know what the injunction does.
22:09
It's not limited to products that are . . .
22:13
It's limited to products practicing the disputed patent.
22:19
It doesn't say anything about the confidential information.
22:23
Appellee Attorney (John David Simmons)
And respectfully, I think it does refer to the disputed patents and says and or practicing disputed patents.
22:33
And I would point out, Your Honor, that Hamamatsu did ask the district court for clarification of that portion of the injunction.
22:40
In an argument in the future that there's products that are practicing the disputed patent,
23:02
Judge Reyna
does the injunction include that within its scope or does there have to be some type of . . .
23:14
I'm concerned that the injunction may deal out the necessity of finding infringement in the future.
23:24
All you have to say is that the products are practicing the disputed patent.
23:29
Appellee Attorney (John David Simmons)
And . . .
23:30
And I think the scope of the injunction is attributes that . . .
24:01
. . . which is backing up and making one clarification point.
24:03
The disputed patents on the end product, the end result, extensive evidence put on a trial by Hamamatsu
24:15
and considered by the district court . . .
24:25
. . . and the dispute . . .
24:37
Thank you.
24:39
Judge Reyna
Thank you.
24:40
Judge Lourie
Counsel, back to Rone Schiff again.
24:42
Was there no evidence that Hamamatsu contributed confidential information to the joint research?
24:51
Appellee Attorney (John David Simmons)
I . . .
24:53
I am not aware of any such information.
24:55
There was definitely evidence presented that they did not.
25:00
And that was certainly evidence that the jury and the judge could have believed in the judge's finding of . . .
25:09
Judge Lourie
Now, on the statute of limitations issue, if we found that there was a bar because there was a breach in 08,
25:20
does that eliminate all the non-patent remedies?
25:27
Appellee Attorney (John David Simmons)
If . . .
25:35
Judge Lourie
Okay.
25:36
Now, defend the conclusion that the 2008 failure to return the information marked the breach.
25:50
Because the jury didn't find that.
25:52
Appellee Attorney (John David Simmons)
The jury was . . . all the defendants' arguments were presented to the jury and that evidence was presented to the jury
25:59
around the question of whether there was a walling or fraudulent concealment of any breach.
26:04
And the record evidence is clear that, securely, . . .
26:57
. . .
27:14
. . . . the record evidence, the e-mail exchange at the time in 2008, Mr. Kobayashi of Hamamatsu and Mr. Sailor at Scionics
27:41
in an exchange of e-mails where Hamamatsu clearly assured Scionics that it would not make any use of the information,
28:02
his record evidence of a contract with Nikon, Nikon and contractual relationship with Nikon.
28:49
At the same time, Nikon was discontinuing the . . .
28:55
and more various trial courts can rely on to find that the one.
29:04
On the issue of willfulness, just to hit that briefly,
29:08
and of developing the cyanide technology, so there's full evidence.
29:40
Some of the briefs, Hamamatsu says the patent was not filed.
29:49
The record is that they had a copy of the application.
29:53
The patent had not provided the ability to sidestep the monitoring.
30:13
Harvard's specific evidence of monitoring the issuance of the patent.
30:47
Judge Lourie
Yes, go ahead.
31:22
Judge Reyna
Counselor, are you saying that the court did not apply octane in its analysis?
31:27
Appellee Attorney (John David Simmons)
Did not apply octane correctly.
31:29
That's right, Your Honor, because the court does cite the octane.
31:54
Judge Lourie
You mean the judgment was low octane.
32:05
Continue, or we'll save the remainder of your time for the cross-appeal
32:10
if there's something to respond to from Pellant.
32:16
So we'll save it for you.
32:18
Appellee Attorney (John David Simmons)
And, Your Honor, just one last point.
32:20
Pellant, if you don't mind, I'm the pre-judge among the others.
33:40
Judge Lourie
Thank you, Counsel.
33:41
Mr. Simmons has five minutes.
33:50
Appellant Attorney (William D. Belanger)
...case by Octane Fitness.
34:01
...presented, just responded to it.
34:07
Point out, district court lived with the case and exercised its discretion
34:13
and did not find that the case stood out.
34:17
This is just a rehash of the case under an exceptional case motion.
34:21
And if I could go back to the ownership issue,
34:24
we talked about whether Hamamatsu and Venters contributed confidential information.
34:28
The MNDA presented information disclosed between the parties as confidential
34:34
under Section 1, proven otherwise,
34:37
demonstrates that the information HPK disclosed during the evaluation,
34:43
including the proprietary methods,
34:45
are by definition confidential under the Agreement.
34:50
That's Appendix 1107 and 1108, and Appendix 1111 to 1112.
34:56
The reality is both parties exchanged confidential information.
35:02
So in section 5 of Appendix 2882, the receiving party acknowledged,
35:06
disclosing party claims ownership of the confidential information disclosed by the disclosing party, and all patent rights in or arising from such confidential information. In this case, both were disclosing parties and both were receiving parties. During the evaluation, each party disclosed
35:24
confidential information to the other. So it follows that each claims ownership in the patent rights arising from such confidential information, they respectively disclosed. The only thing that they're referring to that they're not aware of confidential information was testimony from Psyonix's Dr. Carey, who said he wasn't aware of any, but he wouldn't be in a position to know. And if I could turn to the breach of contract injunction, you pointed out that the injunction calls for practicing the disputed patents. Well, this court previously held in Maycomb, which is
35:56
the
35:56
881 S. 3rd, 1323, that even in a breach of contract case, injunctions which merely forbid practicing a patent are overly broad. The injunction here is just like Maycomb. It merely forbids practicing the U.S. disputed patents, and it's overly broad for that reason. The disputed patents were only in the case to determine inventorship. There was no adjudication as to the scope of the claims or an analysis of what products would be infringing them, not even the accused products. And the cross-appellants in their gray brief at 16.9
36:27
to 17 now urge that the injunction is even broader, because they say that practicing means the injunction is worldwide with respect to these U.S. patents. If I could turn to the foreign ownership issue briefly, I think the cross-appellants are relying on a stipulation about 35 U.S. T. 119. We agree we made that stipulation, but making their argument, it's an improper understanding of Section 119. 119 doesn't require that the U.S. patents be translated.
37:01
That's inaccurate. And we actually disputed that on the record. Unfortunately, it's not in the appendix because it wasn't submitted in the briefs. But if it pleases the court, we can submit pages of the transcript from that day of the trial. And we'd also note that cross-appellants are asking the district court and now this court to transfer a list of foreign patents without ever giving the court the patent numbers. So there's patents in China, Europe, Korea, Taiwan, and the U.S.
37:34
None of which are of record in the case. And that's a failure of proof by the cross-appellants. Any questions, Your Honor?
37:49
Judge Lourie
Apparently not.
37:51
No.
37:53
Thank you, Your Honor. Thank you, panel.
37:55
Mr. Belanger has, what, three minutes to respond on foreign patents and attorney case.
38:04
Appellee Attorney (John David Simmons)
Thank you, Your Honor.
38:05
And I would counsel on the foreign patent issue.
38:10
Counsel made an observation that Dr. Carey wouldn't be in a position.
38:15
And, you know, Hamamatsu had provided confidential information in the collaboration.
38:25
And he testified clearly appendix Hamamatsu confidential to your knowledge.
38:32
No.
38:33
He then, it appended, is exactly what was in the, by Hamamatsu's prior art.
38:57
Dr. Carey asked about whether anything in that example was, should be deemed a sole.
39:35
Judge Lourie
Mr. Belanger, you're asking for ownership of foreign patents.
39:40
You classified them.
39:42
You haven't made them of record, have you?
39:44
Appellee Attorney (John David Simmons)
We did make the foreign parents.
39:49
Judge Lourie
The Japanese parents.
39:50
Is that what you're asking for?
39:52
Appellee Attorney (John David Simmons)
Yes.
40:01
Judge Lourie
Are you just asking for the Japanese patents, not the Korean and the Chinese and the European?
40:08
Appellee Attorney (John David Simmons)
We're asking for the children.
40:09
So it's a matter of record.
40:12
It does exactly this, Your Honor.
40:47
I'm saying that the assignment is for priority application.
40:55
Judge Reyna
Does a Section 119 require, priority requires that they be for the same invention?
41:01
Are you saying that all of these foreign patents, countries other than Japan, are for the same invention?
41:10
Appellee Attorney (John David Simmons)
That's what we're asking for assignment of.
41:12
Yes, Your Honor.
41:14
Judge Reyna
I know you're asking for an assignment of them, but are they all for the same invention?
41:20
Has that been shown?
41:25
Appellee Attorney (John David Simmons)
Yes, Your Honor.
41:25
We believe it has been shown by the way that simply by claiming priority under the PCT,
41:31
they are claiming that they are foreign patents are for the same invention.
41:36
Judge Lourie
Well, that's a claim.
41:38
That's a claim.
41:39
Unless there's an adjudication, one doesn't necessarily get the benefit of the priority application.
41:48
But I understand.
41:50
You're in your position.
41:51
Appellee Attorney (John David Simmons)
And just to, if I could break it into two, respectfully,
41:54
certainly the Japanese parents are in the record.
41:58
They were the subject of express testimony,
42:00
and they're the subject of stipulation that they are in fact for this invention.
42:04
So at a minimum, the Japanese patents should be assigned.
42:08
We believe that that same finding under Richardson applies to all of the other foreign applications that we submit.
42:19
Thank you, Counsel.
42:25
Judge Lourie
We will take case under submission.
42:29
Appellee Attorney (John David Simmons)
Thank you, Your Honor.
42:29
Thank you, Your Honor.