Google Win Invokes Lesson on Ex-Employees' Patents

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By Tony Dutra

Aug. 19 — Google Inc. can't claim rights in patents asserted against it in an infringement case, but the patents appear to be of no value to their current rights holder in any case.

The Federal Circuit's Aug. 18 ruling highlighted the due diligence required for a company to avoid losing patent rights when an employee leaves and starts up his own firm.

SRI International—the company selling its rights to Google—had failed to conduct an exit interview or even minimally monitor the ex-employee's new venture. The court affirmed a district court's judgment that SRI could not wait 12 years to claim a breach of contract because of the employee's failure to assign the patent to SRI.

The appeals court also ruled that the employee-patentee here could not appeal the district court's claim construction decisions without also appealing either invalidity or Google's noninfringement.

Statute of Limitations Rules

Yochai Konig was employed by SRI and left to start the company that eventually became Personalized User Model LLP. Konig received patents on “automatic, personalized information services to a computer user” that arguably he developed while still at SRI and was obligated under his employment contract to assign patent rights to SRI. U.S. Patent Nos. 6,981,040 and 7,685,276.

After PUM sued Google for patent infringement, Google bought rights to the patents from SRI and then counterclaimed Konig's breach of his employment contract.

But the Federal Circuit held that Google could not overcome the three-year statute of limitations by claiming that Konig's actions were “inherently unknowable” by a “blamelessly ignorant” SRI—the two-part standard under Delaware law.

The court said that any employee who leaves to immediately work at a start-up technology company should raise a “‘red flag' that should have generated an inquiry” into Konig.

And the court rejected the “blamelessly ignorant” tag when SRI could have conducted an exit interview as “the minimum quantum of evidence necessary to show that SRI did anything to protect its interests.”

SRI could also have found out about Konig's new firm from asking other employees, monitoring the start-up's progress and watching competitive patent filings, the court said.

“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,” the court said.

No Jurisdiction Over Claim Construction

PUM and Konig cross-appealed the district court's construction of the claim term “document.” The lower court said that it had to be an “electronic file.”

A jury used that claim construction and found the asserted patent claims invalid and not infringed by Google. PUM did not challenge either of the jury's findings.

That means there is no “live controversy” for an Article III court to consider, the court said, and PUM's appeal amounted to a request for an advisory opinion.

“Despite PUM’s concerns that the construction might be given preclusive effect in future litigation involving its related patents, we may not provide an advisory opinion on the meaning of a claim term that does not affect the merits of this appeal and thus is not properly before us,” the court said, refusing to review the claim construction judgment.

The court also noted that the Patent and Trademark Office has cancelled all the patent claims that PUM asserted in this case in an inter partes reexamination, leaving PUM with little hope of enforcing the patent going forward.

Judge Alan D. Lourie wrote the court's opinion, which was joined by Chief Judge Sharon Prost and Judge Jimmie V. Reyna.

Richard Salgado of Dentons US LLP, Dallas, represented PUM. David A. Perlson of Quinn Emanuel Urquhart & Sullivan, LLP, San Francisco, represented Google.

To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

To contact the editor responsible for this story: Anandashankar Mazumdar in Washington at amazumdar@bna.com

Full text at http://www.bloomberglaw.com/public/document/Personalized_User_Model_LLP_v_Google_Inc_Docket_No_1401841_Fed_Ci.