CODA Development s.r.o. v. Goodyear Tire & Rubber Co.  (Fed. Cir. 2019)

Inventorship, particularly assertion of proper inventorship, has a unique place in U.S. patent law. This is based in large part on the language of Article I, Section 8, Clause 8 of the U.S. Constitution, which gives Congress the power to grant patents "to Inventors." Ample evidence of the primacy of inventorship can be found in the Supreme Court's decision in Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., where the Court vitiated the University's interests in an economically important patent (using the polymerase chain reaction, PCR, to detect HIV in patients treated with anti-AIDS drugs to measure the effectiveness of treatment) based on a mistake by a naïve graduate student at the behest of Cetus, the company that developed PCR. Indeed, there was a time when misjoinder of invention (the error of naming a person as an inventor who is not an inventor) or nonjoinder (the error of omitting an inventor) could render a patent invalid. This draconian consequence was ameliorated over time; the standard was changed over 30 years ago to permit correction of inventorship in granted patents provided that there was no deceptive intent in the misjoinder or nonjoinder (35 U.S.C. § 256). Even this requirement was loosened by the America Invents Act, which amended relevant sections of Title 35 to no longer require a lack of deceptive intent (see "The Disappearance of Deceptive Intent in S. 23").

These considerations were the basis for the Federal Circuit's decision last week in CODA Development s.r.o. v. Goodyear Tire & Rubber Co. overruling the District Court's grant of Defendant Goodyear's motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). The case involved Plaintiff CODA development's complaint in pursuit of a direction by the Court for the Patent and Trademark Office to correct the inventorship of U.S. Patent Nos. 8,042,586; 8,235,081; 8,322,036; 8,381,784; 8,550,137; 8,573,270; 8,695,661; 8,944,126; 8,857,484; 8,746,306; 8,381,785; and 8,113,254. The facts set forth in the Federal Circuit opinion are that CODA's CEO, Frantisek Hrabal invented self-inflating tire (SIT) technology and Goodyear approached CODA, expressing an interest in the SIT technology. Several meetings ensued under a nondisclosure agreement (NDA) where "Coda shared novel, proprietary, and confidential information concerning its SIT technology, including the placement of the tire's pump tube, the design of the pressure management system, the efficiency of the leakage compensation system, and the air passageway/interface between the exterior and interior of the tire," but after some time Goodyear apparently lost interest in the technology. As part of one of these meetings, Goodyear representatives took photographs of CODA's tires in breach of the NDA.

Thereafter, CODA and Mr. Hrabal were informed (from a former Goodyear employee) that the company had used CODA's SIT technology to develop its own self-inflating tires and that the company had filed patent applications based on their copying of CODA's technology as disclosed in the meetings. Over a four year period, the patents set forth above were granted to Goodyear inventors and assigned to the company. CODA's complaint sought changing inventorship of the '586 patent to name Mr. Hrabal as inventor and go delete the Goodyear inventors. Regarding the remainder of the patents, CODA asked the Court to add Mr. Hrabal as an inventor. The complaint also contained a claim for misappropriation of trade secrets.

Goodyear filed its motion to dismiss based on an earlier Hrabal filing and for failure to adequately describe the invention purportedly improperly obtained by Goodyear based on CODA's disclosure, and that the trade secret misappropriation claim was barred by the relevant statute of limitations. Goodyear also responded to CODA's opposition to its motion by asserting a Hrabal publication disclosing the invention, which proffer CODA argued the District Court should disregard because it was offered for the first time in Goodyear's reply brief. The District Court denied CODA's motion to strike the reference (denoting the reference as a public disclosure that was within the Court's purview to judicially notice) and granted Goodyear's motion to dismiss. The reasoning for granting the motion to dismiss focused on the Hrabal article, which the Court found disclosed all the elements in the Goodyear patents that CODA alleged were the basis for the change in inventorship claims. In addition, the Court found that Goodyear's failure to communicate with CODA after the initial meetings "undermined the necessary showing of collaboration because it alleged that Goodyear stopped communicating with CODA" after the initial meetings. Finally, the District Court found that CODA's trade secret misappropriation claims were time-barred by the statute of limitations, because the alleged sequence of events triggered a duty to investigate that CODA did not pursue until the statute had run.

Also important to the Federal Circuit's decision on appeal, CODA moved the District Court under Federal Rule of Civil Procedure 59(e) to amend the judgment and leave to file an amended complaint, which the District Court denied. This appeal followed.

The Federal Circuit vacated the District Court's dismissal under Fed. R. Civ. Pro. 12(b)(6) and remanded for further considerations, in an opinion by Chief Judge Prost joined by Judges Wallach and Hughes. Applying Sixth Circuit law (de novo review), and citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), and Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007), the panel set forth the relevant analysis: "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." "Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense" (citations omitted). Applying these standards, the Federal Circuit held that CODA's claims for correcting inventorship were "plausible," setting forth these facts:

The complaint describes Goodyear's prior failures with inflation technology. It also describes two meetings with Goodyear representatives—both arranged at Goodyear's initiative and attended by Mr. Benedict, Goodyear's point-person on SIT technology. Goodyear sought technical information from Coda at both meetings. And in the second meeting, Mr. Benedict requested that he and his team be allowed to spend some time alone with Coda's functional prototype, during which he photographed it without permission. After this second meeting, Goodyear stopped communicating with Coda for a time. When Coda reached out to Mr. Benedict attempting to restart communications, Mr. Benedict responded that a meeting would be premature.

Yet the next month, in preparation for Goodyear's own internal meeting, a Goodyear employee independently contacted Coda to inquire about the status of Coda's SIT technology. Correspondence with that employee revealed that Mr. Benedict responded in an "oddly vague" way when asked whether Goodyear had looked into Coda's invention. Also that month, Goodyear applied for the first in a series of patents covering assemblies and methods concerning self-inflating tires, with claims covering the allegedly novel, proprietary, and confidential information Coda disclosed to Goodyear. Years later, after Coda deemed the Goodyear endeavor a bust, Coda received an unsolicited email from the former Goodyear employee, who said that Goodyear copied Coda's SIT technology.

These facts provided sufficient support for the inferences that Mr. Hrabal had conceived the invention claimed in the '586 patent prior to the named inventors and had made "a more-than-insignificant contribution to the conception" of at least one claim of the Alleged Jointly Invented Patents. The opinion finds error by the District Court in "a procedural error," i.e., considering material (the Hrabal publication) outside the pleadings (citing Sixth Circuit precedent and Fed. R. Civ. Pro. 12(d)), which requires the court to convert a motion to dismiss into a summary judgment motion, in order to give the non-movant "a reasonable opportunity to present all pertinent material." As part of this determination, the panel noted that items taken into consideration under "judicial notice" must "not [be] subject to reasonable dispute," circumstances not present here. "Whether the Hrabal article actually disclosed those alleged novel trade secrets was a reasonably (indeed, hotly) disputed factual issue—one outside any judicial-notice exception to the general rule requiring conversion, and one that should not have been resolved adversely to Plaintiffs on a motion to dismiss," according to the opinion. In addition, in a footnote the panel further noted that reliance on the Hrabal reference "constituted an inference adverse to Plaintiffs when there were other reasonable inferences to draw in their favor."

The Federal Circuit also held the District Court erred in dismissing CODA's trade secret misappropriation claim for being time-barred. Stating that the inquiry involved in the "discovered or by the exercise of reasonable diligence should have discovered" their claim was "fact specific," the panel faulted as deficient Goodyear for "ask[ing] us to infer, from the complaint itself, that Plaintiffs should have begun investigating in 2009 and that, had they done so, they would have discovered the application leading to the '586 patent as of its publication date eighteen months later," and that "the only reasonable inference to be drawn is against Plaintiffs" (emphasis in opinion). The Federal Circuit held that CODA could have reasonably inferred that Goodyear had just lost interest in the technology, on the other hand, and that Goodyear would honor the NDA. Also, because pleading statute of limitations is an affirmative defense, the District Court further erred because CODA was not obliged to plead a "lack" of an affirmative defense in order to state a claim.

Finally, the panel held that the District Court erred in not permitting CODA to file its amended complaint. The opinion cites Foman v. Davis, 371 U.S. 178, 181–82 (1962), for the principle that "in the absence of any apparent reason (e.g., undue delay, bad faith or dilatory motive, repeated failure to cure deficiencies by previously allowed amendments, undue prejudice to the opposing party, futility), leave to amend should be freely given, as Rule 15 requires."

And the relevance of the change in the law referenced in the prelude to the discussion of the decision herein? Clearly there is no possibility for the named inventors to aver that their inventorship was without deceptive intent under the facts as set forth in this opinion. This outcome illustrates the consequence of Congress deciding that having the properly named inventors is of utmost importance under U.S. patent law.

CODA Development s.r.o. v. Goodyear Tire & Rubber Co. (Fed. Cir. 2019)
Panel: Chief Judge Prost and Circuit Judges Wallach and Hughes
Opinion by Chief Judge Prost