Gaia Technologies, Inc. v. Reconversion Technologies, Inc.

• Decision Date: 19 August 1996
• Docket Number: 95-1346 and 95-1347,Nos. 95-1345,s. 95-1345
• Citation: 93 F.3d 774,39 USPQ2d 1826
• Parties: , 41 U.S.P.Q.2d 1134 GAIA TECHNOLOGIES, INC., Plaintiff-Appellee, v. RECONVERSION TECHNOLOGIES, INC., Reconversion Technologies of Texas, Inc., Progressive Capital Corporation, Defendants-Appellants, and David Gordon, Ira Rimer, Joel Holt and Richard Clark, Defendants-Appellants.
• Court: U.S. Court of Appeals — Federal Circuit

Page 774

93 F.3d 774

39 U.S.P.Q.2d 1826, 41 U.S.P.Q.2d 1134

GAIA TECHNOLOGIES, INC., Plaintiff-Appellee, v. RECONVERSION TECHNOLOGIES, INC., Reconversion Technologies

of Texas, Inc., Progressive Capital Corporation,

Defendants-Appellants,

and

David Gordon, Ira Rimer, Joel Holt and Richard Clark,

Defendants-Appellants.

Nos. 95-1345, 95-1346 and 95-1347.

United States Court of Appeals, Federal Circuit.

Aug. 19, 1996.

Rehearing Denied; Suggestion for Rehearing In Banc Declined

March 26, 1997.

As Amended on Limited Grant of Rehearing Dec. 4, 1996.

Guy E. Matthews, J. Albert Riddle, and William P. Jensen, Matthews and Associates, L.L.P., Houston, Texas, argued for plaintiff-appellee. Of counsel was Perry McConnell, R. Perry McConnell, P.C., Houston, Texas.

R. Thomas Seymour, Tulsa, Oklahoma, argued for defendants-appellants, David Gordon, Ira Rimer, Joel Holt and Richard Clark. With him on the brief was C. Robert Burton, IV.

Michael A. Maness, Houston, Texas, for defendants-appellants Reconversion Technologies, Inc., Reconversion Technologies of Texas, Inc., and Progressive Capital Corporation. On the brief was George D. Gordon, Baggett & Gordon, Conroe, Texas.

Before MICHEL, CLEVENGER, and SCHALL, Circuit Judges.

CLEVENGER, Circuit Judge.

Reconversion Technologies, Inc. (Retech), Reconversion Technologies of Texas, Inc. (Retex), and Progressive Capital Corporation (PCC) (collectively the Corporate Defendants) and David Gordon, Ira Rimer, Joel Holt, and Richard Clark (collectively the Individual Defendants) appeal the judgment of the United States District Court for the Southern District of Texas, Gaia Technologies, Inc. v. Reconversion Technologies, Inc., Civil Action No. H-94-2256 (S.D.Tex. March 17, 1995). This judgment, entered on jury verdicts, held the Corporate Defendants and the Individual Defendants liable to Gaia Technologies, Inc. (Gaia) for various patent, trademark, and state law claims. Because we reverse the district court's determination that Gaia had standing to bring an infringement action for four patents and one trademark, we vacate the judgment insofar as it relates to the patent and trademark claims. Because the district court may or may not elect to assert jurisdiction over the state law claims under 28 U.S.C. § 1367(a) (1994), we vacate the judgement on the state law claims and remand the case for dismissal of the patent and trademark claims and consideration of the state claims under 28 U.S.C. § 1367(a).

I

On October 20, 1993, Gaia filed a complaint in the United States District Court for the Southern District of Texas against the Corporate Defendants and the Individual Defendants. At trial, Gaia litigated the following federal issues which were submitted to a jury: (1) infringement under 35 U.S.C. § 271 (1994) of U.S. Patent Nos. 4,003,408 (the '408 patent), 4,028,288 (the '288 patent), 4,168,799 (the '799 patent), and 4,191,522 (the '522 patent); ¹ and (2) infringement under 15 U.S.C § 1114 (1994) of the trademark LEAKY PIPE, Reg. No. 1,703,285. As to the patent counts, Gaia alleged that the Corporate Defendants committed direct infringement and the Individual Defendants induced this infringement. Pursuant to the supplemental jurisdiction granted to federal district courts under 28 U.S.C. § 1367(a), Gaia also litigated the following Texas state law claims which were submitted to the jury: (1) unfair competition; (2) tortious interference with prospective contractual relations; and (3) wrongful appropriation of trade secrets.

Among other defenses, each group of defendants alleged that Gaia did not own the patents and trademark at the time the suit was filed, and thus lacked standing to assert the patent and trademark infringement claims. The district court submitted all of the above claims to the jury, reserving the issue of Gaia's standing to sue until after the jury verdict.

For the '408 and '799 patents, the jury found that the Corporate Defendants directly infringed and that damages of $123,750 should be assessed for each patent. Although the jury also found that the Individual Defendants induced infringement of the '408 and '799 patents, the jury found that no damages could be attributable to the Individual Defendants. In contrast, for the '522 patent, the jury found infringement and inducement of infringement against the Corporate Defendants and Individual Defendants, respectively, and assessed damages of $1.8 million. For the '288 patent, the jury found infringement by the Corporate Defendants and assessed damages of $1.8 million, but found no inducement of infringement by the Individual Defendants. For all four patents, the jury found no willfulness on the part of the Individual Defendants, Retech, and PCC, but found that Retex's infringement was willful. For the trademark infringement, the jury found that while the Individual Defendants did not infringe, the Corporate Defendants willfully infringed and assessed $125,000 in damages.

Regarding the state law claims, the jury found that the Corporate Defendants engaged in unfair competition and assessed damages at $125,000. Similarly, the jury found that the Corporate Defendants engaged in tortious interference with prospective contractual relations and assessed damages at $4,350,000. As to the wrongful appropriation of trade secrets claim, while the jury found that the Corporate Defendants had engaged in wrongful appropriation that caused damage, the jury answered "$0" to the question of the amount of damages. Additionally, the jury found that the Individual Defendants were not liable for each of the three state law claims. Nevertheless, in determining punitive damages "for the willful conduct of the defendants," the jury assessed $100,000 against each Individual Defendant and nothing against each Corporate Defendant.

After the verdict, the judge denied the defendants' motion to dismiss based on Gaia's lack of standing to bring the patent and trademark claims. The judge, in two other post-verdict orders, extensively modified the jury's findings. For the '799 and '408 patents, the judge modified the jury verdict so as to assign liability to the Individual Defendants for the damage that the jury found occurred because of their inducement of infringement, making the Individual Defendants jointly and severally liable with the Corporate Defendants for the $123,750 damage award for each patent.

Reversing an earlier post-verdict holding that voided the jury's punitive damages assessment, the judge also reinstated the punitive damages against the Individual Defendants. Reasoning that the jury could not have assessed punitive damages against the Individual Defendants without finding them liable on a state law claim, the judge found all defendants jointly and severally liable for $4,350,000 for both wrongful appropriation of trade secrets and tortious interference with prospective contractual relations. In addition, the judge found that the Corporate Defendants willfully and maliciously infringed Gaia's patents and trademark and awarded double damages and attorney's fees (set at $450,000 in the final judgment). The judge then awarded Gaia costs, pre- and post-judgment interest, and issued a permanent injunction against the defendants. Finally, the judge entered a final judgment reflecting the amount of damages owed to Gaia. ² The Corporate Defendants and Individual Defendants appealed to this court.

II

On appeal, the Corporate Defendants renew their objection that Gaia lacked standing to bring the patent and trademark claims because Gaia did not own the four patents and one trademark (the Intellectual Property) at the time the suit was filed on October 20, 1993. The question of a party's standing to bring a case is a jurisdictional one which we review de novo. See Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1551, 35 USPQ2d 1065, 1074 (Fed.Cir.) (in banc), cert. denied, --- U.S. ----, 116 S.Ct. 184, 133 L.Ed.2d 122 (1995).

A

Patents and trademarks, like other personal property, may be conveyed from the inventor (patent) or registrant (trademark) to others, see FilmTec Corp. v. Allied-Signal, Inc., 939 F.2d 1568, 1572, 19 USPQ2d 1508, 1511 (Fed.Cir.1991), although a trademark cannot be validly assigned unless accompanied by its goodwill garnered in the marketplace, see Marshak v. Green, 746 F.2d 927, 929, 223 USPQ 1099, 1099-1100 (2d Cir.1984). 35 U.S.C. § 261 (1994), the patent statute governing assignments, states:

Applications for patent, patents, or any interest therein, shall be assignable in law by an instrument in writing.... An assignment, grant or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage.

For registered trademarks, 15 U.S.C. § 1060 (1994) similarly provides:

Assignments shall be by instruments in writing duly executed.... An assignment shall be void as against any subsequent purchaser for a valuable consideration without notice, unless it is recorded in the Patent and Trademark Office within three months after the date thereof or prior to such subsequent purchase.

Both statutes thus provide that: (1) a patent or trademark assignment must be in writing; and (2) the recording of an assignment is necessary only to protect the assignee from subsequent bona fide purchasers without notice.

B

In order to adjudicate the Corporate Defendants' appeal on the standing issue, we must trace the chain of title of the Intellectual Property from its original owner and creator--James E. Turner, the sole inventor of the four patented inventions and the original registrant of the LEAKY PIPE trademark. If Gaia can prove that it was the assignee of the Intellectual Property at the time the suit was filed, Gaia has standing to sue for patent infringement under 35 U.S.C. § 281 (1994) as a patentee, see 35...