Khalid v. Citrix Systems, Inc., 79143-5-I

CourtCourt of Appeals of Washington
Writing for the CourtANDRUS, A.C.J.
Decision Date07 December 2020
PartiesATM SHAFIQUL KHALID, an individual, and XENCARE SOFTWARE, INC., a Washington corporation, Appellants, v. CITRIX SYSTEMS, INC., a Delaware corporation, Respondent. CITRIX SYSTEMS, INC., Appellant, v. ATM SHAFIQUL KHALID, and XENCARE SOFTWARE, INC., Respondents.
Docket Number79305-1-I,79143-5-I,79405-1-I,79145-5-I

ATM SHAFIQUL KHALID, an individual, and XENCARE SOFTWARE, INC., a Washington corporation, Appellants,
v.

CITRIX SYSTEMS, INC., a Delaware corporation, Respondent.

CITRIX SYSTEMS, INC., Appellant,
v.

ATM SHAFIQUL KHALID, and XENCARE SOFTWARE, INC., Respondents.

Nos. 79143-5-I, 79405-1-I, 79145-5-I, 79305-1-I,

Court of Appeals of Washington, Division 1

December 7, 2020


UNPUBLISHED OPINION

ANDRUS, A.C.J.

Software engineer ATM Shafiqul Khalid[1] sued his former employer, Citrix Systems, Inc., raising numerous claims, including breach of an employment agreement relating to the ownership of intellectual property Khalid developed during his employment. Citrix countersued Khalid for breaching the same agreement and for trademark infringement under the Lanham Act, 15 U.S.C. §1114 et seq. based on Khalid's use of Citrix's "Xen" trademarks for his startup businesses.

On summary judgment, the trial court dismissed several of Khalid's claims and also found Khalid had infringed Citrix's trademarks. A jury subsequently found Citrix breached Khalid's employment agreement and severance agreement and awarded him over $3 million in damages. The jury found Khalid had not breached his employment agreement and awarded Citrix no damages on its trademark infringement claim.

In post-trial motions, the trial court awarded Khalid over $2.6 million in attorney fees and costs. It awarded Citrix $117, 816 in legal fees and costs for prevailing in part on summary judgment on its trademark infringement counterclaim. The trial court also concluded, based on the jury's verdicts, that Citrix has no ownership interest in two of Khalid's patents and entered a declaratory judgment to that effect in Khalid's favor.

On appeal, Citrix and Khalid challenge a number of pretrial, trial, and post-trial decisions.[2] We conclude that the trial court erred in denying Khalid's request for prejudgment interest on the jury's $3 million damages award and erred in awarding attorney fees to Citrix on its trademark infringement claim. We remand with instructions to vacate the attorney fee award in favor of Citrix, to award prejudgment interest to Khalid as set out in this opinion, and to adjust Khalid's attorney fee award to eliminate compensation for work that does not relate to a common core of facts. In all other regards, we affirm the decisions of the trial court and the judgment entered on the jury's verdicts.

FACTS

Khalid's Education and Employment History

Khalid completed his undergraduate studies in computer science and engineering in Bangladesh, his country of origin, in 1995. After publishing multiple research papers in computer science journals and winning a national computer programming competition from the Bangladesh Computer Council, Khalid began graduate studies in the United States, completing a master's degree in computer engineering in 1998. That same year, he began working at Microsoft as a software design engineer, in its "kernel and architecture group," working on the nucleus of its Windows operating system.

In 2006, Khalid left Microsoft to join Citrix, an international technology company that provides desktop virtualization and networking services. Citrix hired Khalid to work in "Citrix Labs," the company's research and development group that functioned as a think tank responsible for the creation and development of new products.

Khalid's Inventions

Khalid has a lengthy history of developing patentable inventions, both for his employers and for his own, separate, business endeavors. The litigation with Citrix involves two such inventions.

The '637 Patent for the Mini-Cloud System

On July 15, 2014, the United States Patent & Trademark Office (USPTO) issued patent number 8, 782, 637 (the '637 Patent). This patent, entitled "Mini-Cloud System for Enabling User Subscription to Cloud Service in Residential Environment," is described as a system "to enable subscription or service model for computing infrastructure, software, and digital content."

Khalid described the '637 Patent as a system comprised of multiple components, including what Khalid called a "thin terminal" device, which is a small piece of computer hardware, similar to a Roku or an Apple TV USB device, paired with a software system to manage digital content subscription services. Khalid began developing the software subscription component of this system as early as in 1996 while still a graduate student. This component involved compressing software to allow users to download it from an online source, so the software seller could eliminate retail in-store sales. He filed a provisional patent application for the system to support a software subscription service in 2001.[3]

In 2007, he broadened the provisional patent application to include a framework and platform for incorporating a digital content subscription. In November 2009, Khalid filed yet another provisional patent application for a system and process to consolidate a DSL modem and small computer into an "access gateway," which could connect to services to host a remote desktop. This home gateway system was, as Khalid described it, a method of combining and centrally managing one's cell phone, movie rentals, and internet services.

In January 2010, Khalid filed his next provisional patent application for "thin devices to deliver computing power." The thin device, described as like a Roku stick, was the hardware needed to control his prior software system inventions.

On November 22, 2010, he filed a nonprovisional patent application combining each of the components for which he had previously filed provisional applications. This application is what culminated in the issuance of the '637 Patent.

Khalid initially formed a company he called KrisanTech in 2000 to develop and market the subscription component of what later became his mini-cloud system. He prepared a business plan for KrisanTech in 2006 when he began exploring how to attract venture capital for his startup company outside of Microsoft. He later began using the name "PCXen" as the name of the startup he intended to use to develop and market the mini-cloud system.

The '219 Patent for Softlock Antivirus Software

On October 9, 2012, the United States Patent & Trademark Office (USPTO) issued patent number 8, 286, 219 (the '219 Patent) to Khalid. This patent, entitled "Safe and Secure Program Execution Framework," is described as a system and method for ensuring that any instructions executing on a computer are certified and secure. Khalid testified that the patent covers a type of antivirus software based on "whitelisting," a process of certifying secure applications permitted access to a computer, as compared to "blacklisting," the then-prevalent antivirus methodology of maintaining a list of unsecure applications to be blocked.

Khalid filed a provisional patent application for this invention in 2005, prior to working for Citrix. He allowed the application to lapse, but after working on the software code and testing it on his own time and using his own resources, he filed a second, nonprovisional patent application for the invention on February 16, 2008. The 2008 application was identical to the 2005 provisional one he had filed, with the exception of one additional improvement.

By 2008, Khalid had a functional software security product that he named "Softlock." Khalid founded a company he called "XenCare Software," purchased the expired domain name of www.xencare.com, and developed a website for the company. In September 2008, he issued a press release announcing the release of Softlock 2.0, described as a "lightweight and powerful protection [system] for Windows computers." Khalid testified that thousands of users downloaded free trial copies of Softlock 2.0. He later assigned the '219 Patent to Xencare, a company he formally incorporated in late 2011.

Khalid's Employment Agreement with Citrix.

When Khalid began working for Citrix in 2006, it asked him to execute a document entitled "Non-Solicitation, Non-Compete and Confidentiality and Employee Non-Disclosure Agreement" (Employment Agreement). Section 7 of the Employment Agreement, entitled "Disclosure and Assignment of Inventions" ("Invention Assignment Clause"), provides:

If at any time during the term of my employment by Citrix, I . . . make, conceive discover or reduce to practice any invention or intellectual property right . . . (hereinafter called "Developments") that (i) relate to the business of Citrix . . .; (ii) result, directly or indirectly, from tasks, duties and/or responsibilities assigned to me by Citrix; or (iii) result, directly or indirectly, from the use of premises or personal property (whether tangible or intangible) owned, leased or contracted for by Citrix, such Developments and the benefits thereof shall be considered work made for hire[4] and shall immediately become the sole and absolute property of Citrix and its assigns If any of the Developments may not, by operation of law or otherwise, be considered work made for hire by me for Citrix, or if ownership of all right, title, and interest of the intellectual property rights therein shall not otherwise vest exclusively in Citrix, I hereby assign to Citrix, and upon the future creation thereof automatically assign to Citrix, without further consideration, the ownership of all such Developments. . . . Upon disclosure of each of such Developments to Citrix, I agree during the term of my employment and at any time thereafter, at the request and cost of Citrix, to sign, execute, make and do all such deeds, documents, acts and things as Citrix may reasonably require to perfect and protect all interests therein. (Emphasis added).

The Invention Assignment Clause required Khalid to disclose all developments "made or conceived" prior to employment by Citrix on "Exhibit B" to the Employment Agreement....

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