Pinpoint, Inc. v. Amazon.Com, Inc.

• Decision Date: 06 December 2004
• Docket Number: No. 03 C 4954.,03 C 4954.
• Citation: 347 F.Supp.2d 579
• Parties: PINPOINT, INC., Plaintiff, v. AMAZON.COM, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

347 F.Supp.2d 579

PINPOINT, INC., Plaintiff, v. AMAZON.COM, INC., et al., Defendants.

No. 03 C 4954.

United States District Court, N.D. Illinois, Eastern Division.

December 6, 2004.

Fred H. Bartlit, Jr., Philip Scott Beck, Mark Edward Ferguson, Peter Benjamin Bensinger, Jr., Shawn F. Fagan, Mark S. Ouweleen, Rebecca Weinstein Bacon, Paul J. Skiermont, Adam K. Mortara, Bartlit Beck Herman Palenchar & Scott Llp, Chicago, IL, Jennifer E. Heisinger, Bartlit Beck Herman Palenchar & Scott Llp, Denver, CO, for Plaintiff.

Todd Clark Jacobs, Laura K. McNally, Robert David Donoghue, Robert Davis Stonebraker, Grippo & Elden, Chicago, IL, Lynn H. Pasahow, J. David Hadden, Darren Donnelly, Wendy Bjerknes, Lynne A. Maher, Jedediah Phillips, Fenwick & West Llp, Mountain View, CA, for Defendants.

OPINION

POSNER, Circuit Judge, Sitting by Designation.

Pinpoint filed this suit last year against Amazon.com and affiliates (for simplicity I'll pretend that "Amazon.com" is the only defendant) for infringement of two business-method patents, U.S. Patent Nos. 5,758,257 and 6,088,722. The patents describe methodologies based on statistical theory, mathematics, and formal logic by which a retailer such as Amazon.com can identify customer preferences and use those preferences to make recommendations to the customers for additional purchases. Amazon.com denies infringement but also argues that the patents are invalid because of obviousness or anticipation.

When the case was reassigned to me last month for trial, Amazon.com's challenge to Pinpoint's standing to bring this suit had not yet been resolved, and I set it for an evidentiary hearing on December 3, 2004. The hearing having now been held, I set forth here my findings of fact (simplified wherever possible to do without material inaccuracy) and conclusions of law. Fed.R.Civ.P. 52(a).

The parties agree that the plaintiff in a patent infringement suit has the burden of proving that it owned the patent or (as here) patents on which its suit is based when it filed the complaint. United States v. Hays, 515 U.S. 737, 743, 115 S.Ct. 2431, 132 L.Ed.2d 635 (1995); Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992); Fieldturf, Inc. v. Southwest Recreational Industries, Inc., 357 F.3d 1266, 1268 (Fed.Cir.2004); Wisconsin Right to Life, Inc. v. Schober, 366 F.3d 485, 489 (7th Cir.2004). They further agree that unless this condition is satisfied, the district court lacks subject-matter jurisdiction. See Paradise Creations, Inc. v. UV Sales, Inc., 315 F.3d 1304, 1309 (Fed.Cir.2003); Enzo APA & Son, Inc. v. Geapag A.G., 134 F.3d 1090, 1093-94 (Fed.Cir.1998); Gaia Technologies, Inc. v. Reconversion Technologies, Inc., 93 F.3d 774, 779-80, amended, 104 F.3d 1296 (Fed.Cir.1996).

The essential distinction on which the analysis in this opinion turns is between "inventor" and "owner." Patent law requires that the (or an) inventor of a patented invention be listed in the patent regardless of whether he is the (or an) owner of the patent. 35 U.S.C. §§ 102(f), 116; Pannu v. Iolab Corp., 155 F.3d 1344, 1348-49 (Fed.Cir.1998). "The statute imposes no requirement of potential ownership in the patent on those seeking to invoke it." Chou v. University of Chicago, 254 F.3d 1347, 1358 (Fed.Cir.2001). Nothing is more common than for an inventor to agree that the owner of a patented product or process that he invents will be someone besides himself, such as his employer. Amazon.com contends that the owner of Pinpoint's two patents at the time the complaint was filed was the University of Pennsylvania. The university has since assigned its patent rights to Pinpoint but the assignment comes too late to confer standing. Pinpoint recognizes this but argues that the university never owned the patents and that in any event one of the inventors listed in the patents, Wachob, not having been affiliated with the university, is a co-owner who assigned his patent rights to Pinpoint before the lawsuit began; if so, Pinpoint, as a co-owner with the University of Pennsylvania, had standing to sue. See 35 U.S.C. § 262; Ethicon, Inc. v. United States Surgical Corp., 135 F.3d 1456, 1465-66 (Fed.Cir.1998); Harrington Mfg. Co. v. Powell Mfg. Co., 815 F.2d 1478, 1481 (Fed.Cir.1986).

The patents list four inventors besides Wachob: Herz, Ungar, Zhang, and Salganicoff. Herz is the principal of Pinpoint; Ungar and Zhang are professors at the University of Pennsylvania. No evidence was presented at the hearing about Salganicoff, and he is barely mentioned in the briefs on standing. I discuss his bearing on the case in the course of my discussion of Wachob.

The inventive activity that culminated in the patented inventions followed the signing in 1994 by Herz, Ungar, and the University of Pennsylvania of a "Sponsored Research Agreement" whereby Herz agreed to finance research by Ungar. The agreement makes clear that all intellectual property resulting from the research belongs to the University of Pennsylvania, except research "made solely by SPONSOR [i.e., Herz] or employees of SPONSOR using facilities other than PENN'S." Attachment A to the agreement describes the sponsored research, which is to say the research the fruits of which belong to the university, as including "obtaining, organizing, entering and editing data on viewer preference characteristics," "searching for the best statistical methods to be employed in obtaining data on user preferences," "exploring theories and algorithms to be used in viewer clustering ... efforts will concentrate on the application of fuzzy set theory," and "building optimization models, through mathematical programming, for scheduling video programs on TV channels." (The patented inventions are intended for use by cable television broadcasters as well as by online and other retailers.)

The description of the sponsored research overlaps the inventions described in the patents closely enough to give rise to an inference that the inventions grew out of that research and therefore belonged to the University of Pennsylvania until — after the suit was filed — it quitclaimed its interest in them to Pinpoint in exchange for a modest share of any net revenues earned by Pinpoint on the patents. The fact that the share was modest — 6 to 7 percent — could be evidence that the university did not have much confidence that it really owned the patents. But Pinpoint makes nothing of the point, and anyway we don't know what representations Herz, Ungar, and Zhang made to the university regarding the applicability of the Sponsored Research Agreement to that research.

Ungar, testifying by way of a videotaped deposition (which enabled me to evaluate his credibility), claimed not to remember having done any research under the Sponsored Research Agreement related to the patented inventions. He testified that his work on those inventions was done solely pursuant to a consulting agreement between him and Herz and involved no use of university facilities, which if true would support Pinpoint's reliance on the "made solely by SPONSOR" clause of the Sponsored Research Agreement.

However, I found Ungar's testimony singularly lacking in credibility, especially but not only in light of Zhang's deposition testimony. Zhang's curriculum vitae describes the work he did for Herz and Ungar as "university-sponsored," and when asked why he described it so he answered: "I just can remember I heard the term from either Fred Herz or Dr. Lyle Ungar, so I just used it." Although he denied having stored any of the data for this research on University of Pennsylvania computers, his emails reveal that he did save some of the data on those computers and also that he used the computers for computations that were part of this research and that he couldn't do on his home computer.

I attach no weight to the fact that Zhang was paid for his work on the patented inventions by Herz rather than by the university. It was in the interest of Herz, Ungar, and Zhang to create the appearance that the research was not sponsored research, since, if it was, the inventors would be entitled under the university's patent policy (of which more shortly) to only a 30 percent share of the profits from the inventions, versus the 100 percent share that they would receive if it was not sponsored research.

Ungar's refusal to acknowledge that an email purporting to come from his email address was actually composed by him or with his knowledge was merely the low point of this witness's unsatisfactory testimony. Herz, who also testified by videotape, like Ungar and Zhang denied that the research leading up to the patents had been sponsored research. His demeanor was evasive, his testimony unresponsive, and the selectivity of his recollections implausible.

Pinpoint points to a clause of the Sponsored Research Agreement that requires the university to disclose to the sponsor, that is, to Herz, any inventions "reasonably considered patentable" resulting from the sponsored research; and this was not done. But the responsibility for its not being done lay with Ungar, the principal investigator, who as I have emphasized had a financial interest in enabling Herz to obtain patents that would not be owned by the university. Ungar was a disloyal employee, whose disloyal act could not bind the university in its dealings with the sponsor whom Ungar was assisting in what amounted to a misappropriation of the university's intellectual property.

I conclude that the research conducted by Ungar, Zhang, and their associates that resulted in the patents was conducted pursuant to the Sponsored Research Agreement and that the patented inventions were the intellectual property of the University of Pennsylvania when the complaint was filed, though by virtue of the subsequent assignment they are now the property of Pinpoint.

The remaining issue is whether Wachob, a co-inventor with no university affiliation, was also a co-owner, which if so...