Schwendimann v. Arkwright Advanced Coating, Inc.

• Decision Date: 05 May 2020
• Docket Number: 2018-2416, 2019-1012
• Citation: 959 F.3d 1065
• Parties: Jodi A. SCHWENDIMANN, fka Jodi A. Dalvey, Plaintiff/Counterclaim Defendant-Cross-Appellant Cooler Concepts, Inc., Counterclaim Defendant-Cross-Appellant v. ARKWRIGHT ADVANCED COATING, INC., Defendant/Counterclaimant-Appellant
• Court: U.S. Court of Appeals — Federal Circuit

959 F.3d 1065

Jodi A. SCHWENDIMANN, fka Jodi A. Dalvey, Plaintiff/Counterclaim Defendant-Cross-AppellantCooler Concepts, Inc., Counterclaim Defendant-Cross-Appellant

v.ARKWRIGHT ADVANCED COATING, INC., Defendant/Counterclaimant-Appellant

2018-2416, 2019-1012

United States Court of Appeals, Federal Circuit.

Sealed Opinion Issued: May 5, 2020

Public Opinion Issued: May 13, 2020^*

Devan V. Padmanabhan, Padmanabhan & Dawson, PLLC, Minneapolis, MN, argued for plaintiff/counterclaim defendant-cross-appellant and counterclaim defendant-cross-appellant. Also represented by Michelle Dawson, Erin Dungan, Paul J. Robbennolt.

Michael Hawes, Baker Botts, LLP, Houston, TX, argued for defendant/counterclaimant-appellant. Also represented by Lauren J. Dreyer, Washington, DC; Laura Lynn Myers, Kurt John Niederluecke, Fredrikson & Byron, PA, Minneapolis, MN.

Before O’malley, Reyna, and Wallach, Circuit Judges.

Opinion for the court filed by Circuit Judge Wallach.

Dissenting opinion filed by Circuit Judge Reyna.

Wallach, Circuit Judge.

Cross-Appellant Jodi A. Schwendimann filed a lawsuit in the U.S. District Court for the District of Minnesota ("District Court") against Appellant Arkwright Advanced Coating, Inc. ("Arkwright"), alleging infringement of U.S. Patent Nos. RE41,623, 7,749,581, 7,754,042, 7,766,475, 7,771,554, and 7,824,748 (collectively, the "Patents-in-Suit").² Following a jury trial, a judgment of willful infringement was entered against Arkwright, the jury awarded Ms. Schwendimann damages in the amount of $2,624,228.00, and the District Court allowed prejudgment interest of $1,915,328.00. See Schwendimann v. Arkwright Advanced Coating, Inc. , No.11-cv-00820-JRT-HB, 2018 WL 3621206, at *9 (D. Minn. July 30, 2018) ; J.A. 104–06 (Judgment).

Arkwright appeals. Ms. Schwendimann and her company Cooler Concepts, Inc. ("Cooler Concepts") cross appeal. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1). We affirm.

BACKGROUND

I. Factual History

Starting in 1992, Ms. Schwendimann worked at American Coating Technologies, Inc. ("ACT"), J.A. 8594, which was owned by Nabil Nasser, J.A. 8595–96. ACT manufactured paper coating products. J.A. 8608. Ms. Schwendimann eventually became a vice president at ACT, J.A. 8597, and worked there until the company ceased operations in 2001, J.A. 8598. From 1998 through 2000, Ms. Schwendimann and Mr. Nasser filed two patent applications with the U.S. Patent and Trademark Office ("USPTO"), claiming inventions relating to image transferring sheets—U.S. Patent Application Nos. 09/150,983 ("the ’983 application"), J.A. 703, 8619–22, and the ’845 application, J.A. 703–04—in which both individuals were named as inventors. In 1999, Ms. Schwendimann filed a patent application, U.S. Patent Application No. 09/391,910 ("the ’910 application"), in which Ms. Schwendimann was named the sole named inventor. J.A. 703. Ms. Schwendimann and Mr. Nasser conveyed assignment of all three applications to ACT in 1998 to 2000. J.A. 703–04.

When ACT ceased operations in 2001, it owed significant debt to various lenders, as well as to Ms. Schwendimann for her wages and sales commissions. J.A. 1344. ACT provided to Ms. Schwendimann a promissory note for the amount $282,073.25 for its outstanding debt to her. J.A. 8608. It had "become clear," however, that ACT would be unable to pay Ms. Schwendimann outright. J.A. 1344. At the same time, ACT owed attorney fees to its attorneys at the firm Schwegman, Lundberg & Woessner, P.A. ("SLW"), which were incurred during the prosecution of ACT’s patent applications, and which amounted to around $25,000 to $30,000. J.A. 705, 1344. To settle its outstanding debts, ACT reached an agreement with Ms. Schwendimann, in which ACT transferred assignment of its patent applications—including the ’983, ’845, and ’910 applications—to Ms. Schwendimann to satisfy its outstanding debt to her ("2001 Security Agreement"). J.A. 1344. In return, Ms. Schwendimann agreed to "take responsibility" for and satisfy ACT’s debts to SLW. J.A. 18682–83. Ms. Schwendimann also agreed that she would not sue ACT for her unpaid wages. J.A. 8665. To memorialize the assignment of the applications, Mr. Nasser and Ms. Schwendimann met with an SLW attorney and instructed her to prepare and file the necessary documents to assign the applications to Ms. Schwendimann. J.A. 8682–83. In June 2002, SLW opened new client matters for Ms. Schwendimann regarding the three outstanding applications. J.A. 705.

In January 2003, SLW prepared a draft assignment of the ’983 application. J.A. 705. The following month, Mr. Nasser executed the assignment of the ’983 application on behalf of ACT, J.A. 733–37, and, the next day, SLW filed the executed assignment with the USPTO, J.A. 486–90. Throughout 2003, the SLW partner primarily representing both ACT and Ms. Schwendimann, Janal Kalis, J.A. 702, communicated with an SLW paralegal, Candy Buending, regarding the assignment of the ’845 and ’910 applications, J.A. 706. In both May and December 2003, Ms. Kalis sought confirmation from Ms. Buending that the assignments for the two applications were finalized. J.A. 706. Ms. Buending drafted assignments for both the ’845 and ’910 applications, J.A. 706, which Mr. Nasser never saw or signed, J.A. 1349–50.

In December 2003, SLW filed the following documents with the USPTO: (1) a fax filing cover sheet notifying and instructing the USPTO to record and attach an assignment for the ’845 application; (2) a Recordation Form Cover Sheet notifying the USPTO that ACT had conveyed by assignment the ’845 application to Ms. Schwendimann; and (3) a copy of the ’983 application assignment with an alteration ("Hand-Altered Copy"). J.A. 707; see J.A. 501–03. The Hand-Altered Copy contains the ’983 patent’s title, application number, the execution date of the ’983 application assignment, and Mr. Nasser’s signature. J.A. 502–03. In the upper righthand corner, the Hand-Altered Copy also contains the handwritten number "1010.021." J.A. 502. SLW had assigned Ms. Schwendimann the internal client number of "1010" and used the number "1010.021" to reference the ’845 application. J.A. 705. SLW acknowledged that it filed the incorrect assignment for the ’845 application. J.A. 8468 ("So, [Ms. Kalis] attached the wrong assignment. No doubt about it."). The USPTO accepted the filing and altered the record owner of the ’845 application in its database to Ms. Schwendimann. J.A. 707.

In 2011, Ms. Schwendimann claims she became aware for the first time that the incorrect assignment was filed with the USPTO for the transfer of the ’845 application. Cross-Appellant’s Br. 12. Subsequently, ACT assigned the Patents-in-Suit to Ms. Schwendimann ("2011 Assignment"), J.A. 8614–16, and it was recorded with the USPTO, J.A. 505–09. Ms. Schwendimann and ACT executed a satisfaction of debt agreement, which stated that ACT "is indebted to [Ms. Schwendimann] under" the Satisfaction of Debt Agreement, as well as the parties’ 2001 Security Agreement and other bank loans "in excess of $600,000." J.A. 1283; see J.A. 1283–87 (Satisfaction of Debt Agreement). The parties agreed that "[ACT] hereby consents to [Ms. Schwendimann’s] acceptance of certain of the [c]ollateral consisting of [ACT’s] right, title and interest in certain patents as described on Schedule I[.]" J.A. 1284 (emphasis removed). Schedule I lists, inter alia, the Patents-in-Suit. J.A. 1287. The Satisfaction of Debt Agreement was approved by the surviving members of the ACT’s Board of Directors ("Board"). J.A. 1290; see J.A. 1289–91 (ACT Written Action). In the ACT Written Action, the Board acknowledged that "ACT is currently indebted to [Ms. Schwendimann] ... under a Promissory Note ... in the principal amount of $282,073.25" and that, pursuant to the 2001 Security Agreement "[ACT] granted [Ms. Schwendimann] a security interest in [ACT’s] personal property and all proceeds thereof[.]" J.A. 1289–90. It further acknowledged that ACT had received two loans from a bank, which were secured by ACT’s personal property and that Ms. Schwendimann’s company, Cooler Concepts, "purchased the [b]ank’s rights to collect the [b]ank [l]oans and the [b]ank’s collateral position[.]" J.A. 1289. Moreover, it stated that "[Ms. Schwendimann] has perfected her security interest in the [c]ollateral by (i) filing a UCC-1 Financing Statement with the Minnesota Secretary of State ... and with the Wisconsin Department of Financial Institutions ... and by (ii) recording an Assignment with the [USPTO]." J.A. 1289. Accordingly, the Board approved the Satisfaction of Debt Agreement. J.A. 1289.

II. Procedural History

In April 2011, Ms. Schwendimann filed a complaint against Arkwright for infringement of the Patents-in-Suit with the District Court. J.A. 274–83 (Complaint).³ In July 2011, Arkwright asserted a lack of standing on the grounds that Ms. Schwendimann did not own the Patents-in-Suit. J.A. 433–34 (Motion to Dismiss for Lack of Jurisdiction). It was at this point that Ms. Schwendimann and ACT took corrective action, including the 2011 Assignment and the Satisfaction of Debt Agreement. J.A. 8614–17; see J.A. 1289–91. In January 2012, Arkwright moved to dismiss the Complaint for lack of standing and Ms. Schwendimann moved for summary judgment on the same issue. J.A. 8. In March 2012, the District Court denied both motions. J.A. 1–18. In doing so, the District Court determined the Hand-Altered Copy constituted an "instrument in writing" pursuant to 35 U.S.C. § 261 (2006). J.A. 13; see J.A. 9–13.⁴ The District Court determined that it did not have sufficient evidence to assess whether the Hand-Altered Copy constituted a valid assignment of the ’845 application. J.A. 17. The production of additional discovery ensued, after which Ms. Schwendimann renewed her motion for summary judgment on standing and the District Court granted it, finding that there was no genuine issue of material fact that ACT had assigned the ’845 application to Ms. Schwendimann in 2002. J.A. 26–30....