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Inventorship Claim Was Barred by Laches, and Related Unjust Enrichment and Fraud Claims Were Barred by Statute of Limitations

08-1075
July 16, 2008

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Last Month at the Federal Circuit - August 2008

Judges:

Michel, Linn (author), Zagel (District Judge sitting by designation)

[Appealed from: S.D.N.Y., Judge Cote]

In Serdarevic v. Advanced Medical Optics, Inc., No. 08-1075 (Fed. Cir. July 16, 2008), the Federal Circuit affirmed the district court’s grant of SJ on the basis of laches and the applicable state statute of limitations, holding that the district court had not abused its discretion in concluding that Olivia N. Serdarevic’s inventorship claim was barred by laches and that the district court correctly determined that Serdarevic’s state-law claims were barred by the applicable statute of limitations. The Court also affirmed the district court’s denial of Serdarevic’s motion for discovery under Fed. R. Civ. P. 56(f).

Serdarevic is a physician who did her residency in the early 1980s at Edward S. Harkness Eye Institute at Columbia Presbyterian Medical Center, where Francis A. L’Esperance, Jr. and Stephen L. Trokel were attending physicians. Serdarevic claims that during her residency, she invented the technology claimed in six patents (“patents-in-suit”). L’Esperance is the sole inventor named on three of the patents, and Trokel is the sole inventor named on the other three. All six patents have been assigned to VISX, Inc. (“VISX”), which is a wholly owned subsidiary of Advanced Medical Optics, Inc. (“AMO”). Serdarevic claims to be the sole inventor of one of the patents and a coinventor of the other five.

In September 2006, Serdarevic brought suit against AMO, VISX, L’Esperance, and Trokel, seeking correction of inventorship and alleging state-law claims of unjust enrichment and fraud against L’Esperance and Trokel. The defendants moved for SJ, or in the alternative, to dismiss on the basis of laches and the applicable state statute of limitations. In response, Serdarevic cross-moved for discovery pursuant to Rule 56(f) on her laches and state-law claims. The district court granted the defendants’ motions for SJ and denied Serdarevic’s cross-motion for discovery. The district court held that Serdarevic’s inventorship claim was barred by laches and that her state-law claims were barred by the applicable statute of limitations. Serdarevic appealed.

On appeal, the Federal Circuit first addressed the issue of laches. Serdarevic challenged the district court’s laches determination on three grounds: (1) that the district court improperly relied on the presumption of laches; (2) that she presented sufficient evidence to rebut the presumption; and (3) that the defendants’ unclean hands precluded them from relying on the laches defense. The Court rejected each of these arguments. With respect to Serdarevic’s presumption of laches argument, the Federal Circuit observed that a delay of more than six years after the omitted inventor knew or should have known of the issuance of the patent results in a rebuttable presumption of laches. The Court noted that Serdarevic knew of the issuance of the patents-in-suit in October 1998, but did not file suit until September 2006—nearly eight years later. As a result, the Court concluded that the presumption of laches applied here.

In so concluding, the Court rejected Serdarevic’s argument that the presumption should not apply at least as to one patent because that patent was in reexamination proceedings. She argued that because the reexamination certificate for that patent did not issue until September 19, 2000, and she brought suit just less than six years later, on September 15, 2006, the presumption should not apply to that patent. The Federal Circuit disagreed. It reasoned that there is no rule that the issuance of a reexamination certificate automatically resets the six-year clock for the presumption of laches. It noted that here, there was nothing in the record to suggest that Serdarevic’s inventorship claim arose during the reexamination proceedings or changed in any material way over the course thereof. To the contrary, noted the Court, Serdarevic claimed to be the sole inventor of all of the claims of the patent in question—both the claims that existed prior to reexamination and those that were added during reexamination. Accordingly, the Court concluded that the district court was correct in applying the presumption of laches.

The Court next turned to the issue of whether there was sufficient evidence to rebut the laches presumption. It explained that one can rebut the presumption of laches by offering evidence to show an excuse for the delay or that the delay was reasonable, or by offering evidence sufficient to place the matters of evidentiary prejudice and economic prejudice genuinely in issue. The district court held that Serdarevic had not met her burden of production on either reasonable delay or prejudice. The Federal Circuit agreed. Serdarevic argued that her eight-year delay in bringing suit was reasonable or excusable because of her unfamiliarity with the U.S. patent system, her inability to obtain legal counsel, and her efforts to license her inventorship rights. The Court noted that the district court considered each of these excuses, but found them insufficient. It explained that there was no basis for it to conclude that the district court abused its discretion in rejecting Serdarevic’s excuses. Similarly, the Court noted that the district court did not abuse its discretion when it concluded that Serdarevic failed to rebut the presumption of prejudice to defendants as a result of Serdarevic’s delay.

The Court then turned to Serdarevic’s argument that the defendants’ unclean hands precluded them from relying on the laches defense. The Court explained that under the unclean hands doctrine, even if unable to overcome the presumption, a plaintiff may be able to preclude application of the laches defense with proof that “the [defendant] was itself guilty of misdeeds towards the [plaintiff].” Slip op. at 11 (alterations in original) (quoting A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1038 (Fed. Cir. 1992) (en banc)). It reasoned that in the context of an inventorship action, a plaintiff relying on the unclean hands doctrine to defeat a defense of laches must show not only that the defendant engaged in misconduct, but that the defendant’s misconduct was responsible for the plaintiff’s delay in bringing suit. Because Serdarevic had not made such a showing, the Court concluded that the district court was correct in finding that the defendants’ laches defense was not precluded by unclean hands.

The Federal Circuit next analyzed Serdarevic’s state-law claims of unjust enrichment and fraud against Trokel and L’Esperance. With respect to these claims, the district court granted SJ in favor of Trokel and L’Esperance based on statute of limitations grounds. The Federal Circuit observed that here, the applicable statute of limitations for unjust enrichment was six years. The Court reasoned that there was no evidence in the record that either Trokel or L’Esperance received any remuneration from the patents-in-suit within the six-year limitations period. Accordingly, the Court affirmed the district court’s grant of SJ in favor of Trokel and L’Esperance with respect to Serdarevic’s unjust enrichment claim.

As for Serdarevic’s fraud claim, the Federal Circuit noted that the applicable statute of limitations for actual fraud was the longer of six years from the date on which the fraud occurred, or two years from the time when the plaintiff discovered or, with reasonable diligence, should have discovered the fraud. Serdarevic asserted a fraud claim against Trokel, claiming that he concealed facts from her and misrepresented facts to her, to prevent her from taking actions that would have resulted in her being listed as an inventor of the patents-in-suit. The Court reasoned that Serdarevic was aware of the patents-in-suit by October 1998 and as a result, even if Trokel had successfully concealed the patents-in-suit from Serdarevic from the 1980s to 1998, Serdarevic necessarily discovered or, with reasonable diligence, should have discovered that concealment when she learned of the patents-insuit in 1998. The Court noted that the six-year limitations period for her actual and constructive fraud claims thus began to run in 1998, and because her action was filed in 2006, well past the six-year limitations period, it was barred by the statute of limitations.

Finally, the Federal Circuit reviewed the district court’s denial of Serdarevic’s Rule 56(f) cross-motion for discovery made in response to defendants’ motions for SJ, and concluded that it had not abused its discretion in denying that motion. Accordingly, the Court affirmed the district court’s grant of defendants’ SJ motions and denial of Serdarevic’s cross-motion for discovery.