Trade Secret Claim Barred by Statute of Limitations; Inventorship Claim Not Necessarily Barred by Res Judicata
April 20, 2010
Last Month at the Federal Circuit - May 2010
Judges: Linn, Plager, Dyk (author)
[Appealed from: N.D. Tex., Judge McBryde]
In Gillig v. Nike, Inc., No. 09-1415 (Fed. Cir. Apr. 20, 2010), the Federal Circuit affirmed the district court’s dismissal of plaintiffs’ trade secrets claim as barred by the statute of limitations. The Federal Circuit however reversed and remanded the district court’s dismissal of plaintiffs’ inventorship claims as barred by res judicata.
In 2004, Triple Tee Golf, Inc. (“Triple Tee”) brought a first suit against Nike, Inc. (“Nike”) for alleged misappropriation of Triple Tee’s golf club-related trade secrets. That suit was dismissed due to Triple Tee’s lack of standing, despite Triple Tee’s argument that it had acquired all of its rights in the trade secrets from its principal, John P. Gillig, in January 2000. In 2008, Triple Tee again brought suit against Nike, this time with Gillig as coplaintiff. In this suit, Triple Tee and Gillig also asserted correction of inventorship claims under 35 U.S.C. § 256. The district court held that it had already dismissed the first suit for lack of standing and on the merits, and therefore dismissed the second suit, concluding that the trade secret claims were barred by the statute of limitations and res judicata, and that the inventorship claims were also barred by res judicata, since they arose from the same nucleus of operative facts as the trade secret claims.
On appeal, the Federal Circuit applied Texas state law for the misappropriation of trade secrets, which includes a three-year statute of limitations. Triple Tee argued that the statute of limitations period tolled during the first Triple Tee suit, which was filed within three years of Gillig’s alleged discovery of the misappropriation in February 2003. The Federal Circuit disagreed, finding that, under Texas law, a statute of limitations may be tolled for a second cause of action where the first action is a predicate action, in which the second cause of action is contingent on the first action’s determination of rights. The Court, however, found no predicate action and concluded that equitable tolling should not be invoked because “[Triple Tee] made a calculated decision to pursue this action in its own name with knowledge that it had not received from Gillig an assignment of whatever rights Gillig acquired through his dealings with [Nike] in September 2000.” Slip op. at 8 (first alteration in original). As a result, the Federal Circuit affirmed the district court’s holding that Triple Tee and Gillig’s trade secret claims were properly barred by the Texas statute of limitations.
With regard to res judicata, the Federal Circuit held that the inventorship claims would be barred only to the extent that the trade secret claims were properly barred, since both issues arose from a common nucleus of operative facts. The district court had purportedly dismissed the trade secret claims for lack of standing, as well as on the merits, since Triple Tee’s lack of full ownership was a failed element of the trade secret cause of action. On appeal, the Federal Circuit held that, to the extent that the dismissal in the original action was for lack of standing, there is no res judicata bar to a second action by a party with proper standing. The Court held that such a case would only bar another action by the same party alleging the same basis for standing, which would preclude Triple Tee’s claim of standing based on the purported assignment of rights in 2000.
The Court also held that an inventorship claim by Gillig would not be barred by res judicata even if an inventorship claim by Triple Tee had been barred, because “[d]ismissal on the ground that the plaintiff is not the real party in interest should not preclude a later action by the real party in interest.” Id. at 11 (alteration in original) (quoting 18A Charles Alan Wright et al., Federal Practice and Procedure § 4388 (2d ed. 2002)). Since the only issue determined by the district court was the failure of the alleged assignment from Gillig to Triple Tee in 2000, the Court concluded that neither collateral estoppel nor res judicata would bar Gillig from pursuing his inventorship claims.
Finally, the Court held that even though Triple Tee would be barred from reasserting inventorship claims based on its alleged assignment of rights in 2000, which was already decided by the district court, Triple Tee might not be barred from asserting inventorship claims based on a later 2005 assignment that had not been addressed by the district court. The Federal Circuit held that the district court was incorrect in deciding that the later 2005 assignment could not retroactively resolve the standing issue in the first Triple Tee suit because, in fact, “the res judicata doctrine does not apply to new rights acquired during the action which might have been, but which were not, litigated.” Id. at 13 (citing Computer Assocs. Int’l, Inc. v. Altai, Inc., 126 F.3d 365, 370 (2d Cir. 1997)). Res judicata, therefore, would also not apply to bar any claim by Triple Tee based on rights that accrued after an action that did not decide such claims.
Summary authored by Christopher K. Agrawal, Esq.