Holding: The determination of whether federal patent law preempts a state law cause of action is based on the state law claim as pled, not on a comparison of the required elements of the state law claim to the objectives embodied by federal patent law.
Lancium operates data centers for Bitcoin miners using wind farms to power the data centers. When power prices are low, Lancium diverts power to the Bitcoin mining operation, and when energy prices are high, Lancium cuts back on power to the data center and sells power to the electrical grid. Lancium disclosed some of its power use concepts in a PCT application in February 2018. After filing the application, Lancium continued to develop its own software to control power usage for Bitcoin mining operations.
Around the same time, Austin Storms, the owner of BearBox, was developing the BearBox system, allowing a remote user to turn Bitcoin mining machines on and off. He also wrote software to control a mining site based on various economic conditions, such as the price of electricity. In May 2019, at a Bitcoin mining summit, Storms met with Lancium to discuss the BearBox system. Lancium showed interest in the BearBox system, and after the conference, Storms sent an email to Lancium including a product specification sheet, a diagram of the BearBox miner management system, specification sheets on fans and hardware components, and a data file with a simulation of the BearBox system. Lancium did not reply to the email sent by Storms. In October 2019, Lancium filed a provisional patent application that became US Patent No. 10,608,433, related to a control system to determine a performance strategy for computer systems using power from a power grid.
After seeing the ‘433 Patent, BearBox sued Lancium, claiming that Storms was the sole owner or a joint owner of the ‘433 Patent and also pleading conversion under Louisiana state law. The district court granted summary judgment to Lancium’s claim that federal patent law preempts the state law conversion claim, and after a bench trial, the district court determined that Storms was not an inventor of the ‘433 Patent.
The Federal Circuit affirmed the district court’s decision that federal patent law preempts BearBox’s Louisiana state law conversion claim. In a case of conflict preemption, preemption occurs when state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress. Public disclosure and use are the main objectives of patent policy, so a state law that interferes with an idea that has been freely disclosed to the public by its author is preempted by federal patent law. When determining whether federal patent law preempts a state law cause of action, the court should not mechanically compare the required elements of the state law claim to the objectives of the federal law. Instead, the court should look to the state law claim as pled to determine whether that cause of action would interfere with the policies of the federal law.
In its pleading, BearBox sought damages for Lancium’s “improper and unauthorized use” of BearBox’s unpatented technology, such as system designs, documents, and data. The pleading stated that Storms had “conceived, developed, and reduced to practice BearBox’s technology” and that Lancium’s actions constituted improper use of BearBox’s property. BearBox also asked for damages in the form of disgorgement of Lancium’s profits. The Federal Circuit found this pleading to essentially read as an inventorship and patent infringement cause of action. Further, BearBox had not patented the technology that it alleged was stolen by Lancium, and had already publicly disclosed this information. Therefore, if the conversion claim were to move forward, it would grant BearBox the potential to recover lost profits for the use of technical information that was not protected by a patent.
The Federal Circuit also upheld a decision to strike a supplemental report filed by BearBox’s expert five months after the close of expert discovery and only three weeks before the start of the trial. The district court had adopted Lancium’s proposed claim constructions in a Markman hearing after the close of discovery. However, BearBox was aware of Lancium’s proposed claim constructions before the end of discovery and had an obligation under the district court’s own precedent to address the proposed constructions in its expert reports.
Finally, the Federal Circuit upheld the district court’s decision that BearBox had not met its burden to show by clear and convincing evidence that Storms should have been listed as a joint inventor on the ‘433 Patent. An alleged joint inventor’s testimony alone is not sufficient to meet this burden, there must be additional evidence to corroborate the testimony of the inventor, such as documents, physical evidence, or oral testimony from a third party. A rule of reason test is applied to determine whether this testimony is sufficiently corroborated and whether the inventor’s story is credible. The Federal Circuit found no issue with the district court’s approach of going limitation-by-limitation through the claims to determine whether Storms should have been listed as an inventor in the ‘433 Patent.
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