On January 13, in BearBox LLC v. Lancium LLC, the Federal Circuit addressed issues related to inventorship and state law conversion claims that stemmed from exchanges between two individuals, Mr. Storms and Mr. McNamara, at an industry summit. The court dismissed the conversion claim brought by Mr. Storms, finding it to be preempted by federal patent law. The court also refused to find that Mr. Storms was inventor on patent filed after the summit, which listed Mr. McNamara as an inventor.
In 2017, Mr. Storms designed a Bitcoin mining datacenter, founded BearBox LLC in 2018 to develop cryptocurrency datacenters, and in 2019, created a BearBox system to control Bitcoin miners and started writing source code to manage a mining site based on factors like electricity costs.
Also in 2017, Mr. McNamara and Dr. Cline co-founded Lancium to develop datacenters located at wind farms to use the power output. Lancium planned to reduce its datacenter operations during high energy prices to sell power to the grid and increase operations when prices were low. This idea was disclosed in a PCT application published in February 2018. In 2019, Lancium created software to control the power level for its miners and manage their operation.
Lancium and Mr. Storms first met at an industry summit in May 2019. At the event, Mr. Storms discussed the BearBox system with Mr. McNamara. Later, Mr. McNamara requested BearBox design specs, which Mr. Storm provided in an email. In October 2019, Lancium filed a patent application, which ultimately issued as US Patent No. 10,608,433 (the ’433 patent). The ’433 patent relates to computing systems that perform computational operations and determine performance strategies for such systems that set power consumption targets. Mr. Storms sued Lancium, asserting claims of inventorship of the ‘433 patent and conversion under Louisiana state law.
Inventorship Claim
The Federal Circuit affirmed the district court’s judgment, which denied BearBox’s inventorship claims. The court agreed that BearBox failed to prove by clear and convincing evidence that Mr. Storms either conceived of or communicated the subject matter of any claim of the ’433 patent prior to Lancium’s independent conception.
In reaching this decision, the court emphasized that Mr. Storms only sent one email with four attachments to Mr. McNamara. Mr. Storms admitted that one attachment was not relevant to the ’433 patent. The other three did not establish that Mr. Storms conceived of the claimed invention or communicated the subject matter of any claim before Lancium’s prior independent conception, which was evidenced by Lancium’s earlier filed PCT application.
BearBox argued that the district court improperly excluded as hearsay Mr. Storm’s testimony about what was discussed with Mr. McNamara during the industry summit. The court acknowledged that the testimony may have served some non-hearsay purpose. However, the claim of error on the exclusion of evidence was not properly preserved.
BearBox also argued that the district court failed to consider claim elements in combination to determine whether Mr. Storms conceived of the claimed invention. Instead, the district court took a limitation-by-limitation approach. None of the cited case law, however, criticized the limitation-by-limitation approach. Because the district court analyzed each claim, the court found no error.
Finally, BearBox contended that the district court erred in applying the rule of reason to determine whether testimony was sufficiently corroborated by someone other than the alleged inventor. The court found that even if testimony supported that Mr. Storms conceived of the disputed limitation, there was no proof that he communicated the subject matter of this limitation to Lancium before Lancium’s independent conception.
Conversion Claim
The district court further dismissed the conversion claim because it was preempted by federal patent law. Under the supremacy clause, state law that conflicts with federal law is without effect. Conflict preemption occurs when a state law is an obstacle to the accomplishment and execution of the full purposes and objectives of Congress. The court agreed with the district court because, as plead, BearBox’s conversion claim amounted to inventorship and patent infringement claims.
The court took issue with how BearBox plead its conversion claim. BearBox sought monetary damages from Lancium for its use, sale, and monetization of technology that BearBox purported to have invented. The court found that the conversion claim, as pleaded, was framed as a patent infringement claim replete with language invoked when a party asserts inventorship or patent infringement (e.g., “conceived, used, and reduced to practice,” and “improperly used”).
Further, BearBox sought patent-like damages in the form of a royalty payment for use of BearBox’s allegedly converted technology. The BearBox technology was not patented and was freely shared with others. The court found that, if the conversion claim were to move forward as plead, BearBox would recover damages akin to those awarded to a patentee for use of technology that is unprotected under federal law.
Conclusion
The case highlights the importance of filing patent applications before industry conferences. Communication of the invention must be shown with clear and convincing evidence. Testimony of discussions that take place at conferences can be excluded as hearsay so written documentation to capture such exchanges may be prudent if a patent is in not in place.
Also, creative attempts to use state conversion laws for misappropriated invention documents may be preempted by federal patent law. Conversional claims should be carefully worded to avoid mirroring patent law claims and to avoid situations that would permit recovery for use of technical information that is unprotected under federal law.
