Personalized User Model, LLP v. Google, Inc.

Addressing the requirements for tolling the statute of limitations (SOL), the U.S. Court of Appeals for the Federal Circuit affirmed the district court’s grant of judgment as a matter of law (JMOL), finding that the district court properly refused to toll the statute of limitations.Personalized User Model, LLP v. Google, Inc., Case No. 14-1841 (Fed. Cir., Aug. 18, 2015) (Lourie, J.).

In the mid-1990s, Yochai Konig signed an employment contract with SRI International (SRI) and agreed to disclose and transfer ownership rights to all inventions and software conceived or made by him during the course of his employment. In 1999, while still an SRI employee, Konig began independently creating new software, which led to the formation of his own company. Before leaving SRI, Konig incorporated the company in Delaware. Konig was later issued two patents which were ultimately assigned from Konig’s company to Personalized User Model (PUM).

In July 2009, PUM filed a patent infringement claim against Google. In response to PUM’s evidence showing that the invention was conceived in July 1999, while Konig was still at SRI, Google purchased SRI’s rights to the patents and brought a breach of contract counterclaim against PUM and Konig. PUM and Konig responded that the counterclaim was time-barred by the three-year SOL.

The jury determined that Google did not infringe PUM’s patents, that the three-year SOL for Google’s contract claim was tolled and that Konig breached his employment contract. PUM and Konig moved for JMOL on the breach of contract claim and the district court granted the motion, concluding that no reasonable juror could find that SRI was blamelessly ignorant to the injury or that the injury was inherently unknowable. The court also rejected Google’s argument that section 8117 of Title 10 of the Delaware Code (the “tolling statute”) was applicable in this case. The JMOL rendered the counterclaim time-barred. Google appealed.

The Court affirmed the district court’s holding that Google failed to prove that the injury was “inherently unknowable” or that SRI was “blamelessly ignorant” to Konig’s alleged breach of contract. The Court considered that SRI knew Konig was leaving the company to work at a start-up company, and his departure should have generated an inquiry into whether Konig had conceived an invention during his employment. In all, the record was deficient of any evidence that SRI did anything to protect its interest.

The Court also agreed that Delaware’s tolling statute was inapplicable, as there was no tie to Delaware at the time the cause of action accrued. The purpose of the Delaware tolling statute is to toll the SOL as to defendants who, at the time the cause of action accrues, are outside the state and not subject to service of process. By contrast, applying the tolling statute in any action in which the defendant is a non-resident would result in the demise of the defense of statutes of limitation. Google’s incorporation in Delaware did not provide sufficient ties to Delaware because the cause of action accrued in California with a California claimant and a California defendant, and was based on an employment agreement executed by California residents in California.