True or False: patent cases are never litigated in state court.
False!
The Delaware Court of Chancery recently adjudicated a patent case, which was affirmed earlier this month by the Delaware Supreme Court.
The Court of Chancery began its opinion in Recor Medical, Inc. v. Warnking, 7387-VCN by describing the case as follows: “On the one hand, this case may be about a competing company attempting to stop a rival company from succeeding in the marketplace. At the time of the acquisition, the plaintiff neither knew about the assets it now seeks to obtain by court order, nor did it intend to pursue [the acquired technology]. On the other hand, this case may also be about the faithful adherence to contractual obligations and the unremitting fiduciary duties that define the proper conduct of a fiduciary.”
ReCor, a medical device company, acquired all of the assets of insolvent company ProRhythm. While at ProRhythm, the CEO, Warnking, executed an Invention Assignment Agreement which provided that any invention he “conceived of” was the property of “the Company and its assigns.” Only 30 days after his employment ended, Warnking filed two patent applications relating to the use of ultrasound technology to treat high blood pressure. Shortly thereafter, Warnking and several other former employees of ProRhythm formed a new company to develop the application of ultrasound technology for the treatment of high blood pressure.
ReCor brought suit seeking a declaration that it owned the ultrasound technology that Warnking and his new company were commercializing, and an injunction. At issue was whether Warnking “conceived” of an invention while employed by ProRhythm, and thus was subject to his Invention Assignment Agreement. (Under Delaware law, invention assignment agreements are permitted “so long as the inventions to be assigned are related to the employer’s business or result from work performed by the employee for the employer”).
Based on the evidence presented at trial, the Court concluded that Warnking conceived the invention disclosed in his patent applications while employed by ProRhythm. The Court also found that Warnking’s invention was related to ProRhythm’s proprietary information. Accordingly, the Court (1) declared that ReCor owned the patents that Warnking obtained, (2) enjoined defendants “from making further use of the technology claimed in the patents-at-issue, and (3) ordered defendants to transfer to ReCor the applicable patents, all books and records pertaining thereto, and all the attendant rights to the applicable patents and the technology claimed therein.
Because the Court found that Recor was entitled to the patents, it did not address ReCor’s breach of fiduciary duty claim, which is that Warnking deliberately concealed the opportunity to develop the ultrasound technology from the ProRhythm board so that he could pursue it on his own.
