## Facts

- In the 1990s, LSI Logic, Inc. (LSI) designed and sold application-specific integrated circuits (ASICs) and relied heavily on electronic design-automation (EDA) tools to create, test, and simulate integrated circuits.
- LSI developed and patented proprietary EDA tools and described itself not only as an ASIC company but also as an “EDA company.”
- Daniel Watkins worked for LSI throughout the 1990s and, as a condition of employment, signed an invention assignment agreement assigning to LSI inventions made or conceived during employment that related to LSI’s business; the agreement tracked and referenced California Labor Code § 2870.
- Watkins worked on EDA tools and other inventions for LSI.
- In 1993, Watkins and Narpat Bhandari, among others, formed a separate venture (Vasona) to develop an EDA verification tool to simulate integrated circuits, with LSI identified as a potential customer.
- Watkins used some LSI resources in connection with the Vasona development effort, and an outside patent attorney warned that LSI could claim ownership of the invention.
- Vasona nevertheless filed a patent application, and in 1997 the United States Patent and Trademark Office issued U.S. Patent No. 5,663,900 (the “’900 patent”) covering the EDA system.
- After learning of the ’900 patent, LSI asserted it owned the invention and resulting patent rights based on Watkins’s employment agreement and the invention’s connection to LSI’s business.
- Bhandari, acting on Vasona’s behalf, transferred the ’900 patent to his company, Vanguard Systems, Inc. (Vanguard).
- Vanguard asserted that Cadence Design Systems, Inc., along with other EDA-related entities (including Altera, Mentor Graphics, and Magma), infringed the ’900 patent.
- Cadence and the other entities filed a declaratory-judgment action in the Northern District of California against Bhandari and Vanguard seeking a determination that defendants had no ownership interest (and thus no right to enforce) the ’900 patent, and they moved for summary judgment.
- The district court also considered the effect of prior litigation in the Eastern District of Texas in which Bhandari’s effort to pursue infringement claims had been dismissed for lack of standing based on an assignment of his interest.

## Issues

1. Whether the undisputed evidence showed that LSI—not Bhandari or Vanguard—owned the rights in the ’900 patent, defeating defendants’ ability to assert infringement claims.
2. Whether the prior Texas ruling on Bhandari’s lack of standing and transfer of rights precluded defendants from relitigating ownership in the Northern District of California action.
3. Whether plaintiffs were entitled to declaratory relief quieting title to the ’900 patent and dismissal of defendants’ counterclaims dependent on asserted ownership or enforcement rights.

## Decision

- The court granted plaintiffs’ motion for summary judgment on ownership of the ’900 patent.
- The court determined that defendants did not retain any enforceable ownership interest in the ’900 patent and could not assert rights inconsistent with the documented assignment history.
- The court gave preclusive effect to the earlier Texas decision on standing/ownership and held Bhandari was barred from relitigating the same ownership issue.
- Because defendants lacked an ownership interest necessary to enforce the patent, the court dismissed counterclaims premised on defendants’ asserted right to sue for infringement.
- The court issued declaratory relief confirming that Bhandari and Vanguard had no ownership interest in the ’900 patent.

## Legal Principles

- Patent ownership and transfers of patent rights generally must be shown through written instruments; unsupported assertions of retained rights do not create a triable issue against unambiguous assignments.
- A party must possess title to the patent (or all substantial rights) to have standing to sue for patent infringement; a nonowner cannot maintain infringement claims.
- Under California employment invention assignment agreements, inventions conceived or developed during employment that relate to the employer’s business may be assigned to the employer, subject to statutory limits such as California Labor Code § 2870.
- Issue preclusion (collateral estoppel) can bar relitigation when an identical issue was actually litigated and necessarily decided in a prior final judgment, and the party to be bound had a full and fair opportunity to litigate.
- Declaratory relief is appropriate where an actual controversy exists over patent ownership that affects the parties’ legal rights and where a declaration will settle the dispute over title and enforcement authority.

## Conclusion

The Northern District of California entered summary judgment for Cadence and the other plaintiffs, holding that LSI owned the ’900 patent and that Bhandari and Vanguard had no enforceable ownership interest; the court also treated the earlier Texas standing ruling as preclusive, dismissed defendants’ ownership-based counterclaims, and declared defendants lacked any right to enforce the ’900 patent.


Cadence Design Systems, Inc. v. Bhandari, 2007 U.S. Dist. LEXIS 83078 (2007)