VAPOR POINT LLC, KEITH NATHAN, KENNETH MATHESON, Plaintiffs-Cross-Appellants
ELLIOTT MOORHEAD, NANOVAPOR FUELS GROUP, INC., BRYANT HICKMAN, Defendants-Appellants DON ALFORD, JEFFEREY ST. AMANT, Counterclaim Defendants-Cross-Appellants
from the United States District Court for the Southern
District of Texas in No. 4:11-cv-04639, Judge Vanessa D.
Aaron Wietjes, Polsinelli PC, Dallas, TX, argued for
plaintiffs-cross-appellants and counterclaim
defendants-cross-appellants. Also represented by Michael
William Peterson Ramey III, Ramey & Schwaller, LLP,
Houston, TX, argued for defendants-appellants.
O'MALLEY, Chen, and Stoll, Circuit Judges.
Point, L.L.C., Keith Nathan ("Nathan"), and Kenneth
Matheson ("Matheson") (collectively "Vapor
Point") sued Elliott Moorhead ("Moorhead"),
NanoVapor Fuels Group, Inc., and Bryant Hickman
("Hickman") (collectively "NanoVapor") in
the United States District Court for the Southern District of
Texas, seeking to have Nathan and Matheson recognized as
joint inventors under 35 U.S.C. §256 on NanoVapor's
U.S. Patent Nos. 7, 727, 310 ("the '310
patent") and 8, 500, 862 ("the '862
patent"). NanoVapor responded by suing Vapor Point,
seeking to have Moorhead recognized as a joint inventor under
35 U.S.C. § 256 on Vapor Point's U.S. Patent Nos. 7,
740, 816; 7, 803, 337; 8, 337, 585; 8, 337, 604; 8, 337, 763
and for declaratory relief regarding inventorship of
NanoVapor's '310 and '862 patents. After a
four-day evidentiary hearing, the district court issued an
order granting Vapor Point's motion for correction of
inventorship and denying each of NanoVapor's motions.
Vapor Point moved for exceptional case status and
attorneys' fees. The district court issued a final
judgment correcting inventorship, dismissing the action with
prejudice, and denying Vapor Point's motion for
exceptional case status and attorneys' fees.
appeals the district court's order on inventorship and
its dismissal of the case. Vapor Point cross-appeals the same
order to the extent it holds that the case is not exceptional
and that an award of attorneys' fees is not warranted. We
find that the district court did not err in dismissing the
case after determining inventorship, especially in light of
NanoVapor's concession that a determination of
inventorship would resolve the case. We further find that the
district court did not abuse its discretion in denying Vapor
Point's motion for exceptional case status and
attorneys' fees. Therefore, we affirm.
factual and procedural history in this case is confusing, but
is important to the issues we resolve. We do our best to lay
it out with clarity.
patents-in-suit are generally directed "to the removal
of volatile fuel vapors, also known as volatile organic
compounds ('VOCs'), from storage tanks and other
holding vessels, generally in the oil and gas industry."
Inventorship Order at 3, Vapor Point, L.L.C., et at. v.
Moorhead, et at., No. 4:11-CV-04639 (S.D. Tex. Mar. 13,
2015), ECF No. 321 (hereinafter "Inventorship
Order"). "EPA and state 'clean air'
regulations regulate the percentage of contaminates that may
be discharged" into the atmosphere. Id. at 4.
The patents-in-suit "address this problem by capturing
and recovering the fuel vapors." Id.
is an industry leader in the field of [VOC] containment,
including a process called Vapor Suppression System developed
by Moorhead that aims to control or eliminate combustible and
toxic gases in fuel storage and transfer operations."
Id. at 7. After working with Moorhead to help market
this technology, Nathan became Chief Operating Officer of
Nano Vapor in 2007. Id. at 8. NanoVapor later
hired Matheson to help with the "commercial
embodiment" of the technology being developed.
Id. Moorhead filed provisional patent application
60/871/766 on December 22, 2006, claiming the vapor
suppression system that is the subject of NanoVapor's
'310 patent. The '310 patent claims priority to this
application. The parties disagree over whether Nathan was
aware at the time of the progress of the patent application.
Id. at 8.
alleged that Nathan and Matheson "plotted to steal
[NanoVapor's] technology and destroy [NanoVapor's]
business when [Nathan and Matheson] developed the commercial
embodiment of NanoVapor's patent-pending concept."
Id. According to NanoVapor, "an outside group
conducted due diligence testing that exceeded expectations,
" after which Nathan and Matheson "decided to steal
the technology and associated trade secrets."
Id. NanoVapor asserts that Nathan and Matheson
"each requested a 20% stake in NanoVapor, which
[NanoVapor] rejected." Id.
contrast, Vapor Point alleges that "the '310 patent
[NanoVapor] filed for on December 18, 2007 wrongfully
incorporated, disclosed, and claimed all of Nathan and
Matheson's conceptual and inventive contributions."
Id. The '862 patent, according to Vapor Point,
similarly misappropriated Nathan and Matheson's work.
Id. Nathan and Matheson allege that they are the
true inventors of the technology disclosed in the '310
patent "because Defendant Moorhead brought on Nathan and
Matheson to help him reengineer the system and bring it to
market but that Moorhead wrongfully filed for the '310
patent without consent, notice, or compensation to Nathan or
Matheson." Id. at 9. Based on the allegations,
Vapor Point asked that the district court correct
inventorship of the '310 and '862 patents to add
their names to both, or possibly even substitute their names
for Moor-head's on both.
part, NanoVapor asked the district court to alter the
inventorship of Vapor Point's five patents to
include Moorhead "because the Vapor Point patents are
based on Defendant Moorhead's conceptions in the '310
addition to its requests to correct the inventorship of
NanoVapor's patents, Vapor Point also asserted a number
of state law claims against Nano Vapor: common-law fraud,
fraud by nondisclosure, unjust enrichment, tortious
interference, misappropriation of trade secrets, and the
Texas Theft Liability Act. First Amended Complaint at
¶¶ 61-104 (Counts III-VIII), Vapor Point
(S.D. Tex. Aug. 16, 2013), ECF No. 151. Nano Vapor, in turn,
asserted a number of affirmative defenses to the claims in
Vapor Point's First Amended Complaint, including that
"[Vapor Point] cannot prevail because [Vapor Point has]
an obligation to assign any invention to NanoVapor Fuels
Group, Inc." Original Answer to First Amended Complaint
at ¶ 116, Vapor Point (S.D. Tex. Aug. 30,
2013), ECF No. 155; see also id. at ¶ 117
(specifying that an obligation to assign arises from an
alleged employment of Nathan and Matheson by NanoVapor). In
its counterclaim NanoVapor also asserted infringement of the
'310 patent and eight state law claims: misappropriation
of trade secrets, the Texas Theft Liability Act, fraud,
breach of fiduciary duty, tortious interference with business
relationships, tortious interference with prospective
business relationships, breach of contract, and unjust
enrichment. Fourth Amended Counterclaim at ¶¶
83-138, Vapor Point (S.D. Tex. May 14, 2014), ECF
25, 2014, the district court issued an order denying
NanoVapor's motion for an evidentiary hearing on
inventorship. Order, Vapor Point (S.D. Tex. June 25,
2014), ECF No. 241. The district court reasoned that,
"[b]y requesting findings of fact and conclusions of law
relating only to inventorship under 35 U.S.C. § 256,
both parties are essentially requesting that this Court
bifurcate the inventorship claims from the state law and
infringement claims and make an early determination on the
inventorship issues." Id. at 1. Because
"the state law causes of action share a common factual
core with the inventorship claims and judicial determination
of the inventorship issues at [that] time would deprive the
parties of their right to a jury trial, " the district
court denied the parties' request for an evidentiary
hearing. Id. at 2.
then filed a notice with the district court dismissing its
state law claims "with prejudice to refiling."
Notice of Nonsuit of State Law Claims, Vapor Point
(S.D. Tex. Aug. 1, 2014), ECF No. 254. In that notice,
NanoVapor asserted that, "[i]n response to [NanoVapor]
non-suiting their state law claims, [Vapor Point has] agreed
to nonsuit" its state law claims. Id. at 2.
"After [Vapor Point's] concurrent nonsuit of the
state law claims only claims related to inventorship and
infringement will remain before the Court." Id.
In so doing, NanoVapor explicitly "request[ed] the Court
to decide the inventorship issues as there is no right to a
jury trial on contested fact issues related to
inventorship." Id. Accordingly, the district
court dismissed all of the state law claims pled by either
Vapor Point or NanoVapor, with prejudice. See Order
on Notice of Nonsuit of State Law Claims, Vapor
Point (S.D. Tex. Aug. 11, 2014), ECF No. 261.
256 . . . explicitly authorizes judicial resolution of
co-inventorship contests over issued patents." MCV,
Inc. v. King-Seeley Thermos Co., 870 F.2d 1568, 1570
(Fed. Cir. 1989). Consistent with § 256, the district
court held a four-day evidentiary hearing to determine
inventorship of the patents-in-suit. After the hearing, the
district court issued an order denying NanoVapor's claims
of inventorship and granting Vapor Point's to the extent
Nathan and Matheson sought to be added to the '310 and
'862 patents as additional inventors. See
Inventorship Order at 27.
decision, the district court addressed the "four key
concepts in the '310 and '862 patents": (1)
using biodiesel as a vapor capture medium; (2) removing VOCs
from a vessel containing fuel vapors and introducing them
into a vapor capture medium (such as biodiesel); (3) using a
particulatizer to create micro-sized VOC particles for
treatment; and (4) using diffusion plates to distribute
micro-sized particles across the vapor capture medium.
Id. at 11. The district court found that Nathan
contributed to the conception of the first three of these
four key concepts and that Matheson contributed to the third
and fourth concepts. See id. at 16-24. The district
court denied NanoVapor's claim that Moorhead should be a
named inventor on Vapor Point's patents. See id.
the district court's resolution of the inventorship
issues, NanoVapor moved for a new trial "solely
address[ing] the Court's closing of the case without
allowing a trial on the affirmative defenses, "
including any obligation to assign. NanoVapor's Motion
for a New Trial, Vapor Point (S.D. Tex. Apr. 3,
2015), ECF No. 330. In Vapor Point's response, it argued
that NanoVapor's motion for a new trial on the
affirmative defense of an obligation to assign was improper.
Point initially asserted a claim for correction of
inventorship under § 256 along with its various state
law tort claims. Because the latter were dismissed with
prejudice, only the federal claim under § 256 remained.
Since "an obligation to assign is not an affirmative
defense to a cause of action to correct inventorship, "
and because only the inventorship claims remained, Vapor
Point argued that the equitable affirmative defense of an
obligation to assign also should be dismissed with prejudice.
Vapor Point's Response to NanoVapor's Motion for New
Trial at 6, Vapor Point (S.D. Tex. Apr. 24, 2015),
ECF No. 335. Because NanoVapor did not join Nathan and
Matheson-now deemed to be two of the inventors of the
patents-in-suit-in the infringement claims against Vapor
Point, Vapor Point argued that NanoVapor "d[id] not have
standing to pursue [its] claim for infringement of the
'310 patent, eliminating any claim against Vapor
Point." Id. at 9; see also
Appellant's Br. at 13 ("All patent owners must join
in a patent infringement suit. NanoVapor did not join Nathan
and Matheson in its infringement claim. Therefore, NanoVapor
did not have standing to pursue a claim for infringement of
the '310 patent.") (citing Enovsys LLC v. Nextel
Commc'ns., Inc., 614 F.3d 1333, 1341 (Fed. Cir.
2010) ("When a patent is co-owned, a joint owner must
join all other co-owners to establish standing."); 35
U.S.C. § 281). The district court agreed with Vapor
Point and dismissed the case. Final Judgment at 2, Vapor
Point (S.D. Tex. Aug. 24, 2015), ECF No. 377.
the court's order on inventorship, Vapor Point moved for
a determination that the case was exceptional, entitling it
to attorneys' fees. See Vapor Point (S.D. Tex.
June 16, 2015), ECF No. 347; Vapor Point (S.D. Tex.
June 16, 2015), ECF No. 349. The district court, without
discussion, denied these motions in its final order. Final
Judgment at 2, Vapor Point ...