United States Court of Appeals for the Federal Circuit
2006-1249
FRANK T. SHUM
Plaintiff-Appellant,
v.
INTEL CORPORATION, LIGHTLOGIC, INC.,
and JEAN-MARC VERDIELL,
Defendants-Appellees.
Paul F. Kirsch, Townsend and Townsend and Crew LLP, of San Francisco,
California, argued for plaintiff-appellant. With him on the brief were George M. Schwab
and Mark T. Jansen.
Stephen E. Taylor, Taylor & Company Law Offices, Inc., of San Francisco,
California, argued for defendants-appellees. With him on the brief were Stacey L.
Wexler and Tyler G. Newby. Of counsel was Mark A. Lemley, Keker & Van Nest, LLP,
of San Francisco, California.
Appealed from: United States District Court for the Northern District of California
Senior Judge D. Lowell Jensen
United States Court of Appeals for the Federal Circuit
2006-1249
FRANK T. SHUM,
Plaintiff-Appellant,
v.
INTEL CORPORATION, LIGHTLOGIC, INC.,
and JEAN-MARC VERDIELL,
Defendants-Appellees.
_____________________
DECIDED: August 24, 2007
_____________________
Before NEWMAN, Circuit Judge, FRIEDMAN, Senior Circuit Judge, and LOURIE,
Circuit Judge.
Opinion for the court filed by Circuit Judge LOURIE. Dissenting opinion filed by Senior
Circuit Judge FRIEDMAN.
LOURIE, Circuit Judge.
Frank T. Shum appeals from the decision of the United States District Court for
the Northern District of California dismissing his claims for correction of inventorship
pursuant to 35 U.S.C. § 256 and various state law claims, including fraud, fraudulent
concealment, breach of fiduciary duty, and unjust enrichment. Because we conclude
that the district court erred in conducting a bench trial on the inventorship claim prior to
a jury trial on the state law claims when there were common underlying factual issues,
and erred in dismissing the unjust enrichment claim on the pleadings, we vacate,
reverse, and remand.
BACKGROUND
Shum is an optical engineer who worked for many years in the field of
optoelectric packaging technology. 1 Shum met Jean-Marc Verdiell, who is also an
engineer experienced in the field of optoelectronics, while working at Spectra Diode
Laboratories, Inc. (“SDL”). In 1996, Shum left SDL to form a company called Radiance
Design (“Radiance”), which focused on the development of optoelectronic packaging.
Although Verdiell was still employed with SDL, Shum continued to work with him on
preparing grant proposals for various optoelectronic packaging projects. In March 1997,
Verdiell resigned from SDL and joined Shum at Radiance. On April 22, 1997, Shum
and Verdiell incorporated Radiance as equal shareholders. Verdiell was named
President and Treasurer, and Shum, Vice President.
On the day of incorporation, Shum filed patent application 08/838,022 (the “’022
patent application”), entitled “Optoelectronic Assembly and Method of Making the
Same,” on behalf of Radiance. Shum was named the sole inventor. During the
following months, Shum and Verdiell’s relationship deteriorated. On January 5, 1998,
Radiance was dissolved pursuant to a Plan of Liquidation, which granted Shum and
Verdiell “equal rights to independently exploit intellectual property developed by the
corporation.” The following day, Verdiell filed a patent application on behalf of a
company he had formed several months earlier called LightLogic, Inc. That patent
1
Optoelectronic packages are devices that are “used to transmit light carrying
data into fiber optic cable in order to send information at high speeds over fiber optic
networks.” Shum v. Intel Corp., No. C-02-3262 (N.D. Cal. June 21, 2005) at 1.
2006-1249 2
application matured into U.S. Patent 5,977,567 (the “’567 patent”) on November 2,
1999. After the issuance of the ’567 patent, LightLogic obtained additional patents
relating to similar subject matter. In 2001, Intel Corporation (“Intel”) acquired LightLogic
and all of its intellectual property rights in exchange for $409,000,000 in stock. On May
13, 2001, Shum became aware of Intel’s purchase of LightLogic and the existence of
the patents in suit. 2
Shum initiated the instant lawsuit after learning of Intel’s acquisition of LightLogic.
In his complaint, Shum made the following allegations that are relevant to this appeal.
According to Shum, Verdiell had engaged in fraudulent conduct by misappropriating the
technology developed by Shum at Radiance. During the pendency of Shum’s ’022
patent application, Verdiell informed Marek Alboszta, the patent agent who prosecuted
that patent application on behalf of Shum, that he was an inventor of the subject matter
described in Shum’s patent application. In response, Alboszta informed Shum that
Verdiell would have to be added as an inventor on the application; otherwise the patent
would be invalid. Verdiell ultimately instructed Alboszta to abandon the patent
application, which he did on November 17, 1997.
Although Shum and Verdiell were business partners, Verdiell did not inform
Shum that he had incorporated LightLogic three days prior to the abandonment of the
’022 patent application. Shum further alleged that Verdiell formed LightLogic as a
vehicle for filing patent applications based on technology developed at Radiance. Shum
asserts that that included the patent application that Verdiell filed one day after the
2
The patents in suit include U.S. Patents 5,977,567, 6,376,268, 6,207,950,
6,227,724, 6,586,726, 6,585,427, and 6,252,726. Verdiell is a named inventor on all of
those patents.
2006-1249 3
dissolution of Radiance, which, according to Shum, is virtually identical to Shum’s
abandoned ’022 patent application. In other words, Shum claims that Verdiell filed an
application solely in Verdiell’s name that is virtually identical to that Shum had filed in his
name, but that Verdiell had instructed be abandoned. Additionally, Shum alleged that
Verdiell engaged in other questionable activity, including transferring bank accounts so
that Radiance’s funds were under Verdiell’s sole control, excluding Shum from meetings
with Radiance investors, removing Shum’s name as “principal investigator” from
government contracts with Radiance, and withholding critical information from Shum.
On May 13, 2002, Shum filed a complaint against numerous defendants,
including Verdiell, LightLogic, and Intel (“appellees”) in state court alleging fraud, unjust
enrichment, and other state law tort claims. On July 9, 2002, the case was removed to
federal court. Appellees moved to dismiss the complaint, which the court granted. On
December 19, 2002, Shum filed a second amended complaint. The amended complaint
added a cause of action for correction of inventorship under 35 U.S.C. § 256, in addition
to the state law claims. Appellees moved to dismiss the second amended complaint,
which the court granted in part and denied in part on March 25, 2003. The court
dismissed Shum’s unjust enrichment claim on the pleadings, but allowed Shum to
proceed with his inventorship, fraud, fraudulent concealment, breach of fiduciary duty,
and breach of contract claims. On February 13, 2004, appellees moved for summary
judgment and to bifurcate the trial. On April 27, 2004, the district court denied the
summary judgment motions, but granted the motion to bifurcate the inventorship and
state law claims. The court ordered that the inventorship cause of action be tried to the
court before the state law claims were tried to a jury.
2006-1249 4
The bench trial on the correction of inventorship issue commenced on January
10, 2005. On June 21, 2005, the court issued an order stating that Shum had not met
his burden of proving by clear and convincing evidence that he was an inventor on any
of the patents at issue. Appellees then filed renewed motions for summary judgment on
the remaining state law claims. The court granted summary judgment and entered
judgment in their favor on January 12, 2006.
Shum timely appealed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
DISCUSSION
On appeal, Shum argues that under Beacon Theatres, Inc. v. Westover, 359 U.S.
500 (1959), the district court’s decision to bifurcate the claims and to conduct a bench
trial on the inventorship issue prior to a jury trial on the state law claims violated his
constitutional right to a jury. According to Shum, his inventorship claim and state law
claims share common factual issues that are “inextricably intertwined,” and thus a jury
trial should have preceded a bench trial. Shum further argues that the court committed
numerous errors in reaching its conclusions with regard to the inventorship
determination. Additionally, Shum asserts that summary judgment should not have
been granted on the state law claims because the court’s erroneous inventorship
decision had a dispositive impact on those claims, and also because the district court
committed numerous errors in reaching its decision.
Appellees respond that the court did not err in holding a bench trial on the
inventorship issue first because the inventorship claim and the state law claims do not
share common underlying factual issues. As such, appellees assert that the rule set
forth in Beacon Theatres is not implicated. Defendants further assert that the court did
2006-1249 5
not err in concluding that Shum was not an inventor on any of the patents in suit.
Lastly, defendants contend that the court properly granted summary judgment on the
state law claims.
A. Seventh Amendment Right to a Jury Trial
We first address Shum’s arguments concerning his right to a jury trial. A trial
court’s decision to bifurcate a trial is reviewed for an abuse of discretion. Danjaq v.
Sony, 263 F.3d 942, 961-62 (9th Cir. 2001). A court has broad discretion with regard to
trial management. Federal Rule of Civil Procedure 42(b) provides:
The court, in furtherance of convenience or to avoid prejudice, or when
separate trials will be conducive to expedition and economy, may order a
separate trial of any claim, cross-claim, counterclaim . . . always
preserving inviolate the right of trial by jury as declared by the Seventh
Amendment to the Constitution or as given by a statute of the United
States.
Fed. R. Civ. P. 42(b) (emphasis added). As the rule acknowledges, the court’s
discretion is not without limits. When deciding whether issues should be separately
tried, trial courts must ensure that a litigant’s constitutional right to a jury is preserved.
“Maintenance of the jury as a fact-finding body is of such importance and occupies so
firm a place in our history and jurisprudence that any seeming curtailment of the right to
a jury trial should be scrutinized with the utmost care.” Dimick v. Schiedt, 293 U.S. 474,
486 (1935).
In Beacon Theatres, the Supreme Court addressed the importance of the order
in which legal and equitable claims are to be tried in one suit. While recognizing that
“the same court may try both legal and equitable causes in the same action,” the
Supreme Court held that “only under the most imperative circumstances . . . can the
right to a jury trial of legal issues be lost through prior determination of equitable claims.”
2006-1249 6
Id. at 508, 510-11. The Court concluded that the trial court erred by conducting a bench
trial on the equitable claim at issue, thereby precluding a jury trial on the legal claims,
when the equitable claim resolved factual issues that were “common” to the legal
claims. Thus, under Supreme Court precedent, when legal claims involve factual issues
that are “common with those upon which [the] claim to equitable relief is based, the
legal claims involved in the action must be determined prior to any final court
determination of [the] equitable claims.” Dairy Queen, Inc. v. Wood, 369 U.S. 469, 479
(1962). Accordingly, in order to resolve the issue presented to us, we must determine
whether this case involves both equitable and legal claims, and if so, whether those
claims share common factual issues.
We agree with Shum that this case does involve both equitable and legal claims,
that his inventorship claim and at least one of his state law claims share common facts,
and thus that he was improperly denied a jury trial on the facts underlying his state law
claims. With respect to the first inquiry, namely, whether this case involves both
equitable and legal claims, that issue is largely undisputed by the parties. A correction
for inventorship claim under section 256 creates a cause of action in federal courts that
authorizes a district court to resolve inventorship disputes over issued patents. MCV,
Inc. v. King-Seeley Thermos Co., 870 F.2d 1568, 1570 (Fed. Cir. 1989). At oral
argument, the parties agreed that an action for correction of inventorship under § 256,
standing alone, is an equitable claim to which no right to a jury trial attaches.
Additionally, the parties do not dispute that Shum’s asserted state law claims are legal
claims to which Shum would be entitled to a jury determination.
2006-1249 7
We next consider whether Shum’s equitable claim and any of the asserted legal
claims share common factual issues. With regard to the correction of inventorship claim
under § 256, “the critical question for joint conception is who conceived, as that term is
used in the patent law, the subject matter of the claims at issue.” Ethicon v. U.S.
Surgical Corp., 135 F.3d 1456, 1460 (Fed. Cir. 1998). “Conception is the touchstone of
inventorship, and each joint inventor must generally contribute to the conception of the
invention.” Board of Educ. ex rel. Bd. of Trustees of Fla. State Univ. v. Am. Bioscience,
Inc., 333 F.3d 1330, 1337-38 (Fed. Cir. 2003) (internal quotations omitted).
“Conception is the ‘formation in the mind of the inventor, of a definite and permanent
idea of the complete and operative invention, as it is hereafter to be applied in practice.’”
Hybritech Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367, 1376 (Fed. Cir. 1986). As
such, in order to prove that he is an inventor of the claimed inventions, Shum was
required to demonstrate that he conceived the inventions. Id. at 1338. Thus, the facts
surrounding the inventorship claim concern the degree of Shum’s inventive contribution
to the claimed inventions, which necessarily include, inter alia, when and where the
claimed inventions were conceived, and by whom.
With regard to Shum’s state law claims, the record demonstrates that Shum
asserted a general fraud claim. In order to establish fraud under California law, one
must prove “a representation, usually of fact, which is false, knowledge of its falsity,
intent to defraud, justifiable reliance upon the misrepresentation, and damage resulting
from that justifiable reliance.” Stansfield v. Starkey, 220 Cal. App. 3d 59, 72-73 (Cal. Ct.
App. 1990). Here, Shum’s fraud claim was based, in part, on his assertion that Verdiell
made misrepresentations to the Patent and Trademark Office and third parties that he
2006-1249 8
was the sole inventor of the patents in suit. Indeed, appellees even acknowledge in
their brief that “Shum’s fraud-based claims were originally focused on the allegation that
Verdiell lied about being the true inventor of the subject technology.” Appellees Br. at
61. Thus, the alleged misrepresentations involve Verdiell’s statements that he was the
sole inventor of the patents in suit. As such, in order to prove his fraud claim, Shum
would have been required to prove the falsity of that representation by establishing, at
the very least, that Verdiell did not solely conceive the inventions. Indeed, a showing
that Shum was a joint inventor, if not the sole inventor, of the claimed inventions proves
such falsity. In this regard, the critical question regarding the fraud claim again centers
on conception. Thus, the facts relating to the fraud claim, namely, Shum’s alleged
contribution to the claimed invention, are common, if not identical, to the facts
underlying the inventorship claim.
Notably, both the trial court and the appellees acknowledge the commonality
between the two claims at various points in the record. In its bifurcation order, the court
noted that:
Like the majority of Shum’s claims, an action for fraud against Verdiell
chiefly relies on the factual determination of inventorship. If Verdiell was
not an inventor of the patent applied for, he misrepresented his status as
an inventor, caused Shum to withdraw the patent based on that
misrepresentation, and subsequently filed a fraudulent patent listing
himself as the sole inventor. Thus, the factual issue of inventorship is a
central issue in the determination of fraud.
Moreover, appellees admit in their brief, “[o]nce the district court decided that Verdiell,
and not Shum, had truly invented the technology, th[e] fraud claims were eviscerated.”
Appellees also contend that “[i]f this Court affirms the district court’s inventorship ruling,
Shum’s arguments that Verdiell misrepresented or concealed the true inventor of the
2006-1249 9
technology necessarily fail.” Thus, the record underscores that Shum’s inventorship
claim is “inextricably intertwined” with at least one of his state law claims.
We disagree with appellees’ assertion that the trial court’s decision must be
upheld in light of Ethicon v. U.S. Surgical Corp., 135 F.3d 1456 (Fed. Cir. 1998).
Appellees argue that Ethicon presented nearly identical procedural circumstances, and
thus that our holding in that case, in which we upheld the trial court’s decision to hold an
extensive hearing on the asserted inventorship claim prior to a trial on infringement,
should be applied here. That case, however, differs substantively from this one. While
a § 256 cause of action was the equitable claim at issue in Ethicon, the legal claim
involved infringement. Unlike a claim for fraud that is premised on an allegation that the
named inventor misrepresented that he was the sole inventor, a claim for infringement
does not share common factual issues with a claim for inventorship. A claim for
infringement requires factual determinations regarding whether an accused product falls
within the scope of a claim. In contrast, as discussed above, an inventorship claim
concerns the identity of the person(s) who conceived the invention. Thus, Ethicon is
distinguishable from this case.
For similar reasons, appellees’ reliance on our decisions in Gardco
Manufacturing, Inc. v. Herst Lighting Co, 820 F.2d 1209 (Fed. Cir. 1987), and Agfa
Corp. v. Creo Products, Inc., 451 F.3d 1366 (Fed. Cir. 2006), is likewise misplaced. In
Gardco, we held that the district court did not abuse its discretion in trying an inequitable
conduct claim prior to a jury trial on the validity and infringement causes of action. In
sustaining the court’s decision, we held that “the conduct-of-the-applicant-in-the-PTO
issue raised in the nonjury trial and the separated infringement/validity issues are
2006-1249 10
distinct and without commonality either as claims or in relation to the underlying fact
issues.” Gardco, 820 F.2d at 1213. We found that the district court “explicitly refused to
make any findings relating to the patentability of the claimed invention, in view of the
undisclosed art or otherwise, and made no finding on infringement.” Id. As such, we
held that the rule set forth in Beacon Theaters did not apply. Similarly, in Agfa, we
upheld the district court’s decision to hold a bench trial on inequitable conduct prior to a
jury trial on infringement and validity. We concluded that while inequitable conduct and
validity questions “overlap in the consideration of some aspects of the same relevant
evidence, they do not involve a common issue.” Agfa, 451 F.3d at 1372. Because the
legal claims in Gardco and Agfa likewise involved infringement and validity, rather than
fraud based on mispresentations relating to inventorship, those cases do not control.
We thus conclude that commonality exists between the factual issues underlying
the inventorship and fraud claims. While Shum would not be entitled to a jury trial on
the § 256 inventorship claim standing alone, given the co-pendency of the asserted
fraud claim, a jury should determine the facts regarding inventorship. Accordingly, the
court’s decision to try the inventorship claim before a jury trial on the state law claim ran
afoul of the Seventh Amendment, and thus was an abuse of discretion. See Cabinet
Vision v. Cabnetware, 129 F.3d 595, 600 (Fed. Cir. 1997) (holding that the court’s
equitable determination was constrained by the Seventh Amendment when there was
commonality between the facts underlying an inequitable conduct claim and a Walker
Process counterclaim). Because Shum was improperly denied a jury trial on legal
issues, the case must be remanded for a trial before a jury. See Lytle v. Household
2006-1249 11
Mfg., Inc., 494 U.S. 545, 553 (1990) (noting that a new trial is required when a trial court
erroneously resolves an equitable claim prior to resolution of a legal claim).
B. Unjust Enrichment
Shum separately appeals the district court’s dismissal on the pleadings of his
unjust enrichment claim. Prior to the bench trial on inventorship, the court dismissed
Shum’s claim for unjust enrichment after concluding that it was “merely duplicative and
dependent” upon the fraudulent concealment claims. Shum argues that the elements of
an unjust enrichment claim are different from those of fraudulent concealment under
California law, and thus that he was improperly denied an opportunity to prove that
claim. Appellees respond that the claim was correctly dismissed because unjust
enrichment is not recognized under California law as a separate cause of action.
Moreover, appellees argue that an unjust enrichment claim must be dismissed when it
is based on another failed cause of action.
Under California law, unjust enrichment claims can exist as a separate cause of
action when “the claim is grounded in equitable principles of restitution.” Hirsch v. Bank
of Am., 107 Cal. App. 4th 708, 721-22 (Cal. Ct. App. 2003); Nordberg v. Trilegiant
Corp., 445 F. Supp. 2d 1082 (N.D. Cal. 2006). In his second amended complaint,
Shum alleged that appellees “were unjustly enriched by the false exclusivity of the
patent and the patent application.” Shum sought to recover, “in equity, all amounts
which unjustly enriched defendants” at his expense. Thus, Shum sought restitution
based on a theory of unjust enrichment and should have been able to litigate his claim.
Moreover, the elements of a fraudulent concealment claim and an unjust enrichment
2006-1249 12
claim differ. 3 As such, the court’s dismissal of the claim on the basis that it was “merely
duplicative” of the fraudulent concealment claim, without further elaboration, cannot be
sustained. Accordingly, we conclude that the court erred in dismissing Shum’s unjust
enrichment claim on the pleadings.
CONCLUSION
For the foregoing reasons, we vacate the district court’s determination on the
inventorship claim and its grant of summary judgment on the remaining state law
claims, reverse the court’s dismissal of the unjust enrichment claim, and remand the
case for further proceedings consistent with this opinion.
VACATED, REVERSED, AND REMANDED
3
The elements of an unjust enrichment claim are “receipt of a benefit and
unjust retention of the benefit at the expense of another.” Lectrodryer v. SeoulBank, 77
Cal. App. 4th 723, 726 (Cal. Ct. App. 2000). In contrast, the elements of a fraudulent
concealment claim are: “(1) the defendant must have concealed or suppressed a
material fact, (2) the defendant must have been under a duty to disclose the fact to the
plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with
the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact
and would not have acted as he did if he had known of the concealed or suppressed
fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must
have sustained damage.” Hahn v. Mirda, 147 Cal. App. 4th 740, 748 (Cal. Ct. App.
2007).
2006-1249 13
United States Court of Appeals for the Federal Circuit
2006-1249
FRANK T. SHUM,
Plaintiff-Appellant,
v.
INTEL CORPORATION, LIGHTLOGIC, INC.,
and JEAN-MARC VERDIELL,
Defendants-Appellees.
FRIEDMAN, Senior Circuit Judge, dissenting.
In my view, the district court’s bifurcation of the federal inventorship issue and the
state-law claims followed by the bench trial of the inventorship claim, did not deny Shum
his Seventh Amendment right to trial by jury of the state-law claims or constitute an
abuse of discretion by the trial court.
The Seventh Amendment guarantees the right to jury trial “[i]n Suits at common
law.”
“[t]he right of trial by jury thus preserved is the right which
existed under the English common law when the
Amendment was adopted.” Baltimore & Carolina Line, Inc.
v. Redman, 295 U.S. 654, 657 (1935). In keeping with our
longstanding adherence to this ‘historical test,’ Wofram, The
Constitutional History of the Seventh Amendment, 57 Minn.
L. Rev. 639, 640-643 (1973), we ask, first, whether we are
dealing with a cause of action that either was tried at law at
the time of the founding or is at least analogous to one that
was, see, e.g., Tull v. United States, 481 U.S. 412, 417
(1987). If the action in question belongs in the law category,
we then ask whether the particular trial decision must fall to
the jury in order to preserve the substance of the common-
law right as it existed in 1791.
As to the first issue, going to the character of the
cause of action, “[t]he form of our analysis is familiar. ‘First
we compare the statutory action to 18th-century actions
brought in the courts of England prior to the merger of the
courts of law and equity.’”
Markman v. Westview Instruments, Inc., 517 U.S. 370, 376-77 (1996).
I know of no authority—and the parties have cited none—showing that at the end
of the 18th century, a suit could have been maintained in England to correct the
inventorship shown on an issued patent or, if such a suit were permissible, it would
have been tried before a jury. It follows that if Shum’s attempt to correct inventorship
under 35 U.S.C. § 256 had been his only claim in this case, he would not have been
entitled to a jury trial of that issue. The question, therefore, is whether Shum was
entitled to a jury trial because he combined that claim with state-law claims that
concededly would have been tried before a jury. Unlike the court, in the circumstances
of this case I answer that question “no.”
The state law claims—breach of fiduciary duty, fraud and fraudulent
concealment—were related to and dependent upon, but significantly different from, his
misstatement-of-inventorship-claim. The state law claims were predicated upon Shum’s
contention that the patent had misstated the inventorship of the patented device by not
listing him as the inventor. If Shum’s inventorship claim failed, that failure also would
undermine his state-law claims. On the other hand, if he had prevailed in the
inventorship claim that would not automatically have established his state law claims.
He still would have been required to establish, in a jury trial, the additional elements of
those claims. In other words, although the inventorship claim was an essential element
2006-1249 2
of the state-law claims, the latter were separate and different claims that included
additional elements not present in the inventorship claim.
Beacon Theatres, Inc. v. Westover, 359 U.S. 500 (1959), upon which the court’s
decision is grounded, involved critical distinctions from the present case and, in my
view, does not support or justify the court’s conclusion that Shum was entitled to a jury
trial on his inventorship claim.
Beacon Theatres involved a dispute between two motion picture theatres over
the validity of contracts under which film distributors had given one of the theatres, Fox,
the exclusive right to show “first run” pictures in the geographic area. Another theatre in
the area, Beacon, informed Fox that it considered Fox’s contracts to violate the antitrust
laws. Fox then filed suit seeking a declaratory judgment that its contracts did not violate
the antitrust laws and an injunction against Beacon’s filing an antitrust claim against it.
Beacon responded with an answer and a counterclaim that Fox’s contracts violated the
antitrust laws and seeking treble damages. Beacon sought a jury trial on its
contentions. Id. at 503 (footnote omitted).
The district court denied a jury trial, ruling that the “issues raised” by Fox’s
complaint were “essentially equitable” and “it directed that these issues be tried to the
court before jury determination of the validity of the charges of antitrust violations made
in the counterclaim and cross-claim.” Id.
The Supreme Court held that Beacon was entitled to a jury trial of its antitrust
claims against Fox, and that the court of appeals had erroneously refused to issue a writ
of mandamus requiring that result. The Court stated that “if Beacon would have been
entitled to a jury trial in a treble damage suit against Fox it cannot be deprived of that
2006-1249 3
right merely because Fox took advantage of the availability of declaratory relief to sue
Beacon first. Since the right to trial by jury applies to treble damage suits under the
antitrust laws, and is, in fact, an essential part of the congressional plan for making
competition rather than monopoly the rule of trade,” “the Sherman and Clayton Act
issues on which Fox sought a declaration were essentially jury questions.” Id. at 504
(internal citation omitted). It further stated that “only under the most imperative
circumstances, circumstances which in view of the flexible procedures of the Federal
Rules we cannot now anticipate, can the right to a jury trial of legal issues be lost
through prior determination of equitable claims.” Id. at 509-10 (footnote and citation
omitted).
In Beacon Theatres the legal issues in both the declaratory judgment complaint
and the counterclaim apparently were the same: the validity of Fox’s first-run exclusivity
contracts under the antitrust laws. The district court’s resolution of that claim in Fox’s
declaratory judgment suit would determine the result in Beacon’s treble damage
antitrust counterclaim and thereby deny Beacon the jury trial that the Supreme Court
apparently ruled it was entitled to on that issue. Id. at 504. The reason for that result
was that Fox filed its declaratory judgment suit before Beacon filed its counterclaim. If
Beacon had filed first, presumably it would have had a jury trial on the antitrust claim.
The Supreme Court refused to permit such an arbitrary result. As noted, it stated “if
Beacon would have been entitled to a jury trial in a treble damage suit against Fox it
cannot be deprived of that right merely because Fox took advantage of the availability of
declaratory relief to sue Beacon first.” Id.
2006-1249 4
In the present case, in contrast, the state law claims, although dependent on the
inventorship claim, involved a number of other issues that were independent of that
claim. Thus, the district court’s decision on the inventorship claim might or might not be
dispositive of the state law claims. Moreover, Shum was responsible for the loss of a
jury trial on the state law claims: had he not added the inventorship claim, as he did in
his first amended complaint after the state-law-claims case originally filed in state court
had been removed to federal court, he could have had a jury trial on those claims.
In Beacon Theatres the district court’s decision itself to try the antitrust issue,
which otherwise would have been tried to a jury, reflected the form in which that claim
was first asserted: as a request for a declaratory judgment and for an injunction, which
were traditional suits in equity, without regard to the substantive claims involved. In the
present case, in contrast, the inventorship claim under section 256 itself was an
equitable claim that would not be tried to a jury.
These critical differences between the present case and Beacon Theatres
suggest that this court here has not given sufficient weight to the district court’s
discretion to determine whether to bifurcate issues for trial before the court and before
the jury. “Under Rule 42(b) [Fed. R. Civ. P. 42(b)], a district court has broad discretion
in separating issues and claims for trial as part of its wide discretion in trial
management.” Gardco Mfg., Inc. v. Herst Lighting Co., 820 F.2d 1209, 1212 (Fed. Cir.
1987).
Three years after Beacon Theatres, the Supreme Court addressed a similar
issue in Dairy Queen, Inc. v. Wood, 369 U.S. 522 (1962). The case involved a contract
under which the petitioner agreed to pay the respondents over a period of time a stated
2006-1249 5
sum for the exclusive use in specified geographic areas of the trademark “Dairy Queen”
that the respondent owned. When the petitioner allegedly failed to make such
payments, the respondents sued it in the district court for breach of contract and
trademark infringement. Respondent sought an accounting and injunctive relief.
The petitioner denied the allegations, alleged respondent had violated the
antitrust laws and sought a jury trial. The district court struck the jury trial demand, on
the alternative grounds that the action was “purely equitable” or, if not, that the “legal
issues” were “’incidental’ to equitable issues.” 369 U.S. at 470.
The Supreme Court held that the court of appeals should have granted
mandamus to overturn the district court’s refusal to permit a jury trial. The Court applied
the “holding in Beacon Theatres . . . that where both legal and equitable issues are
presented in a single case, ‘only under the most imperative circumstances,
circumstances which in view of the flexible procedures of the Federal Rules we cannot
now anticipate, can the right to a jury trial of legal issues be lost through prior
determination of equitable claims.’” Id. at 472-73 (footnote omitted). Ruling that
respondents’ “claim for a money judgment is a claim wholly legal in its nature however
the complaint is construed,” id. at 477, the Court “conclude[d] that
the district judge erred in refusing to grant petitioner’s
demand for a trial by jury on the factual issues related to the
question of whether there has been a breach of contract.
Since these issues are common with those upon which
respondents’ claim to equitable relief is based, the legal
claims involved in the action must be determined prior to any
final court determination of respondents’ equitable claims.
Id. at 479 (footnote omitted).
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The differences between the present case and Dairy Queen are similar to those
involving Beacon Theatres. In Dairy Queen, the critical issue in both parties’ claims was
the same: whether the petitioner had breached the trademark licensing agreement – a
legal issue subject to jury trial. The denial of a jury trial resulted not from the nature of
the claim, but from the form in which it was asserted.
Despite the broad language in Beacon Theatres, the Supreme Court
subsequently recognized the authority of a trial court in other circumstances to
determine preliminary issues that could have a dispositive impact upon the other issues
in the case that a jury would decide. Thus, in Katchen v. Landy, 382 U.S. 323 (1966),
the issue was “whether a bankruptcy court has summary jurisdiction to order the
surrender of voidable preferences asserted and proved by the trustee in response to a
claim filed by the creditor who received the preferences.” 382 U.S. at 325. The Court
held that such summary action by the bankruptcy court would not violate the creditor’s
Seventh Amendment right to a jury trial. The Court stated that a court may first resolve
an “equitable claim even though the results might be dispositive of the issue involved in
[a] legal claim. . . .” Id. at 339-40; see also, Parkland Hosiery Company v. Shore, 439
U.S. 322 (1979), stating that Beacon Theatres had “enunciated no more than a general
prudential rule” and that “an equitable determination can have collateral-estoppel effect
in a subsequent legal action and that this estoppel does not violate the Seventh
Amendment,” id. at 334-35.
The Supreme Court’s most recent case dealing with the Seventh Amendment
right to jury trial in patent cases was Markman, supra. There a jury had found
infringement based upon its interpretation of a disputed term in the patent claims. The
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district court, however, then granted judgment as a matter of law in favor of the
defendant, based on the court’s own interpretation of the claim, and this court affirmed.
The Supreme Court began its opinion as follows:
The question here is whether the interpretation of a so-called
patent claim, the portion of the patent document that defines
the scope of the patentee’s rights, is a matter of law
reserved entirely for the court, or subject to a Seventh
Amendment guarantee that a jury will determine the
meaning of any disputed term of art about which expert
testimony is offered. We hold that the construction of a
patent, including terms of art within its claim, is exclusively
within the province of the court.
Id. at 372.
Noting that “there is no dispute that infringement cases today must be tried to a
jury as their predecessors were more than two centuries ago,” id. at 377, the Court
discussed in some detail the conduct of English patent litigation in the latter part of the
18th-century, id. at 378-83. It concluded that at that time English juries did not construe
patent documents. It further held that giving the court exclusive authority to interpret
patent claims was consistent with precedent, id. at 384-88, that the judge was “in a
better position” to construe the patent than the jury, id. at 390, and that “the importance
of uniformity in the treatment of a given patent” was “an independent reason to allocate
all issues of construction to the court,” id. at 390.
In its discussion of the applicability of the Seventh Amendment jury trial right to
the interpretation of patent claims, the Supreme Court did not even mention the
possibility that giving the court exclusive jurisdiction to perform that function might
impinge upon the patentee’s right to a jury trial on infringement. It did not discuss or
even cite Beacon Theatres. Such silence seems to suggest that the Court did not
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believe that allocating the interpretation of patent claims to the court raised any
problems relating to the right of jury trial on the infringement issue.
The same conclusion follows, I believe, with regard to the Seventh Amendment
right to jury trial in the present case. There is a striking parallel between the situations
in Markman and here, since in both cases resolution of a threshold issue by the court
might be dispositive of the remaining issues that were to be tried by the jury. The two
cases cannot properly be distinguished on the ground that in Markman the two issues
both related to patents, whereas in the present case only the inventorship issue did.
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