BlueRadios, Inc. v. Kopin Corp.
BlueRadios, Inc. v. Kopin Corp.
2022 WL 4549674 (D. Colo. 2022)
August 3, 2022
Kane, John L., United States District Judge
Summary
The court found that Kopin had withheld evidence necessary for proper adjudication of BlueRadios' claims, and therefore reopened discovery for the limited purposes described in the order. The court discussed the importance of ESI, noting that it is necessary for the resolution of the motions before the court, and ordered Kopin to produce additional discovery in accordance with the terms of the order.
Additional Decisions
BLUERADIOS, INC., a Colorado corporation, Plaintiff,
v.
KOPIN CORPORATION, INC., a Delaware corporation, Defendant
v.
KOPIN CORPORATION, INC., a Delaware corporation, Defendant
Civil Action No. 1:16-cv-02052-JLK
United States District Court, D. Colorado
Signed August 03, 2022
Counsel
David Brian Seserman, Seserman Law, LLC, Joseph E. Kovarik, Sheridan Ross, P.C., Denver, CO, Lena Streisand, Stanley Martin Gibson, Jeffer Mangels Butler & Marmaro LLP, Los Angeles, CA, for Plaintiff.Ehsun Forghany, Morgan Lewis & Bockius LLP, Palo Alto, CA, Joshua M. Dalton, Morgan Lewis & Bockius LLP, Boston, MA, Julie Sarah Goldemberg, Morgan Lewis & Bockius LLP, Philadelphia, PA, Kathryn Ann Feiereisel, Faegre Drinker Biddle & Reath LLP, Chicago, IL, Mark Stephen Peloquin, Peloquin, PLLC, Seattle, WA, Stephen B. Rotter, Workplace Counsel, Denver, CO, for Defendant.
Kane, John L., United States District Judge
ORDER ON DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND PLAINTIFF'S MOTIONS FOR DISCOVERY SANCTIONS (ECF NOS. 232, 238, 362)
*1 Ten years after Apple's introduction of the iPhone, its Chief Executive Officer described the iPhone as “one of the most important, world-changing and successful products in history.” When Apple Introduced the iPhone, The Washington Post (June 22, 2017).[1] This dispute, which begins shortly before Apple released its first iPhone on June 29, 2007, concerns the efforts of two companies to capitalize on valuable intellectual property rights at the dawn of the smartphone era.
This Order concerns three motions. First is Defendant Kopin Corporation, Inc.’s (“Kopin”) Motion for Partial Summary Judgment (ECF No. 232, Restricted Doc. No. 231). In it, Kopin argues that all but one of eight claims brought by Plaintiff BlueRadios, Inc. (“BlueRadios”) are either preempted or time-barred. I find that BlueRadios’ claims for unjust enrichment and breach of fiduciary duty are preempted by contract and fail as a matter of law. The Motion is therefore granted as to those two claims, as is the portion of BlueRadios’ correction of inventorship claim pertaining to patent applications. However, the Motion is denied in all other respects.
BlueRadios brings two motions related to alleged discovery violations: the (1) Motion for Sanctions for Spoliation of Evidence (ECF No. 238, Restricted Doc. No. 237) and (2) Motion for Sanctions Against Kopin (ECF No. 362, Restricted Doc. No. 361). I have meticulously analyzed the twelve briefs and extensive exhibits filed in support of the motions before me. I find Kopin has withheld evidence necessary for proper adjudication of BlueRadios’ remaining claims. I therefore reopen discovery for the limited purposes described herein. BlueRadios’ Motion for Sanctions Against Kopin is granted in part, to the extent it seeks to compel additional discovery. BlueRadios’ motions are otherwise denied without prejudice.
I. BACKGROUND
I construe the evidence in the light most favorable to the non-moving party, BlueRadios, when considering Kopin's Motion for Partial Summary Judgment. See Pepsi-Cola Bottling Co. of Pittsburg, Inc. v. Pepsico, Inc., 431 F.3d 1241, 1255 (10th Cir. 2005).
BlueRadios is a Colorado-based wireless data and voice communications company. Kopin manufactures small displays, known as micro-displays and small optical devices, primarily for sale to the consumer markets.
When “smartphone” technology was in its infancy, Kopin sought to develop head worn devices that incorporated micro-displays manufactured by Kopin “for new applications such as reading e-mail and browsing the Internet using digital wireless devices and other consumer electronics devices.” Kopin 2005 Securities and Exchange Commission (“SEC”) Form 10-K, ECF No. 233-2. In late 2006, Jeff Jacobsen, a Kopin employee, approached BlueRadios’ founder and President, Mark Kramer, regarding a potential collaboration. Kramer Decl. ¶¶ 2, 5, ECF No. 296-2. Mr. Jacobsen shared his concept of a head worn unit that housed a micro-display and was connected to a battery and processor hanging as a pendant around the user's neck. Id. Mr. Jacobsen wanted to develop technology that would allow the head worn unit and pendant to take over control of a smartphone or other small computer wirelessly. Id. The final product would be called “Golden-i.” Jacobsen Dep. at 25:14-17, ECF No. 296-32.
*2 Mr. Kramer explained to Mr. Jacobsen that BlueRadios’ technology enabled it to subminiaturize printed circuit boards and embed them within a head worn device, such as a headset or glasses, eliminating the need for a pendant. Kramer Decl. ¶¶ 5-6. Additionally, BlueRadios could transmit high quality audio and video files using Bluetooth wireless communication technology. Id. ¶¶ 3, 6. The industry perception at the time was that Bluetooth protocol was not suitable for video transport. Hernandez Report ¶ 141, ECF No. 269-4.
On January 11, 2007, BlueRadios provided its initial plans for Golden-i, including a Build-of-Materials and a “bubble figure depicting the connectivity between a Kopin monocular device and a host system via Bluetooth.” Hernandez Report ¶¶ 69-70, ECF No. 234-4 (quotation marks omitted). Negotiations continued after the parties signed a nondisclosure agreement in February 2007. See Confidential Disclosure Agreement, ECF No. 234-8. Kopin admitted it had “no wireless or radio experience” and that it had “a growing need for embedded process and [digital signal processor] skills”—a need BlueRadios could meet. 3/19/2007 Jacobsen email, ECF No. 255-17.
At a demonstration on April 10, 2007, BlueRadios wirelessly streamed video from a mobile communication device to a micro-display. Kopin was impressed, responding that Golden-i had “turned out to be more revolutionary than we probably would have guessed back in February when most of you were exposed to the concept.” Cass Dep. at 97:15-98:2 (reading 4/18/2007 Jacobsen email), ECF No. 296-32. In May, Mr. Jacobsen acknowledged that “without BlueRadios[’] pre-existing Bluetooth knowledge, know-how and technology independently developed, Golden-i would be impossible to manufacture at this time.” 5/18/2007 Jacobsen Email, ECF No. 255-12.
BlueRadios declined Kopin's offer to work as a subcontractor and pushed for a collaborative business venture. Kramer Decl. ¶ 6. The parties’ communications suggest both companies envisioned a commercial relationship far more robust than the provision of general engineering services by BlueRadios. See, e.g., 3/19/2007 Jacobsen Email, ECF No. 255-17; 10/17/2008 Fan Email, ECF No. 255-21.
BlueRadios presented Kopin with a proposal titled “Golden-i Wireless Video Design Solution.” Contract Proposal (the “Contract”), ECF No. 296-4. The Contract went into effect on June 5, 2007, after it was signed by Mr. Kramer and Kopin's Chief Financial Officer, Richard Sneider. It described the scope of the agreement, identified the rights and obligations of the parties and, most relevant to this case, allocated intellectual property rights generated by the business venture.
The parties’ relationship was governed by the Contract through September 2008. An addendum was executed the next month, amending Sections IV and V. Contract Addendum (the “Addendum”), ECF No. 234-9. Since the Addendum was executed, neither party has provided the required 90-days’ written notice to terminate the Contract. See Contract Sec. IV. The specific provisions of the Contract and Addendum are discussed in more depth below.
The Contract gave Kopin “the sole right and responsibility to decide whether or not to seek patent protection with respect to any intellectual property rights that [we]re developed as part of or incorporated into the project deliverables and to file for, procure and maintain such patents at Kopin's expense.” Contract Sec. VII. Kopin engaged the law firm of Hamilton, Brook, Smith & Reynolds, P.C. (“HBSR”) for that purpose. Rader Report ¶ 62, ECF No. 234-12. Kopin had used HBSR's services extensively in a preexisting relationship. Id.
*3 HBSR filed many applications related to the Golden-i project, including provisional applications and continuing applications. See 35 U.S.C. §§ 111, 119-120; 37 C.F.R. § 1.78. One of the first patent applications was U.S. Provisional Patent Application [2] No. 61/010,177 (the “ ‘177 Application”), titled “Protocol for Transporting Video Signal Over Bluetooth Wireless Interface.” 2/22/2008 HBSR Email, ECF No. 255-4. The ‘177 Application contained BlueRadios’ inventive contributions that predated the Contract and listed only BlueRadios inventors. Kazanjian Dep. at 137:25-138:12, ECF No. 255-18. In June 2009, Kopin asked BlueRadios to assign its rights in several pending applications, including the ‘177 Application, to Kopin. 6/26/2009 Choi Email, ECF No. 255-6. Kopin's Chief Technology Officer, Dr. Hong Choi, assured BlueRadios: “These assignment documents are a formality to properly record the joint ownership between BlueRadios and Kopin at the Patent Office for these patents. The assignments in no way attempt to alter the contract between Kopin and BlueRadios.” Id. BlueRadios declined to sign the documents.
By mid-2012, Kopin was attempting to “handl[e]” or “drop” any BlueRadios’ patent claims through one of two mechanisms: (1) the filing of a continuing application, which allowed Kopin to drop a claim and make changes to the list of inventors, or (2) to file a request for the correction of inventorship. 6/29/2012 HBSR Email at 1, ECF No. 296-6. Kopin opted for the first mechanism “with revised claims that involve Kopin inventors only.” 8/6/2012 Choi Email, ECF No. 254-26. Though the parties dispute Kopin's justifications for doing so, Kopin managed to strip nearly all Golden-i patent applications of any reference to BlueRadios inventors. At the time BlueRadios filed suit, all issued Golden-i patents of which BlueRadios was aware list Kopin as the sole assignee, and all but one fail to name a BlueRadios inventor. See e.g., U.S. Patent No. 8,355,671, ECF No. 233-27; U.S. Patent No. 8,909,296, ECF No. 63-8.
In 2014, Google expressed an interest in purchasing BlueRadios and wanted to know the value of BlueRadios’ intellectual property before doing so. When Mr. Kramer requested that information from Mr. Jacobsen, he was directed to Dr. Choi, who would not return Mr. Kramer's calls or emails. Kramer Decl. ¶ 58. BlueRadios’ attempts to get the information from HBSR were similarly unavailing; Mr. Kramer received only a partial response five months later. Id.
The Contract required BlueRadios to deliver “working demonstration units ... and initial prototypes as soon as practical.” Contract Sec. VI. The parties refer to these prototypes as “Gen 1.0” or “GEN1” units. The Addendum required delivery of ten fully functional prototype Golden-i printed circuit board assemblies (the “Gen 2.0 PCBs”) to Kopin “as soon as possible.” Addendum at 1. BlueRadios delivered the Gen 2.0 PCBs in March 2009. Kramer Decl. ¶ 21. Before delivery, the Gen 2.0 PCBs were tested by Mr. William Tucker, a BlueRadios engineer, to be fully functional and operational. 3/18/2009 Tucker Email, ECF No. 254-14. Kopin used the Gen 2.0 PCBs in public demonstrations within days of their receipt.
Kopin did not communicate dissatisfaction with the Gen 2.0 prototypes, or request alterations. In June and July 2009, BlueRadios repeatedly asked Kopin to acknowledge its acceptance of the Gen 2.0 PCBs as fully functional and otherwise in accord with the terms of the Contract. See 7/21/2009 Kramer Letter at 1, ECF No. 185-9. Kopin neither responded nor returned the Gen 2.0 PCBs, although it used them in more than 4,000 Golden-i demonstrations that year. 12/16/2009 Jacobsen Email, ECF No. 184-15.
*4 In March 2010, Mr. Kramer wrote to Kopin's Chief Executive Officer, John Fan, to follow up on his July 2009 request that Kopin acknowledge acceptance of the Gen 2.0 PCBs. 3/26/2010 Kramer Letter, 233-10. In the letter, Mr. Kramer notified Mr. Fan that any implied warranty on the Gen 2.0 PCBs had expired. He also inquired into sales of Golden-i development kits, and asked Mr. Fan to propose a “method and trigger point” for royalty payments. Id. at 2. Mr. Kramer wrote that he “understand[s] it is not economical to process payments until some minimum volume has been achieved.” Id. Again, Kopin did not respond. Kramer Decl. ¶ 28.
In the years that followed, Mr. Kramer interacted with various Kopin employees while they were displaying Golden-i units at tradeshows. Kramer Decl. ¶ 29. On each occasion, he was informed that the product was evolving, and no units had been sold. Id. ¶¶ 29, 31.
At some point, Kopin pivoted from product manufacturing and sales of Golden-i products to a licensing model. In an SEC report regarding the 2011 fiscal year, Kopin wrote: “Our business model is to generate revenues by licensing for a royalty fee the Golden-i technology and know[-]how, which includes the operating software and patented product designs, and selling a CyberDisplay product to a partner who develops and manufactures or distributes products based on the Golden-i technology.” 2012 SEC Form 10-K at 10, ECF No. 233-14.
As Kopin pursued its new business model, it began to collaborate with third parties who licensed Golden-i technology but produced goods not identified as Golden-i products. For example, Kopin wrote in a press release:
In October [2012], Kopin celebrated a milestone event several years in the making—the commercial introduction of the world's first hands-free computer headset, the Motorola Solutions HC1, based on Kopin's wireless hands-free technology platform, Golden-i. The Motorola Solutions partnership exemplifies Kopin's business model to partner with major companies to develop wearable computing products.
3/13/2013 SEC Press Release, ECF No. 233-34.
In January 2013, Kopin sold a portion of its business and “made a strategic decision to focus on [its] Golden-i business and technology” and on its “closely related” micro-display business. 1/10/2013 SEC Form 8-K at 2, ECF No. 233-33. In March, Kopin described its strategy as “be[ing] a leader in providing critical components and licensing reference systems to partners who develop branded wearable computing products.” 3/13/2013 SEC Form 8-K, ECF No. 233-24. Kopin neither terminated the Contract nor communicated its new business model to BlueRadios.
In response to Kopin's new business strategies, one of Kopin's software engineers left Kopin to co-found RealWear, a “product company.”[3] 12/11/2018 Parkinson Dep. at 138:25-139:6, 140:18-20, ECF No. 296-12. He did so after Kopin's senior management explained to him that Kopin is “not a product company.... and did not want to make product.” Id. at 139:19-140:2. Instead, they wanted to “generate [intellectual property] for themselves” and to “create marketplaces that would cause unit sales of [their display] component[s].” Id. at 140:4-12. In June 2015, Kopin granted RealWear a royalty-bearing perpetual license. See RealWear Tech. License Agreement at 1-3, ECF No. 130-2. As of 2018, RealWear was basing its product on a license it had with Kopin relating to the “Golden-i 3.8M headset system.” Second Amend. to RealWear Tech. License Agreement at 1-3, ECF No. 130-3.
While Kopin's total product revenue from direct sales and licensing was approximately 36 million dollars from 2011 to 2021, Kopin has not paid BlueRadios any royalties under the Contract. Pedigo Report at Schedule 14, ECF No. 234-7; Kramer Decl. ¶ 41.
*5 BlueRadios filed suit against Kopin on August 12, 2016, stating eight claims for relief: (1) Breach of Contract; (2) Breach of Covenant of Good Faith and Fair Dealing; (3) Breach of Fiduciary Duty; (4) Misappropriation of Trade Secrets under the Colorado Uniform Trade Secrets Act (the “CUTSA”); (5) Misappropriation of Trade Secrets under the federal Defend Trade Secrets Act (the “DTSA”); (6) Unjust Enrichment; (7) Accounting; and (8) Correction of Inventorship. In its Motion for Partial Summary Judgment, Kopin seeks dismissal of claims (2)-(7) and partial dismissal of claims (1) and (8).
HBSR originally represented Kopin in these proceedings. In January 2017, I disqualified HBSR after finding it conflicted due to its relationship with BlueRadios pursuant to the parties’ collaborative agreement, embodied by the Contract and Addendum. See Order Granting Pl.’s Mot. to Disqualify Def.’s Counsel at 8, ECF No. 38.[4]
On November 28, 2018, I granted a joint motion seeking correction of inventorship of U.S. Patent Nos. 9,116,340 and 9,886,231. The Motion stated that two BlueRadios employees—Mr. Wilfred Tucker and Mr. John Sample—had been removed as inventors during patent prosecution upon deletion of a particular claim from U.S. Patent Application No. 12/348,646. Joint Mot. to Correct Inventorship at 2. The parties agreed the deletion of Messrs. Tucker and Sample was in error. Id. at 3.
II. LEGAL STANDARD
Summary judgment is only appropriate if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A disputed fact is “material” if it could affect the outcome of the suit. Chasteen v. UNISIA JECS Corp., 216 F.3d 1212, 1216 (10th Cir. 2000) (citation omitted). A factual dispute is “genuine” if “a rational jury could find in favor of the non-moving party based on the evidence presented.” Id. The moving party bears the burden of showing that the facts material to the motion are not in dispute. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In reviewing a motion for summary judgment, a district court must credit the non-movant's evidence and draw all reasonable inferences favorably to that party. Sprint Nextel Corp. v. Middle Man, Inc., 822 F.3d 524, 530 (10th Cir. 2016). The judge's function at this stage “is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
III. ANALYSIS
The undisputed evidence establishes that Kopin and its employees had access to BlueRadios’ intellectual property and trade secrets following a series of contractual agreements. On the record before me, a rational factfinder could find that Kopin used this information to secure valuable intellectual property rights through the patent application process and then falsely claimed exclusive credit for those rights by, in part, failing to acknowledge BlueRadios’ inventive contributions. I find material disputes of fact prohibit a grant of summary judgment on BlueRadios’ claims of trade secret misappropriation under the CUTSA and DTSA, and on its claims of breach of Kopin's express and implied contractual duties. But, as I explain below, BlueRadios’ claims for breach of fiduciary duty, unjust enrichment, accounting, and correction of inventorship of patent applications fail as a matter of law.
*6 I begin by confirming the common law and equitable claims are not barred by any statute of limitations, and then turn to the merits of Kopin's arguments regarding BlueRadios’ individual claims.
Under Colorado law, three-year statute of limitations applies to BlueRadios’ claims for unjust enrichment, breach of fiduciary duty, accounting, and breach of implied covenant of good faith and fair dealing. Colo. Rev. Stat. § 13-80-101; see also Grynberg v. Total S.A., 538 F.3d 1336, 1353 (10th Cir. 2008). As relevant to this case, the statute of limitations begins to accrue on the date the breach is “discovered or should have been discovered by the exercise of reasonable diligence.” Colo. Rev. Stat. § 13-80-108(6), (8).
Kopin argues Counts 2-7 and a portion of Count 1 are time-barred because BlueRadios knew or ought to have known all facts necessary to investigate its claims more than three years before it filed suit. As evidence of BlueRadios’ actual notice that Kopin was no longer engaged in the parties’ collaborative business venture, Kopin identifies several emails BlueRadios’ President, Mr. Kramer, sent to a third-party subcontractor, Mistral, in February 2010, and to a letter Mr. Kramer sent to Kopin's Chief Executive Officer, John Fan, in March 2010. Mot. for Partial Summ. J. at 15-17. As proof of BlueRadios’ constructive notice, Kopin points to public statements made in SEC filings in March 2012, January 2013, and March 2013. Id. at 17-18. Kopin describes the contents of these filings as “easily-knowable facts” that should have prompted BlueRadios to investigate. Id. at 45. Kopin's evidence of actual or constructive notice is unpersuasive when balanced against BlueRadios’ evidence that Kopin actively concealed relevant information from it during that same period.
First, BlueRadios’ emails to Mistral do not even hint at a belief that Kopin was violating the terms of its Contract with BlueRadios. See Mistral Emails at 2-4, ECF No. 234-13. The emails express BlueRadios’ concerns about potential violations of a Nondisclosure Agreement between Mistral and BlueRadios. Id. Second, Mr. Kramer did not accuse Kopin of breaching the Contract in his March 2010 letter. 3/26/2010 Kramer Letter. On the contrary, he commented on Kopin's apparent acceptance of the Gen 2.0 PCBs and stated that a reasonable person would conclude “all is well.” Id. at 1. Third, even if BlueRadios did review the SEC filings at or near the time of publication, several of the statements Kopin relies on follow a clear disclaimer that they “contain[ ] forward-looking statements.” See, e.g., 2012 SEC Form 10-K at 3.
Meanwhile, other portions of the record suggest Kopin employees conspired to keep BlueRadios in the dark about Golden-i's evolution during this same timeframe, and to conceal its plans to use the Golden-i technology in a manner contradictory to the parties’ intentions at the time of contracting. See 8/24/2009 Parkinson Email, ECF No. 296-5; 8/26/2009 Jacobsen Email, ECF No. 296-5; 2/17/2010 Jacobsen Email, ECF No. 296-5. When Kopin began licensing Golden-i technology to third parties to market a final product, Kopin did not require products to be branded as Golden-i, thereby camouflaging the technology from BlueRadios’ view. Kramer Decl. ¶¶ 50, 68. Further, the evidence suggests Kopin did everything in its power to ensure BlueRadios that it was in the process of developing a Golden-i product and that royalties would be forthcoming. See 8/10/2009 Jacobsen Email at 1, ECF No. 255-9; Kramer Decl. ¶¶ 29, 31. For instance, in or about 2013, BlueRadios requested micro-display modules from Kopin pursuant to a provision in the Addendum that required Kopin to “sell such products to BlueRadios in good faith and at fair market pricing.” Addendum Sec. (d). Kopin responded that the Golden-i micro-display modules were not yet in production and that Kopin was “still changing the design.” ¶ Kramer Decl. 31.
*7 It would be unreasonable to expect BlueRadios to scour Kopin's public filings for evidence that royalties were due when Kopin employees were both concealing relevant information and also assuring BlueRadios directly that the royalty-bearing products were still in the development phase. If Kopin had stated its intention to abandon all plans to develop and manufacture a Golden-i product, or if it had communicated to BlueRadios that it was altering its business model and would begin licensing Golden-i technology to third parties, a reasonable jury could determine that BlueRadios would have investigated further. Further, a jury could reasonably determine that Kopin was operating behind a curtain of silence, with full knowledge that BlueRadios was both relying on Kopin to finalize the Golden-i product and anticipating future royalty payments. Thus, even if I were to conclude that BlueRadios should have “discovered [Kopin's alleged breach] by the exercise of reasonable diligence,” Colo. Rev. Stat. § 13-80-108(6), (8), I would find that the statute of limitations should be tolled. See Dean Witter Reynolds, Inc. v. Hartman, 911 P.2d 1094, 1096 (Colo. 1996) (equitable tolling is appropriate when “flexibility is required to accomplish the goals of justice”).
BlueRadios asserts it did not become aware of the basis for its claims until late 2014, when its request for a list of pending and issued patents was met with an abrupt deflection. This suit was filed in August 2016, less than two years later. Because genuine factual disputes prevent me from finding that BlueRadios knew or ought to have known of Kopin's allegedly unlawful activity more than three years before it filed suit, none of BlueRadios’ common law or equitable claims are time-barred by the statute of limitations. I turn next to Kopin's arguments on the merits of the individual claims.
The Contract defined the Golden-i project as “a wireless Bluetooth video interface communications controller board with Bluetooth® technology and ARM9/DSP/Memory based microcontroller video display design as outlined in KOPIN specification ([to be determined]).” Contract Sec. I. It laid out eleven objectives for the design, development and integration of embedded firmware and hardware. Id. Sec. III. Once (1) the parties defined “a baseline Golden-i product specification for ... pre-production customer units,” and after (2) BlueRadios delivered suitable product samples to support demonstrations of the jointly developed technology, Kopin was to pay specified royalties to BlueRadios for any Gen 1.0 product sales. Id. Sec. V. The royalty schedule included a cap of $7.8 million, but required no minimum payment. Id.
The Addendum primarily altered the Contract Sections dealing with costs of fabrication (Section IV) and royalty payments (Section V). Regarding royalty payments, the Addendum amended the Contract such that “successful completion, delivery and acceptance by Kopin of ten (10) fully functional, stable, consistently operating [Gen 2.0 PCBs],” was required before BlueRadios was entitled to receive royalties. Addendum at 1. Anything not “expressly modified by [the] Addendum, continue[d] in full force and effect.” Id.
In its Complaint, BlueRadios alleges Kopin breached the parties’ written agreements by (a) failing to pay royalties due under the Addendum and (b) failing to identify BlueRadios as an inventor and/or owner on patent applications covered by the Contract.[5] Kopin insists it owes no royalties to BlueRadios, and that any failure to correctly identify inventors on Golden-i patent applications has resulted in no economic loss to BlueRadios. For purposes of its summary judgment motion, however, Kopin does not delve into the merits of those arguments. Instead, it seeks partial summary judgment on BlueRadios’ royalty claims for sales made before August 12, 2013, based on BlueRadios’ actual or constructive notice of Kopin's commercial activities related to the Golden-i project.
*8 As I have just explained, however, a reasonable jury could find that Kopin actively concealed its business dealings from BlueRadios. A jury could also find that Kopin spent years misrepresenting relevant information to its business partner only to later claim that its partner should have been scrutinizing SEC filings and public statements for evidence of a breach of contract. Kopin's motion for partial summary judgment on BlueRadios’ breach-of-contract claim is therefore denied.
“Under Colorado law, every contract contains an implied duty of good faith and fair dealing.” City of Golden v. Parker, 138 P.3d 285, 292 (Colo. 2006). A violation of that duty is therefore a breach of contract. Id. The duty—sometimes referred to as the covenant of good faith and fair dealing—may be relied on “when the manner of performance under a specific contract term allows for discretion on the part of either party.” Amoco Oil Co. v. Ervin, 908 P.2d 493, 498 (Colo. 1995). “Discretion in performance occurs when the parties, at formation, defer a decision regarding performance terms of the contract leaving one party with the power to set or control the terms of performance after formation.” City of Golden, 138 P.3d at 292 (citation and quotation marks omitted). By requiring parties to perform their contractual obligations in good faith, the covenant of good faith and fair dealing honors the parties’ reasonable expectations as to how discretion will be exercised under a contract. See id.
In its second claim, BlueRadios contends Kopin engaged in conduct that deprived BlueRadios of the benefits of their agreement. Specifically, it alleges the “[c]ontract provided Kopin with the discretion to seek patent protection and to file, procure and maintain patent rights ... for the benefit of BlueRadios on mat[t]ers within the scope of the relationship formed to advance the Golden-i Project,” and that Kopin did not exercise its discretion in good faith. Resp. to Mot. for Summ. J. at 53, ECF No. 257.
Section VII of the Contract, titled “Intellectual Property (IP) Ownership,” addresses two categories of intellectual property: (1) rights to BlueRadios’ technology and products developed outside the scope of the Contract (hereinafter “BlueRadios IP”), and (2) rights to BlueRadios’ developments made within the course of the Contract (hereinafter “Joint Developments”). It does not address any Kopin technology, products, or developments.
As to BlueRadios IP, BlueRadios maintains “all rights, title and interest,” but grants Kopin an exclusive royalty-bearing license to any “intellectual property rights incorporated into the project deliverables.” Contract Sec. VII. The license expires automatically if Kopin terminates the agreement “before BlueRadios delivers source code and production design build files” with one exception: The license continues “with respect to any patent rights that Kopin has filed for, procured and/or maintained at its expense in which case a license solely to such patent rights shall continue so long as Kopin continues to undertake the prosecution and/or maintenance of same.” Id. BlueRadios reserves all rights to BlueRadios IP for any non-micro-display applications.
Joint Developments are jointly owned, although BlueRadios may not “use, sell or license Joint Developments for any micro-display applications.” Id. The Contract contains the following provision regarding both categories of intellectual property: “Kopin will have the sole right and responsibility to decide whether or not to seek patent protection with respect to any intellectual property rights that are developed as part of or incorporated into the project deliverables and to file for, procure and maintain such patents at Kopin's expense.” Id.
*9 In other words, the Contract provides Kopin with (1) a license to BlueRadios IP until termination of the agreement; (2) perpetual joint ownership of Joint Developments; (3) discretion to seek patent protection for Golden-i technology—either BlueRadios IP or Joint Developments—at its own expense; and (4) a license to BlueRadios IP that was developed for or incorporated into the Golden-i Project after termination, so long as Kopin sought patent protection of such intellectual property before termination.
The doctrine of good faith performance is generally used to protect a “weaker” party from a “stronger” party. Amoco Oil, 908 P.2d at 498. “The relative strength of the party exercising discretion typically arises from an agreement of the parties to confer control of a contract term on that party. The dependent party then is left to the good faith of the party in control.” Id. at 498-99 (citation omitted). Viewing the Contract in its totality, a jury could reasonably find that the purpose of Kopin's patent prosecution efforts was to protect the collaborative business venture to the benefit of both companies. If the Contract gives Kopin discretion over the protection of both parties’ intellectual property rights, that authority was circumscribed by the duty of good faith and fair dealing. Because “[p]atent issuance creates a presumption that the named inventors are the true and only inventors,” whether Kopin exercised its discretion in a manner that deprived BlueRadios of the benefit of the Contract remains a genuine dispute of fact. Ethicon, 135 F.3d at 1460; see also O'Reilly v. Physicians Mut. Ins. Co., 992 P.2d 644, 646 (Colo. App. 1999) (“[A] breach of the duty [of good faith and fair dealing] occurs when one party uses discretion conferred by the contract to act dishonestly or to act outside the scope of accepted commercial practices to deprive the other party of the benefit of the contract.”).
Kopin argues BlueRadios is improperly using the covenant of good faith and fair dealing to inject new substantive terms into the Contract by requiring it to accurately identify BlueRadios inventors on Golden-i patent applications. Kopin also claims the Contract gives it freedom to “decide what patent applications to abandon.”[6] Reply to Mot. for Partial Summ. J. at 20 n.14, ECF No. 266. By doing so, Kopin takes the position that nothing in the Contract required Kopin to be accurate in its patent prosecution or to pay heed to BlueRadios’ interests in the Golden-i patent applications. It is not a sensible position to take.
By definition, all BlueRadios IP and Joint Developments include intellectual property that is attributable exclusively to BlueRadios inventors. Kopin's suggestion that the parties might have included a separate provision requiring Kopin to explicitly name those inventors on patent applications covering BlueRadios IP or Joint Developments is farcical. Should they also have included a provision requiring Kopin employees to date signed documents with the actual date of signature, and not an inaccurate one? Quite apart from injecting new substantive terms, the Contract's silence as to the reporting of inventors suggests BlueRadios was justified in expecting Kopin to act in a reasonable manner and to “perform in good faith the obligations imposed by their agreement.” Wells Fargo Realty Advisors Funding, Inc. v. Uioli, Inc., 872 P.2d 1359, 1363 (Colo. App. 1994).
*10 Moreover, Kopin's failure to keep track of BlueRadios’ intellectual property rights under the Contract is troubling. As BlueRadios points out, it jointly owned patents for Joint Developments and was at liberty to use those rights for non-micro-display applications. Also, Kopin's license to BlueRadios IP was not perpetual. To accurately determine the scope of its license upon termination of the Contract, Kopin would need to record the number and status of Golden-i patent applications, at a minimum. Accordingly, a jury could find Kopin had an implied duty to maintain detailed records of its Golden-i patent prosecution for the benefit of both companies. But when BlueRadios specifically requested such information, Kopin demurred. See Kramer Decl. ¶ 58.
Kopin also argues summary judgment is appropriate on this claim because BlueRadios has failed to come forward with evidence that the inaccurate naming of inventors caused BlueRadios economic harm. It claims “BlueRadios has admitted that it lacks any evidence of monetary damages to itself or benefit to Kopin arising from” its failure to correctly name inventors on patent applications. Mot. for Partial Summ. J. at 43. That is misleading. BlueRadios seeks disgorgement of Kopin's monetization of BlueRadios’ intellectual property such as licensing fees and royalty payments, but it cannot specify the precise amount it seeks because Kopin has withheld relevant information such as third-party licensing agreements from discovery. Thus, summary judgment on BlueRadios’ claim for breach of the covenant of good faith and fair dealing is inappropriate due to genuine factual disputes and due to Kopin's inadequate production during discovery. As set forth below, the latter will be addressed in the limited reopening of discovery following issuance of this Order.
This ruling only applies to BlueRadios’ claim for economic loss. As Kopin points out, BlueRadios also seeks punitive damages under its second claim. Punitive damages are ordinarily not recoverable for a breach of contract. Mortg. Finance, Inc. v. Podleski, 742 P.2d 900, 903 (Colo. 1987); see also William H. White Co. v. B&A Mfg. Co., 794 P.2d 1099, 1101 (Colo. App. 1990) (“Colorado does not recognize a claim for punitive damages predicated upon breach of contract.”). No exception to the rule applies here. Thus, the portion of BlueRadios’ claim for breach of the implied covenant of good faith and fair dealing seeking punitive damages is dismissed.
BlueRadios asserts claims for misappropriation of trade secrets under both the federal Defend Trade Secret Act (the “DTSA”), 18 U.S.C. § 1831 et seq., and the Colorado Uniform Trade Secrets Act (the “CUTSA”), Colo. Rev. Stat. § 7–74–101 et seq. Under either law, an owner of a trade secret may be entitled to damages when it can prove misappropriation by another so long as (a) the trade secret owner has taken reasonable measures to keep the information secret, and (b) the trade secrets have value. 18 U.S.C. § 1839(3);[7] Colo. Rev. Stat. §§ 7–74–102, 104. As relevant here, misappropriation is defined as the “[d]isclosure or use of a trade secret of another without express or implied consent by a person who ... at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was ... acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret.” 18 U.S.C. § 1839(5); see also Colo. Rev. Stat. § 7–74–102(2).
*11 The parties agree Kopin had access to BlueRadios’ valuable trade secrets. Kopin argues it did not violate the DTSA or CUTSA because (1) there was no misappropriation and (2) BlueRadios has not identified its trade secrets with sufficient particularity.[8] Additionally, Kopin asserts BlueRadios’ DTSA claim fails because the alleged misappropriation occurred before the non-retroactive statute was enacted on May 11, 2016. I address these three arguments in turn.
According to Kopin, it could not have misappropriated BlueRadios’ trade secrets because the Contract granted it either joint ownership or an exclusive license to use those trade secrets in precisely the manner alleged. Because the relevant contractual provisions are ambiguous, I cannot conclude there was no misappropriation by Kopin as a matter of law.
Section VII of the Contract plainly states that Joint Developments “will be owned jointly.” Relying on 35 U.S.C. § 262, Kopin contends “[a] company cannot misappropriate intellectual property it jointly owns.” Mot. for Partial Summ. J. at 31. But § 262 begins with a qualifying clause: “In the absence of any agreement to the contrary, each of the joint owners of a patent may make, use, offer to sell, or sell the patented invention within the United States, ... without the consent of and without accounting to the other owners.” 35 U.S.C. § 262 (emphasis added). A factual dispute exists as to whether there is an “agreement to the contrary.”
The Contract describes Joint Developments as “[a]ny intellectual property rights developed by BlueRadios in the course of this development contract” and it gives Kopin the “sole right and responsibility to decide whether or not to seek patent protection for [Joint Developments].” Contract Sec. VII. Because Joint Developments were the exclusive product of BlueRadios’ efforts, a rational factfinder could infer an agreement on Kopin's part to include BlueRadios inventors on any patent applications involving Joint Developments. Kopin was contractually required to list BlueRadios inventors in patent applications for Joint Developments, then its failure to do so constituted misappropriation.
I next address Kopin's argument that it had an exclusive license to use any trade secrets contained in BlueRadios IP. The Contract grants Kopin “an exclusive royalty-bearing license to any solely owned BlueRadios intellectual property rights incorporated into the project deliverables to use, sublicense, make and have made, and sell products for all micro-display applications.” Contract Sec. VII. BlueRadios undoubtedly consented to a broad use of its intellectual property. Still, there are two problems with Kopin's position. First, the phrase “incorporated into the project deliverables” is ambiguous. Second, there is evidence that Kopin disclosed BlueRadios IP before the Contract was signed and in violation of the Confidential Disclosure Agreement.
I first address the ambiguous scope of Kopin's exclusive license. BlueRadios granted Kopin a license to its intellectual property, so long as it was “incorporated into the project deliverables.” The Contract defines Project Deliverables as the Gen 1.0 PCBs, along with:
• Schematics
• Build of Materials
• Gerbers
• Block Diagrams
• Theory of Operations
*12 • Source Code
• Interface API & cell phone interface prototype
Contract Sec. VI.
The parties’ interpretations of this list differ vastly. While Kopin asserts the Contract “unambiguously includes at least the eight things specifically identified under the bold-faced heading ‘Project Deliverables,’ ” Reply to Mot. for Partial Summ. J. at 5-6, BlueRadios describes the provision as “a rambling list,” and suggests the phrase “working demonstration units” is far from clear, Surreply to Mot. for Partial Summ. J. at 6.
More ambiguity results from the Addendum, which added a requirement that BlueRadios deliver ten “fully functional, stable, consistently operating Gen 2.0 because the Addendum specifically did not alter the definition of the “Project Deliverables.” Together, the agreements do not clearly extend Kopin's license to BlueRadios IP incorporated into the Gen 2.0 PCBs.
There are additional factual disputes about what trade secrets were “incorporated into” BlueRadios’ Golden-i work product. For example, BlueRadios developed techniques and procedures for subminiaturizing PCBs before the Contract, but the parties dispute whether those techniques were “incorporated into the project deliverables.” The techniques were not included in Kopin's Golden-i patent applications. Kramer Dep. at 311:13-312:5, ECF No. 254-1; Kramer Decl. ¶ 6; see also Hernandez Report ¶¶ 148-165, ECF No. 269-4. If that technology was not in fact “incorporated in” BlueRadios’ project deliverables, then Kopin's broad license did not permit its disclosure. Thus, Kopin's disclosure of such technology may have been misappropriated. In sum, the scope of Kopin's license is hotly contested and appropriate for resolution by a factfinder.
Second, Kopin revealed BlueRadios’ trade secrets before the Contract was signed. The parties signed a Confidential Disclosure Agreement (the “CDA”) on February 13, 2007, with an effective date of February 12, 2007. The CDA states that “absent prior written consent from [BlueRadios], [Kopin] will not distribute, disclose or disseminate [BlueRadios’ trade secrets] to any third party.” CDA at 2. Nevertheless, immediately after a BlueRadios demonstration in April 2007, Kopin began preparing U.S. Provisional Patent Application No. 60/930,232 (the “ ‘232 Prov. Application”), titled “Method for Controlling a Monocular Display Device and Wirelessly Displaying Multi-Media from a Host Computing Device,” which was filed on May 14, 2007. ‘232 Prov. Application at 6, ECF No. 233-36. One of its patent claims involves “a wireless interface connected to [a] monocular display and configured to wirelessly communicate with host computing device”—the very idea Mr. Kramer presented to Mr. Jacobsen during their initial discussions. See 9/6/2018 Kramer Dep. at 70:1-71:19; Kramer Decl. ¶ 5. As such, a genuine factual dispute exists regarding whether Provisional Application ‘232 contains trade secrets owned by BlueRadios that were improperly disclosed under the Confidential Disclosure Agreement.
Moreover, the parties dispute the duration of the CDA. The CDA lasts until “the discussions between the parties with respect to the purpose referred to herein have been completed or are terminated, or one [ ] year from the date of the ... Agreement, whichever event occurs first.” CDA at 2. Because the Contract left a portion of its scope “to be determined,” see Contract Sec. I, BlueRadios contends the CDA terminated after one year, or on February 12, 2008. Kopin, on the other hand, implies the CDA terminated on June 5, 2007, once the Contract was signed, though it does not commit to that position. See Mot. for Partial Summ. J. at 7-8; Reply to Mot. for Partial Summ. J. at 85. Consequently, I find numerous genuine issues of material fact regarding whether Kopin misappropriated BlueRadios’ trade secrets before the Contract, during the term of the CDA, and in breach of the Contract and Addendum.
*13 Kopin claims BlueRadios has failed to describe its alleged trade secrets with sufficient particularity to survive its motion for summary judgment as to BlueRadios’ CUTSA and DTSA claims. I disagree. BlueRadios has sufficiently identified its trade secrets in its interrogatory responses and through its technical expert. See, e.g., Suppl. Resp. to Interrog. No. 16, at ECF No. 233-19; Hernandez Report ¶ 488, ECF No. 234-4. I agree that greater clarity would be useful—if not necessary—to the final disposition of BlueRadios’ misappropriation claims, but I find Kopin to be at fault for the present lack of detail. As I explain below, BlueRadios has submitted compelling evidence that Kopin has withheld relevant discovery relating to its history of patent prosecution, technology transfers, and third-party licensing agreements.
The federal Defend Trade Secrets Act (the “DTSA”) was enacted on May 11, 2016. See Pub. L. No. 114-153, May 11, 2016, 130 Stat. 376 (2016). The DTSA is not retroactive. Id. § 2(e). It applies to “any misappropriation of a trade secret ... for which any act occurs on or after the date of the enactment of [the] Act.” Id. at 381-82. The statute, which borrows heavily from the Uniform Trade Secrets Act (the “UTSA”), does not address claims for continued use of misappropriated trade secrets. See Brand Energy & Infrastructure Servs., Inc. v. Irex Contracting Group, No. CV 16-2499, 2017 WL 1105648, at *7 (E.D. Pa. Mar. 24, 2017). However, the DTSA conspicuously omits Section 11 of the UTSA which would have provided that the law “does not apply to the continuing misappropriation that [began prior to and] occurs after the effective date.” Id. at *8 (quoting UTSA § 11). For that reason, I agree that “[i]t only follows that, when Congress did not adopt the anti-retroactivity provisions found in the UTSA and many states’ trade secret laws, it did so consciously and for a reason.... Congress clearly expressed its intent to apply the DTSA to continuing misappropriations that began prior to—but continued after—the DTSA's enactment.” Id.; see also Sonoma Pharms., Inc. v. Collidion Inc., No. 17-cv-01459-EDL, 2018 WL 3398940, at *5 (N.D. Cal. June 1, 2018).
Kopin contends BlueRadios’ trade secrets lost any element of secrecy before enactment of the DTSA as a result of the parties’ collaboration during patent prosecution, claiming all relevant trade secrets were extinguished by the publication of its patent applications.[9] Kopin refers to BlueRadios’ trade secrets that were encapsulated in various patent application figures and argues that any use of that information after publication was not a “disclosure or use” under the DTSA. This case is more factually complex than Kopin makes it out to be.
First, BlueRadios maintains that many of its trade secrets were not incorporated into issued patents. Kramer Decl. ¶ 56; Hernandez Report, ¶¶ 496-500, ECF No. 234-4. Further, BlueRadios’ expert states Kopin failed to follow a “clean room approach” following delivery of the Gen 2.0 PCBs, and that the result of this failure was the incorporation of BlueRadios’ trade secrets into past and current generations of Golden-i technology. Hernandez Report, ¶¶ 496-97. The presence of any trade secrets in more recent Golden-i technology—including technology that was developed after the DTSA's enactment—is therefore a genuine dispute of fact.
Second, Kopin's contention that all alleged acts of misappropriation occurred long ago is untenable given its recalcitrance during discovery. At a 2018 hearing on BlueRadios’ first Motion to Compel, I explained that the scope of Kopin's litigation hold at that time—and consequently the scope of discovery—was insufficient. I stated:
*14 BlueRadios equates Golden-i progeny with all wireless [head-mounted devices or “HMDs”]. That is not an unreasonable position to take. This position rests on BlueRadios’ assertion that Kopin had never offered wireless technologies before its collaboration with BlueRadios, meaning that any subsequent Kopin wireless HMDs, whether developed directly with BlueRadios or not, necessarily incorporate technology that stems from the parties’ original Golden-i collaboration. The nature of BlueRadios’ claims against Kopin makes it relevant for BlueRadios to know all of the details of Kopin's subsequent wireless HMD ventures. Whether the HMDs are manufactured, produced, or sold by Kopin itself or in conjunction with a third party is an unimportant distinction. The only necessary inquiries ought to be, and they are, whether the product is or includes a wireless HMD and whether Kopin contributed technological know-how to the product's design and development. Any information that meets both of those criteria is relevant to the case for the purposes of discovery, and accordingly I grant BlueRadios’ motion to compel production of information related to all Golden-i progeny.
4/6/2018 Hearing Tr. at 13:22-14:17. Federal Rule of Civil Procedure 26(e) imposes a duty to supplement initial disclosures that are incomplete or incorrect, and that duty survives the close of fact discovery. See Campos-Eibeck v. C R Bard Inc., 19-cv-2026-W(BLM), 2020 WL 835305, at *5 (S.D. Cal. Feb. 20, 2020). Thus, both my direct statements and the federal rules required Kopin to proactively enlarge the scope of discovery after that hearing. To the extent Kopin complied, its compliance was insufficient.
To illustrate, consider Kopin's military contracts involving head-mounted devices. See Mot. for Sanctions Against Kopin at 6-7 (Figures 5A & 5B). The title of U.S. Patent No. 10,672,860 (the “ ‘860 Patent”) is “Headset Computer That Uses Motion and Voice Commands to Control Information Display and Remote Devices.” Id. at 5 (emphasis added). The ‘860 Patent issued on April 21, 2020, and is linked to unpublished U.S. Provisional Application No. 61/484,464, filed on May 10, 2011. Kovarik Decl. ¶¶ 4-5, ECF No. 365-1. The military device is therefore a head-mounted device with wireless capabilities to which Kopin contributed technological know-how. Nevertheless, in early 2020 Kopin asserted: “Other than as it relates to Kopin's own developments concerning its own micro[-]displays, Kopin's military division never used the technology developed during the Golden-i Project.” Resp. to Mot. for Spoliation Sanctions at 17, ECF No. 250. But the extent to which Golden-i technology is incorporated into the ‘860 Patent is disputed and that dispute cannot be resolved without adequate discovery. Kopin's military contracts and technology transfers are relevant to BlueRadios’ claims.
Likewise, Kopin has not produced adequate discovery regarding its commercial relationship with Motorola. Early in the case, Kopin flatly denied that its license to Motorola included any Joint Developments or BlueRadios IP. In its license agreement, Kopin stated that it had exclusive ownership of U.S. Patent No. 9,116,340. See Motorola Tech. License Agreement at 27-29, ECF No. 275-14. And yet, it later admitted that BlueRadios inventors should have been named on the underlying application. See Joint Mot. to Correct Inventorship. Because Kopin has refused to produce discovery about Kopin's licensing agreements and technology transfer with third parties such as the U.S. military and because it has affirmatively misstated the extent of BlueRadios’ interests in intellectual property licensed to companies such as Motorola, I find genuine factual disputes regarding ongoing misappropriation under the DTSA.
To summarize, there are factual disputes about (1) whether Kopin misappropriated BlueRadios’ trade secrets in patent applications; (2) whether and when Kopin misappropriated BlueRadios’ trade secrets that were not incorporated into issued patents; and (3) whether and when Kopin misappropriated BlueRadios’ trade secrets in its licensing agreements with the U.S. military and other entities. The latter two disputes are complicated by Kopin's apparent disregard of my clear statements regarding the scope of discovery. I therefore deny Kopin's motion for summary judgment on BlueRadios’ CUTSA and DTSA claims and order limited additional discovery, as described in Part IV, below.
*15 The equitable doctrine of unjust enrichment—also known as quantum meruit or quasi-contract—is a theory of contract recovery. Dudding v. Norton Frickey & Assocs., 11 P.3d 441, 444-45 (Colo. 2000). A plaintiff must prove three elements to prevail on an unjust enrichment claim: “(1) the defendant received a benefit (2) at the plaintiff's expense (3) under circumstances that would make it unjust for the defendant to retain the benefit without commensurate compensation.” Lewis v. Lewis, 189 P.3d 1134, 1141 (Colo. 2008). The doctrine “seeks to restore fairness when a contract fails.” Dudding, 11 P.3d at 445.
Generally, a party cannot recover under a theory of unjust enrichment “where there is an express contract addressing the subject of the alleged obligation to pay.” Pulte Home Corp., Inc. v. Countryside Cmty. Ass'n, Inc., 382 P.3d 821, 833 (Colo. 2016). Colorado law recognizes two exceptions to the general rule: “[A] party may still recover for unjust enrichment when (1) the express contract fails or is rescinded, or (2) the claim covers matters that are outside of or arose after the contract.” Id. (citations omitted).
BlueRadios bases its claim for unjust enrichment on (a) Kopin's alleged failure to name BlueRadios inventors on patent applications and (b) on Kopin's breach of a fiduciary duty owed to it, asserting these actions allowed Kopin to take advantage of valuable patent rights by claiming exclusive ownership of those rights.[10] BlueRadios’ claims fail as a matter of law because they are preempted by the Contract.
First, BlueRadios’ failure-to-name claim relating to Golden-i patent applications is covered by the Contract. Although the Contract does not specifically require Kopin to name inventors on patent applications filed in pursuit of the parties’ common enterprise, the Contract comprehensively addresses the subjects of intellectual property ownership and patent prosecution. Any failure to properly name inventors on a patent is in breach of an implied contractual duty owed under the Contract, as discussed in Section III(3) above.
Second, Kopin owes no fiduciary duty to BlueRadios. To establish a claim for breach of fiduciary duty under Colorado law, a plaintiff must prove “(1) that the defendant was acting as a fiduciary of the plaintiff; (2) that the defendant breached a fiduciary duty to the plaintiff; (3) that the plaintiff incurred damages; and (4) that the defendant's breach of fiduciary duty was a cause of the plaintiff's damages.” Sewell v. Great N. Ins. Co., 535 F.3d 1166, 1172 (10th Cir. 2008). BlueRadios has not established the first element of its claim.
A fiduciary relationship exists when one party is under a duty to act for the benefit of another party within the scope of their relationship. Accident & Injury Medical Specialists, P.C. v. Mintz, 279 P.3d 658, 663 (Colo. 2012). The relationship imposes a duty of care that will support an action in tort, independent of any contractual agreement. Town of Alma v. AZCO Const., Inc., 10 P.3d 1256, 1262-63 (Colo. 2000) (adopting economic loss rule). Here, BlueRadios contends that a fiduciary duty was created when it granted Kopin “a high degree of control” over its intellectual property. Resp. to Mot. for Summ. J. at 60. But rather than creating “a special relationship of trust,” the undisputed evidence portrays BlueRadios’ agreement with Kopin to be the result of a standard business transaction. Mintz, 279 P.3d at 663; see also id. (“Fiduciary relationships ... are distinguishable from business relationships involving parties dealing at arm's length for mutual benefits.”).
*16 In short, Kopin owes BlueRadios no extra-contractual duty of care, and BlueRadios’ claims for unjust enrichment and breach of a fiduciary duty fail as a matter of law.
BlueRadios seeks an accounting based on its inability to obtain a complete picture of Kopin's success at monetizing Golden-i intellectual property rights and, allegedly, BlueRadios’ trade secrets. Kopin correctly identifies this claim as a request for a remedy, not an independent cause of action. Under Colorado law, an accounting claim is generally equitable in nature. See Andrikopoulos v. Broadmoor Mgmt. Co., 670 P.2d 435, 440 (Colo. App. 1983). But an accounting claim can also be “a means by which to arrive at an accurate calculation of compensatory damages” when providing a remedy at law. Virdanco, Inc. v. MTS Int'l, 820 P.2d 352, 354 (Colo. App. 1991). It is in this latter sense that BlueRadios seeks an accounting. As such, BlueRadios’ seventh claim is dismissed. The claim's dismissal does not, however, foreclose the availability of an accounting remedy should BlueRadios prevail on any of its substantive claims.
BlueRadios seeks a correction of inventorship of Golden-i patent applications filed by Kopin as well as issued patents. Pursuant to 35 U.S.C. § 256(b), a district court “may order correction of [a] patent on notice and hearing of all parties concerned and the [USPTO] Director shall issue a certificate accordingly.” Kopin argues and BlueRadios concedes that Congress has limited the avenues available to contest patent inventorship in pending patent applications, and this is not one of them. See HIF Bio, Inc. v. Yung Shin Pharms. Indus. Co., 600 F.3d 1347, 1353 (Fed. Cir. 2010) (citing 35 U.S.C. §§ 116, 135(a)). Although 35 U.S.C. § 116 permits the Director of the USPTO to correct the inventorship of an application, it “plainly does not create a cause of action in the district courts to modify inventorship on pending patent applications.” Eli Lilly & Co. v. Aradigm Corp., 376 F.3d 1352, 1356 n.1 (Fed. Cir. 2004). Consequently, this claim is dismissed insomuch as it seeks correction of inventorship of patent applications.
IV. BLUERADIOS’ MOTIONS FOR SANCTIONS
BlueRadios seeks sanctions against Kopin for alleged violations of Federal Rule of Civil Procedure 37 and for its willful failure to comply with its discovery obligations and court orders. See Fed. R. Civ. P. 37(b), (c), (e); Lee v. Max Int'l, LLC, 638 F.3d 1318, 1321 (10th Cir. 2011). Specifically, it requests an adverse inference jury instruction or entry of default against Kopin, in addition to an award of costs and attorney fees. I conclude these sanctions are premature. I agree with Kopin, however, that the appropriate course of action for at least a portion of BlueRadios’ discovery requests was the filing of a motion to compel. I will briefly review the law concerning sanctions for the violations alleged in BlueRadios’ motion, then explain why I consider it both appropriate and expedient to order Kopin to produce additional discovery and otherwise deny the motions without prejudice.
District Courts have inherent power to impose sanctions. See Crocs, Inc. v. Effervescent, Inc., 278 F. Supp. 3d 1182, 1193 (D. Colo. 2017). “Because of their very potency, inherent powers must be exercised with restraint and discretion.” Chambers v. NASCO, Inc., 501 U.S. 32, 44 (1991). Federal Rule of Civil Procedure 37 authorizes the entry of a default judgment against a party who fails to comply with court orders, but it is a harsh sanction. M.E.N. Co. v. Control Fluidics, Inc., 834 F.2d 869, 872 (10th Cir. 1987). For that reason, “due process requires that ‘failure’ is a sufficient ground only when it is the result of ‘wil[lful]ness, bad faith, or [some] fault of petitioner’ rather than inability to comply.” Id. (second alteration in original) (quoting Nat'l Hockey League v. Metro. Hockey Club, Inc., 427 U.S. 639, 640 (1976)). Regarding sanctions for the destruction or loss of evidence:
*17 [T]he court must first determine whether the missing documents or materials would be relevant to an issue at trial.... If the missing documents would be relevant, the court must then decide whether [the non-movant] was under an obligation to preserve the records at issue. Finally, if such a duty existed, the court must consider what sanction, if any, is appropriate given the non-moving party's degree of culpability, the degree of any prejudice to the moving party, and the purposes to be served by exercising the court's power to sanction.
Cache La Poudre Feeds, LLC v. Land O'Lakes, Inc., 244 F.R.D. 614, 621 (D. Colo. 2007).
There is little, if any, evidence of spoliation. Kopin properly objected to at least some of BlueRadios’ discovery requests, and BlueRadios’ initial requests for production were, at times, impermissibly broad. See, e.g., Req. for Produc. No. 24, ECF No. 252-6. Even so, I find clear evidence of other discovery violations.
When Kopin initiated its litigation hold, for example, it only sought to preserve documents and data related to “BlueRadios” and not “Golden-i.”[11] Choi Dep. at 37:21-38:23, ECF No. 275-9. Such a hold was obviously inadequate. Further, Kopin waited until “some point in 2017” to ask Mr. Jacobsen to produce documents in accordance with the litigation hold. Jacobsen Decl. ¶ 8, ECF No. 274-1. When it did so, Kopin “requested ... only Golden-i product development and business documents from 2007 through roughly 2010.” Id. ¶ 4. Kopin instructed its outside information technology vendor, Simpletonian, to “preserve all data related to BlueRadios.” Resp. to Mot. for Spoliation Sanctions at 5 n.2. Those requests were also too narrow. More to the point, there is no indication that Kopin broadened the scope of its litigation hold after I directed them to do so in April 2018.[12]
In defending itself against claims of spoliation, Kopin states “this is a contract case about at most a modest sum of allegedly unpaid royalties and inventorship on a handful of patents.” Resp. to Mot. for Spoliation Sanctions at 5. Kopin also suggests it withheld some discovery as irrelevant due to BlueRadios’ claims being time-barred. Id. at 13-14. These determinations are irrelevant to Kopin's discovery obligations. Kopin may not unilaterally limit the scope of this case. As I warned Kopin previously, I will not tolerate a party litigant deciding what is relevant and what is not. See 9/15/2017 Status Conference Tr. at 12:23-24.
*18 BlueRadios has demonstrated that Kopin's assertions of irrelevance are far off-base, if not entirely wrong. For instance, after producing very few board meeting minutes, Kopin stated that any “unproduced board minutes are not relevant.” Resp. to Mot. for Spoliation Sanctions at 11. Yet HBSR later produced additional board minutes that are patently relevant. See, e.g., Kopin Board Materials at 2, 3, 5, 10, 12, ECF No. 330-6.
Additionally, I have reviewed excerpts of the deposition of Kopin's Chief Financial Officer, Mr. Sneider and I agree that Mr. Sneider was not adequately prepared to “testify about information known or reasonably available to the organization” pursuant to Federal Rule of Civil Procedure 30(b)(6). BlueRadios shall therefore be permitted to conduct a Rule 30(b)(6) deposition of Simpletonian regarding (1) its involvement implementing a litigation hold for Kopin in 2016, (2) whether the hold was later expanded in response to my oral rulings on the proper scope of discovery, and (3) its efforts to review and turn over relevant discovery to Kopin.
Thus, I hereby order Kopin to produce additional discovery in the following three categories:
1. Items Kopin admits are in its possession must be produced within 30 days:
• Minutes or packages relating to Kopin Board Meetings that discuss any aspect of Golden-i technology or its progeny—in other words, all HMDs (1) that incorporate wireless technology in any fashion and (2) to which Kopin contributed technology, see Resp. to Mot. for Spoliation Sanctions at 15;
• Documentation regarding Kopin's negotiations and contractual agreements with other third parties with whom Kopin has a licensing agreement for Golden-i technology or its progeny, including but not limited to RealWear; Google; Lenovo New Vision; Vuzix; Raytheon; DRS Network & Imaging Systems, LLC; Goertek; and Panasonic, see id. at 16; Resp. to Mot. for Sanctions Against Kopin at 5; and
• Product design, software, hardware and firmware files; license agreements related to the Solos eyewear product and/or Golden-i technology or its progeny; and communications with Dr. Fan and members of his family regarding the licensing or sale of any Solos HMD technology, see Resp. to Mot. for Sanctions Against Kopin at 5.
2. To the extent they are within Kopin's possession, custody, or control, Kopin is required to produce the following within 60 days:
• Contracts and licensing agreements for Golden-i technology or its progeny with any additional third parties, including but not limited to Motorola; Fujitsu; British Petroleum; Schumberger; Verizon; Recon Instruments; Garmin; Scott Safety; Symbol Technologies; Endopodium and/or HMDmd; and Pico Interactive;
• Technology transfers of Golden-i technology or its progeny to third parties including but not limited to RealWear; Google; Lenovo New Vision; Vuzix; Raytheon; DRS Network & Imaging Systems, LLC; Goertek; Panasonic; Motorola; Fujitsu; British Petroleum; Schumberger; Verizon; Recon Instruments; Garmin; Scott Safety; Symbol Technologies; Endopodium and/or HMDmd; and Pico Interactive;
• Access to and information about www.mygoldeni.com;
• Documents or data relating to the 16 U.S. Patents that include the “Parkinson Figure,” see Mot. for Sanctions Against Kopin at 8;
• Jeffrey Jacobsen's Golden-i reports and quarterly bonus reports sent to Dr. Fan and Mr. Sneider, see Jacobsen Decl. ¶ 3; and
*19 • Golden-i program summaries prepared by Christopher Parkinson, Steve Pombo, and/or David Fergusson, see id.
3. Kopin is to produce the following within 90 days:
• Supplementation of financial disclosures related to BlueRadios’ claims for economic loss and/or disgorgement, and
• Simpletonian for a Rule 30(b)(6) deposition.
Any motions for a protective order against disclosure of this information must be made within an item's respective deadline.
Kopin correctly recalls my admonishment against any document dumps during the 2018 hearing on BlueRadios’ first Motion to Compel. My admonition was not meant to stay Kopin's hand in the process of producing relevant discovery. I was clear that Kopin was to avoid a document dump, in part, by producing materials that are “comprehensive and organized,” and by providing its algorithms and “methods of acquisition of [ ] electronic information.” 4/6/2018 Hearing Tr. at 15:11-18. Kopin did make a significant production following the April 2018 hearing, but BlueRadios asserts it was neither comprehensive nor organized. Reply to Mot. for Spoliation Sanctions at 25-26.
Though the evidence of Kopin's discovery conduct is unflattering, I am not convinced Kopin has acted in bad faith or intentionally ignored my oral rulings. Had BlueRadios raised these issues in a motion to compel, more light may have been shed on these topics.[13] As it stands, Kopin is being provided another opportunity to produce the full range of documents necessary for a proper resolution of BlueRadios’ remaining claims. If Kopin does not alter its unreasonable position or if it fails to comply with the present order, I will not hesitate to impose sanctions at a later time. Accordingly, I grant BlueRadios’ Motion for Sanctions Against Kopin to the extent it seeks to compel discovery and otherwise deny it without prejudice. BlueRadios’ Motion for Spoliation Sanctions is denied without prejudice.
V. CONCLUSION
Based on my findings and conclusions above, it is hereby ORDERED:
1. Kopin's Motion for Summary Judgement (ECF No. 232) is:
a. DENIED as to Claims 1, 4, and 5;
b. GRANTED IN PART as to Claim 2; the claim for punitive damages under Claim 2 is DISMISSED but the motion is DENIED as to the remainder of the claim;
*20 c. GRANTED as to claims 3, 6, and 7; and
d. GRANTED IN PART as to Claim 8, inasmuch as it seeks correction of inventorship of patent applications.
2. BlueRadios’ Motion for Sanctions for Spoliation of Evidence (ECF No. 238) is DENIED WITHOUT PREJUDICE.
3. BlueRadios’ Motion for Sanctions Against Kopin (ECF No. 362) is GRANTED IN PART and otherwise DENIED WITHOUT PREJUDICE, as identified above.
4. Kopin is ORDERED to produce additional discovery in accordance with the terms of this Order and by the deadlines listed therein.
This Order has been issued as Restricted Level 1, but a public Order will be issued. The parties are DIRECTED to confer and submit a version of the Order containing any redactions they agree are necessary on or before August 17, 2022.
DATED this 3rd day of August, 2022.
Footnotes
Available at https://www.washingtonpost.com/lifestyle/magazine/when-apple-introduced-the-iphone/2017/06/20/7f2e968a-3cde-11e7-9e48-c4f199710b69_story.html.
“Provisional” patent applications are not examined, and the inventions contained therein are generally not publicly available. 35 U.S.C. §§ 102, 111(b). Provisional applications remain live for one year and must then be followed by a “non-provisional” patent application if the filer is to retain the benefit of the initial filing date. Only the claims of a non-provisional application are subject to examination.
RealWear, Inc. was originally known as WearNext, Inc.
In my order disqualifying HBSR, I limited use of any factual findings to the motion to disqualify counsel. See Joint Mot. to Correct Inventorship at 2, ECF No. 124. I later expanded my determination of conflict outside the scope of that motion. See Order Granting in Part Mot. Challenging Privilege Logs at 7 (“[By] preparing, filing, and perfecting the parties’ jointly held rights in patent applications .... HBSR was acting as attorney for both parties.”), ECF No. 379.
Although “an invention presumptively belongs to its creator,” patent inventorship is not synonymous with patent ownership. Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1465 (Fed. Cir. 1998). To prove inventorship, BlueRadios must prove one of its inventors contributed to the conception of an invention as described in at least one claim in the patent application. Id. at 1460 (“[O]ne does not qualify as a joint inventor by merely assisting the actual inventor after conception of the claimed invention.”). A determination regarding the extent of BlueRadios’ Golden-i patent inventorship and/or ownership is not necessary for resolution of the motions before me, so I leave it for another day.
In making this argument, Kopin cites the report of BlueRadios’ patent law expert as support. Reply to Mot. for Partial Summ. J. at 20 n.14. BlueRadios’ expert says no such thing. See Rader Dep. at 175:3-11, ECF No. 269-2 (“[I]f [Kopin was] going to abandon or change course” after making “the initial decision to pursue a patent on technology related to the contracts,” Kopin “certainly had an obligation to inform [BlueRadios].”); Surreply to Mot. for Partial Summ. J. at 10, ECF No. 341 (“Kopin was not free to fail to responsibly pursue patent protection .... Rather, it had a duty to undertake the necessary steps ‘for the benefit of itself and BlueRadios.’ ” (emphasis added) (quoting Rader Report ¶ 139)).
The DTSA also requires trade secrets to “relate[ ] to a product or service used in, or intended for use in, interstate or foreign commerce.” 18 U.S.C. § 1836(b)(1). There is no question that Golden-i products were intended for interstate commerce.
Kopin's statute of limitations argument is listed as a third ground for dismissal of both claims. As I have addressed it previously and found it meritless, I do not address it again here.
Kopin makes a similar argument regarding the CUTSA's three-year statute of limitations period. Reply to Mot. for Partial Summ. J. at 35 (citing Colo. Rev. Stat. § 7-74-107). The same factual disputes relevant to the DTSA analysis preclude me from finding that BlueRadios’ CUTSA claim is foreclosed due to the publication of BlueRadios’ trade secrets in patent applications and issued patents.
It is not uncommon to predicate an unjust enrichment claim on a breach of fiduciary duty while asserting a separate claim for breach of fiduciary duty on the same facts. Because I find no fiduciary duty, I consider both claims simultaneously. See Grynberg, 538 F.3d at 1351-52.
Kopin's Chief Technology Officer, Dr. Hong Choi, describes the scope of the litigation hold more expansively as, inter alia, “[a]nything to do with Bluetooth” and “[e]arly versions of Golden-i [and] those that followed the BlueRadios collaboration,” Choi Decl. ¶ 3, ECF No. 251, but Kopin has not provided any documentation that the litigation hold was communicated to Kopin employees as Dr. Choi remembers it, see Reply to Mot. for Spoliation Sanctions at 7-8.
BlueRadios makes much of Kopin's obligation to implement a litigation hold in March 2010, after Mr. Kramer sent a letter regarding Kopin's acceptance of the Gen 2.0 PBCs and the initiation of royalty payments. 3/26/2010 Kramer Letter. Kopin counters that BlueRadios’ letter was not an objectively reasonable threat of litigation. I tend to agree, but I do not go so far as to resolve this dispute as a resolution would be futile. Even if Kopin was on notice of imminent litigation in March 2010 as BlueRadios posits, any litigation hold would have terminated long before BlueRadios filed suit. See Colo. Rev. Stat. § 13-80-101 (three-year statute of limitations for BlueRadios’ common law and equitable claims); Colo. Rev. Stat. § 7-74-197 (three-year statute of limitations under CUTSA).
Kopin makes repeated assertions that BlueRadios’ discovery requests and motions for sanctions are untimely. See, e.g., 2/22/2019 Dalton Email, ECF No. 252-9; 7/31/2020 Dalton Email at 4, 361-10; Resp. to Mot. for Sanctions Against Kopin at 1-4, ECF No. 364. On the record before me, I conclude Kopin has improperly withheld discovery materials based on its independent determination that such materials are irrelevant and, by doing so, it has unilaterally limited the scope of this case. Kopin has kept in the shadows information that is highly relevant to BlueRadios’ claims, thereby preventing BlueRadios from making its discovery requests in a timely or logical manner. See Fed. R. Civ. P. 26(b)(1). Even if Kopin was not intentionally concealing information, I still find good cause for BlueRadios’ delays in its requests for production. See Reply to Mot. for Spoliation Sanctions at 25, ECF No. 274.