Nexus Technologies, Inc. v. Unlimited Power Ltd.

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF NORTH CAROLINA

ASHEVILLE DIVISION

CIVIL CASE NO. 1:19-cv-00009-MR

NEXUS TECHNOLOGIES, INC., )

DANIEL CONTI and BENJAMIN )

BOMER, )

)

Plaintiffs, )

)

vs. ) MEMORANDUM OF

) DECISION AND ORDER

UNLIMITED POWER LTD. and )

CHRISTOPHER J. PETRELLA, )

)

)

Defendants. )

_______________________________ )

THIS MATTER is before the Court on Defendants Unlimited Power Ltd.

and Christopher J. Petrella’s Motion to Dismiss Plaintiff’s Complaint [Doc.

11].

I. BACKGROUND

On January 9, 2019, the Plaintiffs Nexus Technologies, Inc. (“Nexus”),

Daniel Conti (“Conti”), and Benjamin Bomer (“Bomer”) (collectively

“Plaintiffs”) filed this civil action against the Defendants Unlimited Power

LTD. (“Unlimited Power”) and Christopher J. Petrella (“Petrella”) (collectively

“Defendants”) to correct inventorship of U.S. Patent Nos. 9,865,903 (“the

‘903 Patent”), 10,084,213 (“the ‘213 Patent”), D807,806 (“the ‘806 Patent”)

and D815,030 (“the ‘030 Patent”) (collectively “the Patents”) under the patent

laws of the United States. Specifically, the Plaintiffs claim under 35 U.S.C.

§ 256 that Plaintiff Conti should be added as an inventor or co-inventor of

the ‘903 and ‘213 Patents (Counts I and II); Plaintiff Bomer should be added

as an inventor or co-inventor of the ‘816 and ‘030 Patents (Counts III and

IV); and Defendant Petrella should be removed as an inventor of the Patents

(Counts I-IV). The Plaintiffs also allege that the Defendants are liable for

conversion (Count VI), violations of the North Carolina Unfair and Deceptive

Trade Practices Act, N.C.G.S. § 75-1.1 et seq., for utilizing unfair methods

of competition and unfair and deceptive trade practices (Count V), and unjust

enrichment (Count VII).

The Defendants now seek the dismissal of this action pursuant to Rule

12(b)(6) of the Federal Rules of Civil Procedure, arguing that the Plaintiffs’

Complaint fails to state claims upon which relief can be granted. [Doc. 11].

The Plaintiffs have filed an opposition to the Defendants’ motion [Doc. 12],

to which the Defendants have replied [Doc. 13].

Having been fully briefed, this matter is ripe for disposition.

II. STANDARD OF REVIEW

To survive a motion to dismiss pursuant to Rule 12(b)(6), “a complaint

must contain sufficient factual matter, accepted as true, to ‘state a claim to

relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

To be “plausible on its face,” a plaintiff must demonstrate more than “a sheer

possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678.

In reviewing the complaint, the Court must accept the truthfulness of

all factual allegations but is not required to assume the truth of “bare legal

conclusions.” Aziz v. Alcolac, Inc., 658 F.3d 388, 391 (4th Cir. 2011). “The

mere recital of elements of a cause of action, supported only by conclusory

statements, is not sufficient to survive a motion made pursuant to Rule

12(b)(6).” Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012).

Determining whether a complaint states a plausible claim for relief is

“a context-specific task,” Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir.

2009), which requires the Court to assess whether the factual allegations of

the complaint are sufficient “to raise the right to relief above the speculative

level,” Twombly, 550 U.S. at 555. As the Fourth Circuit has explained:

To satisfy this standard, a plaintiff need not forecast

evidence sufficient to prove the elements of the

claim. However, the complaint must allege sufficient

facts to establish those elements. Thus, while a

plaintiff does not need to demonstrate in a complaint

that the right to relief is probable, the complaint must

advance the plaintiff’s claim across the line from

conceivable to plausible.

Walters, 684 F.3d at 439 (citations and internal quotation marks omitted).

III. FACTUAL BACKGROUND

Taking the well-pleaded factual allegations of the Complaint as true,

the following is a summary of the relevant facts.1

Defendant Petrella is the President, Chairperson of the Board, and

majority owner of Defendant Unlimited Power. [Doc. 1 at ¶ 5]. In January

2013, the Defendants and the Plaintiffs began discussions about designing

and manufacturing a portable renewable energy system. [Id. at ¶ 14].

Defendant Petrella gave Plaintiffs a sample system with numerous flaws that

prevented it from being sold in the United States. [Id. at ¶ 15]. Defendant

Petrella asked the Plaintiffs to design and manufacture a new system without

the flaws that could be sold in the United States. [Id.]. The Plaintiffs and the

Defendants did not enter a contractual relationship, but Plaintiff Conti agreed

to prepare a design for Defendant Petrella’s review. [Id. at ¶ 16].

After the meeting, Plaintiff Conti prepared a design and manufacturing

proposal titled “Portable Renewable Energy Power System (PREPS)

Development Proposal”. [Id. at ¶ 17]. The fifteen-page proposal contained

extensive details regarding the system’s design and operation. [Id. at ¶ 18].

1 In reciting the relevant factual allegations, the Court has disregarded all “bare legal

conclusions” asserted in the Complaint, see Aziz v. Alcolac, Inc., 658 F.3d 388, 391 (4th

Cir. 2011), as well as “[t]he mere recital of elements of a cause of action,” see Walters v.

McMahen, 684 F.3d 435, 439 (4th Cir. 2012).

In a footer, the proposal stated that “Nexus Technologies, Inc. is the

exclusive owner of all copyrights and all other intellectual property rights

contained in this document. This document contains confidential information

and embodies trade secrets developed by Nexus Technologies, Inc. at

substantial cost and expense.” [Id. at ¶ 17]. Plaintiff Conti emailed the

proposal to Mr. Petrella’s agent on March 5, 2013 and the agent forwarded

the proposal to Defendant Petrella. [Id. at ¶ 19]. In 2013 and early 2014,

Defendant Petrella conveyed to Plaintiffs that he was trying to obtain funding

to design and manufacture prototypes of the system. [Id. at ¶ 20].

On February 24, 2014, Defendant Petrella filed Provisional Application

No. 61/966,378 (“the ‘378 Application”) with the United States Patent and

Trademark Office (“PTO”). [Id. at ¶ 21]. The ‘378 Application consisted

entirely of the proposal Nexus sent to Defendant Petrella on March 5, 2013,

although Defendant Petrella changed the date, removed the word “proposal”

from the title, and deleted most of the language associating the proposal with

Nexus.2 [Id. at ¶ 22]. Defendant Petrella filed the ‘378 Application as an

unpublished application, so that members of the public could not see it. [Id.

2 Notably, Defendant Petrella failed to remove a reference to Nexus in Section 1.2 of the

‘378 Application. [Id. at ¶ 22].

at ¶ 23]. Defendant Petrella also did not notify the Plaintiffs about the filing.

[Id.].

A year later, Defendant Petrella filed non-provisional application

14/630,341 (“the ‘341 Application”) on February 24, 2015. [Id.]. Defendant

Petrella also filed the ‘341 Application as an unpublished application. [Id.].

The ‘341 Application derived from the ‘378 Application and led to the ‘903

Patent. [Id.].

Plaintiffs Conti and Nexus continued to correspond with Defendant

Petrella regarding the design during 2015 and 2016. [Id. at ¶ 24]. Plaintiff

Bomer created additional images of a prototype design during that time. [Id.].

Plaintiffs Conti and Nexus sent those images to Defendant Petrella. [Id.].

On September 29, 2016, Defendant Petrella filed patent application

numbers 29/579,328 (“the ‘328 Application”) and 29/579,349 (“the ‘349

Application”) with the PTO. [Id. at ¶ 25]. Defendant Petrella filed the ‘328

and ‘349 Applications as unpublished applications and did not notify the

Plaintiffs about the filings. [Id.]. Those Applications led to the ‘816 and the

‘030 Patents, respectively. [Id.].

On December 1, 2017, Defendant Petrella filed patent application

number 15/829,465 (“the ‘465 Application”) with the PTO. [Id. at ¶ 26].

Again, Defendant Petrella did not notify the Plaintiffs about filing the ‘465

Application. [Id.]. The ‘465 Application is a continuation of the ‘341

Application and led to the ‘213 Patent. [Id.].

On January 9, 2018, the PTO issued the ‘903 Patent. [Id. at ¶ 10]. On

January 16, 2018, the PTO issued the ‘816 Patent. [Id. at ¶ 12]. On April

10, 2018, the PTO issued the ‘030 Patent. [Id. at ¶ 13]. On September 25,

2018, the PTO issued the ‘213 Patent. [Id. at ¶ 11].

Substantial portions of the ‘903 and ‘213 Patents derived from the

proposals and designs the Plaintiffs shared with the Defendants. [Id. at ¶¶

28-30]. The ‘816 and the ‘030 Applications also featured designs derived

from the images Plaintiff Bomer created and Plaintiffs sent to Defendant

Petrella in 2015 and 2016. [Id. at ¶ 25]. All of the Patents list Defendant

Petrella as the sole inventor and Defendant Unlimited Power as the lone

assignee. [Id. at ¶ 10-13]. None of the Patents list Plaintiffs Conti or Bomer

as co-inventors or inventors. [Id.]. During an August 31, 2018

teleconference, Defendant Petrella acknowledged that Plaintiff Bomer was

at least a co-inventor of the ‘816 and ‘030 Patents and did not dispute that

Plaintiff Conti was an inventor of the ‘903 and ‘213 Patents. [Id. at ¶ 31].

IV. DISCUSSION

A. Correction of Inventorship

In Counts I, II, III, and IV of the Complaint, the Plaintiffs assert

alternative claims under 35 U.S.C. § 256. [Id. at ¶ 32-59]. Specifically, the

Plaintiffs request an order directing the Commissioner for Patents to add

Plaintiff Conti as an inventor of the ‘903 and ‘213 Patents; an order directing

the Commissioner for Patents to add Plaintiff Bomer as an inventor of the

‘816 and ‘030 Patents; and an order directing the Commissioner for Patents

to remove Defendant Petrella as an inventor of the Patents. [Id.].

Alternatively, the Plaintiffs request an order adding Plaintiff Conti as a co-

inventor of the ‘903 and ‘213 Patents and an order adding Plaintiff Bomer as

a co-inventor of the ‘816 and ‘030 Patents. [Id.].

The Defendants make three arguments in their Motion to Dismiss.

First, the Defendants argue the Complaint does not state a plausible claim

upon which relief can be granted because it alleges alternative claims for

complete substitution of inventors and co-inventorship. [Doc. 11-1 at ¶ 3].

Second, the Defendants argue that the Plaintiff’s claims should be decided

by the PTO’s Patent Trial and Appeal Board instead of this Court. [Doc. 11-

1 at ¶ 5]. Finally, the Defendants argue that the Plaintiffs' claims fail to state

plausible claims for complete substitution of inventors or co-inventorship.

[Doc. 11-1 at ¶ 8]. The Court addresses each of these arguments in turn.

1. Alternative Claims

Defendants argue that the Complaint does not state a plausible claim

because it alleges alternative claims for complete substitution of inventors

and co-inventorship. [Doc. 11-1 at p. 3]. Plaintiffs rightly note, however, that

parties may plead in the alternative even if the claims are inconsistent. “A

party may set out 2 or more statements of a claim or defense alternatively or

hypothetically, either in a single count or defense or in separate ones.” Fed.

R. Civ. P. 8(d)(2). “If a party makes alternative statements, the pleading is

sufficient if any one of them is sufficient.” Fed. R. Civ. P. 8(d)(2). “A party

may state as many separate claims or defenses as it has, regardless of

consistency.” Fed. R. Civ. P. 8(d)(3). There is no issue with the Plaintiffs

raising alternative claims here since the Federal Rules of Civil Procedure

explicitly allow alternative pleading.

2. Priority of Invention

The Defendants also claim that the Plaintiff’s correction of inventorship

claims should be decided by the PTO’s Patent Trial and Appeal Board

instead of this Court. [Doc. 11-1 at 5]. To support their claim, the Defendants

cite to Rubin v. General Hospital Corp., 523 F. App'x 719, (Fed. Cir. 2013),

an unpublished Federal Circuit Court of Appeals case holding that claims for

priority of invention are not disputes under 35 U.S.C. § 256 and should be

decided under the PTO’s “‘interference’ procedure of § 135.” Id. at 722-23.

The Plaintiffs’ Complaint, however, does not allege a dispute over priority of

invention. [Doc. 1]. The Complaint alleges correction of inventorship. [Id.

at ¶¶ 32-59]. As such, this case is different from a priority contest like in

Rubin where the dispute only involved determining the priority of an invention

because “there was no ‘collaboration’” between the parties. Rubin 523 F.

App'x at 722. This Court is an appropriate venue to decide the correction of

inventorship claims. See 35 U.S.C. § 256 (“The court before which such

matter is called in question may order correction of the patent on notice and

hearing of all parties concerned.”).

3. Plausible Claim for Relief

Finally, the Defendants argue that the Plaintiffs' correction-of-

inventorship claims fail to state a plausible claim for complete substitution of

inventors or co-inventorship. [Doc. 11-1 at 8]. The Defendants allege the

Plaintiffs have failed to plead a claim for complete substitution because they

have failed to demonstrate that the Plaintiff “conceived of the total patented

invention.” [Id. at 4]. Additionally, the Defendants allege the Plaintiffs have

failed to plead a claim for co-inventorship because they have failed to

demonstrate collaboration between the parties. [Id. at 7].

“To invent something, in the lexicon of patent law, is to conceive it.”

Levin v. Septodont Inc., 34 F. App'x 65, 70 (4th Cir. 2002) (citing Burroughs

Wellcome Co. v. Barr Lab., Inc., 40 F.3d 1223, 1227–28 (Fed. Cir. 1994)

(stating that “[c]onception is the touchstone of inventorship”). Section 256

“addresses two types of inventorship errors — misjoinder and nonjoinder.

Misjoinder is the error of naming a person as an inventor who is not an

inventor; nonjoinder is the error of omitting an inventor.” CODA Dev. S.R.O.

v. Goodyear Tire & Rubber Co., 916 F.3d 1350 (Fed. Cir. 2019) (citing Stark

v. Advanced Magnetics, Inc., 119 F.3d 1551, 1553 (Fed. Cir. 1997).

“Through claims of misjoinder and nonjoinder together, § 256 allows

complete substitution of inventors.” Id. (citation and internal quotation marks

omitted).

“A person who alleges that he is a co-inventor of the invention claimed

in an issued patent who was not listed as an inventor on the patent may bring

a cause of action to correct inventorship in a district court under 35 U.S.C. §

256.” Vapor Point LLC v. Moorhead, 832 F.3d 1343, 1348 (Fed. Cir. 2016)

(citing Eli Lilly & Co. v. Aradigm Corp., 376 F.3d 1352, 1357 n.1 (Fed. Cir.

2004)); see also 35 U.S.C. § 116. To prove co-inventorship, the alleged co-

inventor must show “some quantum of collaboration.” Coda, 2019 WL

847582, at *6. In addition, the Federal Circuit requires a co-inventor to:

(1) contribute in some significant manner to the

conception or reduction to practice of the invention,

(2) make a contribution to the claimed invention that

is not insignificant in quality, when that contribution is

measured against the dimension of the full invention,

and (3) do more than merely explain to the real

inventors well-known concepts and/or the current

state of the art.

Levin, at 34 F. App'x 70–71 (citing Pannu v. Iolab Corp., 155 F.3d 1344, 1351

(Fed. Cir. 1998)).

According to the Complaint, Defendant Petrella asked the Plaintiffs to

design the system ultimately detailed in the Patents. [Doc. 1 at ¶ 14]. In

response to that request, the Plaintiffs and the Defendants exchanged

several design proposals over the course of roughly three years. [Id. at ¶¶

14-24]. The Plaintiffs allege that the Patents mostly replicate the designs

Plaintiffs sent, except for a few minor changes intended to conceal the

source of the information. [Id. at ¶¶ 22, 23, 25]. As a result, the Plaintiffs

contend, the Patents reflect Plaintiff’s designs contained in the proposals

Plaintiffs sent to the Defendants. [Id. at ¶¶ 23, 25, 29-30]. The Plaintiffs

further allege that Defendant Petrella acknowledged as much during an

August 31, 2018 teleconference when he admitted that Plaintiffs Conti and

Bomer were at least co-inventors in the Patents. [Id. at ¶ 31].

These allegations are sufficient to state a plausible claim for complete

substitution of inventors or, alternatively, co-inventorship. The allegations

allow the reasonable inference that Plaintiffs Conti and Bomer, not

Defendant Petrella, conceived the invention in the Patents or alternatively

that there was collaboration between the parties showing co-inventorship.

See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (“A claim has facial

plausibility when the plaintiff pleads factual content that allows the court to

draw the reasonable inference that the defendant is liable for the misconduct

alleged.”).3

B. State Law Claims

The Defendants also ask this Court to dismiss the Plaintiffs’ state-law

claims under 28 U.S.C. § 1367(c)(3) for lack of subject-matter jurisdiction.

Because the Defendants’ Motion to Dismiss the patent claims is denied,

Defendants’ request to dismiss the state-law claims is also denied.

3 The Defendants argue that the Plaintiffs have not stated a claim for complete substitution

of inventors because they have failed to plead conception of the “total patented

inventions.” [Doc. 11-1 at p. 5]. Taking the allegations in the light most favorable to the

Plaintiffs and drawing reasonable inferences therefrom, the Plaintiffs have sufficiently

alleged conception of the total patented invention.

ORDER

IT IS, THEREFORE, ORDERED that the Defendants’ Motion to

Dismiss Plaintiff's Complaint [Doc. 11] is DENIED.

IT IS SO ORDERED.

Signed: July 3, 2019

a Reidinger er

United States District Judge aes

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