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LORAL FAIRCHILD CORP. v. MATSUSHITA ELEC. INDUS. C

January 7, 1994

LORAL FAIRCHILD CORP., Plaintiff,
v.
MATSUSHITA ELECTRIC INDUSTRIAL COMPANY, LTD., et al., Defendants. LORAL FAIRCHILD CORP., Plaintiff, v. VICTOR COMPANY OF JAPAN, LTD., et al., Defendants.



The opinion of the court was delivered by: STERLING JOHNSON, JR.

 INTRODUCTION

 BACKGROUND

 This case involves thirty-eight defendants -- thirty-six for infringement of two patents *fn2" (the "infringing defendants") while two, NSC and FSC, are involved in an ownership dispute over the two patents at issue (the "ownership defendants"). Extensive discovery has been conducted and the parties have already filed over thirty motions for summary judgment on a variety of issues. These motions have been stayed pending the resolution of this motion regarding supplemental jurisdiction.

 This litigation centers around two patents, U.S. Patent No. 3, 931, 674 ("'674 patent") and U.S. Patent No. 3, 896, 485 ("'485 patent"), which relate to charge-coupled devices ("CCDs"). CCDs are a type of semiconductor chip used in the light-sensing components of videocameras, facsimile machines, and various other devices.

 The '674 patent is entitled "Self-Aligned CCD Element Including Two Levels of Electrodes and Method of Manufacture Therefor" which relates to the fabrication process of a self-aligned, two-phase, two-poly, charge-coupled device structure. Dr. Gilbert F. Amelio was the inventor of this process and applied for a patent on February 7, 1974 at which time he also assigned his entire right, title and interest to the patent to his then-employer, Fairchild Camera and Instrument Corporation ("FCIC"). The patent was issued on January 13, 1976 to FCIC and has remained in FCIC's name throughout its validity. *fn3"

 The '485 patent is entitled "Charge-Coupled Device with Overflow Protection" which relates to "anti-blooming" and exposure control structures and methods in charge-coupled devices. Dr. James M. Early invented this device and applied for a patent on November 30, 1973 at which time he assigned his entire right, title and interest to his then-employer, FCIC. The patent was issued on July 22, 1975 to FCIC and has remained in FCIC's name throughout its validity. *fn4"

 On October 22, 1985, FCIC changed its name to Fairchild Semiconductor Corporation (FSC) which was duly filed with the Secretary of State of Delaware, the state of FCIC's incorporation. At that time, FSC was a division of Schlumberger Technology Corporation which was in turn a subsidiary of Schlumberger, Ltd. (collectively, "Schlumberger"). In 1987, Schlumberger entered into negotiations with NSC to forge an agreement under which NSC would purchase all of the issued and outstanding stock of FSC.

 This agreement, dated August 31, 1987 (the "Stock Purchase Agreement") had a closing date of October 8, 1987 and purported to transfer all of FSC's assets other than the "Merchant Semiconductor Business" out of FSC. Included within the closing documents were a series of agreements that concerned various pieces of intellectual property. It is these agreements that are the subject of the ownership dispute between Plaintiff Loral and Defendants NSC and FSC.

 Loral alleges that in an agreement dated August 21, 1987 (the "August 21 agreement"), FSC assigned all right, title, and interest to certain defined CCD Technical Rights to Fairchild Weston ("Weston"), a division of Schlumberger. This agreement allegedly included the '674 and '485 patents listed on Schedule A to the August 21 agreement. FSC alleges that the copy of the agreement which it signed did not contain Schedule A; thus, it is their contention that the assignment of the two patents did not occur and that only a non-exclusive license was transferred. Thus, NSC acquired ownership of the patents through the merger.

 Loral contends that a draft of the August 21 agreement including Schedule A was circulated to FSC on August 7, 1987 and was signed on September 3, 1987 by FSC and by Weston on the 24th. Loral further alleges that the August 21 agreement contemplated an assignment agreement which was duly executed by FSC and Weston on September 14, 1987 (the "September 14 agreement") and that it included Schedule A. Thus, Loral contends that the assignment was valid and that FSC and NSC knew about Schedule A and its relation to the assignment.

 In contrast, FSC argues that the officer signing the September 14 agreement was without authority to do so and that the agreement lacked proper consideration. *fn5" NSC posits that FSC did not have the right to transfer ownership at that time nor did the officer have authority and that Loral knew this. NSC contends that Loral only succeeded to Weston's interest as a licensee. Indeed, according to NSC and FSC, the fact that no transfer of ownership was reflected at the patent office is evidence that Loral knew that it had not acquired full ownership of the patents. *fn6"

 NSC and FSC have further argued that an assignment of the patents from FSC to Schlumberger on October 7, 1987 (the "October 7 agreement") was invalid because the purported officers of FSC were acting at the direction of Schlumberger and were under Schlumberger's control when they signed the September 14 and October 7 agreements. This is the basis of the lawsuit in California where plaintiffs NSC and FSC claim that defendant Schlumberger fraudulently signed the agreement with NSC transferring ownership of FSC's assets while simultaneously secretly transferring ownership from FSC to Schlumberger entities.

 Loral, relying on the validity of the August 21 agreement, claims that it obtained ownership of the patents when Weston, on June 27, 1989, allegedly assigned the patents to Loral Computer Systems Corporation which changed its name to Loral Fairchild Corporation in July of the same year. It is this entity, Loral, which now seeks a declaratory judgment that it owns the two patents and seeks damages from the infringing defendants for alleged patent infringement.

 Loral, believing that it owned the '674 and '485 patents, initiated this suit on September 12, 1991 against twenty-eight defendants and subsequently added ten other defendants. The suit was first brought in the Eastern District of Virginia and was subsequently removed to this court. Discovery was undertaken and in early 1992, some of the infringing defendants asserted that they were licensed to use the technology of the patents at issue. *fn7" Consequently, discovery was begun on that issue and NSC was subpoenaed to produce any documents pertaining to the licensing of the two patents. At that time, NSC stated that it was extremely reluctant to undertake a search of its records for any documents that might shed light on the matter because it had over 70,000 boxes of records and it did not own the patents in question. These declarations were made by NSC officials and counsel in affidavits filed with California District Court Magistrate Judge Hamilton. In a June 30, 1992 Order, Magistrate Judge Hamilton stated that Loral owned the patents; nevertheless, she directed NSC to ...


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