Memorylink Corp. v. Motorola Solutions, Inc. , 773 F.3d 1266 ( 2014 )

United States Court of Appeals
for the Federal Circuit
______________________
MEMORYLINK CORP.,
a Wisconsin Corporation,
Plaintiff-Appellant,
v.
MOTOROLA SOLUTIONS, INC. AND
MOTOROLA MOBILITY, INC.,
Defendants-Appellees.
______________________
2014-1186
______________________
Appeal from the United States District Court for the
Northern District of Illinois in No. 1:08-cv-03301, Judge
John J. Tharp, Jr.
______________________
Decided: December 5, 2014
______________________
MATTHEW J. CAVANAGH, McDonald Hopkins LLC, of
Cleveland, Ohio, argued for plaintiff-appellant. With him
on the brief were DAVID B. CUPAR; and RICHARD N.
KESSLER and PETER T. BERK, of Chicago, Illinois.
CHRISTOPHER LANDAU, Kirkland & Ellis LLP, of
Washington, DC, argued for defendants-appellees. Of
counsel on the brief were ANNE M. SIDRYS, NYIKA O.
STRICKLAND, and JOEL R. MERKIN, of Chicago, Illinois. Of
counsel was JOHN C. O’QUINN, of Washington, DC.
2 MEMORYLINK CORP. v. MOTOROLA SOLUTIONS, INC.
______________________
Before LOURIE, MOORE, and O’MALLEY, Circuit Judges.
LOURIE, Circuit Judge.
Memorylink Corp. (“Memorylink”) appeals from the
decisions of the United States District Court for the
Northern District of Illinois (i) granting summary judg-
ment in favor of Motorola Solutions, Inc. and Motorola
Mobility, Inc. (collectively, “Motorola”) on the contract and
patent infringement claims, Memorylink Corp. v. Moto-
rola, Inc., No. 08 C 3301, 2013 WL 4401676 (N.D. Ill. Aug.
15, 2013) (“Summary Judgment Opinion”), and (ii) dis-
missing various tort claims as barred by the statute of
limitations, Memorylink Corp. v. Motorola, Inc., No. 08 C
3301, 2009 WL 464338 (N.D. Ill. Feb. 23, 2009) (“Dismis-
sal Opinion”). Because we conclude that the district court
did not err in granting summary judgment or in dismiss-
ing the tort claims, we affirm.
BACKGROUND
In late 1997, Peter Strandwitz (“Strandwitz”) and Bob
Kniskern (“Kniskern”) approached Motorola, seeking to
jointly develop a handheld camera device that could
wirelessly transmit and receive video signals. By early
1998, they had constructed prototypes with wireless radio
boards and technical information from Motorola, and
Strandwitz had formed Memorylink as a funding entity
specifically for that venture.
After the first successful demonstration at Motorola’s
offices in January 1998, Strandwitz sent a letter to
Motorola in which he “agree[d] that any patents would be
jointly owned by Motorola and Memorylink” and that
Motorola should “head up the patent investigation.” J.A.
4586. Strandwitz then sent Motorola a technical docu-
ment that Kniskern drafted, entitled “Wireless Multime-
dia Core Technology Overview for Patent Review”
(“Technology Overview”). After reviewing that document,
MEMORYLINK CORP. v. MOTOROLA SOLUTIONS, INC. 3
Motorola’s attorney Hugh Dunlop sent a letter to Strand-
witz in April 1998 (the “Dunlop Letter”). J.A. 250–54.
The Dunlop Letter described the features to be focused on
for patent applications and stated the attorney’s under-
standing that the inventors were Strandwitz, Kniskern,
and two of Motorola’s employees: Gary Schulz (“Schulz”)
and Jan-Michel Wyckoff (“Wyckoff”). The letter explicitly
asked for Strandwitz and Kniskern to “let [the attorney]
know if [they] disagree[d] with this determination of
inventorship.” J.A. 250. A proposed patent filing agree-
ment was enclosed, which “contemplate[d] taking ad-
vantage of [Motorola’s patent] department for preparation
and filing of patent applications,” although “Motorola
[was] open to alternative proposals” if Strandwitz and
Kniskern preferred otherwise. J.A. 251. Attached to the
proposed agreement was a copy of the Technology Over-
view, with what the Dunlop Letter explained were dele-
tions relating to areas in which Motorola was previously
involved and thus in which it could not enter into agree-
ments that might result in joint ownership of intellectual
property. Shortly thereafter, Strandwitz, Kniskern,
Schulz, and Wyckoff all signed an invention disclosure.
In June 1998, all four designated inventors signed the
Assignment and Agreement (“Assignment”), transferring
their rights to both Motorola and Memorylink. J.A. 258–
65. The Assignment begins with the statement, “[f]or and
in consideration of the sum of One Dollar to us in hand
paid, and other good and valuable consideration, the
receipt of which is hereby acknowledged . . . .” J.A. 258.
The designated inventors also signed an inventor declara-
tion for the patent application, which Motorola filed once
the Assignment was executed. U.S. Patent 6,522,352
(“the ’352 patent”), which lists Strandwitz, Kniskern,
Schulz, and Wyckoff as inventors, issued in February
2003.
In December 1998, before the ’352 patent issued,
Memorylink retained counsel at an intellectual property
4 MEMORYLINK CORP. v. MOTOROLA SOLUTIONS, INC.
law firm to “review the Memory Link/Motorola relation-
ship” and “assess the existing Memory Link agreements.”
J.A. 4241–42; see also J.A. 4244. The same law firm
subsequently filed a divisional patent application in
January 2003, which listed the same four inventors.
However, when Memorylink conducted an external inves-
tigation in November 2007, it was advised by an unaffili-
ated attorney that Schulz and Wyckoff were not proper co-
inventors.
Memorylink then filed suit against Motorola in June
2008, alleging patent infringement and various torts
mostly sounding in fraud, and seeking a declaration that
the Assignment was void for lack of consideration. In
response, Motorola moved to dismiss the entire Com-
plaint, arguing that, inter alia, the tort claims were
barred by the five-year statute of limitations. The district
court rejected Memorylink’s argument that its claims did
not accrue until the inventorship problem was discovered
and dismissed most of the claims. Dismissal Opinion at
*4–8. The court reasoned that because Memorylink
insisted that Motorola’s employees contributed nothing to
the idea, Memorylink should have known that they were
not co-inventors when the Assignment was signed in
1998. Id. at *5. Because Memorylink was aware of all of
the underlying facts in 1998, its claims were thus untime-
ly. Id. at *4. However, the district court revived some
claims upon reconsideration a few months later. Memory-
link Corp. v. Motorola, Inc., 2009 WL 3366974, at *5–6
(N.D. Ill. Oct. 15, 2009). In particular, the court chose to
revive the claim of lack of consideration for the Assign-
ment as a contract claim and therefore not time-barred,
despite being originally pleaded as a fraud claim. Id. at
*5.
Motorola later moved for summary judgment on the
remaining claims, asserting that there was consideration
to support the Assignment and it therefore could not be
liable for infringement as a co-owner of the patent. The
MEMORYLINK CORP. v. MOTOROLA SOLUTIONS, INC. 5
district court found that the Assignment unambiguously
stated that one dollar, as well as other good and valuable
consideration, was received as consideration. Summary
Judgment Opinion, 2013 WL 4401676, at *5. Because
Memorylink eschewed reliance on parol evidence, the
court rejected the arguments on the inadequacy of the
consideration. Id. The court also found that Schulz and
Wyckoff transferred their ownership interests in the
patent, which is what Memorylink argued was the in-
tended consideration. Id. at *6–7. And, if parol evidence
were considered, the court found that Memorylink intend-
ed for patent prosecution representation, which was
indisputably provided, to be part of the bargain. Id. at *7.
The court therefore concluded that there was no genuine
issue of material fact, and granted summary judgment in
Motorola’s favor on the contract claim. Id. Because the
Assignment was valid, Motorola was a joint owner of the
’352 patent and therefore could not be liable for infringe-
ment. Thus, the court also granted summary judgment of
noninfringement to Motorola. Id. The court then entered
final judgment under Federal Rule of Civil Procedure
54(b) for the claims now on appeal.
Memorylink timely appealed. We have jurisdiction
pursuant to 28 U.S.C. § 1295(a)(1).
DISCUSSION
We review the district court’s grant of summary
judgment under the law of the regional circuit, here the
Seventh Circuit. Lexion Med., LLC v. Northgate Techs.,
Inc., 641 F.3d 1352, 1358 (Fed. Cir. 2011). Applying the
law of the Seventh Circuit, we review the grant of sum-
mary judgment de novo. Chaklos v. Stevens, 560 F.3d
705, 710 (7th Cir. 2009). Summary judgment is appropri-
ate when, drawing all justifiable inferences in the non-
movant’s favor, Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 255 (1986), “there is no genuine dispute as to any
6 MEMORYLINK CORP. v. MOTOROLA SOLUTIONS, INC.
material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a).
We also review the district court’s dismissal of claims
under Rule 12(b)(6) under the law of the regional circuit.
CoreBrace LLC v. Star Seismic LLC, 566 F.3d 1069, 1072
(Fed. Cir. 2009). Applying the law of the Seventh Circuit,
we review the dismissal on a statute of limitations de-
fense de novo, Perry v. Sullivan, 207 F.3d 379, 382 (7th
Cir. 2000), accepting all well-pleaded allegations in the
complaint as true and drawing all reasonable inferences
in favor of the plaintiff, Killingsworth v. HSBC Bank
Nevada, N.A., 507 F.3d 614, 618 (7th Cir. 2007).
A.
We first address the district court’s grant of summary
judgment in favor of Motorola on the issue of considera-
tion for the Assignment. The district court applied Illi-
nois substantive law to interpret the assignment,
Summary Judgment Opinion, 2013 WL 4401676, at *5
n.7, and the parties have not disputed that application on
appeal. Illinois courts follow the “four corners” rule when
interpreting contracts, which requires that “an agree-
ment, when reduced to writing, must be presumed to
speak the intention of the parties who signed it. . . . It is
not to be changed by extrinsic evidence.” Urban Sites of
Chicago, LLC v. Crown Castle USA, 979 N.E.2d 480, 490
(Ill. App. Ct. 2012) (quotation marks omitted). Considera-
tion is a basic requirement of a contract, Melena v. An-
heuser-Busch, Inc., 847 N.E.2d 99, 109 (Ill. 2006), but
nominal consideration will suffice to support a contract,
Davis v. Wells, 104 U.S. 159, 168 (1881). Courts “will not
inquire into the adequacy of the consideration.” Carter v.
SSC Odin Operating Co., 976 N.E.2d 344, 352 (Ill. 2012);
see also Gavery v. McMahon & Elliott, 670 N.E.2d 822,
827 (Ill. App. Ct. 1996) (“A court’s inquiry into whether a
contract is supported by consideration does not extend to
examining the adequacy of the consideration. It is not a
MEMORYLINK CORP. v. MOTOROLA SOLUTIONS, INC. 7
court’s function to review the amount of consideration
unless the amount is so grossly inadequate as to shock the
conscience.”) (citation omitted).
Memorylink argues that the Assignment lacked con-
sideration and therefore is not a valid contract. Although
the document on its face lists consideration, Memorylink
asserts that this language is mere boilerplate, evidencing
a hollow shell only to be recorded in the U.S. Patent and
Trademark Office. Memorylink claims that, instead, the
underlying agreement was the mutual exchange of own-
ership interests from the inventors to Memorylink and
Motorola. But because the Motorola employees were not
proper co-inventors and therefore had no ownership
interests to assign, Memorylink asserts, Strandwitz and
Kniskern received no consideration. Memorylink further
argues that the contract is invalid because Strandwitz
and Kniskern only entered into the contract in reliance on
their mistaken beliefs as to antecedent rights; that is, the
beliefs that Schulz and Wyckoff were inventors because of
Motorola’s representations, that they were receiving
ownership interests in exchange, and that they had to
share ownership of any resulting patents.
Motorola responds that there is no genuine issue of
material fact because consideration is explicit on the face
of the agreement. Even if the consideration were actually
the exchange of ownership interests, Motorola contends
that Memorylink received what it bargained for: Schulz
and Wyckoff’s agreement to assign their patent rights
jointly to Memorylink and Motorola. Moreover, Motorola
notes, Memorylink received substantial “other” considera-
tion in the form of patent prosecution representation,
technical and engineering support, and business opportu-
nities.
We agree with Motorola that there is no genuine issue
of material fact that consideration existed, because the
Assignment explicitly acknowledges consideration for the
8 MEMORYLINK CORP. v. MOTOROLA SOLUTIONS, INC.
sale, assignment, and transfer of rights relating to the
wireless video technology. If extrinsic evidence is not
considered to determine the intended consideration, as
Memorylink urges, then the “four corners” of the agree-
ment quite clearly contain recitals of consideration. The
use of boilerplate language does not make the stated
consideration invalid or nonexistent. Alternatively, if
extrinsic evidence is considered, then the district court
held that other intended consideration could be found
from various exchanges between Motorola and Memory-
link. Summary Judgment Opinion at *7.
Furthermore, consideration was actually exchanged.
Even drawing the inference in Memorylink’s favor that
the exchange of ownership interests was the only intend-
ed consideration contained within the four corners of the
document, we find no genuine dispute of material fact.
Schulz and Wyckoff did in fact transfer whatever owner-
ship rights they possessed to Memorylink and Motorola
by executing the Assignment. Whether they are later
determined to have been erroneously included as co-
inventors, and thus those rights are eventually decided to
be nonexistent, does not create a genuine issue of materi-
al fact on the consideration issue. Although Memorylink
argues that the Assignment is not analogous to a quit-
claim deed because the latter involves a buyer who under-
stands that the interests conveyed are uncertain and may
turn out to be valueless, that distinction is unavailing. A
party assigning patent rights before a patent application
is filed or during patent prosecution cannot guarantee
that a patent will issue or, even once issued, that the
patent will not be later invalidated.
Memorylink’s arguments about mistake and unfair-
ness are also unconvincing. Summary judgment was
reversed in Harbaugh v. Hausman, 569 N.E.2d 523, 528–
29 (Ill. App. Ct. 1991), because the defendants were
claiming a mutual mistake of law by the parties in enter-
ing the contract, not a lack of consideration. However,
MEMORYLINK CORP. v. MOTOROLA SOLUTIONS, INC. 9
Memorylink did not attempt to pursue its claim under a
theory of mutual mistake; instead, it chose to allege that
Motorola knew the inventorship determination was
wrong. The only reasonable inference from the facts
alleged, in the light most favorable to Memorylink, would
be that Motorola was not mistaken as to inventorship,
which precludes any basis for finding a mutual mistake.
Moreover, we do not find the consideration to be so insuf-
ficient as to shock the conscience of the court; we thus
decline to examine the adequacy of the consideration.
Gavery, 670 N.E.2d at 827.
We therefore conclude that Memorylink raised no
genuine issue of material fact and that the district court
did not err in granting summary judgment in favor of
Motorola on the issue of whether there was consideration
supporting the patent assignment.
B.
We next consider the district court’s dismissal of the
tort claims. The statute of limitations for fraud-based
claims in Illinois bars claims five years after accrual. 735
Ill. Comp. Stat. 5/13-205; Horbach v. Kaczmarek, 288 F.3d
969, 977 (7th Cir. 2002). The discovery rule delays the
start of the clock until “the plaintiff knew or should have
known” of the injury, Horbach, 288 F.3d at 973, but the
normal five-year period applies where the purported fraud
is “readily apparent to the naked, non-expert eye,” id. at
977. An attorney’s failure to flag a potential claim or
provision of erroneous advice does not toll the statute of
limitations. Weger v. Shell Oil Co., 966 F.2d 216, 219 (7th
Cir. 1992) (applying Illinois law); accord Witherell v.
Weimer, 421 N.E.2d 869, 875 (Ill. 1981) (quoting United
States v. Kubrick, 444 U.S. 111, 124 (1979)).
Memorylink argues that mere knowledge of the facts
underlying a claim is insufficient to start the statute of
limitations clock; rather, the claim should not accrue until
those facts lead to the conclusion that a legal claim exists.
10 MEMORYLINK CORP. v. MOTOROLA SOLUTIONS, INC.
Because of the fiduciary duty owed to it by Motorola’s
attorney, Memorylink maintains that it had no reason to
question the improper inventorship determination and
thus could not have concluded that any of the tort claims
existed before its external investigation in 2007.
Motorola responds that Memorylink knew all the rel-
evant facts that serve as the basis for its claims—who was
listed as an inventor and who contributed what—well
before the statute of limitations had run. Moreover,
Motorola contends, the allegations relating to the attor-
ney–client relationship or faulty legal advice have no
bearing on when the tort claims accrued, which is condi-
tioned upon knowledge of the factual basis for a claim.
Motorola also argues that Memorylink knew or should
have known of its tort claims when Memorylink retained
its own patent counsel in 1998, or when that same counsel
filed the divisional application in January 2003.
We agree with Motorola that the district court proper-
ly dismissed the tort claims because Memorylink knew all
the facts necessary to assert its claims, and therefore its
causes of action accrued, more than five years before it
filed suit. Memorylink alleged that as of April 1998,
although “neither Schulz nor Wyckoff had contributed or
done anything towards the conception of the Invention,”
J.A. 156–57, Motorola had asserted that all four people
were co-inventors. The Dunlop Letter provided a prime
opportunity for Strandwitz and Kniskern to question that
inventorship determination, yet they failed to do so.
Memorylink had additional occasions in 1998 at which to
inquire about or challenge the issue of inventorship,
including the signing of the invention disclosure, the
Assignment, and the inventor declaration for the patent
application. Even accepting the Complaint’s allegations
as true, we agree with the district court that Memorylink
reasonably should have concluded that a legal claim
existed based on Schulz and Wyckoff having contributed
nothing to the conception of the invention yet being
MEMORYLINK CORP. v. MOTOROLA SOLUTIONS, INC. 11
included as co-inventors on various documents relating to
the invention. Memorylink did not later learn of any new
and significant facts underlying the tort claims to warrant
tolling the statute of limitations.
Memorylink’s arguments about the timing of and the
fiduciary duties owed from the attorney–client relation-
ship are also unpersuasive. The accrual of any claim was
not delayed by the alleged false statements and omissions
regarding the in-house attorney’s inventorship determina-
tion. J.A. 157–60; Witherell, 421 N.E.2d at 875. Even if,
as alleged in the Complaint, Motorola’s attorney had not
explained inventorship, assignment, or joint ownership,
Strandwitz and Kniskern were aware of that when they
signed the Assignment. Moreover, Memorylink obtained
independent legal counsel soon thereafter, and thus
reasonably should have discovered any legal claims it had
well before the statute of limitations period had run.
Instead, it failed to challenge the inventorship determina-
tion until June 2008. The district court therefore did not
err in dismissing the various tort claims as untimely.
C.
As for the patent infringement claim, we find no genu-
ine issue of material fact because there was a valid as-
signment, and thus no error of law in granting summary
judgment. Because we have affirmed the district court’s
summary judgment in favor of Motorola on the considera-
tion issue, we accordingly affirm the summary judgment
of noninfringement.
CONCLUSION
We have considered the remaining arguments and
conclude that they are without merit. For the foregoing
reasons, the district court’s grant of summary judgment
and dismissal of the tort claims are affirmed.
AFFIRMED