Cadence Design Systems, Inc. v. Bhandari

In the 1990s, LSI Logic, Inc. (LSI) was primarily engaged in the design, development, manufacture, and marketing of application-specific integrated circuits (ASICs). To create, improve, test, and simulate the circuits, LSI relied on electronic design-automation (EDA) tools. LSI patented its proprietary EDA tools and described itself as an “EDA company” as well as a developer of ASICs. Throughout the 1990s, Daniel Watkins was employed by LSI. As a condition of employment, Watkins signed an agreement (the invention agreement) under which he assigned and transferred to LSI any inventions he made or conceived during his employment that related to the company’s business. The language of the invention agreement followed and referenced California Labor Code § 2870 (the assignment-restriction statute). Watkins developed EDA tools and other inventions for LSI. In 1993, a group including Watkins and Narpat Bhandari (defendant) formed a separate organization (Vasona) to develop an EDA verification tool that would simulate integrated circuits. Vasona planned to target LSI as a customer. Watkins used some LSI resources as part of his and Bhandari’s development of the EDA system, and an external patent attorney believed that LSI could claim ownership of the invention. Nevertheless, Vasona filed a patent application, and in 1997, a patent was issued on the EDA system (the ’900 patent). LSI eventually found out about the patent and claimed ownership. Bhandari, on Vasona’s behalf, transferred the ’900 patent to his company, Vanguard Systems, Inc. (Vanguard) (defendant). Thereafter, Vanguard asserted that a group of entities including Cadence Design Systems, Inc. (collectively, Cadence) (plaintiffs) was infringing the ’900 patent. Cadence initiated a declaratory-judgment action against Vanguard and Bhandari and moved for summary judgment, arguing that LSI was the actual owner of the ’900 patent and that Bhandari and Vanguard lacked standing to sue for patent infringement. The ownership issue depended on whether the invention related to LSI’s business and was therefore assigned by Watkins to LSI under the invention agreement.