LED Shareholder Derivative Suit Has an IP Twist

This is something I haven’t seen before: a shareholder derivative action for patent infringement.

BaoLiang Wang (Plaintiff Wang) is a 22 percent shareholder of a small California LED sign maker called Sun LED Sign Supply Inc. (Sun).

Last month, Plaintiff Wang sued Sun, two of its directors, Xiao Ping Wang (Defendant Wang) and Wei Rong Fang, as well as JT LED USA (JT), Sunfire LED LLC (Sunfire) and The LED Inc. in federal court in Los Angeles, alleging patent infringement against all defendants and unfair competition against the two directors of Sun.

The patent at issue is U.S. Patent No. 7,245,279 (’279 patent), for which Defendant Wang is the named inventor.

The ‘279 patent is directed to an easily extendable waterproof LED display array.  Each LED unit comprises a tray-like housing (62) containing a printed circuit board (55).  LED elements (31) are soldered onto the circuit board, and an outer covering (45) is attached to the opening of the housing.

A liquid gel provides a watertight seal for the elements on the PCB. Each unit has a positive power source (20) and a negative power source (21). According to the ‘279 patent, a significant advantage of the invention is that each LED display unit has its own waterproof arrangement, so each unit can function separately, allowing LED displays of variable length at low cost.

According to the complaint (wang_complaint.pdf), while the application that issued as the ‘279 patent was pending, Defendant Wang assigned the application to Sun, “giving the exclusive right to [Sun] for a period of eight (8) years.�  The U.S. Patent & Trademark Office patent assignments database lists Sun as the assignee of the ‘279 patent.

The patent count of the complaint alleges that defendants’ JT-SLS01, JT-SLS02 and JT-SLS03 series products and similar waterproof LED devices infringe the ‘279 patent.  Defendant LED, Inc. is also accused of selling infringing LED modules.

Under the unfair competition claim the complaint alleges, on information and belief, that Defendant Wang:

...via false pretense and deceit, executed assignment of the 279 patent to himself on or about 4/23/2007, without proper corporate authority, violating the previous 8-year requirement, and in an attempt to avoid patent infringement liability.

The complaint goes on to accuse Defendant Wang of using the patented technology to conduct his own business, JT LED USA, dba Jia Tang Electronic Company, in violation of Sun’s exclusive right.

Plaintiff Wang is asking the court to find defendants liable for patent infringement, to compensate him for his losses and to assess punitive damages on defendants for their alleged fraudulent acts.

So it’s a competing director type shareholder suit with an IP twist.  And because the inventor assigned away his rights, we have a situation in which the inventor is accused of infringing his own patent.

Eric Lane is a patent attorney and intellectual property lawyer at Luce, Forward, Hamilton & Scripps in San Diego, where he is in the Intellectual Property and Climate Change & Clean Technology practices.  Eric is the founder and author of Green Patent Blog, which provides discussion and analysis of intellectual property law issues in clean technology.