In a patent case concerning cryptocurrency data mining, the US Court of Appeals for the Federal Circuit affirmed a district court’s grant of summary judgment and its ruling that a state law conversion claim was preempted by patent law of inventorship. The Court also affirmed the denial of a correction to the inventorship claim. BearBox LLC v. Lancium LLC, Case No. 23-1922 (Fed. Cir. Jan. 13, 2025) (Stoll, Chen, Bryson, JJ.)

BearBox was an entity founded by Austin Storms that developed and designed mobile cryptocurrency data centers. It operated a half-megawatt data center but was unprofitable as a consequence of the high cost of electricity and the data center’s high energy requirements. Lancium was an entity that aimed to co-locate data centers at wind farms to use the highly variable power generated for data mining but sell excess electricity to the grid when electricity cost was high. BearBox and Lancium met in 2019 at a cryptocurrency mining summit. At that time, BearBox was looking to find customers for its newly developed BearBox containers, and Lancium was in the market for those containers. Both BearBox and Lancium had developed similar software to detect profitable time periods for cryptocurrency mining. Their systems aimed to mine cryptocurrency during periods when electricity prices were low, while selling the energy to the grid when prices were high. Lancium disclosed these concepts in an international patent application filed 15 months before Storms met anyone at Lancium.

BearBox’s system was discussed over dinner at the summit and in a single email exchange afterwards. However, BearBox never disclosed any source code associated with the BearBox system to Lancium. The email exchange was the last communication between the two parties. About five months after the meeting, Lancium filed a patent application that related to a set of computing systems configured to perform computational operations using electricity from a power grid and to a control system that monitored a set of conditions and received power option data based at least in part on a power option algorithm. After that application matured into a patent, BearBox filed suit asserting sole or joint inventorship of the patent and conversion under Louisiana state law.

Lancium moved for summary judgment on the conversion claim. The district court granted the motion, noting that federal patent law preempted the claim. However, the district court denied Lancium’s motion for summary judgment on the inventorship claims – claims that were then heard at a bench trial. At trial, the district court concluded that BearBox failed to prove by clear and convincing evidence that BearBox’s founder, Storms, conceived any part of the claimed invention. BearBox appealed.

The Federal Circuit began by assessing the ruling on preemption of BearBox’s conversion claim. Relying on its 2005 decision in Ultra-Precision Mfg. v. Ford Motor, the Court noted that although the state law of conversion does not squarely implicate federal patent law, the way a conversion claim is pled may “[stand] as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Thus, a conversion claim cannot offer “patent-like” protection that would otherwise not garner protection under federal patent law. Based on this reasoning, the Court affirmed that BearBox’s state law conversion claim was preempted by federal patent law because, as pled, the claim was “essentially an inventorship cause of action and infringement cause of action.”

The Federal Circuit next addressed the district court’s decision denying BearBox’s inventorship claims. BearBox argued that the district court erred in “analyzing individual claim elements (rather than a combination of elements) [and] . . . comparing them, element-by-element, to Mr. Storms’s corroborating documents,” and by “applying the rule of reason by evaluating corroborating documents in isolation.”

An omitted inventor seeking to have their name listed on a patent must prove their inventorship by clear and convincing evidence. In its 1998 decision in Ethicon v. U.S. Surgical Corp., the Federal Circuit held that “an alleged joint inventor’s testimony alone is insufficient to establish inventorship by clear and convincing evidence.” Instead, the alleged joint inventor “must supply evidence to corroborate his testimony.” As the Ethicon court explained, “[c]orroborating evidence may take many forms,” including “contemporaneous documents” or physical evidence, “[c]ircumstantial evidence about the inventive process,” and “oral testimony of someone other than the alleged inventor.”

To corroborate its testimony, BearBox used the four attachments in the one-time email exchange with Lancium, none of which evidenced inventorship or patented subject matter. While a rule of reason standard is applied to the corroboration evaluation, clear and convincing evidence is required to prevail on the ultimate inventorship issue.

The Federal Circuit saw no issue with the district court’s limitation-by-limitation analysis. The Court went even further and determined that regardless of approach, BearBox could not prove that Storms had introduced the subject matter of the patent claims prior to Lancium’s independent conception.

As the Federal Circuit explained, an alleged joint inventor “must show that he contributed significantly to the conception – the definite and permanent idea of the invention – or reduction to practice of at least one claim.” These contributions must also arise from “some element of joint behavior, such as collaboration or working under common direction” with the other inventor(s).

Thus, the Federal Circuit affirmed that BearBox did not and could not prove by clear and convincing evidence that Storms was the sole or joint inventor of the patent claims.

Sarah Mezini also contributed to this article.