Brasseler v. Stryker Sales

• Decision Date: 09 October 2001
• Docket Number: No. 00-1194,00-1194
• Parties: (Fed. Cir. 2001) BRASSELER, U.S.A. I, L.P., Plaintiff-Appellant, v. STRYKER SALES CORPORATION and STRYKER CORPORATION, Defendants-Appellees. DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 1370

267 F.3d 1370 (Fed. Cir. 2001)

BRASSELER, U.S.A. I, L.P., Plaintiff-Appellant, v. STRYKER SALES CORPORATION and STRYKER CORPORATION, Defendants-Appellees.

No. 00-1194

United States Court of Appeals for the Federal Circuit

DECIDED: October 9, 2001

Appealed from: United States District Court for the Southern District of Georgia Judge B. Avant Edenfield

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

Edward E. Vassallo, Fitzpatrick, Cella, Harper & Shinto, of New York, New York, argued for plaintiff-appellant.

Gregory J. Vogler, McAndrews Held & Malloy, Ltd., of Chicago, Illinois, argued for defendants-appellees. With him on the brief were Timothy J. Malloy, Geoffrey A. Baker, and James R. Nuttall. Of counsel on the brief were Paul W. Painter, Jr., Ellis, Painter, Ratterree & Bart LLP, of Savannah, Georgia; and Alexander J. Simmons, Schreeder, Wheeler & Flint, LLP, of Atlanta, Georgia.

Before CLEVENGER, Circuit Judge, PLAGER, Senior Circuit Judge, and GAJARSA, Circuit Judge.

GAJARSA, Circuit Judge.

DECISION

Brasseler, U.S.A. I, L.P. ("Brasseler") appeals from a grant of a motion for attorney fees by the United States District Court for the Southern District of Georgia awarding attorney fees in accordance with 35 U.S.C. § 285. Brasseler U.S.A. I, L.P. v. Stryker Sales Corp., 93 F. Supp. 2d 1255 (S.D. Ga. 1999) ("Brasseler III"). For the reasons discussed below, we affirm the judgment of the district court.

BACKGROUND

Brasseler markets medical instruments through an unincorporated division, Komet Medical. In May 1991, Alex Miller, Brasseler's national sales director, contacted Robert L. Stranahan, the sole owner of DS Manufacturing ("DSM"), a saw blade manufacturer, to assist in the development of a new surgical saw blade. In exchange for his assistance, Brasseler promised to purchase the blades exclusively from DSM. Miller and Stranahan, with the assistance of an employee from each company, created a design for a surgical saw blade that later became known as the K-2000 blade. In accordance with their agreement, DSM was to manufacture the newly designed blades for sale to Brasseler. Brasseler would then mark, package and sterilize the blades for resale under an FDA license authorizing it to make such sales.

On April 13, 1992, DSM sold over 3,250 of the K-2000 blades to Brasseler for approximately $27,000.00. Twelve months later Brasseler instructed its attorney to prepare and file a patent application. On April 27, 1993, Christopher W. Brody, an associate with the law firm representing Brasseler, apparently was instructed by Robert L. Price, his supervising attorney, to prepare a patent application covering the K-2000 blade. Brody was instructed to file the application by April 30, 1993, to avoid "a potential on-sale bar of May, 1992." During the two days Brody spent preparing the application he made no inquiry about the details of the sale. The application was filed on April 30, 1993, and issued on April 26, 1994, as U.S. Patent No. 5,306,285 ("the '285 patent"). Neither Price nor Brody ever conducted an investigation into the facts surrounding the potential May on-sale bar, and Brody claimed not to have learned of the April 13, 1992 sale, or any event which might have given rise to the rushed filing, until the sale became an issue in the initial proceeding before the district court.

Brasseler filed suit against Stryker Corporation ("Stryker") for infringement of the '285 patent. Brasseler, U.S.A. I, L.P. v. Stryker Sales Corp., No. CV 497-184 (S.D. Ga. June 25, 1998) (memorandum order) ("Brasseler I"). Stryker raised an on-sale bar defense, claiming that the patent was invalid because the inventors sold the patented blades more than one year before Brasseler filed its patent application, in violation of 35 U.S.C. § 102(b). Brasseler insisted that no invalidating sale occurred, arguing that the blades were not within the scope of the claims because they required additional processing. Brasseler further argued that because the sale took place between companies owned by or employing the individual inventors, the sale did not qualify as one giving rise to a statutory on-sale bar.

The district court determined that the transaction constituted a sale in accordance with the statute and granted Stryker's motion for summary judgment on this issue. This court affirmed that determination. Brasseler U.S.A. I, L.P. v. Stryker Sales Corp., 182 F.3d 888, 51 USPQ2d 1470 (Fed. Cir. 1999) ("Brasseler II"). In Brasseler II, although we noted that the Supreme Court had enunciated a new two part test for establishing criteria for determining whether an offer for sale or a sale will give rise to a statutory bar in Pfaff v. Wells Elecs., Inc., 525 U.S. 55 (1998), our holding did not turn on the new test. The determinative holding in Brasseler II was premised on the finding that there had been a sale between two unrelated corporate entities and the case did not involve a mere offer for sale. On appeal, Brasseler had requested the court to adopt a "joint development" exception to the on-sale bar rule, a proposition that this court had never before recognized. We rejected Brasseler's argument that sales between joint inventors escape the reach of the on-sale bar because this court had previously recognized that a sale between separate and distinct legal entities qualifies as a sale under the statutory bar even where there is an overlap of ownership between the buyer and seller, citing In re Caveney, 761 F.2d 671, 676, 226 USPQ 1, 4 (Fed. Cir. 1985). See Brasseler II, 182 F.3d at 890, 51 USPQ2d at 1471. Thus, before the events that produced this litigation, patent lawyers knew that no "joint development" exception existed in the on-sale bar law. In Brasseler II, therefore, we concluded that the sale gave rise to a bar because it was a sale between two distinctly separate corporate entities with no common ownership or control. In that case, we also determined that the sale involved products embodying the claimed invention, finding that the processing step, alleged by Brasseler to distinguish the blades as sold from those claimed, was not a component of the claims. Id. at 891, 51 USPQ2d at 1473. In Brasseler II, we further noted that, "[b]y way of the sale to Brasseler, these inventors commercially exploited the invention prior to the critical date." Id. at 891, 51 USPQ2d at 1472. The case was remanded to the district court for a determination of whether this was an exceptional case entitling Stryker to attorney fees in accordance with 35 U.S.C. § 285. Id. at 892, 51 USPQ2d at 1474.

On remand, Stryker argued before the district court that it was entitled to attorney fees because Brasseler had breached its duty of candor and disclosure to the Patent and Trademark Office ("PTO") by: (1) unreasonably failing to investigate the sale of the invention; (2) applying for a patent without disclosing the "on-sale" facts; and (3) unjustifiably suing Stryker despite knowledge of the patent's invalidity. Brasseler III, 93 F. Supp. 2d at 1257.

The district court noted that to prove inequitable conduct, in accordance with FMC Corp. v. Manitowoc Co., 835 F.2d 1411, 5 USPQ2d 1112 (Fed. Cir. 1987), one alleging "failure to disclose" type inequitable conduct must prove with sufficient clarity that: (1) information exists that is material; (2) the applicant or his or her attorney knew of this information and that it was material; and (3) the applicant or his or her attorney failed to disclose the information with the intent to mislead the PTO. Brasseler III, 93 F. Supp. 2d at 1259.

Focusing on the third element in the inequitable conduct analysis, the district court noted that the degree of intent to mislead necessary to trigger culpability varies in proportion to the materiality of the information. Id. Next, the district court noted that in Critikon, Inc. v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253, 43 USPQ2d 1666 (Fed. Cir. 1997), this circuit had emphasized that depending on the facts of each particular case, intent may be inferred where a patent applicant knew, or should have known, that withheld information could be material to the PTO's consideration of the patent application. Brasseler III, 93 F. Supp. 2d at 1260. The district court noted that in Critikon, 120 F.3d at 1256-57, 43 USPQ2d at 1668-69, this court found a patentee's failure to appreciate the legal significance of the facts that it failed to disclose did not absolve it of its duty to disclose. Brasseler III, 93 F. Supp. 2d at 1260. Accordingly, the district court concluded that Brasseler is charged with its attorney's knowledge of the law. Id. At the same time, the district court noted that mere negligence, or even gross negligence, cannot lead to a finding of deceptive intent. Id. at 1258-59.

Reviewing the circumstances surrounding the sale and the prosecution of the application, the district court recognized that the failures were more than gross negligence holding that "[t]he 'sum total of [Brasseler's] conduct,' demonstrates § 285-level intent to defraud the PTO." Id. Based on the conduct of both the inventors and their representatives, the court deemed this case "exceptional," entitling Stryker to attorney fees. Price and Brody had notice that a potential on-sale bar event had occurred, but did not know what the event was or the exact date the event took place. The court determined that, having received notice that a potential bar existed, Brasseler's attorneys were obligated to conduct an investigation into the facts surrounding the sale and to disclose any information reasonably believed to be material. Id. at 1260-61. The court found Price and Brody's failure to investigate, at any time prior to issuance of the patent, the potential bar of which they were aware and that had generated such concern amongst the inventors, constituted sufficient evidence of inequitable conduct.

Specifically, Brody testified that there was...