767 F.2d 853 (Fed. Cir. 1985), 84-1528, King Instrument Corp. v. Otari Corp.

Docket Nº:Appeal Nos. 84-1528, 84-1529, 84-1558 and 84-1595.
Citation:767 F.2d 853
Party Name:226 U.S.P.Q. 402 KING INSTRUMENT CORPORATION, Plaintiff-Appellant/Cross-Appellee, v. OTARI CORPORATION, Defendant-Appellee/Cross-Appellant.
Case Date:June 26, 1985
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit

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767 F.2d 853 (Fed. Cir. 1985)

226 U.S.P.Q. 402

KING INSTRUMENT CORPORATION, Plaintiff-Appellant/Cross-Appellee,


OTARI CORPORATION, Defendant-Appellee/Cross-Appellant.

Appeal Nos. 84-1528, 84-1529, 84-1558 and 84-1595.

United States Court of Appeals, Federal Circuit

June 26, 1985

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[Copyrighted Material Omitted]

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Elmer S. Albritton, Flehr, Hohback, Text, Albritton & Herbert, of San Francisco, Cal., argued for plaintiff-appellant/cross-appellee. With him on the brief were Donald N. MacIntosh and William A. Cammett; Nicholas A. Pandiscio, Schiller & Pandiscio, of Waltham, Mass., was on the brief, of counsel.

Allen Kirkpatrick, Cushman, Darby & Cushman, of Washington, D.C., argued for defendant-appellee/cross-appellant. With him on the brief were George C. Limbach, Limbach, Limbach & Sutton, of San Francisco, Cal., Henry Y. Ota, Shigeru Watanabe, Kelley, Drye & Warren, of Los Angeles, Cal. and C. Michael Zimmerman, Cushman, Darby & Cushman, of Palo Alto, Cal.

Before MARKEY, Chief Judge, DAVIS, Circuit Judge, and SKELTON, Senior Circuit Judge.

DAVIS, Circuit Judge.

King Instrument Corporation (King), the plaintiff below, charged Otari Corporation (Otari) with infringement of its U.S. Patent Nos. 3,637,153 ('153) issued January 25, 1972, and 3,737,358 ('358) issued June 5, 1973. King now appeals from final judgment by the United States District Court for the Northern District of California, following a bench trial, that held the '358 patent invalid because the invention claimed was found to be "on sale" under 35 U.S.C. Sec. 102(b). We affirm.

Otari cross-appeals from the district court's holding that the '153 patent is valid and infringed, and that King is entitled to lost profits incurred from the sale of Otari's infringing devices in the amount of $2,282,935, and lost profits of $438,810 from the sale of "spare parts." We affirm as to the award based on the infringing devices, and vacate and remand as to the award based on spare parts. We also affirm the district court's determination that King is not entitled to increased damages relating to Otari's sale of infringing devices.



A. The King patents.

The patents at issue relate to an automated apparatus for loading magnetic (blank or pre-recorded audio or video) tape into closed cassettes. Before loading, a closed cassette consists of an outer plastic case containing two winding hubs (spools) and a short length of leader tape wound around each hub. After loading, the finished product has a much longer length of magnetic supply ("use") tape which has been spliced to the leader tape. The patents claim an apparatus for automatically cutting, splicing, and winding magnetic use tape into closed cassettes.

The tape loading machine embodying the invention of the earlier '153 patent came to be known as the "swing arm" machine. For appreciation of the apparatus claims of the '153 patent we describe how the swing arm device works. A new cassette having a short length of leader tape with one end wound about one of the hubs and the other end connected to the other hub is mounted onto a holder in the machine. The leader tape is manually pulled out of the cassette,

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formed into a loop and then extended over two splicing heads. The start button is pressed setting off the following sequence of operations: first, a knife blade just above the splicing heads is thrust forward slitting the leader tape into two sections each of which is held in place by suction on the two respective splicing heads; as the blade returns to its position, the splicing head supporting one section of the leader tape pivots (swings) counterclockwise and is replaced by a third splicing head supporting the magnetic use tape which pivots into a position that is contiguous with and abuts the stationary splicing head supporting the other section of leader tape; a splicing tape dispenser-applicator then pivots downward and splices one section of the leader tape to the magnetic use tape; the tape is wound at a fast rate onto the right hub to a predetermined length; thereafter, the knife is again activated, slitting the use tape, and all the splicing heads swing back to their original positions; the splicing tape dispenser-applicator then pivots downward to splice together the trailing end of the magnetic use tape and the abutting end of the leader tape; at this time, the operator may pull the spliced tape off the splicing heads and eject the cassette from the holder. Disclosed in the specification, but not specifically claimed, this automated operating sequence has been referred to as "cut, shift, splice - wind - cut, shift, splice."

The device disclosed in the '358 patent has been called a "shift block" machine. The assembly disclosed consists of two splicing blocks. The first block has two tape-receiving grooves, and the second block has one tape receiving groove. Although using a different mechanism, the unclaimed operating sequence is generally the same as in the swing arm machine. The leader tape lies across both blocks whereupon it is cut into two sections by a knife unit. A means is provided for moving one block relative to the other (i.e., horizontally pulling out one block--"shifting") so as to selectively align the second groove of the first block which supports the use tape with the single groove of the second block which supports one end of the leader tape. A splicing tape dispenser splices the leader tape and use tape. The tape is wound and then severed at a predetermined length. The block shifts back to its original position, aligning and splicing the wound tape with the other "forgotten" leader end.

B. Otari's devices.

Otari has received, held in inventory, assembled and sold tape loading machines bearing model designations DP-6750, DP-2700, VL-100, VL-120/VTW-120, VL-500, VL-600, VL-110 and 37M. The "VL" designation refers to video, as opposed to audio, tape loading machines. Although no documentary evidence which may have been used below to describe the Otari devices appears in the printed record before this court, 1 the record does contain extensive testimony offered by both parties comparing the VL-600 to the claims of the '153 patent. The witnesses included Harris Zimmerman, King's expert; the deposition testimony of James King, Sr., the patentee of both the '153 and '358 patents; Ernest Chilton, Otari's expert; and Dirks Foster, Otari's expert on patent law.

C. Proceedings below.

After considering over 2,000 pages of trial transcripts, 400 exhibits and the credibility of more than 25 witnesses, the district court entered final judgment. The court concluded that the invention claimed in the '153 patent was neither anticipated under 35 U.S.C. Sec. 102(a), nor would have been obvious under 35 U.S.C. Sec. 103. The court found that Otari machines DP-6750, DP-2700, VL-500 and VL-600 directly infringe claims 2, 4, 5, 6, 8, 9, 10, 11, 12, 14

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and 16, and Otari machines VL-100, VL-110, and VTW-120 directly infringe claims 2, 4, 5, 6, 8, 9, 10, 11, 12 and 14 of the '153 patent. The court then concluded that King was entitled to its lost profits with respect to the sale by Otari of these machines. The court also awarded damages for lost profits from the sale of "parts" by Otari. Pre-judgment interest was awarded, but enhanced damages for willful infringement and an award of attorney fees were denied.

In holding the '358 shift block patent invalid, the district court found that a device which embodied the claims of the '358 patent and which had been previously reduced to practice was offered for sale to the Morningstar Division of Data Packaging Company (Morningstar) prior to May 27, 1970 (one year prior to the '358 filing date). Except as to its on sale defense, Otari was summarily denied relief on its other counterclaims for invalidity and noninfringement of the '358 patent.



A. The '153 patent.

After considering all the relevant prior art, the district court found that the invention claimed in the '153 patent was not anticipated by the prior art, and also ruled that the differences between the prior art and the claimed subject matter as a whole would not have been obvious to one of ordinary skill in the tape winding art in 1969. 2 Otari argues that the district court committed reversible error by not making detailed findings of fact under the guidelines set forth in Graham v. John Deere Co., 383 U.S. 1, 86 S.Ct. 684, 15 L.Ed.2d 545, 148 USPQ 459 (1966), and by failing to recognize the Plastaras patent as the most relevant prior art.

In a Sec. 103 obviousness analysis, Graham requires that the trier assess certain underlying facts: (1) the scope and content of the prior art, (2) the level of ordinary skill in the art, (3) the differences between the claimed invention and the prior art, and (4) the so-called "secondary considerations." See Atlas Powder Co. v. E.I. Du Pont De Nemours & Co., 750 F.2d 1569, 1574, 224 UPSQ 409, 412 (Fed.Cir.1984). Otari cites Jones v. Hardy, 727 F.2d 1524, 220 USPQ 1021 (Fed.Cir.1984) as showing that the district court improperly failed to make express findings relating to these factors. In Jones, however, this court reversed the trial court's conclusion of obviousness because the record contained no specific factual findings, no mention of any patented prior art, and was replete with legal error. By comparison, not only did the district court conclude that the '153 patent was nonobvious, but none of the Jones "parade of horrors" exists in this case.

During prosecution of the '153 patent, the Patent and Trademark Office examiner had before him, inter alia, the Canadian Kilmartin patent. As Otari admits in its brief, Kilmartin relates to butt splicing...

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