Paragon Podiatry Laboratory, Inc. v. KLM Laboratories, Inc.

• Decision Date: 26 January 1993
• Docket Number: No. 91-1455,91-1455
• Parties: PARAGON PODIATRY LABORATORY, INC., Plaintiff-Appellant, v. KLM LABORATORIES, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1182

984 F.2d 1182

25 U.S.P.Q.2d 1561

PARAGON PODIATRY LABORATORY, INC., Plaintiff-Appellant, v. KLM LABORATORIES, INC., Defendant-Appellee.

No. 91-1455.

United States Court of Appeals Federal Circuit.

Jan. 26, 1993.

William H. Drummond, Fulwider, Patton, Lee & Utecht, Long Beach, CA, argued, for plaintiff-appellant. With him on the brief was Vern Schooley.

James E. Brunton, Glendale, CA, argued, for defendant-appellee.

Before NIES, Chief Judge, ARCHER, Circuit Judge, and COHN, District Judge. ^*

PER CURIAM.

Paragon Podiatry Laboratory, Inc., appeals from the grant of KLM Laboratories, Inc.'s motion for summary judgment by the United States District Court for the Central District of California. The district court held Paragon's U.S. Patent No. 4,686,993 (the '993 patent) invalid under 35 U.S.C. § 102(b) (1988) and unenforceable by reason of the applicant's inequitable conduct before the Patent and Trademark Office (PTO). We affirm the grant of summary judgment.

I. Background

Paragon, as assignee of the '933 patent for a low profile functional orthotic, ¹ brought suit against KLM for infringement of the '933 patent. KLM denied the claim of infringement and filed counterclaims against Paragon seeking, inter alia, a declaratory judgment that the '993 patent is invalid and unenforceable and an award of attorney fees. Paragon denied the allegations of the counterclaims. Upon KLM's motion for summary judgment on its declaratory judgment counterclaims, the district court held the '933 patent invalid under 35 U.S.C. § 102(b) and unenforceable by reason of the inequitable conduct of the patent applicant and his attorney before the PTO. The district court, in its opinion, reserved ruling on whether the case is exceptional under 35 U.S.C. § 285 (1988) and, accordingly, whether KLM is entitled to attorney fees. The district court also noted that KLM's counterclaims for common law unfair competition remain undecided. Paragon appeals the district court's summary judgment with respect to both invalidity and unenforceability. ²

II. Summary Judgment Standard

Summary judgment is properly granted where there are no genuine issues of material fact and the moving party is entitled to judgment on undisputed facts and the correct application of the law. Fed.R.Civ.P. 56(c). "By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986) (emphasis in original). The proper inquiry, therefore, is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 252, 106 S.Ct. at 2512. However, the evidence must be viewed in the light most favorable to the party opposing summary judgment. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 993, 8 L.Ed.2d 176 (1962). In other words, "[s]ummary judgment is authorized when it is quite clear what the truth is," Hodosh v. Block Drug Co., 786 F.2d 1136, 1141, 229 USPQ 182, 186 (Fed.Cir.) (citing Sartor v. Arkansas Natural Gas Corp., 321 U.S. 620, 627, 64 S.Ct. 724, 728, 88 L.Ed. 967 (1944)), cert. denied, 479 U.S. 827, 107 S.Ct. 106, 93 L.Ed.2d 55 (1986), and the law requires judgment in favor of the movant based upon facts not in genuine dispute.

On appeal, we are not bound to give deference to the district court's grant of summary judgment, but must make an independent determination that the standards for summary judgment have been met. Vas-Cath, Inc. v. Mahurkar, 935 F.2d 1555, 1560, 19 USPQ2d 1111, 1114 (Fed.Cir.1991).

III. On-Sale Bar

Section 102(b) provides, in relevant part, that a person may not obtain a patent if "the invention was ... on sale in this country[ ] more than one year prior to the date of the application for patent in the United States." 35 U.S.C. § 102(b). Under long standing judicial interpretation, a product embodying the patented invention, which is sold or offered for sale more than a year before the application's filing date, may escape the statutory bar where such sale was primarily for a bona fide experimental purpose to perfect the invention, rather than for commercial exploitation. A.B. Chance Co. v. RTE Corp., 854 F.2d 1307, 1311, 7 USPQ2d 1881, 1884 (Fed.Cir.1988); Pennwalt Corp. v. Akzona, Inc., 740 F.2d 1573, 1581, 222 USPQ 833, 838 (Fed.Cir.1984). Thus, any sales of the later patented product outside of the grace period must be merely incidental to the primary purpose of experimentation. ³ Barmag Barmer Maschinenfabrik AG v. Murata Machinery, Ltd., 731 F.2d 831, 839, 221 USPQ 561, 567 (Fed.Cir.1984) (citing In re Theis, 610 F.2d 786, 793, 204 USPQ 188, 194 (CCPA 1979)).

In this case, the district court held the '933 patent invalid under section 102(b) by reason of commercialization outside of the grace period. The court based this holding upon Paragon's sale and advertising for sale of functional orthotic devices, under the product name Omniflex, which included all of the elements of the '933 patent claims, more than one year before the '933 patent application's filing date of July 26, 1985 (the critical date therefore being July 26, 1984) and its conclusion that Paragon's activities were not "for legitimate experimental purposes." Specifically, the court made the following statement respecting the evidence:

The record shows that prior to the critical date, plaintiff published price lists and sales letters offering for sale the orthotic described in the patent in suit. None of these documents refer in any way to testing. Further, plaintiff has admitted that about three hundred of the said orthotics were sold prior to the critical date without maintaining any control over the orthotics and without restriction of any kind being placed upon their use.

Paragon does not challenge the court's above statement of the facts. Indeed, it admits that approximately 300 Omniflex units were sold prior to mid-July 1984 and that those units embodied the '933 invention. Paragon only challenges the propriety of the court's making a conclusion on summary judgment that the sales were not for experimental purposes.

In response to the summary judgment motion, Paragon had submitted an affidavit of the inventor, Michael T. Grumbine, averring that he considered the sales as being not for profit but for experimentation respecting the structure of the orthotic to determine if the heel was sufficiently fused to the shell so as to be "unitary" as required by the claims. ⁴ He further averred that sales were promoted to small volume or new customers so as to minimize the detrimental effects on customer relations if the devices were not satisfactory, and that it was common practice to distribute new orthotics before large scale commercialization in order to get feedback on their performance by receiving complaints and by making random phone calls to purchasers.

"[T]he ultimate question of patent validity is one of law." Graham v. John Deere Co., 383 U.S. 1, 17, 86 S.Ct. 684, 694, 15 L.Ed.2d 545 (1966). Whether an invention was "on sale" within the meaning of section 102(b) is itself a subsidiary question of law. Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544, 549, 16 USPQ2d 1587, 1591 (Fed.Cir.1990); U.S. Envtl. Prods., Inc. v. Westall, 911 F.2d 713, 715, 15 USPQ2d 1898, 1900 (Fed.Cir.1990); UMC Elecs. Co. v. United States, 816 F.2d 647, 657, 2 USPQ2d 1465, 1472 (Fed.Cir.1987), cert. denied, 484 U.S. 1025, 108 S.Ct. 748, 98 L.Ed.2d 761 (1988); Harrington Mfg. Co. v. Powell Mfg. Co., 815 F.2d 1478, 1480, 2 USPQ2d 1364, 1366 (Fed.Cir.1986); Barmag Barmer Maschinenfabrik AG, 731 F.2d at 835-40, 221 USPQ at 564-68. While resolution of the issue of experimental use is fact driven, a fact is not material if the legal conclusion does not turn on how that fact is resolved. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510 ("Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.").

Paragon asserts that the inventor's affidavit averring that the sales were experimental is sufficient, in itself, to raise a genuine issue of material fact. We disagree. The fact that an inventor had an intent to experiment in making the sale need not be overcome or disputed to invoke the statutory bar. Such intent is merely a fact to be taken into account in resolving the ultimate legal question. Moreover, as a factor in the ultimate conclusion, we have held, "[T]he expression by an inventor of his subjective intent to experiment, particularly after institution of litigation, is generally of minimal value." TP Lab., 724 F.2d at 972, 220 USPQ at 583. Further, we have held that the assertion of experimental sales, at a minimum, requires that customers must be made aware of the experimentation. LaBounty Mfg., Inc. v. United States Int'l Trade Comm'n, 958 F.2d 1066, 1072, 22 USPQ2d 1025, 1029 (Fed.Cir.1992); In re Dybel, 524 F.2d 1393, 1401, 187 USPQ 593, 599 (CCPA 1975).

Here, Paragon admits that it did not inform the ordering doctors that the Omniflex unit was an experimental device. To the contrary, sales letters sent to doctors stated, "The Omniflex is the culmination of extensive research and exhaustive clinical testing" (emphasis added). Sales letters and manuals were distributed to potential customers stating that the Omniflex had a "unitized polypropylene post," the object of the supposed testing. See In re Brigance, 792 F.2d 1103, 1108, 229 USPQ 988, 991 (Fed.Cir.1986); In re Smith, 714 F.2d 1127, 1135, 218 USPQ 976, 983 (Fed.Cir.1983); Harrington, 815 F.2d at 1481 n. 3, 2 USPQ2d at 1366 n. 3. The devices were sold with a "lifetime guarantee."

"When sales are made in an...