Braddeler v. Stryker Sales Corp.

• Court: U.S. Court of Appeals — Federal Circuit
• Writing for the Court: B. Avant Edenfield; Before PLAGER, LOURIE and CLEVENGER; PLAGER
• Citation: Braddeler v. Stryker Sales Corp., 182 F.3d 888, 51 USPQ2d 1470 (Fed. Cir. 1999)
• Decision Date: 09 July 1999
• Parties: (Fed. Cir. 1999) BRASSELER, U.S.A. I, L.P., Plaintiff-Appellant, v. STRYKER SALES CORPORATION and STRYKER CORPORATION, Defendants-Cross Appellants. 98-1512,-1524 DECIDED:

Page 888

182 F.3d 888 (Fed. Cir. 1999)

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

98-1512,-1524

United States Court of Appeals for the Federal Circuit

DECIDED: July 9, 1999

Rehearing Denied; Suggestion for Rehearing In Banc Declined: August 16, 1999

Appealed from: United States District Court for the Southern District of Georgia

Judge B. Avant Edenfield

John D. Fleming, Jr., Sutherland Asbill & Brennan, LLP, of Atlanta, Georgia, argued for plaintiff-appellant. With him on the brief were John L. North and Allegra J. Lawrence.

Gregory J. Vogler, McAndrews, Held & Malloy, Ltd., of Chicago, Illinois, argued for defendants-cross appellants. With him on the brief was Geoffrey A. Baker.

Of counsel on the brief was Alexander J. Simmons, Jr., Schreeder, Wheeler & Flint, LLP, of Atlanta, Georgia; and Paul W. Painter, Jr., Ellis, Painter, Ratterree & Bart LLP, of Savannah, Georgia.

Before PLAGER, LOURIE and CLEVENGER, Circuit Judges.

PLAGER, Circuit Judge.

DECISION

Plaintiff Brasseler, U.S.A. I, L.P. ("Brasseler") appeals a judgment that its U.S. Patent No. 5,306,285 is invalid for violation of the "on sale" bar of 35 U.S.C. 102(b). The judgment of invalidity was entered by the U.S. District Court for the Southern District of Georgia on motion for summary judgment by Defendants Stryker Sales Corporation and Stryker Corporation (collectively "Stryker"). See Brasseler, U.S.A., I, L.P. v. Stryker Sales Corp., No. CV 497-184 (S.D. Ga. June 25, 1998) (memorandum order).

In ruling on Stryker's motion for summary judgment of invalidity, the district court additionally held that Stryker had "abandoned" its claim for attorney fees under 35 U.S.C. 285 by failing to mention the claim in its motion for summary judgment. Id., slip op. at 10-11. Thereafter the court entered final judgment on all claims. Stryker cross-appeals the dismissal of its claim for attorney fees under 285.

We affirm the judgment of invalidity, vacate the dismissal of Stryker's claim for attorney fees, and remand for further proceedings consistent with this opinion.

DISCUSSION

I. On-Sale Bar

We review the district court's grant of summary judgment of invalidity without deference. See Conroy v. Reebok Int'l, Ltd., 14 F.3d 1570, 1575, 29 USPQ2d 1373, 1377 (Fed. Cir. 1994). Summary judgment is proper when "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The ultimate determination of whether an invention was on sale within the meaning of 102(b) is a question of law. See Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544, 549, 16 USPQ2d 1587, 1591 (Fed. Cir. 1990).

The patent at issue in this case is directed to surgical saw blades. It is undisputed that prior to the patent's 102(b) critical date there was a sale of over three-thousand surgical saw blades embodying the invention set forth in the patent's claims. The sale was made by DS Manufacturing, Inc., a saw blade manufacturer, to an unincorporated operating division of Plaintiff Brasseler, which sells medical implements including surgical saw blades to hospitals. The district court held that this was a "sale" under 102(b) and that the patent was therefore invalid.

Brasseler argues that the transaction should be held not to be a 102(b) sale because of the special facts and circumstances of this case. In particular, Brasseler points out that joint inventors named on the patent were associated with the buyer (Brasseler) and seller (DS Manufacturing) to the transaction: two of the four named inventors were employed by Brasseler, one of the named inventors owned DS Manufacturing, and the fourth named inventor was employed by DS Manufacturing. Additionally, Brasseler alleges that it initiated development of the invention, and that at the time of the transaction DS Manufacturing had an arrangement with Brasseler under which DS Manufacturing was obligated to manufacture the patented saw blade solely for Brasseler. Brasseler further alleges that it was the equitable owner of the invention at all times, though the district court found to the contrary and Stryker contests this assertion. Finally, Brasseler points out that before selling the blades to hospitals it performs three further processing steps on the blades, namely, marking, packaging, and sterilization.

In arguing that these facts establish that there was no 102(b) sale, Brasseler places heavy reliance on our previously used "totality of the circumstances" test under which all of the circumstances surrounding the sale are considered and weighed against the "policies" underlying 102(b). E.g., Envirotech Corp. v. Westech Eng'g, Inc., 904 F.2d 1571, 1574, 15 USPQ2d 1230, 1232 (Fed. Cir. 1990) (citations omitted). Recently, the Supreme Court rejected this test, indicating a preference for "a definite standard for determining when a patent application must be filed." Pfaff v. Wells Elecs., Inc., 119 S. Ct. 304, 311-12 & n.11 (1998). The Court in Pfaff concluded that the on-sale bar of 102(b) applies if, prior to the critical date, a product embodying the patented invention was "the subject of a commercial offer for sale . . . . [, and] the invention [was] ready for patenting." Id. at 311-12.

Since the Pfaff decision, this court has held a patent invalid for violation of the on-sale bar based on "the Supreme Court's two-part test [enunciated in Pfaff] without balancing various policies according to the totality of the circumstances as may have been done in the past." Weatherchem Corp. v. J.L. Clark, Inc., 163 F.3d 1326, 1333, 49 USQP2d 1001, 1006 (Fed. Cir. 1998). The present case illustrates the shortcomings of the "totality of the circumstances" test. Indeed, Brasseler's discussion of this test and the "policies" of 102(b) displays why the test leads to unpredictable results.

The transaction at issue undisputedly was a "sale" in a commercial law sense. See In re Caveney, 761 F.2d 671, 676, 226 USPQ 1, 4 (Fed. Cir. 1985) ("It is well settled that a sale is a contract between parties to give and to pass rights of property for consideration which the buyer pays or promises to pay the seller for the thing bought or sold."). Furthermore, it is undisputed that the invention was "ready for patenting" at the time of the sale. Pfaff, 119 S. Ct. at 312.

Brasseler points out that we have recognized that "a sale or offer to sell under 35 U.S.C. 102(b) must be between two separate entities." Caveney, 761 F.2d at 676, 226 USPQ at 4. However, Brasseler and DS Manufacturing are clearly separate in a corporate sense: there is no common ownership or control of the two corporate entities. We have held entities separate for purposes of 102(b) in cases in which there was much more overlap between the buyer and seller than there is here. See id. at 673-74, 676, 226 USPQ at 2, 4 (upholding determination that buyer and seller are separate entities for purposes of 102(b) despite the fact that corporate entity that wholly owned seller also owned 49% of buyer and buyer was formed to be seller's exclusive seller in the United States); Ferag AG v. Quipp Inc., 45 F.3d 1562, 1565, 1567, 33 USPQ2d 1512, 1515 (Fed. Cir. 1995) (overturning district court conclusion that buyer and seller were not separate for purposes of 102(b) despite the fact that seller owned 50% of buyer and buyer was seller's exclusive distributor). The fact that Brasseler may have retained control over the manufacturing of the patented invention as a result of the alleged exclusive relationship between the two companies says nothing about the basic corporate relationships.

We decline Brasseler's invitation to establish a new exception based on the fact (alleged) that it and DS Manufacturing were joint developers and as such a sale between the two of them should not be considered a 102(b) sale. It is true that Brasseler and DS Manufacturing both employed one or more of the named inventors. However, we have "never recognized a 'joint development' exception to the 'on sale' bar." Buildex Inc. v. Kason Indus., Inc., 849 F.2d 1461, 1465, 7 USPQ2d 1325, 1328 (Fed. Cir. 1988).

Brasseler invites us to follow the holding in Ex-Cell-O Corp. v. Litton Industrial Products, Inc., 479 F. Supp. 671, 689, 205 USPQ 612, 629 (E.D. Mich. 1979). In Ex-Cell-O, the district court opined that because the invention was jointly developed by the buyer and seller, each employing one of the named inventors, the sale between them was not a 102(b) sale. However, the district court failed to provide any reasoning for this conclusion. The court did note that the accused infringer never disputed the patentee's contention that if the invention was jointly developed, the on-sale bar does not apply. See id. at 689 n.14, 205 USPQ at 629 n. 14. In any event, we are not bound by the district court decision in Ex-Cell-O. Brasseler has failed to convince us that we should adopt the holding in that case.

Brasseler also cites M & R Marking Sys., Inc. v. Top Stamp, Inc., 926 F. Supp. 466, 468-70 (D.N.J. 1996), in which the district court declined to apply the on-sale bar to a sale from a manufacturer to a sales corporation that employed the sole named inventor and had asked the manufacturer to make the patented product pursuant to the patented design. Again, we have no obligation to follow the district court's reasoning. Furthermore, the case before us is distinguished in at least one significant respect. In M & R Marking, there was only one inventor and that inventor was employed by the buyer. Here, in contrast, DS Manufacturing (the seller) was owned by one of the inventors and it employed a second inventor. By way of the sale to Brasseler, these inventors commercially exploited the invention prior to the critical date.

This is not a case in which an individual inventor takes a design to a fabricator and pays the fabricator for its services in...