Brasseler U.S.A., I, L.P. v. Stryker Sales Corp.

• Decision Date: 30 December 1999
• Docket Number: No. CV 497-184.,CV 497-184.
• Citation: 93 F.Supp.2d 1255
• Parties: BRASSELER U.S.A., I, L.P., Plaintiff, v. STRYKER SALES CORPORATION and Stryker Corporation, Defendants.
• Court: U.S. District Court — Southern District of Georgia

93 F.Supp.2d 1255

BRASSELER U.S.A., I, L.P., Plaintiff, v. STRYKER SALES CORPORATION and Stryker Corporation, Defendants.

No. CV 497-184.

United States District Court, S.D. Georgia, Savannah Division.

December 30, 1999.

Geoffrey A. Baker, Timothy J. Malloy, Gregory J. Vogler, McAndrews, Held & Malloy, LTD, Chicago, IL, for defendant.

Glen M. Darbyshire, Inglesby, Falligant, Horne, Courington & Chisholm, PC, Savannah, GA, for counterdefendant.

J.D. Fleming, Jr., John L. North, Sutherland, Asbill & Brennan, LLP, Atlanta, GA, for counterdefendant.

Cindy Leigh McAfee, Hunter, Maclean, Exley & Dunn, Savannah, GA, for plaintiff.

Timothy M. O'Brien, Patrick T. O'Connor, Oliver, Maner & Gray, Savannah, GA, for plaintiff.

Paul W. Painter, Jr., Ellis, Painter, Ratterree & Bart, LLP, Savannah, GA, for counterclaimant.

Alex J. Simmons, Jr., Schreeder, Wheeler & Flint, Atlanta, GA, for defendant.

ORDER

EDENFIELD, District Judge.

I. INTRODUCTION

In this patent-infringement case, the accused infringers — defendants Stryker Corporation and Stryker Sales Corporation (collectively, Stryker) — successfully raised 35 U.S.C. § 102(b)'s "on-sale" defense. Stryker, claimed that plaintiff Brasseler, U.S.A. I, L.P.'s (Brasseler's) patent for surgical saw blades is invalid because the blades' inventors sold them — in violation of § 102(b) — more than one year before Brasseler filed its patent application.

Brasseler insisted that no such sale occurred. Because the evidence showed that it did, the Court granted Stryker summary judgment on this issue, and the Federal Circuit affirmed. Brasseler U.S.A. I., L.P. v. Stryker Sales Corp., 182 F.3d 888 (Fed. Cir.1999). Stryker now moves, over Brasseler's opposition, for an award of attorney fees. Doc. # 74. Under 35 U.S.C. § 285, Stryker can recover them only if "exceptional circumstances" exist. Brasseler, 182 F.3d at 892. The parties contest whether they do.

II. BACKGROUND

The "exceptional circumstances" Stryker must show are reasonably demanding, and warrant a brief review of 35 U.S.C. § 102(b)'s "on-sale" provision. As the Federal Circuit previously explained, that provision

represents a balance of the policies of allowing the inventor a reasonable amount of time to ascertain the commercial value of an invention, while requiring prompt entry into the patent system after sales activity has begun. Thus, the statute limits the period of commercial sale or offers for sale of an invention to one year, before the application must be filed[,] or be forever barred.

Seal-Flex, Inc. v. Athletic Track and Court Constr., 98 F.3d 1318, 1322 (Fed.Cir. 1996) (cite omitted; emphasis added).

It does not take much for an inventor to cross § 102(b)'s one-year, statutory limit. See Dawn Equip. Co. v. Micro-Trak Sys., Inc., 186 F.3d 981, 989 (7th Cir.1999) (it does not require an actual sale, only activity by the inventor or his company in attempting to sell the patented idea); Linear Tech. Corp. v. Micrel, Inc., 63 F.Supp.2d 1103, 1125 (N.D.Cal. 1999) (Patentee's active promotion of electronic device incorporating switching voltage regulator invention among its sales representatives, distributors, and end-user customers, and its receipt of orders from distributors, more than one year before filing of patent application, constituted offers for sale, precluding patentability, even though patentee did not actually ship samples or formally book orders until after critical date).

Stryker showed that Brasseler crossed that line. Brasseler, 182 F.3d at 889. Brasseler unsuccessfully urged this Court to recognize no sale due to the existence of "special facts and circumstances" (that the inventors were associated with either the buyer or seller, the parties were joint developers, etc.). It in part relied on the "totality of the circumstances" test, "under which all of the circumstances surrounding the sale are considered and weighed against the `policies' underlying § 102(b)." Id.

However, after the case left this Court, the U.S. Supreme Court rejected that test in favor of a two-part test: "First, the product must be the subject of a commercial offer for sale .... [and s]econd, the invention must be ready for patenting." Pfaff v. Wells Elecs. Inc., 525 U.S. 55, 67, 119 S.Ct. 304, 142 L.Ed.2d 261 (1998). The "ready for patenting" component can be satisfied either "by proof of reduction to practice¹ before the critical date; or by proof that prior to the critical date [i.e, more than one year] the inventor had prepared drawings or other descriptions of the invention that were sufficiently specific to enable a person skilled in the art to practice the invention." Id. at 67-68, 119 S.Ct. 304 (footnote added and omitted).

The Federal Circuit applied Pfaff in concluding that Brasseler's patent is invalid because, prior to § 102(b)'s one-year period, the inventors engaged in a sale even though the invention itself was ready for patenting. 182 F.3d at 889. Nor had the circuit ever recognized, as Brasseler advocated, a "joint development" exception to the on-sale bar. Id. The court also rejected several other arguments as without merit. Id. at 890-92.

Stryker argues that this is an "exceptional case" because Brasseler breached its duty of candor and disclosure to the Patent and Trademark Office (PTO), by (among other things): (a) failing to reasonably investigate the sale of the subject invention prior to the "on-sale" bar date; (b) applying for a patent without disclosing the "on-sale" facts; and (c) unjustifiably suing Stryker despite knowledge of the patent's invalidity. Doc. # 75 at 1-2. Brasseler denies Stryker's assertions and points out, inter alia, that Stryker ignores intervening changes (i.e., the Pfaff decision) in the law. Doc. # 82.

III. ANALYSIS

A. 35 U.S.C. § 285 — General Standards

District judges determine the § 285 "exceptional case" issue. Pharmacia & Upjohn Co. v. Mylan Pharm., Inc., 182 F.3d 1356, 1360 (Fed.Cir.1999). They find the facts² and determine first if the case is exceptional, then whether attorney fees should be awarded. Enzo Biochem, Inc. v. Calgene, Inc., 188 F.3d 1362, 1380 (Fed.Cir.1999). Their "discretion [is] informed by [their] familiarity with the matter in litigation and the interests of justice." Badalamenti v. Dunham's, Inc., 896 F.2d 1359, 1365 (Fed.Cir.1990) (quotes and cite omitted).

B. "Inequitable Conduct"

"Exceptional cases" include those involving "inequitable conduct" before the PTO. A patentee engages in inequitable conduct by failing to disclose material facts³ which might otherwise preclude the issuance of a patent. Enzo, 188 F.3d at 1380-81; Senior Techs., Inc. v. R.F. Techs., Inc., 58 F.Supp.2d 1076, 1093 (D.Neb.1999). Omitted "on-sale bar" facts can be material facts. Enzo, 188 F.3d at 1380-81. But they must be both material and form part of the "threshold level of intent to mislead the PTO." Key Pharms. v. Hercon Labs. Corp., 161 F.3d 709, 719 (Fed.Cir.1998); Baxter, 149 F.3d at 1327. "The more material the omission, the less evidence of intent will be required in order to find that inequitable conduct has occurred." Baxter, 149 F.3d at 1327.

C. Standard for Showing Inequitable Conduct

Section 285 movants must show inequitable conduct by clear and convincing evidence in light of § 285's purpose: "to provide discretion where it would be grossly unjust that the winner be left to bear the burden of his own counsel which prevailing litigants normally bear." Badalamenti, 896 F.2d at 1364 (quotes and cite omitted; emphasis original).

Pointing to evidence submitted on this motion, Stryker contends that Brasseler engaged in inequitable conduct because its patent counsel knew or should have known of "other inventor" and "on-sale" facts when he filed Brasseler's patent application, thus violating Brasseler's duty to inform the PTO of them. Doc. # 75 at 1-2. Had he upheld his duty, no patent would have issued and this litigation would not have occurred. These "exceptional circumstances," Stryker concludes, justify awarding § 285 attorney fees to it. Id.

(1) Mere Negligence

A "knew or should have known" contention bespeaks simple negligence, which typically is not enough:

[O]ne who alleges a "failure to disclose" form of inequitable conduct must offer clear and convincing proof of: (1) prior art⁴ or information that is material; (2) knowledge chargeable to applicant of that prior art or information and of its materiality; and (3) failure of the applicant to disclose the art or information resulting from an intent to mislead the PTO.

Senior Technologies, 58 F.Supp.2d at 1094 (quotes and cite omitted; emphasis and footnote added); Union Oil Co. of Calif. v. Atlantic Richfield, 34 F.Supp.2d 1208, 1211-12 (C.D.Cal.1998); 60 AM.JUR.2D Patents § 1045 (1985 & 1999 supp.). Once the "intent" showing is made, the patentee can rebut

by a showing that: (a) the prior art or information was not material (e.g., because it is less pertinent than or merely cumulative with prior art or information cited to or by the PTO); (b) if the prior art or information was material, a showing that [the] applicant did not know of that art or information; (c) if [the] applicant did know of that art or information, a showing that [he] did not know of its materiality; (d) a showing that [the] applicant's failure to disclose art or information did not result from an intent to mislead the PTO.

Senior Technologies, 58 F.Supp.2d at 1094 (quotes and cite omitted; emphasis added); accord Elk Corp. of Dallas v. GAF Bldg Materials Corp., 168 F.3d 28, 30 (Fed.Cir. 1999).

(2) Gross Negligence

The § 285 standard generally also requires movants to show more than gross negligence:

Although intent may be inferred from circumstantial evidence, mere gross negligence is insufficient to justify an inference of an intent to deceive the PTO. In a case involving an omission of a material reference to the PTO, there must be clear and convincing evidence that the applicant made a deliberate...