D.L. Auld Co. v. Chroma Graphics Corp.

• Citation: 714 F.2d 1144,219 USPQ 13
• Decision Date: 15 August 1983
• Docket Number: No. 83-585,83-585
• Parties: The D.L. AULD COMPANY, Appellant, v. CHROMA GRAPHICS CORP., Appellee. Appeal
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

Page 1144

714 F.2d 1144

219 U.S.P.Q. 13

The D.L. AULD COMPANY, Appellant, v. CHROMA GRAPHICS CORP., Appellee.

Appeal No. 83-585.

United States Court of Appeals, Federal Circuit.

Aug. 15, 1983.

Richard A. Killworth, Dayton, Ohio, argued for appellant. With him on the brief was A. Michael Knapp, Columbus, Ohio.

Andrew S. Neely, Knoxville, Tenn., argued for appellee. With him on the brief was Edwin M. Luedeka, Knoxville, Tenn.

Before MARKEY, Chief Judge, DAVIS and BALDWIN, Circuit Judges.

MARKEY, Chief Judge.

BACKGROUND

On October 15, 1981, the D.L. Auld Company (Auld) sued Chroma Graphics Corp. (Chroma) in the Eastern District of Tennessee for infringement of Patent No. 4,100,010 (the Waugh patent) issued on a continuing application filed July 2, 1976 of an The parties agreed on trial and entry of judgment before and by a magistrate and on direct appeal from that judgment.

                original application filed June 12, 1974.   The patent claims are drawn to a method of forming foil-backed inserts in the form of cast decorative emblems. 1
                

Chroma took a discovery deposition of the inventor, Robert E. Waugh, who was also Vice President for Research and Development of Auld, the assignee of the patent. Submitting portions of that deposition and documents from Auld's files, Chroma moved for summary judgment on the ground that the invention had been "on sale" for more than one year before June 12, 1974. 35 U.S.C. § 102(b).

Auld opposed the motion and asked for oral hearing, submitting other portions of Waugh's discovery deposition, an affidavit amending answers to interrogatories, affidavits of Robert A. Wanner and David L. Auld, both with attachments, and pages from a Waugh deposition taken in another case.

Chroma replied, submitting further parts of the Waugh discovery deposition.

On October 22, 1982, the magistrate entered an order granting the motion, accompanied by a memorandum opinion.

Auld moved to vacate the order because no hearing had been held. The magistrate treated the motion as one to alter or amend under Fed.R.Civ.P. 59(e) and held a hearing. The magistrate then entered an order denying Auld's motion, accompanied by a memorandum opinion.

ISSUES

(1) Whether issues of material fact were present, rendering issuance of summary judgment improper.

(2) Whether absence of an oral hearing before issuance of the original order rendered that order invalid in this case.

OPINION

(1) Propriety of Summary Judgment

A. General

The primary principles governing summary judgment are so well settled as not to require citation of authority. A summary judgment may not issue when material issues of fact requiring trial to resolve are present. Evidence and inferences must be viewed and drawn in a light most favorable to the nonmoving party. The moving party bears the burden of showing absence of a material fact issue and doubt will be resolved against that party. Summary judgment is an important means of conserving judicial and other resources. It must, however, be carefully employed in appropriate cases for an improvident grant may deny a party a chance to prove a worthy case and an improvident denial may force on a party and the court an unnecessary trial.

Concurring as they must in applicability of the foregoing principles, ² the parties assert respectively the presence and absence in the record of an issue of fact material to a determination of whether the claimed invention was on sale before the critical date, June 12, 1973.

Though Auld asserts the contrary on appeal, the magistrate fully applied the principles listed above, saying in his memorandum opinion:

The only issue before the Court was whether the defendant was entitled to Summary Judgment as a matter of law or whether disputed issues of material fact remained requiring that the case proceed to trial.

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Various indicia of intent to sell preclude any serious possiblity [sic] that these efforts were merely experimental. First of all, sales representatives, not the Research and Development people, carried these samples around in their briefcases and showed them to customers. Prices and delivery times were discussed. Mr. Waugh's deposition makes it abundantly clear that, over a period of about four years, the D.L. Auld Company attempted to obtain orders for emblems made according to the patented process. This is precisely the activity that Section 102(b) attempts to limit to one year.

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Even the most indulgent reading of The D.L. Auld Company's business records and the deposition testimony of its Vice-President for Research and Development Robert E. Waugh precludes any other finding but that at least some sample products were made in the laboratory according to the Waugh patent and were offered for sale well outside of the statutorily protected year.

Waugh's invention is a method. The parties cite numerous cases involving "on sale" considerations in respect of product inventions under 35 U.S.C. § 102(b). The focus of inquiry here, however, is on the method. If Auld produced an emblem by the method of the invention and offered that emblem for sale before the critical date, the right to a patent on the method must be declared forfeited. Metallizing Engineering Co. v. Kenyon Bearing & Auto Parts Co., 153 F.2d 516, 68 USPQ 54 (2nd Cir.1946). The "forfeiture" theory expressed in Metallizing parallels the statutory scheme of 35 U.S.C. § 102(b), the intent of which is to preclude attempts by the inventor or his assignee to profit from commercial use of an invention for more than a year before an application for patent is filed. The record includes testimonial and documentary evidence establishing that the claimed method was employed in preparing a number of sample emblems and that Auld attempted to profit from use of that method by offering some of those samples for sale to a number of potential buyers well before the critical date. Those facts operate to create a forfeiture of any right to the grant of a valid patent on the method to Auld.

Where a method is kept secret, and remains secret after a sale of the product of the method, that sale will not, of course, bar another inventor from the grant of a patent on that method. The situation is different where, as here, that sale is made by the applicant for patent or his assignee. Though the magistrate referred to § 102(b), he did so in recognizing that the "activity" of Auld here was that which the statute "attempts to limit to one year." In so doing, the magistrate correctly applied the concept explicated in Metallizing, i.e. that a party's placing of the product of a method invention on sale more than a year before that party's application filing date must act as a forfeiture of any right to the grant of a valid patent on the method to that party if circumvention of the policy animating § 102(b) is to be avoided in respect of patents on method inventions.

B. Evidence of Sale

The involved emblems include a layer of clear plastic having a curved outer surface formed on a decoration-bearing base. Since 1965, Auld sold that type of emblem to the auto industry. The early emblems were made by the "Vitrolux" method, in which the base is a shallow cavity designed to receive a measured amount of liquid plastic, while the base was held horizontal. The quantity of plastic was greater than that required to fill the cavity, producing a curved upper surface. The plastic did not overflow the cavity walls because of its surface tension.

In about 1968, Waugh began work on a variation of the Vitrolux process. That work resulted in the Vitrofoil method, the subject of patent 4,100,010. The Vitrofoil method employs a flat sheet of metal as the base on which a metered amount of liquid plastic is deposited while the base is held horizontal. The plastic flows to the edge of the sheet without overflowing; its surface tension causing it to stop at the sheet's edge to form a curved upper surface.

Waugh testified in his deposition that as early as 1969, Auld was producing samples in accordance with the claimed method by hand, and that between 1969 and June 1973, Auld "showed these samples to people and said we [Auld] could do this, and we [Auld] could not generate any interest for the product". ³ Attempts to market those emblems were conducted by an outside manufacturer's representative and Auld's sales staff. The emblem produced by the Vitrofoil method initially would not sell and Auld for a period "shelved" the emblem produced by the Vitrofoil method.

Sample emblems were submitted to prospective customers, such as Cadillac, General Motors, Buick, Ford, Chrysler, and the National Hockey League and the National Football League, through a company called International Crest. Waugh said that the established sales practice in the automotive industry was to present samples to prospective customers, that Auld would not "tool up" without a purchase order, and that the submission of sample emblems produced by the Vitrofoil method followed Auld's established sales procedure.

Waugh testified that sample emblems submitted to prospective customers before the critical date were made in the laboratory following each of the steps set forth in Claim 1 of the patent in suit. He further said that the claimed method was not followed on some samples and a "postforming" operation was required on those particular emblems because they curled.

Waugh testified that of the samples submitted before June 1973 by the Auld sales department to International Crest, to interest them in the product for the National Football and Hockey Leagues, some were not made by the claimed method, but that others were. Auld quoted pricing and delivery dates in writing, for an order of more than 150,000 emblems, to International Crest.

Thus the record evidence includes corporate documents and testimony establishing that some sample emblems were produced by hand, following the steps of the method, and that those hand-produced emblems were offered...