Dippin' Dots, Inc. v. Mosey

• Decision Date: 09 February 2007
• Docket Number: No. 2005-1330.,No. 2005-1582.,2005-1330.,2005-1582.
• Citation: 476 F.3d 1337
• Parties: DIPPIN' DOTS, INC. and Curt D. Jones, Plaintiffs-Appellants, v. Thomas R. MOSEY, Dots of Fun, International Laser Expressions, Inc. (also known as I.L.E., Inc.), and Nicholas Angus, Defendant/Counterclaimant-Cross Appellant, and Frosty Bites Distribution LLC, Defendant-Appellee, and Frosty Bites Distributor of Florida, Inc., Frosty Bites Distributor of Georgia, Inc., Frosty Bites of Michigan, Inc., J & J Concessions of New Jersey, Inc., Frosty Bites Ice Cream Company, LLC, Frosty Bites South, Inc., International Association of Amusement Parks and Attractions, Frosty Bites of New York, LLC, and Frosty Bites Ice Cream Development, LLC, Defendants, v. F. Robert Esty, Jr., Barry Jay Bass, Victor Bauer, Jack Miller, Daniel Kilcoyne, Shawn P. Kilcoyne, and Daniel Dopko, Counterclaim Defendants, and Frosty Bites, Inc. (now known as Mini Melts, Inc.), Counterclaim Defendant-Cross Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

476 F.3d 1337

DIPPIN' DOTS, INC. and Curt D. Jones, Plaintiffs-Appellants, v. Thomas R. MOSEY, Dots of Fun, International Laser Expressions, Inc. (also known as I.L.E., Inc.), and Nicholas Angus, Defendant/Counterclaimant-Cross Appellant, and Frosty Bites Distribution LLC, Defendant-Appellee, and Frosty Bites Distributor of Florida, Inc., Frosty Bites Distributor of Georgia, Inc., Frosty Bites of Michigan, Inc., J & J Concessions of New Jersey, Inc., Frosty Bites Ice Cream Company, LLC, Frosty Bites South, Inc., International Association of Amusement Parks and Attractions, Frosty Bites of New York, LLC, and Frosty Bites Ice Cream Development, LLC, Defendants, v. F. Robert Esty, Jr., Barry Jay Bass, Victor Bauer, Jack Miller, Daniel Kilcoyne, Shawn P. Kilcoyne, and Daniel Dopko, Counterclaim Defendants, and Frosty Bites, Inc. (now known as Mini Melts, Inc.), Counterclaim Defendant-Cross Appellant.

No. 2005-1330.

No. 2005-1582.

United States Court of Appeals, Federal Circuit.

February 9, 2007.

Daniel J. Warren, Sutherland Asbill & Brennan LLP, of Atlanta, GA, argued for plaintiffs-appellants, Dippin Dots, Inc. and Curtis D. Jones. With him on the brief were Candice C. Decaire, Erin C. Witkow, and Troy R. Covington. of counsel was Todd Stockwell, Stockwell & Associates, of Lexington, KY.

Robert G. Oake, Jr., Oake Law Office, of Allen, Texas, and Rudolf O. Siegesmund, Siegesmund & Associates, of Dallas, TX, argued for defendants-cross-appellants Thomas R. Mosey et al., defendant/counterclaimant-cross appellant Nicholas Angus, and counterclaim defendant-cross appellant, Frosty Bites, Inc. (now known as Mini Melts, Inc.).

Keith E. Broyles, Alston & Bird LLP, of Atlanta, GA, argued for defendant-appellee. With him on the brief were Stacey A. Mollohan and William R. Hubbard.

Before MAYER, RADER, and GAJARSA, Circuit Judges.

GAJARSA, Circuit Judge.

This is a patent infringement and antitrust case dealing with a unique ice cream product. Plaintiffs Dippin' Dots, Inc. and Curt D. Jones (collectively "DDI") appeal from the district court's claim construction and summary judgment of noninfringement of U.S. Patent No. 5,126,156 ("the '156 patent") and from the judgment following jury trial that all claims of that patent are obvious, that the patent is unenforceable due to inequitable conduct during prosecution, and that DDI violated the antitrust laws by asserting a patent that had been procured through fraud on the Patent Office. We affirm the judgments of noninfringement, obviousness, and unenforceability, but reverse as to the antitrust counterclaim.

I. BACKGROUND

A. The Technology and Patent

The '156 patent, covering subject matter invented by plaintiff Jones and exclusively licensed to plaintiff Dippin' Dots, is directed to a process for making a form of cryogenically prepared novelty ice cream product. Claim 1, the only independent claim, reads:

A method of preparing and storing a free-flowing, frozen alimentary dairy product, comprising the steps of:

[(1)] preparing an alimentary composition for freezing;

[(2)] dripping said alimentary composition into a freezing chamber;

[(3)] freezing said dripping alimentary composition into beads;

[(4)] storing said beads at a temperature at least as low as -20° F. so as to maintain said beads free-flowing for an extended period of time;

[(5)] bringing said beads to a temperature between substantially -10° F. and -20° F. prior to serving; and

[(6)] serving said beads for consumption at a temperature between substantially -10° F. and -20° F. so that said beads are free flowing when served.

'156 patent col.6 ll.41-57 (numbering added for reference). DDI has commercialized this process. The ice cream it produces, sold under the Dippin' Dots brand, is known to patrons of amusement parks, stadiums, shopping malls, and the like.

The initial application that eventually issued as the '156 patent, filed on March 6, 1989, omitted the final "serving" step from Claim 1. The examiner rejected all of the claims as obvious in light of Canadian Patent No. 964,921, of Aref et al. DDI appealed the rejections to the Board of Patent Appeals and Interferences ("Board"), which affirmed the rejection. DDI then filed a continuation application, amending Claim 1 by adding the "serving" step. The examiner again rejected over the Aref reference, noting that "dependent on the food product being served," it would be obvious to serve the product in a cold, free-flowing state. DDI then submitted a declaration pursuant to 37 C.F.R. § 1.132 in which it submitted evidence of the significant commercial success of its method. It argued that its commercial success should weigh against a finding of obviousness. See Graham v. John Deere Co., 383 U.S. 1, 17-18, 86 S.Ct. 684, 15 L.Ed.2d 545 (1966) (noting that commercial success is one of the "secondary considerations" that may serve as "indicia of . . . nonobviousness"). The examiner agreed and the '156 patent issued in June 1992.

B. The Festival Market Sales

Much of the debate in this case centers on the import of sales made at the Festival Market mall in Lexington, Kentucky, more than a year before DDI filed its patent application. Sales made more than one year before the patent's priority date implicate the on-sale bar of 35 U.S.C. § 102(b). For the '156 patent, this critical date is March 6, 1988. Starting on July 24, 1987, Jones sold cryogenically-prepared, largely beaded ice cream at the Festival Market. During Jones's time at Festival Market, which lasted at least until July 29th, over 800 customers purchased his beaded ice cream and others received free samples. The customers were permitted to leave with the product and were not restricted by any kind of confidentiality agreement. Jones later testified that his main goal at the Festival Market was to "get . . . test-marketing information" and not to further develop technical aspects of his product such as particular temperature ranges for storage and service.

It is undisputed that the Festival Market sales were never disclosed to the Patent and Trademark Office ("PTO") during prosecution of the '156 patent. The declaration of commercial success which ultimately persuaded the examiner to grant the patent contained a sworn statement by Jones that "[t]he initial sales were in March of 1988," which was on or after the critical date.

Jones testified that at Festival Market he only practiced the first three steps of the claimed method, not the storing, bringing, or serving steps. He testified that he considered the evidence of what had happened at Festival Market to be irrelevant to patentability. The attorney who prosecuted the '156 patent, Warren Schickli, testified that he considered the sales to have been experimental since the process as practiced at Festival Market could not be feasibly commercially exploited. He also testified that the Festival Market ice cream was not sold for "direct consumption" under the meaning of Claim 1, because the ice cream was too cold to eat comfortably when initially given to the consumer.

C. Prior Litigation

The controversy in this case began when several of DDI's distributors severed their relationship, found alternative manufacturing sources, and entered into competition against DDI. DDI initiated a series of patent infringement lawsuits against its new competitors in various judicial districts. In this appeal, the defendants fall into two primary categories: the "manufacturing parties" who make the competing ice cream product and the "distributing parties" who sell it to consumers.¹ The defendants counterclaimed for violation of § 2 of the Sherman Act due to DDI's allegation of patent infringement based on a fraudulently acquired patent. This type of antitrust claim has become known as a "Walker Process" claim, named for the Supreme Court's decision in Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 177, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965). The various suits were consolidated by the Judicial Panel on Multi-District Litigation for pretrial proceedings before the United States District Court for the Northern District of Georgia, with Judge Thomas W. Thrash presiding. That court adopted in large part an earlier-recommended claim construction by a special master. In re Dippin' Dots Patent Litig., 249 F.Supp.2d 1346, 1366 (N.D.Ga.2003). It issued summary judgment of noninfringement both literally; id. at 1368, and via the doctrine of equivalents, id. at 1370-71. It refused to grant summary judgment to any party on invalidity, id. at 1362, 1364, or on inequitable conduct, id. at 1365.²

After the pretrial proceedings in the Northern District of Georgia were completed, the case was remanded to the United States District Court for the Northern District of Texas. Judge Thrash, sitting by designation, continued to preside over the Northern District of Texas proceedings. That court conducted a jury trial on the issues of invalidity, unenforceability, and antitrust violations by DDI. By special verdict, the jury found that the sales by Jones prior to March 1988 could be asserted against the patent as prior art and that all claims of the '156 patent were invalid as obvious. The jury also found that both Jones and Schickli had, with intent to deceive, made material misrepresentations or omissions in violation of the duty of candor to the PTO. It also determined that defendants Mini Melts, Inc. and Frosty Bites Distribution had proven all required elements of their antitrust counterclaim, including the requisite fraud on the PTO. However, it found no antitrust damages, granting the counterclaim plaintiffs zero dollars in damages on their Sherman Act counterclaim. The district court denied DDI's motion for judgment notwithstanding the verdict (JMOL), finding that there was sufficient evidence for the jury to find all claims obvious and that DDI had withheld a material reference with the deceptive intent required for Walker...