J.A. LaPorte, Inc. v. Norfolk Dredging Co.

• Decision Date: 16 April 1986
• Docket Number: No. 85-2773,85-2773
• Citation: 787 F.2d 1577,229 USPQ 435
• Parties: J.A. LaPORTE, INC., Appellant, v. NORFOLK DREDGING COMPANY, Appellee. Appeal
• Court: U.S. Court of Appeals — Federal Circuit

Page 1577

787 F.2d 1577

229 U.S.P.Q. 435

J.A. LaPORTE, INC., Appellant, v. NORFOLK DREDGING COMPANY, Appellee.

Appeal No. 85-2773.

United States Court of Appeals, Federal Circuit.

April 16, 1986.

John T. Roberts, Roberts & Floyd, Washington, D.C., for appellant. With him on brief were W. Brown Morton, Jr., Warsaw, Va. and James C. Howell, Willcox & Savage, P.C., Norfolk, Va.

Robert A. Vanderhye, Nixon & Vanderhye, P.C., Arlington, Va., for appellee. With him on brief was Francis N. Crenshaw, Crenshaw, Ware & Johnson, Norfolk, Va.

Before FRIEDMAN, NIES and ARCHER, Circuit Judges.

NIES, Circuit Judge.

The determinative issue in this appeal is whether activities of a third party created an on-sale bar which invalidated the asserted claims of the patent in suit, No. 4,373,277. The application for the patent in suit for a "Cutter Extension Cone" was filed on December 7, 1981, and issued to Edward Cucheran. Rights in the patent have been granted to appellant, J.A. LaPorte, Inc. LaPorte sued Norfolk Dredging Company for infringement in the United States District Court for the Eastern District of Virginia (McKenzie C.J.). ¹ Norfolk challenged the validity of the Cucheran patent on two grounds under 35 U.S.C. Sec. 102(b), which provides for a loss of right to a patent where the claimed invention is in public use or on sale in this country more than one year prior to the filing date of the United States application. ² The district court here held that the Cucheran invention was both in public use and on sale prior to the critical date of December 7, 1980. We agree that the invention was on sale within the meaning of the statute and, accordingly, affirm the judgment.

Background

The claimed invention ³ is directed to hydraulic dredges of the type used to remove material from the bottom of river channels. These dredges use a cutter head to break up the mud and rock at the bottom of the river. The cutter head is a generally cone-shaped arrangement of helical blades. The helical shape of the turning blades acts to force material from the tip of the cutter back toward the inlet orifice of the suction pipe that carries the material up to the dredge.

The claimed invention is an extension of the cutter head situated behind the suction pipe inlet orifice. The extension carries helical blades oriented in the direction opposite those on the cutter head. The blades on the extension act to direct back toward the intake orifice material which the cutter head has directed past the orifice. LaPorte alleges that the Cucheran invention has doubled the efficiency of its hydraulic dredges.

I.

Cucheran invented and built his cutter extension in Canada in 1977. He successfully used it on dredges in Canada in 1977 and 1978. In 1978, a consulting engineer from Baltimore, Maryland, named Jantzen, of whom Cucheran was a client, photographed Cucheran's cutter extension. It is undisputed that Jantzen photographed the extension in Cucheran's presence, with his permission, and with no directions from him concerning confidentiality. In 1979, Jantzen gave a copy of the photograph to another of his customers, John MacDonald, the president of LaPorte. Jantzen told MacDonald of Cucheran's success with the extension and recommended that LaPorte use it on the LaPorte dredges. In November, 1980, MacDonald ordered a cutter extension from Jantzen, at a price of Jantzen's cost plus 15 percent, which was Jantzen's standard method of pricing where no design services were involved. Jantzen contracted with Ackerman & Baynes, Inc. of Baltimore for construction of the extension some time before November 25, 1980. Before initiating the project, Jantzen called Cucheran to let him know as a courtesy what Jantzen was doing and Cucheran said there was "no problem."

In early 1981, MacDonald began urging Jantzen to get Cucheran to seek a patent. An agreement was worked out in 1981 whereby Jantzen and LaPorte financed the preparation and prosecution of Cucheran's application. In return, Cucheran assigned LaPorte the patent rights for Virginia, North Carolina, South Carolina, Georgia and Florida, and gave Jantzen a one-third interest in the remaining rights. The application was filed on December 7, 1981.

Norfolk Dredging Company operates a commercial dredging business, primarily in Virginia, North Carolina, South Carolina, Georgia and Florida. In November, 1982, Norfolk Dredging hired Charles Gillikin as a consultant to work on improving the efficiency of one of its dredges. Gillikin was formerly LaPorte's dredging supervisor. While with LaPorte, he had seen and used the extension and had seen the photographs of the original Cucheran extension, and he recommended its installation on Norfolk's dredges. By January, 1983, Norfolk had ordered four extensions for its cutter heads from Gillikin. Norfolk Dredging does not contend that its cutter extensions are anything but the Cucheran invention.

The Cucheran patent issued February 15, 1983. Shortly thereafter LaPorte filed suit against Norfolk Dredging for patent infringement.

II.

The district court held that the purchase arrangement between Jantzen and LaPorte in November, 1980, created an on-sale bar. The district court applied the test enunciated in Barmag Barmer Maschinenfabrik AG v. Murata Machinery, Ltd., 731 F.2d 831, 221 USPQ 561 (Fed.Cir.1984), stating that test as follows:

(1) that the invention was embodied in the machine offered for sale;

(2) that the invention was reduced to practice and operable [before November, 1980]; and

(3) that the invention was on sale for profit and not for experimentation. ⁴

The court found that LaPorte's order met each of these requirements:

(1) that the Cucheran invention was fully embodied in the cutter cone constructed by Cucheran in 1977; that the sale in November 1980 was made from an actual photograph of that embodiment, in which all necessary details of this very simple device were fully disclosed. * * *

(2) that the Cucheran patent [sic, invention] was fully operable before the sale in November, 1980. It was successfully utilized on two occasions before November, 1980. Thus, it had been tested sufficiently to verify that it was commercially marketable; and

(3) that the cutter cone was on sale for profit in the transaction with LaPorte in November, 1980, and in no wise was such sale experimental. It is agreed that Jantzen made at least fifteen percent profit over the cost of the components and assembly labor. Reference is made to the holding in General Electric Co. v. United States, 654 F.2d 55, 59 (Ct.Cl.1981), wherein the CEC profit of 20-25 percent over costs of material and labor indicated to that court that the product was priced for sale and sold in a competitive market.

625 F.Supp. at 39-40, 227 USPQ at 384-85.

III. Issues

1. Was there a sale between Jantzen and LaPorte?

2. Was there no on-sale bar because the invention was not disclosed to the public at the time of the sale?

IV.

Although not stated in haec verba, the thrust of the district court's holding is that there was a sale, not merely an offer to sell, which created the Sec. 102(b) bar. ⁵ Whether we consider that Jantzen's promotion of the Cucheran extension to his "best customer," LaPorte, was an offer of sale which LaPorte accepted by ordering the extension from Jantzen or that LaPorte's purchase order was an offer to buy which Jantzen accepted, either proposition results in a sale before the critical date. See U.C.C. Sec. 2-206 (1962). Further, Sec. 102(b) renders invalid a patent directed to an invention placed on sale in the United States more than one year before filing of the patent application. That bar is not limited to sales by the inventor or one under his control, but may result from activities of a third party. Andrews v. Hovey, 124 U.S. 694, 719, 8 S.Ct. 676, 686, 31 L.Ed. 557 (1888); In re Caveney, 761 F.2d 671, 676, 226 USPQ 1, 4 (Fed.Cir.1985); Pennwalt Corp. v. Akzona, Inc., 740 F.2d 1573, 1580 n. 14, 222 USPQ 833, 837 n. 14 (Fed.Cir.1984); General Electric Co. v. United States, 654 F.2d 55, 61-62, 228 Ct.Cl. 192, 211 USPQ 867, 873 (1981). Nor does LaPorte disagree with that proposition of law. However, LaPorte argues that, if it had built the extension itself, there would be no on-sale bar and that having the device fabricated by another should have no different consequence. In LaPorte's view, Jantzen was simply LaPorte's agent to arrange for Ackerman & Baynes to make the extension for LaPorte. Under LaPorte's theory, there was no sale between Jantzen and LaPorte.

We must reject LaPorte's view of the facts. The district court found that LaPorte ordered the extension from Jantzen. See supra note 5. As evidence in support of that finding, we note that LaPorte repeatedly says it was Jantzen's "best customer." Moreover, LaPorte's president testified that he ordered the extension from Jantzen. Finally, Ackerman & Baynes billed Jantzen, not LaPorte, and LaPorte paid Jantzen his normal fee of cost (as billed by Ackerman) plus 15%. In contrast, LaPorte points to no evidence that Jantzen was LaPorte's "agent" on this transaction any more than on any other. The finding that LaPorte ordered the extension from Jantzen is not clearly erroneous. ⁶ Thus, a sale of the patented invention occurred before the critical date.

V.

Alternatively, LaPorte advances a theory that the sale in this case is not of the kind which gives rise to an on-sale bar as a matter of law. ⁷ Per LaPorte, while any commercial exploitation of an invention by an inventor (or his assigns) before the critical date works a forfeiture of his right to obtain a patent, in contrast, commercial exploitation by third parties does not work a forfeiture against the inventor unless the claimed invention is disclosed to the relevant "public" simultaneously with the sale.

In LaPorte's view, the only purpose of the third-party on-sale bar is to preclude the award of a patent to one who is not deemed an inventor because of...