KALVAR CORPORATION v. XIDEX CORPORATION

• Decision Date: 09 November 1973
• Docket Number: No. 70-1860-CBR.,70-1860-CBR.
• Parties: KALVAR CORPORATION, Plaintiff, v. XIDEX CORPORATION, Defendant.
• Court: U.S. District Court — Northern District of California

384 F. Supp. 1126

KALVAR CORPORATION, Plaintiff, v. XIDEX CORPORATION, Defendant.

No. 70-1860-CBR.

United States District Court, N. D. California.

November 9, 1973.

Cushman, Darby & Cushman, Lawrence A. Hymo, William T. Bullinger, Washington, D. C., Bronson, Bronson & McKinnon, E. D. Bronson, Jr., San Francisco, Cal., Calvin J. Laiche, New Orleans, La., for plaintiff.

Townsend & Townsend, Albert J. Hillman, Charles E. Townsend, Jr., Marvin W. Murray, Brobeck, Phleger & Harrison, John W. Larson, San Francisco, Cal., Milling, Saal, Benson, Woodward & Hillyer, Neal D. Hobson, New Orleans, La., for defendant.

OPINION AND ORDER DISMISSING ACTION

RENFREW, District Judge.

On September 1, 1970, Kalvar Corporation ("Kalvar") brought this action against Xidex Corporation ("Xidex") in a two-count complaint alleging patent infringement and unfair competition. The jurisdiction of the Court was invoked pursuant to 28 U.S.C. § 1338(a) and 35 U.S.C. § 281. Defendant's First Amended Answer and Counterclaims, filed on July 21, 1972, included a counterclaim charging a violation of the antitrust laws and a counterclaim for declaratory relief with respect to the validity, infringement, and enforceability of United States Patent No. 3,149,971. Specifically, defendant claimed that the patent in question was invalid because the invention covered by it was in public use or on sale, within the meaning of 35 U.S.C. § 102(b), more than one year prior to the filing date of the original patent application on which the patent was granted.

Accordingly, by agreement of the Court and the parties a separate trial on the limited issue of the validity of United States Letters Patent 3,149,971 under 35 U.S.C. § 102(b) was held pursuant to Rule 42(b) of the Federal Rules of Civil Procedure, commencing on December 11, 1972. The trial was held from that date through December 19, 1972. Then, after submission of post-trial briefs by counsel, final argument was heard on April 27 and 28, 1973. Counsel for Kalvar asked the Court to delay rendering its opinion in the hope that the case could be settled. At a settlement conference held on August 2, 1973, Kalvar counsel advised the Court that settlement appeared unlikely. At the Court's suggestion, the parties agreed to make one last effort to see if the matter was capable of settlement. By letters dated August 8, 1973, the parties each advised the Court that settlement was not possible.

This opinion constitutes this Court's Findings of Fact and Conclusions of Law on the issue of patent invalidity pursuant to Rule 52(a) of the Federal Rules.

Kalvar Corporation, a Louisiana corporation, was organized in 1956 as a successor to T. J. Moran's Sons, Inc., to develop and promote vesicular photography, a process by which a photographic image is produced in the form of vesicles, or very small bubbles, in a plastic vehicle by exposing the photographic material to light and then heating it. The patent itself pertains to a manufacturing process in which vesicular photographic material is treated with a hot aqueous fluid by a process known as "thermal cycling" so as to improve its photographic characteristics, particularly the film's ability to yield continuouston reproductions.

Kalvar, upon its formation, actively experimented with new kinds of vesicular photographic materials, heat treatments, and manufacturing techniques. In 1956, it produced a variety of vesicular photographic materials, some of which were subjected to the thermal cycling process and some of which were not. The patent in question, United States Letters Patent No. 3,149,971 for "Method of Improving Gradation of Light Scattering Photographic Material," was granted to Kalvar on September 22, 1964, based upon a patent application filed in the Patent Office on October 14, 1958.

For purposes of this separate trial, defendant Xidex prays for a decree that United States Letters Patent No. 3,149,971 is invalid by reason of prior public use or sale under 35 U.S.C. § 102(b).¹ Therefore, the critical date for purposes of making that determination is October 14, 1957, one year prior to the filing of the application which was to result in the issuance of the patent.

Since 1956 Kalvar activities can be viewed as falling into two basic categories — research and development in vesicular photographic materials and applications and the sale of vesicular photographic materials. While the relative degree of involvement in the respective activities was the subject of some dispute at trial, there was no question but that there were sales of film. Of the vesicular photographic materials produced by Kalvar, however, some materials were subjected to the patented process and some were not. For purposes of this inquiry, it becomes necessary to determine whether or not sales were made of vesicular materials which had been subjected to the patented process.

The experimental program conducted by Kalvar involved determining the effect on the vesicular photographic material of using plastics, individually and in mixture with each other, the effect of various sensitizers, and an evaluation of the effect of manufacturing conditions on photographic characteristics. Experimentation also involved different kinds of heat treatments to drive off solvents. The sales program of Kalvar, on the other hand, included, it is claimed by defendant, a major Government procurement contract for vesicular photographic materials as well as sales to private customers. In addition, defendant alleges extensive promotional activities on behalf of Kalvar for the purpose of generating sales of film which had been subjected to the patented process.

Much of the initial inquiry at trial was directed at determining whether, in fact, Kalvar's production activities and capabilities were such as to allow them to produce thermally cycled vesicular photographic materials in amounts sufficient in quantity and quality to offer film subject to the patented process into commercial sale or use.

It is clear that prior to June 1, 1957, Kalvar had developed a crude apparatus to thermal cycle vesicular materials in roll form. In May of 1957 Kalvar's first attempt to carry out thermal cycling on a large scale was initiated in connection with a Naval Research and Development contract to develop a vesicular photographic paper for duplicating aerial reconnaissance photographs. Contrary to Kalvar's assertions, it is clear that Kalvar attempted to meet this contract using a thermally cycled vesicular product. As evidenced by the language of a May 1957 progress report (Defendant's Exhibit 65, pp. 5-6), although "the apparatus for thermal-cycling was a crude experimental set up * * * a new apparatus had been designed" which was expected to be completed by July 1, 1957.

This apparatus was not in fact completed until sometime between August 2 and August 16, 1957, as evidenced by the several purchase orders made in the course of modifying the apparatus after its installation at the Kalvar facilities on August 2 (Plaintiff's Exhibit 199). While the precise manner in which this machine operated need not concern the Court, suffice it to say that the modified rollers were installed prior to the critical date and that between those two dates, a number of rolls of marketable vesicular photographic paper and film were produced by the thermal-cycling apparatus. Therefore, although Kalvar could not undertake rapid production for purposes of meeting large orders, Kalvar's equipment was capable of and did produce marketable film subject to the patented process.

The evidence conclusively establishes that, prior to the critical date, thermally cycled vesicular photographic film was sold and samples distributed to numerous individuals and organizations. Under the law, it appears that either of these activities is sufficient to invalidate the patent. The actual sale of the product made by the patented process invalidates the patent under 35 U.S.C. § 102(b). The courts have long held this to be so even if there was but one unrestricted sale. See Smith & Griggs Mfg. Co. v. Sprague, 123 U.S. 249, 257, 8 S. Ct. 122, 31 L.Ed. 141 (1887); Tool Research and Engineering Corp., v. Honcor Corp., 367 F.2d 449, 453 (9 Cir. 1966). In addition, courts have held that the quotation of prices and attempts to sell the product require invalidating the patent as having had the patented process "on sale." In other words, actual sales need not be present to establish that the product was "on sale." Chromalloy American Corp. v. Alloy Surfaces Co., 339 F.Supp. 859, 869 (D.Del.1972). The policy considerations underlying this rule are clear and have been enunciated by the courts of this circuit many times. See Pickering v. Holman, 459 F.2d 403, 406 (9 Cir. 1972); Super Mold Corporation v. Clapp's Equipment Division, Inc., 397 F.2d 932, 933 (9 Cir. 1968). In Cataphote Corporation v. De Soto Chemical Coatings, Inc., 356 F.2d 24 (9 Cir. 1966), cert. denied, 385 U.S. 832, 87 S. Ct. 71, 17 L.Ed.2d 67 (1966), the court set out that policy:

"The express purpose of this statutory provision was to prevent the extension of the monopoly period permitted by the patent laws by requiring an inventor to make timely application so that the patent period might commence to run without undue delay." 356 F.2d at 25.

In contending that the patented process was in public use or on sale, defendant alleges a series of commercial activities or transactions, prior to the critical date, involving vesicular photographic paper and film, both of which had been subjected to the patented process. The transactions relied on include alleged distribution of samples, offers to sell, demonstrations and three completed sales of the film and paper, all prior to the critical date. For purposes of further discussion, the Court will divide its inquiry into an examination of Kalvar's distribution of samples and promotional activities and then its alleged actual sales of film.

In making these...