Kock v. Quaker Oats Co.

• Decision Date: 15 July 1982
• Docket Number: No. 80-4072,80-4072
• Citation: 681 F.2d 649
• Parties: Bruce A. KOCK, Plaintiff-Appellant, v. The QUAKER OATS COMPANY, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 649

681 F.2d 649

215 U.S.P.Q. 200

Bruce A. KOCK, Plaintiff-Appellant, v. The QUAKER OATS COMPANY, et al., Defendants-Appellees.

No. 80-4072.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 12, 1981.

Decided July 15, 1982.

Sidney F. DeGoff, DeGoff & MacGowan, San Francisco, Cal., for plaintiff-appellant.

Lawrence Rosenthal, Blum, Kaplan, Friedman, Silberman & Beran, New York City, for defendants-appellees.

Appeal from the United States District Court for the Northern District of California.

Before WALLACE, KENNEDY, and PREGERSON, Circuit Judges.

KENNEDY, Circuit Judge:

The appeal comes from a patent infringement suit where the trial court, within the confines of a summary judgment motion, determined the patent invalid. The court ruled that 35 U.S.C. § 102(b) (1976) operates to invalidate the patent because the invention had been on sale for longer than one year before the date of the patent application. All concede that certain rights to the invention were transferred by an agreement executed more than a year before the patent application. The inventor argues that the transfer was for an experimental purpose and so not within the bar of the cited statute, while the defendant in the infringement suit argues the contract was a sale not limited to that purpose. We agree that summary judgment must be entered for the defendant below based on the cited statute, although on reasoning somewhat different from that of the court below, and we affirm.

Bruce A. Kock, the inventor in this case, was the plaintiff below and is appellant here. Kock undertook a project for Merry Manufacturing Company (Merry). Kock was to be paid one thousand dollars "for the development and building of one working prototype toy watch movement, exclusively for Merry Manufacturing Company." The toy watch had to be accurate, tick when running, run for one hour per winding, be easily assembled, and be marketable at one dollar retail, allowing for a thirty percent profit margin.

Kock came up with a prototype he thought met these specifications. On April 28, 1967, Kock and the Company signed the agreement here in question. ¹ One clause states, "The INVENTOR hereby sells, assigns and transfers all rights to his novelty toy watch movement and any invention embodied therein to the (Merry) COMPANY." The agreement supplies the basis for the contention of the alleged patent infringers that the patent was void under section 102(b). The district court granted summary judgment for the defendants, reasoning, first, that under the case of Robbins Co. v. Lawrence Mfg. Co., 482 F.2d 426 (9th Cir. 1973), the court may not look beyond the four corners of the written contract in search for an experimental purpose, and second, that the experiments undertaken by Merry were commercial and so not the sort within the experimental purpose exception to the on sale bar of section 102(b).

We begin by exploring the history and rationale of the on sale bar and the experimental purpose exception to it.

35 U.S.C. § 102(b) (1976) states:

A person shall be entitled to a patent unless ... (b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States. (Emphasis added.)

The public use or on sale bar has been part of patent law in some form since 1836. The last amendment to section 102(b) occurred in 1939, when Congress shortened the grace period from two years to one year. Act of August 5, 1939, ch. 450, § 1, 53 Stat. 1212. See generally 2 D. Chisum, Patents: A Treatise on the Law of Patentability, Validity and Infringement § 6.02 (1979) at 6-5 to 6-16.

The one year grace period gives inventors an incentive to pursue diligently the patent process after their invention is ready for commercial application. This serves to limit the monopoly to the statutory period, Pickering v. Holman, 459 F.2d 403, 406 (9th Cir. 1972), and also encourages inventors to place their handiwork in the public domain as soon as possible so all may benefit from it. Pennock v. Dialogue, 27 U.S. (2 Pet.) 1, 19, 7 L.Ed. 327 (1829); Gould Inc. v. United States, 579 F.2d 571, 580 (Ct.Cl.1978); Atlas v. Eastern Air Lines, Inc., 311 F.2d 156, 159 (1st Cir. 1962), cert. denied, 373 U.S. 904, 83 S.Ct. 1290, 10 L.Ed.2d 199 (1963). See also Note, New Guidelines for Applying the On Sale Bar to Patentability, 24 Stan.L.Rev. 730, 732-736 (1972).

Not all transfers from an inventor to a third party trigger the bar of section 102(b). If a transfer is made for the dominant purpose of experimentation, that is, to perfect the invention, and only incidentally for the profit of the inventor, then there is no public use or sale within the meaning of the statute.

The classic case for the experimental use exception is City of Elizabeth v. American Nicholson Pavement Co., 97 U.S. 126, 24 L.Ed. 1000 (1878):

It is sometimes said that an inventor acquires an undue advantage over the public by delaying to take out a patent, inasmuch as he thereby preserves the monopoly to himself for a longer period than is allowed by the policy of the law; but this cannot be said with justice when a delay is occasioned by a bona fide effort to bring his invention to perfection, or to ascertain whether it will answer the purpose intended ... (I)t is the interest of the public, as well as himself, that the invention should be perfect and properly tested, before a patent is granted for it.

Any attempt to use it for a profit, and not by way of experiment, for a longer period than two years (the grace period at that time), would deprive the inventor of his right to a patent. Id. at 137.

Thus, City of Elizabeth held that "the use of an invention by the inventor himself, or of any other person under his direction, by way of experiment, and in order to bring the invention to perfection" was not a public use within section 102(b). Id. at 134.

The experimental purpose exception applies to the sale of an invention under § 102(b), just as it does to its use. Although the Supreme Court has never had occasion to so hold, we think the law is clear on the point. Robbins Co. v. Lawrence Mfg. Co., 482 F.2d 426, 430 (9th Cir. 1973); Red Cross Mfg. Corp. v. Toro Sales Co., 525 F.2d 1135, 1144 (7th Cir. 1975); In re Yarn Processing Patent Validity Litigation, 498 F.2d 271, 277 (5th Cir. 1974), cert. denied, 419 U.S. 1057, 95 S.Ct. 640, 42 L.Ed.2d 654 (1974); see generally, Chisum, supra, section 6.02(6), (7).

To insure that abuses section 102(b) is designed to prevent do not arise, the burden of proof that sale is for an experimental purpose is on the inventor. The Supreme Court so indicated in Smith & Griggs Mfg. Co. v. Sprague, 123 U.S. 249, 8 S.Ct. 122, 31 L.Ed. 141 (1887):

In considering the evidence as to the alleged prior use for more than two years of an invention which, if established, will have the effect of invalidating the patent, and where the defense is met only by the allegation that the use was not a public use in the sense of the statute, because it was for the purpose of perfecting an incomplete invention by tests and experiments, the proof, on the part of the patentee, the period covered by the use having been clearly established, should be full, unequivocal, and convincing.

Id. at 264, 8 S.Ct. at 129; see also Omark Industries, Inc. v. Carlton Co., 652 F.2d 783, 787 (9th Cir. 1980); Aerovox Corp. v. Polymet Mfg. Corp., 67 F.2d 860, 861 (2d Cir. 1933).

The appellees argue, and the district court agreed, that the testing which occurred in this case, even if it was the purpose for the sale, was "that of a trader, not of an inventor." They insist that the experimentation required to stop the running of the time period is limited to determining the operability of the patented invention itself. We think that is too narrow a formulation.

In determining whether the transfer fell within the statutory exception, or the closely related question whether the pleadings presented a triable issue of fact on the point, we must examine the distinction between tests and research for experimental purposes and those for commercial purposes. The dichotomy may not be easy to apply since experimentation, for most inventors, is only a means to later commercial exploitation. The precedents allow such a distinction to be stated, however. Where the purpose of a sale is to investigate or stimulate the demand for the product, the object of the transfer is deemed commercial, not experimental, and the exception does not apply. Such a sale is within the bar of section 102(b). Omark Industries, Inc. v. Carlton, 652 F.2d 783, 787-88 (9th Cir. 1980); Kalvar Corp. v. Xidex Corp., 556 F.2d 966, 967-68 (9th Cir. 1977); Cataphote Corp. v. DeSoto Chemical Coatings, Inc., 356 F.2d 24, 27 (9th Cir. 1966), aff'g, 235 F.Supp. 931 (N.D.Cal.1964), cert. denied, 385 U.S. 832, 87 S.Ct. 71, 17 L.Ed.2d 67 (1966); Paeco, Inc. v. Applied Moldings, Inc., 562 F.2d 870, 874-75 (3d Cir. 1977); Dart Industries, Inc. v. E. I. Dupont DeNemours & Co., 489 F.2d 1359, 1366 (7th Cir. 1973).

On the other hand, where the purpose of the sale, as revealed by objective circumstances, is to determine whether the invention can be improved, or reduced to operable, manufacturable, and useful form, a valid experimental purpose exists.

When an invention has been reduced to practice, further public testing and demonstration may well support an inference that the inventor's intent is to exploit the invention, but "there may be an experimental use even following reduction to practice where the experiments are an attempt to further refine the device."

Del Mar Engineering Laboratories v. Physio-Tronics, 642 F.2d 1167 at 1169 (9th Cir. 1981), quoting Cataphote Corp. v. DeSoto Chemical Coatings, Inc., 235 F.Supp. 931, 934 (N.D.Cal.1964). " '(A)n inventor may ... wait until he learns whether his invention is of...