LaBounty Mfg., Inc. v. U.S. Intern. Trade Com'n

• Decision Date: 12 March 1992
• Docket Number: No. 90-1282,90-1282
• Citation: 958 F.2d 1066,22 USPQ2d 1025
• Parties: , 22 U.S.P.Q.2d 1025 LABOUNTY MANUFACTURING, INC., Appellant, v. UNITED STATES INTERNATIONAL TRADE COMMISSION, Appellee, Dudley Shearing Machine Manufacturing Co., Ltd., Intervenor-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1066

958 F.2d 1066

13 ITRD 2281, 22 U.S.P.Q.2d 1025

LABOUNTY MANUFACTURING, INC., Appellant, v. UNITED STATES INTERNATIONAL TRADE COMMISSION, Appellee Dudley Shearing Machine Manufacturing Co., Ltd., Intervenor-Appellee.

No. 90-1282.

United States Court of Appeals Federal Circuit.

March 12, 1992.

Rehearing Denied May 5, 1992.

R.V. Lupo, William Brinks Olds Hofer Gilson & Lione, Washington, D.C., argued, for appellant. With him on the brief were Donna M. Tanquay and Mark G. Davis. Also on the brief were H. Dale Palmatier and Gerald E. Helget, Palmatier & Sjoquist, Minneapolis, Minn.

Jean H. Jackson, Office of the General Counsel, U.S. Intern. Trade Com'n, Washington, D.C., argued, for appellee. On the brief for the appellee were Lyn M. Schlitt, General Counsel, James A. Toupin, Asst. General Counsel and John M. England, Jr., Office of General Counsel, U.S. Intern.

                Trade Com'n, Washington, D.C.   W. Thad Adams, III, of W. Thad Adams, III, P.A., Charlotte, N.C., argued, for intervenor-appellee
                

Before NIES, Chief Judge, LOURIE and RADER, Circuit Judges.

NIES, Chief Judge.

LaBounty Manufacturing, Inc., appeals from the final determination of the United States International Trade Commission (ITC) in Investigation No. 337-TA-252, Certain Heavy Duty Mobile Scrap Shears, that U.S. Patent No. 4,519,135 ('135) was unenforceable due to inequitable conduct and thus, no violation of 19 U.S.C. § 1337 (1988) was established by Dudley Shearing Machine Manufacturing Co., Ltd. We affirm.

I. BACKGROUND

A. History of the Litigation

LaBounty filed a complaint with the ITC in 1986, alleging a violation of the Tariff Act of 1930, as amended, 19 U.S.C. § 1337 by Dudley Shearing Machine Manufacturing Co., Ltd., a British manufacturer of scrap shears, and its U.S. subsidiary, Dudley Shearing Inc. (collectively, "Dudley") due to the importation and sale of Dudley's heavy-duty mobile scrap shears that were alleged to infringe all 22 claims of the '135 patent owned by LaBounty. ¹ In the initial phase of this case, the ITC held there was no violation of the statute because Dudley did not infringe any claim of the '135 patent. The ITC did not reach the issues of validity and enforceability of LaBounty's patent. On appeal, this court vacated the noninfringement finding and remanded the case for reconsideration. LaBounty Mfg. Inc. v. United States Int'l Trade Comm'n, 867 F.2d 1572, 9 USPQ2d 1995 (Fed.Cir.1989).

The remand resulted in a second determination by the ITC that there was no section 1337 violation, this time on the ground that LaBounty's '135 patent is unenforceable due to inequitable conduct during prosecution in that LaBounty intentionally withheld material prior art from the Patent and Trademark Office (PTO). Specifically, LaBounty was found to have failed to disclose certain devices denominated the "MS107," "Adamo/Dodge," and "Ace" shears, which it had placed on sale or in public use more than one year prior to filing the application for the '135 patent. These shears were found to either anticipate certain claims of the '135 patent or, in any event, to be "far closer to the claimed inventions than any of the art cited by the examiner...." Scrap Shears, Inv. No. 337-TA-252, slip op. at 96. From all of the evidence, the ITC found that LaBounty had intended to mislead the PTO and that the '135 patent was therefore unenforceable due to LaBounty's inequitable conduct.

B. Patented Invention

The '135 patent relates to a type of heavy duty scrap shear for use in cutting up scrap metal, especially iron or steel pipes and structural steel. ² The shear is The guide blade ... has its upper edge spaced well below the cutting edge of the lower shear blade. The guide blade will thereby provide ... support for the workpiece after the blades have sheared off a length of the workpiece. The backhoe boom and shear may then be swung to the side and thereby move the shear blade along the workpiece in preparation for cutting off another length of the workpiece. As a result, a long girder or pipe or heavy cable may be cut several times into short lengths without dropping the workpiece and without having to repeatedly pick the workpiece off the ground.

                designed to be attached to the boom structure and hydraulic system of a construction machine known as a "backhoe."   The shear is comprised of two jaws engaged in a scissor-like fashion, one lower and one upper.   The upper jaw is a single movable shear (cutting) blade, whereas the stationary lower jaw has two blades--one shear blade and one guide blade.   The invention operates by way of the upper blade closing upon the lower shear blade causing the workpiece to be severed in a single place.   The guide blade performs a "receive and support" function for the workpiece as explained in the specification of the '135 patent
                

As indicated above, the upper edges of both the inner (the part closer to the pivot) and outer portions of the guide blade are offset below the cutting edge of the lower shear blade to provide a cradle to receive and support the workpiece after the cut. This offset acts to minimize the possibility of double-cutting, which occurs when both the shear and guide blades cut the workpiece.

II.

INEQUITABLE CONDUCT

Applicants for patents are required to conduct themselves with candor in their dealings with the PTO. Thus, if an applicant withholds material information from the PTO with intent to affect the allowance of claims, the applicant may be found guilty of inequitable conduct and the patent obtained would be rendered unenforceable. FMC Corp. v. Manitowoc Co., 835 F.2d 1411, 1415, 5 USPQ2d 1112, 1115 (Fed.Cir.1987). The elements of materiality of withheld information and culpable intent must be established by clear and convincing evidence. An equitable judgment must be made that, in light of all the particular circumstances, the conduct of the patentee is so culpable that its patent should not be enforced. Hewlett-Packard Co. v. Bausch & Lomb, Inc., 882 F.2d 1556, 1566, 11 USPQ2d 1750, 1755 (Fed.Cir.1989), cert. denied, 493 U.S. 1076, 110 S.Ct. 1125, 107 L.Ed.2d 1031 (1990); Kingsdown Medical Consultants v. Hollister Inc., 863 F.2d 867, 876, 9 USPQ2d 1384, 1392 (Fed.Cir.1988), cert. denied, 490 U.S. 1067, 109 S.Ct. 2068, 104 L.Ed.2d 633 (1989); J.P. Stevens & Co. v. Lex Tex Ltd., 747 F.2d 1553, 1560, 223 USPQ 1089, 1092 (Fed.Cir.1984), cert. denied, 474 U.S. 822, 106 S.Ct. 73, 88 L.Ed.2d 60 (1985). While the ultimate decision that inequitable conduct occurred is committed to a trial judge's discretion, Manville Sales Corp. v. Paramount Sys., 917 F.2d 544, 551, 16 USPQ2d 1587, 1592 (Fed.Cir.1990), the decision may not be upheld where the exercise of discretion rests on erroneous findings of facts or on a misunderstanding of the law. Id. Such As grounds for reversal of ITC's determination of inequitable conduct, LaBounty argues that it withheld no material prior art from the PTO and, thus, could not be guilty of inequitable conduct. Per LaBounty, (1) the undisclosed Adamo/Dodge and Ace shears were not prior art devices because they were offered for sale and used by prospective customers only for experimental purposes and (2) the MS107 shears, a device admittedly on sale, does not anticipate the claims of the '135 patent and was substantially disclosed in U.S. Patent No. 4,198,747 ('747) which was before the PTO examiner. LaBounty also asserts it held a good faith belief that the above devices did not have to be disclosed to the PTO, and that, therefore, the requisite "intent to deceive" was lacking.

                findings of the ITC may be overturned only if they are unsupported by substantial evidence.   See Tandon Corp. v. United States Int'l Trade Comm'n., 831 F.2d 1017, 1019, 4 USPQ2d 1283, 1284-85, 5 Fed.Cir.  (T) 129, 130 (Fed.Cir.1987) (citing 19 U.S.C. § 1337(c), which incorporates 5 U.S.C. § 706(2)(E) (1988)).
                

A. Prior Art

The patent statute provides, in pertinent part, in 35 U.S.C. § 102 (1988):

A person shall be entitled to a patent unless--

* * * * * *

(b) the invention was ... 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....

Section 102(b) may create a bar to patentability either alone, if the device placed on sale is an anticipation of the later claimed invention or, in conjunction with 35 U.S.C. § 103 (1988), if the claimed invention would have been obvious from the on-sale device in conjunction with the prior art. ³ In re Corcoran, 640 F.2d 1331, 1333, 208 USPQ 867, 869 (CCPA 1981). As stated in Baker Oil Tools v. Geo Vann, Inc., 828 F.2d 1558, 1563, 4 USPQ2d 1210, 1213 (Fed.Cir.1987): "If a device was in public use or on sale before the critical date, then that device becomes a reference under section 103 against the claimed invention."

The general purpose behind section 102(b) bars is to require inventors to assert with due diligence their right to a patent through the prompt filing of a patent application. 2 Donald S. Chisum, Patents § 6.01 (1991). However, a patentee may escape the section 102(b) bars on the ground the use or sale was experimental.

"[A] use or sale is experimental for purposes of section 102(b) if it represents a bona fide effort to perfect the invention or to ascertain whether it will answer its intended purpose.... If any commercial exploitation does occur, it must be merely incidental to the primary purpose of experimentation to perfect the invention." Pennwalt Corp. v. Akzona Inc., 740 F.2d 1573, 1580-81, 222 USPQ 833, 838 (Fed.Cir.1984) (citations omitted). Factors accepted to show an inventor's experimental relationship with a customer despite a sale have included, for example, an agreement by the customer to use the device secretly and keep records of progress, see In re Smith, 714 F.2d 1127, 1137, 218 USPQ 976, 984 (Fed.Cir.1983); a doctor-patient relationship where the inventor/doctor conducted the experimentation, TP Labs. v. Professional...