Lannom Mfg. Co., Inc. v. U.S. Intern. Trade Com'n
| Decision Date | 27 August 1986 |
| Docket Number | No. 85-2558,85-2558 |
| Citation | 799 F.2d 1572,231 USPQ 32 |
| Parties | , 55 USLW 2167, 231 U.S.P.Q. 32, 4 Fed. Cir. (T) 131 LANNOM MANUFACTURING COMPANY, INC., Petitioner, v. UNITED STATES INTERNATIONAL TRADE COMMISSION, Respondent. Appeal |
| Court | U.S. Court of Appeals — Federal Circuit |
Nathaniel Humphries (argued), Mason, Fenwick & Lawrence, Washington, D.C., for appellant; with him on brief were Paul F. Kilmer and Linda J. Shapiro. Also on brief were Michael A. Hertzberg, Stuart E. Benson and Gary W. Christian, Graham & James, Washington, D.C.
Jack Simmons, III (argued), Office of the General Counsel, U.S. Intern. Trade Com'n, Washington, D.C., for appellee; with him on brief were Lyn M. Schlitt and Michael P. Mabile.
Before FRIEDMAN, BALDWIN, and PAULINE NEWMAN, Circuit Judges.
Lannom Manufacturing Company, Inc. appeals the final decision of the United States International Trade Commission, which held that there was no violation of section 337 of the Tariff Act of 1930 as amended, 19 U.S.C. Sec. 1337, in that Lannom's U.S. Patent No. 3,976,295 ("the '295 patent") was invalid and that the importation and sale of certain articles did not tend to injure the domestic industry. The Commission declined to determine infringement. In re Certain Softballs and Polyurethane Cores Therefor, Inv. No. 337-TA-190, USITC Pub. No. 1751 (September 1985).
We vacate the determinations of patent invalidity and absence of tendency to injure, and remand for determination of the question of infringement and redetermination of the question of injury.
On April 3, 1984 Lannom filed a complaint pursuant to section 337 alleging, inter alia, unfair methods of competition and unfair acts in the importation and sale of certain softballs and polyurethane cores for softballs, by the direct or contributory infringement of claims 3, 4, and 5 of the '295 patent, having the effect or tendency to destroy or to substantially injure an efficiently and economically operated industry in the United States.
The '295 patent describes and claims a softball usable for organized league play, having a core of polyurethane foam and a leather cover. Claim 3 is representative:
3. A composite ball having the appearance, physical characteristics and dimensions of a conventional softball including a core of cork or kapok, yarn windings, and a leather cover comprising
a spherical core member formed of flexible and resilient molded polyurethane foam and a leather cover portion enclosing and stitched over said core portion
wherein said core portion is formed of polyurethane foam of such density and resilience as to give said composite ball essentially the same rebound weight, hardness, size, feel and sound qualities as said conventional softball so as to be usable in organized league play of softball.
The advantages of this softball are that it is five to ten times more durable than conventional cork or kapok softballs, and its resilience or liveliness can be varied by manipulation of the chemical composition of the core. Polyurethane core softballs, since their introduction by Lannom, have obtained a significant portion of the United States softball market.
On May 1, 1984 the Commission ordered that an investigation be instituted, in accord with 19 U.S.C. Sec. 1337(b). Lannom named as respondents the Taiwan manufacturing companies Success Chemical Company, Ltd., Tusa, Inc., and Complete Merchants Corporation; the U.S. importer Diamond Sports Company; Regent Sports Company, a U.S. manufacturer of softballs; and Diamond's eight U.S. distributors (also called manufacturer's representatives). Only Diamond Sports entered an appearance and filed a response to the complaint. This response alleged, inter alia, that Lannom's patent was invalid and not infringed.
Lannom and Diamond Sports filed on October 3, 1984 a joint motion to terminate the investigation as to Diamond Sports and its U.S. distributors, on the basis that Lannom had granted Diamond a license under the '295 patent. On October 19, 1984 the Administrative Law Judge ("ALJ") terminated the investigation as to Diamond but did not terminate the investigation as to Diamond's distributors because of the absence of sublicense or consent agreements. Although their status is unclear on the record, the distributors took no part either in the proceedings before the Commission or in this appeal. Lannom also asserted that it no longer considered sales to Diamond Sports by the Taiwan manufacturers Success Chemical, Complete Merchants, and Tusa to constitute unfair acts, but only sales to unlicensed importers.
The hearing began on October 30, 1984. Only Lannom and the Commission Investigative Attorney ("the Staff") appeared, the Staff participating in accordance with 19 C.F.R. Sec. 210.4(b). 1 None of the remaining respondents appeared or defended. Lannom relied on the presumption of patent validity and asserted that patent validity was no longer at issue. Lannom requested that the remaining respondents be found in default and that adverse inferences be taken, as provided in 19 C.F.R. Sec. 210.25. This request was rejected by the ALJ.
Evidence was adduced on the subjects of patent validity, patent infringement, and injury or tendency to injure. Among the witnesses were Jesse H. Heald, the inventor of the '295 Patent and an officer of Lannom; Charles Dale, general manager of Lannom's Ball Division; Frank Hardy, president of Diamond Sports; and Thomas Tuten of Flexible Products Co., a U.S. company that sells chemicals for forming the cores of the patented softballs. The depositions of James L. Muhlfelder, vice president of J. DeBeer & Son, a softball manufacturer and competitor of Lannom; and Lily Hsu, a Taiwan investigator hired by Lannom, were also submitted into evidence.
In its post-hearing brief the Staff discussed all the issues and concluded that claims 3, 4, and 5 of the '295 patent were valid, that the claims were infringed by the imported products, and that the evidence supported a finding of tendency to injure in terms of section 337. Lannom, of course, espoused the same conclusion. There was no proponent of a contrary result.
The ALJ, in his initial determination ("ID") on February 19, 1985, held all of the claims of the patent (not only claims 3, 4, and 5) invalid for failure to comply with 35 U.S.C. Secs. 103 and 112; and in the alternative, if valid then infringed by some but not all of the imported polyurethane core softballs. The ALJ also held that there was neither substantial injury nor a tendency to substantially injure the domestic industry.
Lannom filed a petition for review of the ID by the full Commission. The Staff supported Lannom's position on the merits of the issues of validity, infringement, default, and tendency to injure, although the Staff did not agree with Lannom on the question of whether validity was properly at issue.
On April 16, 1985 the Commission affirmed the ALJ's determinations of patent invalidity under sections 103 and portions of section 112, and of absence of either the effect or tendency to substantially injure the domestic industry. The Commission took no position on the issues of invalidity under section 112 based on "best mode", or infringement, and stated:
By taking no position on those two issues, the Commission neither affirms nor reverses the ALJ as to them. Accordingly, the ID (except for the issues of best mode and infringement) has become the determination of the Commission pursuant to 19 C.F.R. Sec. 210.53(h).
On this appeal from the Commission's final determination, none of the respondents named before the Commission has filed an appearance or participated in any way. The Commission itself is the only "respondent" before us.
Lannom asserts that the Commission erred in law in its decision of invalidity of the '295 patent, and appeals from that decision on its merits. Lannom also challenges the authority of the Commission to have determined the validity of the '295 patent, in view of the statutory presumption of validity, 35 U.S.C. Sec. 282:
A patent shall be presumed valid. Each claim of a patent ... shall be presumed valid independently of the validity of other claims.... The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.
The following shall be defenses in any action involving the validity or infringement of a patent and shall be pleaded:
* * *
* * *
(2) Invalidity of the patent or any claim in suit....
Lannom relies on the fact that none of the remaining respondents had raised the defense of invalidity, as they could have under 19 U.S.C. Sec. 1337(c), and asserts that in the absence of such defense the presumption of 35 U.S.C. Sec. 282 controls, and validity is not at issue.
Diamond Sports had initially pled the defense of invalidity, but entered into a settlement agreement with Lannom and withdrew before the hearing. Lannom refers to the requirement of section 282 that the defense of invalidity "shall be pleaded". It is not disputed that after Diamond was withdrawn the defense of invalidity was not raised.
Lannom also asserts that it was denied the procedural benefits of section 282 because the ALJ treated validity as if the burden were on Lannom to come forward and to present a prima facie case that the patent was valid, rather than determining whether a challenger had met its burden of proving invalidity by clear and convincing evidence. Although the ALJ quoted from SSIH Equipment S.A. v. U.S. International Trade Commission, 718 F.2d 365, 375, 218 USPQ 678, 687 (Fed.Cir.1983), that "the presumption places the burden of going forward, as well as the burden of persuasion, upon the party asserting invalidity", the ALJ did not explain how this applied when no party disputed the validity of the patent.
Throughout the proceedings the Staff did not assert that the patent was invalid. Prior to the hearing the...
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