Pennwalt Corp. v. Akzona Inc., s. 83-1417
| Decision Date | 10 August 1984 |
| Docket Number | 84-505,Nos. 83-1417,s. 83-1417 |
| Citation | 740 F.2d 1573,222 USPQ 833 |
| Parties | PENNWALT CORPORATION, Appellee/Cross-Appellant, v. AKZONA INCORPORATED and Armak Company, Appellants/Cross-Appellees. Appeal |
| Court | U.S. Court of Appeals — Federal Circuit |
Phillip H. Mayer, Chicago, Ill., argued for appellants. With him on the brief were Gordon R. Coons and Stephen B. Heller, Chicago, Ill.
John G. Mulford, Wilmington, Del., of counsel.
Arthur H. Seidel, Philadelphia, Pa., argued for appellee. With him on the brief was Daniel A. Monaco, Philadelphia, Pa., of counsel.
Before KASHIWA, BENNETT and MILLER, Circuit Judges.
Akzona, Incorporated, and its subsidiary, Armak Company (both hereafter referred to as "Armak"), appeal from the decision of the United States District Court for the District of Delaware ("district court") 1 that U.S. Patent No. 4,107,292 2 ("Nemeth patent") is invalid and that Pennwalt Corporation ("Pennwalt") is not liable under contract and equity counterclaims of Armak based on state law. Pennwalt cross-appeals the district court's decision denying attorney fees. We affirm.
Methyl and ethyl parathion are well known insecticides, which are highly toxic to insects as well as to humans. Due to their toxicity, Pennwalt developed a microencapsulated formulation of these insecticides which is less toxic to humans and maintains insecticidal effectiveness for long periods of time. The encapsulating material utilized in this formulation is a polymer skin of cross-linked polyamide-polyurea which is disclosed in Pennwalt's U.S. Patent No. 3,959,464 3 to DeSavigny.
Pennwalt, which marketed the microencapsulated insecticide under the trademark PENNCAP M, preferred to suspend it in water so that it could be dispersed with a spraying device; however, Pennwalt discovered that the microcapsules tended to settle out of the suspension and, once settling occurred, it was difficult to redisperse the microcapsules so they could be sprayed in the proper concentration. To overcome this problem, Pennwalt sought technical assistance from a number of specialty chemical companies, including Armak, in February, 1971. In April, 1971, Armak supplied Pennwalt with four sample formulations of microencapsulated methyl parathion suspended in water, which Armak found to be satisfactory. One of these formulations, which Armak found to achieve the best results, contained xanthan gum as a suspending agent ("Nemeth invention"). Armak Between July 18 and August 7, 1972, Pennwalt's Bryan, Texas, plant manufactured six batches of approximately 4300 gallons of an aqueous suspension of encapsulated methyl parathion containing xanthan gum acquired from Armak. A sample of each batch was subjected to chemical assay, toxicology, and cricket bioassay tests and, after passing these tests, the batches were released for sale. 4 On August 22, 1972, Pennwalt sold 400 gallons of the suspension to Helena Chemical Company ("Helena") for $900. Between August 24 and September 19, 1972, Borden Company's distributor, Smith-Douglas ("Borden"), bought 1,015 gallons of suspension from Pennwalt for $4,567.50. Another 5 gallons of suspension were sold to Stauffer Chemical Company for $22.50 on August 29, 1972. With the exception of the last, these sales were made to distributors who sold to farmers. Pennwalt's aqueous suspension of encapsulated methyl parathion and xanthan gum was distributed under a "temporary permit," issued pursuant to an Environmental Protection Agency ("EPA") regulation (40 C.F.R. Sec. 162.17 revised January 1, 1972), 5 which provided that such permits "will be issued only for bona fide experimental programs under the supervision of qualified persons." (Emphasis added.)
did not advise Pennwalt that the preferred suspending agent was xanthan gum, but, instead, told Pennwalt to order the suspending agent from Armak under the code RD-4237.
Prior to Armak's development of the Nemeth invention, the predecessors of Armak and Pennwalt executed a Product Development Agreement ("PDA") for the cooperative development of pesticides. Under this agreement, Armak's predecessor, Armour Industrial Chemical Co., agreed to grant exclusive licenses to Pennwalt's predecessor, Pennsalt Chemicals Corporation, on "[a]ny United States patents obtained on chemical use or composition of matter inventions on chemicals or formulations submitted to PENNSALT." After Armak discovered the advantage of using xanthan gum in an aqueous suspension of encapsulated methyl parathion, there was a series of communications between Armak and Pennwalt regarding the licensing of the Nemeth invention. 6 It was in October, 1971, that Pennwalt first learned that Armak wanted compensation for the development of the Nemeth invention. On August 4, 1972, Armak's Director of Marketing, Roy deVries, wrote to Robert Toth, the General Manager of Pennwalt's Agchem-Decco Division, suggesting that the parties "should sit down and come to some agreement" on royalty terms for the use of RD-4237. On August 11, 1972, Toth responded that technical and manufacturing people would soon report their evaluation of RD-4237 and that "we should sit down and discuss some type of an agreement as soon as we determine the future of your product." In a subsequent meeting with Armak representatives on March 27, 1973, Toth expressed his unwillingness to discuss a royalty agreement until the patent status of the Nemeth invention was determined. On August 3, 1973, Pennwalt had the Kelco Company determine the identity of RD-4237 by reverse engineering, and after learning that RD-4237 was xanthan gum, Pennwalt elected to discontinue buying this suspending agent from Armak.
The Nemeth patent issued on August 15, 1978, and, fearing that it would be sued for patent infringement after further negotiations failed to lead to a royalty agreement, Pennwalt brought an action for declaratory judgment that the Nemeth patent was invalid and not infringed. In its answer, Armak denied Pennwalt's allegation of invalidity and counterclaimed for damages for infringement of the Nemeth patent. Armak also sought damages under state The district court held that the claims of the Nemeth patent 7 were not entitled to the filing date of the grandparent application under 35 U.S.C. Sec. 120 (1982), 8 because the grandparent application disclosed only polyamide encapsulated insecticides--not the polyurea and cross-linked polyamide-polyurea encapsulated insecticides set forth in the claims of the Nemeth patent. The district court's holding that the claims of the Nemeth patent were not entitled to the filing date of the grandparent application under 35 U.S.C. Sec. 120 was also based on its conclusion that the grandparent application did not meet the enablement and best mode requirements of the first paragraph of 35 U.S.C. Sec. 112 (1982). Accordingly, the claims of the Nemeth patent were only accorded the April 1, 1974, filing date of the parent application.
law, asserting that Pennwalt had breached the PDA and an implied agreement to pay a royalty and that Pennwalt had been unjustly enriched.
As to Pennwalt's sales of aqueous suspensions of encapsulated methyl parathion and xanthan gum and the use of these suspensions by farmers, the district court found that these were all made prior to April 1, 1973. The district court also found that these sales and uses under the EPA "temporary permit" were not experimental because: a Government agency's labeling a use or sale "experimental" does not necessarily make it "experimental" under the patent laws; the data gathered by Pennwalt in tests conducted under the temporary permit were not commensurate in scope with the claims of the Nemeth patent; Armak did not restrict Pennwalt's use of RD-4237; Armak did not require Pennwalt to report back any test results; Pennwalt's primary motive in obtaining the temporary permit was commercial; and any experimentation by Pennwalt was not under Armak's control. Accordingly, the district court held the Nemeth patent invalid, because the claimed invention was in "public use" and "on sale" under 35 U.S.C. Sec. 102(b) (1982). 9
The district court also held that Pennwalt was not liable to Armak under the PDA, because the PDA covered the development of active pesticides rather than inert ingredients, like xanthan gum, in pesticides. Also, Armak's conduct indicated to the district court that the PDA did not apply, because Armak failed to comply with the PDA's requirements that Pennwalt be advised of the applications corresponding to the Nemeth patent and the identity of RD-4237.
The district court further held that Pennwalt was not liable on a theory of breach of an implied contract or unjust enrichment because, when Pennwalt sought help in solving its dispersion problem, it was seeking free technical service, which is a common practice in the chemical industry; that, having failed to request compensation until after the technical service was completed, Armak could not recover for performance of that service. Although the district court acknowledged that Armak and Pennwalt did discuss the payment of royalties after Armak's technical service work was completed, the court concluded that these discussions did not give rise to any liability, because Pennwalt only agreed to pay royalties if a valid patent issued on the Nemeth invention.
The district court refused to award Pennwalt attorney fees, because Armak had a good faith belief that the Nemeth patent was valid, and this case was, therefore, not "exceptional" under 35 U.S.C. Sec. 285 (1982). 10
(1) Whether the district court's holding that the Nemeth patent is invalid is correct; (2) Whether the district court correctly held that Pennwalt was not liable under Armak's state law counterclaims; (3) Whether the district court abused its discretion in denying an award of attorney fees.
OPINIONIn assessing the validity of the...
To continue reading
Request your trial
-
Ralston Purina Co. v. Far-Mar-Co, Inc.
...the district court was to show by clear and convincing evidence that Flier was invalid. See, e.g., Pennwalt Corp. v. Akzona, Inc., 740 F.2d 1573, 1578, 222 USPQ 833, 836 (Fed.Cir.1984). The district court recognized and enunciated these rules. Accordingly, we hold that it did not place an i......
-
Pall Corp. v. Micron Separations, Inc.
...date of the parent application. Ralston Purina Co. v. Far-Mar-Co., Inc., 772 F.2d 1570, 1573-74 (Fed.Cir.1985); Pennwalt Corp. v. Akzona, Inc. 740 F.2d 1573, 1578 (Fed.Cir.1984). The ratio claims are entitled to the filing date of the parent application under 35 U.S.C. § 120 if the disclosu......
-
Cordant Technology, Inc. v. Alliant Techsystems Inc., Civ.A. 95-706-JJF.
...that experimental use ends with an invention's reduction to practice. RCA Corp., 887 F.2d at 1061 (citing Pennwalt Corp. v. Akzona, Inc., 740 F.2d 1573, 1580-81 (Fed.Cir.1984); Gould, Inc. v. United States, 217 Ct.Cl. 167, 579 F.2d 571, 572 (1978); Ushakoff v. United States, 164 Ct.Cl. 455,......
-
Pfizer Inc. v. Teva Pharmaceuticals Usa, Inc.
...claim priority to the filing date of a parent application may not be available under certain circumstances. See Pennwalt Corp. v. Akzona Inc., 740 F2d 1573, 1579 (Fed.Cir.1984). In Pennwalt, the plaintiffs subsidiary filed a patent application that was rejected by the Patent and Trademark O......
-
Chapter §7A.03 Prior Art Under Post-AIA 35 U.S.C. §102(a)
...a patent if the sale or offer to sell is made over a year before the latter's filing date.") (citing Pennwalt Corp. v. Akzona Inc., 740 F.2d 1573, 1580 n.14 (Fed. Cir. 1984); General Electric Co. v. United States, 654 F.2d 55, 61–62 (Ct. Cl. 1981)); Caveney, 761 F.2d at 675 (stating further......