Rexam Ind. v. Eastman Kodak

• Decision Date: 16 July 1999
• Citation: 51 USPQ2d 1457,182 F.3d 1366
• Parties: (Fed. Cir. 1999) REXAM INDUSTRIES CORP., Plaintiff-Appellant, v. EASTMAN KODAK COMPANY Defendant-Appellee and AVERY DENNISON CORPORATION, Defendant-Appellee. 98-1279 DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 1366

182 F.3d 1366 (Fed. Cir. 1999)

REXAM INDUSTRIES CORP., Plaintiff-Appellant, v. EASTMAN KODAK COMPANY Defendant-Appellee and AVERY DENNISON CORPORATION, Defendant-Appellee.

98-1279

United States Court of Appeals for the Federal Circuit

DECIDED: July 16, 1999

Appealed from: United States District Court for the Western District of North Carolina

Judge H. Brent McKnight

William M. Atkinson, The Bell Seltzer Intellectual Property Law Group of Alston & Bird LLP, of Charlotte, North Carolina, argued for plaintiff-appellant. With him on the brief were Charles B. Park, III, and John J. Barnhardt, III.

Richard D. Rochford, Jr., Nixon, Hargrave, Devans, & Doyle LLP, of Rochester, New York, argued for defendant-appellee, Eastman Kodak Company. Of counsel on the brief was Michael L. Goldman.

Roderick G. Dorman, O'Melveny & Meyers LLP, of Los Angeles, California, argued for defendant-appellee, Avery Dennison Corporation. With him on the brief was Mark C. Scarsi. Of counsel on the brief was John D. Carpenter, Christie, Parker & Hale LLP, of Pasadena, California.

Before RICH,^* NEWMAN, and LOURIE, Circuit Judges.

LOURIE, Circuit Judge.

This case comes to us on certification of two questions by the United States District Court for the Western District of North Carolina, Civil Action No. 95-CV-62, in an interference case. The district court certified the following questions for appeal:

1. Can a patent applicant that prevails in an interference before the Board of Patent Appeals and Interferences based only on the constructive reduction to practice represented by its patent application, continue to contest priority in a succeeding civil action under 35 U.S.C. n 146, notwithstanding the patent applicants acquiescence, during pendency of that Section 146 action, in entry of final judgment against it on priority grounds in another interference involving the same inventions but a different adversary?

2. If the answer to the above question is in the negative, must the Boards decision awarding priority to the patent applicant and against a patentee be reversed, with judgment entered in favor of the patentee regarding priority?

We answer the first certified question in the affirmative for the reasons given hereinbelow. Consequently, we do not reach the second certified question.

BACKGROUND

Two interference proceedings, both involving an identical interference count, are relevant to this appeal.¹ The first is Interference No. 102,667 (the '667 interference), declared by the U.S. Patent and Trademark Office (PTO) Board of Patent Appeals and Interferences in 1991 between the claims of a U.S. patent assigned to Rexam Industries Corp. and certain claims of a U.S. patent application assigned to Eastman Kodak Co. The second is Interference No. 103,738 (the 738 interference), declared by the Board in 1996 between the same claims of Kodak's application and certain claims of an application assigned to Avery Dennison Corp. These interferences, and the challenge to the '667 interference brought by Rexam following the Board's final judgment in that case, are discussed below.

The '667 Interference

The '667 interference count involved all of the claims of Rexam's U.S. Patent 4,931,324 (the '324 patent) and claims 66-76 of Kodak's U.S. Patent Application 07/609,050 (the '050 application). Kodak relied on its constructive reduction to practice date, in particular, the filing date of a parent application, to antedate Rexam's asserted date of invention. In 1994, the Board entered judgment deciding the priority issue in favor of Kodak, but did not decide the issues of validity and enforceability of Rexam's patent that Kodak had asserted. Rexam then challenged the Board's decision in the district court pursuant to 35 U.S.C. 146 (1994). It is this section 146 proceeding, described further below, from which the certified questions that are the subject of this appeal arise.

The '738 Interference

After Avery and Kodak became aware that the Board would probably declare an interference between Avery's U.S. Patent Application No. 08/419,837 (the '837 application) and Kodak's '050 application, the parties executed an agreement in which, inter alia, they agreed that neither party would challenge the Board's priority decision if the Board did declare and adjudicate such an interference. In 1996 the Board declared the '738 interference between these applications. As in the '667 interference, the '738 interference again concerned claims 66-76 of the '050 application, and Kodak again based its priority argument on its constructive reduction to practice.

In 1997, the Board entered judgment deciding priority in favor of Avery. Pursuant to its agreement with Avery, Kodak allowed the Boards decision to become final. As a result, claims 66-76 of the '050 application became unpatentable to Kodak. However, Kodak did not expressly abandon that application.

The Section 146 District Court Proceeding

Rexam initiated suit against Kodak in the district court pursuant to 35 U.S.C. 146 to challenge the Board's decision in the '667 interference.² Rexam and Kodak both reasserted the priority arguments they had made before the Board. Kodak also reasserted its arguments that the claims in Rexam's patent were invalid and/or unenforceable.

After the Board's decision in the '738 interference became final, Rexam moved for summary judgment in the section 146 proceeding.³ Rexam argued that Kodak had abandoned its constructive reduction to practice by permitting the '738 interference decision to become final, and that Kodak's concession of priority to Avery should be treated as a request for entry of an adverse judgment against Kodak in the section 146 proceeding under 37 C.F.R. 1.662(a).⁴

The district court denied Rexams motion, concluding that Kodaks loss of priority in the '738 interference did not prohibit Kodak from defending its priority judgment against Rexam. However, the court certified the questions recited above for interlocutory appeal under 28 U.S.C. n 1292(b), whereupon Rexam petitioned this court for permission to appeal the questions. We granted the petition.

DISCUSSION

In addition to arguing the merits of the certified questions, Rexam also argues that the section 146 action is moot as a result of Kodak's loss in the '738 interference. We address the certified questions first.

Rexam argues that because Kodak's '050 application cannot mature into a patent containing claims 66-76, Kodak should be precluded from continuing to assert its priority in the section 146 proceeding, and that the first certified question should therefore be answered in the negative. Kodak responds that our precedent refutes Rexam's argument. We agree with Kodak.

While no language in section 146 of the patent statute expressly addresses this issue, section 135(a) of the statute and our case law interpreting that provision provide substantial guidance for our analysis. The recently amended version of 35 U.S.C. 135(a) provides that the Board "shall determine questions of priority of the inventions and may determine questions of patentability." 35 U.S.C. 135(a) (1994).⁵ We interpreted this new language broadly in Perkins v. Kwon, 886 F.2d 325, 12 USPQ2d 1308 (Fed. Cir. 1989), where the Board had decided the issue of priority in favor of Kwon even though it also determined that the invention of the interference count was unpatentable to Kwon under 35 U.S.C. 102(b)/103. Perkins appealed, arguing that once the Board decided that Kwon's claims were unpatentable, the Board should have dissolved the interference and left Perkins' claims standing as originally issued without further consideration of priority. See id. at 326, 12 USPQ2d at 1309-10. We affirmed the Board's action, stating that "decision by the Board of all issues that are fully and fairly raised during the interference proceeding, whether related to patentability or priority, is in full accord with congressional intent that PTO procedures be simplified as well as improved. . . ." Id. at 328, 12 USPQ2d at 1310.

We have consistently applied the rationale of Perkins to conclude that priority issues that have been fully developed and presented to the Board for decision in interference proceedings should be decided by the Board even if a count is deemed unpatentable to one party. See Hyatt v. Boone, 146 F.3d 1348, 1356-57, 47 USPQ2d 1128, 1133-34 (Fed. Cir. 1998) (holding that Board was required to decide priority issue even though applicant had requested conversion of his application to a statutory invention registration during interference); Wu v. Wang, 129 F.3d 1237, 1242, 44 USPQ2d 1641, 1645 (Fed. Cir. 1997) (holding that Board properly decided priority issue after holding Wang's claim corresponding to interference count unpatentable); Guinn v. Kopf, 96 F.3d 1419, 1422, 40 USPQ2d 1157, 1159 (Fed. Cir. 1996) (holding that Board properly decided priority in favor of Guinn despite Kopf's attempt to dissolve interference by disclaiming relevant claim under 37 C.F.R. 1.662(c)).

The rationale of Perkins similarly applies in this case, where Kodak claims that it is entitled to defend its priority victory over Rexam even though it has lost priority to Avery. The policy behind the statute encouraging adjudication of all properly-raised issues accordingly entitles Kodak to defend its victory in the '738 interference. Public policy also favors award of the patent to the first inventor; thus, even though Kodak cannot obtain a patent for the contested subject matter because it is not the assignee of the first inventor, it should be entitled to attempt to show that Rexam, which similarly is not the assignee of the first inventor, is not entitled to retain its patent. The reasoning is that, if Kodak has been determined by the Board to have priority over Rexam, then Avery, which has similarly been determined to have priority over Kodak, must have priority over Rexam, and Rexam should not retain its patent.

The fact that the...