Troy v. Samson Mfg. Corp.

• Decision Date: 27 August 2014
• Docket Number: No. 2013–1565.,2013–1565.
• Citation: 758 F.3d 1322
• Parties: Stephen P. TROY, Jr., Plaintiff–Appellant, v. SAMSON MANUFACTURING CORPORATION, Defendant–Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

758 F.3d 1322

Stephen P. TROY, Jr., Plaintiff–Appellant,

v.SAMSON MANUFACTURING CORPORATION, Defendant–Appellee.

No. 2013–1565.

United States Court of Appeals, Federal Circuit.

July 11, 2014.

Rehearing Denied Aug. 27, 2014.

Damian R. Laplaca, Nelson Kinder + Mosseau PC, of Boston, MA, argued for plaintiff-appellant.

Laura L. Carroll, Burns & Levinson LLP, of Boston, MA, argued for defendant-appellee. With her on the brief was Zachary R. Gates. Of counsel was Howard Susser.

Robert J. McManus, Associate Solicitor, United States Patent and Trademark Office, of Alexandria, VA, argued for amicus curiae. With him on the brief were Nathan K. Kelley, Solicitor, Thomas W. Krause, Special Counsel for IP Litigation. Of counsel on the brief were Stuart F. Delery, Assistant Attorney General, Mark R. Freeman and Samantha L. Chaifetz, Attorneys, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC.

Before PROST, Chief Judge, BRYSON and MOORE, Circuit Judges.

MOORE, Circuit Judge.

Stephen P. Troy, Jr. appeals from the district court's judgment in a civil action under 35 U.S.C. § 146 and challenges the court's conclusion that the Board of Patent Appeals and Interferences (Board) properly cancelled the claims of U.S. Patent No. 7,216,451 ('451 patent) in an interference proceeding with Samson Manufacturing Corp. (Samson). Because the district court erred in refusing to consider evidence pertinent to the determination of priority, we vacate and remand.

Background

The Board declared an interference between Mr. Troy's '451 patent and Samson's U.S. Patent Application No. 11/326,665 ('665 application). ¹ The ' 451 patent claims priority to a provisional application filed on February 11, 2005. The '665 application claims priority to a provisional application filed on January 18, 2005. Because the '665 application has an earlier priority date than the ' 451 patent, Samson was named the senior party. Mr. Troy's priority motion alleged reduction to practicein early February 2004, conception at several dates prior to February 2004, inurement, and derivation. Samson's priority motion alleged reduction to practice in late February or early March 2004 and conception in early February 2004. The Board concluded that Mr. Troy failed to prove actual reduction to practice in February 2004, and also rejected Mr. Troy's claims of inurement and derivation because he did not establish prior conception. The Board therefore entered judgment against Mr. Troy and ordered all claims of the ' 451 patent cancelled.

Mr. Troy challenged the Board's decision in district court under § 146. Mr. Troy proffered new evidence of prior conception at the various conception dates he asserted at the Board and new evidence of actual reduction to practice in February 2004. He also introduced new evidence of actual reduction to practice in July 2004–the Chin affidavit and the Conley deposition testimony. Additionally, Mr. Troy argued Samson engaged in “inequitable conduct” by including in its provisional application confidential drawings that Samson misappropriated from Mr. Troy. Mr. Troy contended that he proved in state court that Samson misappropriated his company's trade secrets, which included the subject matter of the count. He argued that this state court finding of misappropriation established that Samson “derived its alleged invention from Troy.” J.A. 4527; see Troy Indus., Inc. v. Samson Mfg. Corp., 963 N.E.2d 777 (Table), 2012 WL 931641 (Mass.App.Ct. Mar. 21, 2012).

The district court affirmed the Board's order canceling all claims of Mr. Troy's patent. Troy v. Samson Mfg. Corp., 942 F.Supp.2d 189, 201 (D.Mass.2013). After reviewing the record before the Board and some of the new evidence proffered by Mr. Troy, the district court concluded that Mr. Troy failed to carry his burden of showing prior conception or February 2004 reduction to practice. The court, however, refused to consider the Chin affidavit or the Conley deposition. It concluded that this evidence, which pertained to an alleged July 2004 reduction to practice, was barred because “[a] party is generally precluded from raising issues or theories of law in a Section 146 proceeding that were not previously raised before the board.” Id. at 198. The court also rejected as a new issue Mr. Troy's argument that Samson used Mr. Troy's confidential proprietary drawings in its provisional application, which Troy alleged demonstrated Samson's inequitable conduct. The district court concluded that Mr. Troy “failed ... to articulate where in the record he actually presented arguments to the Board regarding the alleged inequitable conduct of Samson.” Id. at 197. In a different part of its opinion, the district court acknowledged that Mr. Troy proved in state court “(1) that Samson improperly submitted to the PTO as its own at least one drawing of Troy's and (2) that Samson violated a confidentiality agreement with Troy Industries in the course of developing its patented inventions,” and noted that “these actions may constitute inequitable conduct by Samson.” Id. at 200 n. 7. But it concluded that “neither action proves Troy conceived of all the elements of [the Count] and timely reduced them to practice.” Id. Accordingly, the district court entered judgment against Mr. Troy.

Mr. Troy appeals. We have jurisdiction under 28 U.S.C. § 1295(a)(4)(C).

Discussion

“The district court's determination of priority in a § 146 action is reviewed de novo on appeal, and the court's factual findings supporting its legal conclusions are reviewed for clear error.” Streck, Inc. v. Research & Diagnostic Sys., Inc., 659 F.3d 1186, 1192 (Fed.Cir.2011). In a § 146 proceeding, the burden of persuasion rests on the junior party. Id. at 1191.

Mr. Troy challenges the district court's refusal to consider evidence pertaining to issues not raised before the Board. He contends that the Supreme Court rejected the rule against new issues when it held that “there are no limitations on a patent applicant's ability to introduce new evidence in a § 145 proceeding beyond those already present in the Federal Rules of Evidence and the Federal Rules of Civil Procedure.” Kappos v. Hyatt, ––– U.S. ––––, 132 S.Ct. 1690, 1700–01, 182 L.Ed.2d 704 (2012).

Samson contends that the district court correctly applied our precedent when it refused to consider issues not raised before the Board. In its amicus brief, the PTO argues that our opinion in Hyatt “expressly endorsed the district court's ability to prohibit parties from raising new issues during its review of Board decisions.” PTO Br. 3 (citing Hyatt v. Kappos, 625 F.3d 1320, 1335 (Fed.Cir.2010) (en banc), aff'd, ––– U.S. ––––, 132 S.Ct. 1690, 182 L.Ed.2d 704). The PTO argues that the Supreme Court's affirmance of Hyatt did not overrule our holding regarding new issues because the Hyatt case concerned only the presentation of new evidence on issues that were raised before the Board.

We conclude that the Supreme Court's decision in Hyatt permits new evidence to be admitted without regard to whether the issue was raised before the Board. The Supreme Court held, without qualification, that “there are no evidentiary restrictions beyond those already imposed by the Federal Rules of Evidence and the Federal Rules of Civil Procedure.” Hyatt, 132 S.Ct. at 1694; see also id. at 1700 (“[W]e agree with the Federal Circuit that ‘Congress intended that applicants would be free to introduce new evidence in § 145 proceedings subject only to the rules applicable to all civil actions, the Federal Rules of Evidence and the Federal Rules of Civil Procedure.’ ”) (quoting 625 F.3d at 1331); id. at 1700–01 (“[W]e conclude that there are no limitations on a patent applicant's ability to introduce new evidence in a § 145 proceeding beyond those already present in the Federal Rules of Evidence and the Federal Rules of Civil Procedure.”). Analyzing the language of § 145, the Court concluded: “By its terms, § 145 neither imposes unique evidentiary limits in district court proceedings nor establishes a heightened standard of review for factual findings by the PTO.” Id. at 1696. The Court expressly rejected the notion that administrative law principles could form the basis for limiting the evidence admissible in a § 145 proceeding: “We reject the Director's contention that background principles of administrative law govern the admissibility of new evidence.... Consequently, the district court must make its own findings de novo and does not act as the ‘reviewing court’ envisioned by the APA. We also conclude that the principles of administrative exhaustion do not apply in a § 145 proceeding.” Id. (citation omitted).

Based on the Supreme Court's holding in Hyatt that there are no limits on the admissibility of evidence in such civil actions except those in the Federal Rules of Evidence and Federal Rules of Civil Procedure, we conclude that new evidence on new issues is admissible in such proceedings. Accord Disney Enters., Inc. v. Kappos, 923 F.Supp.2d 788, 802 (E.D.Va.2013) (holding that prohibiting a party from raising new issues would be contrary to Hyatt ). Introducing new evidence on a new issue in a civil action is not barred by any Federal Rule of Evidence or Federal Rule of Civil Procedure. Relying essentially on the same administrative exhaustionand Administrative Procedure Act arguments that the Supreme Court rejected in Hyatt, Samson and the PTO argue that evidence on new issues ought to be prohibited. We find it impossible to reconcile the limitation on evidence that Samson and the PTO seek with the Supreme Court's unequivocal language, analysis, and holding in Hyatt.

We conclude that to the extent that our prior precedent, see, e.g.,Conservolite v. Widmayer, 21 F.3d 1098, 1102 (Fed.Cir.1994), held that new evidence on an issue not presented to the Board was generally to be excluded in district court proceedings, it is no longer viable following the Supreme...