Talk:Bendix Corp. v. Balax, Inc. (full text)

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Maura

Before trial, plaintiff withdrew its patent No. 2,991,491, admitting its invalidity due to plaintiff's own prior public use. The trial court held plaintiff's Patent Re. 24,572 valid and infringed; it held plaintiff's Patent No. 3,050,755 infringed but invalid for prior public use by plaintiff; it dismissed that portion of the complaint charging defendants with appropriation of plaintiff's trade secrets; it dismissed defendant Van Vleet as an individual defendant; it denied plaintiff's request for treble damages and attorneys' fees; and it dismissed defendants' antitrust counterclaim.

Their first contention is that it is anticipated by the 1939 German Gebrauchsmuster Patent 1,455,626 (GM). Section 102(b) of Title 35, U.S.C.A. provides: 'A person shall be entitled to a patent unless-- * * * (b) the invention was patented or described in a printed publication in this or a foreign country or 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 * * *.' 11 A GM is clearly a patent within the meaning of this section, but it is not a printed publication.

On this basis, all parties agree that only that which is 'patented' by a GM may be considered as prior art under Section 102(b), supra. Subject matter which is ancillary to, but not a part of, the patented subject matter may not be considered.

The Reeves court had said: '* * * for anticipation purposes under Section 102 a GM * * * is a reference only for what is patented, i.e., for what it claims and not, for what is disclosed in its specifications.' 282 F.Supp. at 136. 14

However, the Reeves court clearly recognized that an article patent may in some cases anticipate a process. Such would be the case where 'a process in one patent can produce only one article and that article is definitely covered by what is claimed in another patent (e.g., in an earlier GM) * * *. But this alone may not be sufficient to treat the article patent as an anticipation of the process patent, if many processes are described in the article patent while only one specific process is described in the process patent.' 282 F.Supp. at 136-137. 16

We conclude that the specifications of a GM may be resorted to for the purpose of clarifying the meaning of the language used in the claims, but may not be resorted to for the purpose of adding completely new material to that which is disclosed by the claims. 18

The specifications of the GM may be resorted to if necessary to clarify the meaning of the words of the claim-- to determine what it is that the claims 'patent' but not to add to what they patent. 20

The advisory explanations accompanying the German Regulations regarding 'the application for Gebrauchsmuster' provide: 29 'Indication of Novelty. 30 According to sec. 2 paragraph 2 of the statute, the application must specify 'what purpose of work, or utility, the new form or device is intended to serve.' Since this indication is of importance for the range of the legal protection corresponding with the recording, applicant will do well in many cases, even tho the law does not prescribe the setting of a protection claim, to summarize separately from the description, in the type of construction of a patent claim, the legally protectable characteristics of the model.' Patents and Gebrauchsmuster in International Law, Emerson Stringham, Pacot Publications, Madison, Wisconsin, 1935, p. 248. Stringham comments: 31 'Scope of protection involves much the same problems which arise everywhere in patent law. The German statute requires no claim for Gebrauchsmuster. The tendency, during a decade or so, of the Reichsgericht to hold itself not bound by the statutory claim of the long-term patent, finds freer play with Gebrauchsmuster; * * *.' Id. at 255. 32

Thus we conclude that all claims of the plaintiff's reissue patent can be found in the Gebrauchsmuster Patent 1,455,626 which was issued more than one year prior to plaintiff's application for its patent. We hold that the claims of plaintiff's Patent Re. 24,572 are invalid because of anticipation by the 1939 GM. 38

Consistent with its interpretation of the GM for purposes of anticipation, it held that only the claims of the GM could be referred to on the obviousness issue.

Defendants urged several other grounds for the invalidity of the reissue patent in the trial court. All were rejected. Among these grounds were contentions that the reissue patent was anticipated by certain German literature and by various sales of taps in this country and that the reissue was obvious in light of the prior art taught by such literature and earlier tools. Since we have concluded that the reissue patent is invalid under the GM prior art, we need not reach these other contentions. PATENT RE 24,572-- INFRINGEMENT 40 Since we have concluded that the reissue patent is invalid, it follows that the district court's determination that defendants' tap infringes it must be reversed. An invalid patent cannot be infringed.

The district court held plaintiff's '755 method patent invalid for plaintiff's own sales and the consequent public use more than one year prior to the application for patent. 35 U.S.C.A. 102(b), supra. It found that when plaintiff's tap is used in the recommended manner, it inherently practices the '755 method. Plaintiff's taps were on sale and in public use in June, 1956. The application which resulted in the '755 patent was not filed until July 23, 1958. 44

It claims the earlier filing date by virtue of 35 U.S.C.A. 1203 which provides that an application for an invention shall have the benefit of the filing date of an earlier application under certain circumstances. 45

To come within the purview of Section 120, the later application must 1) disclose an invention disclosed in the manner provided in 35 U.S.C.A. 112 in an earlier application; 2) be by the same inventor; 3) be filed before the patenting of the earlier application; and 4) contain a specific reference to the earlier application. Technicon Instruments Corp. v. Coleman Instruments Corp., 7 Cir., 385 F.2d 391, 393 (1967). 46 The district court found the first condition was not satisfied in the instant case for the reason that the earlier application did not disclose the invention in the manner required by Section 112, which, in relevant part, provides: 'The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.' 47

However, these cases do not support plaintiff's contention that the '755 patent is entitled to the filing date of the first filed tap application. They deal with a basically different situation. They are relevant when explanatory material is added to a pending application to clarify the invention claimed in such application. Typically they deal with amendments to applications which have been rejected under 35 U.S.C.A. 132.5 That section provides for reexamination of applications after amendment but states: 'No amendment shall introduce new matter into the disclosure of the invention.' 50

We hold that plaintiff's Patent No. 3,050,755 is invalid by reason of its prior public use and plaintiff's sales in June, 1956.

DEFENDANTS' COUNTERCLAIM-- ALLEGED ANTITRUST VIOLATIONS 59 Defendants' counterclaim to plaintiff's infringement suit charges two violations of federal antitrust laws. First, defendants contend that plaintiff violated Section 2 of the Sherman Act by 'illegal procurement and enforcement of patents.' They rely upon Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965). That reliance is misplaced in this case. Walker decided a purely legal issue, as the following passages from the opinion indicate: 60 'We have concluded that the enforcement of a patent procured by fraud on the Patent Office may be violative of 2 of the Sherman Act provided the other elements necessary to a 2 case are present. (Id. at 174, 86 S.Ct. at 349.) 61

Thus to prevail here, defendants must prove, what was assumed as true in Walker, that any misstatements by plaintiff in its patent applications were the products of intentional fraud and not good faith mistake.

Defendants next urge that even if all of plaintiff's patents were valid, plaintiff would be guilty of violations of Sections 1 and 2 of the Sherman Act for the reason that they have misused their patents to extend the patent monopoly beyond the scope permitted by the Constitution and the Congress. 67

'The owner of a patent cannot extend his statutory grant by contract or agreement. A patent affords no immunity for a monopoly not fairly or plainly within the grant. * * * It will not do to say that since the patentee has the power to refuse a license, he has the lesser power to license on his own conditions.'

The district court found no merit in this claim saying, inter alia, '* * * there has been no sufficient showing of an illegal combination to restrain trade. By dint of its valid patent Re. 24,572, the plaintiffs were entitled to the limited protection afforded under the patent laws. This included the right to license others to manufacture the patented tap. It is inappropriate to denominate this conduct as 'conspiratory' or 'monopolistic'.' 69

While it is true that a valid patent does afford some 'limited protection,' including 'the right to license others to manufacture the patented tap,' this is no answer to the thrust of defendants' contention that the licensor may not thereby forever preclude the licensee from challenging the validity of the patent. By requiring such a condition in the license or sales agreement, plaintiff may have placed itself in the position of unlawfully exceeding the protected area. 71

From all this we can only conclude that the right to estop licensees from challenging a patent is not part of the 'limited protection' afforded by the patent monopoly. Furthermore, the reason is that it creates a danger of unwarranted monopolization. Such danger may be even greater here than in the usual licensee-estoppel case for the reason that in the instant case the licensor sought to create an irrevocable estoppel, not one merely extending during the life of the licenses and sales agreements. 75

It concluded that while the information disclosed by plaintiff constituted trade secrets, no confidential relationship existed between the parties. Such a relationship is required to state a cause of action under Wisconsin law. Abbott Laboratories v. Norse Chemical Corp., 33 Wis.2d 445, 147 N.W.2d 529 (1967). 78

In No. 17343, that part of the judgment of the district court holding Patent Re. 24,572 to be valid and infringed is reversed; that part of the judgment dismissing defendants' antitrust counterclaim is vacated and set aside and this cause is ordered remanded to the district court for a reconsideration of such counterclaim; and defendants' claim for attorneys' fees is denied. 83 In No. 17344, the judgment of the district court is affirmed. 84 Reversed in part. Vacated in part and remanded. Affirmed in part. 1

Gebrauchsmuster is registered under the German law after an application filed in the German Patent Office. If the application meets the requirements of form and content, the GM is issued without any novelty search and is accompanied by the publication of an official notice in the German Official Gazette that it has been so issued. There is no requirement of nonobviousness in order to obtain a GM, and its purpose is to enable the applicant to obtain a speedy protection for a new article and if desirable, to concurrently seek a regular patent, a procedure which would consume much more time. After registration the specifications and claims become available to the public and anyone has free and open access to the same. The GM was not a printed publication at any time and is referred to as a utility model. It is limited to a maximum of six years instead of eighteen years, covers only articles and never can cover processes as such, and grants to the inventor the exclusive right to prevent others from making, using or selling his article and also to recover damages for any infringement. * * *

'By a directive issued to its examiners in 1965, the United States Patent Office resolved certain prior inconsistent practices as to the treatment of GMs and stated that GMs may be considered as patents for anticipation purposes within the purview of Section 102. Official Gazette of the United States Patent Office, Nov. 2, 1965, Vol. 820, No. 1.' 2


Courtney

Since we have concluded that the reissue patent is invalid, it follows that the district court's determination that defendants' tap infringes it must be reversed. An invalid patent cannot be infringed. Scovill Mfg. Co. v. Goldblatt Bros., Inc., 7 Cir., 362 F.2d 777, 781 and cases cited therein. 41

We note, however, that had we found the reissue patent valid, the finding of infringement would have been affirmed. The district court found infringement under the doctrine of equivalents. Graver Tank & Mfg. Co., Inc. v. Linde Air Products Co., 339 U.S. 605, 70 S.Ct. 854, 94 L.Ed. 1097 (1950). The finding of equivalency is one of fact and will not be set aside unless clearly erroneous within the meaning of Rule 52(a), Federal Rules of Civil Procedure. Graver Tank, supra at 609-610, 70 S.Ct. 854. We conclude that the finding here is supported by the record and defendants do not seriously contend that it is not. 42

The district court specifically found that defendants had not met their burden of proving fraud on the patent office by clear and convincing evidence as required in Armour & Co. v. Wilson & Co., 7 Cir., 274 F.2d 143, 148 (1960). Our examination of the record leads us to conclude that such finding is not clearly erroneous and thus we accept it. Accordingly, the conclusion of the district court that this claim of antitrust violation is without merit should be approved. 66

While it is true that a valid patent does afford some 'limited protection,' including 'the right to license others to manufacture the patented tap,' this is no answer to the thrust of defendants' contention that the licensor may not thereby forever preclude the licensee from challenging the validity of the patent. By requiring such a condition in the license or sales agreement, plaintiff may have placed itself in the position of unlawfully exceeding the protected area. 71

Further, subsequent to the judgment of the district court under consideration here, the Supreme Court in Lear, Inc. v. Adkins, 395 U.S. 653 (June 16, 1969), at 668-671, 89 S.Ct. 1902, 23 L.Ed.2d 610, overruled the holding of Automatic Radio Manufacturing Co., Inc. v. Hazeltine Research, Inc., 339 U.S. 827, 836, 70 S.Ct. 894, 94 L.Ed. 1312 (1950), insofar as it invoked a legally implied estoppel to deny a licensee the right to challenge the validity of his licensor's patent in a suit for the collection of royalties. The Court's decision is rationalized almost exclusively in terms of 'the strong federal policy favoring free competition in ideas which do not merit patent protection.' Id. 395 U.S. at 656, 89 S.Ct. at 1904. 72

The Court concluded that even a good-faith patentee-licensor should not be given the benefit of the estoppel doctrine since even in such cases the strong public policy reflected in the 'federal law (that) requires that all ideas in general circulation be dedicated to the common good unless they are protected by a valid patent' overrides the equities of the licensor. The Court said: 'Surely the equities of the licensor do not weigh very heavily when they are balanced against the important public interest in permitting full and free competition in the use of ideas which are in reality a part of the public domain. Licensees may often be the only individuals with enough economic incentive to challenge the patentability of an inventor's discovery. If they are muzzled, the public may continually be required to pay tribute to would-be monopolists without need or justification.' Id. at 670, 89 S.Ct. at 1911. 73

The Court then went on to hold that the licensee would not be required to pay royalties accruing before an adjudication of invalidity even though that is what the express contract of the parties provided. Again the Court found such a result might frustrate federal policies favoring free competition. Id. at 673-674, 89 S.Ct. 1902. 74

Kevin

Plaintiff's predecessor brought this action charging defendants with infringement of three of its patents and with appropriation of its trade secrets. Defendants counterclaimed charging plantiff with violations of the antitrust laws. 2