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INTELLECTUAL PROPERTY SURVEY

PATENT CASES

2008

F20081

I.P. Survey – Patent Cases

SUPREME COURT OF THE UNITED STATES

SIDNEY A. DIAMOND, COMMISSIONER OF PATENTS AND TRADEMARKS

v.

ANANDA M. CHAKRABARTY ET AL.

447 U.S. 303No. 79-136.

Argued March 17, 1980.Decided June 16, 1980.

The United States Court of Customs and Patent Appeals, Rich, J., 571 F.2d 40, ruled that claims were not outside the scope of patentable inventions merely because they were drawn to “live organisms.” On reconsideration, the United States Court of Customs and Patent Appeals, Rich, J., 596 F.2d 952, reaffirmed its earlier judgment. [Certiorari was granted to consider the question of patent eligibility of living materials.]

Mr. Chief Justice BURGER delivered the opinion of the Court.

We granted certiorari to determine whether a live, human-made micro-organism is patentable subject matter under 35 U.S.C. 101.

I

In 1972, respondent Chakrabarty, a microbiologist, filed a patent application, assigned to the General Electric Co. The application asserted 36 claims related to Chakrabarty's invention of “a bacterium from the genus Pseudomonas containing therein at least two stable energy-generating plasmids, each of said plasmids providing a separate hydrocarbon degradative pathway.” FN1 This human-made, genetically engineered bacterium is capable of breaking down multiple components of crude oil. Because of this property, which is possessed by no naturally occurring bacteria, Chakrabarty's invention is believed to have significant value for the treatment of oil spills.FN2

FN1. Plasmids are hereditary units [of ring-shaped DNA] physically separate from the chromosomes of the cell. In prior research, Chakrabarty and an associate discovered that plasmids control the oil degradation

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abilities of certain bacteria. In particular, the two researchers discovered plasmids capable of degrading camphor and octane, two components of crude oil. In the work represented by the patent application at issue here, Chakrabarty discovered a process by which four different plasmids, capable of degrading four different oil components, could be transferred to and maintained stably in a single Pseudomonas bacterium, which itself has no capacity for degrading oil.

FN2. At present, biological control of oil spills requires the use of a mixture of naturally occurring bacteria, each capable of degrading one component of the oil complex. In this way, oil is decomposed into simpler substances which can serve as food for aquatic life. However, for various reasons, only a portion of any such mixed culture survives to attack the oil spill. By breaking down multiple components of oil, Chakrabarty's micro-organism promises more efficient and rapid oil-spill control.

Chakrabarty's patent claims were of three types: first, process claims for the method of producing the bacteria; second, claims for an inoculum comprised of a carrier material floating on water, such as straw, and the new bacteria; and third, claims to the bacteria themselves. The patent examiner allowed the claims falling into the first two categories, but rejected claims for the bacteria. His decision rested on two grounds: (1) that micro-organisms are “products of nature,” and (2) that as living things they are not patentable subject matter under 35 U.S.C. § 101.

Chakrabarty appealed the rejection of these claims to the Patent Office Board of Appeals, and the Board affirmed the Examiner on the second ground.FN3 Relying on the legislative history of the 1930 Plant Patent Act, in which Congress extended patent protection to certain asexually reproduced plants, the Board concluded that § 101 was not intended to cover living things such as these laboratory created micro-organisms.

FN3. The Board concluded that the new bacteria were not “products of nature,” because Pseudomonas bacteria containing two or more different energy-generating plasmids are not naturally occurring.

The Court of Customs and Patent Appeals, by a divided vote, reversed on the authority of its prior decision in In re Bergy, 563 F.2d 1031, 1038 (1977), which held that “the fact that microorganisms . . . are alive . . . [is] without legal significance” for purposes of the patent law.FN4 Subsequently, we granted the Acting Commissioner of Patents and Trademarks' petition for certiorari in Bergy, vacated the judgment, and remanded the case “for further consideration in light of Parker v. Flook, 437 U.S. 584, [98 S.Ct. 2522, 57 L.Ed.2d 451] (1978).” 438 U.S. 902, 98 S.Ct. 3119, 57 L.Ed.2d 1145 (1978). The Court of Customs and Patent F2008

3I.P. Survey – Patent Cases

Appeals then vacated its judgment in Chakrabarty and consolidated the case with Bergy for reconsideration. After re-examining both cases in the light of our holding in Flook, that court, with one dissent, reaffirmed its earlier judgments. 596 F.2d 952 (1979).

FN4. Bergy involved a patent application for a pure culture of the micro-organism Streptomyces vellosus found to be useful in the production of lincomycin, an antibiotic.

The Commissioner of Patents and Trademarks again sought certiorari, and we granted the writ as to both Bergy and Chakrabarty. 444 U.S. 924, 100 S.Ct. 261, 62 L.Ed.2d 180 (1979). Since then, Bergy has been dismissed as moot, 444 U.S. 1028, 100 S.Ct. 696, 62 L.Ed.2d 664 (1980), leaving only Chakrabarty for decision.

II

The Constitution grants Congress broad power to legislate to “promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Art. I, 8, cl. 8. The patent laws promote this progress by offering inventors exclusive rights for a limited period as an incentive for their inventiveness and research efforts. The authority of Congress is exercised in the hope that “[t]he productive effort thereby fostered will have a positive effect on society through the introduction of new products and processes of manufacture into the economy, and the emanations by way of increased employment and better lives for our citizens.” Kewanee, supra, 416 U.S., at 480, 94 S.Ct., at 1885-86.

The question before us in this case is a narrow one of statutory interpretation requiring us to construe 35 U.S.C. § 101, which provides:

“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”

Specifically, we must determine whether respondent's micro-organism constitutes a “manufacture” or “composition of matter” within the meaning of the statute.FN5

FN5. This case does not involve the other “conditions and requirements” of the patent laws, such as novelty and nonobviousness. 35 U.S.C. § 102,

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103.

III

In cases of statutory construction we begin, of course, with the language of the statute. And “unless otherwise defined, words will be interpreted as taking their ordinary, contemporary common meaning.” Perrin v. United States, 444 U.S. 37 (1979). We have also cautioned that courts “should not read into the patent laws limitations and conditions which the legislature has not expressed.” United States v. Dubilier Condenser Corp., 289 U.S. 178 (1933).

Guided by these canons of construction, this Court has read the term “manufacture” in § 101 in accordance with its dictionary definition to mean “the production of articles for use from raw or prepared materials by giving to these materials new forms, qualities, properties, or combinations, whether by hand-labor or by machinery.” American Fruit Growers, Inc. v. Brogdex Co., 283 U.S. 1, 11 (1931). Similarly, “composition of matter” has been construed consistent with its common usage to include “all compositions of two or more substances and . . . all composite articles, whether they be the results of chemical union, or of mechanical mixture, or whether they be gases, fluids, powders or solids.” Shell Development Co. v. Watson, 149 F.Supp. 279, 280 (D.C.1957). In choosing such expansive terms as “manufacture” and “composition of matter,” modified by the comprehensive “any,” Congress plainly contemplated that the patent laws would be given wide scope.

The relevant legislative history also supports a broad construction. The Patent Act of 1793, authored by Thomas Jefferson, defined statutory subject matter as “any new and useful art, machine, manufacture, or composition of matter, or any new or useful improvement [thereof].” Act of Feb. 21, 1793, 1, 1 Stat. 319. The Act embodied Jefferson's philosophy that “ingenuity should receive a liberal encouragement.” 5 Writings of Thomas Jefferson 75-76 (Washington ed. 1871). Subsequent patent statutes in 1836, 1870, and 1874 employed this same broad language. In 1952, when the patent laws were recodified, Congress replaced the word “art” with “process,” but otherwise left Jefferson's language intact. The Committee Reports accompanying the 1952 Act inform us that Congress intended statutory subject matter to “include anything under the sun that is made by man.” S.Rep.No.1979, 82d Cong., 2d Sess., 5 (1952); H.R.Rep.No.1923, 82d Cong., 2d Sess., 6 (1952).

This is not to suggest that § 101 has no limits or that it embraces every discovery. The laws of nature, physical phenomena, and abstract ideas have been held not patentable. Thus, a new mineral discovered in the earth or a new plant found in the F2008


wild is not patentable subject matter. Likewise, Einstein could not patent his celebrated law that E=mc 2; nor could Newton have patented the law of gravity. Such discoveries are “manifestations of . . . nature, free to all men and reserved exclusively to none.” Funk, supra, 333 U.S., at 130, 68 S.Ct., at 441.

Judged in this light, respondent's micro-organism plainly qualifies as patentable subject matter. His claim is not to a hitherto unknown natural phenomenon, but to a nonnaturally occurring manufacture or composition of matter-a product of human ingenuity “having a distinctive name, character [and] use.” Hartranft v. Wiegmann, 121 U.S. 609, 615 (1887). The point is underscored dramatically by comparison of the invention here with that in Funk. There, the patentee had discovered that there existed in nature certain species of root-nodule bacteria which did not exert a mutually inhibitive effect on each other. He used that discovery to produce a mixed culture capable of inoculating the seeds of leguminous plants. Concluding that the patentee had discovered “only some of the handiwork of nature,” the Court ruled the product nonpatentable:

“Each of the species of root-nodule bacteria contained in the package infects the same group of leguminous plants which it always infected. No species acquires a different use. The combination of species produces no new bacteria, no change in the six species of bacteria, and no enlargement of the range of their utility. Each species has the same effect it always had. The bacteria perform in their natural way. Their use in combination does not improve in any way their natural functioning. They serve the ends nature originally provided and act quite independently of any effort of the patentee.” 333 U.S., at 131.

Here, by contrast, the patentee has produced a new bacterium with markedly different characteristics from any found in nature and one having the potential for significant utility. His discovery is not nature's handiwork, but his own; accordingly it is patentable subject matter under 101.

IV

Two contrary arguments are advanced, neither of which we find persuasive.

(A)

[The Court holds that the Plant Variety Protection Act, passed in 1930, did not preempt the issuance of utility patents (the regular kind) claiming living subject matter.] F2008


(B)

The petitioner's second argument is that micro-organisms cannot qualify as patentable subject matter until Congress expressly authorizes such protection. His position rests on the fact that genetic technology was unforeseen when Congress enacted § 101. From this it is argued that resolution of the patentability of inventions such as respondent's should be left to Congress. The legislative process, the petitioner argues, is best equipped to weigh the competing economic, social, and scientific considerations involved, and to determine whether living organisms produced by genetic engineering should receive patent protection. In support of this position, the petitioner relies on our recent holding in Parker v. Flook, 437 U.S. 584 (1978), and the statement that the judiciary “must proceed cautiously when . . . asked to extend patent rights into areas wholly unforeseen by Congress.” Id., at 596, 98 S.Ct. at 2529.

It is, of course, correct that Congress, not the courts, must define the limits of patentability; but it is equally true that once Congress has spoken it is “the province and duty of the judicial department to say what the law is.” Marbury v. Madison, 1 Cranch 137, 177, 2 L.Ed. 60 (1803). Congress has performed its constitutional role in defining patentable subject matter in 101; we perform ours in construing the language Congress has employed. In so doing, our obligation is to take statutes as we find them, guided, if ambiguity appears, by the legislative history and statutory purpose. Here, we perceive no ambiguity. The subject-matter provisions of the patent law have been cast in broad terms to fulfill the constitutional and statutory goal of promoting “the Progress of Science and the useful Arts” with all that means for the social and economic benefits envisioned by Jefferson. Broad general language is not necessarily ambiguous when congressional objectives require broad terms.

Nothing in Flook is to the contrary. That case applied our prior precedents to determine that a “claim for an improved method of calculation, even when tied to a specific end use, is unpatentable subject matter under 101.” 437 U.S., at 595, n. 18. The Court carefully scrutinized the claim at issue to determine whether it was precluded from patent protection under “the principles underlying the prohibition against patents for ‘ideas' or phenomena of nature.” Id., at 593. We have done that here. Flook did not announce a new principle that inventions in areas not contemplated by Congress when the patent laws were enacted are unpatentable per se.

To read that concept into Flook would frustrate the purposes of the patent law. This Court frequently has observed that a statute is not to be confined to the “particular application[s] . . . contemplated by the legislators.” Barr v. United F2008


States, 324 U.S. 83 (1945). This is especially true in the field of patent law. A rule that unanticipated inventions are without protection would conflict with the core concept of the patent law that anticipation undermines patentability. Mr. Justice Douglas reminded that the inventions most benefiting mankind are those that “push back the frontiers of chemistry, physics, and the like.” Great A. & P. Tea Co. v. Supermarket Corp., 340 U.S. 147 (1950) (concurring opinion). Congress employed broad general language in drafting 101 precisely because such inventions are often unforeseeable.

To buttress his argument, the petitioner, with the support of amicus, points to grave risks that may be generated by research endeavors such as respondent's. The briefs present a gruesome parade of horribles. Scientists, among them Nobel laureates, are quoted suggesting that genetic research may pose a serious threat to the human race, or, at the very least, that the dangers are far too substantial to permit such research to proceed apace at this time. We are told that genetic research and related technological developments may spread pollution and disease, that it may result in a loss of genetic diversity, and that its practice may tend to depreciate the value of human life. These arguments are forcefully, even passionately, presented; they remind us that, at times, human ingenuity seems unable to control fully the forces it creates-that with Hamlet, it is sometimes better “to bear those ills we have than fly to others that we know not of.”

It is argued that this Court should weigh these potential hazards in considering whether respondent's invention is patentable subject matter under § 101. We disagree. The grant or denial of patents on micro-organisms is not likely to put an end to genetic research or to its attendant risks. The large amount of research that has already occurred when no researcher had sure knowledge that patent protection would be available suggests that legislative or judicial fiat as to patentability will not deter the scientific mind from probing into the unknown any more than Canute could command the tides. Whether respondent's claims are patentable may determine whether research efforts are accelerated by the hope of reward or slowed by want of incentives, but that is all.

What is more important is that we are without competence to entertain these arguments-either to brush them aside as fantasies generated by fear of the unknown, or to act on them. The choice we are urged to make is a matter of high policy for resolution within the legislative process after the kind of investigation, examination, and study that legislative bodies can provide and courts cannot. That process involves the balancing of competing values and interests, which in our democratic system is the business of elected representatives. Whatever their validity, the contentions now pressed on us should be addressed to the political branches of the Government, the Congress and the Executive, and not to the courts.F2008


We have emphasized in the recent past that “[o]ur individual appraisal of the wisdom or unwisdom of a particular [legislative] course . . . is to be put aside in the process of interpreting a statute.” TVA v. Hill, 437 U.S., at 194. Our task, rather, is the narrow one of determining what Congress meant by the words it used in the statute; once that is done our powers are exhausted. Congress is free to amend 101 so as to exclude from patent protection organisms produced by genetic engineering. Cf. 42 U.S.C. 2181(a), exempting from patent protection inventions “useful solely in the utilization of special nuclear material or atomic energy in an atomic weapon.” Or it may chose to craft a statute specifically designed for such living things. But, until Congress takes such action, this Court must construe the language of 101 as it is. The language of that section fairly embraces respondent's invention.

Accordingly, the judgment of the Court of Customs and Patent Appeals is

Affirmed.

Mr. Justice BRENNAN, with whom Mr. Justice WHITE, Mr. Justice MARSHALL, and Mr. Justice POWELL join, dissenting.

I agree with the Court that the question before us is a narrow one. Neither the future of scientific research, nor even, the ability of respondent Chakrabarty to reap some monopoly profits from his pioneering work, is at stake. Patents on the processes by which he has produced and employed the new living organism are not contested. The only question we need decide is whether Congress, exercising its authority under Art. I, 8, of the Constitution, intended that he be able to secure a monopoly on the living organism itself, no matter how produced or how used. Because I believe the Court has misread the applicable legislation, I dissent.

The patent laws attempt to reconcile this Nation's deep seated antipathy to monopolies with the need to encourage progress. Given the complexity and legislative nature of this delicate task, we must be careful to extend patent protection no further than Congress has provided. In particular, were there an absence of legislative direction, the courts should leave to Congress the decisions whether and how far to extend the patent privilege into areas where the common understanding has been that patents are not available.

In this case, however, we do not confront a complete legislative vacuum. The sweeping language of the Patent Act of 1793, as re-enacted in 1952, is not the last pronouncement Congress has made in this area. In 1930 Congress enacted the Plant Patent Act affording patent protection to developers of certain asexually F2008


reproduced plants. In 1970 Congress enacted the Plant Variety Protection Act to extend protection to certain new plant varieties capable of sexual reproduction. Thus, we are not dealing-as the Court would have it-with the routine problem of “unanticipated inventions.” Ante, at 2211. In these two Acts Congress has addressed the general problem of patenting animate inventions and has chosen carefully limited language granting protection to some kinds of discoveries, but specifically excluding others. These Acts strongly evidence a congressional limitation that excludes bacteria from patentability.

***

It is the role of Congress, not this Court, to broaden or narrow the reach of the patent laws. This is especially true where, as here, the composition sought to be patented uniquely implicates matters of public concern.

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UNITED STATES COURT OF APPEALS, FEDERAL CIRCUIT.

STATE STREET BANK & TRUST CO., Plaintiff-Appellee,

v.

SIGNATURE FINANCIAL GROUP, INC. Defendant-Appellant.

149 F.3d 1368[cert. denied, 119 U.S. 1093 (1999)]

No. 96-1327.

July 23, 1998.

Bank brought action against assignee of patent for computerized accounting system used to manage mutual fund investment structure, seeking declaratory judgment that patent was invalid and unenforceable. The United States District Court for the District of Massachusetts, Patti B. Saris, J., 927 F.Supp. 502, granted summary judgment for bank, and assignee appealed.

Before RICH, PLAGER, and BRYSON, Circuit Judges.

RICH, Circuit Judge.

Signature Financial Group, Inc. (Signature) appeals from the decision of the United States District Court for the District of Massachusetts granting a motion for summary judgment in favor of State Street Bank & Trust Co. (State Street), finding U.S. Patent No. 5,193,056 (the '056 patent) invalid on the ground that the claimed subject matter is not encompassed by 35 U.S.C. § 101 (1994). See State Street Bank & Trust Co. v. Signature Financial Group, Inc., 927 F.Supp. 502 (D.Mass.1996). We reverse and remand because we conclude that the patent claims are directed to statutory subject matter.

BACKGROUND

Signature is the assignee of the '056 patent which is entitled “Data Processing System for Hub and Spoke Financial Services Configuration.” The '056 patent issued to Signature on 9 March 1993, naming R. Todd Boes as the inventor. The '056 patent is generally directed to a data processing system (the system) for F2008


implementing an investment structure which was developed for use in Signature's business as an administrator and accounting agent for mutual funds. In essence, the system, identified by the proprietary name Hub and Spoke® , facilitates a structure whereby mutual funds (Spokes) pool their assets in an investment portfolio (Hub) organized as a partnership. This investment configuration provides the administrator of a mutual fund with the advantageous combination of economies of scale in administering investments coupled with the tax advantages of a partnership.

State Street and Signature are both in the business of acting as custodians and accounting agents for multi-tiered partnership fund financial services. State Street negotiated with Signature for a license to use its patented data processing system described and claimed in the '056 patent. When negotiations broke down, State Street brought a declaratory judgment action asserting invalidity, unenforceability, and noninfringement in Massachusetts district court, and then filed a motion for partial summary judgment of patent invalidity for failure to claim statutory subject matter under 101. The motion was granted and this appeal followed.

DISCUSSION

On appeal, we are not bound to give deference to the district court's grant of summary judgment, but must make an independent determination that the standards for summary judgment have been met. Summary judgment is properly granted where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The substantive issue at hand, whether the '056 patent is invalid for failure to claim statutory subject matter under § 101, is a matter of both claim construction and statutory construction. “[W]e review claim construction de novo including any allegedly fact-based questions relating to claim construction.” Cybor Corp. v. FAS Techs., 138 F.3d 1448, 1451, 46 USPQ2d 1169, 1174 (Fed.Cir.1998) (in banc). We also review statutory construction de novo. We hold that declaratory judgment plaintiff State Street was not entitled to the grant of summary judgment of invalidity of the '056 patent under 101 as a matter of law, because the patent claims are directed to statutory subject matter.

The following facts pertinent to the statutory subject matter issue are either undisputed or represent the version alleged by the nonmovant. The patented invention relates generally to a system that allows an administrator to monitor and record the financial information flow and make all calculations necessary for maintaining a partner fund financial services configuration. As previously mentioned, a partner fund financial services configuration essentially allows several mutual funds, or “Spokes,” to pool their investment funds into a single F2008


portfolio, or “Hub,” allowing for consolidation of, inter alia, the costs of administering the fund combined with the tax advantages of a partnership. In particular, this system provides means for a daily allocation of assets for two or more Spokes that are invested in the same Hub. The system determines the percentage share that each Spoke maintains in the Hub, while taking into consideration daily changes both in the value of the Hub's investment securities and in the concomitant amount of each Spoke's assets.

In determining daily changes, the system also allows for the allocation among the Spokes of the Hub's daily income, expenses, and net realized and unrealized gain or loss, calculating each day's total investments based on the concept of a book capital account. This enables the determination of a true asset value of each Spoke and accurate calculation of allocation ratios between or among the Spokes. The system additionally tracks all the relevant data determined on a daily basis for the Hub and each Spoke, so that aggregate year end income, expenses, and capital gain or loss can be determined for accounting and for tax purposes for the Hub and, as a result, for each publicly traded Spoke.

It is essential that these calculations are quickly and accurately performed. In large part this is required because each Spoke sells shares to the public and the price of those shares is substantially based on the Spoke's percentage interest in the portfolio. In some instances, a mutual fund administrator is required to calculate the value of the shares to the nearest penny within as little as an hour and a half after the market closes. Given the complexity of the calculations, a computer or equivalent device is a virtual necessity to perform the task.

The '056 patent application was filed 11 March 1991. It initially contained six “machine” claims, which incorporated means-plus-function clauses, and six method claims. According to Signature, during prosecution the examiner contemplated a 101 rejection for failure to claim statutory subject matter. However, upon cancellation of the six method claims, the examiner issued a notice of allowance for the remaining present six claims on appeal. Only claim 1 is an independent claim.

The district court began its analysis by construing the claims to be directed to a process, with each “means” clause merely representing a step in that process. However, “machine” claims having “means” clauses may only be reasonably viewed as process claims if there is no supporting structure in the written description that corresponds to the claimed “means” elements. See In re Alappat, 33 F.3d 1526, 1540-41, 31 USPQ2d 1545, 1554 (Fed.Cir.1994) (in banc ). This is not the case now before us.

When independent claim 1 is properly construed in accordance with 112, ¶ 6, it F2008


is directed to a machine, as demonstrated below, where representative claim 1 is set forth, the subject matter in brackets stating the structure the written description discloses as corresponding to the respective “means” recited in the claims.

1. A data processing system for managing a financial services configuration of a portfolio established as a partnership, each partner being one of a plurality of funds, comprising:

(a) computer processor means [a personal computer including a CPU] for processing data;

(b) storage means [a data disk] for storing data on a storage medium;

(c) first means [an arithmetic logic circuit configured to prepare the data disk to magnetically store selected data] for initializing the storage medium;

(d) second means [an arithmetic logic circuit configured to retrieve information from a specific file, calculate incremental increases or decreases based on specific input, allocate the results on a percentage basis, and store the output in a separate file] for processing data regarding assets in the portfolio and each of the funds from a previous day and data regarding increases or decreases in each of the funds, [sic, funds'] assets and for allocating the percentage share that each fund holds in the portfolio;

(e) third means [an arithmetic logic circuit configured to retrieve information from a specific file, calculate incremental increases and decreases based on specific input, allocate the results on a percentage basis and store the output in a separate file] for processing data regarding daily incremental income, expenses, and net realized gain or loss for the portfolio and for allocating such data among each fund;

(f) fourth means [an arithmetic logic circuit configured to retrieve information from a specific file, calculate incremental increases and decreases based on specific input, allocate the results on a percentage basis and store the output in a separate file] for processing data regarding daily net unrealized gain or loss for the portfolio and for allocating such data among each fund; and

(g) fifth means [an arithmetic logic circuit configured to retrieve information from specific files, calculate that information on an aggregate basis and store the output in a separate file] for processing data regarding aggregate year-end income, expenses, and capital gain or loss for the portfolio and each of the funds.

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Each claim component, recited as a “means” plus its function, is to be read, of course, pursuant to § 112, ¶ 6, as inclusive of the “equivalents” of the structures disclosed in the written description portion of the specification. Thus, claim 1, properly construed, claims a machine, namely, a data processing system for managing a financial services configuration of a portfolio established as a partnership, which machine is made up of, at the very least, the specific structures disclosed in the written description and corresponding to the means-plus-function elements (a)-(g) recited in the claim. A “machine” is proper statutory subject matter under § 101. We note that, for the purposes of a § 101 analysis, it is of little relevance whether claim 1 is directed to a “machine” or a “process,” as long as it falls within at least one of the four enumerated categories of patentable subject matter, “machine” and “process” being such categories.

This does not end our analysis, however, because the court concluded that the claimed subject matter fell into one of two alternative judicially-created exceptions to statutory subject matter. The court refers to the first exception as the “mathematical algorithm” exception and the second exception as the “business method” exception. Section 101 reads:

Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.

The plain and unambiguous meaning of § 101 is that any invention falling within one of the four stated categories of statutory subject matter may be patented, provided it meets the other requirements for patentability set forth in Title 35, i.e., those found in §§ 102, 103, and 112, ¶ 2.

The repetitive use of the expansive term “any” in § 101 shows Congress's intent not to place any restrictions on the subject matter for which a patent may be obtained beyond those specifically recited in § 101. Indeed, the Supreme Court has acknowledged that Congress intended 101 to extend to “anything under the sun that is made by man.” Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980).FN3

Thus, it is improper to read limitations into § 101 on the subject matter that may be patented where the legislative history indicates that Congress clearly did not intend such limitations. See Chakrabarty, 447 U.S. at 308, 100 S.Ct. 2204 (“We have also cautioned that courts ‘should not read into the patent laws limitations and conditions which the legislature has not expressed.’ ” (citations omitted)).

FN3. The Committee Reports accompanying the 1952 Act inform us that Congress intended statutory subject matter to “include anything under the

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sun that is made by man.” S.Rep. No. 82-1979 at 5 (1952); H.R.Rep. No. 82-1923 at 6 (1952).

The “Mathematical Algorithm” Exception

The Supreme Court has identified three categories of subject matter that are unpatentable, namely “laws of nature, natural phenomena, and abstract ideas.” [Diamond v.] Diehr, 450 U.S. 175, 185 (1981). Of particular relevance to this case, the Court has held that mathematical algorithms are not patentable subject matter to the extent that they are merely abstract ideas. See Diehr, 450 U.S. 175, passim; Parker v. Flook, 437 U.S. 584 (1978); Gottschalk v. Benson, 409 U.S. 63 (1972). In Diehr, the Court explained that certain types of mathematical subject matter, standing alone, represent nothing more than abstract ideas until reduced to some type of practical application, i.e., “a useful, concrete and tangible result.” Alappat, 33 F.3d at 1544.FN4

FN4. This has come to be known as the mathematical algorithm exception. This designation has led to some confusion, especially given the Freeman-Walter-Abele analysis. By keeping in mind that the mathematical algorithm is unpatentable only to the extent that it represents an abstract idea, this confusion may be ameliorated.

Unpatentable mathematical algorithms are identifiable by showing they are merely abstract ideas constituting disembodied concepts or truths that are not “useful.” From a practical standpoint, this means that to be patentable an algorithm must be applied in a “useful” way. In Alappat, we held that data, transformed by a machine through a series of mathematical calculations to produce a smooth waveform display on a rasterizer monitor, constituted a practical application of an abstract idea (a mathematical algorithm, formula, or calculation), because it produced “a useful, concrete and tangible result”-the smooth waveform.

Similarly, in Arrhythmia Research Technology Inc. v. Corazonix Corp., 958 F.2d 1053, 22 USPQ2d 1033 (Fed.Cir.1992), we held that the transformation of electrocardiograph signals from a patient's heartbeat by a machine through a series of mathematical calculations constituted a practical application of an abstract idea (a mathematical algorithm, formula, or calculation), because it corresponded to a useful, concrete or tangible thing-the condition of a patient's heart.

Today, we hold that the transformation of data, representing discrete dollar amounts, by a machine through a series of mathematical calculations into a final share price, constitutes a practical application of a mathematical algorithm, formula, or calculation, because it produces “a useful, concrete and tangible result”-a final share price momentarily fixed for recording and reporting purposes F2008


and even accepted and relied upon by regulatory authorities and in subsequent trades.

The district court erred by applying the Freeman-Walter-Abele test to determine whether the claimed subject matter was an unpatentable abstract idea. The Freeman-Walter-Abele test was designed by the Court of Customs and Patent Appeals, and subsequently adopted by this court, to extract and identify unpatentable mathematical algorithms in the aftermath of Benson and Flook. See In re Freeman, 573 F.2d 1237 (CCPA 1978) as modified by In re Walter, 618 F.2d 758 (CCPA 1980). The test has been thus articulated:

First, the claim is analyzed to determine whether a mathematical algorithm is directly or indirectly recited. Next, if a mathematical algorithm is found, the claim as a whole is further analyzed to determine whether the algorithm is “applied in any manner to physical elements or process steps,” and, if it is, it “passes muster under § 101.”

In re Pardo, 684 F.2d 912 (CCPA 1982) (citing In re Abele, 684 F.2d 902 (CCPA 1982)).FN5

FN5. The test has been the source of much confusion. In In re Abele, 684 F.2d 902 (CCPA 1982), the CCPA upheld claims applying “a mathematical formula within the context of a process which encompasses significantly more than the algorithm alone.” Id. at 909. Thus, the CCPA apparently inserted an additional consideration-the significance of additions to the algorithm. The CCPA appeared to abandon the application of the test in In re Taner, 681 F.2d 787 (CCPA 1982), only to subsequently “clarify” that the Freeman-Walter-Abele test was simply not the exclusive test for detecting unpatentable subject matter. In re Meyer, 688 F.2d 789 (CCPA 1982).

After Diehr and Chakrabarty, the Freeman-Walter-Abele test has little, if any, applicability to determining the presence of statutory subject matter. As we pointed out in Alappat, 33 F.3d at 1543, application of the test could be misleading, because a process, machine, manufacture, or composition of matter employing a law of nature, natural phenomenon, or abstract idea is patentable subject matter even though a law of nature, natural phenomenon, or abstract idea would not, by itself, be entitled to such protection. The test determines the presence of, for example, an algorithm. Under Benson, this may have been a sufficient indicium of nonstatutory subject matter. However, after Diehr and Alappat, the mere fact that a claimed invention involves inputting numbers, F2008


calculating numbers, outputting numbers, and storing numbers, in and of itself, would not render it nonstatutory subject matter, unless, of course, its operation does not produce a “useful, concrete and tangible result.” Alappat, 33 F.3d at 1544. *** After all, as we have repeatedly stated, every step-by-step process, be it electronic or chemical or mechanical, involves an algorithm in the broad sense of the term. Since 101 expressly includes processes as a category of inventions which may be patented and 100(b) further defines the word “process” as meaning “process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material,” it follows that it is no ground for holding a claim is directed to nonstatutory subject matter to say it includes or is directed to an algorithm. This is why the proscription against patenting has been limited to mathematical algorithms....

The question of whether a claim encompasses statutory subject matter should not focus on which of the four categories of subject matter a claim is directed to - process, machine, manufacture, or composition of matter-but rather on the essential characteristics of the subject matter, in particular, its practical utility. Section 101 specifies that statutory subject matter must also satisfy the other “conditions and requirements” of Title 35, including novelty, nonobviousness, and adequacy of disclosure and notice. See In re Warmerdam, 33 F.3d 1354, 1359 (Fed.Cir.1994). For purpose of our analysis, as noted above, claim 1 is directed to a machine programmed with the Hub and Spoke software and admittedly produces a “useful, concrete, and tangible result.” Alappat, 33 F.3d at 1544. This renders it statutory subject matter, even if the useful result is expressed in numbers, such as price, profit, percentage, cost, or loss.

The Business Method Exception

As an alternative ground for invalidating the '056 patent under § 101, the court relied on the judicially-created, so-called “business method” exception to statutory subject matter. We take this opportunity to lay this ill-conceived exception to rest. Since its inception, the “business method” exception has merely represented the application of some general, but no longer applicable legal principle, perhaps arising out of the “requirement for invention” - which was eliminated by § 103. Since the 1952 Patent Act, business methods have been, and should have been, subject to the same legal requirements for patentability as applied to any other process or method. FN10

FN10. As Judge Newman has previously stated,

[The business method exception] is ... an unwarranted encumbrance to the definition of statutory subject matter in section 101, that [should] be

F200818


discarded as error-prone, redundant, and obsolete. It merits retirement from the glossary of section 101.... All of the “doing business” cases could have been decided using the clearer concepts of Title 35. Patentability does not turn on whether the claimed method does “business” instead of something else, but on whether the method, viewed as a whole, meets the requirements of patentability as set forth in Sections 102, 103, and 112 of the Patent Act.

In re Schrader, 22 F.3d 290 (Fed.Cir.1994) (Newman, J., dissenting).

The business method exception has never been invoked by this court, or the CCPA, to deem an invention unpatentable.FN11 Application of this particular exception has always been preceded by a ruling based on some clearer concept of Title 35 or, more commonly, application of the abstract idea exception based on finding a mathematical algorithm. Illustrative is the CCPA's analysis in In re Howard, 394 F.2d 869, (CCPA 1968), wherein the court affirmed the Board of Appeals' rejection of the claims for lack of novelty and found it unnecessary to reach the Board's section 101 ground that a method of doing business is “inherently unpatentable.” Id. at 872. FN12

FN11. See Rinaldo Del Gallo, III, Are “Methods of Doing Business” Finally out of Business as a Statutory Rejection?, 38 IDEA 403, 435 (1998).

FN12. See also Dann v. Johnston, 425 U.S. 219 (1976) (the Supreme Court declined to discuss the section 101 argument concerning the computerized financial record-keeping system, in view of the Court's holding of patent invalidity under section 103); In re Chatfield, 545 F.2d 152 (CCPA 1976); Ex parte Murray, 9 USPQ2d 1819, 1820 (Bd.Pat.App & Interf. 1988) (“[T]he claimed accounting method [requires] no more than the entering, sorting, debiting and totaling of expenditures as necessary preliminary steps to issuing an expense analysis statement ....”) states grounds of obviousness or lack of novelty, not of non-statutory subject matter.

Similarly, In re Schrader, 22 F.3d 290 (Fed.Cir.1994), while making reference to the business method exception, turned on the fact that the claims implicitly recited an abstract idea in the form of a mathematical algorithm and there was no “transformation or conversion of subject matter representative of or constituting physical activity or objects.” 22 F.3d at 294 (emphasis omitted).FN13

FN13. Any historical distinctions between a method of “doing” business F2008


and the means of carrying it out blur in the complexity of modern business systems. See Paine, Webber, Jackson & Curtis v. Merrill Lynch, 564 F.Supp. 1358 (D.Del.1983), (holding a computerized system of cash management was held to be statutory subject matter.)

State Street argues that we acknowledged the validity of the business method exception in Alappat when we discussed Maucorps and Meyer:

Maucorps dealt with a business methodology for deciding how salesmen should best handle respective customers and Meyer involved a “system” for aiding a neurologist in diagnosing patients. Clearly, neither of the alleged “inventions” in those cases falls within any 101 category.

Alappat, 33 F.3d at 1541. However, closer scrutiny of these cases reveals that the claimed inventions in both Maucorps and Meyer were rejected as abstract ideas under the mathematical algorithm exception, not the business method exception.

Even the case frequently cited as establishing the business method exception to statutory subject matter, Hotel Security Checking Co. v. Lorraine Co., 160 F. 467 (2d Cir.1908), did not rely on the exception to strike the patent. In that case, the patent was found invalid for lack of novelty and “invention,” not because it was improper subject matter for a patent. The court stated “the fundamental principle of the system is as old as the art of bookkeeping, i.e., charging the goods of the employer to the agent who takes them.” Id. at 469. “If at the time of [the patent] application, there had been no system of bookkeeping of any kind in restaurants, we would be confronted with the question whether a new and useful system of cash registering and account checking is such an art as is patentable under the statute.” Id. at 472.

This case is no exception. The district court announced the precepts of the business method exception as set forth in several treatises, but noted as its primary reason for finding the patent invalid under the business method exception as follows:

If Signature's invention were patentable, any financial institution desirous of implementing a multi-tiered funding complex modelled (sic) on a Hub and Spoke configuration would be required to seek Signature's permission before embarking on such a project. This is so because the '056 Patent is claimed [sic] sufficiently broadly to foreclose virtually any computer-implemented accounting method necessary to manage this type of financial structure.

F200820


927 F.Supp. 1502, 1542 (emphasis added). Whether the patent's claims are too broad to be patentable is not to be judged under § 101, but rather under §§ 102, 103 and 112. Assuming the above statement to be correct, it has nothing to do with whether what is claimed is statutory subject matter.

In view of this background, it comes as no surprise that in the most recent edition of the Manual of Patent Examining Procedures (MPEP) (1996), a paragraph of 706.03(a) was deleted. In past editions it read:

Though seemingly within the category of process or method, a method of doing business can be rejected as not being within the statutory classes.

MPEP 706.03(a) (1994). This acknowledgment is buttressed by the U.S. Patent and Trademark 1996 Examination Guidelines for Computer Related Inventions which now read:

Office personnel have had difficulty in properly treating claims directed to methods of doing business. Claims should not be categorized as methods of doing business. Instead such claims should be treated like any other process claims.

Examination Guidelines, 61 Fed.Reg. 7478, 7479 (1996). We agree that this is precisely the manner in which this type of claim should be treated. Whether the claims are directed to subject matter within § 101 should not turn on whether the claimed subject matter does “business” instead of something else.

CONCLUSION

The appealed decision is reversed and the case is remanded to the district court for further proceedings consistent with this opinion.

REVERSED and REMANDED.

F200821



CITY OF ELIZABETH

v.

PAVEMENT CO.

97 U.S. 126; 1877 U.S. LEXIS 1761; 24 L. Ed. 1000; 7 Otto126

OCTOBER, 1877, Term

MR. JUSTICE BRADLEY delivered the opinion of the court.

This suit was brought by the American Nicholson Pavement Company against the city of Elizabeth, N. J., George W. Tubbs, and the New Jersey Wood-Paving Company, a corporation of New Jersey, upon a patent issued to Samuel Nicholson, dated Aug. 20, 1867, for a new and improved wooden pavement, being a second reissue of a patent issued to said Nicholson Aug. 8, 1854. The reissued patent was extended in 1868 for a further term of seven years. A copy of it is appended to the bill; and, in the specification, it is declared that the nature and object of the invention consists in providing a process or mode of constructing wooden block pavements upon a foundation along a street or roadway with facility, cheapness, and accuracy, and also in the creation and construction of such a wooden pavement as shall be comparatively permanent and durable, by so uniting and combining all its parts, both superstructure and foundation, as to provide against the slipping of the horses' feet, against noise, against unequal wear, and against rot and consequent sinking away from below. Two plans of making this pavement are specified. Both require a proper foundation on which to lay the blocks, consisting of tarred-paper or hydraulic cement covering the surface of the road-bed to the depth of about two inches, or of a flooring of boards or plank, also covered with tar, or other preventive of moisture. On this foundation, one plan is to set square blocks on end arranged like a checker-board, the alternate rows being shorter than the others, so as to leave narrow grooves or channel-ways to be filled with small broken stone or gravel, and them pouring over the whole melted tar or pitch, whereby the cavities are all filled and cemented together. The other plan is, to arrange the blocks in rows transversely across the street, separated a small space (of about an inch) by strips of board at the bottom, which serve to keep the blocks at a uniform distance apart, and then filling these spaces with the same material as before. The blocks forming the pavement are about eight inches high. The alternate rows of short blocks in the first plan and the strips of board in the second

F200822


plan should not be higher than four inches. The patent has four claims, the first two of which, which are the only ones in question, are as follows: --

"I claim as an improvement in the art of constructing pavements:

"1. Placing a continuous foundation or support, as above described, directly upon the roadway; then arranging thereon a series of blocks, having parallel sides, endwise, in rows, so as to leave a continuous narrow groove or channel-way between each row, and then filling said grooves or channel-ways with broken stone, gravel, and tar, or other like materials.

"2. I claim the formation of a pavement by laying a foundation directly upon the roadway, substantially as described, and then employing two sets of blocks: one a principal set of blocks, that shall form the wooden surface of the pavement when completed, and an auxiliary set of blocks or strips of board, which shall form no part of the surface of the pavement, but determine the width of the groove between the principal blocks, and also the filling of said groove, when [**6] so formed between the principal blocks, with broken stone, gravel, and tar, or other like material."

The bill charges that the defendants infringed this patent by laying down wooden pavements in the city of Elizabeth, N.J., constructed in substantial conformity with the process patented, and prays an account of profits, and an injunction.

The defendants answered in due course, admitting that they had constructed, and were still constructing, wooden pavements in Elizabeth, but alleging that they were constructed in accordance with a patent granted to John W. Brocklebank and Charles Trainer, dated Jan. 12, 1869, and denied that it infringed upon the complainant.

They also denied that there was any novelty in the alleged invention of Nicholson, and specified a number of English and other patents which exhibited, as they claimed, every substantial and material part thereof which was claimed as new.

They also averred that the alleged invention of Nicholson was in public use, with his consent and allowance, for six years before he applied for a patent, on a certain avenue in Boston called the Mill-dam; and contended that said public use worked an abandonment of the pretended invention.

These several issues, together with the question of profits, and liability on the part of the several defendants to respond thereto, are the subjects in controversy before us. F2008


***

[After discussing prior literature on roadways of stone and wood --] None of these pavements combine all the elements of Nicholson's, much less a combination of those elements arranged and disposed according to his plan. We think they present no ground for invalidating his patent, and no defence to this suit.

The next question to be considered is, whether Nicholson's invention was in public use or on sale, with his consent and allowance, for more than two years prior to his application for a patent, within the meaning of the sixth, seventh, and fifteenth sections of the act of 1836, as qualified by the seventh section of the act of 1839, which were the acts in force in 1854, when he obtained his patent. It is contended by the appellants that the pavement which Nicholson put down by way of experiment, on Mill-dam Avenue in Boston, in 1848, was publicly used for the space of six years before his application for a patent, and that this was a public use within the meaning of the law.

To determine this question, it is necessary to examine the circumstances under which this pavement was put down, and the object and purpose that Nicholson had in view. It is perfectly clear from the evidence that he did not intend to abandon his right to a patent. He had filed a caveat in August, 1847, and he constructed the pavement in question by way of experiment, for the purpose of testing its qualities. The road in which it was put down, though a public road, belonged to the Boston and Roxbury Mill Corporation, which received toll for its use; and Nicholson was a stockholder and treasurer of the corporation. The pavement in question was about seventy-five feet in length, and was laid adjoining to the toll-gate and in front of the toll-house. It was constructed by Nicholson at his own expense, and was placed by him where it was, in order to see the effect upon it of heavily loaded wagons, and of varied and constant use; and also to ascertain its durability, and liability to decay. Joseph L. Lang, who was toll-collector for many years, commencing in 1849, familiar with the road before that time, and with this pavement from the time of its origin, testified as follows: "Mr. Nicholson was there almost daily, and when he came he would examine the pavement, would often walk over it, cane in hand, striking it with his cane, and making particular examination of its condition. He asked me very often how people liked it, and asked me a great many questions about it. I have heard him say a number of times that this was his first experiment with this pavement, and he thought that it was wearing very well. The circumstances that made this locality desirable for the purpose of obtaining a satisfactory test of the durability and value of the pavement were: that there would be a better chance to lay it there; he would have more room F2008


and a better chance than in the city; and, besides, it was a place where most everybody went over it, rich and poor. It was a great thoroughfare out of Boston. It was frequently travelled by teams having a load of five or six tons, and some larger. As these teams usually stopped at the toll-house, and started again, the stopping and starting would make as severe a trial to the pavement as it could be put to."

This evidence is corroborated by that of several other witnesses in the cause; the result of the whole being that Nicholson merely intended this piece of pavement as an experiment, to test its usefulness and durability. Was this a public use, within the meaning of the law?

An abandonment of an invention to the public may be evinced by the conduct of the inventor at any time, even within the two years named in the law. The effect of the law is, that no such consequence will necessarily follow from the invention being in public use or on sale, with the inventor's consent and allowance, at any time within two years before his application; but that, if the invention is in public use or on sale prior to that time, it will be conclusive evidence of abandonment, and the patent will be void.

But, in this case, it becomes important to inquire what is such a public use as will have the effect referred to. That the use of the pavement in question was public in one sense cannot be disputed. But can it be said that the invention was in public use? The use of an invention by the inventor himself, or of any other person under his direction, by way of experiment, and in order to bring the invention to perfection, has never been regarded as such a use. Curtis, Patents, sect. 381; Shaw v. Cooper, 7 Pet. 292.

Now, the nature of a street pavement is such that it cannot be experimented upon satisfactorily except on a highway, which is always public.

When the subject of invention is a machine, it may be tested and tried in a building, either with or without closed doors. In either case, such use is not a public use, within the meaning of the statute, so long as the inventor is engaged, in good faith, in testing its operation. He may see cause to alter it and improve it, or not. His experiments will reveal the fact whether any and what alterations may be necessary. If durability is one of the qualities to be attained, a long period, perhaps years, may be necessary to enable the inventor to discover whether his purpose is accomplished. And though, during all that period, he may not find that any changes are necessary, yet he may be justly said to be using his machine only by way of experiment; and no one would say that such a use, pursued with a bona fide intent of testing the qualities of the machine, would be a public use, within the meaning of the statute. So long as he does not voluntarily allow others to make it F2008


and use it, and so long as it is not on sale for general use, he keeps the invention under his own control, and does not lose his title to a patent.

It would not be necessary, in such a case, that the machine should be put up and used only in the inventor's own shop or premises. He may have it put up and used in the premises of another, and the use may inure to the benefit of the owner of the establishment. Still, if used under the surveillance of the inventor, and for the purpose of enabling him to test the machine, and ascertain whether it will answer the purpose intended, and make such alterations and improvements as experience demonstrates to be necessary, it will still be a mere experimental use, and not a public use, within the meaning of the statute.

Whilst the supposed machine is in such experimental use, the public may be incidentally deriving a benefit from it. If it be a grist-mill, or a carding-machine, customers from the surrounding country may enjoy the use of it by having their grain made into flour, or their wool into rolls, and still it will not be in public use, within the meaning of the law.

But if the inventor allows his machine to be used by other persons generally, either with or without compensation, or if it is, with his consent, put on sale for such use, then it will be in public use and on public sale, within the meaning of the law.

If, now, we apply the same principles to this case, the analogy will be seen at once. Nicholson wished to experiment on his pavement. He believed it to be a good thing, but he was not sure; and the only mode in which he could test it was to place a specimen of it in a public roadway. He did this at his own expense, and with the consent of the owners of the road. Durability was one of the qualities to be attained. He wanted to know whether his pavement would stand, and whether it would resist decay. Its character for durability could not be ascertained without its being subjected to use for a considerable time. He subjected it to such use, in good faith, for the simple purpose of ascertaining whether it was what he claimed it to be. Did he do any thing more than the inventor of the supposed machine might do, in testing his invention? The public had the incidental use of the pavement, it is true; but was the invention in public use, within the meaning of the statute? We think not. The proprietors of the road alone used the invention, and used it at Nicholson's request, by way of experiment. The only way in which they could use it was by allowing the public to pass over the pavement.

Had the city of Boston, or other parties, used the invention, by laying down the pavement in other streets and places, with Nicholson's consent and allowance, then, indeed, the invention itself would have been in public use, within the meaning of the law; but this was not the case. Nicholson did not sell it, nor allow F2008


others to use it or sell it. He did not let it go beyond his control. He did nothing that indicated any intent to do so. He kept it under his own eyes, and never for a moment abandoned the intent to obtain a patent for it.

In this connection, it is proper to make another remark. It is not a public knowledge of his invention that precludes the inventor from obtaining a patent for it, but a public use or sale of it. In England, formerly, as well as under our Patent Act of 1793, if an inventor did not keep his invention secret, if a knowledge of it became public before his application for a patent, he could not obtain one. To be patentable, and invention must not have been known or used before the application; but this has not been the law of this country since the passage of the act of 1836, and it has been very much qualified in England. Lewis v. Marling, 10 B. & C. 22. Therefore, if it were true that during the whole period in which the pavement was used, the public knew how it was constructed, it would make no difference in the result.

It is sometimes said that an inventor acquires an undue advantage over the public by delaying to take out a patent, inasmuch as he thereby preserves the monopoly to himself for a longer period than is allowed by the policy of the law; but this cannot be said with justice when the delay is occasioned by a bona fide effort to bring his invention to perfection, or to ascertain whether it will answer the purpose intended. His monopoly only continues for the allotted period, in any event; and it is the interest of the public, as well as himself, that the invention should be perfect and properly tested, before a patent is granted for it. Any attempt to use it for a profit, and not by way of experiment, for a longer period than two years before the application, would deprive the inventor of his right to a patent.

***

F200827


UNITED STATES COURT OF APPEALS, FEDERAL CIRCUIT

In re Leo M. HALL

781 F.2d 897Appeal No. 85-2338.

Jan. 16, 1986.

Applicant appealed from a decision of the United States Patent and Trademark Office's former Board of Appeals, sustaining rejection of claims of a reissue application for an enzyme.

Before BALDWIN, Circuit Judge, NICHOLS, Senior Circuit Judge, and KASHIWA, Circuit Judge.FN*

FN* Circuit Judge Kashiwa retired on January 7, 1986. Prior to his retirement, he participated in the consideration and decision of this case, and joined in this opinion.

BALDWIN, Circuit Judge.

This is an appeal from the decision of the U.S. Patent and Trademark Office's (PTO) former Board of Appeals, adhered to on reconsideration by the Board of Patent Appeals and Interferences (board), sustaining the final rejection of claims 1-25 of reissue Application No. 343,922, filed January 29, 1982, based principally on a “printed publication” bar under 35 U.S.C. § 102(b). The reference is a doctoral thesis. Because appellant concedes that his claims are unpatentable if the thesis is available as a “printed publication” more than one year prior to the application's effective filing date of February 27, 1979, the only issue is whether the thesis is available as such a printed publication. On the record before us, we affirm the board's decision.

Background

A protest was filed during prosecution of appellant's reissue application which included in an appendix a copy of the dissertation “1,4-a-Glucanglukohydrolase ein amylotylisches Enzym ...” by Peter Foldi (Foldi thesis or dissertation). The record indicates that in September 1977, Foldi submitted his dissertation to the Department of Chemistry and Pharmacy at Freiburg University in the Federal Republic of Germany, and that Foldi was awarded a doctorate degree on November 2, 1977.

F200828


Certain affidavits from Dr. Erich Will, who is the director and manager of the Loan Department of the Library of Freiburg University, have been relied upon by the examiner and the board in reaching their decisions. One document, styled a “Declaration” and signed by Dr. Will, states that:

[I]n November 1977 copies of the dissertation FOLDI ... were received in the library of Freiburg University, and in ... December 1977 copies of the said dissertation were freely made available to the faculty and student body of Freiburg University as well as to the general public.

In an August 28, 1981 letter responding to an inquiry from a German corporation, Dr. Will said that the Freiburg University library was able to make the Foldi dissertation “available to our readers as early as 1977.”

The examiner made a final rejection of the application claims. He said: “On the basis of the instant record it is reasonable to assume that the Foldi thesis was available (accessible) prior to February 27, 1979.” He also pointed out that there was no evidence to the contrary and asked the appellant to state his “knowledge of any inquiry which may have been made regarding ‘availability’ beyond that presently referred to in the record.” Appellant did not respond.

By letter, the PTO's Scientific Library asked Dr. Will whether the Foldi dissertation was made available to the public by being cataloged and placed in the main collection. Dr. Will replied in an October 20, 1983 letter, as translated:

Our dissertations, thus also the Foldi dissertation, are indexed in a special dissertations catalogue, which is part of the general users' catalogue. In the stacks they are likewise set apart in a special dissertation section, which is part of the general stacks.

In response to a further inquiry by the PTO's Scientific Library requesting (1) the exact date of indexing and cataloging of the Foldi dissertation or (2) “the time such procedures normally take,” Dr. Will replied in a June 18, 1984 letter:

The Library copies of the Foldi dissertation were sent to us by the faculty on November 4, 1977. Accordingly, the dissertation most probably was available for general use toward the beginning of the month of December, 1977.

The board held that the unrebutted evidence of record was sufficient to conclude F2008


that the Foldi dissertation had an effective date as prior art more than one year prior to the filing date of the appellant's initial application. In rejecting appellant's argument that the evidence was not sufficient to establish a specific date when the dissertation became publicly available, the board said:

We rely on the librarian's affidavit of express facts regarding the specific dissertation of interest and his description of the routine treatment of dissertations in general, in the ordinary course of business in his library.

On appeal, appellant raises two arguments: (1) the § 102(b) “printed publication” bar requires that the publication be accessible to the interested public, but there is no evidence that the dissertation was properly indexed in the library catalog prior to the critical date; and (2) even if the Foldi thesis were cataloged prior to the critical date, the presence of a single cataloged thesis in one university library does not constitute sufficient accessibility of the publication's teachings to those interested in the art exercising reasonable diligence.

OPINION

The “printed publication” bar is found in 35 U.S.C. 102:

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 ... more than one year prior to the date of the application for patent in the United States....

The bar is grounded on the principle that once an invention is in the public domain, it is no longer patentable by anyone. In re Bayer, 568 F.2d 1357, 1361 (CCPA 1978).

The statutory phrase “printed publication” has been interpreted to give effect to ongoing advances in the technologies of data storage, retrieval, and dissemination. In re Wyer, 655 F.2d 221, 226 (CCPA 1981). Because there are many ways in which a reference may be disseminated to the interested public, “public accessibility” has been called the touchstone in determining whether a reference constitutes a “printed publication” bar under 35 U.S.C. § 102(b). The § 102 publication bar is a legal determination based on underlying fact issues, and F2008


therefore must be approached on a case-by-case basis. The proponent of the publication bar must show that prior to the critical date the reference was sufficiently accessible, at least to the public interested in the art, so that such a one by examining the reference could make the claimed invention without further research or experimentation.

Relying on In re Bayer, appellant argues that the Foldi thesis was not shown to be accessible because Dr. Will's affidavits do not say when the thesis was indexed in the library catalog and do not chronicle the procedures for receiving and processing a thesis in the library.

As the board pointed out in its decision, the facts in Bayer differ from those here. Bayer, who was himself the author of the dissertation relied upon by the PTO, submitted a declaration from the university librarian which detailed the library's procedures for receiving, cataloging, and shelving of theses and attested to the relevant dates that Bayer's thesis was processed. The evidence showed that cataloging and shelving thesis copies routinely took many months from the time they were first received from the faculty and that during the interim the theses were accumulated in a private library office accessible only to library employees. In particular, processing of Bayer's thesis was shown to have been completed after the critical date.

On those facts the CCPA held that Bayer's thesis was not sufficiently accessible and could not give rise to the § 102(b) publication bar. But the court did not hold, as appellant would have it, that accessibility can only be shown by evidence establishing a specific date of cataloging and shelving before the critical date. While such evidence would be desirable, in lending greater certainty to the accessibility determination, the realities of routine business practice counsel against requiring such evidence. The probative value of routine business practice to show the performance of a specific act has long been recognized. See, e.g., 1 Wigmore, Evidence 92 (1940); rule 406, Fed.R.Evid.; 2 Weinstein, Evidence 406[01], 406[03] (1981). Therefore, we conclude that competent evidence of the general library practice may be relied upon to establish an approximate time when a thesis became accessible.

In the present case, Dr. Will's affidavits give a rather general library procedure as to indexing, cataloging, and shelving of theses. Although no specific dates are cited (except that the thesis was received on November 4, 1977), Dr. Will's affidavits consistently maintain that inasmuch as the Foldi dissertation was received by the library in early November 1977, the dissertation “most probably was available for general use toward the beginning of the month of December, 1977.” The only reasonable interpretation of the affidavits is that Dr. Will was relying on his library's general practice for indexing, cataloging, and shelving F2008


theses in estimating the time it would have taken to make the dissertation available to the interested public. Dr. Will's affidavits are competent evidence, and in these circumstances, persuasive evidence that the Foldi dissertation was accessible prior to the critical date. Reliance on an approximation found in the affidavits such as “toward the beginning of the month of December, 1977” works no injustice here because the critical date, February 27, 1978, is some two and one half months later. Moreover, it is undisputed that appellant proffered no rebuttal evidence.

Based on what we have already said concerning “public accessibility,” and noting that the determination rests on the facts of each case, we reject appellant's legal argument that a single cataloged thesis in one university library does not constitute sufficient accessibility to those interested in the art exercising reasonable diligence.

We agree with the board that the evidence of record consisting of Dr. Will's affidavits establishes a prima facie case for unpatentability of the claims under the 102(b) publication bar. It is a case which stands unrebutted.

Accordingly, the board's decision sustaining the rejection of appellant's claims is affirmed.

AFFIRMED

F200832



WILLIAM T. GRAHAM

v.

JOHN DEERE COMPANY OF KANSAS CITY

383 U.S. 1Nos. 11, 37, 43.

Argued Oct. 14, 1965.Decided Feb. 21, 1966.

In a patent infringement action, the United States District Court for the Western District of Missouri, 216 F.Supp. 272, entered judgment for plaintiffs, and defendants appealed. The Court of Appeals, Eighth Circuit, reversed, 333 F.2d 529. In separate actions, plaintiffs sought declaration that patent was invalid and not infringed. The United States District Court for the Western District of Missouri, 220 F.Supp. 414, held that patent was valid and infringed and plaintiffs appealed. The Court of Appeals, Eighth Circuit, affirmed, 336 F.2d 110.

Mr. Justice CLARK delivered the opinion of the Court.

After a lapse of 15 years, the Court again focuses its attention on the patentability of inventions under the standard of Art. I, 8, cl. 8, of the Constitution and under the conditions prescribed by the laws of the United States. Since our last expression on patent validity, Great A. & P. Tea Co. v. Supermarket Equipment Corp., 340 U.S. 147 (1950), the Congress has for the first time expressly added a third statutory dimension to the two requirements of novelty and utility that had been the sole statutory test since the Patent Act of 1793. This is the test of obviousness, i.e., whether ‘the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. Patentability shall not be negatived by the manner in which the invention was made.’ s 103 of the Patent Act of 1952, 35 U.S.C. 103 (1964 ed.).

The questions, involved in each of the companion cases before us, are what effect the 1952 Act had upon traditional statutory and judicial tests of patentability and what definitive tests are now required. We have concluded that the 1952 Act was intended to codify judicial precedents embracing the principle long ago announced F2008


by this Court in Hotchkiss v. Greenwood, 11 How. 248, 13 L.Ed. 683 (1851), and that, while the clear language of s 103 places emphasis on an inquiry into obviousness, the general level of innovation necessary to sustain patentability remains the same.

***

This Court formulated a general condition of patentability in 1851 in Hotchkiss v. Greenwood, 11 How. 248, 13 L.Ed. 683. The patent involved a mere substitution of materials-porcelain or clay for wood or metal in doorknobs-and the Court condemned it, holding:

‘(U)nless more ingenuity and skill * * * were required * * * than were possessed by an ordinary mechanic acquainted with the business, there was an absence of that degree of skill and ingenuity which constitute essential elements of every invention. In other words, the improvement is the work of the skilful mechanic, not that of the inventor.’ At p. 267.

Hotchkiss, by positing the condition that a patentable invention evidence more ingenuity and skill than that possessed by an ordinary mechanic acquainted with the business, merely distinguished between new and useful innovations that were capable of sustaining a patent and those that were not. The Hotchkiss test laid the cornerstone of the judicial evolution suggested by Jefferson and left to the courts by Congress. The language in the case, and in those which followed, gave birth to ‘invention’ as a word of legal art signifying patentable inventions. Yet, as this Court has observed, ‘(t)he truth is, the word (‘invention’) cannot be defined in such manner as to afford any substantial aid in determining whether a particular device involves an exercise of the inventive faculty or not.' McClain v. Ortmayer, 141 U.S. 419, 427 (1891); Great A. & P. Tea Co. v. Supermarket Equipment Corp., supra, 340 U.S., at 151. Its use as a label brought about a large variety of opinions as to its meaning both in the Patent Office, in the courts, and at the bar. The Hotchkiss formulation, however, lies not in any label, but in its functional approach to questions of patentability. In practice, Hotchkiss has required a comparison between the subject matter of the patent, or patent application, and the background skill of the calling. It has been from this comparison that patentability was in each case determined.

IV.

The 1952 Patent Act.

F200834


The Act sets out the conditions of patentability in three sections. An analysis of the structure of these three sections indicates that patentability is dependent upon three explicit conditions: novelty and utility as articulated and defined in s 101 and s 102, and nonobviousness, the new statutory formulation, as set out in s 103. The first two sections, which trace closely the 1874 codification, express the ‘new and useful’ tests which have always existed in the statutory scheme and, for our purposes here, need no clarification. The pivotal section around which the present controversy centers is 103. It provides:

Conditions for patentability; non-obvious subject matter‘A patent may not be obtained though the invention is not identically disclosed or described as set forth in section 102 of this title, if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. Patentability shall not be negatived by the manner in which the invention was made.’

***

Approached in this light, the § 103 additional condition, when followed realistically, will permit a more practical test of patentability. The emphasis on non-obviousness is one of inquiry, not quality, and, as such, comports with the constitutional strictures.

While the ultimate question of patent validity is one of law, Great A. & P. Tea Co. v. Supermarket Equipment Corp., supra, 340 U.S. at 155, 71 S.Ct. at 131, the s 103 condition, which is but one of three conditions, each of which must be satisfied, lends itself to several basic factual inquiries. Under 103, the scope and content of the prior art are to be determined; differences between the prior art and the claims at issue are to be ascertained; and the level of ordinary skill in the pertinent art resolved. Against this background, the obviousness or nonobviousness of the subject matter is determined. Such secondary considerations as commercial success, long felt but unsolved needs, failure of others, etc., might be utilized to give light to the circumstances surrounding the origin of the subject matter sought to be patented. As indicia of obviousness or nonobviousness, these inquiries may have relevancy. See Note, Subtests of ‘Nonobviousness': A Nontechnical Approach to Patent Validity, 112 U.Pa.L.Rev. 1169 (1964).

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This is not to say, however, that there will not be difficulties in applying the nonobviousness test. What is obvious is not a question upon which there is likely to be uniformity of thought in every given factual context. The difficulties, however, are comparable to those encountered daily by the courts in such frames of reference as negligence and scienter, and should be amenable to a case-by-case development. We believe that strict observance of the requirements laid down here will result in that uniformity and definiteness which Congress called for in the 1952 Act.

***

F200836


UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT

TITANIUM METALS CORPORATION OF AMERICA, Appellee,

v.

DONALD W. BANNER, Commissioner of Patents and Trademarks, Appellant.

Nov. 7, 1985

Before RICH, Circuit Judge, NICHOLS, Senior Circuit Judge, and NEWMAN, Circuit Judge.


This appeal is from an Order of the United States District Court for the District of Columbia in a civil action brought pursuant to 35 U.S.C. 145 against Donald W. Banner as Commissioner of Patents and Trademarks authorizing the Commissioner to issue to appellee a patent containing claims 1, 2, and 3 of patent application serial No. 598,935 for "TITANIUM ALLOY." The Commissioner has appealed. We reverse.

Background

The inventors, Loren C. Covington and Howard R. Palmer, employees of appellee to whom they have assigned their invention and the application thereon, filed an application on March 29, 1974, serial No. 455,964, to patent an alloy they developed. The application involved on this appeal is a continuation-in-part thereof, filed July 25, 1975, containing the three claims on appeal. The alloy is made primarily of titanium (Ti) and contains small amounts of nickel (Ni) and molybdenum (Mo) as alloying ingredients to give the alloy certain desirable properties, particularly corrosion resistance in hot brine solutions, while retaining workability so that articles such as tubing can be fabricated from it by rolling, welding and other techniques. The inventors apparently also found that iron content should be limited, iron being an undesired impurity rather than an alloying ingredient. They determined the permissible ranges of the components, above and below which the desired properties were not obtained. A precise definition of the invention sought to be patented is found in the claims, set forth below, claim 3 representing the preferred composition, it being understood, however, that no iron at all would be even more preferred.

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1. A titanium base alloy consisting essentially by weight of about 0.6% to 0.9% nickel, 0.2% to 0.4% molybdenum, up to 0.2% maximum iron, balance titanium, said alloy being characterized by good corrosion resistance in hot brine environments.

2. A titanium base alloy as set forth in Claim 1 having up to 0.1% iron, balance titanium.

3. A titanium base alloy as set forth in Claim 1 having 0.8% nickel, 0.3% molybdenum, up to 0.1% maximum iron, balance titanium.

The examiner's final rejection, repeated in his Answer on appeal to the Patent and Trademark Office (PTO) Board of Appeals (board), was on the grounds that claims 1 and 2 are anticipated (fully met) by, and claim 3 would have been obvious from, an article by Kalabukhova and Mikheyew, Investigation of the Mechanical Properties of Ti-Mo-Ni Alloys, Russian Metallurgy (Metally) No. 3, pages 130-133 (1970) (in the court below and hereinafter called "the Russian article") under 35 U.S.C. 102 and 103, respectively. The board affirmed the examiner's rejection. However, it mistakenly proceeded on the assumption that all three claims had been rejected as anticipated under 102 by the Russian article and ignored the obviousness rejection. On this appeal the PTO says it does not pursue the 103 rejection further. Appellee proceeds on the basis that only the 102 rejection is before us.

***

3. The merits

Finding, as we do, that claim 3 was never purposefully rejected under 102, both the board and the district court being confused about that fact, we are left with the propriety of the rejection of claims 1 and 2 under 102 and the rejection of claim 3 under 103, both rejections having been held by the district court to have been erroneous. That necessarily follows from the court's conclusion "that the Claims are patentable." We find that conclusion contrary to statutory law and will deal with the two grounds of rejection separately.

A. Anticipation, 102

From consideration of the trial court's memorandum opinion, we are unable to determine whether it erred because of misconstruction of the claims, misreading of what the reference discloses, lack of proper advice on the requirements of the patent statute respecting patentability, or the technical legal meaning of "anticipation," a term which some courts have erroneously used from time to time.F2008












We are left in no doubt that the court was impressed by the totality of the evidence that the applicants for patent had discovered or invented and disclosed knowledge which is not to be found in the reference, nor do we have any doubt about that ourselves. But those facts are beside the point. The patent law imposes certain fundamental conditions for patentability, paramount among them being the condition that what is sought to be patented, as determined by the claims, be new. The basic provision of Title 35 applicable here is 101, providing in relevant part: "Whoever invents or discovers any new ... composition of matter, or any new ... improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title." (Emphasis ours.) The title of the application here involved is "Titanium Alloy," a composition of matter. Surprisingly, in all of the evidence, nobody discussed the key issue of whether the alloy was new, which is the essence of the anticipation issue, including the expert Dr. Williams. Plaintiff's counsel, bringing Dr. Williams' testimony to its climax, after he had explained the nature of the ingredients, the alloys made therefrom, and their superior corrosion resistance in hot brine, etc., repetitively asked him such questions as "Does the [Russian] article direct you as one skilled in the art to a titanium alloy having nickel present in an amount between .6 and .9 percent molybdenum in an amount between .2 and .4 percent?" (emphasis ours) followed by "Is there anything mentioned in the article about corrosion resistance?" Of course, the answers were emphatically negative. But this and like testimony does not deal with the critical question: do claims 1 and 2, to which the questions obviously relate, read on or encompass an alloy which was already known by reason of the disclosure of the Russian article?

Section 102, the usual basis for rejection for lack of novelty or anticipation, lays down certain principles for determining the novelty required by 101, among which are the provisions in 102(a) and (b) that the claimed invention has not been "described in a printed publication in this or a foreign country," either (a) before the invention by the applicant or (b) more than one year before the application date to which he is entitled (strictly a "loss of right" provision similar to novelty). Either provision applies in this case, the Russian article having a date some 5 years prior to the filing date and its status as "prior art" not being questioned. The PTO was never specific as to what part of 102 applies, merely rejecting on 102. The question, therefore, is whether claims 1 and 2 encompass and, if allowed, would enable plaintiff-appellee to exclude others from making, using, or selling an alloy described in the Russian article. See 35 U.S.C. 154. Kalman v. Kimberly-Clark Corp., 713 F.2d 760 (Fed.Cir.1983) .

To answer the question we need only turn to the affidavit of James A. Hall, a metallurgist employed by appellee's TIMET Division, who undertook to analyze the Russian article disclosure by calculating the ingredient percentages shown in F2008


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the graph data points, which he presented in tabular form. There are 15 items in his table. The second item shows a titanium base alloy containing 0.25% by weight Mo and 0.75% Ni and this is squarely within the ranges of 0.2- 0.4% Mo and 0.6-0.9% Ni of claims 1 and 2. As to that disclosed alloy of the prior art, there can be no question that claims 1 and 2 read on it and would be infringed by anyone making, using, or selling it. Therefore, the statute prohibits a patent containing them. This seems to be a case either of not adequately considering the novelty requirement of the statute, the true meaning of the correlative term "anticipation," or the meaning of the claims.

By reason of the court's quotations from cases holding that a reference is not an anticipation which does not enable one skilled in the art to practice the claimed invention, it appears that the trial court thought there was some deficiency in the Russian article on that score. Enablement in this case involves only being able to make the alloy, given the ingredients and their proportions without more. The evidence here, however, clearly answers that question in two ways. Appellee's own patent application does not undertake to tell anyone how to make the alloy it describes and seeks to patent. It assumes that those skilled in the art would know how. Secondly, appellee's expert, Dr. Williams, testified on cross examination that given the alloy information in the Russian article, he would know how to prepare the alloys "by at least three techniques." Enablement is not a problem in this case.

As we read the situation, the court was misled by the arguments and evidence to the effect that the inventors here found out and disclosed in their application many things that one cannot learn from reading the Russian article and that this was sufficient in law to justify granting them a patent for their contributions--such things as what good corrosion resistance the claimed alloys have against hot brine, which possibly was not known, and the range limits of the Ni and Mo content, outside of which that resistance diminishes, which are teachings of very useful information. These things the applicants teach the art and the Russian article does not. Indeed, appellee's counsel argued in his opening statement to the trial court that the PTO's refusal of a patent was "directly contrary to the requirement of Article I, Section 8, of the Constitution," which authorizes Congress to create a patent law. But throughout the trial counsel never came to grips with the real issues: (1) what do the claims cover and (2) is what they cover new? Under the laws Congress wrote, they must be considered. Congress has not seen fit to permit the patenting of an old alloy, known to others through a printed publication, by one who has discovered its corrosion resistance or other useful properties, or has found out to what extent one can modify the composition of the alloy without losing such properties.

It is also possible that the trial court did not properly interpret the claims and took F2008


them to be directed only to the applicants' discoveries about the properties of the alloys instead of to the alloys themselves, as they are, possibly because of the phrase at the end of claim 1, "characterized by good corrosion resistance in hot brine environments," which applies to the other two dependent claims also. No light is shed by its opinion on what the court thought the claims mean as the opinion does not construe the claims. Until it has been definitely determined what subject matter is being claimed, it is not known what it is that the PTO held to be unpatentable. Claim interpretation, which is the logical starting point of the analysis, is a question of law free from the clearly erroneous standard of review. Raytheon Co. v. Roper Corp., 724 F.2d 951, 956 (Fed.Cir.1983) . It is the correct and necessary construction of all three claims that they simply define titanium base alloys. Claims 1 and 2 state certain narrow limits within which the alloying ingredients, Mo and Ni, are present and necessarily cover a number of alloys. Claim 3 is specific to a single alloy. This said, it is immaterial, on the issue of their novelty, what inherent properties the alloys have or whether these applicants discovered certain inherent properties.

The trial court and appellee have relied on In re Wilder, supra , but they have both failed to note those portions of that opinion most relevant to the present case. The issue there, as here, was anticipation of certain claims. Wilder argued "that even though there may be a technical anticipation, the discovery of the new property and the recitation of this property in the claims 'lends patentable novelty' to the claims." The court answered:

However, recitation, in a claim to a composition, of a particular property said to be possessed by the recited composition, be that property newly-discovered or not, does not necessarily change the scope of the subject matter otherwise defined by that claim. [429 F.2d at 450.]

The court in that case also said:

[W]e start with the proposition that claims cannot be obtained to that which is not new. This was the basis of the holding in In re Thuau [135 F.2d 344 (CCPA 1943) ]. It was the law then, is now and will be until Congress decrees otherwise. [Id.]

It is also an elementary principle of patent law that when, as by a recitation of ranges or otherwise, a claim covers several compositions, the claim is "anticipated" if one of them is in the prior art. In re Petering, 301 F.2d 676, 682 (CCPA 1962).

For all of the foregoing reasons, the court below committed clear error and legal error in authorizing the issuance of a patent on claims 1 and 2 since, properly F2008


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construed, they are anticipated under 102 by the Russian article which admittedly discloses an alloy on which these claims read.

B. Obviousness, 103

Little more need be said in support of the examiner's rejection of claim 3, affirmed by the board, on the ground that its more specific subject matter would have been obvious at the time the invention was made from the knowledge disclosed in the reference.

As admitted by appellee's affidavit evidence from James A. Hall, the Russian article discloses two alloys having compositions very close to that of claim 3, which is 0.3% Mo and 0.8% Ni, balance titanium. The two alloys in the prior art have 0.25% Mo--0.75% Ni and 0.31% Mo--0.94% Ni, respectively. The proportions are so close that prima facie one skilled in the art would have expected them to have the same properties. Appellee produced no evidence to rebut that prima facie case. The specific alloy of claim 3 must therefore be considered to have been obvious from known alloys.

Conclusion

For the foregoing reasons, the decision and order of the district court holding that claims 1, 2, and 3 are directed to patentable subject matter and authorizing the issuance of a patent thereon were clearly erroneous and are reversed.

F200842





WAYNE K. PFAFF

v.

WELLS ELECTRONICS, INC.

525 U.S. 55No. 97-1130.

Argued Oct. 6, 1998.Decided Nov. 10, 1998

Patentee brought action against competitor, alleging infringement of patent for computer chip socket. The United States District Court for the Northern District of Texas, Barefoot Sanders, Chief Judge, entered summary judgment of noninfringement, and patentee appealed. The United States Court of Appeals for the Federal Circuit, 5 F.3d 514, reversed and remanded for trial. On remand, the District Court, Sanders, Senior District Judge, held that two claims of patent were invalid but other claims were infringed, and appeal was taken. After reinstating appeal, the Court of Appeals, 124 F.3d 1429, reversed, finding all claims at issue invalid. Patentee's petition for certiorari was granted.

Justice STEVENS delivered the opinion of the Court.

Section 102(b) of the Patent Act of 1952 provides that no person is entitled to patent an “invention” that has been “on sale” more than one year before filing a patent application.FN1 We granted certiorari to determine whether the commercial marketing of a newly invented product may mark the beginning of the 1-year period even though the invention has not yet been reduced to practice.FN2

FN1. “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, or ....” 35 U.S.C. 102.

FN2. “A process is reduced to practice when it is successfully performed. F2008


A machine is reduced to practice when it is assembled, adjusted and used. A manufacture is reduced to practice when it is completely manufactured. A composition of matter is reduced to practice when it is completely composed.” Corona Cord Tire Co. v. Dovan Chemical Corp., 276 U.S. 358, 383, 48 S.Ct. 380, 72 L.Ed. 610 (1928).

I

On April 19, 1982, petitioner, Wayne Pfaff, filed an application for a patent on a computer chip socket. Therefore, April 19, 1981, constitutes the critical date for purposes of the on-sale bar of 35 U.S.C. 102(b); if the 1-year period began to run before that date, Pfaff lost his right to patent his invention.

Pfaff commenced work on the socket in November 1980, when representatives of Texas Instruments asked him to develop a new device for mounting and removing semiconductor chip carriers. In response to this request, he prepared detailed engineering drawings that described the design, the dimensions, and the materials to be used in making the socket. Pfaff sent those drawings to a manufacturer in February or March 1981.

Prior to March 17, 1981, Pfaff showed a sketch of his concept to representatives of Texas Instruments. On April 8, 1981, they provided Pfaff with a written confirmation of a previously placed oral purchase order for 30,100 of his new sockets for a total price of $91,155. In accord with his normal practice, Pfaff did not make and test a prototype of the new device before offering to sell it in commercial quantities.FN3

FN3. At his deposition, respondent's counsel engaged in the following colloquy with Pfaff:“Q. Now, at this time [late 1980 or early 1981] did we [sic] have any prototypes developed or anything of that nature, working embodiment?“A. No.“Q. It was in a drawing. Is that correct?“A. Strictly in a drawing. Went from the drawing to the hard tooling. That's the way I do my business.“Q. ‘Boom-boom’?“A. You got it.“Q. You are satisfied, obviously, when you come up with some drawings that it is going to go-‘it works'?“A. I know what I'm doing, yes, most of the time.” App. 96-97.

The manufacturer took several months to develop the customized tooling F2008


necessary to produce the device, and Pfaff did not fill the order until July 1981. The evidence therefore indicates that Pfaff first reduced his invention to practice in the summer of 1981. The socket achieved substantial commercial success before Patent No. 4,491,377 ( '377 patent) issued to Pfaff on January 1, 1985.FN4

FN4. Initial sales of the patented device were:

1981 $ 350,0001982 $ 937,0001983 $2,800,00

01984 $3,430,00

0

App. to Pet. for Cert. 223a.

After the patent issued, petitioner brought an infringement action against respondent, Wells Electronics, Inc., the manufacturer of a competing socket. Wells prevailed on the basis of a finding of no infringement. FN5 When respondent began to market a modified device, petitioner brought this suit, alleging that the modifications infringed six of the claims in the '377 patent.

FN5. Pfaff v. Wells Electronics, Inc., 9 USPQ2d 1366 (N.D.Ind.1988). The court found that the Wells device did not literally infringe on Pfaff's '377 patent based on the physical location of the sockets' conductive pins.

After a full evidentiary hearing before a Special Master,FN6 the District Court held that two of those claims (1 and 6) were invalid because they had been anticipated in the prior art. Nevertheless, the court concluded that four other claims (7, 10, 11, and 19) were valid and three (7, 10, and 11) were infringed by various models of respondent's sockets. App. to Pet. for Cert. 21a-22a. Adopting the Special Master's findings, the District Court rejected respondent's 102(b) defense because Pfaff had filed the application for the '377 patent less than a year after reducing the invention to practice.

FN6. Initially the District Court entered summary judgment in favor of respondent, but the Court of Appeals reversed and remanded for trial because issues of fact were in dispute. See 5 F.3d 514 (C.A.Fed.1993).

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The Court of Appeals reversed, finding all six claims invalid. 124 F.3d 1429 (C.A.Fed.1997). Four of the claims (1, 6, 7, and 10) described the socket that Pfaff had sold to Texas Instruments prior to April 8, 1981. Because that device had been offered for sale on a commercial basis more than one year before the patent application was filed on April 19, 1982, the court concluded that those claims were invalid under 102(b). That conclusion rested on the court's view that as long as the invention was “substantially complete at the time of sale,” the 1-year period began to run, even though the invention had not yet been reduced to practice. Id., at 1434. The other two claims (11 and 19) described a feature that had not been included in Pfaff's initial design, but the Court of Appeals concluded as a matter of law that the additional feature was not itself patentable because it was an obvious addition to the prior art.FN7 Given the court's 102(b) holding, the prior art included Pfaff's first four claims.

FN7. Title 35 U.S.C. 103 provides: “A patent may not be obtained though the invention is not identically disclosed or described ... if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.”

Because other courts have held or assumed that an invention cannot be “on sale” within the meaning of 102(b) unless and until it has been reduced to practice, see, e.g., Timely Products Corp. v. Arron, 523 F.2d 288, 299-302 (C.A.2 1975); Dart Industries, Inc. v. E.I. du Pont De Nemours & Co., 489 F.2d 1359, 1365, n. 11 (C.A.7 1973), cert. denied, 417 U.S. 933, 94 S.Ct. 2645, 41 L.Ed.2d 236 (1974), and because the text of 102(b) makes no reference to “substantial completion” of an invention, we granted certiorari. 523 U.S. 1003, 118 S.Ct. 1183, 140 L.Ed.2d 315 (1998).

II

The primary meaning of the word “invention” in the Patent Act unquestionably refers to the inventor's conception rather than to a physical embodiment of that idea. The statute does not contain any express requirement that an invention must be reduced to practice before it can be patented. Neither the statutory definition of the term in 100 FN8 nor the basic conditions for obtaining a patent set forth in 101 FN9 make any mention of “reduction to practice.” The statute's only specific reference to that term is found in 102(g), which sets forth the standard for resolving priority contests between two competing claimants to a patent. That subsection provides:F2008


“In determining priority of invention there shall be considered not only the respective dates of conception and reduction to practice of the invention, but also the reasonable diligence of one who was first to conceive and last to reduce to practice, from a time prior to conception by the other.”

Thus, assuming diligence on the part of the applicant, it is normally the first inventor to conceive, rather than the first to reduce to practice, who establishes the right to the patent.

FN8. Title 35 U.S.C. 100, “Definitions,” states:

“When used in this title unless the context otherwise indicates-“(a) The term ‘invention’ means invention or discovery....”

FN9. Section 101, “Inventions patentable,” provides:

“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”

It is well settled that an invention may be patented before it is reduced to practice. In 1888, this Court upheld a patent issued to Alexander Graham Bell even though he had filed his application before constructing a working telephone. Chief Justice Waite's reasoning in that case merits quoting at length:

“It is quite true that when Bell applied for his patent he had never actually transmitted telegraphically spoken words so that they could be distinctly heard and understood at the receiving end of his line, but in his specification he did describe accurately and with admirable clearness his process, that is to say, the exact electrical condition that must be created to accomplish his purpose, and he also described, with sufficient precision to enable one of ordinary skill in such matters to make it, a form of apparatus which, if used in the way pointed out, would produce the required effect, receive the words, and carry them to and deliver them at the appointed place. The particular instrument which he had, and which he used in his experiments, did not, under the circumstances in which it was tried, reproduce the words spoken, so that they could be clearly understood, but the proof is abundant and of the most convincing

F200847


character, that other instruments, carefully constructed and made exactly in accordance with the specification, without any additions whatever, have operated and will operate successfully. A good mechanic of proper skill in matters of the kind can take the patent and, by following the specification strictly, can, without more, construct an apparatus which, when used in the way pointed out, will do all that it is claimed the method or process will do....

“The law does not require that a discoverer or inventor, in order to get a patent for a process, must have succeeded in bringing his art to the highest degree of perfection. It is enough if he describes his method with sufficient clearness and precision to enable those skilled in the matter to understand what the process is, and if he points out some practicable way of putting it into operation.” The Telephone Cases, 126 U.S. 1, 535-536, 8 S.Ct. 778, 31 L.Ed. 863 (1888).

When we apply the reasoning of The Telephone Cases to the facts of the case before us today, it is evident that Pfaff could have obtained a patent on his novel socket when he accepted the purchase order from Texas Instruments for 30,100 units. At that time he provided the manufacturer with a description and drawings that had “sufficient clearness and precision to enable those skilled in the matter” to produce the device. Id., at 536, 8 S.Ct. 778. The parties agree that the sockets manufactured to fill that order embody Pfaff's conception as set forth in claims 1, 6, 7, and 10 of the '377 patent. We can find no basis in the text of 102(b) or in the facts of this case for concluding that Pfaff's invention was not “on sale” within the meaning of the statute until after it had been reduced to practice.

III

Pfaff nevertheless argues that longstanding precedent, buttressed by the strong interest in providing inventors with a clear standard identifying the onset of the 1-year period, justifies a special interpretation of the word “invention” as used in 102(b). We are persuaded that this nontextual argument should be rejected.

As we have often explained, most recently in Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 151, 109 S.Ct. 971, 103 L.Ed.2d 118 (1989), the patent system represents a carefully crafted bargain that encourages both the creation and the public disclosure of new and useful advances in technology, in return for an exclusive monopoly for a limited period of time. The balance between the interest in motivating innovation and enlightenment by rewarding invention with F2008


patent protection on the one hand, and the interest in avoiding monopolies that unnecessarily stifle competition on the other, has been a feature of the federal patent laws since their inception. As this Court explained in 1871:

“Letters patent are not to be regarded as monopolies ... but as public franchises granted to the inventors of new and useful improvements for the purpose of securing to them, as such inventors, for the limited term therein mentioned, the exclusive right and liberty to make and use and vend to others to be used their own inventions, as tending to promote the progress of science and the useful arts, and as matter of compensation to the inventors for their labor, toil, and expense in making the inventions, and reducing the same to practice for the public benefit, as contemplated by the Constitution and sanctioned by the laws of Congress.” Seymour v. Osborne, 11 Wall. 516, 533-534.

Consistent with these ends, 102 of the Patent Act serves as a limiting provision, both excluding ideas that are in the public domain from patent protection and confining the duration of the monopoly to the statutory term. See, e.g., Frantz Mfg. Co. v. Phenix Mfg. Co., 457 F.2d 314, 320 (C.A.7 1972).

We originally held that an inventor loses his right to a patent if he puts his invention into public use before filing a patent application. “His voluntary act or acquiescence in the public sale and use is an abandonment of his right.” Pennock v. Dialogue, 2 Pet. 1, 24, 7 L.Ed. 327 (1829) (Story, J.). A similar reluctance to allow an inventor to remove existing knowledge from public use undergirds the on-sale bar.

Nevertheless, an inventor who seeks to perfect his discovery may conduct extensive testing without losing his right to obtain a patent for his invention-even if such testing occurs in the public eye. The law has long recognized the distinction between inventions put to experimental use and products sold commercially. In 1878, we explained why patentability may turn on an inventor's use of his product.

“It is sometimes said that an inventor acquires an undue advantage over the public by delaying to take out a patent, inasmuch as he thereby preserves the monopoly to himself for a longer period than is allowed by the policy of the law; but this cannot be said with justice when the delay is occasioned by a bona fide effort to bring his invention to perfection, or to ascertain whether it will answer the purpose intended. His monopoly only continues for the allotted period, in any event; and it is the interest of the public, as well as

F200849


himself, that the invention should be perfect and properly tested, before a patent is granted for it. Any attempt to use it for a profit, and not by way of experiment, for a longer period than two years before the application, would deprive the inventor of his right to a patent.” Elizabeth v. American Nicholson Pavement Co., 97 U.S. 126, 137, 24 L.Ed. 1000 (1877) (emphasis added).

The patent laws therefore seek both to protect the public's right to retain knowledge already in the public domain and the inventor's right to control whether and when he may patent his invention. The Patent Act of 1836, 5 Stat. 117, was the first statute that expressly included an on-sale bar to the issuance of a patent. Like the earlier holding in Pennock, that provision precluded patentability if the invention had been placed on sale at any time before the patent application was filed. In 1839, Congress ameliorated that requirement by enacting a 2-year grace period in which the inventor could file an application. 5 Stat. 353.

In Andrews v. Hovey, 123 U.S. 267, 274, 8 S.Ct. 101, 31 L.Ed. 160 (1887), we noted that the purpose of that amendment was “to fix a period of limitation which should be certain”; it required the inventor to make sure that a patent application was filed “within two years from the completion of his invention,” ibid. In 1939, Congress reduced the grace period from two years to one year. 53 Stat. 1212.

Petitioner correctly argues that these provisions identify an interest in providing inventors with a definite standard for determining when a patent application must be filed. A rule that makes the timeliness of an application depend on the date when an invention is “substantially complete” seriously undermines the interest in certainty.FN11 Moreover, such a rule finds no support in the text of the statute. Thus, petitioner's argument calls into question the standard applied by the Court of Appeals, but it does not persuade us that it is necessary to engraft a reduction to practice element into the meaning of the term “invention” as used in 102(b).

FN11. The Federal Circuit has developed a multifactor, “totality of the circumstances” test to determine the trigger for the on-sale bar. See, e.g., Micro Chemical, Inc. v. Great Plains Chemical Co., 103 F.3d 1538, 1544 (C.A.Fed.1997) (stating that, in determining whether an invention is on sale for purposes of 102(b), “ ‘all of the circumstances surrounding the sale or offer to sell, including the stage of development of the invention and the nature of the invention, must be considered and weighed against the policies underlying section 102(b)’ ”); see also UMC Electronics Co. v. United States, 816 F.2d 647, 656 (1987) (stating the on-sale bar “does not lend itself to formulation into a set of precise requirements”). As the

F200850


Federal Circuit itself has noted, this test “has been criticized as unnecessarily vague.” Seal-Flex, Inc. v. Athletic Track & Court Construction, 98 F.3d 1318, 1323, n. 2 (C.A.Fed.1996).

The word “invention” must refer to a concept that is complete, rather than merely one that is “substantially complete.” It is true that reduction to practice ordinarily provides the best evidence that an invention is complete. But just because reduction to practice is sufficient evidence of completion, it does not follow that proof of reduction to practice is necessary in every case. Indeed, both the facts of The Telephone Cases and the facts of this case demonstrate that one can prove that an invention is complete and ready for patenting before it has actually been reduced to practice.

We conclude, therefore, that the on-sale bar applies when two conditions are satisfied before the critical date. First, the product must be the subject of a commercial offer for sale. An inventor can both understand and control the timing of the first commercial marketing of his invention. The experimental use doctrine, for example, has not generated concerns about indefiniteness, and we perceive no reason why unmanageable uncertainty should attend a rule that measures the application of the on-sale bar of 102(b) against the date when an invention that is ready for patenting is first marketed commercially. In this case the acceptance of the purchase order prior to April 8, 1981, makes it clear that such an offer had been made, and there is no question that the sale was commercial rather than experimental in character.

Second, the invention must be ready for patenting. That condition may be satisfied in at least two ways: by proof of reduction to practice before the critical date; or by proof that prior to the critical date the inventor had prepared drawings or other descriptions of the invention that were sufficiently specific to enable a person skilled in the art to practice the invention. In this case the second condition of the on-sale bar is satisfied because the drawings Pfaff sent to the manufacturer before the critical date fully disclosed the invention.

The evidence in this case thus fulfills the two essential conditions of the on-sale bar. As succinctly stated by Learned Hand:

“[I]t is a condition upon an inventor's right to a patent that he shall not exploit his discovery competitively after it is ready for patenting; he must content himself with either secrecy, or legal monopoly.” Metallizing Engineering Co. v. Kenyon Bearing & Auto Parts Co., 153 F.2d 516, 520 (C.A.2 1946).

F200851


The judgment of the Court of Appeals finds support not only in the text of the statute but also in the basic policies underlying the statutory scheme, including 102(b). When Pfaff accepted the purchase order for his new sockets prior to April 8, 1981, his invention was ready for patenting. The fact that the manufacturer was able to produce the socket using his detailed drawings and specifications demonstrates this fact. Furthermore, those sockets contained all the elements of the invention claimed in the '377 patent. Therefore, Pfaff's '377 patent is invalid because the invention had been on sale for more than one year in this country before he filed his patent application. Accordingly, the judgment of the Court of Appeals is affirmed.

It is so ordered.

F200852



ELI LILLY AND COMPANY, PETITIONER

v.

MEDTRONIC, INC.

No. 89-243

496 U.S. 661; 110 S. Ct. 2683; 110 L. Ed. 2d 605; 1990 U.S.LEXIS 3184; 58 U.S.L.W. 4838; 15 U.S.P.Q.2D (BNA) 1121

February 26, 1990, Argued

June 18, 1990, Decided

Justice SCALIA delivered the opinion of the court:

This case presents the question whether 35 U.S.C. 271(e)(1) renders activities that would otherwise constitute patent infringement noninfringing if they are undertaken for the purpose of developing and submitting to the Food and Drug Administration information necessary to obtain marketing approval for a medical device under 515 of the Federal Food, Drug, and Cosmetic Act, 90 Stat. 552, 21 U.S.C. 360e (FDCA).

I

In 1983, pursuant to 28 U.S.C. 1338(a), the predecessor-in-interest of petitioner Eli Lilly filed an action against respondent Medtronic in the United States District Court for the Eastern District of Pennsylvania to enjoin respondent's testing and marketing of an implantable cardiac defibrillator, a medical device used in the treatment of heart patients. Petitioner claimed that respondent's actions infringed its exclusive rights under United States Patent No. Re 27,757 and United States Patent No. 3,942,536. Respondent sought to defend against the suit on the ground that its activities were "reasonably related to the development and submission of information under" the FDCA, and thus exempt from a finding of infringement under 35 U.S.C. 271(e)(1). The District Court rejected this argument, concluding that the exemption does not apply to the development and submission of information relating to medical devices. Following a jury trial, the jury returned a verdict for petitioner on infringement of the first patent and the court directed a verdict for petitioner on infringement of the second patent. The court entered F2008


judgment for petitioner and issued a permanent injunction against infringement of both patents.

On appeal, the Court of Appeals for the Federal Circuit reversed, holding that by virtue of 35 U.S.C. 271(e)(1) respondent's activities could not constitute infringement if they had been undertaken to develop information reasonably related to the development and submission of information necessary to obtain regulatory approval under the FDCA. It remanded for the District Court to determine whether in fact that condition had been met. 872 F.2d 402 (1989). We granted certiorari. 493 U.S. (1989).

In 1984, Congress enacted the Drug Price Competition and Patent Term Restoration Act of 1984, 98 Stat. 1585 (1984 Act), which amended the FDCA and the patent laws in several important respects. The issue in this case concerns the proper interpretation of a portion of section 202 of the 1984 Act, codified at 35 U.S.C. 271(e)(1). That paragraph, as originally enacted, provided:

"It shall not be an act of infringement to make, use, or sell a patented invention (other than a new animal drug or veterinary biological product (as those terms are used in the Federal Food, Drug, and Cosmetic Act and the Act of March 4, 1913)) solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs." 35 U.S.C. 271(e)(1) (1982 ed., Supp. II). n1 The parties dispute whether this provision exempts from infringement the use of patented inventions to develop and submit information for marketing approval of medical devices under the FDCA.

n1 Unless otherwise specified, references to sections of the United States Code are to those sections as they existed upon the effective date of the 1984 Act.

A

The phrase "patented invention" in 271(e)(1) is defined to include all inventions, not drug-related inventions alone. See 35 U.S.C. 100(a) ("When used in this title unless the context otherwise indicates . . . the term 'invention' means invention or discovery"). The core of the present controversy is that petitioner interprets the statutory phrase, "a Federal law which regulates the manufacture, use, or sale of drugs," to refer only to those individual provisions of federal law that regulates F2008


drugs, whereas respondent interprets it to refer to the entirety of any Act (including, of course, the FDCA) at least some of whose provisions regulate drugs. If petitioner is correct, only such provisions of the FDCA as 505, 52 Stat. 1052, as amended, 21 U.S.C. 355, governing premarket approval of new drugs, are covered by 271(e)(1), and respondent's submission of information under 21 U.S.C. 360e, governing premarket approval of medical devices, would not be a noninfringing use.

***

The centrally important distinction in this legislation (from the standpoint of the commercial interests affected) is not between applications for drug approval and applications for device approval, but between patents relating to drugs and patents relating to devices. If only the former patents were meant to be included, there were available such infinitely more clear and simply ways of expressing that intent that it is hard to believe the convoluted manner petitioner suggests was employed would have been selected. The provision might have read, for example, "It shall not be an act of infringement to make, use, or sell a patented drug invention . . . solely for uses reasonably related to the development and submission of information required, as a condition of manufacture, use, or sale, by Federal law." Petitioner contends that the terms "patented drug," or "drug invention" (or, presumably, "patented drug invention") would have been "potentially unclear" as to whether they covered only patents for drug products, or patents for drug composition and drug use as well. Brief for Petitioner 22. If that had been the concern, however, surely it would have been clearer and more natural to expand the phrase constituting the object of the sentence to "patented invention for drug product, drug composition, or drug use" than to bring in such a limitation indirectly by merely limiting the laws under which the information is submitted to drug regulation laws.

On the other side of the ledger, however, one must admit that while the provision more naturally means what respondent suggests, it is somewhat difficult to understand why anyone would want it to mean that. Why should the touchstone of noninfringement be whether the use is related to the development and submission of information under a provision that happens to be included within an Act that, in any of its provisions, not necessarily the one at issue, regulates drugs? ***

As far as the text is concerned, therefore, we conclude that we have before us a provision that somewhat more naturally reads as the Court of Appeals determined, but that is not plainly comprehensible on anyone's view. Both parties seek to enlist legislative history in support of their interpretation, but that sheds no clear light.

F200855


We think the Court of Appeals' interpretation is confirmed, however, by the structure of the 1984 Act taken as a whole.

B Under federal law, a patent "grants to the patentee, his heirs or assigns, for the term of seventeen years, . . . the right to exclude others from making, using, or selling the invention throughout the United States." 35 U.S.C. 154. Except as otherwise provided, "whoever without authority makes, uses or sells any patented invention, within the United States during the term of the patent therefor, infringes the patent." 35 U.S.C. 271(a). The parties agree that the 1984 Act was designed to respond to two unintended distortions of the 17-year patent term produced by the requirement that certain products must receive premarket regulatory approval. First, the holder of a patent relating to such products would as a practical matter not be able reap any financial rewards during the early years of the term. When an inventor makes a potentially useful discovery, he ordinarily protects it by applying for a patent at once. Thus, if the discovery relates to a product that cannot be marketed without substantial testing and regulatory approval, the "clock" on his patent term will be running even though he is not yet able to derive any profit from the invention.

The second distortion occurred at the other end of the patent term. In 1984, the Court of Appeals for the Federal Circuit decided that the manufacture, use, or sale of a patented invention during the term of the patent constituted an act of infringement, see 35 U.S.C. 271(a), even if it was for the sole purpose of conducting tests and developing information necessary to apply for regulatory approval. See Roche Products, Inc. v. Bolar Pharmaceutical Co., 733 F.2d 858 (CA Fed.), cert. denied, 469 U.S. 856 (1984). Since that activity could not be commenced by those who planned to compete with the patentee until expiration of the entire patent term, the patentee's de facto monopoly would continue for an often substantial period until regulatory approval was obtained. In other words, the combined effect of the patent law and the premarket regulatory approval requirement was to create an effective extension of the patent term.

The 1984 Act sought to eliminate this distortion from both ends of the patent period. Section 201 of the Act established a patent-term extension for patents relating to certain products that were subject to lengthy regulatory delays and could not be marketed prior to regulatory approval. The eligible products were described as follows:

"(1) The term 'product' means:

F200856


"(A) A human drug product.

"(B) Any medical device, food additive, or color additive subject to regulation under the Federal Food, Drug, and Cosmetic Act.

Section 201 provides that patents relating to these products can be extended up to five years if, inter alia, the product was "subject to a regulatory review period before its commercial marketing or use," and "the permission for the commercial marketing or use of the product after such regulatory review period [was] the first permitted commercial marketing or use of the product under the provision of law under which such regulatory review period occurred." 35 U.S.C. 156(a).

The distortion at the other end of the patent period was addressed by 202 of the Act. That added to the provision prohibiting patent infringement, 35 U.S.C. 271, the paragraph at issue here, establishing that "it shall not be an act of infringement to make, use, or sell a patented invention . . . solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs." 35 U.S.C. 271(e)(1). This allows competitors, prior to the expiration of a patent, to engage in otherwise infringing activities necessary to obtain regulatory approval.

*** It seems most implausible to us that Congress, being demonstrably aware of the dual distorting effects of regulatory approval requirements in this entire area -- dual distorting effects that were roughly offsetting, the disadvantage at the beginning of the term producing a more or less corresponding advantage at the end of the term -- should choose to address both those distortions only for drug products; and for other products named in 201 should enact provisions which not only leave in place an anticompetitive restriction at the end of the monopoly term but simultaneously expand the monopoly term itself, thereby not only failing to eliminate but positively aggravating distortion of the 17-year patent protection. It would take strong evidence to persuade us that this is what Congress wrought, and there is no such evidence here.

***

It must be acknowledged that the seemingly complete product-correlation between 201 and 202 was destroyed in 1986, when, without adding "new infant formula" to the defined products eligible for the patent-term extension under 156, Congress established a premarket approval requirement for that product, and thus F2008


automatically rendered it eligible for the 271(e)(1) exemption from patent infringement. See Pub. L. 99-570, 4014(a)(7), 100 Stat. 3207-116, codified at 21 U.S.C. 350a(d). That subsequent enactment does not change our view of what the statute means. ***

[A]bbreviated drug-application provisions incorporated an important new mechanism designed to guard against infringement of patents relating to pioneer drugs. Pioneer drug applicants are required to file with the FDA the number and expiration date of any patent which claims the drug that is the subject of the application, or a method of using such drug. See 21 U.S.C. 355(b)(1). ANDAs [abbreviated new drug applications] and paper NDAs are required to contain one of four certifications with respect to each patent named in the pioneer drug application: (1) "that such patent information has not been filed," (2) "that such patent has expired," (3) "the date on which such patent will expire," or (4) "that such patent is invalid or will not be infringed by the manufacture, use, or sale of the new drug for which the application is submitted." 21 U.S.C. 355(b)(2)(A), 355(j)(2)(A)(vii).

This certification is significant, in that it determines the date on which approval of an ANDA or paper NDA can be made effective, and hence the date on which commercial marketing may commence. If the applicant makes either the first or second certification, approval can be made effective immediately. See 21 U.S.C. 355(c)(3)(A), 355(j)(4)(B)(i). If the applicant makes the third certification, approval of the application can be made effective as of the date the patent expires. See 21 U.S.C. 355(c)(3)(B), 355(j)(4)(B)(ii). If the applicant makes the fourth certification, however, the effective date must depend on the outcome of further events triggered by the Act. An applicant who makes the fourth certification is required to give notice to the holder of the patent alleged to be invalid or not infringed, stating that an application has been filed seeking approval to engage in the commercial manufacture, use, or sale of the drug before the expiration of the patent, and setting forth a detailed statement of the factual and legal basis for the applicant's opinion that the patent is not valid or will not be infringed. See 21 U.S.C. 355(b)(3)(B), 355(j)(2)(B)(ii). Approval of an ANDA or paper NDA containing the fourth certification may become effective immediately only if the patent owner has not initiated a lawsuit for infringement within 45 days of receiving notice of the certification. If the owner brings such a suit, then approval may not be made effective until the court rules that the patent is not infringed or until the expiration of (in general) 309 months, whichever first occurs. See 21 U.S.C. 355(c)(3)(C), 355(j)(4)(B)(iii). This scheme will not work, of course, if the holder of the patent pertaining to the pioneer drug is disabled from establishing in court that there has been an act of F2008


infringement. And that was precisely the disability that the new 271(e)(1) imposed, with regard to use of his patented invention only for the purpose of obtaining premarketing approval. Thus, an act of infringement had to be created for these ANDA and paper NDA proceedings. That is what is achieved by 271(e)(2) -- the creation of a highly artificial act of infringement that consists of submitting an ANDA or a paper NDA containing the fourth type of certification that is in error as to whether commercial manufacture, use, or sale of the new drug (none of which, of course, has actually occurred) violates the relevant patent. Not only is the defined act of infringement artificial, so are the specified consequences, as set forth in paragraph (e)(4). Monetary damages are permitted only if there has been "commercial manufacture, use, or sale." 35 U.S.C. 271(e)(4)(C). Quite obviously, the purpose of (e)(2) and (e)(4) is to enable the judicial adjudication upon which the ANDA and paper NDA schemes depend. It is wholly to be expected, therefore, that these provisions would apply only to applications under the sections establishing those schemes -- which (entirely incidentally, for present purposes) happen to be sections that relate only to drugs and not to other products.

No interpretation we have been able to imagine can transform 271(e)(1) into an elegant piece of statutory draftsmanship. To construe it as the Court of Appeals decided, one must posit a good deal of legislative imprecision; but to construe it as petitioner would, one must posit that and an implausible substantive intent as well.

The judgment of the Court of Appeals is affirmed, and the case remanded for further proceedings consistent with this opinion.

So ordered.

[Justice Kennedy’s dissent omitted.]

F200859



GRAVER TANK & MFG. CO., Inc., et al.

v.

LINDE AIR PRODUCTS CO.No. 2.

339 U.S. 605

Reargued March 30, 1950.Decided May 29, 1950.

Mr. Justice JACKSON delivered the opinion of the Court.

***

In determining whether an accused device or composition infringes a valid patent, resort must be had in the first instance to the words of the claim. If accused matter falls clearly within the claim, infringement is made out and that is the end of it.

***

[Note: This case is famous for its enunciation of the modern doctrine of equivalents – that an accused structure outside the scope of the claim language can nevertheless be an infringement of that claim. This doctrine will be taken up in the next case. Graver is less known for the proposition excerpted here, by which claim language determines patent scope. This has led patent draftspersons to devise numerous ways of phrasing claims broadly, to include large classes of structures, compositions, or methods in a single claim. In the written description portion of the patent the law remains unclear whether anything more than a single configuration within the claim is necessary to support the broad claim, except where chemical reactions are involved.]

F200860



WARNER-JENKINSON COMPANY, INC., Petitioner

v.

HILTON DAVIS CHEMICAL CO., Respondent

520 U.S. 17No. 95-728.

Argued Oct. 15, 1996.Decided March 3, 1997.

Patentee brought infringement action against competitor, alleging that competitor's ultrafiltration method for purifying dye infringed patented method under doctrine of equivalents. The United States District Court for the Southern District of Ohio, Herman J. Weber, J., entered judgment in favor of patentee, and competitor appealed. The Court of Appeals of the Federal Circuit affirmed, 62 F.3d 1512, and certiorari was granted.

Justice THOMAS delivered the opinion of the Court.

Nearly 50 years ago, this Court in Graver Tank & Mfg. Co. v. Linde Air Products Co., 339 U.S. 605 (1950), set out the modern contours of what is known in patent law as the “doctrine of equivalents.” Under this doctrine, a product or process that does not literally infringe upon the express terms of a patent claim may nonetheless be found to infringe if there is “equivalence” between the elements of the accused product or process and the claimed elements of the patented invention. Id., at 609, 70 S.Ct., at 856-857. Petitioner, which was found to have infringed upon respondent's patent under the doctrine of equivalents, invites us to speak the death of that doctrine. We decline that invitation. The significant disagreement within the Court of Appeals for the Federal Circuit concerning the application of Graver Tank suggests, however, that the doctrine is not free from confusion. We therefore will endeavor to clarify the proper scope of the doctrine.

I

The essential facts of this case are few. Petitioner Warner-Jenkinson Co. and respondent Hilton Davis Chemical Co. manufacture dyes. Impurities in those F2008


dyes must be removed. Hilton Davis holds United States Patent No. 4,560,746 ('746 patent), which discloses an improved purification process involving “ultrafiltration.” The '746 process filters impure dye through a porous membrane at certain pressures and pH levels,FN1 resulting in a high purity dye product.

FN1. The pH, or power (exponent) of Hydrogen, of a solution is a measure of its acidity or alkalinity. A pH of 7.0 is neutral; a pH below 7.0 is acidic; and a pH above 7.0 is alkaline. Although measurement of pH is on a logarithmic scale, with each whole number difference representing a ten-fold difference in acidity, the practical significance of any such difference will often depend on the context. Pure water, for example, has a neutral pH of 7.0, whereas carbonated water has an acidic pH of 3.0, and concentrated hydrochloric acid has a pH approaching 0.0. On the other end of the scale, milk of magnesia has a pH of 10.0, whereas household ammonia has a pH of 11.9. 21 Encyclopedia Americana 844 (Int'l ed.1990).

The '746 patent issued in 1985. As relevant to this case, the patent claims as its invention an improvement in the ultrafiltration process as follows:

“In a process for the purification of a dye ... the improvement which comprises: subjecting an aqueous solution ... to ultrafiltration through a membrane having a nominal pore diameter of 5-15 Angstroms under a hydrostatic pressure of approximately 200 to 400 p.s.i.g., at a pH from approximately 6.0 to 9.0, to thereby cause separation of said impurities from said dye....” App. 36-37 (emphasis added).

The inventors added the phrase “at a pH from approximately 6.0 to 9.0” during patent prosecution. At a minimum, this phrase was added to distinguish a previous patent (the “Booth” patent) that disclosed an ultrafiltration process operating at a pH above 9.0. The parties disagree as to why the low-end pH limit of 6.0 was included as part of the claim. FN2

FN2. Petitioner contends that the lower limit was added because below a pH of 6.0 the patented process created “foaming” problems in the plant and because the process was not shown to work below that pH level. Brief for Petitioner 4, n. 5, 37, n. 28. Respondent counters that the process was successfully tested to pH levels as low as 2.2 with no effect on the process because of foaming, but offers no particular explanation as to why the lower level of 6.0 pH was selected. Brief for Respondent 34, n. 34.

F200862


In 1986, Warner-Jenkinson developed an ultrafiltration process that operated with membrane pore diameters assumed to be 5-15 Angstroms, at pressures of 200 to nearly 500 p.s.i.g., and at a pH of 5.0. Warner-Jenkinson did not learn of the '746 patent until after it had begun commercial use of its ultrafiltration process. Hilton Davis eventually learned of Warner-Jenkinson's use of ultrafiltration and, in 1991, sued Warner-Jenkinson for patent infringement.

As trial approached, Hilton Davis conceded that there was no literal infringement, and relied solely on the doctrine of equivalents. Over Warner-Jenkinson's objection that the doctrine of equivalents was an equitable doctrine to be applied by the court, the issue of equivalence was included among those sent to the jury. The jury found that the '746 patent was not invalid and that Warner-Jenkinson infringed upon the patent under the doctrine of equivalents. The jury also found, however, that Warner-Jenkinson had not intentionally infringed, and therefore awarded only 20% of the damages sought by Hilton Davis. The District Court denied Warner-Jenkinson's post-trial motions, and entered a permanent injunction prohibiting Warner-Jenkinson from practicing ultrafiltration below 500 p.s.i.g. and below 9.01 pH. A fractured en banc Court of Appeals for the Federal Circuit affirmed. 62 F.3d 1512 (1995).

The majority below held that the doctrine of equivalents continues to exist and that its touchstone is whether substantial differences exist between the accused process and the patented process. Id., at 1521-1522. The court also held that the question of equivalence is for the jury to decide and that the jury in this case had substantial evidence from which it could conclude that the Warner-Jenkinson process was not substantially different from the ultrafiltration process disclosed in the '746 patent. Id., at 1525.

There were three separate dissents, commanding a total of 5 of 12 judges. Four of the five dissenting judges viewed the doctrine of equivalents as allowing an improper expansion of claim scope, contrary to this Court's numerous holdings that it is the claim that defines the invention and gives notice to the public of the limits of the patent monopoly. Id., at 1537-1538 (opinion of Plager, J.) The fifth dissenter, the late Judge Nies, was able to reconcile the prohibition against enlarging the scope of claims and the doctrine of equivalents by applying the doctrine to each element of a claim, rather than to the accused product or process “overall.” Id., at 1574. As she explained it: “The ‘scope’ is not enlarged if courts do not go beyond the substitution of equivalent elements.” Ibid. All of the dissenters, however, would have found that a much narrowed doctrine of equivalents may be applied in whole or in part by the court. Id., at 1540-1542 (opinion of Plager, J.); id., at 1579 (opinion of Nies, J.).

We granted certiorari, 516 U.S. 1145 (1996), and now reverse and remand.F2008


II

In Graver Tank we considered the application of the doctrine of equivalents to an accused chemical composition for use in welding that differed from the patented welding material by the substitution of one chemical element. 339 U.S., at 610, 70 S.Ct., at 857. The substituted element did not fall within the literal terms of the patent claim, but the Court nonetheless found that the “question which thus emerges is whether the substitution [of one element for the other] ... is a change of such substance as to make the doctrine of equivalents inapplicable; or conversely, whether under the circumstances the change was so insubstantial that the trial court's invocation of the doctrine of equivalents was justified.” Ibid. The Court also described some of the considerations that go into applying the doctrine of equivalents:

“What constitutes equivalency must be determined against the context of the patent, the prior art, and the particular circumstances of the case. Equivalence, in the patent law, is not the prisoner of a formula and is not an absolute to be considered in a vacuum. It does not require complete identity for every purpose and in every respect. In determining equivalents, things equal to the same thing may not be equal to each other and, by the same token, things for most purposes different may sometimes be equivalents. Consideration must be given to the purpose for which an ingredient is used in a patent, the qualities it has when combined with the other ingredients, and the function which it is intended to perform. An important factor is whether persons reasonably skilled in the art would have known of the interchangeability of an ingredient not contained in the patent with one that was.” Id., at 609.

Considering those factors, the Court viewed the difference between the chemical element claimed in the patent and the substitute element to be “colorable only,” and concluded that the trial court's judgment of infringement under the doctrine of equivalents was proper. Id., at 612.

A

Petitioner's primary argument in this Court is that the doctrine of equivalents, as set out in Graver Tank in 1950, did not survive the 1952 revision of the Patent Act, 35 U.S.C. 100 et seq., because it is inconsistent with several aspects of that Act. In particular, petitioner argues: (1) The doctrine of equivalents is inconsistent F2008


with the statutory requirement that a patentee specifically “claim” the invention covered by a patent, 112; (2) the doctrine circumvents the patent reissue process-designed to correct mistakes in drafting or the like-and avoids the express limitations on that process, 251-252; (3) the doctrine is inconsistent with the primacy of the Patent and Trademark Office (PTO) in setting the scope of a patent through the patent prosecution process; and (4) the doctrine was implicitly rejected as a general matter by Congress' specific and limited inclusion of the doctrine in one section regarding “means” claiming, 112, ¶ 6. All but one of these arguments were made in Graver Tank in the context of the 1870 Patent Act, and failed to command a majority.FN3

FN3. Graver Tank was decided over a vigorous dissent. In that dissent, Justice Black raised the first three of petitioner's four arguments against the doctrine of equivalents. See 339 U.S., at 613-614, 70 S.Ct., at 858-859 (doctrine inconsistent with statutory requirement to “distinctly claim” the invention); id., at 614-615, 70 S.Ct., at 859-860 (patent reissue process available to correct mistakes); id., at 615, n. 3, 70 S.Ct., at 859, n. 3 (duty lies with the Patent Office to examine claims and to conform them to the scope of the invention; inventors may appeal Patent Office determinations if they disagree with result).

Indeed, petitioner's first argument was not new even in 1950. Nearly 100 years before Graver Tank, this Court approved of the doctrine of equivalents in Winans v. Denmead, 15 How. 330, 14 L.Ed. 717 (1854). The dissent in Winans unsuccessfully argued that the majority result was inconsistent with the requirement in the 1836 Patent Act that the applicant “particularly ‘specify and point’ out what he claims as his invention,” and that the patent protected nothing more. Id., 15 How. at 347 (opinion of Campbell, J.).

The 1952 Patent Act is not materially different from the 1870 Act with regard to claiming, reissue, and the role of the PTO. Compare, e.g., 35 U.S.C. 112 (“The specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention”) with the Consolidated Patent Act of 1870, ch. 230, 26, 16 Stat. 198, 201 (the applicant “shall particularly point out and distinctly claim the part, improvement, or combination which he claims as his invention or discovery”). Such minor differences as exist between those provisions in the 1870 and the 1952 Acts have no bearing on the result reached in Graver Tank, and thus provide no basis for our overruling it. In the context of infringement, we have already held that pre-1952 precedent survived the passage of the 1952 Act. See Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 342 (1961) (new section defining infringement “left intact the entire body of case law on direct infringement”). We F2008


see no reason to reach a different result here.FN4

FN4. Petitioner argues that the evolution in patent practice from “central” claiming (describing the core principles of the invention) to “peripheral” claiming (describing the outer boundaries of the invention) requires that we treat Graver Tank as an aberration and abandon the doctrine of equivalents. Brief for Petitioner 43-45. We disagree. The suggested change in claiming practice predates Graver Tank, is not of statutory origin, and seems merely to reflect narrower inventions in more crowded arts. Also, judicial recognition of so-called “pioneer” patents suggests that the abandonment of “central” claiming may be overstated. That a claim describing a limited improvement in a crowded field will have a limited range of permissible equivalents does not negate the availability of the doctrine vel non.

***

B

We do, however, share the concern of the dissenters below that the doctrine of equivalents, as it has come to be applied since Graver Tank, has taken on a life of its own, unbounded by the patent claims. There can be no denying that the doctrine of equivalents, when applied broadly, conflicts with the definitional and public-notice functions of the statutory claiming requirement. Judge Nies identified one means of avoiding this conflict:

“[A] distinction can be drawn that is not too esoteric between substitution of an equivalent for a component in an invention and enlarging the metes and bounds of the invention beyond what is claimed.

. . . . .

“Where a claim to an invention is expressed as a combination of elements, as here, ‘equivalents' in the sobriquet ‘Doctrine of Equivalents' refers to the equivalency of an element or part of the invention with one that is substituted in the accused product or process.

. . . . .

F200866


“This view that the accused device or process must be more than ‘equivalent’ overall reconciles the Supreme Court's position on infringement by equivalents with its concurrent statements that ‘the courts have no right to enlarge a patent beyond the scope of its claims as allowed by the Patent Office.’ [Citations omitted.] The ‘scope’ is not enlarged if courts do not go beyond the substitution of equivalent elements.” 62 F.3d, at 1573-1574 (dissenting opinion) (emphasis in original).

We concur with this apt reconciliation of our two lines of precedent. Each element contained in a patent claim is deemed material to defining the scope of the patented invention, and thus the doctrine of equivalents must be applied to individual elements of the claim, not to the invention as a whole. It is important to ensure that the application of the doctrine, even as to an individual element, is not allowed such broad play as to effectively eliminate that element in its entirety. So long as the doctrine of equivalents does not encroach beyond the limits just described, or beyond related limits to be discussed infra, this page and 1050-1051, 1053, n. 8, and 1054, we are confident that the doctrine will not vitiate the central functions of the patent claims themselves.

III

Understandably reluctant to assume this Court would overrule Graver Tank, petitioner has offered alternative arguments in favor of a more restricted doctrine of equivalents than it feels was applied in this case. We address each in turn.

A

Petitioner first argues that Graver Tank never purported to supersede a well-established limit on nonliteral infringement, known variously as “prosecution history estoppel” and “file wrapper estoppel.” See Bayer Aktiengesellschaft v. Duphar Int'l Research B.V., 738 F.2d 1237, 1238 (C.A.Fed.1984). According to petitioner, any surrender of subject matter during patent prosecution, regardless of the reason for such surrender, precludes recapturing any part of that subject matter, even if it is equivalent to the matter expressly claimed. Because, during patent prosecution, respondent limited the pH element of its claim to pH levels between 6.0 and 9.0, petitioner would have those limits form bright lines beyond which no equivalents may be claimed. Any inquiry into the reasons for a surrender, petitioner claims, would undermine the public's right to clear notice of the scope of the patent as embodied in the patent file.F2008


We can readily agree with petitioner that Graver Tank did not dispose of prosecution history estoppel as a legal limitation on the doctrine of equivalents. But petitioner reaches too far in arguing that the reason for an amendment during patent prosecution is irrelevant to any subsequent estoppel. In each of our cases cited by petitioner and by the dissent below, prosecution history estoppel was tied to amendments made to avoid the prior art, or otherwise to address a specific concern-such as obviousness-that arguably would have rendered the claimed subject matter unpatentable. Thus, in Exhibit Supply Co. v. Ace Patents Corp., 315 U.S. 126 (1942) Chief Justice Stone distinguished inclusion of a limiting phrase in an original patent claim from the “very different” situation in which “the applicant, in order to meet objections in the Patent Office, based on references to the prior art, adopted the phrase as a substitute for the broader one” previously used. Id., at 136 (emphasis added). Similarly, in Keystone Driller Co. v. Northwest Engineering Corp., 294 U.S. 42 (1935), estoppel was applied where the initial claims were “rejected on the prior art,” id., at 48, and where the allegedly infringing equivalent element was outside of the revised claims and within the prior art that formed the basis for the rejection of the earlier claims, id.

It is telling that in each case this Court probed the reasoning behind the Patent Office's insistence upon a change in the claims. In each instance, a change was demanded because the claim as otherwise written was viewed as not describing a patentable invention at all-typically because what it described was encompassed within the prior art. But, as the United States informs us, there are a variety of other reasons why the PTO may request a change in claim language. Brief for United States as Amicus Curiae 22-23 counsel for the PTO also appearing on the brief). And if the PTO has been requesting changes in claim language without the intent to limit equivalents or, indeed, with the expectation that language it required would in many cases allow for a range of equivalents, we should be extremely reluctant to upset the basic assumptions of the PTO without substantial reason for doing so. Our prior cases have consistently applied prosecution history estoppel only where claims have been amended for a limited set of reasons, and we see no substantial cause for requiring a more rigid rule invoking an estoppel regardless of the reasons for a change.

FN6. That petitioner's rule might provide a brighter line for determining whether a patentee is estopped under certain circumstances is not a sufficient reason for adopting such a rule. This is especially true where, as here, the PTO may have relied upon a flexible rule of estoppel when deciding whether to ask for a change in the first place. To change so substantially the rules of the game now could very well subvert the various balances the PTO sought to strike when issuing the numerous patents which have not yet expired and which would be affected by our decision.

F200868


In this case, the patent examiner objected to the patent claim due to a perceived overlap with the Booth patent, which revealed an ultrafiltration process operating at a pH above 9.0. In response to this objection, the phrase “at a pH from approximately 6.0 to 9.0” was added to the claim. While it is undisputed that the upper limit of 9.0 was added in order to distinguish the Booth patent, the reason for adding the lower limit of 6.0 is unclear. The lower limit certainly did not serve to distinguish the Booth patent, which said nothing about pH levels below 6.0. Thus, while a lower limit of 6.0, by its mere inclusion, became a material element of the claim, that did not necessarily preclude the application of the doctrine of equivalents as to that element.

We are left with the problem, however, of what to do in a case like the one at bar, where the record seems not to reveal the reason for including the lower pH limit of 6.0. In our view, holding that certain reasons for a claim amendment may avoid the application of prosecution history estoppel is not tantamount to holding that the absence of a reason for an amendment may similarly avoid such an estoppel. Mindful that claims do indeed serve both a definitional and a notice function, we think the better rule is to place the burden on the patent holder to establish the reason for an amendment required during patent prosecution. The court then would decide whether that reason is sufficient to overcome prosecution history estoppel as a bar to application of the doctrine of equivalents to the element added by that amendment. Where no explanation is established, however, the court should presume that the patent applicant had a substantial reason related to patentability for including the limiting element added by amendment. In those circumstances, prosecution history estoppel would bar the application of the doctrine of equivalents as to that element. The presumption we have described, one subject to rebuttal if an appropriate reason for a required amendment is established, gives proper deference to the role of claims in defining an invention and providing public notice, and to the primacy of the PTO in ensuring that the claims allowed cover only subject matter that is properly patentable in a proffered patent application. Applied in this fashion, prosecution history estoppel places reasonable limits on the doctrine of equivalents, and further insulates the doctrine from any feared conflict with the Patent Act.

Because respondent has not proffered in this Court a reason for the addition of a lower pH limit, it is impossible to tell whether the reason for that addition could properly avoid an estoppel. Whether a reason in fact exists, but simply was not adequately developed, we cannot say. On remand, the Federal Circuit can consider whether reasons for that portion of the amendment were offered or not and whether further opportunity to establish such reasons would be proper.

F200869


B

Petitioner next argues that even if Graver Tank remains good law, the case held only that the absence of substantial differences was a necessary element for infringement under the doctrine of equivalents, not that it was sufficient for such a result. Brief for Petitioner 32. Relying on Graver Tank's references to the problem of an “unscrupulous copyist” and “piracy,” 339 U.S., at 607, 70 S.Ct., at 855-856, petitioner would require judicial exploration of the equities of a case before allowing application of the doctrine of equivalents. To be sure, Graver Tank refers to the prevention of copying and piracy when describing the benefits of the doctrine of equivalents. That the doctrine produces such benefits, however, does not mean that its application is limited only to cases where those particular benefits are obtained.

Elsewhere in Graver Tank the doctrine is described in more neutral terms. And the history of the doctrine as relied upon by Graver Tank reflects a basis for the doctrine not so limited as petitioner would have it. In Winans v. Denmead, 15 How. 330, 343, 14 L.Ed. 717 (1854), we described the doctrine of equivalents as growing out of a legally implied term in each patent claim that “the claim extends to the thing patented, however its form or proportions may be varied.” Under that view, application of the doctrine of equivalents involves determining whether a particular accused product or process infringes upon the patent claim, where the claim takes the form-half express, half implied-of “X and its equivalents.”

Union Paper-Bag Machine Co. v. Murphy, 97 U.S. 120, 125 (1878), on which Graver Tank also relied, offers a similarly intent-neutral view of the doctrine of equivalents:

“[T]he substantial equivalent of a thing, in the sense of the patent law, is the same as the thing itself; so that if two devices do the same work in substantially the same way, and accomplish substantially the same result, they are the same, even though they differ in name, form, or shape.”

If the essential predicate of the doctrine of equivalents is the notion of identity between a patented invention and its equivalent, there is no basis for treating an infringing equivalent any differently from a device that infringes the express terms of the patent. Application of the doctrine of equivalents, therefore, is akin to determining literal infringement, and neither requires proof of intent.

Petitioner also points to Graver Tank's seeming reliance on the absence of independent experimentation by the alleged infringer as supporting an equitable defense to the doctrine of equivalents. The Federal Circuit explained this factor F2008


by suggesting that an alleged infringer's behavior, be it copying, designing around a patent, or independent experimentation, indirectly reflects the substantiality of the differences between the patented invention and the accused device or process. According to the Federal Circuit, a person aiming to copy or aiming to avoid a patent is imagined to be at least marginally skilled at copying or avoidance, and thus intentional copying raises an inference-rebuttable by proof of independent development-of having only insubstantial differences, and intentionally designing around a patent claim raises an inference of substantial differences. This explanation leaves much to be desired. At a minimum, one wonders how ever to distinguish between the intentional copyist making minor changes to lower the risk of legal action and the incremental innovator designing around the claims, yet seeking to capture as much as is permissible of the patented advance.

But another explanation is available that does not require a divergence from generally objective principles of patent infringement. In both instances in Graver Tank where we referred to independent research or experiments, we were discussing the known interchangeability between the chemical compound claimed in the patent and the compound substituted by the alleged infringer. The need for independent experimentation thus could reflect knowledge-or lack thereof-of interchangeability possessed by one presumably skilled in the art. The known interchangeability of substitutes for an element of a patent is one of the express objective factors noted by Graver Tank as bearing upon whether the accused device is substantially the same as the patented invention. Independent experimentation by the alleged infringer would not always reflect upon the objective question whether a person skilled in the art would have known of the interchangeability between two elements, but in many cases it would likely be probative of such knowledge.

Although Graver Tank certainly leaves room for petitioner's suggested inclusion of intent-based elements in the doctrine of equivalents, we do not read it as requiring them. The better view, and the one consistent with Graver Tank's predecessors and the objective approach to infringement, is that intent plays no role in the application of the doctrine of equivalents.

C

Finally, petitioner proposes that in order to minimize conflict with the notice function of patent claims, the doctrine of equivalents should be limited to equivalents that are disclosed within the patent itself. A milder version of this argument, which found favor with the dissenters below, is that the doctrine should be limited to equivalents that were known at the time the patent was issued, and should not extend to after-arising equivalents.F2008


As we have noted, supra, at 1052, with regard to the objective nature of the doctrine, a skilled practitioner's knowledge of the interchangeability between claimed and accused elements is not relevant for its own sake, but rather for what it tells the fact-finder about the similarities or differences between those elements. Much as the perspective of the hypothetical “reasonable person” gives content to concepts such as “negligent” behavior, the perspective of a skilled practitioner provides content to, and limits on, the concept of “equivalence.” Insofar as the question under the doctrine of equivalents is whether an accused element is equivalent to a claimed element, the proper time for evaluating equivalency-and thus knowledge of interchangeability between elements-is at the time of infringement, not at the time the patent was issued. And rejecting the milder version of petitioner's argument necessarily rejects the more severe proposition that equivalents must not only be known, but must also be actually disclosed in the patent in order for such equivalents to infringe upon the patent.

IV

The various opinions below, respondents, and amici devote considerable attention to whether application of the doctrine of equivalents is a task for the judge or for the jury. However, despite petitioner's argument below that the doctrine should be applied by the judge, in this Court petitioner makes only passing reference to this issue. See Brief for Petitioner 22, n. 15 (“If this Court were to hold in Markman v. Westview Instruments, Inc., No. 95-26, 1996 WL 12585 (argued Jan. 8, 1996), that judges rather than juries are to construe patent claims, so as to provide a uniform definition of the scope of the legally protected monopoly, it would seem at cross-purposes to say that juries may nonetheless expand the claims by resort to a broad notion of ‘equivalents' ”); Reply Brief for Petitioner 20 (whether judge or jury should apply the doctrine of equivalents depends on how the Court views the nature of the inquiry under the doctrine of equivalents).

Petitioner's comments go more to the alleged inconsistency between the doctrine of equivalents and the claiming requirement than to the role of the jury in applying the doctrine as properly understood. Because resolution of whether, or how much of, the application of the doctrine of equivalents can be resolved by the court is not necessary for us to answer the question presented, we decline to take it up. The Federal Circuit held that it was for the jury to decide whether the accused process was equivalent to the claimed process. There was ample support in our prior cases for that holding. Nothing in our recent decision in Markman v. Westview Instruments, Inc., 517 U.S. 370, 116 S.Ct. 1384, 134 L.Ed.2d 577 (1996) necessitates a different result than that reached by the Federal Circuit. Indeed, Markman cites with considerable favor, when discussing the role of judge and F2008


jury, the seminal Winans decision. 517 U.S., at 384-385, 116 S.Ct., at 1393. Whether, if the issue were squarely presented to us, we would reach a different conclusion than did the Federal Circuit is not a question we need decide today.

V

All that remains is to address the debate regarding the linguistic framework under which “equivalence” is determined. Both the parties and the Federal Circuit spend considerable time arguing whether the so-called “triple identity” test-focusing on the function served by a particular claim element, the way that element serves that function, and the result thus obtained by that element-is a suitable method for determining equivalence, or whether an “insubstantial differences” approach is better. There seems to be substantial agreement that, while the triple identity test may be suitable for analyzing mechanical devices, it often provides a poor framework for analyzing other products or processes. On the other hand, the insubstantial differences test offers little additional guidance as to what might render any given difference “insubstantial.”

In our view, the particular linguistic framework used is less important than whether the test is probative of the essential inquiry: Does the accused product or process contain elements identical or equivalent to each claimed element of the patented invention? Different linguistic frameworks may be more suitable to different cases, depending on their particular facts. A focus on individual elements and a special vigilance against allowing the concept of equivalence to eliminate completely any such elements should reduce considerably the imprecision of whatever language is used. An analysis of the role played by each element in the context of the specific patent claim will thus inform the inquiry as to whether a substitute element matches the function, way, and result of the claimed element, or whether the substitute element plays a role substantially different from the claimed element. With these limiting principles as a backdrop, we see no purpose in going further and micromanaging the Federal Circuit's particular word choice for analyzing equivalence. We expect that the Federal Circuit will refine the formulation of the test for equivalence in the orderly course of case-by-case determinations, and we leave such refinement to that court's sound judgment in this area of its special expertise.

VI

Today we adhere to the doctrine of equivalents. The determination of equivalence should be applied as an objective inquiry on an element-by-element basis. Prosecution history estoppel continues to be available as a defense to F2008


infringement, but if the patent holder demonstrates that an amendment required during prosecution had a purpose unrelated to patentability, a court must consider that purpose in order to decide whether an estoppel is precluded. Where the patent holder is unable to establish such a purpose, a court should presume that the purpose behind the required amendment is such that prosecution history estoppel would apply. Because the Court of Appeals for the Federal Circuit did not consider all of the requirements as described by us today, particularly as related to prosecution history estoppel and the preservation of some meaning for each element in a claim, we reverse its judgment and remand the case for further proceedings consistent with this opinion.

It is so ordered.

[Concurring opinion omitted.]

F200874


UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT

INTEL CORPORATION, Plaintiff-Appellee,

v.

ULSI SYSTEM TECHNOLOGY, INC., Defendant-Appellant.

92-1116

995 F.2d 1566; 1993 U.S. App. LEXIS 13605; 27 U.S.P.Q.2D(BNA) 1136; 93 Cal. Daily Op. Service 4419; 93 Daily Journal

DAR 7845

June 10, 1993, Decided

Before MICHEL, PLAGER, and LOURIE, Circuit Judges.

LOURIE, Circuit Judge.

ULSI System Technology, Inc. appeals from the order of the United States District Court for the District of Oregon granting Intel Corporation's motion for a preliminary injunction enjoining ULSI from infringing U.S. Patent Re. 33,629. Intel Corp. v. ULSI Sys. Technology, Inc., 782 F. Supp. 1467 (D. Or. 1991). Because the district court clearly erred in concluding that Intel had established a reasonable likelihood of success on the issue of infringement, we reverse.

BACKGROUND

Intel is the assignee of U.S. Patent Re. 33,629 to John F. Palmer, et al., entitled "Numerical Data Processor." The claims of the '629 patent are directed to the design and operation of a floating-point arithmetic processor capable of mixed precision calculations, mixed mode arithmetic calculations, and rounding operations. Intel has developed a line of math coprocessors n2 covered by the patent, including the Intel 8087, 80287, and 80387 coprocessors.

n2 A math coprocessor is a device which is designed to operate in conjunction with a microprocessor and is capable of performing mathematical computations at speeds up to 100 times faster than the microprocessor alone.

On January 10, 1983, Intel and the Hewlett-Packard Company (HP) entered into a cross-licensing agreement to "increase their freedom of design by obtaining a F2008


license under present and future patents and patent applications owned or controlled by the other." Under that agreement, Intel and HP each granted to the other an "irrevocable, retroactive, nonexclusive, world-wide, royalty-free license" under all patents and patent applications "having an effective filing date prior to January 1, 2000, said license to be effective until the expiration of said patents."

ULSI sells a math coprocessor known as the US83C87 ('C87 coprocessor) which is compatible with the Intel 80386 microprocessor and competes commercially with the Intel 80387 coprocessor. Since September 22, 1989, ULSI has purchased the 'C87 coprocessors from HP under an agreement entered into on August 2, 1988, in which HP agreed to manufacture the coprocessors for ULSI. As is apparently common in such "foundry" arrangements in the semiconductor industry, ULSI supplied HP with proprietary design specifications and HP then manufactured and shipped completed coprocessor chips to ULSI, which resold them as ULSI products.

Intel first became aware of ULSI's 'C87 coprocessor sales on February 4, 1991. On July 29, 1991, Intel brought an action in the U.S. District Court for the District of Oregon alleging infringement of the '629 patent by ULSI's "making and selling, and inducing others to make, sell and use, the 'US83C87' [coprocessor]." Intel filed a motion for a preliminary injunction. In considering Intel's motion, the district court weighed several factors relating to injunctive relief, including the likelihood of Intel's success on the merits, irreparable harm, the balance of hardships, and the public interest.

The district court determined that the public interest favored neither party because the public's interest in the protection of patents was balanced by its interest in allowing an accused company to continue to operate until the issue of liability was fully adjudicated. Additionally, the court determined that the balance of hardships tipped in favor of ULSI because the 'C87 coprocessor was ULSI's only product and ULSI "would in all likelihood be forced out of business" if it were enjoined. However, the district court concluded that Intel had established a likelihood of success on the merits with respect to the issues of infringement, validity, and enforceability of the '629 patent. Furthermore, it determined that ULSI failed to rebut the presumption of irreparable harm that arose from Intel's "clear showing" of validity and infringement. Because the "likelihood of success on the merits and the irreparable harm (both of which favor Intel)" outweighed "the balance of hardships (which favors ULSI)," the district court granted Intel's motion. n5

n5 ULSI filed a motion in this court for a stay pending appeal. Because we concluded that ULSI had shown that a substantial legal question existed on the

F200876


issue of infringement, we granted the motion for a stay pending appeal. Intel Corp. v. ULSI Sys. Technology, Inc., No. 92-1116 (Fed. Cir. January 14, 1992).

DISCUSSION

[The court discusses standards for issuance of preliminary injunctions.]

In opposition to the motion [for preliminary injunction], ULSI maintained that HP was permitted under the licensing agreement to act as a foundry for ULSI and that the sale of the coprocessors by HP to ULSI was a "first sale" that extinguished Intel's patent rights with respect to those products. The district court, however, rejected ULSI's argument because it determined that the licensing agreement did not grant HP the "power to sublicense" the '629 patent. On appeal, ULSI claims that the district court erred in concluding that the "patent exhaustion" or "first sale" doctrine did not shield ULSI from Intel's claim of infringement.

The law is well settled that an authorized sale of a patented product places that product beyond the reach of the patent. See Bloomer v. Millinger, 68 U.S. (1 Wall.) 340, 350-51, 17 L. Ed. 581 (1864). The patent owner's rights with respect to the product end with its sale, United States v. Univis Lens Co., 316 U.S. 241, 252 (1942), and a purchaser of such a product may use or resell the product free of the patent, id. at 250. This longstanding principle applies similarly to a sale of a patented product manufactured by a licensee acting within the scope of its license. See Unidisco, Inc. v. Schattner, 824 F.2d 965, 968 (Fed. Cir. 1987), cert. denied, 484 U.S. 1042 (1988).

In the instant case, the issue as to whether ULSI is free from infringement liability turns on whether there was a sale of 'C87 coprocessors by HP to ULSI. Intel argues that the "patent exhaustion" doctrine does not apply because HP never sold a product to ULSI. Although Intel claims, as it must, that the 'C87 coprocessor infringes the '629 patent, it maintains that what was actually sold by HP under the foundry agreement was its fabrication services with an ancillary sale of wafers and chemicals. Intel asserts that HP could not have sold a product covered by the '629 patent because HP never had or retained any ownership rights in the 'C87 coprocessors. Thus, according to Intel, no sale ever took place that could support ULSI's "first sale" defense. That argument is incorrect.

Interpretation of a contract is a question of law which we review de novo. See Interstate Gen. Gov't Contractors, Inc. v. Stone, 980 F.2d 1433, 1434 (Fed. Cir. 1992). After reviewing the HP-ULSI contract, we cannot accept Intel's characterization of that agreement as one in which HP merely provided fabrication services to ULSI. That agreement, entitled "Terms and Conditions of Sale," is replete with references to the sale of semiconductor wafers (i.e., chips) that F2008


incorporate the 'C87 coprocessor design. For example, the section of the agreement headed "Section 2: Production Fabrication" provided that HP "will sell CMOS34 wafers to" ULSI. That section recites prices for the chips and includes a delivery schedule for shipments of the chips to ULSI. Although the agreement also includes a section delineating the "engineering services" to be provided by HP, the agreement clearly involved the sale of chips, not merely the sale of fabrication services.

Nor, as Intel contends, must the licensed seller of a patented product own intellectual property rights to the product in order for there to be a sale. Intel makes much of the fact that the 'C87 chip was based on a design provided by ULSI. Intel confuses the issue of design origin with the issue of sale. Who designed the chip and whether it embodies inventions other than Intel's have no bearing on the controlling issue whether the 'C87 coprocessors were sold by HP to ULSI and thus extinguished Intel's patent rights relating to those products.

That ULSI, rather than HP, might have owned any existing intellectual property rights to the chips was a matter between ULSI and HP, and did not concern Intel. Intel does not dispute that HP was authorized under the broad terms of the licensing agreement to sell the chips at issue. To the extent that Intel had a patent covering the chips, HP's conceded right to sell the chips deprives Intel of any claim of infringement, as long as HP sold the chips. If it had not granted that license or if the license had been limited in some relevant way, that would be a different case from the one before us. Intel might thereby have retained its right to proceed against those who entered into foundry agreements such as the present one. While Intel may not in retrospect be pleased with the deal that it made permitting HP to make unrestricted sales, it nevertheless granted HP that right in 1983, presumably for consideration it believed to be of value at that time. It cannot now renege on that grant to avoid its consequences.

We also reject Intel's contention that the sale of chips by HP to ULSI constituted a "de facto sublicense" prohibited by the licensing agreement. We found a similar argument to be "without merit and specious" in Lisle Corp. v. Edwards, 777 F.2d 693 (Fed. Cir. 1985). In Lisle, a licensed manufacturer sold products covered by the licensor's patent to a third party which resold them under its trademark. The licensor brought an infringement action against both the licensee and the third party on the basis that the manufacture of the patented product for the third party constituted a sublicense. Because such sublicensing was prohibited under the licensing agreement, the patent owner claimed that the products were infringing. The court in Lisle, however, concluded that the licensee's sales were authorized and that the resale by the third party did not create a sublicense. Id. at 695. Similarly, the sale by HP to ULSI here did not create a sublicense. HP did not empower ULSI to make Intel-patented chips or to use or sell any such chips except F2008


those lawfully sold to it by HP; these would have been the incidents of a sublicense.

Relatedly, we do not agree with the district court's conclusion that the sale of chips by HP to ULSI was not a "first sale" because HP was not authorized to sublicense ULSI to design products covered by the '629 patent. That HP did not have the authority to sublicense the '629 patent to ULSI is irrelevant. The agreement between HP and ULSI was not a sublicense, but a contract for the manufacture and sale of chips. Thus, HP did not grant a sublicense; it sold a product, albeit one designed by its purchaser. ULSI is immune from infringement, not because it was a sublicensee, which it was not, but because HP was a licensed and therefore legitimate source of the chips. Moreover, ULSI was not required to be sublicensed in order to provide its chip design to HP.

Both parties cite our earlier decision in Int'l Corp. v. United States Int'l Trade Comm'n, 946 F.2d 821(Fed. Cir. 1991) ("Atmel"), as supporting authority. Atmel is similar to, but distinguishable from, the instant case. Under the agreement in Atmel, Intel granted Sanyo a "non-exclusive, world-wide royalty-free license without the right to sublicense except to Subsidiaries, under Intel Patents which read on any Sanyo [devices] for the lives of such patents, to make, use and sell such products." (Emphases added). Intel alleged that Atmel, among others, violated 19 U.S.C. 1337 (1988) by importing EPROMs (Erasable Programmable Read Only Memories) that infringed a number of Intel patents. Atmel claimed that its imported EPROMs were not infringing because they were manufactured and sold by Sanyo under its agreement with Intel. Intel, on the other hand, argued that Sanyo was not permitted to sell EPROMs to Atmel for resale as Atmel products because the licensing agreement only authorized Sanyo to sell Sanyo products.

As an initial matter, the court in Atmel expressly recognized the freedom from patent infringement of one purchasing products from a licensed party under a foundry agreement. The court stated that

if the Intel/Sanyo agreement permits Sanyo to act as a foundry for another company for products covered by the Intel patents, the purchaser of those licensed products from Sanyo would be free to use and/or resell the products. Such further use and sale is beyond the reach of the patent statutes. See United States v. Univis Lens Co., 316 U.S. 241, 250-52 (1942) (the first vending of any article manufactured under a patent puts the article beyond the reach of the patent).

Id. at 826, 20 USPQ2d at 1166. Thus, the court agreed that Atmel would be shielded from Intel's claims of infringement if Atmel could establish that Sanyo was authorized to sell the EPROMs to Atmel. F2008


In determining whether the licensing agreement provided for foundry rights, the court focused on what was meant by the "Sanyo limitation" in the agreement. The court concluded that the limitation precluded Sanyo from serving as a foundry for non-Sanyo EPROMs because Sanyo was only permitted to sell Sanyo products. Sanyo was prohibited from producing and selling EPROMs to Atmel for resale as Atmel products, and the court thus held that Atmel could not rely on the license defense. Id. at 828. In contrast, the licensing agreement between Intel and HP here contains no restriction on HP's right to sell or serve as a foundry.

In light of our discussion above, we hold that the 'C87 coprocessors were insulated from Intel's claim of infringement because they were sold to ULSI by HP, which was authorized to do so under its licensing agreement with Intel. Accordingly, we conclude that Intel cannot establish a likelihood of success on the issue of infringement.

***

The district court's finding on the likelihood of success is clearly erroneous because it was based on a legal error concerning the application of the first sale doctrine. As to the other preliminary injunction factors, the district court presumed irreparable harm because it found that Intel had made a clear showing that the '629 patent was valid and infringed. Because that presumption was based on a clearly erroneous finding on the likelihood of success, it too was clearly erroneous. We discern no clear error in the district court's determination that the balance of hardships tipped in ULSI's favor and that the public interest favored neither party. In view of the totality of these factors, as weighed by the district court, we conclude that the district court abused its discretion in granting Intel's motion for a preliminary injunction.

CONCLUSION

The district court erred in determining that the Intel-HP licensing agreement did not provide ULSI with a defense against Intel's claim of infringement, a predicate to its finding a likelihood of success in proving infringement, and derivatively, irreparable harm. The district court's grant of Intel's motion for a preliminary injunction is therefore reversed.

REVERSED

[Judge Plager’s dissent omitted.]

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United States Court of Appeals for the Federal Circuit.

HEWLETT-PACKARD COMPANY, Plaintiff/Cross-Appellant,

v.

BAUSCH & LOMB INCORPORATED, Defendant/Appellant.

909 F.2d 1464Nos. 90-1016, 90-1017.

July 30, 1990.

Patent infringement suit was brought. The United States District Court for the Northern District of California, Robert P. Aguilar, J., 722 F.Supp. 595, held that patent was valid and infringed prior to defendant's sale of business, but held that defendant had not actively induced infringement of patent subsequent to sale of business. Appeal and cross appeal were taken.

Before RICH and NEWMAN, Circuit Judges, and COWEN, Senior Circuit Judge.


Bausch & Lomb Incorporated (B & L) appeals from the September 13, 1989 Judgment of the United States District Court for the Northern District of California, holding U.S. Pat. No. 4,384,298 (LaBarre) valid and infringed by B & L. Hewlett-Packard Co. v. Bausch & Lomb Inc., 722 F.Supp. 595 (N.D.Cal.1989). Hewlett-Packard Company (HP) cross-appeals from that portion of the Judgment holding that B & L had not actively induced infringement of the LaBarre patent subsequent to September of 1985. We affirm.

BACKGROUND

[Two patents relating to X-Y plotters had claims which the court here agreed with the district court were nonobvious, and hence validity challenges on that ground failed.]

Claims 1 and 3 of the LaBarre patent are asserted against B & L, but only claim 1 is relevant to this opinion. It reads as follows:

1. An X-Y plotter system for forming images on a web comprising:

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first means being coupled to at least one edge of said web for imparting motion thereto to provide a first degree of motion during plotting onto said web in response to a first applied signal;

second means for forming selected visual images on said web and being movable to provide a second degree of motion in response to a second applied signal; and

third means responsive to a third applied signal for imparting motion to said second means;

said first means including first drive means having at least one powered drive wheel contacting the web, and an idle wheel opposite to each of said drive wheels to form a pinch roller assembly with the web between the drive and idler wheels, one of said at least one drive and idler wheels having a rough surface, and said drive and idler wheels additionally being spring biased together to cause the rough surface to make a series of indentations along the driven edge of the web to minimize slippage with these indentations repeatedly mating with the rough surface of the drive wheel as the web is driven back and forth, wherein the rough surface on one of said at least one powered drive and idler wheels of the first drive means has a random pattern, size, and height of rough spots.

Claim 1 of LaBarre was specifically allowed by the Patent and Trademark Office (PTO) over the Yeiser patent. In particular, Yeiser was brought to the PTO examiner's attention by HP after the LaBarre application had been filed. A telephone interview was subsequently held between the examiner and HP's attorney during which the Yeiser patent was discussed. As a result of this discussion, the last phrase of claim 1, “wherein the rough surface ... has a random pattern, size, and height of rough spots,” was added by amendment. Claim 1 was subsequently allowed.

B & L, through a division called Houston Instruments, began selling plotters having grit-covered pinch wheels (“grit wheel plotters”) sometime in late 1982 or early 1983. However, in September of 1985, B & L entered into a “PURCHASE AGREEMENT” with Ametek, Inc. (Ametek) pursuant to which B & L sold the Houston Instruments division (including all “assets, properties, rights and business”) to Ametek for a total purchase price of $43,000,000. Concurrent with execution of the PURCHASE AGREEMENT, B & L and Ametek also entered into an “AGREEMENT WITH RESPECT TO PATENTS,” in which the parties agreed that, among other things, (1) B & L would grant Ametek a license under the Yeiser patent; (2) B & L would indemnify Ametek against liability for F2008


infringing the LaBarre patent up to a cap of $4.6 million; (3) B & L and Ametek would jointly work toward developing a plotter which would not infringe the LaBarre patent; and (4) Ametek would comply with a so-called “gag order;” (i.e., would not communicate with HP concerning the LaBarre patent).

HP brought the present suit against B & L in May of 1986, accusing B & L of direct infringement of the LaBarre patent for the time period prior to the sale of Houston Instruments to Ametek, and of active inducement of infringement under 35 U.S.C. § 271(b) for the period subsequent to the sale of Houston Instruments. *** As to the charge of inducing infringement, B & L denied that its activities surrounding the sale of Houston Instruments to Ametek in September of 1985 constituted active inducement of infringement.

The district court [found the claims nonobvious, but] that B & L did not actively induce infringement of the LaBarre patent by Ametek under 35 U.S.C. 271(b), and so found no liability subsequent to the 1985 sale. These appeals followed.

OPINION

Section 271(b) provides that “Whoever actively induces infringement of a patent shall be liable as an infringer.” At the outset, we feel that it is necessary to make clear the distinction, often confused, between active inducement of infringement under § 271(b) and contributory infringement under § 271(c).FN3 Prior to the enactment of the Patent Act of 1952, there was no statute which defined what constituted infringement. However, infringement was judicially divided into two categories: “direct infringement,” which was the unauthorized making, using or selling of the patented invention, and “contributory infringement,” which was any other activity where, although not technically making, using or selling, the defendant displayed sufficient culpability to be held liable as an infringer. See, e.g., Henry v. A.B. Dick Co., 224 U.S. 1, 33-34 (1912); Thomson-Houston Elec. Co. v. Ohio Brass Co., 80 F. 712, 721 (6th Cir.1897). Such liability was under a theory of joint tortfeasance, wherein one who intentionally caused, or aided and abetted, the commission of a tort by another was jointly and severally liable with the primary tortfeasor. Thomson-Houston, 80 F. at 721; Tubular Rivet & Stud Co. v. O'Brien, 93 F. 200, 202-05 (C.C.D.Mass.1898).

FN3. 35 U.S.C. 271(c) provides that:

(c) Whoever sells a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an

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infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer.

The most common pre-1952 contributory infringement cases dealt with the situation where a seller would sell a component which was not itself technically covered by the claims of a product or process patent but which had no other use except with the claimed product or process. In such cases, although a plaintiff was required to show intent to cause infringement in order to establish contributory infringement, many courts held that such intent could be presumed because the component had no substantial non-infringing use. See Henry v. A.B. Dick, 224 U.S. at 48.

The legislative history of the Patent Act of 1952 indicates that no substantive change in the scope of what constituted “contributory infringement” was intended by the enactment of 271. However, the single concept of “contributory infringement” was divided between 271(b) and 271(c) into “active inducement” (a type of direct infringement) and “contributory infringement,” respectively. Section 271(c) codified the prohibition against the common type of contributory infringement referred to above, and made clear that only proof of a defendant's knowledge, not intent, that his activity cause infringement was necessary to establish contributory infringement. Section 271(b) codified the prohibition against all other types of activity which, prior to 1952, had constituted “contributory infringement.”

That, however, leaves open the question of what level of knowledge or intent is required to find active inducement under § 271(b). On its face, § 271(b) is much broader than § 271(c) and certainly does not speak of any intent requirement to prove active inducement. However, in view of the very definition of “active inducement” in pre-1952 case law and the fact that § 271(b) was intended as merely a codification of pre-1952 law, we are of the opinion that proof of actual intent to cause the acts which constitute the infringement is a necessary prerequisite to finding active inducement. And it is proof of that intent which is missing in the present case.

Looking at the totality of events surrounding the sale of Houston Instruments, it is clear that B & L was merely interested in divesting itself of Houston Instruments at the highest possible price. B & L had no interest in what Ametek did with Houston Instruments and certainly did not care one way or the other whether Houston Instruments, under Ametek's ownership, continued to make grit wheel plotters. HP attempts to make much of the fact that part of the sale of Houston Instruments included the sale of specific plans for making grit wheel plotters as well as key personnel knowledgeable in this area. However, this is simply a F2008


result of the fact that Houston Instruments was sold “lock, stock and barrel” (i.e. with all “assets, properties, rights and business” included). B & L had no interest in nor control over what Ametek chose to do with the plans or the personnel. In this regard, it should also be kept in mind that grit wheel plotters constituted only a portion of Houston Instruments' sales. The PURCHASE AGREEMENT between B & L and Ametek indicates that Houston Instruments was also in the business of developing, manufacturing and selling analog and digital recorders, digitizers, computer-assisted drafting equipment, and other products.

We do not find any of the remaining details of the agreement between B & L and Ametek to be sufficiently probative of intent to induce infringement. The grant of a license from B & L to Ametek under the Yeiser patent is not probative of any intent to induce infringement. The license agreement between B & L and Ametek did not purport to give Ametek the right to make, use and sell X-Y plotters; it merely freed Ametek from whatever bar the Yeiser patent would have been to such activity. Both parties clearly knew, as evidenced by their discussion of the LaBarre patent in the AGREEMENT WITH RESPECT TO PATENTS, that other patents could still be a bar to making, using and selling X-Y plotters. The agreement between B & L and Ametek to work together to find a way to avoid infringement of the LaBarre patent establishes, if anything, an intent by B & L not to induce infringement by helping Ametek to develop a plotter which would not infringe.

The most troubling aspect of the agreement between B & L and Ametek is the indemnification clause. Cases have held that an indemnification agreement will generally not establish an intent to induce infringement, but that such intent can be inferred when the primary purpose is to overcome the deterrent effect that the patent laws have on would-be infringers. See Miller, “Some Views on the Law of Patent Infringement by Inducement,” 53 J.Pat.Off.Soc'y 86, 150-51 (1971), and the cases cited therein. While overcoming the deterrent of the patent laws might have been the ultimate effect of the indemnification agreement in the present case, we cannot say that that was its purpose. We are once again led back to our conclusion that what B & L really wanted out of this agreement was the sale of Houston Instruments at the greatest possible price. Therefore B & L agreed that, if Ametek should wish to continue the manufacture and sale of grit-wheel plotters, B & L would bear the risk of those plotters ultimately being found to infringe the LaBarre patent. The indemnification agreement certainly facilitated the sale of Houston Instruments at the particular price at which it was sold, but we cannot agree that B & L used it to induce infringement by Ametek.

CONCLUSION

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The district court's decision holding the LaBarre patent valid and holding B & L not liable for the period subsequent to the sale of Houston Instruments is affirmed.

AFFIRMED.

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