Buehler Ag v. Ocrim, SpA

Citations: 836 F. Supp. 1291; 29 U.S.P.Q. 2d (BNA) 1001; 1992 U.S. Dist. LEXIS 20770; 1992 WL 533250Docket: Civ. No. 3:90-CV-0771-H

Court: District Court, N.D. Texas; August 6, 1992; Federal District Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

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Buehler AG and Buhler, Inc. filed a civil suit against OCRIM, S.P.A., Ocrim America, Inc., and Farmers Elevator of Dawn, Inc., concerning U.S. Patent No. 4,442,980. The case was heard in the United States District Court for the Northern District of Texas, Dallas Division, with various legal representatives involved for both plaintiffs and defendants. The court is currently considering multiple motions: 

1. Defendants' Motion for Partial Summary Judgment regarding the patent's invalidity and unenforceability due to failure to disclose PXC-M121 as the best mode and prior art.
2. Defendants' Motion for Partial Summary Judgment of Noninfringement of the same patent.
3. Defendants' Motion asserting the patent's invalidity based on the "on sale" bar.
4. Counter-Defendants' Motion for Summary Judgment on an antitrust counterclaim.

The memorandum outlines the summary judgment standard, emphasizing that it serves to expedite legal proceedings and reduce litigation costs. Summary judgment may be granted when there are no genuine factual disputes relevant to the case, and the moving party is entitled to judgment as a matter of law. The court must assess whether any factual issues exist that require resolution by a jury, affirming that the moving party does not need to disprove the opposing party's case but must show entitlement to judgment as a matter of law.

The respondent to a motion for summary judgment bears the burden of proof to establish each element for which he has the burden at trial, given adequate opportunity for discovery. All evidence must be evaluated in favor of the opponent of the motion. The party opposing summary judgment must present specific facts demonstrating a genuine issue for trial, as summary judgment aims to assess the proof beyond mere pleadings to determine if a claim is baseless or if a genuine issue exists warranting a trial. Vague allegations or self-serving statements lacking specific factual support are inadequate.

In the context of Plaintiffs’ claim that Defendants' LAM roller mill infringes U.S. Patent No. 4,442,980, Defendants argue the patent's invalidity based on inequitable conduct. They assert that Plaintiffs did not disclose the best mode of their invention—an operating model with a two-position PXC-M121 valve—while misleading the patent examiner into believing a three-position valve was used. Defendants' motion raises several key inquiries: the type of valve represented in the '980 Patent, the patent examiner's understanding of the valve's operation, whether a skilled person in the art would recognize the patent's valve functionality, and the best mode and prior art relevant to the patent.

In response, Plaintiffs rely solely on affidavits from inventors Winteler and Gaemperle, who contend that the best mode is a two-position valve with inherent third-position capabilities, claiming this was clearly depicted in the patent for someone skilled in the art.

The PXC-M121 valve used by Defendants does not create a genuine dispute over material facts sufficient to prevent summary judgment. A genuine dispute requires evidence that a reasonable jury could favor the nonmoving party; here, the evidence presented by the nonmoving party is merely colorable and lacks significant probative value, allowing for summary judgment. The affidavits from Winteler and Gaemperle are deemed inconsequential due to the patent's prosecution history, its language, and testimony from unrelated parties, which clarify that the '980 Patent was fundamentally based on a three-position valve rather than a two-position valve. Furthermore, the patent's best mode involving a two-position valve was inadequately disclosed, and neither the patent examiner nor someone skilled in the art could interpret it as a valid embodiment of the best mode.

The patent is presumed valid, placing the burden on Defendants to demonstrate its invalidity with clear and convincing evidence. During the patent's prosecution, Plaintiffs faced rejections by the Patent Office based on their prior British patent (UK Patent 698,085). They claimed that the three positions of the valve were essential to their invention and argued that the British patent did not include a three-position valve. Nevertheless, the examiner rejected their claims, stating that substituting a three-way valve for a two-way valve was not patentable as three-way valves were already established in the field. In their final amendment, Plaintiffs successfully argued that their invention offered a novel operational mode for the control system, which provided significant advantages over previous systems due to the interaction of the three-state valve and the coupling mechanism. This prosecution history indicates that the patent examiner was led to believe that the innovation was centered on a three-position valve and that its benefits stemmed from this design.

Claim 1 of the '980 Patent highlights the valve's ability to produce three operational modes, detailing the functionalities associated with each actuator position.

Substantially identical language appears in Claim 2 of the patent, particularly regarding the phrase "positive overlap or transfer," which is extensively referenced in the Affidavits of Winteler and Gaemperle to support the claim that a two-position valve can achieve three positions. However, this phrase lacks precedent in the patent documentation. The prosecution history and figures indicate a three-position valve, yet the data presented were derived from two-position valves. Specifically, Figures 4 and 5, used to argue the advantages of a three-position valve against previous rejections, were based on the two-position PXC-M121 valve. Winteler asserts that the schematic representations in Figures 3, 6, and 7 were also based on the PXC-M121 valve, though they depict elements as three-position valves.

Moreover, the only comprehensive representation of the system, shown in Figure 8, includes a three-position valve, but Winteler claims the working model incorporated the two-position valve. Testimonies from Winteler and another inventor reveal contradictions to the assertion that a two-position valve can achieve a third position through the claimed mechanism, with Winteler admitting he has never observed such a third position in practice, believing it only theoretically exists. Furthermore, Figure 8 was deemed "irrelevant" to their invention.

The patent examiner was likely misled into believing the invention involved a three-position valve, as there is no evidence that he knew the figures were based on a two-position valve. The inclusion of a "fictitious" and "inoperable" representation of the invention could render the patent invalid due to inequitable conduct, as established in case law. Testimonies from representatives of the PXC-M121 valve's manufacturer confirm it is a two-position valve, contradicting the patent's claims that Figures 3, 6, and 7 depict a three-position valve and asserting that Figure 8 could not have incorporated the PXC-M121 valve.

A person of ordinary skill in the relevant field would not understand from the patent that the best mode of the invention involved a two-position valve, nor how such a valve could achieve a third position through positive overlap or transfer. Although there is a general reference to the best mode, inadequate disclosure can lead to concealment of critical information (Spectra-Physics, Inc. v. Coherent, Inc.). The best mode associated with the '980 Patent is identified as the PXC-M121 valve, which is used in the Plaintiffs' MDDK roller mill, though it is not mentioned in the patent itself. At the time of filing, the Plaintiffs possessed a Telemecanique manual describing the PXC-M121 as a two-position valve, which they failed to disclose as relevant prior art to the patent examiner. 

To obtain a patent, inventors must provide a clear and detailed description of their invention, including the best mode known at the time of filing (35 U.S.C. 112). If an inventor does not disclose a superior method known at filing, the patent can be deemed invalid (Consolidated). The Court finds that Plaintiffs did not disclose the best mode involving the PXC-M121 valve and misled the patent examiner regarding the incorporation of a three-position valve. 

Patent applicants must adhere to a duty of good faith and candor, which includes disclosing all material information to the patent office (37 C.F.R. 1.56). Failure to do so constitutes inequitable conduct, which can render a patent unenforceable. The elements of inequitable conduct include failure to disclose material information, knowledge of that information, and intent to deceive (Merck Co. v. Danbury Pharmacal, Inc.). Material information is defined as that which a reasonable examiner would find significant in the patent issuance process.

Intent can be established through inferred actions rather than direct evidence. The Court determined that Plaintiffs committed inequitable conduct by failing to disclose relevant prior art, specifically regarding the PXC-M121 two-position valve, which was significant to the patent examiner and the patent's prosecution history. As there are no genuine disputes over material facts, summary judgment is deemed appropriate. Defendants demonstrated, with clear and convincing evidence, that Plaintiffs' omission invalidates and renders the '980 Patent unenforceable. Consequently, the motion for partial summary judgment regarding the invalidity and unenforceability of the '980 Patent is granted.

Additionally, Defendants assert that the '980 Patent is invalid under 35 U.S.C. § 102(b) because the Plaintiffs had both reduced their invention to practice and offered it for sale prior to the critical date of December 5, 1979. The invention pertains to a new design for a roller mill's feed gate control system, specifically incorporating a pneumatic servo control system. The MDDK roller mill, which embodies the '980 Patent, represents a full pneumatic improvement over previous models that utilized manual or partially pneumatic systems. 

Defendants bear the responsibility of overcoming the presumption of patent validity with clear and convincing evidence. Under § 102(b), an invention cannot be patented if it was on sale more than one year before the patent application date. A single offer to sell can invalidate patentability, regardless of acceptance. The critical date is agreed upon as December 5, 1979. A three-part test established by case law determines whether an invention has been placed "on sale": (1) the invention must be embodied in or obvious from the offered product, (2) it must be sufficiently tested to confirm operability and marketability, and (3) the sale must primarily aim for profit rather than experimentation.

The third prong of the legal test is presumed true if the customer pays for the device unless the patentee demonstrates experimental intent. The "on sale" requirement under Section 102(b) can be satisfied by various forms of evidence, including documents and witness testimony. Courts assess the "totality of the circumstances" to determine if the patentee's offer is novel compared to previous offers and if the invention was adequately tested for functionality before the critical date. The offer does not need to detail the invention's workings.

Defendants presented evidence relevant to the case, including: 
1. Winteler, an inventor of the '980 Patent, reported on October 31, 1979, the testing of a working model of a new MDDK roller mill equipped with pneumatic controls. The test results were included in the '980 Patent.
2. An assembly drawing for the MDDK roller mill was finalized by October 22, 1979.
3. In late 1979, Plaintiffs offered to sell their new MDDK roller mill to Seaboard Allied Milling Corporation, enhancing prior offers to avoid contract issues with older models.
4. A sales contract for MDDK roller mills with pneumatic controls was signed with Seaboard on November 13, 1979.
5. Seaboard accepted the offer believing it was for the latest model with all pneumatic controls.
6. Seaboard's Vice President visited Plaintiffs' facility on November 29-30, 1979, to inspect the MDDK mills.
7. The machines ordered before the critical date, when delivered, included the features of the '980 Patent.

Overall, Plaintiffs successfully demonstrated that they offered and accepted a sale for the new MDDK roller mill with pneumatic controls prior to the critical date of December 5, 1979.

The '980 Patent was tested sufficiently to demonstrate its workability before the critical date of December 5, 1979. Plaintiffs challenge this evidence with two main arguments. First, they claim that the MDDK roller mill offered to Seaboard was an earlier model with a mechanical feed gate control, which had been in use since the late 1970s, while the '980 Patent covers a later model with full pneumatic controls. However, testimony from Wanzenried, a sales head for Plaintiffs, indicates that the mill offered was "new" and not yet marketed, and that the term "all air controlled" was not used for older models. Plaintiffs failed to provide evidence supporting the existence of an earlier MDDK model. Second, Plaintiffs argue that design and testing continued until March or April 1980, but legal precedent establishes that ongoing development does not negate prior sufficient testing. The Plaintiffs' evidence does not create a genuine dispute regarding the "on sale" bar, leading to a conclusion that the invention was indeed "on sale" before the critical date, resulting in the invalidation of the '980 Patent. Consequently, Defendants' Motion for Partial Summary Judgment of Invalidity and Unenforceability of the '980 Patent is granted. Additionally, Defendants' motion for summary judgment on noninfringement is denied as moot. An antitrust counterclaim by Defendants alleges that Plaintiffs sought to enforce invalid patent claims to eliminate competition, and Plaintiffs seek summary judgment on this counterclaim based on lack of standing for some defendants, referencing the legal standard from Walker Process Equipment, Inc. v. Food Machinery, Chemical Corp.

Prosecution of patents obtained through inequitable conduct may constitute an unlawful monopolization attempt under Section 2 of the Sherman Act, contingent on satisfying additional required elements. "Inequitable conduct" involves intentional misrepresentations made to the Patent Office by the patent holder. The court has determined that the '980 Patent is invalid and unenforceable due to the plaintiffs' inequitable conduct and violation of the on-sale bar. The key issue remaining for the current motion is whether the necessary elements for a Section 2 violation are present. The court identifies material factual disputes regarding the "relevant product market," "specific intent," and "market power," which prevent summary judgment.

Establishing the relevant product market is essential for a monopolization claim under Section 2, as it assesses the exclusionary impact of the illegally obtained patent. The relevant market encompasses both geographic and product dimensions, defined as the area where competition exists and buyers can seek alternative suppliers. The geographic market must reflect industry realities and hold economic significance, typically limited to the United States for patent misuse cases. The relevant product market includes products with reasonable interchangeability for their intended uses, although they need not be identical. Factors such as functional interchangeability and price responsiveness are considered in this assessment. For a patent owner to violate the Sherman Act, they must possess monopoly market power or a significant probability of acquiring it, defined as the capability to control prices or exclude competition in the relevant market.

To establish a Section 2 antitrust violation, two elements must be proven: (1) possession of monopoly power in the relevant market, and (2) willful acquisition or maintenance of that power, distinct from growth due to superior products or business strategies. Additionally, for an attempt to monopolize, specific intent and a dangerous probability of success must be demonstrated. Specific intent can be inferred from circumstantial evidence of bad faith conduct. A finding of actual exclusion from the market can support a claim of dangerous probability, but is not strictly necessary; it can also be shown through direct evidence of intent or conduct indicative of intent.

Plaintiffs assert that Defendants Ocrim S.p.A. and Farmers lack standing for their antitrust counterclaim due to indirect antitrust injury. Ocrim S.p.A., as the manufacturer of the accused LAM roller mill, faces direct injury from potential lost sales if the Plaintiffs' infringement claims succeed, establishing its standing. Defendant Farmers, having purchased lower-priced mills from Ocrim America, claims loss of business opportunity due to restrictions imposed during the infringement litigation. As a direct customer affected by alleged anticompetitive actions, Farmers also has standing to seek damages. Consequently, Plaintiffs' Motion for Summary Judgment on Defendants' Antitrust Claim is denied.

Defendants' motions for partial summary judgment regarding the invalidity and unenforceability of U.S. Patent No. 4,442,980 are granted on the grounds of best mode and prior art, as well as the on-sale bar. The motion for partial summary judgment on noninfringement is denied as moot, while Plaintiffs' motion for summary judgment on the antitrust counterclaim is denied. 

Key notes include a motion by Defendants to strike Gaemperle's affidavit due to Plaintiffs' refusal to allow his deposition and the introduction of previously undisclosed statements and documents. The deposition of two inventors indicates that Plaintiffs' affidavits lack probative value. Although Plaintiffs argue that the patent's data and figures derived from a two-position valve could illustrate three positions through a "positive overlap or transfer," the Court finds this insufficient to establish what a skilled person would derive from the patent or what was disclosed to the examiner. 

Plaintiffs have not identified an alternative best mode in the patent, as required for summary judgment. They also argue that the PXC-M121 valve cannot be considered prior art due to its general availability; however, the Court distinguishes this case from precedent, noting that prior art applies to individual elements as well as the overall invention. Finally, it is noted that Plaintiffs acknowledged in an interrogatory that the MDDK roller mill was first sold in the U.S. around 1980.

Defendants obtained significant information about an earlier sale date through subpoenaed documents from Seaboard Allied Milling Corporation, which Plaintiffs have not contested. The withholding of discovery related to the on-sale bar can lead to "suspicion" and "adverse inferences" against Plaintiffs, as established in prior case law. While there is a stringent standard for determining an offer for sale, it is not an absolute requirement; all circumstances must be evaluated in light of Section 102(b) regulations. The determination of a sale involves assessing the development stage of an invention, including the existence of models. Plaintiffs argue that the term "Airborne" was not used in reference to the MDDK roll mills offered to Seaboard before the critical date, but this term alone does not conclusively identify the invention of the patent. The fact that the devices delivered to Seaboard after the critical date incorporated the patented device supports the claim that the earlier offer was for the fully pneumatic MDDK roller mill. Additionally, affidavits provided by Winteler and Caderas lack personal knowledge regarding the interactions with Seaboard, violating Federal Rule of Civil Procedure 56(e). A drawing attached to Winteler's affidavit, claimed to depict an earlier model of the MDDK roller mill, is disputed by Defendants, who assert the inscription was added shortly before litigation and that the drawing was not used for Seaboard. Lastly, Defendants assert that the relevant product market pertains to the sale of newly built European automatic grain roller mills in the United States.

Plaintiffs assert a broad market definition encompassing global sales of roller mills—both new and old—across various countries, arguing that the relevant geographic market should not be confined to the United States due to worldwide competition among major players in this sector. They reference the Gearhart case, which recognized a global market in the context of a Section 7 Clayton Act acquisition challenge. However, the plaintiffs lack supporting authority for their claims regarding U.S. patent misuse leading to antitrust violations. They mistakenly contend that the intent to monopolize can be established independently of any findings of bad faith prosecution and that "dangerous probability" of monopolization requires proof of actual competition exclusion. Additionally, Farmers claim injury due to litigation costs from the plaintiffs' infringement action, but these expenses are reportedly incurred by Ocrim S.p.A. and Ocrim America, not Farmers.