Continental Plastic Containers v. Owens Brockway Plastic Products, Inc.

Citations: 141 F.3d 1073; 1998 WL 142276Docket: 96-1509

Court: Court of Appeals for the Federal Circuit; May 27, 1998; Federal Appellate Court

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Continental Plastic Containers, Inc. (Continental) appeals a judgment from the United States District Court for the Northern District of Illinois, which granted summary judgment to Owens-Brockway Plastic Products, Inc. (Owens) on two key issues. The court determined that U.S. Design Patent No. Des. 352,905 was invalid due to the 'on-sale' bar under 35 U.S.C. § 102(b), as Continental's product embodying the design was sold or offered for sale more than one year prior to the patent's filing date. Additionally, the court found that Owens' trade dress did not create a likelihood of confusion regarding the source of the products under section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). The ruling was affirmed on appeal, with the court stating that summary judgment is appropriate when there are no genuine issues of material fact, and the moving party is entitled to judgment as a matter of law. Continental's appeal was viewed as potentially frivolous, leading Owens to request damages and costs under Rule 38 of the Federal Rules of Appellate Procedure. The opinion was delivered by Circuit Judge Rich, with a concurring and dissenting opinion from Circuit Judge Pauline Newman.

In evaluating a motion for summary judgment, the court examines the necessary proof to establish liability under relevant law, focusing on the nonmovant's ability to meet their burden of proof at trial. A design is deemed 'on-sale' under section 102(b) if it was sold or offered for sale in the U.S. more than one year before the critical filing date, with sales primarily aimed at profit rather than experimentation. Key factors include the circumstances of the sale, the invention's development stage, and its nature, aligned with policies that discourage removing inventions from the public domain, promote prompt disclosure, allow reasonable time for economic evaluation, and limit commercial exploitation to one year post-sale.

In this case, the district court ruled that the '905 patent was invalid due to being 'on-sale' as Continental had offered the patented design to customers and executed a supply agreement with L. A. Juice before the critical date of February 16, 1992. Key facts include Continental's supply agreement with L. A. Juice dated January 3, 1992, intended to commence on April 1, 1992, but delayed until fall 1992. Continental contends that it could only manufacture the design after the critical date, arguing the agreement did not constitute a sale. The agreement followed efforts by Continental to engage Tree Top as a customer, which involved preliminary designs and a wood model, but ultimately led to a partnership with L. A. Juice after Tree Top discontinued its project.

Continental engaged in the design and development of gallon bottles in collaboration with L. A. Juice, utilizing a wooden model and three-dimensional drawings produced between October 1991 and August 1992. A significant commitment was demonstrated when a 'critical female duplicating model' was created on December 11, 1991, which is essential for producing molds. A prototype production mold was ordered on January 3, 1992, coinciding with the execution of a supply agreement, and was shipped shortly thereafter.

Continental contends that the molds and drawings did not embody the patented design due to substantial modifications needed to address manufacturing challenges, including changes to various structural features. However, the district court noted that the revisions were minimal, requiring precise measurement to identify differences, suggesting that these modifications did not constitute a significant ornamental change from the earlier designs. Therefore, it was concluded that the molds and drawings did indeed embody the patented design.

Continental also argued that the '905 patent should not be subject to the 'on-sale' bar, asserting that their inability to produce a functional article before the critical date should suspend the bar's application. They referenced the case Tone Bros. v. Sysco Corp., which dealt with 'public use' and allowed for some leeway for experimentation regarding functional aspects of a design. However, the court distinguished between 'public use' and 'on-sale' contexts, emphasizing that the latter focuses on preventing commercial exploitation beyond a designated time frame. Continental's agreement with L. A. Juice was interpreted as an explicit commercial exploitation of the claimed design, violating the statutory time limits.

Continental's argument that the 'on-sale' bar should not apply to its ornamental design patent because the design is merely a conception until the article is functionally operable is deemed flawed. Key points include: 

1. The specific functions of the article are not disclosed in the design patent; for instance, the '905 patent does not specify limitations regarding rocking, mass production suitability, or any functional characteristics.
2. Adopting Continental's interpretation would lead to increased litigation over functional features, requiring judicial clarification that should be evident from the patent itself.
3. Continental’s view improperly adds limitations based on a commercial embodiment, contradicting the design patent's focus on ornamental aspects as outlined in 35 U.S.C. § 171.
4. The absence of a functionality requirement in design patent acquisition means that the lack of a "functionally acceptable container" does not affect the 'on-sale' bar.
5. Continental's claim of experimental use negation is inapplicable; such negation applies to utility patents and requires genuine experimentation aimed at perfecting the invention, which is not relevant in the design patent context.
6. Design patents are considered reduced to practice upon the construction of an embodiment, making experimental use negation almost irrelevant.
7. Continental's sales to L.A. Juice were purely for commercial purposes, lacking any characteristics of experimentation; thus, the sale does not qualify for experimental use negation.

The court affirms the summary judgment ruling that the '905 patent is invalid due to the 'on-sale' bar.

Section 43(a) of the Lanham Act establishes a federal cause of action for trade dress infringement, prohibiting false designations of origin and misleading representations that could confuse consumers regarding the source or affiliation of goods. To succeed in a claim under this section, a plaintiff must demonstrate that their trade dress is either inherently distinctive or has acquired secondary meaning, and that there exists a likelihood of confusion with the defendant's trade dress. In this case, Continental conceded the issue of secondary meaning, leading the court to focus solely on the likelihood of confusion.

The district court found no infringement, determining that Continental did not prove a likelihood of confusion among the relevant consumer base, which it defined as wholesale purchasers of empty bottles. These purchasers were deemed sophisticated and unlikely to confuse the source of the bottles due to their industry knowledge and the nature of their purchasing practices. Continental contended that the relevant market should include ultimate retail consumers of bottled juice, arguing that confusion at this level affects its sales. However, the district court rejected this argument, asserting that the relevant inquiry should focus on confusion among consumers specifically in the market for the product in question—empty plastic bottles—rather than the end consumers of the final product. Therefore, the court upheld the conclusion that there was no likelihood of confusion regarding the source among the appropriate consumer group.

Continental faces a significant challenge because its wholesalers focus on juice, not bottles, creating a disconnect in customer confusion regarding the source of the bottles. The bottle's shape may mislead consumers about the juice's source but does not affect the source of the bottles themselves. According to Seventh Circuit law, a clear connection between the product and potential customer confusion is necessary for a valid claim. Continental contends that the district court wrongly omitted the application of the Seventh Circuit's 'seven factor test' for assessing likelihood of confusion under the Lanham Act, asserting that this application would support their claim against Owens. However, the court determined that applying the seven-factor test was not mandatory in this case, as established in prior rulings (Libman Co. v. Vining Industries, Inc.; Dorr-Oliver). Consequently, the court affirmed the summary judgment ruling that there was no likelihood of confusion regarding source in the relevant market, thereby dismissing the trade dress infringement claim. Additionally, Owens sought damages for a frivolous appeal, but this motion was denied. Judge Pauline Newman concurred with the trade dress decision but dissented against the majority's new rule concerning design patents, arguing it unjustifiably limits the application of the 'totality of the circumstances' standard and that the on-sale bar should not apply until the design is functionally complete. Newman's perspective emphasizes that design patents should not accrue a statutory bar until the design is proven capable of its intended use, rejecting the notion that preliminary designs or modifications constitute a bar event. In the case discussed, a design for a plastic juice bottle was created, but it ultimately failed before the critical date.

The prototype mold failed to produce the product due to design flaws, necessitating design changes and new molds. The district court identified seven design modifications, five of which occurred after a critical date. These modifications included adjustments to height, handle configuration, and label area. Although minor in appearance, these changes were essential for successful manufacturing. The law does not support triggering the on-sale bar before a successful design is finalized; a clear completion event must exist for the one-year bar period to commence. Evaluating the totality of circumstances involves assessing whether the design was satisfactory for its intended use or still subject to modifications. This standard applies equally to design and utility patents, emphasizing that the design must be manufacturable to activate the on-sale bar. Changes to the patented subject matter are relevant, and considerations of future improvements and experimental use are also pertinent. The totality of circumstances is assessed collectively rather than through isolated factors. The distinction between public use and experimental use is unified under the question of whether the use qualifies as public under 35 U.S.C. § 102(b). When an inventor engages a potential customer but cannot sell an unusable design, this situation is critical and must be considered. Policies that protect public interests are not served by recognizing an on-sale bar while a design is still evolving.

A policy emphasizes the importance of timely and broad disclosure of new inventions, which remains applicable even if a design is initially unmanufacturable and requires modifications for production. Another policy aims to prevent inventors from extending the commercial exclusivity of their inventions beyond the legally allowed period; however, this is less significant for design patents due to their shorter lifespan compared to patent protection. The dominant policy allows inventors time to assess their invention's market value after completion, which helps avoid unnecessary patent filing costs for unsuccessful designs.

In the case of Continental Plastic Containers, the court noted the limited commercial lifespan of container designs, which prompted an expedited judgment. Continental argued that its post-critical-date design changes were crucial for manufacturability, despite maintaining the overall aesthetic of the prior design. While the ornamental aspect is relevant, the changes were deemed essential to convert a previously unmarketable design into a functional one. The court ruled that a design must be shown to be useful for its intended purpose to trigger the critical date for patent law purposes. A design that cannot be manufactured does not fulfill this requirement, regardless of customer interest or orders. The court also emphasized that the critical date should be clear and recognizable, established only when the completed design is indeed useful, not when an incomplete or unmanufacturable version is presented.

Dissenting from the court's ruling, it is argued that the on-sale bar for design patents should not automatically begin with any sales event linked to the initial drawing or model, regardless of subsequent modifications needed for the design's utility. The law governing design patents should align with that of utility patents, considering the full context, including experimentation and design development. Chief Judge Mayer has served since December 25, 1997. The production mold is created based on customer-approved specifications following the review of a model, which may undergo adjustments to meet mass production needs as dictated by the customer. The customer plays a crucial role in approving the design, setting specifications, and conducting tests to ensure the product meets market demands. Several specific changes to the design are documented in a series of drawings dated between January and August 1992, detailing adjustments in height, base length, label area, cap section, and handle shape.