ATLANTIC THERMOPLASTICS CO., INC., James B. Sullivan and Richard B. Fox, Plaintiffs-Appellees, v. FAYTEX CORPORATION, Defendant-Appellant.
No. 93-1110.
United States Court of Appeals, Federal Circuit.
Sept. 30, 1993.
1477
Anthony M. Lorusso, Lorusso & Loud, Boston, MA, argued, for defendant-appellant. With him on the brief was Thomas M. Saunders. Of counsel was Deborah M. Utstein.
Before ARCHER, MICHEL, and RADER, Circuit Judges.
ARCHER, Circuit Judge.
Faytex Corp. appeals the judgment of the United States District Court for the District of Massachusetts finding United States Patent No. 4,674,204 (‘204 patent) not invalid and infringed by Faytex and awarding damages to Atlantic Thermoplastics Co., James B. Sullivan and Richard B. Fox (collectively, Atlantic). Atlantic Thermoplastics Co. v. Faytex Corp., No. 88-0210-H (D.Mass. Oct. 28, 1992). Because the district court did not provide findings of fact relating to validity as required by
I.
This case is before us again after remand to the district court. The facts will be discussed only as necessary for this opinion.2 For the second time these parties are here contesting the validity of the ‘204 patent and the damages for its infringement. Atlantic Thermoplastics Co. v. Faytex Corp., 970 F.2d 834, 23 USPQ2d 1481 (Fed. Cir.1992), was remanded for fact-findings on the on-sale bar issue and for a recalculation of the appropriate damages.
Regarding the on-sale bar issue, we stated:
The district court did not provide any findings of fact or analysis for its conclusion. Moreover, the district court‘s finding does not consider several offers to sell before October 1984. The district court apparently assumed, incorrectly, that mere offers do not trigger the on-sale bar rule. In any event, in the absence of findings, this court cannot determine whether the trial court properly considered those offers of sale and therefore applied the correct legal standard.
After a bench trial, a trial court must put forth the findings of fact relied upon to justify its actions.
Fed.R.Civ.P. 52(a) . Without findings, this court has no basis to evaluate whether the district court‘s analysis uses the proper legal standard. Cf. Nutrition 21 v. United States, 930 F.2d 867, 869, 18 USPQ2d 1347, 1349 (Fed.Cir. 1991) (preliminary injunction). Because the absence of findings goes to the heart of the issue, any error cannot be harmless. Therefore, this court vacates the district court‘s judgment on validity and remands for a proper on-sale analysis.
Atlantic, 970 F.2d at 837, 23 USPQ2d at 1483. In its decision on remand, the district court has failed to carry out the remand instructions and has provided only conclusory findings, as follows:
This court found, and again finds, that the ‘204 patent was not invalid under the on sale bar of
35 USC § 102(b) . Faytex failed to show by clear and convincing evidence that Atlantic sold or offered forsale the claimed innersole before the critical date of October 9, 1984. Prior to that date, Atlantic had indeed engaged in negotiations with Triangle, but this court found that these preliminary negotiations concerned primarily the necessity of further prototype testing and development. Consistent with the testimony of all participants in the dealings between Atlantic and Triangle, this court found no definite sale or offer to sell prior to October 9, 1984. This court found and now reaffirms its finding that the dealings prior to the bar date were for experimental purposes and not primarily for profit.
Atlantic, slip op. at 1-2. Under the circumstances of this case, see II B., infra, we again must conclude that the court‘s findings of fact are inadequate and do not comply with
II.
A.
In all actions tried upon the facts without a jury . . . the court shall find the facts specially and state separately its conclusions of law thereon. . . . Findings of fact shall not be set aside unless clearly erroneous.
Although
Although this court reviews judgments not opinions, King Instrument Corp. v. Otari Corp., 767 F.2d 853, 862, 226 USPQ 402, 408 (Fed. Cir.1985), “[w]here evidence creates disputes as to the facts, the facts must be found by the district court which we must review in accordance with
B. Atlantic had numerous dealings with a prospective purchaser of the subject innersole prior to the critical date.3 The parties dispute whether any of three particular events triggers the application of the on-sale bar. On May 3, 1984, an Atlantic salesman met with representatives of Triangle4 and showed them innersoles made in accordance with the claims of the ‘204 patent. In a July 9, 1984 letter, Atlantic quoted Triangle a “projected unit cost” of $1.30 to $1.50 per pair of “Product C“-innersoles made in accordance with the claims of the ‘204 patent. In an August 10, 1984 letter, Atlantic told Triangle that “we now have” the “products you want” (including Product C) and included an invoice for tooling charges for those products. Although highly probative of whether the product of the claims of the ‘204 patent was sold or offered for sale, the district court did not evaluate the May meeting or the July or August letters.
In its decision on remand, the district court noted that it had previously “found” that “preliminary negotiations [between Atlantic and Triangle] concerned primarily the necessity of further prototype testing and development” and therefore, those dealings “were for experimental purposes.” In so concluding, the district court did not discuss any evidence relevant to the need for or the existence of testing and development of the innersole. A bare “finding” of “prototype testing and development” is inadequate to support the determination of experimental use.5
Furthermore, experimental use does not defeat the on-sale bar once the invention has been reduced to practice. RCA Corp. v. Data General Corp., 887 F.2d 1056, 1061, 12 USPQ2d 1449, 1453 (Fed. Cir.1989). In this case, the patentee stated that prior to the critical date a prototype innersole “was made in accordance with the process later described in the ‘204 patent.” Without the benefit of the district court‘s findings and conclusions regarding reduction to practice, however, we have nothing to review. We will not and cannot take a first look at this important issue on appellate review.
Also unanswered in the district court‘s opinion is how an innersole similar to one insufficiently developed to trigger an on-sale bar is capable of infringing the claims of the patent. The claims of the ‘204 patent require that the elastomeric insert have sufficient tack to remain in place in the mold upon the introduction of expandable polyurethane foam. If displacement occurs, a portion of the foam seeps under the bottom edges of the insert. Atlantic argues in this appeal: “If the insert moved, the innersole would be useless. . . . If the insert were lifted, the open-celled polyurethane would seep under
In Atlantic‘s first appeal we found the district court‘s opinion insufficient under
III.
We disagree with the dissent‘s position that the district court has now made adequate findings. The district court has simply restated its previous conclusory findings, merely adding an equally conclusory statement as to the negotiations, without any further explanation of the underlying facts relied on or rationale to support them. The findings of the district court were insufficient then; the record before us has not changed; the findings are insufficient now.
The dissent suggests that there is only one possible path leading to the conclusion that there was no on-sale bar in which case we do not need expansive fact-findings. But this case is fraught with factual issues—some of which we have pointed out—that demand close examination. Only by clairvoyance could we know what evidence the district court considered and found persuasive in determining the facts underlying its conclusion of no on-sale bar. That the record may support findings that could be implied from the district court opinion does not satisfy the requirement that findings adequate to support the judgment be “specially” found. It is not the function of an appellate court “to search the record and analyze the evidence in order to supply findings which the trial court failed to make.” Kelley v. Everglades, 319 U.S. at 421-22, 63 S.Ct. at 1145. The dissent‘s hypothetical opinion may articulate some or many of the district court‘s unwritten findings but we do not know which of the hypothetical findings the district court would have made. If we succumb to making findings to justify the lower court‘s conclusion, our role as an appellate court has been abrogated and we have not performed our duty. We therefore believe it is proper, as well as required by
IV.
On remand, the district court thoroughly reviewed and recalculated the damages award “using a permissible market share approach” as instructed by this court. Atlantic, 970 F.2d at 847, 23 USPQ2d at 1492. In determining Atlantic‘s market share, the district court took into account the patented innersoles and acceptable noninfringing substitutes. Atlantic was awarded lost profits on its market share percentage of the infringing sales and a reasonable royalty on the remaining infringing sales.
Faytex contends that the district court‘s determination of the relevant market was unreasonable because it did not include the 16 domestic and several foreign manufacturers of foam innersoles. The district court concluded that the “Sorbothane products were the only acceptable non-infringing substitute” based on its finding that other products on the market “did not have the beneficial attributes of the light weight molded polyurethane innersoles with shock-absorbing inserts.” Atlantic, slip op. at 3. We are not persuaded that this finding is clearly erroneous. See Standard Havens Prods., Inc. v. Gencor Indus., Inc., 953 F.2d 1360, 1373, 21 USPQ2d 1321, 1331 (Fed.Cir.1991)
The district court found Atlantic entitled to a royalty rate of $0.25 per pair of innersoles because “[t]his is the royalty rate at which Atlantic offered to license the invention of the ‘204 patent to Spenco Medical Corporation and is consistent with the commercial value and profitability of the ‘204 patent and the extensive remaining life of the patent at the time of the infringement.” Atlantic, slip op. at 4. Contrary to Faytex‘s argument, there was sufficient evidence of record to support the district court‘s finding, which we do not hold to be clearly erroneous.
COSTS
Each party to bear its own costs.
VACATED and REMANDED.
RADER, Circuit Judge, dissenting.
Citing inadequate findings from the trial court, this court vacates and remands a second time. I dissent.
In the United States District Court
This district court finds that the ‘204 patent is not invalid under the on-sale bar of
35 U.S.C. § 102(b) . Faytex has the burden of showing by clear and convincing evidence that Atlantic sold or offered for sale a product embodying (or rendering obvious) the claimed innersole before the critical date of October 9, 1984. See Buildex Inc. v. Kason Indus., Inc., 849 F.2d 1461, 1462-63, 7 USPQ2d 1325, 1326-27 (Fed.Cir.1988). After reviewing the record of twenty-five days of trial and the parties’ submissions on remand, this court finds that Faytex did not meet its burden.The United States Court of Appeals for the Federal Circuit has set forth several tests for the on-sale bar of
35 U.S.C. § 102(b) . The appellate court has stated that the on-sale bar requires: (1) the complete invention claimed must have been embodied in or obvious in view of the subject matter of the sale; (2) the invention must have been tested sufficiently to verify its operability; and (3) the sale must have been primarily for profit rather than experimental purposes (Test No. 1). See King Instrument Corp. v. Otari Corp., 767 F.2d 853, 859-60, 226 USPQ 402, 406 (Fed. Cir.1985), cert. denied, 475 U.S. 1016 [106 S.Ct. 1197, 89 L.Ed.2d 312] (1986); Barmag Barmer Maschinenfabrik AG v. Murata Mach., Ltd., 731 F.2d 831, 835-37, 221 USPQ 561, 564-65 (Fed.Cir.1984); see alsoIn re Corcoran, 640 F.2d 1331, 1333-34, 208 USPQ 867, 870 (CCPA 1981). The Federal Circuit has cautioned, however, that this test does not apply in all cases. Barmag, 731 F.2d at 837. Circumstances may require a court to apply a less stringent standard to avoid frustrating the policies underlying the bar. King, 767 F.2d at 860. Those policies include: (1) discouraging removal of inventions from the public domain that the public justifiably believes are freely available; (2) favoring prompt and widespread disclosure of inventions; (3) prohibiting extension of the statutory period of exclusive rights; and (4) providing a reasonable time after sales activity for inventors to determine whether the invention warrants the expense of patenting. Id. Thus, this district court recognizes that it must temper application of Test No. 1 with consideration of these policies.
In other cases, the Federal Circuit set forth another version of the on-sale bar test requiring: (1) a sale or definite offer to sell more than one year prior to the critical date; (2) evidence that the thing sold or offered for sale anticipates or renders obvious the later-claimed invention; and (3) weighing of the circumstances surrounding the sale or offer in light of the underlying policies. See UMC Elec. Co. v. United States, 816 F.2d 647, 656, 2 USPQ2d 1465, 1471-72 (Fed.Cir.1987), cert. denied, 484 [U.S.] 1025 [108 S.Ct. 748, 98 L.Ed.2d 761] (1988). This second formulation adds to the complexity of the first test.
Finally, in some cases, the Federal Circuit has gone straight to weighing of the “totality of the circumstances” against the policies because “the policies or purposes underlying the on-sale bar, in effect define it.” E.g., Manville Sales Corp. v. Paramount Systems, Inc., 917 F.2d 544, 549-50, 16 USPQ2d 1587, 1591-92 (Fed.Cir.1990). After full consideration of this bewildering and blinding blizzard of instructions,1 this district court determines that Atlantic‘s patent is not invalid under the on-sale bar. For the reasons given below, Faytex did not meet its burden under any of the Federal Circuit‘s tests.
Under Test No. 1, Atlantic‘s invention was not sufficiently developed to have been on-sale before October 9, 1984. As noted above, the Federal Circuit has stated that the subject matter of the sale or offer to sell must fully anticipate the claimed invention or must render the claimed invention obvious by its addition to the prior art.2 Buildex, 849 F.2d at 1462; UMC, 816 F.2d at 656.
* The citations to the record in this hypothetical district court opinion refer to the record in this case on appeal.
Faytex contends that Atlantic offered to sell its innersole to Triangle at a meeting on May 3, 1984. At the May 1984 meeting, Atlantic identified its innersole as experimental and still under development. (Appendix (App.) 103-04, 294-95, 467-69, 473, 640.) Referring to the May 3 meeting, Mr. Richard Fox, one of the inventors, testified: “I didn‘t want to sell something that we couldn‘t make.” (App. 158.)
On the second part of Test No. 1, the invention was not complete principally because the elastomeric insert was not tacky enough to stay in place in the mold upon injection of the polyurethane. (App. 158-59, 393-97, 404-05.) Indeed testing and experimentation did not solve this problem until at least November or December of 1984. (App. 112-13, 158-60A, 403-07, 469-80.) Without sufficient tack, the heel insert could shift out of position and defeat the cushioning purpose of the invention. (App. 112, 160A, 403-05.) Atlantic had not developed the invention sufficiently to serve its intended purpose until after the critical date of October 9. Accordingly, the on-sale bar cannot apply. See A.B. Chance Co. v. RTE Corp., 854 F.2d 1307, 1311-12, 7 USPQ2d 1881, 1884-85 (Fed. Cir.1988).
On the third prong of this first test for an on-sale bar, the alleged commercial activity between Atlantic and Triangle during 1984 and early 1985 fits within the experimental use exception to the on-sale bar. The Federal Circuit states that a sale for experimental, rather than commercial purposes, does not constitute a bar. Manville, 917 F.2d at 550.
From the outset of their relationship, Atlantic and Triangle both insisted on extensive testing to determine whether the invention would work. (App. 467, 469-70.) Atlantic sent samples of its developing product to Triangle for testing as late as January 1985. (App. 467, 469-70, 471, 903.) To ensure that the testing remained experimental rather than commercial, Atlantic required Triangle to keep the prototype confidential. (App. 104, 645, 649.) Atlantic‘s insistence on confidentiality underscores the experimental nature of its prototype product. Rather than seeking secrecy, commercial profit-seekers advertise.
The Federal Circuit has clarified that any testing must relate to the claimed features of the invention to qualify as experimental. In re Brigance, 792 F.2d 1103, 1109, 229 USPQ 988, 991-92 (Fed. Cir.1986). Claim 1 of the ‘204 patent requires the elastomeric insert to have “sufficient surface tack to remain in the placed position in the mold on the introduction of the expandable polyurethane material.” Thus, Atlantic satisfies this requirement as well.
Finally, Atlantic did not commercially exploit the invention at all. Atlantic did not even receive any money for the test samples it sent Triangle until a January 1985 shipment, well after the October 1984 critical date. (App. 299, 471, 908.) As noted above, Atlantic could have sold its prototypes for experimental purposes without triggering the on-sale bar. Manville, 917 F.2d at 550. Perhaps out of an abundance of caution, Atlantic did not even risk experimental sales. It sold nothing. Atlantic exhibited the classic hallmarks of experimentation, not commercialization. See id. It did not trigger the on-sale bar.
Faytex argues that the activities between Atlantic and Triangle could not have been experimental because Atlantic‘s inventors admitted reducing the invention to practice before May 1984. See RCA Corp. v. Data General Corp., 887 F.2d 1056, 1061, 12 USPQ2d 1449, 1453 (Fed.Cir.1989) (for on-sale purposes, experimentation ends with reduction to practice). Faytex moved pretrial for summary judgment contending that a prior art reference anticipated the ‘204 patent. To show that the ‘204 patent antedated the prior art reference, Faytex argues that Atlantic needed to claim reduction to practice before May 1984. Faytex is incorrect. In denying Faytex‘s motion for summary
judgment, this district court did not find a reduction to practice before May 1984 because such a finding was unnecessary. To predate a prior art reference, an inventor need only show prior conception and reasonable diligence to reduce the invention to practice. See Griffith v. Kanamaru, 816 F.2d 624, 626, 2 USPQ2d 1361, 1362 (Fed. Cir.1987). Moreover, the supposed admissions by the ‘204 patent‘s inventors do not admit reduction to practice before May 1984. Rather the inventors noted repeatedly that they had an “experimental prototype” before and after May 1984. (App. 413, 651-52, 657-58, 660-61, 696, 698.) By use of the term “experimental prototype,” the inventors made clear the experimental nature of their invention in May 1984. (App. 413.) Furthermore, this district court finds that any alleged evidence of pre-May 1984 reduction to practice is greatly outweighed by the evidence at trial showing that Atlantic‘s inventors did not reduce the invention to practice until November 1984 or later. (App. 160-61, 361-61A, 362-63, 408, 469, 661, 698.)
Thus, under Test No. 1, Faytex did not show that Atlantic‘s ‘204 patent is invalid under the on-sale bar. See Barmag, 731 F.2d at 837. Consideration of the policies underlying the on-sale bar buttresses this conclusion. None of Atlantic‘s activities could have led the public to believe that the invention later described in the ‘204 patent was available. Atlantic did not exploit the invention commercially, and therefore did not try to extend the statutory period of exclusivity. In light of the inventors’ work to solve the tackiness problem, among others, they did not unduly delay the disclosure of the invention to the public. Rather the inventors took a reasonable time to learn the merits of their invention. Rejecting Faytex‘s assertion of the on-sale bar furthers, rather than frustrates, the “statutory policies“.3
Next, this district court proceeds to consider the additional factors mentioned in the Federal Circuit‘s second formulation of the on-sale bar. Faytex did not show a definite sale of or offer to sell a product embodying the patented invention before October 9, 1984. See RCA Corp., 887 F.2d at 1062 (“where there is no sale, a definite offer to sell is an essential requirement of the on-sale bar“). Faytex asserts that two letters from Atlantic to Triangle evince a definite offer to sell the patented invention. Neither letter, however, contains a definite offer to sell. The letters contain no quotation of price, no discussion of quantity, no delivery terms, no payment terms, no warranties, nor any other hallmark of an offer to sell. (App. 701-03, 711-14.) Neither letter could have been “accepted” by Triangle to create a binding contract between it and Atlantic. The letters are simply too indefinite.
The indefiniteness of both letters is starkly in contrast to the offer for sale in Barmag Barmer Maschinenfabrik AG v. Murata Mach. Ltd., 731 F.2d 831, 221 USPQ 561 (Fed.Cir.1984). At most, the letters disclose Atlantic‘s intent or desire ultimately to sell Triangle the product later described in the ‘204 patent—if the product could be developed. Such an intent is different from an offer to sell and does not trigger the on-sale bar. Envirotech Corp. v. Westech Eng‘g Inc., 904 F.2d 1571, 1574-75, 15 USPQ2d 1230, 1232-33 (Fed.Cir.1990).
Faytex incorrectly argues that the July 9, 1984 letter contains a price quotation that, when combined with the parties’ other dealings, constituted an offer to sell. The July 9 letter merely contained a request for payment of tooling costs that Atlantic incurred in making mold tools and patterns for several products, including its experimental innersole. The letter does not contain a price quotation for sale of the innersole later described in the ‘204 patent. By its terms, the letter merely provides a range of projected unit costs for the various innersoles. Neither Atlantic nor Triangle viewed the July 9 letter as providing a price quote. (App. 320, 480-82, 650-51.) Atlantic provided the projections to enable Triangle to make an economic decision about incurring the tool and die expenses for the respective products. (App. 320.)
In fact, on November 5, 1984, nearly one month after the critical date, James W. Post, General Manager of Health and Fitness Systems at Triangle/Campbell, sent a letter to Robert Fox of Atlantic concerning several of Atlantic‘s products, including the incomplete invention. That letter contained the following post-script: “I‘m also waiting for your first crack at pricing all five products.” (App. 904.) Triangle was still waiting for Atlantic‘s first price quote on the experimental innersole in November 1984, months after the July 9 letter, and nearly one month after the critical date. Clearly the July 9 letter contained no price quotation and thus no definite offer to sell the innersole. This finding, when coupled with this court‘s consideration of the policies underlying the on-sale bar, leads this court to conclude that Faytex did not meet the Federal Circuit‘s second batch of requirements for the on-sale bar.
Finally, going directly to consideration of the policies underlying the on-sale bar, this district court again discerns no record support for an on-sale bar. As noted above, Faytex has not shown how rejection of its assertion of the on-sale bar will frustrate any of these policies. Thus, Faytex has not met its burden under the Federal Circuit‘s third formulation of the on-sale bar.
Under each of the three Federal Circuit on-sale bar tests,4 Faytex does not meet its burden. To repeat, the record of trial clearly shows that the innersole described in the ‘204 patent was not on sale more than one year before the application date: the innersole was not sufficiently developed before the critical date; the innersole was still in testing until after the critical date; the innersole provided Atlantic no economic return at all before that date; Atlantic made no sale of or definite offer to sell the experimental innersole before the critical date; the policies underlying the on-sale bar do not support Faytex‘s case. Each of these findings independently warrants rejection of the on-sale bar. Moreover as noted above, Faytex had a high burden to meet this defense. Viewing all of the circumstances, this court finds that the ‘204 patent is not invalid under the on-sale bar.
This appellate court has repeatedly stated that it reviews “judgments not opinions.” E.g., Chemical Eng‘g Corp. v. Essef Indus. Inc., 795 F.2d 1565, 1572, 230 USPQ 385, 390 (Fed.Cir.1986), Fromson v. Advance Offset Plate, Inc., 755 F.2d 1549, 1556 (Fed.Cir. 1985); Chore-Time Equip., Inc. v. Cumberland Corp., 713 F.2d 774, 781, 218 USPQ 673, 677 (Fed.Cir.1983). In reviewing,
we are not ourselves finding those facts which the trial court failed to set out for us. As an appellate court, we lack the power to perform that exercise. Where the trial court fails to make findings, the judgment will normally be vacated and the
action remanded for appropriate findings to be made. [Footnote omitted.] Where a full understanding may be had without the aid of separate findings, however, we recognize a narrow exception to that general rule. [Footnote omitted.]
ACS Hospital Systems, Inc. v. Montefiore Hospital, 732 F.2d 1572, 1578, 221 USPQ 929, 933 (Fed.Cir.1984). In the instant case, the record abundantly supports the district court‘s judgment. This court correctly remanded when the district court in a single sentence found no statutory bar. Atlantic Thermoplastics Co. v. Faytex Corp., 970 F.2d 834, 836-37, 23 USPQ2d 1481, 1483 (Fed.Cir. 1992). At that time, this court had nothing to review. Id. 970 F.2d at 837. On remand, however, the trial court reviewed the entire issue a second time. For the reasons set forth above, the district court again found no bar. This court now calls for still another remand.
As this court has stated, however, “[n]o useful purpose would be served by a remand to enable the district court to tell us in express terms what we already know from the record.” Carroll Touch, Inc. v. Electro Mechanical Systems, Inc., 3 F.3d 404, 415 (Fed.Cir.1993) (citing Consolidated Aluminum Corp. v. Foseco Int‘l. Ltd., 910 F.2d 804, 815, 15 USPQ2d 1481, 1489 (Fed.Cir. 1990)). Although its opinion erected a few signposts instead of drawing a detailed map, the district court satisfied