Opinion
Civil No. 99-1607 (DWF/AJB)
April 25, 2003
Martin Lueck, Esq., Michael V. Ciresi, Esq., Keiko L. Sugisaka, Esq., and Matthew Woods, Esq., Robins, Kaplan, Miller Ciresi, Minneapolis, MN, for Plaintiff.
Anthony F. Lo Cicero, Esq., Michael J. Berger, Esq., Morton Amster, Esq., Holly Pekowsky, Esq., Richard S. Mandaro, Esq., Kenneth M. Bernstein, Esq., and Charles R. Macedo, Esq., Amster, Rothstein Ebenstein, New York, NY, David Pearson, Esq., Winthrop Weinstine, Minneapolis, MN, for Defendants.
MEMORANDUM OPINION AND ORDER
Introduction
The above-entitled matter came on for hearing before the undersigned United States District Judge on March 28, 2003, pursuant to Defendants' motion for summary judgment of non-infringement and Defendants' motion for summary judgment of invalidity based on the on-sale bar. For the reasons set forth below, Defendants' motions are denied.
Background
This litigation involves a claim by Plaintiff Honeywell, Inc. ("Honeywell") that a component of certain camcorders manufactured by Defendant Victor Company of Japan, Ltd., and its United States subsidiary, Defendant U.S. JVC Corp. (collectively "JVC"), infringe Honeywell's patent rights. Because the Court has provided more extensive discussions of the facts in past orders, the Court limits its current recitation of the facts to those relevant to the instant motions.
1. Motion for Summary Judgment of Non-Infringement
Honeywell owns the rights to United States Patent No. 4,425,501 ("the '501 patent"). The '501 patented invention, titled a "Light Aperture For A Lenslet Photodetector Array," is a masking mechanism used to block the intrusion of unwanted light in the operation of autofocus cameras, video cameras, and camcorders. The independent claim at issue in this litigation reads:
Apparatus for use with an auto focus camera including a circuit chip having a plurality of radiation responsive detector areas and a circuit area adjacent the detector areas which circuit area may produce error signals for the auto focus camera if exposed to light and including a transparent member having a plurality of lenslets formed therein and placed contiguous the chip so that each lenslet directs radiation from a remote source onto one of the detector areas, the improvement comprising:
an opaque member having a plurality of transparent portions therein placed contiguous the transparent member so as to permit radiation through the lenslets to reach the detector areas and to prevent radiation through the transparent member from reaching the circuit area.
In December of 2000, this Court issued an order interpreting the claim language. The Court stated that "[t]he transparent member is a structure formed of some transparent medium (through which light might pass unadulterated) and on which are formed more than one lenslet. The Court further found that the claim language requires that "[t]he transparent member is adjacent to the circuit chip, without any structure intervening, so that light passes through each lenslet and is directed onto a corresponding detector area." The Court's decision was based upon its interpretation of the term "contiguous." The Court construed the term to require that two contiguous structures not have any structure between them.
In a subsequent order, the Court concluded that the allegedly infringing product produced by Defendants did not read on the '501 patent. Specifically, in the JVC product, the opaque member is located between the transparent member and the chip. Accordingly, the Court granted summary judgment.
Honeywell appealed, and the Federal Circuit reversed in part this Court's decision. The Federal Circuit held that two structures would be contiguous if, at any point, they touched or almost touched without any structure intervening. The Federal Circuit directed the Court to "determine whether there is some point at which the transparent member and the chip are not separated by some intervening structure, and whether the distance between the transparent member and the chip at that point is sufficiently small, in the context of the structure as a whole, to satisfy the requirements of contiguity. . . ." Honeywell, Inc. v. Victor Co. of Japan, Ltd. and U.S. JVC Corp., 298 F.3d 1317, 1325 (Fed. Cir. 2002).
JVC apparently concedes that, because there are holes in the opaque member, the opaque member does not undermine the contiguity between the transparent member and the chip. Instead, JVC focuses the instant motion for summary judgment of non-infringement on the color filter layer of the transparent member. JVC argues the color filter employed by JVC renders the JVC device non-infringing in one of two ways: either the color filter layer is an intervening structure between the transparent member and the chip, or the color filter, by virtue of its ability to block various wavelengths of light, renders the lenslet member non-transparent.
2. Motion for Summary Judgment of Invalidity
In November of 1978, Norman Stauffer, a Honeywell employee, first conceived of an autofocus module for single lens reflex cameras. This so-called "through the camera lens," or "TCL," component is the device ultimately described in the '501 patent.
Between November of 1978 and March 30 of 1980, Honeywell entered into "Advance Disclosure Agreements" with twelve camera manufacturers. These agreements, the "TCL Agreements," provided that "Honeywell had designed and [was] offering to sell" the TCL component to companies that signed the TCL agreements. The TCL Agreements state that the manufacturers wanted "to have the opportunity to purchase [TCL] Components from Honeywell, in the event that Honeywell is successful in developing TCL." In exchange for a sum of cash (typically, about $85,000), Honeywell agreed to disclose proprietary design information about the TCL components; to provide the manufacturers with sample components when available; and to sell TCL components to the manufacturers "in such quantities as may be reasonably available to Honeywell, . . . and according to the then prevailing Honeywell price list and Honeywell Standard Terms and Conditions, the current version of which [was] set forth as Appendix B [to the TCL Agreements]."
Honeywell filed the application for the '501 patent on March 30, 1981. As a result, the critical date for the on-sale bar doctrine is March 30, 1980.
The twelve manufacturers are Nippon Kogaku; Ricoh Company, Ltd.; Fuji Photo Film; Asahi Optical Co., Ltd.; Minolta Camera Co., Ltd.; Mamiya Camera Co., Ltd., Rollei-Werke Franke Heidecke; Yashica Co., Ltd.; Konishiroku Photo Industry Co., Ltd.; Olympus Optical Co., Ltd.; Canon, Inc.; and Chinon Industries, Inc.
The Court makes specific reference to the TCL Agreement between Honeywell and Nippon Kogaku entered into on November 21, 1978. Although there is some variation among the TCL Agreements, they are substantially similar to the specific agreement described by the Court.
The TCL Agreements recognize the possibility that Honeywell may decide to abandon the TCL program before production. The TCL Agreements provide that Honeywell will not be liable for "direct, indirect, or consequential damages in the event that TCL does not become a working product and/or in the event that Honeywell considers that TCL is not a sufficient market development to ever manufacture or deliver working Components." In that event, however, or if Honeywell otherwise decided to abandon the TCL program, Honeywell agreed to refund to the manufacturer the full consideration paid under the TCL Agreements. JVC asserts that the TCL Agreements were commercial offers for sale pursuant to Pfaff v. Wells Elecs., Inc., 525 U.S. 55 (1998), and thereby render the '501 patent invalid pursuant to 35 U.S.C. § 102(b). Honeywell contends that the TCL Agreements were merely research and development tools and do not constitute offers for sale that would invoke the on-sale bar.
Discussion 1. Standard of Review
Summary judgment is proper if there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The court must view the evidence and the inferences which may be reasonably drawn from the evidence in the light most favorable to the nonmoving party. Enterprise Bank v. Magna Bank of Missouri, 92 F.3d 743, 747 (8th Cir. 1996). However, as the Supreme Court has stated, "[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed 'to secure the just, speedy, and inexpensive determination of every action.'" Fed.R.Civ.P. 1. Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986).
The moving party bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Enterprise Bank, 92 F.3d at 747. The nonmoving party must demonstrate the existence of specific facts in the record which create a genuine issue for trial. Krenik v. County of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995). A party opposing a properly supported motion for summary judgment may not rest upon mere allegations or denials, but must set forth specific facts showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); Krenik, 47 F.3d at 957.
2. Non-Infringement
JVC's motion springs from this Court's earlier claim construction. In response to the Markman hearing, the Court construed the claim language regarding "a transparent member having a plurality of lenslets formed therein." Specifically, the Court found that a "transparent member is a structure formed of some transparent medium (through which light might pass unadulterated)." Focusing on the Court's use of the word "unadulterated," JVC argues that the color filter is not transparent because it blocks various unwanted wavelengths of light. Honeywell argues, in contrast, that the color filter does allow light (of certain specified wavelengths) to pass through the lenslet structure unadulterated.
The Court's language was not entirely gratuitous, but neither should it be afforded undue weight. Merriam-Webster's Collegiate Dictionary, Tenth Edition, defines "transparent" as "having the property of transmitting light without appreciable scattering so that bodies lying beyond are seen clearly." The Court's use of the phrase "through which light might pass unadulterated" was an attempt to capture this meaning of transparent. However, the Court notes that perhaps something was lost in the translation. Moreover, the Court notes that the word "transparent" has other meanings (e.g., "allowing the passage of a specified form of radiation"), and the parties did not brief or argue whether "transparent," as used in the '501 patent, should be limited in scope to one or more of its possible definitions. JVC should not benefit from a limitation unintentionally created by the Court in the absence of record support for such a limitation.
The Court issued its Markman order without anticipating the possible ramifications of its attempt to define "transparent." The Court is inclined, at this juncture, to eliminate the parenthetical definition of "transparent," and to allow the ultimate fact-finder to determine whether the color shield either is an intervening structure or renders the lenslet structure non-transparent.
3. Invalidity
A patent is presumed valid. 35 U.S.C. § 282. However, a patent is invalid if, more than one year before the application for U.S. patent, the invention is both ready for patenting and the subject of a commercial offer for sale. See Pfaff v. Wells Electronics, Inc., 525 U.S. 55, 67 (1998), 35 U.S.C. § 102(b).
The ultimate determination of whether a patent is invalid under § 102(b) due to application of an on-sale bar is a question of law. . . . This ultimate determination is "based upon underlying factual considerations." . . . In order to overcome the presumption of validity, such underlying facts supporting a determination of invalidity must be proven by clear and convincing evidence.
Monon Corp. v. Stoughton Trailers, Inc., 239 F.3d 1253, 1257 (Fed. Cir. 2001) (citations omitted).
JVC asserts that both Pfaff conditions were met as of the date of the first TCL Agreement (November 21, 1978) which is far more than one year before the date of the patent application (March 30, 1981). Honeywell does not contest that the invention was ready for patenting as of December of 1979, if not earlier, but asserts that the TCL Agreements were not "commercial offers for sale" that would invoke the application of the on-sale bar. Honeywell argues that the TCL Agreements were part of a joint research and development program aimed at acquiring capital to finance development of the TCL components. Specifically, Honeywell contends that it made its product design information and certain prototypes available to potential customers so that those customers could determine whether the TCL components would be suitable for integration into the customers' products. In support of that proposition, Honeywell notes that the TCL Agreements only gave signing camera manufacturers the right to purchase TCL components when and in the event that Honeywell decided to actually produce such components, an eventuality that was purely speculative.
Moreover, the consideration paid by the camera manufacturers bore no relation to the potential wholesale per-unit cost of the components; indeed, for the $85,000 advance disclosure fee, Honeywell promised a mere 25 prototype TCL components.
The Court agrees that JVC makes a compelling argument that the TCL Agreements were nevertheless commercial offers for sale. Apart from the plain language of the agreements, which states that Honeywell was "offering to sell" the TCL components, JVC notes that Honeywell agreed to refund the full consideration amount under the TCL Agreements in the event that Honeywell decided not to produce the TCL components. The promise of this refund belies Honeywell's contention that the consideration was solely for research and development. Still, the Court is guided by the Federal Circuit's decision in Monon Corp., supra. In Monon, a trailer manufacturer brought suit for infringement of a patent for a particular type of trailer. The defendant asserted the on-sale bar doctrine, and the District Court granted summary judgment of invalidity. As in this case, the plaintiff in Monon alleged that the sale of a single trailer to a potential customer was not a commercial sale but rather was for purposes of determining how the product would perform when used and whether it was suitable for public sale. The Federal Circuit concluded that, while the plaintiff's initial sale "was a marketing ploy, and that it helped secure future sales of its trailers . . . the characterization of [the] sale [was] very much in dispute. . . . [A] reasonable jury could conclude that . . . the agreement primarily provided Monon an opportunity to subject its trailer to experimental use." Monon, 239 F.3d at 1261.
The Court finds that Honeywell has created a genuine issue of material fact as to whether the TCL Agreements were commercial offers for sale or merely research and development ventures aimed at financing the development of the TCL components and testing their suitability for use in potential customers' products. Accordingly, summary judgment is denied.
For the reasons stated, IT IS HEREBY ORDERED:
1. Defendants' Motion for Summary Judgment of Non-Infringement (Doc. No. 173) is DENIED; and
2. Defendants' Motion for Summary Judgment of Invalidity (Doc. No. 121) is DENIED.