Neupak, Inc. v. Ideal Manufacturing and Sales Corp.

Full title: Neupak, Inc., Plaintiff, v. Ideal Manufacturing and Sales Corp., Defendants

Court: United States District Court, D. Minnesota

Date published: Apr 14, 2001

Civ. File No. 3-96-713 (PAM/JGL) (D. Minn. Apr. 14, 2001)

Opinion

Civ. File No. 3-96-713 (PAM/JGL).

April 14, 2001.

MEMORANDUM AND ORDER FOR JUDGMENT

PAUL A. MAGNUSON, United States District Court Judge.

This matter was tried to the Court during the week of March 26, 2001. At issue are the counterclaims of Defendant Ideal Manufacturing and Sales Corporation ("Ideal") against Plaintiff Neupak, Inc. ("Neupak") alleging that U.S. Patent No. 5,505,233 ("the `233 patent") is invalid and seeking attorney's fees. The Court heard four days of testimony, read and viewed several depositions, and considered the opening and closing arguments of counsel. For the reasons that follow, the Court determines that the `233 patent is not invalid, and that Ideal is not entitled to its attorney's fees.

BACKGROUND

This matter has been the subject of two claim construction motions and one motion for summary judgment. The full factual history of the case is set forth in this Court's Orders resolving those motions. This section will recite only those facts relevant to the Court's decision herein. Other factual findings appear throughout the legal discussion, below.

Neupak applied for the `233 patent on November 8, 1993. The patent, covering mobile filling machines for filling liquid product, was issued on April 9, 1996. Neupak commenced this action on July 29, 1996, alleging that certain machines manufactured by Ideal infringed the `233 patent. In November 1996, Ideal asked the Patent and Trademark Office ("PTO") to reexamine the `233 patent, and this Court stayed the matter pending the reexamination. The PTO required Neupak to make certain changes to the claims of the `233 patent, and issued a reexamination certificate on May 11, 1999. Neupak's infringement claims against Ideal were mooted by the claims constructions mentioned above. However, Ideal had counterclaimed against Neupak, alleging that the `233 patent was invalid for obviousness, that the `233 patent was anticipated by prior art and was therefore invalid, and that inequitable conduct on the part of Neupak and its patent counsel in the proceedings before the PTO rendered the patent invalid. The instant bench trial was held to resolve these counterclaims.

DISCUSSION

A. Obviousness

35 U.S.C. § 103 prohibits the issuance of a patent for an invention that was obvious at the time it was made. To determine whether a particular invention is invalid for obviousness, the Court must consider the scope and content of prior art and the difference between the prior art and the claims at issue, from the perspective of a person of ordinary skill in the pertinent art. Graham v. John Deere Co., 383 U.S. 1, 17 (1966). The obviousness inquiry is a complicated one, with the patent challenger at all times bearing the burden to prove obviousness by substantial, or clear and convincing, evidence. 35 U.S.C. § 282; see also Clark Equip. Co. v. Keller, 570 F.2d 778, 795 (8th Cir. 1978); Connell v. Sears, Roebuck Co., 722 F.2d 1542, 1549 (Fed. Cir. 1983). The Court must not use hindsight to determine obviousness, Diamond Rubber Co. v. Consol. Rubber Tire Co., 220 U.S. 428, 434-35 (1911), and should evaluate not only the prior art, but also secondary considerations such as commercial success and long-felt need. See Truswal Sys. Corp. v. Hydro-Air Eng'g, Inc., 813 F.2d 1207, 1212 (Fed. Cir. 1987) (commercial success is "clearly important" in determining obviousness).

In the instant case, Ideal contends that all of the claims of the `233 patent were obvious in light of prior art. Specifically, Ideal asserts that the `233 patent merely embodied obvious improvements to a machine previously manufactured by Neupak, the so-called swing-arm filler sold to the Fuller O'Brien Company in 1992 (the "swing-arm filler"), and that those improvements were suggested by other prior art. Moreover, Ideal contends that the Court should not defer to the PTO's conclusion in the reexamination proceeding that the `233 patent was not obvious because Neupak failed to submit the swing-arm filler to the PTO as relevant prior art and because Neupak misrepresented the commercial succes of the machine embodying the `233 patent (the "mobile filling cart").

According to Neupak, the `233 patent introduced several novel concepts to the filling machine industry. The evidence at trial centered on two terms: "mobile filling unit transportable" and "removable connection." These terms appear in claims 4, 7, and 8 of the reexamined `233 patent. Neupak urges the Court to find that "mobile" means "easily moveable" and "removable" means "easily removable." Ideal's definition of the terms, on the other hand, is that "mobile" and "removable" mean moveable or removable by any means. According to Ideal, using its definition, several prior art machines were mobile and contained removable connections.

The Court adopts the definitions of "mobile" and "removable" put forth by Neupak. The definitions urged by Ideal ignore the plain intent of the patent. Neupak's mobile filling cart would not be considered "mobile" if it was not easily moveable from place to place. A machine that is moveable only if one uses a forklift or similar piece of machinery is not mobile under any common sense definition of the term. Similarly, the term "removable" must mean "easily removable." There would be no reason to specify the removability of the connections if such removability depended on the use of complicated tools or an electrician's skill. The Court has considered both dictionary definitions and common usage, as well as the testimony of the parties' witnesses, and determines that Neupak's definitions of the disputed terms are correct. The evidence at trial focused on the following allegedly invalidating prior art: (1) four prior patents, to Sauer, Bausch, Neumann, and Stone, covering liquid filling machines; (2) two liquid filling machines built by a competitor of Neupak, Mateer Burt; and (3) the swing-arm filler. Ideal argues that this prior art, either taken individually or considered together, taught all of the allegedly novel benefits of the `233 patent's mobile filling cart.

The Court finds that the four prior patents to Sauer, Bausch, Neumann, and Stone do not invalidate the `233 patent. As an initial matter, the Court notes that Ideal submitted these patents to the PTO during the reexamination proceeding. When prior art cited to establish invalidity was considered by the PTO, the burden on the patent challenger to prove obviousness is a heavy one, indeed. Chicago Rawhide Mfg. Co. v. Crane Packaging Co., 523 F.2d 452, 458 (7th Cir. 1974). Ideal has failed to carry its heavy burden with respect to these patents. The patents, either individually or taken together, do not teach all of the relevant claims of the `233 patent. Specifically, the four prior art patents do not teach a mobile, transportable filling unit with removable connections to both the product source and the sensing means. Nor do the Mateer Burt machines invalidate the `233 patent, either alone or in combination with the prior patents. Among other things, these machines did not have removable connections to the source of the product.

Ideal contends that the four patents mentioned above, when viewed together with the swing-arm filler, render the `233 patent obvious. The Court disagrees. The swing-arm filler was not mobile in the same way that the embodiment of the `233 patent is mobile. Nor was the swing-arm filler easily disconnectable or removable as the `233 patent is. The swing-arm filler is not invalidating prior art, either alone or together with other pieces of prior art.

In making its determination that the claims of the `233 patent were not obvious, the Court credits the testimony of the inventors of the patent, Karl Fritze and Terry Roberts. The story of how the mobile filling machine came to be invented is persuasive evidence that the improvements embodied by this machine were not obvious in light of the prior art. Much of the testimony presented by Ideal regarding obviousness, to the contrary, relied on hindsight to conclude that the `233 patent was obvious. As noted above, the use of hindsight is not permissible in the obviousness determination. Therefore, the Court determines that the claims of the `233 patent were not obvious when invented.

Moreover, the commercial success of the mobile filler indicates that the `233 patent was not obvious. See Truswal Sys., 813 F.2d at 1212. Ideal attempted to show that the mobile filler was not a commercial success, but its evidence was confusing and did not, in the Court's view, accurately portray the relevant markets. Instead, the Court finds more credible the evidence presented by Neupak, which is that its mobile filling cart quickly became Neupak's biggest seller, and now constitutes a large percentage of Neupak's business. In the Court's opinion, the evidence shows that the embodiment of the `233 patent has been a commercial success.

The Court agrees with the PTO's determination that the `233 patent is not invalid for obviousness. Ideal's request for a declaratory judgment that the patent is invalid for obviousness is denied.

B. Anticipation

Anticipation under 35 U.S.C. § 102 is a question of fact, requiring the patent challenger to demonstrate by clear and convincing evidence that the patent's claims are anticipated. Tyler Refrigeration v. Kysor Indus. Corp., 777 F.2d 687, 690 (Fed. Cir. 1985). Here, Ideal contends that the `233 patent is invalid because it was anticipated by the swing-arm filler. Specifically, Ideal asserts that claims 4 through 9, 12, 13, and 15 of the `233 patent were anticipated by the swing-arm fillers. (Def.'s Proposed Findings of Fact and Conclusions of Law ¶ 43, at 61.)

The standard for anticipation is rigorous. Minnesota Mining Mfg. Co. v. Johnson Johnson Orthopaedics, Inc., 976 F.2d 1559, 1565 (Fed. Cir. 1992). Indeed, "[f]or a prior art reference to anticipate in terms of 35 U.S.C. § 102, every element of the claimed invention must be identically shown in a single reference." Diversitech Corp. v. Century Steps, Inc., 850 F.2d 675, 677 (Fed. Cir. 1988). In this case, Ideal does not allege, and did not prove, that every element of the `233 patent is shown in the swing-arm fillers. Thus, Ideal's contention that the `233 patent is invalid for anticipation fails, and Ideal's request for a declaratory judgment to that effect is denied.

C. Inequitable Conduct

For its contention that Neupak committed inequitable conduct in the reexamination proceeding, Ideal points to several memoranda sent during the reexamination proceedings to Neupak's patent counsel, Nelson Capes, from Terry Roberts, Neupak's president. According to Ideal, these memoranda show that Neupak believed that the swing-arm filler was merely a prototype of the mobile filling cart that embodies the `233 patent. Therefore, Ideal argues, Neupak should have presented the swing-arm filler to the PTO as relevant prior art, and its failure to do so constitutes inequitable conduct. Moreover, Ideal contends that, had the PTO been aware of the swing-arm filler, the reexamination certificate for the `233 patent would not have issued.

A patent applicant may be guilty of inequitable conduct if he or she fails to disclose material prior art to the PTO during the patent proceedings and has the intent to deceive the PTO. PerSeptive Biosys., Inc. v. Pharmacia Biotech, Inc., 225 F.3d 1315, 1318 (Fed. Cir. 2000). The parties dispute the relevant standard for evaluating whether prior art is material. Neupak contends that prior art is material if it establishes a prima facie case of unpatentability or is inconsistent with a position the patent applicant takes in the proceedings. 37 C.F.R. § 1.56(b). Ideal asserts that information is material if there is a substantial likelihood that the PTO would have considered the information important in evaluating the patent. Baxter Int'l, Inc. v. McGaw Inc., 149 F.3d 1321, 1327 (Fed. Cir. 1998). Whether the Court uses the standard as put forward by Neupak or that pressed by Ideal is of no moment, however. The Court has previously determined that the swing-arm filler was not invalidating prior art. The testimony presented by Neupak showed that the swing-arm filler and the mobile filling cart of the `233 patent were different in many substantial ways. The evidence to the contrary put forward by Ideal was not persuasive in this regard. The Court determines that the PTO would not have considered the swing-arm filler to be important, and therefore the swing-arm filler is not material prior art.

Moreover, the memoranda do not evince any intent to mislead the PTO on the part of Mr. Roberts or Mr. Capes by omitting any reference to the swing-arm filler. At the most, as testified to by Mr. Roberts, these memoranda show the typical back-and-forth that must take place between and lawyer and client when preparing a factually complicated and legally sophisticated affidavit. Neupak is not guilty of inequitable conduct in failing to inform the PTO of the swing-arm filler, and the `233 patent will not be invalidated on this basis. Because the Court finds no inequitable conduct, this is not an exceptional case and Ideal is not entitled to its attorney's fees.

CONCLUSION

After considering all of the evidence presented at the bench trial in this matter, the Court concludes that the `233 patent is not invalid for obviousness, nor was the `233 patent anticipated by prior art. The Court further determines that Neupak did not conduct itself inequitably before the PTO during the reexamination proceeding. Therefore, for the foregoing reasons, and upon all of the files, records, and proceedings herein, the Court finds against Ideal on its declaratory judgment claims. Accordingly, IT IS HEREBY ORDERED that judgment is entered in favor of Plaintiff Neupak, Inc., on the counterclaims of Defendant Ideal Manufacturing and Sales Corporation.

LET JUDGMENT BE ENTERED ACCORDINGLY.