NOTE: Pursuant to Fed. Cir. R. 47.6, this disposition is not citable as precedent. It is a public record. 

## United States Court of Appeals for the Federal Circuit

04-1070 SLIP TRACK SYSTEMS, INC., Plaintiff-Appellee,

v.
METAL LITE, INC., Defendant-Appellant.

__________________________ DECIDED: December 1, 2004

__________________________ Before NEWMAN, Circuit Judge , FRIEDMAN, Senior Circuit Judge , and SCHALL, Circuit Judge

. Opinion for the court filed by Circuit Judge SCHALL. Opinion dissenting-in-part filed by Circuit Judge NEWMAN. SCHALL, Circuit Judge

.

DECISION Metal Lite, Inc. (“Metal Lite”) appeals the final judgment of the United States District Court for the Central District of California (1) th at U.S. Patent No. 5,127,760 (“the ‘760 patent”), owned by Slip Track Systems, Inc. (“Slip Track”), has priority over U.S. Patent. No. 5,127,203 (“the ‘2 03 patent”), owned by both Me tal Lite and Slip Track;and (2) that Metal Lite infringed the ‘760 pat ent and is liable for damages in t he amount of $7,000,000 by reason of that infringement. Slip Track Sys., In c. v. Metal Lite, Inc. , No. SA CV 98-20 AHS (C.D. Cal. Oct. 22, 2003) (“ Final Judgment ”). For the reasons set forth below, we affirm t he judgment of the district c ourt on the priority issue. Howev e r, we vacate t he judgment of infrin gement and the award of damages in favor of Slip Track and remand the case to the district court for furt her proceedings on the issue of infringement based upon the claim cons truction set forth in this opinion. DISCUSSI ON
I. After remand following our decis ion in Slip Track Systems, Inc

. v

. Metal Lite, Inc. , 304 F.3d 1256 (Fed. Cir. 2002) (“ Slip Tra ck II ”), the district court awarded the ‘760 patent priority over the ‘203 pat ent. The district court’s awar d of priority was based on a jury’s finding that the invent ion of the ‘760 pat ent was reduced to pr actice before the invention of the ‘203 patent. Metal Lite’s sole argument on appeal with respect to the priority issue is that the dist rict court erred i n not granting its motion in limin e to bar Slip Track, an assignee and 50% owner of the ‘203 pat ent, fr om challenging the validity of the ‘203 patent based upon the doc trine of assignee es toppel. We find no error in the district court’s decision. Assignee estoppel is an equitable doctrine which, under appropriate circumstances, bars the assign ee of a patent from cont esting the validity of the assigned patent. C.f. Diamond Scientific Co. v. Ambico, Inc. , 848 F.2d 1220, 1225 (Fed. Cir. 1988) (“[D]espite t he public policy encouraging peo ple t o challenge potentially invalid pat ents, there are still circumstances in whic h the equit i es of the contractua l

04-1070 2relationships between the parties should deprive one party . . . of the right to bring that challenge.”). For example, circumstance ma y warrant application of the doctrine to prevent an assignee from avoiding royalty pay ments otherwise due under an assignment contract by challenging t he validity of the assigned patent. See Baladev on, Inc. v. Abbott Labs., Inc. , 871 F. Supp. 89, 96 (D. Mass. 1994); Sybron Transition Corp. v. Nixo n , 770 F. Supp. 803, 811-12 (W.D.N.Y. 1991). This case, however, does not present such circumstances. Slip Track only asserted invalidity of the ‘203 patent after Metal Lite put Slip Track’s ‘760 patent in to reexa m ination before the Patent an d Trademark Office on the grounds t hat it was invalid in view of the ‘203 patent. See Slip Track Sys., Inc. v. Metal Lite, Inc. , 159 F.3d 1337, 1338-39 (Fed. C i r. 1998) (“ Slip Trac k
I ”). Moreover, Slip Track owns 100% of t he ‘760 patent but only 50% of the ‘203 patent. The reexamination c onsequently forced Slip Track to choose between protecting the validity of either the ‘760 patent or the ‘203 patent. Slip Track made the natural decis i on to protect its greater of tw o property interests, the ‘760 patent. There is nothing inequitable here. Having reje cted Metal Lite’s ass i gnee estoppel argument , we affirm the judgment of the district court on the priority issue.
II. After determining that the ‘760 patent has pr iority over the ‘203 patent, the di strict court granted Slip Track’s motion in limi ne barring Metal Lite from contesting infringement and subsequently ent ered judgment against Metal Lite for infringement of the ‘760 patent. The district c ourt based its dec ision to grant the motion on three separate grounds: (1) the doctrine of ma rking estoppel; (2) our decision in Slip Track II ; and (3) Metal Lite’s litigation conduct. Slip Track Sys., Inc. v. Me tal Lite, Inc. , No. SA

04-1070 3CV 98-20 AHS, slip op. at 6-13 (C.D. Cal. Dec. 11, 2003) (“ Order Denying Motion for New Tria l ”). For the reasons that follow, we reject each of the grounds upo n which the district court relied in granti ng Slip Track’s motion in limi ne. We consequently vacate the judgment of infringement and damages in favor of Slip Track and remand the case to the distri ct court for proceedi ngs on the issue of infringement.
A. Marking Estoppel The district court determined that Metal Lite ’s marking of its product with the ‘7 60 and ‘203 patents estopped it fr om contesting infringement of the ‘760 patent under the doctrine of marking estoppel. Specifically, the court determined that the combination of (1) Metal Lite’s deliber ate marking with the ‘760 patent from 1994 to September of 1995, while in partnership with Slip Track; and (2) Metal Lite’s c ontinued marking with the ‘203 patent following dissolution of the partnership in September of 1995, justified estopping Metal Lite from subsequently de nying infringement of the ‘760 pat ent. The district court reasoned t hat marking with the ‘203 patent was tantamount to marking with the ‘760 patent because Metal Lite had argued inv a lidity of the ‘760 pat ent during the priority dispute based on ov erl apping subject matter with the ‘203 patent. Order Denying Motion for New Trial , slip op. at 7-9. At the outset, we note that the parties dispute the contin ued viability of the doctrine of marking estoppel. We find it unnecessary to address this issue becaus e, even assuming the doctrine remains viable, it does not apply to the facts of this case. “[The doctrine of] marking estoppel, like other varieties of estoppel, should arise only when a c onsideration of all aspects of a defendant’s pertinent conduct makes it inequitable for him to take a position contrary to his prior statements or actions.” Boy d

04-1070 4v. Shildkraut Giftware Corp. , 936 F.2d 76, 79 (2d Cir. 1991). T he doctrine serves t o protect the public by cauti oning manufacturers that “car e must be taken in avoiding misrepresentation to the public that goods are prot ected by a patent.” Smithklin e Diagnostic s , Inc. v. H e lena Labs . Corp. , 859 F.2d 878, 890-91 (Fed. Cir. 1988) (quoting Crane Co. v. Aeroquip Corp. , 364 F. Supp. 547, 560 (N.D. Ill. 1973)). It is undisputed that Metal Lite only mark ed its product with t he ‘760 patent for a period of about one year whil e in partnership with Slip Trac k. This marking wa s deliberate. Indeed, S lip Track consented to the mark ing. There is no evidenc e , however, that Metal Lite deli ber ately mismarked its products during this time. In other words, nothing indicates Metal Lite believ e d its product to fall outside the scope of the ‘760 patent’s claims when it made the decis ion to mark with the ‘760 patent. See Boyd , 936 F.2d at 79 (explaining that “deliber ate mismarking” may provide grounds for apply i ng es toppel); see also Cra n e , 364 F. Supp. at 560 (applying marking estoppel to a licens ee who continued marking its product with the licensed patent after designing around the claimed invention). T he similariti es betwee n the ‘203 and ‘760 patents also fail to provide a sufficient basis f o r apply i ng estoppel. In particular, the record does not indic a te that marking with t he ‘203 patent created a risk to the public—that is, a risk of misleading the public to believe the accu s ed product was also covered by the ‘760 patent—sufficient to warrant application of estoppel.
B. The Decision of the Federal Circuit in Slip Track II Having concluded that the district c ourt erred in its applic ation of marking estoppel, we turn to the court’s second basis fo r granting Slip Track’s motion in limine:

04-1070 5this court’s decis ion in S lip Trac k II

. 1 T he district court stated that in Slip Track II we determined that, with the exce ption of the wallboard limita tion of the ‘203 patent, the ‘203 and ‘760 patent s cover ident ical s u bject matter. Order Denying Motion for Ne w Trial , slip op. at 10. T he court reasoned that the neces sary implic ation of this is that the claims of the two patents are virtually identical. Id. The district court further reasoned that since Metal Lite made it s product pursuant to the ‘203 pat ent, it must al so infringe the ‘760 patent. Id. The district court’s decision suffers fr om two errors: (1) equating the scope of the interfering subject matter with the scope of the claims of the two patents; and (2) equating the scope of the interfering subject matter with the elements of the accused product. With respect to the fi rst issue, although t h is case involves an interference proceeding filed in district court as oppos ed to the PTO, we have explained that “the count is not a claim to an invention.” In re Van Geuns , 988 F.2d 1181, 11 84 (Fed. Cir. 1993). Rather, the overlapping s ubject matter “o f an interference is merely the vehicle for contesti ng the priority of invention and de termining what evidence is relevant to the issue of priority .” Id. (emphasis added). The definition of interfering subject matter is not relevant to the separate issue of infrin gement. Therefore, afte r determining priority, the district court had an obligation to interpret the claims of the ‘760 patent in order to address the separate issue of infringement. After construing the c l aims, the second step in the infringement analysis requires the court to compare the properly cons trued claims to the accused product. Markman v. Westview Instruments, Inc. , 52 F.3d 967, 976 (Fed. Cir. 1995) ( en banc ), aff’d, 517 U.S.

1 The appeal in Slip Track II concerned the scope of interfering subject matter between the ‘760 and ‘203 patents.

04-1070 6370, 116 S. Ct. 1384, 134 L.Ed.2d 577 (1996). In bypassing this step, the district court failed to consider that even assuming virtually identical breadth of the claims of the ‘203 and ‘760 patents, Metal Lite’s pr oducts do not necess a rily infringe the ‘760 patent. In other words, the fact that the accused product was made pursuant to the ‘203 patent and, under the district court’s reasoning, pursuant to the virtually identical ‘760 patent , does not necessarily mean the co mpleted product actually contai ns all of the limitation s of the ‘760 patent. In sum, the district court was required to determine the issue of infringement using our two-step analys is of (1 ) construi ng the claims and (2) comparing the accused product to the properly construed claims. Id. C. Metal Lite’s Litigation Conduct The district court cited Metal Lite’s liti gation conduct as a third reason for barring Metal Lite f r om contesting infringement. Th e court not ed that Metal Lite’s sole defense up until thr ee months before tria l was invalidity of the ‘760 patent based upon priority of the ‘203 patent. The court al so noted that it was not until May 12, 2003, that Metal Lit e requested a claim construction, and not until July of 2003 that Metal Lite raised its specific “claims-based theory of non-infringement.” 2 Order Denying Motion for New Trial , slip op. at 12. The court found Metal Li te’s tardiness in presenting its claimsbased theory of non-i n fringement contrary to the objective reflected in Rule 26 of the Federal Rules of Civ il Pr ocedure of “fully air[ing] each part ies’ theories of the case well in advance of trial.” Id. at 13.

2 The district court distinguished be tween inv a lidity-based and cla i ms-based theories of non-infringement, t he invalidity-based theor y being premised on invalidity of the ‘760 patent and the claims-based th eory being premised on a traditional noninfringement position.

04-1070 7An ev identiary ruling based on a party’s litigation conduct is not unique to patent law, so we apply the standard of review of t he regional circuit of the district court. Sulzer Textil A.G. v. Picanol N.V. , 358 F.3d 1356, 1363 (Fed. Cir. 2004). The Nint h Circuit reviews evide n t iary ruling s for an abuse of discretion. Heyne v. Caruso , 69 F.3d 1475, 1478 (9th Cir. 1995). In this case, we conc lude that the dist rict court erred in granting Slip Track’s motion in limine based on Metal Lite’s litigation conduct and that the error rose to the level of an abuse of discretion. We so hold because the record does not s upport the district co urt’s position that, up until three months before trial, Metal Lite’s sole defense of non-infringem ent was invalidity of the ‘ 760 patent. In its answer to Slip T r ack’s complain t for patent infringement, Metal Lite denied infringement of the ‘760 patent (Answer and Counterc l . at 3) and separately sought a declaration of invalidity (Answer and Count ercl. at 9). Metal Lite’s delay after that in presenting its claims-based t heory of non-infringement is explained by the long procedural history of this case . Until recently in the case, the focus of both parties was on the issue of priority. (Dec l. Ronald P. Oines at 7.) This was a logic a l focal point considering that the issue of infringement would only becom e relevant in the event the ‘760 patent was declared s enior to the ‘203 patent. 3 Indeed, it is tell ing that, as of our remand in Slip Track II , Slip Track had not come forward with its claims-based theory of infringement. Accordingly, we hold that the district court abus ed its discretion in granting Slip Track’s motion in limine barring Metal Lite from contesting infringement.

3 This is bec ause Slip T r ack, as a co-owner of the ‘203 patent, could not be sued for infringing the ‘203 patent

.
04-1070 8III. The district court entered judgment of infringement of the ‘760 patent without having construed the pertinent claim terms at i ssue. On appeal, Meta l Lite argues that under the claim cons truction it urges, its a ccused pr oduct does not infringe the ‘7 60 patent. Slip Track, on t he other hand, argues that under its proposed claim construction, the accused produc t does infringe t he ‘760 patent. Both parties urge us t o construe the pertinent claim terms at this time. In view of the rel a tively straightforward nature of the claim construction issue and the interest in bringing this litigation to a conclus i on, we accept the parties’ invitation to construe the claims. The ‘760 patent relates to a “slotted tr ack” or “slotted header” wall assembly used to alleviate stress on a wall’s inf r astructu re caused by environmental forces, such as earthquakes. Slip Track alleges that Metal Li te’s product, a particular slotted track wall assembly, infringes the claims of the ‘760 pa tent. The patent contains two independent claims and eight dependent claims. Claim 1 of the ‘760 patent is re presentative of the claims at issue and reads: A building construction assembly that includes a header and a stud wherein the header is ca pable of vertical movemen t relative to said assembly comprising: a header having a web and flanges with said flanges connected to said web; at least one of said flanges having at least one vertical slot therein; a stud having a width less than the distance between said flanges of said header and having a top end; said stud having at least one hole formed therein proximal to said top end; said top end fitting between said flanges perpendic u lar to said header pos itioned so that said hole is aligned wit h said vertical slot; and

04-1070 9an attachment means passing through said s l ot and through said hole to slideably unite said header to said stud whereby said slot permits said header to move vertic ally with respect to said stud while restricting horizontal movem ent of said header. The sole c l aim construction issue relate s to the limitation “said stud having at least one hole formed therein proximal to sa id top end.” Metal Lite argues that the prosecution history requires t he stud to hav e a “pre-existing h o le, ” meaning a stud with a hole in existenc e prior to inserting the stud between the flanges of the header. Slip Track argues that the limitation in no way requires a pre- existing hole and that the claim
encompass e s assemblies wherein the hole is formed before or after inserting the stud between t he flanges . Requiring a pre- exis ting hole, Slip Track argues, woul d impermissibly limit the apparatus claim to a product-by-process claim and also woul d

exc l ude the preferred embodiment. We agree with Metal Lite that claim 1 is limited to a stud having a hole in existence prior to inserting the stud bet ween the flanges of the header. Claim construction starts with the language of the claims as understood by one of ordinary skill in the art. See ResQNet.com, Inc. v. Lansa, Inc. , 346 F.3d 1374, 1378 (Fed. Cir. 2003); CCS Fitness, Inc. v. Brunswick Corp. , 288 F.3d 1359, 1366 (Fed. Cir. 2002); Johnson Worldwide Assocs., Inc. v. Zebco Corp. , 175 F.3d 985, 989 (Fed. Cir. 1999). Intrinsic evidenc e— namely, the specification and, if in ev idence, the prosecution history—are also highly relevant to claim construction. See Victronics, Corp. v. Conceptronic, Inc. , 90 F.3d 1576, 1582 (Fed. Cir. 1996). One r eason “[t]his court . . . considers the prosecution history . . . [is] to det ermine whether the applicant clearly and unambiguously ‘disclaimed or disavowed [any interpretation] during prosecution in order

04-1070 10to obtain claim allowance.’” Middleton, Inc. v. Mi nn. Mi ning & Mfg. Co. , 311 F.3d 1384, 1388 (Fed. Cir. 2002) (quoting Standard Oil Co. v. Am. Cyanamid Co. , 774 F.2d 448, 452 (Fed. Cir. 1985)); see also Omega Eng’g, Inc. v. Raytek Corp. , 334 F.3d 1314, 1324 (Fed. Cir. 2003) (explaining that prosecution disclaimer does not apply “where the alleged dis a vowel of clai m scope is ambiguous”). In this cas e , the pros ecution his t ory of the ‘760 patent reveal s that the patentee limited its invention to studs hav ing pre-exis ting holes. Claim 1, as originally drafted, read, in pertinent part, “said stud being aligned with sa id vertic al slot.” On March 29, 1991, the Examiner issued a fir s t rejection fi nding the claim obvious and “indefinite for failin g to particularly point out and distinct ly claim the subject matter which applic a n t regards as the invention.” T he Examiner s pecifically asked: “Re: claim 1 . . . line 10, how is the stud ‘aligned’ with the vertical slot . . . ?” The patentee responded by amending claim 1 to read: “said stud having at least one hole formed therein proximal to said top end; said top end fitting between sa id flanges perpendicular to said header positioned so that said hole is aligned with sa id vertical slot.” The patentee also made the following remark accompanying the amendment: First, the E x aminer’s question of how the stud is aligned with the vertical slot has been ans wered by adding hole 22 proximal to top end 40 of the stud as an element of the claims. The hole 22 s e rves as a reference point on the stud which is used to align the s t ud and t he slot. This amendment should ov ercome the Examiner’s § 112 rejection based upon i n defi teness w i t h re spect to claim 1 and the claims dependent therefrom. This amendment and accom panying stat ement provide clear and unambiguous evidenc e that the patentee lim ited the claim to a stud with a pre-existing hole.

04-1070 11Slip Track’s argument that such a construction improperly limits its apparatus claim to a product-by-process claim is unav ailing. Our case law makes clear that statements made during prosecut ion may limit what began as an apparatus claim to a product-by-process claim. See Minn. Mining & Mfg. Co. v. Avery Dennis o n Corp. , 350 F.3d 1365, 1373 (Fed. Cir. 2003); Vanguard Prods. Corp. v. Parker Hannifin Corp. , 234 F.3d 1370, 1372 (Fed. Cir. 2000). This is exactly what Slip Track did in this case. By making the above amendment, the patentee over came the Examiner’s obviousness an d indefiniteness rejection, but did so at the price of limiting it s claim to a product made by a particular process. We also reject Slip Tr ack’s argument that our claim construction is wrong bec ause it exc l udes the pr eferred method of assembly. This is bec ause, while recognizing the general rule disfavoring a c l aim constructi on that exc l udes a preferred embodiment, the prosecution disclaimer in this case provides “highly persuasiv e evidentiary support” for our construction. Se e Vitronics , 90 F.3d at 1583. In short, w e hold that the limitation “said stud having at least one hole formed therein proximal to said top end,” means that a hole must be formed in the stud prior to insertion of the stud between the flanges so t hat the hole can be us ed to align the stud with the v e rtical slot before passing the atta chment means through t he vertic al slot and into the stud. In the infringement proceedings that are to follow on remand, the district court is to apply this claim construction.
IV. In sum, (1) We affirm the district court’s grant of Slip Track’s motion in limine precluding Metal Lite from offeri ng evidenc e on the issue of assignee estoppel. We

04-1070 12consequently affirm the district court’s judgment on t he issue of priority of the ‘760 patent over the ‘203 patent. (2) Because we find error in the district court’s grant of Slip Track’s motion in limine prec luding Met a l Lite from contesting infringement, we vacate the district court’s judgment of infringement and award of damages in favor of Slip Track. (3) We consequently remand the case to the district court for further proceedings on the issue of infringement bas ed upon the claim constr uction set forth in this opinion. We thus affirm-in-part, vacate-in-part, and remand.

04-1070 13NOTE: Pursuant to Fed. Cir. R. 47.6, this disposition is not citable as precedent. It is a public record. 

## United States Court of Appeals for the Federal Circuit

04-1070

SLIP TRACK SYSTEMS, INC., Plaintiff-Appellee,

v. METAL LITE, INC., Defendant-Appellant.

NEWMAN, Circuit Judge , dissenting in part.

In this exceedingly complex and multi-issued case, I do not discern reversible error in the district court's opinion, and would affirm it in the major respects presented on this appeal.