Court Opinion

ID: 9491571
Source: CourtListenerOpinion
Date Created: 2023-08-05 14:17:47.78519+00
Date Added: 2024-06-11T17:54:49.558578
License: Public Domain

BRYSON, Circuit Judge,
concurring in part and dissenting in part.
I concur in the portion of the court’s opinion upholding the jury’s verdict of non-in*1379fringement of the ’308 patent. I also concur in the portions of the court’s opinion reversing the district court’s judgment that the ’308 patent is invalid, and overturning the jury’s verdict on the issue of fraud. Accordingly, I join parts II-V, VI.A-B, and VII of Judge Newman’s opinion.
With respect to portions of the judgment relating to the ’056 patent, I agree with Chief Judge Mayer that the ’056 patent is invalid under the “on-sale bar” of 35 U.S.C. § 102(b), although I take a somewhat different analytical path to that conclusion, as discussed below. Because I conclude that the ’056 patent is invalid based on the on-sale bar, I do not reach the other grounds on which the jury found the ’056 patent invalid.
Finally, Chief Judge Mayer and I agree that the jury verdict on M3’s antitrust counterclaim must be affirmed. Because we do not uphold all of the grounds on which the jury found liability, however, we conclude that the jury may have improperly assessed damages on liability grounds that cannot stand. We therefore must remand for further proceedings to determine the proper amount of damages to be assessed on the antitrust counterclaim.
I
With respect to the on-sale bar, I believe that the June 1985 sale of 250 needles from Radiplast to Pharmaseal was sufficient to support the jury’s verdict that the asserted claims of the ’056 patent were rendered invalid by a sale more than one year before July 30, 1986, the effective filing date of the patent. It is undisputed that the needles sold in June 1985 embodied the invention of the ’056 patent. Whether that sale was sufficient to invoke the on-sale bar turns on whether the sale falls within the “experimental purpose” exception to the on-sale bar.
A
In the summer of 1984, Radiplast began looking for a company “to distribute and promote the sales of [its] biopsy instruments in the United States.” Pharmaseal, a potential distributor of the instruments, sent a telex to Radiplast stating that “before any formal purchasing plans can be made,” it would have to conduct field trials “to determine the performance and specimen quality of your biopsy device and disposable needle.” Pharmaseal sent letters to several hospitals in December 1984 inviting them to participate in a “field trial as a potential sales/distribution system for Radiplast devices.”
Radiplast responded by telex on January 21, 1985, setting a price for the needles to be used in Pharmaseal’s field trial and offering large-quantity discounts for batches of up to 50,000 needles. Radiplast’s telex stated that “in order to be able to deliver both needles and instruments in beginning of March [1985], we need a [telex] order, preferably this week.” It also stated that “we have to meet and discuss more in detail all things related with the marketing of our biopsy instrument in U.S.” With respect to Pharma-seal’s proposed field trial, Radiplast merely suggested that “if you would like [Dr. Lind-gren, the inventor] to visit the hospitals performing the trial, in order to help them get started, he will be happy to help you.”
Pharmaseal agreed to purchase the instruments and, on March 28, 1985, placed an order for 10 biopsy guns and 250 needles from Radiplast. The instruments were shipped in June 1985. It is undisputed that the June 1985 transaction constituted a sale and that the needles sold at that time embodied the invention of the ’056 patent.
Pharmaseal conducted in-house testing of the devices in July 1985 before releasing the products to hospitals for the field trials. Following the in-house testing, Pharmaseal reported only minor problems and made minor manufacturing suggestions, such as recommending that Radiplast strengthen the stylet hub design and add a buffing operation to the cannula grinding process.
Although Bard contends that Dr. Lindgren attended some of the field trials and that Radiplast “was continually advised by Phar-maseal of [their] progress,” Dr. Lindgren *1380testified that he did not exercise any control over the tests, that he did not recall ever seeing the instrument used during a test, and that he did not receive or maintain any data from the tests. Bard appears to concede that the test results were not maintained in confidence, and it points to no evidence showing that the primary purpose of the tests was to ensure that the claimed features of the invention would operate as intended.
The field testing was performed at the behest of Pharmaseal, the purchaser, not Ra-diplast or the inventor. Pharmaseal “assumed primary responsibility” for the tests, while Radiplast merely “had an ongoing interest” in the progress of the trials and “was kept informed” of the progress of the field trials. During the field trials, Pharmaseal and Radiplast continued to discuss market potential, potential prices and volumes, and an instructional videotape to teach proper use of the instruments.
B
Bard argues that the jury verdict cannot stand because the in-house testing at Phar-maseal and the hospital field trials show that the sale was for experimental testing purposes. The so-called “experimental testing” exception to the on-sale bar applies only if commercial exploitation is “merely incidental to the primary purpose of experimentation to perfect the invention.” Barmag Barmer Maschinenfabrik AG v. Murata Mach., Ltd., 731 F.2d 881, 839, 221 USPQ 561, 567 (Fed.Cir.1984). In determining whether the inventor made the sale in question for purposes of determining whether the invention would work for its intended purpose, a court must consider various factors, such as the amount of control the inventor exercised over the testing; the length of the test period; whether any payment was made; whether there was a secrecy obligation; whether progress records were kept; whether someone other than the inventor conducted the experiments; and the degree of commercial exploitation during the tests in relation to the purpose of the experimentation. Baker Oil Tools, Inc. v. Geo Vann, Inc., 828 F.2d 1558, 1564, 4 USPQ2d 1210, 1214 (Fed.Cir.1987). Certain factors, such as the requirement that the inventor control the testing, that detailed progress records be kept, and that the purported testers know that testing is occurring, are critical to proving experimental purpose. Lough v. Brunswick Corp., 86 F.3d 1113, 1120, 39 USPQ2d 1100, 1105 (Fed.Cir.1996) (“if the inventor has no control over the alleged experiments, he is not experimenting”); see generally 2 Donald S. Chisum, Patents § 6.02[7][c] (1998).
The evidence shows that Radiplast’s primary purpose in making the sale to Pharma-seal was to market the patented invention through Pharmaseal, not to conduct tests to determine whether the claimed invention would work for its intended purpose. Neither the in-house testing at Pharmaseal nor the field trials at hospitals were conducted under the control or supervision of the inventor or Radiplast; instead, the tests were proposed, controlled, and monitored by Phar-maseal, the purchaser. Dr. Lindgren, the inventor, admitted at trial that he had no control over the field trials, that he did not maintain any test data, and that he did not recall receiving any test results. Radiplast was not aware of the identity of the patients in the field tests, the organs that were being biopsied, or the types of tests being performed; indeed, the patients were apparently not even informed that the biopsies were being conducted as part of a test. The hospitals participating in the field trials were told that the trials were intended as “a potential sales/distribution system for Radiplast devices.” There is no evidence that any secrecy agreements were made with Pharmaseal, the hospitals, or any of the test participants. Finally, it is undisputed that Pharmaseal paid for the instruments and needles used in the tests. All of these factors point away from the conclusion that the sale was made for purposes of experimentation. See Western Marine Elecs., Inc. v. Furuno Elec. Co., 764 F.2d 840, 846, 226 USPQ 334, 339 (Fed.Cir.1985) (no experimental use where evidence pointed to market testing rather than experimentation).
*1381Significantly, at the time of the sale of 250 needles in June 1985, Radiplast had an open offer to sell large quantities of needles to Pharmaseal at bulk discount prices. The January 21, 1985, telex had offered batches of up to 50,000 needles for a specific price, and smaller quantities of 10,000 and 20,000 needles for somewhat higher prices. The offer of such large quantities of needles was clearly for commercial, rather than experimental, purposes, and by June 1985 it was clear that the needles that were being offered to Pharmaseal embodied the later-claimed invention. The bulk purchase offer provides further evidence that the June 1985 sale was not for experimental purposes. See Seal-Flex, Inc. v. Athletic Track & Court Constr., 98 F.3d 1318, 1325, 40 USPQ2d 1450, 1455 (Fed.Cir.1996) (Bryson, J., concurring) (“if the sale or offer in question embodies the invention for which a patent is later sought, a sale or offer to sell that is primarily for commercial purposes and that occurs more than one year before the application renders the invention unpatentable”). Thus, it appears that Radiplast was marketing the later-claimed needles commercially at least by late June 1985. Its willingness to sell smaller quantities of needles to Pharmaseal to use in its field tests was evidently an accommodation to Pharmaseal, which conducted its own tests before distributing the needles to hospitals and doctors. The fact that Radiplast recognized that Pharmaseal intended to test the needles before distributing them in bulk, however, did not make Radiplast’s offer and sale in 1985 any less commercial in nature.
The facts of this case are analogous to those in U.S. Environmental Products, Inc. v. Westall, 911 F.2d 713, 15 USPQ2d 1898 (Fed.Cir.1990). In Westall, this court affirmed a district court’s conclusion that a patent was invalidated by a sale more than one year before the filing date. That conclusion was based primarily on (1) the lack of written progress records and the failure to adhere to a testing schedule; (2) the inventor’s failure to maintain control over the testing; and (3) promotion of the invention during the testing. Id. at 717-18. In this case, as in Westall, the evidence shows that neither the in-house tests at Pharmaseal nor the field tests at hospitals were under the control of the inventor or his company. There is little or no evidence of any written progress records; indeed, the inventor was apparently never provided with any test results. Finally, the communications between Radiplast and Pharmaseal throughout the purported testing period emphasized commercial sales and projections, not controlled experimentation.
Bard relies heavily on Continental Can Co. USA, Inc. v. Monsanto Co., 948 F.2d 1264, 20 USPQ2d 1746 (Fed.Cir.1991), for the proposition that providing price estimates for future sales does not otherwise vitiate the experimental testing exception. In Continental, however, this court noted that “no sales were ever made”; there was a joint development project between two companies to develop the invention; and the project was “cloaked in confidentiality.” 948 F.2d at 1269-70, 20 USPQ2d at 1750. Because the circumstances in Continental are so different from the circumstances in this case, Continental is of no help to Bard.
C
Bard also contends that the Pharmaseal sale cannot constitute a bar under 35 U.S.C. § 102(b) because Radiplast did not make a profit on the transaction. The jury heard testimony, however, suggesting that Radi-plast made a 60% profit on the Pharmaseal sale. Even ignoring any actual profit on the devices used in the field trials, it is clear that the Pharmaseal transaction was made primarily to develop a market for future sales, not primarily to test the claimed invention. At any rate, the failure to turn a profit is not determinative. “A patent owner may have created an on-sale bar despite losing money on a sale.” U.S. Envtl. Prods., Inc. v. Westall, 911 F.2d 713, 717, 15 USPQ2d 1898, 1902 (Fed.Cir.1990).
II
In support of its antitrust counterclaim, M3 presented three theories to the jury: (1) *1382that Bard committed fraud in the procuring its patents (the Walker Process theory); (2) that Bard acted in bad faith in enforcing its patents (the “sham litigation” theory), and (3) that Bard modified its Biopty gun for the purpose of preventing its competitors’ needles from being used in that gun. Bard challenges the sufficiency of the evidence to support the jury’s verdict on each of those three theories. The panel is unanimous in concluding that the evidence is insufficient to support liability on the Walker Process and . “sham litigation” theories. Chief Judge Mayer and I agree, however, that there is sufficient evidence to affirm the jury’s antitrust liability verdict based on Bard’s gun modification program, for the reasons set forth below.
A
The jury considered evidence that Bard modified its Biopty gun to prevent its competitors’ non-infringing, flangeless needles from being used in Bard’s guns. By special verdicts, the jury found that there was a relevant product market for replacement needles for fully automated reusable biopsy guns, that Bard had monopoly power in that market, and that it had acquired or maintained its monopoly power in that market through restrictive or exclusionary conduct.
In order to prevail on its claim of an antitrust violation based on Bard’s modification of its Biopty gun to prevent the use of competing replacement needles, M3 was required to prove that Bard made a change in its Biopty gun for predatory reasons, ie., for the purpose of injuring competitors in the replacement needle market, rather than for improving the operation of the gun. See In re IBM Peripheral EDP Devices Antitrust Litig., 481 F.Supp. 965, 1002 (N.D.Cal.1979), aff'd sub. non. Transamerica Computer Co. v. International Bus. Mach. Corp., 698 F.2d 1377 (9th Cir.1983); see generally 1 ABA, Antitrust Law Developments 286-87 (4th ed.1997). Bard argues that the evidence showed that absent patent protection for Bard’s devices, M3 could still compete in the relevant market. While the evidence of Bard’s market power was in dispute, the jury specifically found that Bard enjoyed monopoly power in the market for replacement needles. The evidence was sufficient to support the jury’s verdict on that point and also to support the jury’s conclusion that Bard maintained its monopoly position by exclusionary conduct, to wit, modifying its patented gun in order to exclude competing replacement needles.
The dissent on this issue starts from the premise that the modification to Bard’s Biopty gun was an “improvement” and argues from that premise that to hold Bard liable for the modification would have the “pernicious” effect of penalizing innovators for making improvements to their products. The dissent’s premise, however, is contrary to the jury’s verdict, which was supported by the evidence. Although Bard contended at trial that it modified its Biopty gun to make it easier to load and unload, there was substantial evidence that Bard’s real reasons for modifying the gun were to raise the cost of entry to potential makers of replacement needles, to make doctors apprehensive about using non-Bard needles, and to preclude the use of “copycat” needles. One internal Bard document showed that the gun modifications had no effect on gun or needle performance; another internal document showed that the use of non-Bard needles in the gun “could not possibly result in injury to either the patient or the physician.” In view of that evidence, the jury could reasonably conclude that Bard’s modifications to its guns constituted “restrictive or exclusionary conduct” in a market over which it had monopoly power.
The dissent also takes issue with the jury instructions, contending that they failed properly to frame a charge of predatory conduct that comports with established criteria of antitrust liability. Because Bard did not challenge the court’s instructions, however, the legal sufficiency of the jury charge on the antitrust issues is not properly before us on appeal. To be entitled to relief based on asserted errors in the court’s instructions to *1383the jury, Bard was required to challenge those instructions in this court and demonstrate that it timely objected to those instructions in the district court. Bard did neither, but instead based its argument entirely on the sufficiency of the evidence. Because the evidence is sufficient to support the verdict on the gun modification theory of liability, the jury’s liability verdict must stand. See Mangren Research & Dev. v. National Chem. Co., 87 F.3d 937, 942 n. 3 (7th Cir.1996); Composite Marine Propellers, Inc. v. Van Der Woude, 962 F.2d 1263, 1265 (7th Cir.1992).
B
While we affirm Bard’s liability on the antitrust counterclaim, that does not necessarily mean that the jury’s damage award of $1.5 million can be sustained. M3 presented evidence of three different markets (guns, guns and needles, and replacement needles) in which Bard allegedly caused antitrust injury, and the jury found Bard liable for injury in each market. The damages portion of the verdict, however, merely indicated a general award of $1.5 million without attribution to a particular market or exclusionary practice.
M3’s evidence concerning Bard’s gun modification program was relevant only to the replacement needle market. Because we have concluded that the evidence concerning Bard’s activities in the other two markets cannot support antitrust liability, the question arises as to whether the $1.5 million damages award can be supported solely on the basis of the injury Bard’s actions caused to M3 in the replacement needle market. That issue was not briefed on appeal, and the record, so far as we can ascertain, does not provide clear guidance as to the proper allocation of damages due to the injury suffered by M3 in-the injury replacement needle market. Consequently, wé vacate the antitrust damages award and remand to the district court to consider, after additional hearing or limited retrial, if necessary, the proper amount of damages attributable to Bard’s gun modification program. See MCI Communications Corp. v. American Tel. & Tel. Co., 708 F.2d 1081, 1166-67 (7th Cir.1983).