Court Opinion

ID: 210634
Source: CourtListenerOpinion
Date Created: 2011-03-13 08:14:48+00
Date Added: 2024-06-11T15:08:16.510852
License: Public Domain

United States Court of Appeals for the Federal Circuit

                                        2006-1419
                               (Interference No. 105,215)

                  ROBERT D. BRAND, CAPITAL MACHINE CO., INC.,
                            and INDIANA FORGE, LLC,

                                                     Appellants,

                                            v.

                     THOMAS A. MILLER, DARREL C. PINKSTON,
                          and MILLER VENEERS, INC.,

                                                     Appellees.

       Meredith Martin Addy, Brinks Hofer Gilson & Lione, of Chicago, Illinois, argued for
appellants. With him on the brief was Raymond W. Green.

       Clifford W. Browning, Krieg Devault LLP, of Indianapolis, Indiana, argued for
appellees.

Appealed from: United States Patent and Trademark Office, Board of Patent Appeals and
               Interferences
 United States Court of Appeals for the Federal Circuit

                                        2006-1419
                               (Interference No. 105,215)

                 ROBERT D. BRAND, CAPITAL MACHINE CO., INC.,
                           and INDIANA FORGE, LLC,

                                                              Appellants,

                                            v.

                      THOMAS A. MILLER, DARREL C. PINKSTON,
                           and MILLER VENEERS, INC.,

                                                              Appellees.

                           ___________________________

                              DECIDED: May 14, 2007
                           ___________________________

Before MICHEL, Chief Judge, ARCHER, Senior Judge, and DYK, Circuit Judge.

DYK, Circuit Judge.

      Appellants Robert D. Brand, Capital Machine Co., Inc. and Indiana Forge, LLC

(“Brand”) appeal from the judgment of the Board of Patent Appeals and Interferences

(“Board”) of the U.S. Patent and Trademark Office (“PTO”) in Interference No. 105,215,

entering judgment for appellees Thomas A. Miller, Darrel C. Pinkston, and Miller

Veneers, Inc. (“Miller”) on the issue of priority. The Board concluded that Brand derived

the subject matter of the single count from Miller. We hold that the Board impermissibly

relied on its own expertise in determining the question of derivation and that the Board’s
conclusion is not supported by substantial record evidence. We therefore reverse and

remand for further proceedings consistent with this opinion.

                                       BACKGROUND

       The invention here relates to methods of cutting veneer from logs of wood.

Typically logs are cut lengthwise into a pair of “flitches,” which are then mounted onto

the rotating “staylog” of a veneer cutting machine. The flitch is held in place on the

staylog by clamping “dogs.” The veneer-cutting knife then cuts off slices of veneer from

the flitch as it rotates on the staylog.

       Because logs are typically thicker at their base than at their end, traditionally the

butt-ends of the resulting tapered flitches were cut off in order to make them more

uniform in cross-section from end to end. The ends that had been cut off were then

discarded. The invention at issue allows a tapered flitch to be mounted on a staylog

such that the flitch’s veneer-producing face (the uppermost surface region of 16 in the

diagram below from U.S. Patent No. 5,865,232 (“’232 patent”)) is parallel to the veneer-

cutting knife. This results in more efficient use of the flitches.

Traditional dogs could not be used to mount a tapered flitch (16) onto a staylog (10)

because traditional dogs did not allow the length of the dog extending from the staylog

to vary based on the flitch’s taper. The inventors here used different types of dogs to

2006-1419                                  2
solve that problem.

         During the relevant period Robert Brand was the Chief Engineer for Capital

Machine Co. (“Capital”), which makes machines for cutting veneer. He is now retired

from Capital and works as an unpaid consultant with Miller Veneers. Brand is the

named inventor of U.S. Patent Application No. 09/377,120 (’120 application). Thomas

Miller was Production Manager of Miller Veneers, a customer of Capital. Miller is the

named inventor of the ’232 patent.           The two companies had a close working

relationship, and Thomas Miller on occasion communicated new design concepts to

Capital.

         On April 28, 2004, the Board declared an interference with a single count to

determine whether Miller or Brand should have priority. The count, which is claim 1 of

Miller’s ’232 patent and the identical claim 38 of Brand’s ’120 application. The count

reads:

                     A method for cutting veneer sheets from a tapered flitch,
               comprising the steps of

                     providing a staylog for a veneer slicing machine having a
               veneer slicing knife;

                      attaching a flitch having a tapered veneer producing face to
               the staylog with the tapered veneer producing face affixed in a
               stable, parallel relationship with the veneer slicing knife; and

                     cutting veneer sheets with the veneer slicing knife from the
               tapered veneer producing face of the flitch.

         While the same claim appears in both the ’232 patent and the ’120 application,

the inventors used different methods to solve the problem of attaching a tapered flitch to

a staylog.     Miller’s ’232 patent employs radially-expandable round “collett dogs”

(depicted below at left) to support the flitch while Brand’s ’120 application uses multi-

2006-1419                                3
headed tall pin dogs (depicted below at right) for the same purpose.

       In the interference proceeding, Brand was the Senior Party, having filed his

application on May 31, 1995. 1 Miller, the Junior Party, made two arguments for priority.

Miller argued it was entitled to priority as the party first to conceive and first to reduce to

practice, and also argued it was entitled to priority because Brand derived the invention

from Miller. The Board first addressed Miller’s argument that it was first to conceive and

first to reduce to practice, and determined the respective conception and reduction to

practice dates of Brand and Miller. The Board held that Miller’s conception date was no

earlier than October 27, 1994, and denied Miller’s attempt to amend its priority

statement to claim an earlier date. The Board held that Miller failed to prove an actual

reduction to practice prior to Brand’s May 31, 1995, benefit date. The Board concluded

that, since Junior Party Miller failed to prove it reduced to practice first, it failed to

establish that it was entitled to an award of priority as the party first to conceive and first

to reduce to practice. Miller has not raised this issue on appeal.

       The Board then turned to Miller’s other argument, that Miller was entitled to

priority because Brand derived the invention from Miller. Miller’s case for derivation was

       1
              The Board then held that Brand failed to prove a conception date earlier
than its May 31, 1995, constructive reduction to practice date. The Board reasoned
that, while several Brand drawings did demonstrate conception of the subject matter of
the count, there was no corroborated evidence of the completion dates of these
drawings because witness William Koss, the Executive Vice President of Capital, did not
distinguish between commencement and completion dates. In light of our holding that
Brand was entitled to priority, we need not describe or address Brand’s alternate
argument that he was entitled to an earlier date for conception and reduction to practice.

2006-1419                                  4
based primarily on two drawings that Miller allegedly showed Brand before Brand’s own

conception. The first, Miller Exhibit 2001 (“MX2001”), depicts an end view of a tapered

flitch:

The Board found that Miller showed Brand and Koss (the Executive Vice President of

Capital), the drawing in MX2001 at a meeting held sometime between October 7, 1994

and October 12, 1994, well before Brand’s conception date of May 31, 1995. The

drawing in MX2001 does not depict any dogs or any holes in the flitch for receiving

dogs.

          The second drawing that Miller alleged supported its case for derivation was

Miller Exhibit 2002 (“MX2002”), which the Board found was contained in a fax from

Miller to Brand on October 7, 1994, and which depicts a type of screw called a “bugle

headed screw dog:”

          The Board addressed whether Miller had proven that Brand derived the invention

from Miller based on the information in Miller Exhibits [“MX”] 2001 and 2002, either

separately or taken together.     While Brand was aware that the bugle-headed dogs

2006-1419                                5
depicted in MX2002 were intended as substitutes for standard dogs, the Board rejected

as uncorroborated the testimony of Miller that he explicitly told Brand how to practice

the invention of the count by using the bugle-headed dogs to support a tapered flitch.

The Board nonetheless held that Miller had established derivation based on the

combination of MX2001 and 2002. The Board reasoned that “one skilled in the art . . .

would have recognized [the] suitability [of Miller’s bugle-headed screw dogs MX2002]

for securely supporting a tapered flitch in the position depicted in [MX2001].” J.A. at 62.

The Board did not cite any testimony or record evidence to support its conclusion. The

Board further held that “[t]he ability of the bugle-headed screw dogs to tightly clamp the

flitch would have been readily apparent.” Id.

       The Board also held, in the alternative, that the information in MX2001, taken

alone, was sufficient to teach one of ordinary skill in the art how to practice the method

of the count.    Again without citing record evidence, the Board concluded that the

drawing in MX2001 disclosed the invention. Although MX2001 does not depict the

relationship between a flitch and the veneer-cutting knife, the Board concluded that

“[a]lthough not discussed in the exhibit, it is apparent that the flitch is supported [in the

required position].” While MX2001 does not show the size and shape of supporting

dogs, the Board concluded that “it is nevertheless clear that the position of the flitch is

due to the fact that the dogging holes have different depths.” Id. at 60-61.

       Brand filed a request for rehearing, arguing principally that the Board failed to

take into account declarations by witnesses that favored Brand’s position, inter alia, on

the derivation issue. The Board denied the request. In particular, on the question of

derivation, the Board described as “unconvincing” the declaration of witness Bobby

2006-1419                                 6
Deckard, who stated that “there is no way one could deduce from [MX2001] how to

build a machine or attach a tapered flitch to the machine,” because it failed to explain

why an artisan “would not have known to use screw dogs which are longer than the

screw dog depicted in MX2002.” J.A. at 77-78. Brand timely filed this appeal. We have

jurisdiction pursuant to 28 U.S.C. § 1295(a)(4)(A).

                                     DISCUSSION

                                             I

      Under § 554 of the Administrative Procedure Act (“APA”), if an agency

adjudication is “required by statute to be determined on the record after opportunity for

an agency hearing,” the adjudication becomes a formal proceeding, subject to the

requirements of §§ 556 and 557 of the APA. 5 U.S.C. § 554. Sections 554, 556 and

557 require hearings to be held, impose detailed conditions for the creation of a written

record and forbid ex parte communications. 5 U.S.C. §§ 554, 556-557.

      As the Supreme Court has held, adjudicatory proceedings before the Board are

governed by the requirements of the APA. Dickinson v. Zurko, 527 U.S. 150, 154

(1999).   In In re Gartside, 203 F.3d 1305 (Fed. Cir. 2000), an appeal from an

interference proceeding, we held that PTO proceedings are not formal adjudications

governed by §§ 556 and 557 of the APA. Id. at 1313. We reasoned that APA § 554

excludes from formal adjudications under §§ 556 and 557 those proceedings that are

subject to subsequent trial de novo, and that the patent statute allows applicants to

obtain in district court such trials after PTO proceedings. Id.; see 35 U.S.C. §§ 145-146.

      Although PTO proceedings are not formal adjudications governed by §§ 556 and

557 of the APA, the Supreme Court has held that our review of those proceedings is

2006-1419                                7
governed by another section of the APA, § 706. Dickinson, 527 U.S. at 152. The

Supreme Court in Dickinson did not decide which of the several standards of review in

APA § 706 applies to PTO proceedings. We first considered that question in Gartside,

an appeal from a Board interference proceeding. We noted that APA § 706 provides

that “[t]he reviewing court shall . . . hold unlawful and set aside agency action, findings,

and conclusions found to be . . . unsupported by substantial evidence in a case subject

to sections 556 and 557 of this title or otherwise reviewed on the record of an agency

hearing provided by statute.” Gartside, 203 F.3d at 1311; 5 U.S.C. § 706 (emphasis

added). We then noted that 35 U.S.C. § 144 directs us to review “on the record” the

decisions of the Board.    Id., quoting 35 U.S.C. § 144 (“The United States Court of

Appeals for the Federal Circuit shall review the decision from which an appeal is taken

on the record before the Patent and Trademark Office.”) (emphasis added).               We

concluded that findings of fact by the Board must in all cases be supported by

substantial evidence in the record.

       Under the substantial evidence standard of review, we search for evidence,

clearly set forth in the record below, to justify the conclusions that the Board has drawn.

See Gartside, 203 F.3d at 1312. As we noted in Gartside, “[i]n appeals from the Board,

we have before us a comprehensive [factual] record . . . including all of the relevant

information upon which the Board relied in rendering its decision.”           Id. at 1314.

Crucially, we held that “[t]hat record, when before us, is closed, in that the Board’s

decision must be justified within the four corners of that record.” Id.; see also Ass’n of

Data Processing Serv. Orgs., Inc. v. Bd. of Governors of Fed. Reserve Sys., 745 F.2d

677, 683 (D.C. Cir. 1984) (“[When cases are governed by the substantial evidence

2006-1419                                8
standard of review] the factual support must be found in the closed record as opposed

to elsewhere.”).

       The fact that section 706 of the APA requires that the Board’s decision be

reviewed on the record does not directly answer the question whether the Board’s

decisions may be based on the Board’s substantive expertise reflected in the record.

However, in a contested proceeding involving “resolution of conflicting private claims to

a valuable privilege,” it is particularly important that the agency’s decision on issues of

fact be limited to the written record made before the agency. See Sangamon Valley

Television Corp. v. United States, 269 F.2d 221, 224 (D.C. Cir. 1959). 2 The Supreme

Court rejected an agency’s attempt to rely on its own expertise in a contested

proceeding in Baltimore & Ohio R.R. Co. v. Aberdeen & Rockfish R.R. Co., 393 U.S. 87,

91-92 (1968).      The Interstate Commerce Commission (“ICC”), in a ratemaking

proceeding involving competing claims by Northern and Southern railroads, determined

that the costs of North-South traffic were fairly represented by territorial average costs.

The Supreme Court held that the ICC’s decision was not supported by record evidence,

and that in such a context agency expertise cannot substitute for record evidence

because “[t]he requirement for administrative decisions based on substantial evidence

and reasoned findings—which alone make effective judicial review possible—would

become lost in the haze of so-called expertise.” Baltimore & Ohio R.R. Co., 393 U.S. at

       2
              That case held that letters that “did not go into the public record” fatally
tainted the Federal Communication Commission’s proceedings because the proceeding
involved “resolution of conflicting private claims to a valuable privilege and . . . basic
fairness requires such a proceeding to be carried on in the open.” Sangamon Valley,
269 F.2d at 224.

2006-1419                                9
92 . 3

         The detailed PTO regulations governing interferences and other contested

proceedings also highlight the importance of the comprehensive record that is required

in contested administrative proceedings before the Board. See 37 C.F.R. §§ 41.100-

41.158 (regulations governing contested cases); 37 C.F.R. § 41.200(a) (“A patent

interference is a contested case.”); 37 C.F.R. §§ 41.200-41.208 (regulations specific to

patent interferences). All motions must be accompanied with “appropriate evidence,

such that, if unrebutted, it would justify the relief sought.” 37 C.F.R. § 41.208. Detailed

rules govern depositions and the taking of testimony, requiring objections to be served

and entered on the record, and permitting parties to move to exclude evidence from the

record. 37 C.F.R. § 41.155. Transcripts of such testimony serve as the “true record of

the testimony given by the witnesses.” 37 C.F.R. § 41.157(e)(6)(ii). Finally, the Federal

Rules of Evidence apply to contested proceedings unless regulations specifically

provide otherwise. 37 C.F.R. § 41.152. These detailed regulations governing contested

cases highlight the Board’s role in such cases as an impartial adjudicator of an

adversarial dispute between two parties.

         We therefore hold that, in the context of a contested case, it is impermissible for

the Board to base its factual findings on its expertise, rather than on evidence in the

record, although the Board’s expertise appropriately plays a role in interpreting record

         3
              Quite a different standard applies when agencies interpret ambiguous
statutes. See Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837
(1984). In most situations deference is due to agency positions on a legal question.
But this is not a Chevron situation both because the issue is factual, not legal, and
because we have held in any event that the Board does not earn Chevron deference on
questions of substantive patent law. Merck & Co. v. Kessler, 80 F.3d 1543, 1549-50
(Fed. Cir. 1996).

2006-1419                                 10
evidence. We do not—and need not—decide here the extent to which the Board in ex

parte proceedings is so limited.

                                              II

         We now turn to the facts of this case. The Board here adjudicated the questions

of priority of invention and derivation. Priority of invention is awarded “to the first party

to reduce an invention to practice unless the other party can show that it was the first to

conceive of the invention and that it exercised reasonable diligence in later reducing that

invention to practice.” Medichem, S.A. v. Rolabo, S.L., 437 F.3d 1157, 1169 (Fed. Cir.

2006); 35 U.S.C. § 102(g). Priority is a question of law which is determined based on

underlying factual determinations. Price v. Symsek, 988 F.2d 1187, 1190 (Fed. Cir.

1993).

         A party may also assert that the patentee did not invent the patented invention by

showing derivation.     Id.   In an interference proceeding, the person challenging the

Senior Party’s priority date bears the burden of proof on derivation and must make two

showings. Id. First, he must “establish prior conception of the claimed subject matter.” 4

Id. Second, he must prove “communication of that conception to the patentee that is

sufficient to enable [him] to construct and successfully operate the invention.”         Int’l

Rectifier Corp. v. IXYS Corp., 361 F.3d 1363, 1376 (Fed. Cir. 2004) (internal quotation

marks omitted). This court reviews a finding of derivation as a question of fact. Gambro

         4
              Conception is defined as “formation in the mind of the inventor, of a
definite and permanent idea of the complete and operative invention, as it is hereafter to
be applied in practice. Conception is complete when the idea is so clearly defined in the
inventor's mind that only ordinary skill would be necessary to reduce the invention to
practice, without extensive research or experimentation.” Stern v. Trustees of Columbia
University in New York, 434 F.3d 1375, 1378 (Fed. Cir. 2006) (internal citations and
quotation marks omitted).

2006-1419                                11
Lundia AB v. Baxter Healthcare Corp., 110 F.3d 1573, 1576 (Fed. Cir. 1997).

       The Board decision here turns on the second issue—communication. On this

issue Brand argues that the Board improperly substituted its own opinion for evidence of

the knowledge of one of ordinary skill in the art. We agree. As the Board correctly

noted, in this case, “Miller, as the proponent of derivation by Brand . . . bears the burden

of proving that one skilled in the art would have been capable, without undue

experimentation, of making a staylog for securely supporting a tapered flitch in the

position depicted [in MX2001].” J.A. at 61. The Board rejected as unconvincing the

only relevant testimony, Miller’s testimony that he explicitly told Brand how to practice

the invention of the count. There was also no testimony from one skilled in the art that

the drawings communicated an enabling invention to a skilled recipient of the drawings.

       The Board’s conclusion that “one skilled in the art . . . would have recognized

[the] suitability [of Miller’s bugle-headed screw dogs MX2002] for securely supporting a

tapered flitch in the position depicted in [MX2001]” was not supported by any citation to

the record. J.A. at 62. Similarly, the Board did not anchor in the record its conclusion

that an artisan would have deduced from the drawing of a flitch in MX2001 standing

alone a method of securely fastening a tapered flitch to a staylog, given that the drawing

did not depict any dogs or holes in the flitch. The Board here did not just interpret the

drawings in MX2001 and MX2002 from the standpoint of one skilled in the art. Those

drawings simply depicted a flitch (without dogs) and a bugle-headed dog (without a

flitch), and did not show the relationship between the two or the position of the flitch with

respect to the veneer-cutting knife. Indeed, the Board’s own description of MX2001

2006-1419                                12
notes specifically that these relationships were “not shown.” J.A. at 60. 5

       Lacking an explanation in the record as to how the depicted flitch or dogs would

be arranged to perform the claimed method, the Board substituted its own expertise for

record evidence that Miller was obligated to provide. The Board’s finding that an artisan

would have known how to securely fasten a tapered flitch to a staylog using bugle-

headed dogs does not represent a simple substitution of bugle-headed dogs for existing

dogs, but detailed inferences as to the mounting process. The detailed nature of the

findings that the Board found necessary to make demonstrates the inappropriateness of

its approach. 6 Finally, the path that the Board determined that a skilled artisan would

       5
               The Board found that “[a]lthough not discussed in the exhibit, it is apparent
that the flitch is supported by the dogs (not shown) with its uppermost surface region
parallel to the staylog mounting surface (not shown) and thus parallel to the edge of the
veneer-cutting knife (not shown). J.A. at 60 (emphases added).
       6
              Among its multiple findings the Board found that:

              we are persuaded that one skilled in the art, having been informed
              of Miller's proposed bugle-headed screw dogs, would have
              recognized their suitability for securely supporting a tapered flitch in
              the position depicted in that exhibit. Furthermore, the artisan further
              would have recognized that Miller's dogs would permit the dogging
              holes to take the form of round holes or longitudinal pockets, with
              round holes offering the advantage of requiring less time and effort
              to form. The ability of the bugle-headed screw dogs to tightly clamp
              the flitch would have been readily apparent, since the hydraulic
              transverse clamping action would be expected to drive the facing
              parts of the edges of each pair of dogs into the walls of the dogging
              holes, whether formed as round holes or as longitudinal pockets.
              (…)
              Although an artisan would have recognized that increasing the
              transverse dimension of the dogging holes while maintaining the
              two-inch transverse spacing shown in the exhibit would come at the
              expense of part or perhaps all of the expected increase in yield the
              exhibit attributes to a "reduced staylog, shallower dogs, and closer
              spacing of dogs" (shown in blue in the original sketch), the artisan
              would have recognized that this modification would have little, if

2006-1419                                13
follow has, so far as the record reflects, never been followed. The Board found that

bugle-headed dogs were not depicted in either Miller’s application or Miller’s ’232 patent

as used to support a tapered flitch, and the Board found no evidence that bugle-headed

dogs had been used for the purpose of supporting a tapered flitch. 7              Under such

circumstances the Board’s decision was not supported by substantial evidence in the

record.

       Accordingly, we reverse the Board’s award of judgment to Miller, order that

judgment be entered for Brand and remand to the Board for entry of judgment and

appropriate orders.

                                         CONCLUSION

       For the foregoing reasons, the decision below is reversed and remanded.

                                REVERSED AND REMANDED

                                            COSTS

       No costs.

                 any, effect on the expected increase in yield the exhibit attributes to
                 "keeping wedge, deep dogging holes, and less severe milling of
                 sides of flitch" (shown in yellow in the original sketch).

J.A. at 62-64.
       7
              The Board stated: “We did not overlook fact [sic] that the record includes
no allegation, let alone proof, that Miller’s proposed bugle-headed dogs were used
(either successfully or unsuccessfully) to support a tapered flitch or a nontapered flitch
on a staylog prior to Brand’s May 31, 1995, benefit date.” J.A. at 79.

2006-1419                                   14