Paper Converting MacHine Company v. Magna-Graphics Corporation

NIES, Circuit Judge,

dissenting-in-part.

I dissent from the majority’s holding that Magna-Graphics’ activities in connection with the Fort Howard machine constitute direct infringement of any claim of Paper Converting’s patent. The majority’s conclusion necessitates giving a meaning to “patented invention” contrary to the definition set forth by the Supreme Court in Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 92 S.Ct. 1700, 32 L.Ed.2d 273 173 USPQ 769 (1972).

The analysis must begin with the statutory language of 35 U.S.C. § 271(a):

Except as otherwise provided in this title, whoever without authority makes, uses or sells any patented invention, within the United States during the term of the patent therefor, infringes the patent. [Emphasis added.]

The majority holds that incomplete assembly of the patented invention is making, testing of subassemblies is using, and a sale of an unassembled machine is selling the patented invention within the meaning of the above section. The majority reasons that a contrary result would emasculate the congressional intent to prevent the making of a patented item during the patent’s full term of 17 years. It could be said with equal validity that, given the lead time necessary to make the invention here, the majority effectively extends the patentee’s right of exclusivity beyond the statutory 17 years.

I do not see in Deepsouth that the Supreme Court’s only concern was the extraterritorial operation of our patent laws. The activities of Deepsouth under attack were all performed in the United States and were found not to result in direct or contributory infringement of the patent. That the activities of final assembly occurred abroad merely precluded a holding that Deepsouth’s activities constituted contributory infringement. Contributory infringement cannot arise without a direct infringement. Mercoid Corp. v. Mid-Continent Investment Co., 320 U.S. 661, 677, 64 S.Ct. 268, 276, 88 L.Ed. 376, 60 USPQ 21, 29 (1944). The situation in Deepsouth is exactly comparable to the one at hand. That the activities of final assembly occurred after the patent expired precludes holding Magna-Graphics to be a contributory infringer, there being no direct infringement by another to which the charge can be appended.

Thus, we are back to the dispositive direct infringement issue in Deepsouth, which is the same as the issue here. What is the meaning of “patented invention” in 35 U.S.C. § 271(a)? The alleged infringer, in each case, made and sold something, but was it the “patented invention”?

The relevant facts in Deepsouth were as follows: Laitram Corp. held two U.S. patents, which together constituted a commercial shrimp deveining machine. Each patented component was, as in all but the simplest machines, a combination of elements. Deepsouth made all of the parts for an infringing machine, assembled them but for two elements, and sold the assembled and unassembled parts as a unit. Deepsouth advertised to its customers that final assembly was of no importance and, in fact, required less than an hour. Indeed, the partially assembled equipment and parts were sold at the same price at which Deepsouth previously had sold fully assembled machines held to be infringements. Admittedly, its course of conduct was, in the words of the majority here, a “scheme" to avoid infringement. Deepsouth’s *25“scheme” was, however, ultimately successful.

Following precedent of the Second, Third and Seventh Circuits1, the district court had held that Deepsouth could not be prohibited from exporting elements of the patented invention even when those elements could, and predictably would, be combined to form the whole. Laitram Corp. v. Deepsouth Packing Co., Inc., 310 F.Supp. 926, 165 USPQ 147 (E.D.La.1970). The Fifth Circuit, to which the case was appealed, reversed, finding the construction of the statute by the other circuits “artificial” and “technical”. In its view, “The Constitutional mandate cannot be limited to just manufacturing and selling in the United States.” Accordingly, the court held “substantial manufacture” to be a sufficient basis for direct infringement. Laitram Corp. v. Deepsouth Packing Co., 443 F.2d 936, 170 USPQ 196 (5th Cir.1971).

In reversing, Justice White wrote:

We cannot endorse the view that the “substantial manufacture of the constituent parts of a machine” constitutes direct infringement when we have so often held that a combination patent protects only against the operable assembly of the whole and not the manufacture of its parts. [Emphasis added.]

406 U.S. at 528, 92 S.Ct. at 1707, 173 USPQ at 773.

Nothing in Justice White’s opinion in Deep-south indicates that the concept of an operable assembly is “probably something short of a full and complete assembly,” as the majority states. The Court had before it the Fifth Circuit opinion which had analyzed just such less-than-full-assembly situations. Repeatedly, the Court emphasized that the “patented invention” means that all of its claimed elements must be united.

Thus, if the claimed invention comprises the elements A, B, C and D, it is only the combination in its entirety that is proteet-ed. The making of the lesser combination A, B and D falls short of direct infringement, even though the missing element C is also supplied by the alleged infringer.

This conclusion follows, in the Court’s analysis, from the principles expressed in Mercoid Corp. v. Minneapolis-Honeywell Regulator Co., 320 U.S. 680, 684, 64 S.Ct. 278, 280, 88 L.Ed. 396, 60 USPQ 30, 32 (1944) and other precedent, that “a patent on a combination is a patent on the assembled or functioning whole, not on the separate parts.” 406 U.S. at 528, 92 S.Ct. at 1707.

The Deepsouth opinion also reiterates the following language from Radio Corp. of America v. Andrea, 79 F.2d 626, 628, 27 USPQ 364, 366 (2d Cir.1935):

[The] relationship is the essence of the patent.
... No wrong is done the patentee until the combination is formed. His monopoly does not cover the manufacture or sale of separate elements capable of being, but never actually, associated to form the invention. Only when such association is made is there a direct infringement of his monopoly____

406 U.S. at 529, 92 S.Ct. at 1707, 173 USPQ at 773.

It must also be noted that the Supreme Court discounted Deepsouth’s sales activity in the following words:

[Laitram’s] argument that Deepsouth sells the machines — based primarily on Deepsouth’s sales rhetoric and related indicia such as price — cannot carry the day unless it can be shown that Deep-south is selling the “patented invention.” The sales question thus resolves itself into the question of manufacture: did Deepsouth “make” (and then sell) something cognizable under the patent law as the patented invention, or did it “make” (and then sell) something which fell short of infringement?

*26406 U.S. at 527, 92 S.Ct. at 1706, 173 USPQ at 773 (footnote omitted).

It is not surprising that Magna-Graphics’ counsel read Deepsouth as permitting the course of conduct condemned here. The majority opinion is no less than a reversal of Deepsouth2. Regardless of the reasonableness of the alternative interpretation of § 271(a) given by the majority, we are bound by the Supreme Court’s decision. No greater prerogative to modify it accrues to us from a 5-4 vote than from a unanimous decision. Change must be left to Congress, or the Court itself. In Deep-south the extension of patent protection which had been urged was viewed as a matter for a legislative directive:

In sum: the case and statutory law resolves this case against the respondent. When so many courts have so often held what appears so evident — a combination patent can be infringed only by combination — we are not prepared to break the mold and begin anew. And were the matter not so resolved, we would still insist on a clear congressional indication of intent to extend the patent privilege before we could recognize the monopoly here claimed. Such an indication is lacking.

406 U.S. at 532, 92 S.Ct. at 1708, 173 USPQ at 774.

Such indication is still lacking. We cannot assume that the present Court would find reason to depart from Deepsouth in the face of congressional inaction over the twelve years since the decision was handed down.3

Indeed, the Deepsouth decision is not without redeeming virtue. This is one of the few areas of patent law where a bright line can be, and has been, drawn. That consideration in itself has merit. A competitor should be able to look to the patent claims and know whether his activity infringes or not. Here, the majority provides no guidance to industry or the district courts. One cannot tell from the opinion whether testing and sales activity must also accompany substantial assembly, as it appears to hold, or whether simply substantially making the device preparatory to selling after the patent expires would be sufficient. Given the disjunctive language of the statute, no basis appears for “summing up” partial making with the testing of partial assemblies and with sales made by the alleged infringer. Those activities do not, in some nebulous way, supply the missing physical elements of the “patented invention.”

The determinative factor in Deepsouth was that the alleged infringer had never made, used or sold the “patented invention.” Its activities fell short of direct infringement because the court rejected the view that direct infringement required anything less than “the operable assembly of the whole and not the manufacture of its parts.” In this case as well, no operable assembly of the whole was ever made by Magna-Graphics. If the patented invention was not made, a fortiori, it could not have *27been used or sold. Thus, there is no direct infringement.4

As a final matter, a decision of non-infringement here would not create an “inconsistency” with the decision in Roche Products, Inc. v. Bolar Pharmaceutical Co., 733 F.2d 858, 221 USPQ 937 (Fed.Cir. 1984). In Roche, the patented invention had been made, albeit not by the alleged infringer, Bolar. The only issue was whether Bolar’s testing of the patented invention for FDA purposes was “use” within § 271(a). The Roche decision lends no support to the proposition that testing of components of a patented invention constitutes infringement.

I would, accordingly, reverse.

. Hewitt-Robins Inc. v. Link-Belt Co., 371 F.2d 225, 151 USPQ 670 (7th Cir.1966); Cold Metal Process Co. v. United Engineering & Foundry Co., 235 F.2d 224, 110 USPQ 332 (3rd Cir.1956), aff’d on other grounds, 351 U.S. 445, 76 S.Ct. 904, 100 L.Ed. 1311 (1956); Radio Corp. of America v. Andrea, 79 F.2d 626, 27 USPQ 364 (2nd Cir.1935), 90 F.2d 612, 34 USPQ 312 (2d Cir.1937).

. The district court in this case relied on the doctrine of equivalents to find direct infringement. While that court’s position is sound in theory, the facts do not support application of that doctrine here. Contrary to what one would understand from reading the majority opinion, more was required to make the Fort Howard machine operable than affixing final nuts and bolts. Assembly was started on April 26, 1982; substantial problems were encountered requiring changes in some parts; and Fort Howard did not accept the machine until November 1982.

. Legislative efforts to overrule Deepsouth have been extensive. However, the thrust of proposed legislation has not been directed to changing the meaning of "patented invention." For example, pending H.R. 4526, 98th Congress, 1st Session, provides in relevant part:

(f) Whoever without authority supplies or causes to be supplied in the United States the material components of a patented invention, where such components are uncombined in whole or in part, intending that such components will be combined outside of the United States, and knowing that if such components were combined within the United States the combination would be an infringement of the patent, shall be liable as an infringer.

. Accord, Amstar Corp. v. Envirotech Corp., 730 F.2d 1476, 1484, 221 USPQ 649, 655 (Fed.Cir. 1984); Decca Ltd. v. United States, 640 F.2d 1156, 1168, 209 USPQ 52, 61 (Ct.C1.1980); Tele-dyne McCormick Selph v. United States, 558 F.2d 1000, 1007-1008, 195 USPQ 261, 267 (Ct.Cl. 1977); Strumskis v. United States, 474 F.2d 623, 628, 175 USPQ 243, 246 (Ct.C1.1973), cert, denied, 414 U.S. 1067, 94 S.Ct. 576, 38 L.Ed.2d 472 (1973).

It appears to me that the "taking” by the government in Decca would have occurred at an earlier date had the Court of Claims utilized the standard here. Use by the government of operable components was held in Decca not to directly infringe claims which required interconnection of the components.