United States Court of Appeals for the Federal Circuit
04-1412
ELECTROMOTIVE DIVISION OF GENERAL MOTORS CORPORATION,
Plaintiff-Appellant,
v.
TRANSPORTATION SYSTEMS DIVISION OF GENERAL ELECTRIC COMPANY,
Defendant-Appellee,
and
DAIDO INDUSTRIAL BEARINGS, LTD.,
Defendant-Appellee.
Ernie L. Brooks, Brooks Kushman P.C., of Southfield, Michigan, argued for
plaintiff-appellant. With him on the brief were Frank A. Angileri and Thomas W.
Cunningham.
Martin R. Lueck, Robins, Kaplan, Miller & Ciresi L.L.P., of Minneapolis,
Minnesota, argued for defendant-appellee Transportation Systems Division of General
Electric Company. With him on the brief was Jan M. Conlin. Of counsel on the brief
were David P. Swenson, of Washington, DC, and David G. Mangum, C. Kevin Speirs,
and Catherine A. Agnoli, Parsons Behle & Latimer, of Salt Lake City, Utah.
Appealed from: United States District Court for the Eastern District of Michigan
Judge John Corbett O’Meara
United States Court of Appeals for the Federal Circuit
04-1412
ELECTROMOTIVE DIVISION OF GENERAL MOTORS CORPORATION,
Plaintiff-Appellant,
v.
TRANSPORTATION SYSTEMS DIVISION OF GENERAL ELECTRIC COMPANY,
Defendant-Appellee,
and
DAIDO INDUSTRIAL BEARINGS, LTD.,
Defendant-Appellee.
__________________________
DECIDED: July 28, 2005
__________________________
Before MICHEL, Chief Judge, PLAGER, Senior Circuit Judge, and LINN, Circuit Judge.
MICHEL, Chief Judge.
The Electromotive Division of General Motors Corporation (“EMD”) appeals the
United States District Court for the Eastern District of Michigan’s grant of summary
judgment of invalidity of United States Patent Nos. 5,169,242 and 5,567,056 (“the ’242
and ’056 patents,” respectively) under the on-sale bar of 35 U.S.C. § 102(b).
Electromotive Div. of Gen. Motors Corp. v. Transp. Sys. Div. of Gen. Elec. Co. & Daido
Indus. Bearings, Ltd., No. 03-70940 (E.D. Mich. May 4, 2004). The ’242 patent is
generally directed to compressor bearings for use in turbochargers for diesel locomotive
engines. The ’056 patent relates generally to planetary bearings for use in turbocharger
planetary drive trains. The appeal was submitted after oral argument on March 8, 2005.
Because the patented compressor and planetary bearings were subject to pre-critical
date sales that were commercial and not primarily experimental, we agree with the
district court that the ’242 and ’056 patents have been proven invalid as a matter of law
under the on-sale bar of § 102(b). Accordingly, we affirm the district court’s grant of
summary judgment of invalidity of both patents in favor of the Transportation Systems
Division of General Electric Company and Daido Industrial Bearings, Ltd.
I. BACKGROUND
A. EMD’s General Design and Testing Procedures
EMD is a division of General Motors Corporation focused on the design and
production of locomotives. As part of that business, EMD designs and manufactures
component parts for locomotive engines, including the two kinds of bearings at issue in
this case. Both types of bearings are embedded in turbochargers, which are in turn
embedded in the engines of locomotives that EMD sells.
After developing a new bearing, EMD typically initiates a two-phase testing
program before releasing the new bearing for commercial production. In the first phase,
termed Reliability Growth Testing, EMD tests its new bearings indoors at its engineering
facilities on multiple unit turbocharger cells (“in-house program”). The purpose of the
in-house program is to ascertain the durability and reliability of the new bearings.
Upon completion of the in-house program, EMD commences the second phase
of testing, termed Reliability Verification Testing (“field program”). This testing occurs
outdoors under actual use conditions. That is, after EMD integrates the new bearings
04-1412 2
into existing orders, the customer railroads use the new bearings in their routine
operations. The purpose of this second phase is to verify durability.
During the field program, EMD does not engage in ongoing monitoring or
periodic inspections of its new bearings because they are buried inside turbochargers
and cannot readily be examined by visual inspection. Rather, EMD inspects the new
bearings only if a particular turbocharger fails and is sent back to EMD. In such case,
EMD disassembles the failed turbocharger to assess whether the failure was caused by
the new bearings or some other part.
B. Events Involving the New Compressor Bearings
In the late 1980s, EMD developed a new compressor bearing for use in diesel
locomotive turbochargers. On July 17, 1989, James L. Blase, an EMD employee and
one of the named inventors on the two asserted patents, reported during an internal
meeting that he had tested the new compressor bearings for approximately 3000 hours
in a twelve-cylinder multiple unit locomotive engine. The minutes of that meeting
document that the in-house program had been completed. Thus, EMD decided to
proceed with the field program by substituting the new compressor bearings into
locomotive orders previously placed by Norfolk Southern, Go Transit, and LXO
railroads.1
EMD contacted Norfolk Southern, Go Transit, and LXO for permission to
substitute the prior art bearings, originally to be used in the purchased locomotives, with
the new compressor bearings. According to Mr. Blase, the three railroads agreed to
1
In the fall of 1988 and spring of 1989, EMD sold a total of forty-six
locomotives to Norfolk Southern, Go Transit, and LXO, scheduling delivery for late 1989
and early 1990. Norfolk Southern ordered thirty-three locomotives, Go Transit ordered
twelve locomotives, and LXO ordered one locomotive.
04-1412 3
accept the new bearings. None of the three companies, however, signed a
confidentiality agreement or any other contract consenting to participate in the field
program. They likewise were not given any design details or other documentation
regarding the new compressor bearings. Further, Norfolk Southern, Go Transit, and
LXO were not restricted or supervised in their use of the new compressor bearings and
were not under any obligation to collect data, keep progress records, or even operate
the subject locomotives during the time of the field program.
After arranging for the substitution, EMD prepared internal memos documenting
the change to be made in the Norfolk Southern, Go Transit, and LXO orders. For
example, a July 19, 1989 internal memo stated: “Orders 887007 [for Norfolk Southern],
C484 [for Go Transit], and 899110 [for LXO] are to have Turbocharger 40014638
replaced by Turbocharger 40021524. . . . The turbocharger and EMD make component
schedules must be revised to reflect this change.” A different July 19, 1989 memo
stated that “[t]he drawings and bills of material for these orders must be changed to
include this new bearing. This will be accomplished with an expedited RFC. Jim
Korenchan will write this RFC and get it to the drafting room by
7-19-89.” Similarly, a July 25, 1989 internal memo stated: “This new bearing
addresses all known failure modes and MUST be included in upcoming 12-710GA
engines. The orders affected are the [Norfolk Southern] GP59 order No. 887007, Go
Transit order no. C484, and LXO no. 899110.”
On August 28, 1989, EMD modified its original specification of February 1, 1989
for the Norfolk Southern order, agreeing to supply more new compressor bearings to
Norfolk Southern than originally planned for in its prior locomotive order. In particular,
04-1412 4
EMD noted that it “will provide spare parts for [Norfolk Southern]’s GP59 locomotives,”
including the “Turbo” of part number 40021531. The specified Turbo included the new
compressor bearings.
Between January 1989 and November 1989, EMD purchased a total of 303 new
compressor bearings from Allison Gas & Turbine (“Allison”), another division of General
Motors Corporation, for a price of $298.80 each. Allison manufactured these bearings
according to specifications provided by EMD. After receiving the new compressor
bearings from Allison, EMD substituted them into locomotives previously sold to Norfolk
Southern, Go Transit, and LXO. Thereafter, EMD shipped the subject locomotives to
the three railroads.
On November 27, 1990, EMD filed a patent application for its new compressor
bearings. Based upon this filing date, the critical date for applying the on-sale bar for
the ’242 patent is November 27, 1989. The ’242 patent issued on December 8, 1992.
Claims 1 through 7 of the ’242 patent are directed to a turbocharger assembly, and
claims 8 through 18 are directed to the new compressor bearings.
On August 19, 1991, EMD released the new compressor bearings for production.
All locomotive sales involving diesel engines after August 1991 included the new
compressor bearings. Before this release, however, EMD employed prior art bearings
in all customer orders, except the Norfolk Southern, Go Transit, and LXO orders
discussed above. EMD likewise did not advertise, market, or create promotional
materials for the new compressor bearings prior to the August 1991 release.
04-1412 5
C. Events Involving the New Planetary Bearings
In September 1992, EMD designed a new planetary bearing for use in
turbocharger planetary drive trains. In January 1993, EMD initiated the in-house
program for this new bearing type. In March 1993, EMD decided to proceed with the
field program. To do so, EMD approached Union Pacific railroad for permission to
substitute its new planetary bearings for prior art bearings in an order for two
locomotives that Union Pacific placed earlier in 1992. Union Pacific allegedly agreed.
Nevertheless, it did not sign a confidentiality agreement or any other type of a contract
consenting to participate in the field program. Union Pacific also was not placed under
any restrictions or supervision regarding the use of the locomotives containing new
planetary bearings. Nor was Union Pacific given any design details for the new
planetary bearings or required to monitor or document its usage of the subject
locomotives during the field program.
On July 6, 1993, EMD ordered 105 new planetary bearings at $88.87 per bearing
from its supplier Glacier, now Daido Industrial Bearings, Ltd. (“Daido”). On August 6,
1993, EMD installed six planetary bearings that it had purchased from Daido into
turbochargers for the two locomotives destined for Union Pacific. EMD shipped those
locomotives to Union Pacific that same day. On September 7, 1994, EMD released the
planetary bearings for production, meaning that the new planetary bearings were
included in all future locomotive sales involving turbocharger planetary drive trains.
On September 29, 1994, EMD filed a patent application for its new planetary
bearings. Based upon this filing date, the critical date for the ’056 patent is September
29, 1993. The ’056 patent issued on October 22, 1996. Claims 1 through 6 of the ’056
04-1412 6
patent are directed to the new planetary bearings, while claim 7 is directed to a
turbocharger planetary drive train.
D. Trial Court Proceedings
In March 2003, EMD filed a patent infringement action against the Transportation
Systems Division of General Electric Company and Daido, asserting infringement of the
’242 and ’056 patents. In December 2003, GE and Daido separately moved for
summary judgment that the ’242 and ’056 patents are invalid under the on-sale bar of
35 U.S.C. § 102(b). EMD filed a cross-motion for summary judgment that neither the
’242 nor the ’056 patent is invalid under the on-sale bar. EMD contended that its sales
of the new compressor and planetary bearings did not raise the on-sale bar provision of
§ 102(b) because those sales were for purposes of experimentation.
In May 2004, the district court granted GE’s and Daido’s motions and denied
EMD’s cross-motion. The district court held that EMD’s purchase of new compressor
bearings from Allison before the critical date was a commercial sale within the meaning
of § 102(b). The district court also held that both EMD’s substitution of new compressor
bearings in place of prior art bearings in sales made to Norfolk Southern, Go Transit,
and LXO prior to the critical date and its sale of spare compressor bearings to Norfolk
Southern prior to the critical date separately raised the on-sale bar. As for the planetary
bearings, the district court concluded that Daido’s sale of the planetary bearings to EMD
prior to the critical date and EMD’s substitution of two sets of new planetary bearings for
prior art bearings in locomotives sold to Union Pacific prior to the critical date were each
invalidating sales under § 102(b).
04-1412 7
The district court considered whether the objective indicia suggesting
experimentation precluded the on-sale bar for either the ’242 or ’056 patent, ultimately
concluding that they did not. The district court found that the various transactions
between EMD, Allison, Daido, and EMD’s four railroad customers were no different than
normal commercial sales. The district court also found that EMD exercised no control
over its customers’ use of the new bearings after they were sold. The district court
further found that there was little evidence of experimentation given that (1) neither
EMD nor its customers maintained any test data, progress reports, or other records;
(2) EMD sold a large number of new compressor and planetary bearings during the
periods of alleged experimentation; and (3) EMD inspected failed turbochargers in the
ordinary course of business, not as part of any experimental protocol. Lastly, the district
court found that the field program was unnecessary because EMD had established that
both types of new bearings were durable through the in-house program.
EMD timely appealed. We have jurisdiction over this appeal pursuant to
28 U.S.C. § 1295(a)(1).
II. DISCUSSION
We review a district court’s grant of summary judgment de novo, and its denial of
summary judgment for abuse of discretion. Intel Corp. v. Via Techs., Inc., 319 F.3d
1357 (Fed. Cir. 2003) (internal citations omitted). Whether an invention was on sale
within the meaning of § 102(b) is a question of law that we review de novo based upon
underlying facts, which we review for clear error. See Pfaff v. Wells Elecs., 124 F.3d
1429, 1432 (Fed. Cir. 1997), aff’d, 525 U.S. 55 (1998).
04-1412 8
A. Whether the Sales Were Sufficient to Raise the Bar of § 102(b)
A person is entitled to a patent unless, inter alia, “the invention was . . . on sale in
this country, more than one year prior to the date of the application for patent in the
United States.” 35 U.S.C. § 102(b) (2000). In order for a patent claim to be held invalid
under the on-sale bar of § 102(b), two conditions must be satisfied before the critical
date. First, the claimed invention must be the subject of a commercial sale. Second,
the claimed invention must be ready for patenting. Pfaff, 525 U.S. at 67-68. “Before the
Supreme Court’s decision in Pfaff, this court used a multifactor, ‘totality of the
circumstances’ test to enforce the on-sale bar.” EZ Dock, Inc. v. Schafer Sys., Inc., 276
F.3d 1347, 1351 (Fed. Cir. 2002). Following Pfaff, we now apply the two-part test
“‘without balancing various policies [of the bar] according to the totality of the
circumstances.’” Id. (quoting Weatherchem Corp. v. J.L. Clark, Inc., 163 F.3d 1326,
1333 (Fed. Cir. 1998)).
EMD did not challenge below, and does not challenge on appeal, that its bearing
inventions were “ready for patenting” at the time of the alleged commercial sales. Thus,
the relevant inquiry here concerns only the first prong of the Pfaff test.
We have recognized that the first prong “involves a determination of whether a
commercial offer for sale [or sale] has occurred, applying traditional contract law
principles.” Allen Eng’g Corp. v. Bartell Indus., Inc., 299 F.3d 1336, 1352 (Fed. Cir.
2002). In this case, the district court found several invalidating sales for the ’242 and
’056 patents. We need not consider whether the district court was correct as to all of
these sales because a single sale or offer for sale suffices to bar patentability. Atl.
Thermoplastic Co. v. Faytex Corp., 970 F.2d 834, 836 (Fed. Cir. 1992) (citing In re
04-1412 9
Caveney, 761 F.2d 671, 676 (Fed. Cir. 1985)); A.B. Chance Co. v. RTE Corp., 854 F.2d
1307, 1311 (Fed. Cir. 1988). Thus, for each type of bearing, we restrict our analysis to
the question of whether any one of EMD’s alleged sales is sufficient to invoke § 102(b).
Before addressing this question, we observe that the first prong of the Pfaff test
entails an assessment of whether the circumstances surrounding a pre-critical date sale
objectively show that it was primarily made for experimentation.
[T]he question posed by the experimental use doctrine, assessed under
the first prong of the two-part on-sale bar test of Pfaff, is not whether the
invention was under development, subject to testing, or otherwise still in
its experimental stage at the time of the asserted sale. Instead, the
question is whether the transaction constituting the sale was not incidental
to the primary purpose of experimentation, i.e., whether the primary
purpose of the inventor at the time of the sale, as determined from an
objective evaluation of the facts surrounding the transaction, was to
conduct experimentation.
Allen Eng’g, 299 F.3d at 1353 (citing EZ Dock, 276 F.3d at 1356-57 (Linn, J.,
concurring)) (internal citations and quotations omitted). If the sale was primarily for
experimentation rather than commercial gain, then the sale is not invalidating under
§ 102(b). Monon, 239 F.3d at 1258 (“[E]vidence that the . . . sale of the patented device
was primarily experimental may negate an assertion of invalidity.”). Although we
proceed in a step-wise fashion, analyzing first whether EMD made any pre-critical date
sales of its compressor and planetary bearings and then whether any such sales were
negated by EMD’s experimentation, we emphasize for sake of clarity that we are
considering only one legal question, namely, the first prong of the Pfaff test.
As to compressor bearings, Transportation Systems Division of General Electric
Company and Daido (collectively “GE”) argue that EMD’s agreement to supply spare
compressor bearings to Norfolk Southern constituted a commercial sale under § 102(b).
04-1412 10
The district court agreed, and so do we. In July 1989, some months after EMD
arranged to substitute its new compressor bearings into locomotives ordered by Norfolk
Southern, EMD contracted with Norfolk Southern to supply spare compressor bearings
not included in the original deal. To reflect this transaction, EMD prepared a
“Specification Supplement H,” dated August 28, 1989, three months before the critical
date, stating that EMD “will provide spare parts for [Norfolk Southern]’s GP59
locomotives,” including the turbocharger part number 40021531. The July 1989
assembly list for turbocharger part number 40021531 reveals that this particular
turbocharger contained the new compressor bearings. Based upon this evidence, we
can only conclude that EMD’s new compressor bearings were the subject of a sale prior
to the critical date.
Turning to planetary bearings, GE asserts that EMD’s purchase of more than one
hundred planetary bearings from Daido was a pre-critical date sale within the meaning
of § 102(b). We agree. Daido’s sale to EMD was plainly a sale of the new planetary
bearings prior to the critical date.
B. Evidence of Experimentation
GE contends that EMD’s sale of spare compressor bearings cannot be the
subject of experimentation. We are persuaded by this contention, noting in particular
that the record does not reveal when or how Norfolk Southern intended to use the spare
compressor bearings. There also was no evidence showing that Norfolk Southern
replaced even one of the compressor bearings found in locomotives that EMD
considered part of its field program with one of the spare compressor bearings. Such
replacement must have occurred prior to the production release of the new compressor
04-1412 11
bearings in August 1991. Any replacement after that date certainly could not qualify as
experimentation because EMD incorporated the new compressor bearings into all diesel
engine locomotive orders following production release. Therefore, for the reasons set
forth below, we conclude that EMD’s sale of spare compressor bearings to Norfolk
Southern was not primarily for experimentation and thus that the district court did not err
in holding the ’242 patent invalid under § 102(b).
Regarding planetary bearings, EMD argues that, at a minimum, a genuine issue
of fact exists as to whether the sale of the new planetary bearings was primarily for
experimentation, pointing out that (1) completion of the field program was required
under EMD’s policy before releasing a new bearing for production; (2) neither
monitoring nor inspection was necessary because the purpose of the field program was
merely to verify durability; (3) inspection was not even possible because the new
planetary bearings were embedded in the turbochargers housed inside locomotive
engines; and (4) failed turbochargers were returned to EMD for teardown and
inspection. EMD also analogizes the facts here to those in Manville Sales Corp. v.
Paramount Systems, Inc., 917 F.2d 544 (Fed. Cir. 1990), and EZ Dock, 276 F.3d 1347.
In both cases, which involved durability testing, we rejected an assertion of the on-sale
bar.
GE responds that the field program was unnecessary because the new planetary
bearings had already been shown to work for their intended purpose during the
in-house program. GE also asserts that durability testing under actual use conditions
was not required because durability is not a claim limitation in the ’056 patent.
Additionally, GE contends that the district court correctly found, despite EMD’s
04-1412 12
subjective intent to experiment, that the objective evidence revealed that EMD’s sale to
Union Pacific was not primarily for experimentation, noting, inter alia, that EMD did not
control Union Pacific’s use of the new planetary bearings and that the field program
lacked the customary objective indicia associated with experimentation such as test
records.
At the outset, we observe that EMD purchased the new planetary bearings from
Daido to use in filling Union Pacific’s pre-critical date locomotive order, which was to
contain new planetary bearings instead of prior art bearings. Thus, we reason that the
sale from Daido to EMD (“upstream sale”) and the sale from EMD to Union Pacific
(“downstream sale”) are so inextricably linked that we cannot identify the purpose for
the Daido’s upstream sale without examining the purpose for EMD’s downstream sale.
Our analysis concerning whether the new planetary bearings were the subject of an
invalidating sale under § 102(b), consequently, hinges on the purpose for the sale from
EMD to Union Pacific.
It is important to recognize that this court has limited experimentation sufficient to
negate a pre-critical date public use or commercial sale to cases where the testing was
performed to perfect claimed features, or, in a few instances like the case here, to
perfect features inherent to the claimed invention. See, e.g., EZ Dock, 276 F.3d at 1353
(experimentation focused on durability of claimed polyethylene floating dock in turbulent
water of the Mississippi River, although durability was not a claim limitation); Seal-Flex,
Inc. v. Athletic Track & Court Constr., 98 F.3d 1318, 1320 (Fed. Cir. 1996)
(experimentation focused on durability of claimed all-weather activity mat under harsh
weather conditions, but durability was not a claim limitation); Manville, 917 F.2d at 550-
04-1412 13
51 (experimentation focused on durability of claimed self-centering, lightpole luminaire
under severe winter conditions in Wyoming, even though durability was not a claim
limitation). Here, EMD designed its field program to verify durability, a feature, although
unclaimed, we hold is inherent to the new planetary bearings. Hence, evidence
showing that EMD’s field program has the requisite objective indicia of experimentation
may negate EMD’s pre-critical date sale of the new planetary bearings to Union Pacific.2
Few decisions address how to determine if a pre-critical date public use or sale is
experimental rather than a public use or sale under § 102(b), even though the doctrine
has been in existence since City of Elizabeth v. Pavement Co., 97 U.S. 126 (1878).3
But certain things are settled. Significantly, an inventor’s subjective intent to experiment
cannot establish that his activities are, in fact, experimental.
When sales are made in an ordinary commercial environment and the
goods are placed outside the inventor’s control, an inventor’s secretly held
subjective intent to “experiment,” even if true, is unavailing without
objective evidence to support the contention. Under such circumstances,
the customer at a minimum must be made aware of the experimentation.
LaBounty Mfg., Inc. v. U.S. Int’l Trade Comm’n, 958 F.2d 1066, 1072 (Fed. Cir. 1992)
(citing In re Brigance, 792 F.2d 1103, 1108 (Fed. Cir. 1986)). Thus, while EMD officials
may have subjectively believed they were conducting experimentation under actual use
2
It is well-settled that an accused infringer carries the burden of proving
invalidity by clear and convincing evidence. When the accused infringer alleges
invalidity under § 102(b) based upon a pre-critical date public use or commercial sale,
however, an inventor may introduce evidence showing that his public use or sale was
primarily for purposes of experimentation, thus neutralizing the accused infringer’s
showing.
3
Although City of Elizabeth involved a pre-critical date public use of the
claimed invention, we have applied experimentation not only in that context but also in
the on-sale context. See In re Hamilton, 882 F.2d 1576, 1580 (Fed. Cir. 1989).
04-1412 14
conditions, their beliefs cannot establish that EMD’s sales were primarily for
experimentation.
We have generally looked to objective evidence to show that a pre-critical date
sale was primarily for experimentation. For example, in T.P. Laboratories, Inc. v.
Professional Positioners, Inc., 724 F.2d 965, 972 (Fed. Cir. 1984), we indicated that
various objective indicia may be considered in determining whether the inventors
engaged in experimentation:
The length of the test period is merely a piece of evidence to add to the
evidentiary scale. The same is true with respect to whether payment is
made for the device, whether a user agreed to use secretly, whether
records were kept of progress, whether persons other than the inventor
conducted the asserted experiments, how many tests were conducted,
how long the testing period was in relationship to tests of other similar
devices.
Id. at 971-72; see also Baker Oil Tools, Inc. v. Geo Vann, Inc., 828 F.2d 1558, 1564
(Fed. Cir. 1987) (listing similar types of objective evidence to be considered in
determining if a public use or sale is experimental).
Recently, we catalogued and consolidated all these considerations into a list of
thirteen objective factors: (1) the necessity for public testing; (2) the amount of control
over the experiment retained by the inventor; (3) the nature of the invention; (4) the
length of the test period; (5) whether payment was made; (6) whether there was a
secrecy obligation; (7) whether records of the experiment were kept; (8) who conducted
the experiment; (9) the degree of commercial exploitation during testing; (10) whether
the invention reasonably requires evaluation under actual conditions of use;
(11) whether testing was systematically performed; (12) whether the inventor continually
monitored the invention during testing; and (13) the nature of the contacts made with
04-1412 15
potential customers. Allen Eng’g, 299 F.3d at 1353 (citing EZ Dock, 276 F.3d at 1357
(J. Linn, concurring)). This list is not exhaustive, and all of the experimentation factors
may not apply in a particular case. See Brigance, 792 F.2d at 1108. They simply
represent various kinds of evidence relevant to the question of whether pre-critical date
activities involving the patented invention – either public use or sale– were primarily
experimental and not commercial.
This court, however, has held or at least suggested that certain evidentiary
showings can be dispositive of the question of experimentation. In In re Hamilton, 882
F.2d 1576 (Fed. Cir. 1989), we stated:
First, we may agree with [the inventor] that control is not the “lodestar” test
in all cases involving experimental use. It is nonetheless an important
factor. The experimental use doctrine operates in the inventor’s favor to
allow the inventor to refine his invention or to assess its value relative to
the time and expense of prosecuting a patent application. If it is not the
inventor or someone under his control or “surveillance” who does these
things, there appears to us no reason why he should be entitled to rely
upon them to avoid the statute.
Id. at 1581 (internal citation omitted and emphasis in original). We observed that
nothing in the record showed that the Hamilton inventor knew what, if anything, the
customer was doing in terms of testing the invention. As a result, we concluded that the
inventor’s purpose in making the sale was not primarily experimental.
Following Hamilton, this court again emphasized the importance of control in
Lough v. Brunswick Corp., 86 F.3d 1113 (Fed. Cir. 1996). In particular, this court said
that an inventor must show control over the alleged testing to establish experimentation.
Id. at 1120. Additionally, the Lough court placed critical emphasis on experimental
records. After listing various objective indicia of experimentation, which included both
whether records or progress reports were made concerning the testing and the extent of
04-1412 16
control the inventor maintained over the testing, this court stated: “The last factor of
control is critically important, because, if the inventor has no control over the alleged
experiments, he is not experimenting. If he does not inquire about the testing or receive
reports concerning the results, similarly, he is not experimenting.” Id. The Lough court
also stated: “When one distributes his invention to members of the public under
circumstances that evidence a near total disregard for supervision and control
concerning its use, the absence of these minimal indicia of experimentation require a
conclusion that the invention was in public use.” Id. at 1122 (emphasis added). Hence,
this court held, based primarily upon the absence of control and records, that the
inventor’s public use of the claimed invention was not experimental.
Two years after Lough, in a concurring opinion in C.R. Bard, Inc. v. M3 Systems,
Inc., 157 F.3d 1340 (Fed. Cir. 1998), Judge Bryson urged that control and
recordkeeping are vital to a showing of experimentation.4 “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.” Id. at 1380 (citing Lough, 86 F.3d at 1120; 2 Donald S. Chisum,
Chisum on Patents § 6.02[7][c] (1998)). Judge Bryson stressed awareness by the
purported testers that testing is occurring. He suggested or at least implied that
consideration of these three factors form the first, and potentially decisive, step in
determining whether a public use or sale was primarily experimental. Indeed, we
4
This court was divided in Bard with Judges Bryson and Mayer concurring
as to the invalidity of one of the asserted patents under § 102(b), but each presented a
different analytical path to that conclusion. Judge Newman dissented with respect to
the on-sale bar.
04-1412 17
discern that Judge Bryson applied only these three factors to conclude that the on-sale
bar applied.
The facts of this case are analogous to those in U.S. Environmental
Products, Inc. v. Westall, 911 F.2d 713 (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. In this case, as in Westall, the evidence shows that neither the in-
house tests . . . nor the field tests . . . 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 [a company with
which the inventor was associated] and [the customer] throughout the
purported testing period emphasized commercial sales and projections,
not controlled experimentation.
Id. at 1381 (internal citation omitted).
We agree with Judge Bryson that a customer’s awareness of the purported
testing in the context of a sale is a critical attribute of experimentation. If an inventor
fails to communicate to a customer that the sale of the invention was made in pursuit of
experimentation, then the customer, as well as the general public, can only view the
sale as a normal commercial transaction. Indeed, our predecessor court recognized in
In re Dybel, 524 F.2d 1393, 1401 (C.C.P.A. 1975), that “[an inventor’s] failure to
communicate to any of the purchasers or prospective purchasers of his device that the
sale or offering was for experimental use is fatal to his case.” And, “we have held that
the assertion of experimental sales, at a minimum, requires that customers must be
made aware of the experimentation.” Paragon Podiatry Lab., Inc. v. KLM Labs., Inc.,
984 F.2d 1182, 1186 (Fed. Cir. 1993) (citing LaBounty, 958 F.2d at 1072; Dybel, 524
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F.2d at 1401). Accordingly, we hold not only that customer awareness is among the
experimentation factors, but also that it is critical.
Our precedent has treated control and customer awareness of the testing as
especially important to experimentation. Indeed, this court has effectively made control
and customer awareness dispositive. See, e.g., Lough, 86 F.3d at 1120; Hamilton, 882
F.2d at 1581. Accordingly, we conclude that control and customer awareness ordinarily
must be proven if experimentation is to be found.
We now consider the facts of this case. First, the record, as the district court
noted, is devoid of any evidence that EMD, or Union Pacific under EMD’s direction,
controlled the field program for its new planetary bearings. EMD did not provide any
protocols to Union Pacific directing their use of locomotives containing the new
planetary bearings. EMD likewise neither supervised nor restricted Union Pacific’s use
of the new planetary bearings in any way. Mr. Blase testified that the railroads involved
in the field testing were not required to run the subject locomotives under any specific
conditions.
The record also shows that EMD made no attempt to monitor the conditions
under which Union Pacific used the “test” locomotives. EMD explains away its lack of
oversight by arguing that the field program was conducted solely to verify the durability
of its new planetary bearings as measured by the number of turbocharger failures, not
by the daily use of its new planetary bearings. Such an argument is, however,
unconvincing. EMD did not request or receive any comments or data from Union
Pacific concerning the operation or durability of its new planetary bearings. Without
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obligating Union Pacific to provide such feedback, it cannot be reasonably said that
EMD exercised any monitoring over the field program.
That Union Pacific returned failed turbochargers to EMD for teardown and
inspection is insufficient to establish EMD’s control over the field program. Union
Pacific voluntarily returned failed turbochargers under the basic warranty given by EMD
to all of its customers. It was not, however, under any obligation to do so. Mr. Blase
testified that EMD requested the return of failed components from all customers in the
ordinary course of business. Union Pacific thus would have returned all failed
turbochargers whether it was participating in experimentation or was merely an ordinary
customer. What is more, EMD’s teardown reports focused only on the appearance and
features of the new planetary bearings without any correlation to the field conditions.
Nothing in the teardown reports thus distinguish them from any other failure reports
prepared outside the field program. Accordingly, the district court did not err in finding
that EMD exercised no control over Union Pacific’s use of the new bearings.
Second, the record is insufficient, even on summary judgment, to objectively
establish Union Pacific’s awareness of the field program. The only evidence regarding
communications with Union Pacific concerning the field program comes from Mr.
Blase’s deposition testimony and an internal memo he prepared. In his deposition, Mr.
Blase testified:
Q: Okay. Now when you would generally send out or do field
verification or reliability verification in the field, were there
agreements that customers entered into in connection with those?
A: The customer would understand that – that the – that what they
were receiving would be a reliability verification test.
Q: Would you tell them which components were associated with that?
A: We would indicate to them which components are under reliability –
reliability verification test, yes.
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Q: You would tell them that.
A: Sure.
Q: Okay. Did they sign any type of secrecy agreement or
confidentiality agreement in connection with that?
A: I do not know that.
Q: Okay. Who would know that?
A: The – the correspondence with the customer would be handled
through the sales department as far as I know.
Q: And who was in the sales department during this timeframe?
A: I don’t recall.
Similarly, in his memo, Mr. Blase stated under the heading “Status of Public Disclosure”
that “[u]pon applying for field test on a customer’s locomotive, the customer is made
aware that there is an experimental part in the turbochargers they are receiving, yet
details of the part are not fully disclosed.” Apart from this single sentence, Mr. Blase did
not otherwise describe EMD’s communications with any customer or state exactly what
Union Pacific was told, if anything.
Neither Mr. Blase’s testimony nor his memo establishes awareness by Union
Pacific that the new planetary bearings were substituted into their pre-existing order for
the purpose of testing those bearings in actual use rather than as part of a commercial
sale. Mr. Blase’s testimony simply suggests the possibility that an unidentified EMD
employee may have engaged in a conversation with one or more unidentified
employees of Union Pacific about substituting the new planetary bearings.
Further, the record fails to show any objective evidence supporting Mr. Blase’s
inference that Union Pacific was “aware” of the field testing. It does not contain even
the hint of a written agreement with Union Pacific, testimony from any representative of
Union Pacific describing the railroad’s awareness of the field program, or any other form
of corroborating documentation held by Union Pacific regarding the field program. The
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lack of such evidence to corroborate Mr. Blase’s conclusory testimony and memo thus
validates the lack of customer awareness.
The facts here are closely analogous to those in Lough, where, as noted above,
this court rejected an inventor’s claim that a pre-critical date public use of his liquid seal
assembly invention was made for experimentation. In Lough, the inventor distributed
six prototypes of his liquid seal assembly invention to his friends for use in their boats.
After distribution, the Lough inventor did not maintain any supervision over his friends’
use of the liquid seal assemblies or follow-up with them for comments as to the
operability of the liquid seal assemblies. Similarly, EMD allowed Union Pacific
unsupervised use of the new planetary bearings. EMD neither monitored the conditions
under which Union Pacific used the new planetary bearings nor solicited any feedback
from Union Pacific regarding the bearings’ performance. What is more, EMD, like the
inventor in Lough, did not maintain any records of the alleged testing or require Union
Pacific to do so. As we stated in Lough, “Lough’s failure to monitor the use of his
prototypes by his acquaintances, in addition to the lack of records or reports from those
acquaintances concerning the operability of the devices, compel the conclusion that, as
a matter of law, he did not engage in experimental use.” 86 F.3d at 1122. We are
equally compelled to conclude as a matter of law that EMD did not engage in any
experimentation on its new planetary bearings.
Finally, contrary to EMD’s contention, Manville and EZ Dock do not control the
outcome here, even though both cases involve durability testing of inventions under
actual use conditions which we held to be experimental. EZ Dock and Manville are
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factually distinguishable, especially with respect to control, recordkeeping, and
customer awareness.
In EZ Dock, two inventors designed a floating dock made of polyethylene. They
later installed one at a customer’s fishing camp located in an area of the Mississippi
River that experienced heavy boat traffic and turbulent water flow. Unlike the inventors
in EZ Dock who routinely inspected the installed polyethylene floating dock over the
course of a summer, EMD did nothing to control, monitor, or systematize the field
testing of its new planetary bearings. EMD did not require Union Pacific to follow any
protocols when using the subject locomotives. EMD likewise did not examine the new
planetary bearings on any schedule. Instead, it did so only when a turbocharger failed.
Additionally, while shopping at one of the inventor’s office supply stores to buy a
copier, the EZ Dock customer noticed the polyethylene floating docks being stored in
the window and approached that inventor requesting to purchase one. Here, EMD
approached Union Pacific, a long-time customer, requesting permission to substitute the
new planetary bearings into an order that Union Pacific had previously placed. The
customer in EZ Dock thus was aware that the polyethylene floating dock was not
commercially available, but instead experimental. The same cannot be said for Union
Pacific given that the record contains only vague, conclusory, and uncorroborated
testimony about Union Pacific’s awareness of the experimental nature of the field
program. Moreover, the sale in EZ Dock was an isolated, unexpected occurrence. The
EZ Dock inventor clearly was not intending to sell the polyethylene floating dock, much
less earn a profit from the sale, as evidenced by the fact he charged only 75 percent of
the final retail price. In contrast, there is no evidence to suggest that EMD discounted
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the price of the locomotive Union Pacific ordered to offset the risk that the new planetary
bearings might fail. Therefore, the record suggests that EMD made the substitution as
part of a commercial sale to make money, not primarily to experiment.
Finally, the inventors in EZ Dock had not tested the polyethylene floating dock in
turbulent water for any length of time. They had only floated it in the Mississippi River
on occasion and installed several at a marina where the water conditions were fairly
stable. They did not know whether their polyethylene floating dock would be durable
under heavier water flow conditions, thus establishing a need for the turbulent water
testing. EMD, in comparison, had tested the new planetary bearings in the in-house
program and already knew they were durable. In light of these significant factual
differences, it is clear that EMD’s reliance on EZ Dock is misplaced.
Turning to Manville, the plaintiff’s employees invented a new, self-centering
lightpole luminaire and installed one in a rest area being built along an interstate
highway in Wyoming, but not yet open to the public. The Manville plaintiff directly
controlled the testing by installing the luminaire in the fall, removing it in the spring, and
thoroughly examining it following this testing period. By contrast, EMD did not control or
systematize Union Pacific’s use of the subject locomotives. Union Pacific was not
placed under any restrictions or obligations concerning its use of the new planetary
bearings; it was free to use the subject locomotives daily or not at all, in hot, dry
climates or cold, wet climates, with maximum loads or load-free.
Also, the State of Wyoming knew of the experimental and confidential nature of
Manville’s installation of the luminaire. Indeed, Manville specifically informed a
Wyoming official that its use of one luminaire on one pole at one site in Wyoming was
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experimental. The State of Wyoming likewise received a drawing of the luminaire
containing a confidentiality notice. Here, the situation was quite the reverse. Mr. Blase
gave only vague, conclusory, and uncorroborated testimony regarding Union Pacific’s
possible awareness of the experimentation. Such testimony, however, cannot establish
what Union Pacific really knew about the purpose of the sale, especially without
correspondence with Union Pacific or other documentation.
In addition, Manville lacked confidence that the luminaire would perform in its
intended environment because Manville only tested a single luminaire on a pole in the
backyard of its Ohio factory for a few days, not under Wyoming winter conditions of high
wind and ice for any extended period of time. In contrast, EMD subjected its new
planetary bearings to the in-house program, which simulated actual use conditions over
extended periods of time. EMD also failed to point to any evidence, like the internal
memo written by a Manville employee, objectively explaining why actual conditions were
impossible to replicate through its in-house program.
Finally, the State of Wyoming agreed to purchase the luminaire only if it proved
operable after the winter. As a result, the State of Wyoming withheld payment until the
results of the weather-related testing were known. Here, Union Pacific neither
conditioned its purchase of the locomotive on the operability of the new planetary
bearings nor withheld payment in an amount corresponding to the cost of the new
planetary bearings pending the results of the field program. Viewing all of the
differences between the facts in Manville and those implicated here, we conclude that
EMD’s reliance on Manville, like its reliance on EZ Dock, is misplaced.
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Because the facts do not show the existence of control or customer awareness,
we do not consider the other experimentation factors. We conclude, as a matter of law,
that EMD’s sale to Union Pacific of the new planetary bearings was not made primarily
for experimentation. We, therefore, conclude that Daido’s sale to EMD could not have
been made primarily for experimentation, since the purpose for the upstream sale was
to make the downstream sale possible. Accordingly, the district court did not err in
holding the ’056 patent invalid under the on-sale bar of § 102(b).
III. CONCLUSION
We conclude, as a matter of law, that EMD’s sale of spare compressor bearings
to Norfolk Southern and Daido’s sale of planetary bearings to EMD were not primarily
experimental. Because the district court correctly held that EMD commercially sold the
patented compressor and planetary bearings prior to the critical date, raising the on-sale
bar of § 102(b) for the ’242 and ’056 patents, we affirm.
AFFIRMED
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