Petition — Clark Equipment Co. v. Keller

Supreme Court, U.

= EILED

MAY 18 1978

IN THE |

Supreme Court of the United States rooax, sr. CLERK

OCTOBER TERM, 1977

No. @7- 1640

CLARK EQUIPMENT COMPANY,

Petitioner

versus

LOUIS J. KELLER AND CYRIL N. KELLER,

Respondents

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

EIGHTH CIRCUIT

JACK E. TOLIVER

Circle Drive

Buchanan, Michigan 49107

FRED E. SCHULZ and

Wildman, Harrold, Allen & Dixon

One IBM Plaza

Chicago, Illinois 60611

JOHN D. KELLY,

Vogel, Brantner, Kelly,

Knutson, Weir & Bye

P.O. Box 1329

Fargo, North Dakota 58102

Attorneys for Petitioner

INDEX TO PETITION

Page

7 EE Se ee ee 2

: CE 46466400000 000066064600005000K0080800008 2

EE a Ee 2

Constitutional and Statutory Provisions Involved .......... 2

RTGS dv cucevcesecaceccssssecesocess 3

CS ne 4

POPSET TOTCTT TU TT TTT TUT TTT TT TT TTT 15

Appendix A — Court of Appeals Opinion ............ Al-42

Appendix B — District Court Opinion .............. B1-96

Appendix C — Notice — Commissioner of Patents ...... C1-2

Appendix Index (separate volume)

Exhibit

Title of Exhibit Pages: Number*

1. Keller et al Patent No. 3,151,503...... 14 ise 2

2. Loyd Patent No. 1,623,929 .......... 510 ... 84

3. Schreck Patent No. 2,336,642 ........ 11-18 ... 85

, 4. Hellwarth Patent No. 1,470,078 ...... 19-25 ... 86

5. White Patent No. 2,936,840 ......... 26-35 ... 75

PEED cc cccccascesecscoces 36 ... 100

*Trial exhibit numbers are used in the District Court’s opinion appearing

in Appendix B.

TABLE OF AUTHORITIES

Aluminum Company of America v. Amerola

Products Corporation, 552 F.2d 1020

i Cn 6 ccna cedacecdaeraudeeew een

Anderson’s-Black Rock, Inc. v. Pavement

Salvage Co., Inc., 396 U.S. 57 (1969).........

Burland v. Trippe Manufacturing Company,

543 F.2d 588 (7th Cir. 1976)...............

Dann v. Johnston, 425 U.S. 219 (1976).........

Digitronics Corp. v. The New York Racing

Association, Inc., 553 F.2d 740

CE Git. BET ED cece ccccccsccescccccceces

Fred Whitaker Company v. E. T. Barwick

Industries, Inc., 551 F.2d 622

GEG. BTU cc cccccscccccescesecsceee

Hotchkiss v. Greenwood, 11 Howard 248,

52 U.S. 248 (1851)... 2... cee eee eee eees

Graham v. John Deere Co., 383 U.S. 1

DD sce c Kt byob bsduseneswenecesees.es

Great Atlantic & Pacific Tea Company v.

Supermarket Equipment Corporation,

340 U.S. 147 (1950) ..... ccc eccceceeces

ii

Page

Page : Kamei-Autokomfort v. Eurasian Automotive

Products, 553 F.2d 603 (9th Cir. 1977) .............. 6

. Kearney & Trecker Corporation v. Cincinnati

Milacron Inc., 562 F.2d 365 (6th Cir. 1977) ........... 6

| Lincoln Engineering Company of Illinois v.

' Stewart-Warner Corporation,

' 303 U.S. 545 (1938) 2.2.0... eee cece ccc cceeeeeee 7

se eeeees 6 Reiner v. I. Leon Co., 285 F.2d 501

ea <n ne G

Robbins Company v. Dresser Industries, Inc.,

554 F.2d 1289 (5th Cir. 1977)..................005. 6

Rutter v. Williams, 541 F.2d 878 (10th Cir. 1976)......... 6

rs Sakraida v. Ag Pro, Inc., 425 U.S. 273 (1976) ............ )

Obi nd & pits 5 ; .

Systematic Tool & Machine Company v.

Walter Kidde & Company, 555 F.2d 342

EE i a ER 6

ili

UNITED STATES CONSTITUTION

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2B USL. GIGRMOD oc ccccdcccccescsscuusenant

BB UBL. GESTED - cccccccsecvccsesesesseenans

3B UBL. QEIGEE) «oc cccvcvccccccccesseesuseus

BB UBL. GSBGE cc ccccdstcccccsscccsceseusuus

BB UBL. GSRES cccccccvctscccsccscesseseswenn

SO UBL. GRID) oc cccccccesccccsscsssseuuees

SO UBL. SIGS) . oc ccvcsccesescesevscuseaeen

BO UBL. CRED occccccccvesecesveseseueneeuum

SO UBG, OORE oc ccccccccccccecessveseaeeuues

Rules of the Supreme Court of the United

Sinton, Ble TOR) «os ccccvceaneseeueseunee

OTHER

B.N.A. Patent, Trademark and Copyright

Journal, October 28, 1976

No. SUR, GB AD .ccccccccccsecsccesescsesees

iv

IN THE 1

Supreme Court of the United States

OCTOBER TERM, 1977

No.

CLARK EQUIPMENT COMPANY,

Petitioner,

versus

LOUIS J. KELLER and CYRIL N. KELLER,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

EIGHTH CIRCUIT

The Petitioner, Clark Equipment Company, respectfully

prays that a writ of certiorari issue to review the judgment and

opinion of the United States Court of Appeals for the Eighth

Circuit.

OPINIONS BELOW

The judgment and opinion of the Court of Appeals was

issued on February 17, 1978 and is set forth herein at Appendix

A. It is reported at 570 F.2d 778. The District Court’s opinion

appears at 197 U.S.P.Q. 83. It is not otherwise reported and is

set forth herein at Appendix B.!

JURISDICTION

The jurisdiction of this Court is invoked under 28 U.S.C.

§ 1254(1) and Rule 19.1(b) of this Court as to the judgment of

the Court of Appeals entered on February 17, 1978. This Peti-

tion for Writ of Certiorari was filed within 90 days of that date

pursuant to 28 U.S.C. § 2101(c).

QUESTIONS PRESENTED

1) Whether a Court in construing 35 U.S.C. § 103 must make a

finding that there has been a synergistic effect where a patent

consists of a combination of old, well-known elements?

2) Whether there is a conflict between the Court of Appeals for

the Eighth Circuit and other Circuit Courts of Appeals with

respect to the requirement that a claimed invention which is

a combination of old, well-known elements must demon-

strate a synergistic effect before a paten: can issue?

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

Article 1, Section 8, Clause 8 of the Constitution provides:

“The Congress shall have Power

* * *

1. Appendices included with the Petition are identified by the letter suffix

“A”, “B”. or “C”; the separate Appendix as “App.”; page references are

to the designated appendix.

3

“To promote the Progress of Science and useful Arts by

securing for limited Times to Authors and Inventors the ex-

clusive Right to their respective Writings and Discoveries;”

35 U.S.C. § 103 provides:

“$103. Conditions for patentability; nonobvious subject

matter

“A patent may not be obtained though the invention is

not identically disclosed or described, as set forth in section

102 of this title, if the difference between the subject matter

sought to be patented and the prior art are such that the

subject matter as a whole would have been obvious at the

time ine invention was made to a person having ordinary skill

in the art to which said subject matter pertains. Patentability

shall not be negatived by the manner in which the invention

was made.”

THE STATEMENT

The petition arises out of an appeal to the Court of Appeals

for the Eighth Circuit which followed a trial on the issue of the

validity of three U.S. patents licensed to Petitioner. A declara-

tory judgment action, Civil Action No. 4875, seeking a judicial

interpretation of the license agreement and the validity of the

three patents filed by Petitioner October 2, 1972, was consoli-

dated with corresponding issues of a contract action, Civil

Action No. 4839, filed by Respondents in the United States

District Court for North Dakota, S.E. Division. The District

Court had jurisdiction under the federal declaratory judgment

statute, 28 U.S.C. §2201, §2202 and 28 U.S.C. § 1331(a) per-

taining to a federal question as well as diversity of citizenship

28 U.S.C. $1332 (a). Of the three patents, U.S. patent No.

3,151,503 (the °503 patent) entitled “Transmission System”,

filed in the Patent Office December 1, 1958, and issued on

October 6, 1964, was adjudged valid at trial and sustained on

appeal in a judgment issued February 17, 1978. Ali four claims

4

of the patent are involved.

In the briefest terms, in prior art forward and reversing rotary

friction drives using belts, sprockets and pulleys for powering a

vehicle wheel, there was a problem with the belts working as

clutches. They tended to slip and be®ome overheated under

load causing a loss of driving and steering control. Common disc

clutches, known for use in other rotary friction drives, but for

higher load applications, were in: ‘alled by Respondents in place

of the belts-as-clutches. With the load now within the capacity

of the disc clutches, the slipping problem was solved. Although

both types of rotary friction drives were known to be old in

their respective load ranges, the contention is that the mere

substitution of disc clutches from the higher load range to the

lower range was novel, nonobvious and patentable.

Petitioner says that the combination patented has nothing

new in it under 35 U.S.C. § 102(b) and § 103. The disc clutches

did exactly what was expected. They performed no new func-

tion in the lower load application not performed in the higher.

Patents should be issued to “promote the Progress of Science

and useful Arts ... Art. 1, Sec. 8, Cl. 8; and should not be

issued to remove existing knowledge from the public domain or

to limit access to simple mechanical elements already available.

REASONS FOR GRANTING THE WRIT

THE DECISION BELOW CONFLICTS WITH ThIS

COURT’S DECISION IN SAKRAIDA v. AG PRO, INC. AS

WELL AS THE DECISIONS OF OTHER CIRCUIT COURTS

OF APPEALS THAT REQUIRE THAT THERE BE A

SYNERGISTIC EFFECT BEFORE A COMBINATION OF

OLD, WELL-KNOWN ELEMENTS CAN BE FOUND TO BE

PATENTABLE

This Petition is directed to the questions of whether the

Court of Appeals for the Eighth Circuit failed to follow the law

)

established by this Court in Dann v. Johnston, 425 U.S. 219

(1976) and Sakraida v. Ag Pro, Inc., 425 U.S. 273 (1976) and

whether there is a conflict between the Court of Appeals for the

Eighth Circuit, and the Courts of Appeals in certain other cir-

cuits, with respect to the application of Dann and Sakraida to

the requirements of 35 U.S.C. § 103.

In Sakraida, supra, this Court analyzed the mandate of the

Constitution, the statutory requirement of ‘‘nonobviousness”

found at 35 U.S.C. § 103, and certain of its prior decisions. This

Court then reiterated its test for the “‘nonobviousness” require-

ment of 35 U.S.C. §103. Essentially, in those circumstances

where a claimed invention is a combination of old, well-known

elements, then the resulting combination must perform in a

synergistic manner, that is, “resulting in an effect greater than

the sum of the several effects taken separately.”

Petitioner believes that Sakraida required both the District

Court and the Court of Appeals to apply a test of “synergism”

to the analysis of whether the claimed invention was “non-

obvious” within the meaning of 35 U.S.C. § 103. However,

neither the District Court nor the Court of Appeals made such

an analysis. Indeed, the Court of Appeals expressly declined to

“... address the question of whether or not a synergism

analysis was mandatory on the facts here.” at A 17.

A series of opinions of the various Circuit Courts of Appeals

has strictly followed the mandate of this Court. For instance,

the Court of Appeals for the Fifth Circuit in Fred Whitaker

Company v. E. T. Barwick Industries, Inc., 551 F.2d 622, 631

(Sth Cir. 1977) made specific references to synergism: “We find

no synergistic interplay of these in the patented process, which

is but a consecutive series of discrete and independent steps.”

In Aluminum Company of America v. Amerola Products

Corporation, 552 F.2d 1020 (3d Cir. 1977), the Court of

Appeals for the Third Circuit at page 1023 referred to the steps

taken by the District Court:

“The district court concluded that the Amerola patent was

merely a combination of known elements with no change in

their respective functions, an aggregation demonstrating only

mechanical skill, not invention, and achieving no synergistic

result.”

It is this analysis which Petitioner requested both the District

Court and the Court of Appeals to make after ascertaining any

differences between the subject matter of the 503 Patent and

the prior art in accordance with the basic factual inquiry re-

quired in Graham v. John Deere Co. 383 U.S. 1 (1966). Peti-

tioner believes that neither court made this determination as

required by Sakraida. Other Courts of Appeals have expressly

made a definitive synergism analysis. See: Kearney & Trecker

Corporation v. Cincinnati Milacron, Inc., 562 F.2d 365 (6th Cir.

1977): The Robbins Company v. Dresser Industries, Inc., 554

F.2d 1289 (5th Cir. 1977); Kamei-Autokomfort v. Eurasian

Automotive Products, 553 F.2d 603 (9th Cir. 1977); Digi-

tronics Corp. v. The New York Racing Association, 553 F.2d

740 (2d Cir. 1977); Systematic Tool & Machine Company v.

Walter Kidde & Company, 555 F.2d 342 (3d Cir. 1977);

Burland v. Trippe Manufacturing Company, 543 F.2d 588 (7th

Cir. 1976); and Rutter v. Williams, 541 F.2d 878 (10th Cir.

1976).

Nowhere in the District Court’s Findings of Fact and Conclu-

sions of Law is there a mention of “‘synergism”, nor any finding

that the whole is greater than the sum of the parts. The District

Court ignored Sakraida. The Court of Appeals acknowledged

the point stating,

“The District Court’s memorandum opinion does not contain

an explicit analysis of synergism.” at A 172.

but rationalizes that the District Court was not required to meet

the test for synergism because of the more “complex elements”

in the combination and moreover;

2. See also note 4, infra p.!!

“In the patent law context, ‘synergism’ has no talismanic

power; synergism is merely one indication of nonobvious-

ness.”’ at A. 17

Petitioner respectfully submits that this is not the law. The

District Court did not scrutinize the claimed invention to deter-

mine whether the combination was, indeed, something more

,jhan the sum of parts and no amount of rationalization that

synergism does not apply to “complex element” and is ‘“‘merely

one indication of nonobviousness” can change that fact. This

Court has established that synergistic effect is much more than

one indication of nonobviousness. When the claimed invention

is merely a combination of old elements, synergism is the

essence of nonobviousness.

A series of cases decided by this Court over the past 100

years has interpreted the mandate of the Constitution, Art 1,

Sec 8, Cl. 8. with respect to the issuance of patents. In Hotch-

kiss v. Greenwood, 11 Howard 248, 52 U.S. 248 (1851) the

mere substitution of materials was not “‘invention”’.

In Lincoln Engineering Company v. Stewart-Warner Corpora-

tion, 303 U.S. 545, 549 (1938), this Court stated: ““The mere

aggregation of a number of old parts or elements which, in the

aggregation, perform or produce no new or different function

or operation than that theretofore performed or produced by

them, is not patentable invention”’.

In Great Atlantic & Pacific Tea Co. v. Supermarket Equip-

ment Corp. 340 U.S. 147 (1951), this Court construed a com-

bination of old elements and formalized the test of synergism:

“The conjunction or concert of known elements must contri-

bute something; only when the whole in some way exceeds the

sum of its parts is the accumulation of old devices patentable.”

Id. at 152.

A & P was followed by Graham, supra in which this Court

reaffirmed and redefined the basic test of patentability.

Graham was followed by Anderson’s-Black Rock, Inc. v.

Pavement Salvage Co., Inc., 396 U.S. 57 (1969), which involved

8

another combination patent. This Court stated: “The question

of invention must turn on whether the combination supplied

the key requirement.” Jd. at 60. To be “nonobvious”’ the com-

bination of old elements had to act in a synergistic manner. The

standard of invention is determined in light of the factual find-

ings required by Graham supra, i.e., the scope and content of

the prior art are to be determined, the differences between the

prior art and the claims at issue are to be ascertained, and the

level of ordinary skill in the pertinent art resolved. Jd. at 17.

Once these facts are determined, then the question of obvious-

ness is to be decided. The Petitioner believes this Court has

recently sent a positive and clear signal that the standard of

‘invention” or “‘nonobviousness”’ is to be consistently applied

within the “general strictness’ requirement laid down in

Graham Id. at 19. The three pronged factual inquiry, especially

for a combination of old elements, is to be followed by a defini-

tive determination of invention meeting this Court’s mandate

for a stricter standard. Not until Sakraida, when this Court

restated the synergism requirement, did the Patent Bar and the

lower Courts begin to reread Graham and follow closely the

“general strictness”’ mandate.

Since this Court’s decision in Sakraida, the Courts of Appeals

for the Second, Third, Fifth, Sixth, Seventh, Ninth and Tenth

Circuits have found that combination patents are invalid unless

there is a synergistic effect from the combination. In contrast,

Petitioner believes that the Court of Appeals for the Eighth

Circuit has not followed this Court’s instructions.

An example of a Court of Appeals closely following Sakraida

is Digitronics Corp. v. New York Racing Association, Inc., 553

F.2d 740 (2d Cir. 1977). This case involved a tote system for

use in paramutual betting at race tracks. The Court found that

the substitution of solid state electronic components in the tote

system for electro-mechanical devices, while new in this applica-

tion, were not new to data processing in other fields and merely

brought to the tote field the increased accuracy, speed, com-

9

pactness and flexibility of solid state electronics. Despite heavy

reliance by the patentee on “commercial success” under the

patent authority of Judge Learned Hand in Reiner v. I. Leon

Co., 285 F.2d 501 (2d Cir. 1960), the Court concluded that

“ _. this view does not represent the current law . . .”” and such

secondary considerations could not play a part in the determin-

ation of “invention” after Sakraida supra at 748. Contrast this

with the District Court’s reliance in the present case on Judge

Hand’s opinion in Reiner and “‘commercial success” at B9, 30.

Recently a Congressional aide, speaking before the Industrial

Research Institute noted that,

“Earlier this year, the Supreme Court declared invalid a

patent on a drainage system for discarding manure in barns —

basically, a sheet of water going down hill. To patent lawyers,

this unanimous decision was unconscionable and anti-patent.

To the rest of the country, the fact that such a patent issued

in the first place, let alone litigated to the highest Court of

the land, was unconscionable.’’?

The Court of Appeals in this case followed the same analysis

which appears to have been followed by the Patent Office in

allowing the ’503 patent to issue in the first place. This Court in

Graham, supra, at p. 18 observed “... a notorious difference

between the standards applied by the Patent Office and by the

Courts.’’ This Court went on to state that one reason for this

discrepancy “... may well be the free rein often exercised by

Examiners in their use of the concept of ‘invention.’ ’’ Hence,

this Court issued its instruction in Graham that adherence was

to be had to the “general strictness” standard of invention. But,

there are fundamental and divergent interests involved. The

Patent Office, like any bureaucracy, is jealous of its bureau-

3. B. M. Nash, Assistant Counsel, Sub-Committee on Antitrust and

Monopoly, United States Senate, October 18, 1976, speech as reported in

B.N.A. Patent, Trademark and Copyright Journal, October 28, 1976, No.

301, at A-9.

10

cratic prerogatives and resists any outside influence that would

tamper with the machinery of issuing thousands of invalid

patents each year, even though debilitation of the entire patent

system and its own long term best interests are at stake. For a

general discussion of this see A and P supra, at 154 (concurring

opinion).

Soon after Sakraida, the Commissioner of Patents felt com-

pelled to inform the Examiner Corps in July, 1976 that it

should adhere to tlhe “obviousness” test as interpreted by the

Patent Office and to make no changes in light of Sakraida which

the Commissioner opined was “somewhat stringent” in the

application of the Graham inquiry. The directive concluded by

suggesting that the Supreme Court’s stricter application of

obviousness test to the Graham findings was limited to the “‘fact

circumstances” in Sakraida, 939 OG 3 (August 3, 1976); see

Appendix C to this petition where the Commissioner’s notice is

fully set forth.

There can be no presumption of validity — or administrative

correctness — when the agency charged by law with applying

the correct legal standard fails to acknowledge this standard.

Thus the presumption of validity under 35 U.S.C. 282 is not

conclusive and can be rebutted even where the references relied

upon were thoroughly considered by the Patent Office, Cf.

Dann, supra.

Recent decisions by this Court, already discussed, were not

foliowed by the Court of Appeals in the present case. The Court

of Appeals distinguished Sakraida, supra, as being restricted to a

trivial type of water system to flush dairy barns; Anderson’s-

Black Rock to hanging a radiant burner on the side of a paving

machine; and A & P to a frivolous frame for sliding groceries

along a counter. at footnote 10, A 17.

The Court of Appeals fell into the same error in the applica-

tion of the Graham “general strictness” requirement as the

Patent Office by relegating this Court’s standard of invention

for combinations to those having a “‘basicness and simplicity”

11

thus artificially restricting what this Court has intended to be a

general legal standard of invention. By attempting to limit the

“general strictness” standard of invention to the “fact circum-

stances” of so called simpler inventions, the Court of Appeals

lends continued support to that considerable body of “‘contrary

opinion” this Court has for so long been trying to change.

The Court of Appeals, therefore, found that there was no

“talismanic power”, at A 17, in synergism so far as the patent

law was concerned which allowed it to conclude, erroneously

Petitioner believes, that “‘synergism”’ is merely one indication of

nonobviousness.* By declining to apply this Court’s standard of

invention to the “gap”, at B 31, as perceived existing by the

District Court between the prior art belt-as-clutch drives and the

disc clutches, the Court of Appeals perpetuated an error of law.

Stated in, Dann supra, at p. 230;

“... [T]he mere existence of differences between the prior

art and an invention does not establish the invention’s non-

obviousness. The gap between the prior art and respondent’s

system is simply not so great as to render the system non-

obvious to one reasonably skilled in the art.”

THE COURT OF APPEALS ERRONEOUSLY MADE A

DETERMINATION OF NONOBVIOUSNESS UNDER 35

USC 103 WHERE THE PRINCIPAL DIFFERENCES

FROM THE PRIOR ART AND THE CLAIMED INVEN-

TION LAY IN THE MERE SUBSTITUTION OF ONE

4. The Court of Appeals chastised the Petitioner for not having specif-

ically raised synergism prior to or during the trial. Petitioner respectfully

believes that the Court of Appeals did not consider the sequence which

certain events occurred: The trial ended on May 21, 1975, Clark’s First

Post Trial Brief was filed on March 24, 1976 and this Court decided

Sakraida on April 20, 1976. Thus, with “synergism” being emphasized by

this Court as the acid test for patentability of combination inventions in

the Sakraida opinion, Clark did indeed ask the District Court in iis Reply

Brief filed May 11, 1976, which was the first opportunity to do so in the

post trial briefing, to consider the application of Sakraida to the facts in

this case.

12

TYPE OF FRICTION CLUTCH PERFORMING IN A

KNOWN MANNER FOR ANOTHER TYPE OF FRIC-

- TION CLUTCH GIVEN THE LEVEL OF SKILL AT THE

TIME OF THE ALLEGED INVENTION EQUIVALENT

TO THAT OF A GRADUATE ENGINEER.

The District Court perceived a “gap”’ existing between the

prior art belt-as-clutch drives and the “installation of clutches”’

as a solution to the slipping problem, at B 31. Yet in finding of

Fact No. 48, the level of ordinary skill in the art at the time the

invention was made was considered to be;

**.. someone who has had some experience in machine

design or the application of engineering principles, a person

who has been exposed to different types of mechanical

mechanisms, such as a graduate engineer or a person with

experience gained in the field.”’ at B 22.

Both the District Court and the Court of Appeals simply

eschewed any attempt to grapple with the legal point involved.

The Courts failed to explain how the substitution of clutches in

disc form for clutches in belt form, in the light of the prior art

teaching these two mechanical elements in side-by-side applica-

tion had left any perceived “gap’’, even to the unskilled, let

alone to a graduate engineer. Petitioner, therefore, contends

13

that at the level of skill applied, there was no perceptible “‘gap”’

between the claims of the 503 patent and the prior art available

either to the Patent Office” or the District Court, although the

latter had the benefit of prior art not available to the Patent

Office.®

The District Court found that the Respondents’ “invention”

came into being when they substituted common disc clutches

for the “belt-as-clutch”” mechanism. There was no dispute that

the substitution of friction plate clutches for belts was a logical

and common step where additional torque had to be trans-

mitted. One of the Petitioners expert witnesses, John Butler,

testified, without contradiction, to the effect that the substitu-

tion of disc clutches for the belt-as-clutch arrangement would

5. The relevant clutch parts of the 503 patent, App. 1, are colored, and

their operation described at 3, to correspond with the similar parts in the

patents cited as prior art by the Patent Office, viz., Loyd patent

1,623,929, App. 7, Schreck patent 2,336,642, App. 12, and description at

14 and Hellwarth patent 1,470,078, App. 19, 20 and description at 23, 24.

6. The White patent No. 2,936,840, App. 26-35, depicts a windrower

similar to that described to the Respondents by Mr. Velo, but Mr. Velos

testimony does not form the basis for the White patent as prior art, as

erroneously concluded by the Court of Appeals, at A 14, rather, the White

patent stands as prior art independently under 35 USC 102(e), “... the

invention was described in a patent granted on an application for patent

by another filed in the United States before the invention thereof by the

applicant for patent. ..”.

14

be used where the latter had reached its capacity.’ This was a

common-sense approach. Since the torque was within the trans-

mission capacity of the disc clutches, the slipping problem was

solved. The District Court and the Court of Appeals viewed the

mere substitution of disc clutches for the belt-as-clutch mechan-

ism to be novel, nonobvious and patentable.

The District Court referred to a “gap’’ between the prior art

and the claimed invention. However, the “gap” was filled by

well known devices. The disc clutches did exactly what was

expected. They performed no new function. The only “gap”

which was crossed by installing the new clutches was one of

efficiency, not invention.

7. The Butler sketch is shown at App. 36 and depicts the substitution of

disc clutches and actuator from Schreck and Hellwarth for the prior art

belt-as-clutch arrangement similar to the White patent. Butler testified at

the trial without contradiction in connection with this sketch as follows:

Q. “Given this problem with the Velo drive [which Butler described as

equivalent to the White disclosure] would this in your opinion be a

minor substitution to make of the Schreck and the Heliwarth substitu-

tions as you have just made it, solve the problem?

I believe it would be a possible solution that one would think of when

confronted with the problem of the belt-as-clutch drive wearing out,

to say, ‘This clutch is wearing out; my other clutches don’t wear out.’

What other clutches?

‘The one in my car or my tractor.’

But those clutches don’t rely on belts; those are disk clutches.

What is there — some may have frictional drives where the belt drive

reaches its capacity and then you go on to some other drive?

Yes, there is.

What would that be, sir? -

The limiting factor in clutches is the pressure between the contacting

surfaces. Disk clutches provide much greater area. The area provided

in this belt is fairly small and confined to the portion of the belt that’s

in contact with the pulley. The area in contact in the disk clutch is,

can be made as generous as possible. And if the disk clutch is unsatis-

factory we may add more plates as Hellwarth, as shown not in this

figure of Hellwarth (indicating).” Transcript, pgs. 196, 197, February

21, 1975.

-

Por © PO

15

CONCLUSION

Reduced to its simplest terms, the Court of Appeals rational-

ized the failure of the District Court to make a synergistic

analysis in accordance with the “general strictness” of this

Court. The issue here is purely one of law. This Court’s recent

decisions are beginning to take hold but there is a substantial

body in opinion which has a long standing vested interest in

maintaining a lower standard of invention. This interest will

seek any semantic excuse for not applying the stricter standard

of invention of chis Court. The conflict will continue to the

detriment of the patent system as a whole. Only by continued

and persistent efforts by this Court will the Graham ‘general

strictness” standard become the uniform legal standard of

invention.

The Petition for a Writ of Certiorari to the Court of Appeals

for the Eighth Circuit should be granted so that the Judgment

and Opinion in this case may conform to, instead of conflict

with, the holdings of this Court and other Courts of Appeals in

the cases referred to above.

Respectfully submitted,

JACK E. TOLIVER

Circle Drive

Buchanan, Michigan 49107

FRED E. SCHULZ and

WILDMAN, HARROLD, ALLEN & DIXON

One IBM Plaza

Suite 3000

Chicago, Illinois 60611

16

JOHN D. KELLY, and

VOGEL, BRANTNER, KELLY,

KNUTSON, WEIR & BYE

P.O. Box 1329

Fargo, North Dakota 58102

Attorneys for Petitioner

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a copy of the above and foregoing

Petition has this date been served upon opposing counsel of

record by placing same in the United States Mail, postage pre-

paid and properly addressed.

Deteds = =

APPENDIX A . A-1

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Clark Equipment Company and

Clark Equipment, A.G..,

Appellants- Appellees,

versus

Louis J. Keller and Cyril N. Keller,

Appellees- Appellants.

Nos. 76-1918 and 76-2009

Appeals from the United States District Court for the District

of North Dakota

Submitted: August 31, 1977

Filed: February 17, 1978

Before GIBSON, Chief Judge, HEANEY and WEBSTER,

Circuit Judges.

GIBSON, Chief Judge.

The two consolidated cases underlying the present appeal and

cross-appeal arise out of a patent license contract whereunder

Louis and Cyril Keller, residents of North Dakota, granted

exclusive licenses on three interrelated patents to Clark Equip-

ment Company, a corporation incorporated under the laws of

Delaware and with its principal place of business in Michigan. In

a similar license agreement, the Kellers granted to Clark Equip-

ment A.G. (CEAG), a Swiss corporation which is a wholly

owned subsidiary of Clark, an exclusive license under certain

foreign patents corresponding to the licensed patents in the

A-2

agreement with Clark. The patents involved relate to self-

propelled, three- and four-wheel skid steer loader vehicles manu-

factured by Clark in Gwinner, North Dakota. Patent 3,151,503

(503 patent) is a mechanical patent entitled “transmission

system’”’; Patent 3,231,117 (117 patent) is a mechanical patent

entitled “tractor vehicle and drive therefor’; Patent 195,254

(254 patent) is a design patent entitled “self-propelled loader.”

CIVIL ACTION 4875

In October 1972, Clark filed a civil action against the Kellers

pursuant to 28 U.S.C. § § 2201 and 2202, seeking a declaration

of the rights and obligations of the parties under their license

agreement and alleging that because the three patents forming

the subject matter of the license were invalid, the license con-

tract was unenforceable. This declaratory judgment action,

which was filed in the Western District of Michigan, was trans-

ferred to the District of North Dakota in August 1973. In Sep-

tember 1973, the Kellers filed an answer and counterclaim. The

counterclaim was for royalties allegedly due from Clark under

its license agreement with the Kellers and under certain non-

exclusive sublicense contracts between Clark and others. In

their counterclaim, the Kellers also alleged that Clark or its

predecessor in interest, the Melroe Company, had been negli-

gent in failing to comply with the requirements of 35 U.S.C.

$102(b) by neglecting to file a patent application on the 117

patent within the one-year period after the invention had been

in public use or on sale.

In response to this negligence claim, Clark filed a third-party

complaint against the law firm of Williamsun, Bains and Moore

as third-party defendant. Clark alleged that if there had been

negligence in the filing of the application for the 117 patent, it

had been that of the third-party defendant, who had repre-

sented Louis Keller and Clifford Melroe, the joint inventors of

the mechanism underlying the 117 patent, and who had had a

A-3

professional obligation to investigate the facts and see that the

application was timely filed. The cases presently before this

court do not include issues of negligence or possible liability for

late filing of the 117 patent application, for on April 29, 1974,

the District Court! ordered that Clark’s third-party complaint

and that portion of the Kellers’ counterclaim pertaining to these

issues be tried separately from and after the present declaratory

judgment action was tried.

CIVIL ACTION 4839

On July 25, 1973, the Kellers filed a separate action against

Clark in the District of North Dakota. This action, which

embodied the allegations in the answer and counterclaim for

royalties due filed in Civil Action 4875, named CEAG as an

additional defendant. The complaint alleged that, pursuant to a

license agreement with the Kellers, CEAG was an exclusive

licensee under certain foreign patents corresponding to the

licensed patents in the agreement with Clark, and that CEAG

had failed to account for and pay royalties due thereunder.

Jurisdiction was based upon diversity of citizenship. This action

was consolidated with Civil Action 4875 on December 21,

1973.

CONSOLIDATED ACTIONS

CEAG responded to the complaint in Civil Action 4837 with

motions to dismiss in which it alleged lack of in personam juris-

diction, absence of proper service of process and failure of

proper jurisdictional amount. The District Court denied these

motions, Keller v. Clark Equipment Co., 367 F. Supp. 1350

(D.N.D. 1973); CEAG reasserted its jurisdictional defenses in its

answer.

1 The Honorable Paul Benson, Chief Judge, United States District Court

for the District of North Dakota.

A-4

On July 18, 1974, the District Court ordered a separate trial

on the issue of the validity of the three patents. The trial on this

severed issue ran for some 33 days in early 1975. The

30-volume trial transcript includes the testimony of 46 wit-

nesses; 546 exhibits were also introduced into evidence. Follow-

ing the trial, the district judge filed a lengthy, unpublished

memorandum opinion in which he ruled that the 503 and 254

patents were valid, and that the 117 patent was invalid. Clark

appeals the judgment of the District Court on all three patents;

the Kellers cross-appeal on the 117 patent. CEAG appeals from

the District Court’s rulings on its jurisdictional allegations and

defenses.

JURISDICTIONAL ISSUES

Before addressing the merits of the patent issues raised on

this appeal and cross-appeal, we will consider CEAG’s jurisdic-

tional contentions. The District Court initially rejected CEAG’s

jurisdictional defenses in a memorandum opinion directed

solely to this issue and entered prior to trial. Keller v. Clark

Equipment Co., 367 F. Supp. 1350 (D.N.D. 1973). CEAG has

continued to assert a lack of in personam jurisdiction. In its

lengthy memorandum opinion on the patent validity issues of

this case, the District Court did not re-analyze CEAG’s jurisdic-

tional assertions. It simply took note of their continuing nature

and cited its previous opinion denying CEAG’s jurisdictionally

based motion to dismiss.

In its initial consideration of CEAG’s motion to dismiss, the

District Court made the following findings of fact and infer-

ences therefrom relative to jurisdiction over CEAG. CEAG, a

corporation organized under the laws of Switzerland, is a

wholly owned subsidiary of Clark, a Delaware corporation

A-5

doing business in North Dakota. The present case concerns

separate manufacturing licenses between Clark and the Kellers,

who are residents of North Dakota, and CEAG and the Kellers.

Each agreement was executed on May 19, 1971. The Clark-

Keller agreement was subscribed by J. Becket (sic), as vice-

president of Clark Equipment Company. The CEAG-Keller

agreement was also signed by J. Becket (sic), this time in the

capacity of vice-president of CEAG. Both agreements give

Clark’s Buchanan, Michigan, address for purposes of notice to

the licensee and provide for continuing royalty payments to be

made to the Kellers, residents of North Dakota. In the instant

case, service on CEAG was made pursuant to Fed. R. Civ. P.

4(d)(7) by serving the summons and complaint on an officer of

Clark at its Melroe Division in Gwinner, North Dakota. CEAG

maintains a liaison engineering employee at the Melroe Division

of Clark in North Dakota.

It can be reasonably inferred that CEAG became aware of the

pa.ents through its close association with the Melroe Division of

Clark. Moreover, the factual situation here supports the infer-

ence that CEAG, or someone from Clark acting on behalf of

CEAG, contacted the Keilers in North Dakota about the foreign

patents, in contemplatior. of securing a European arrangement

analogous to Clark’s American arrangement exploiting the

domestic patents in question. Irrefutably, CEAG sought out the

Kellers in North Dakota, and the Clark-Keller and CEAG-Keller

licensing agreements were handled by Clark’s counsel for both

Clark and CEAG. In this transaction, it clearly appears that

Clark was acting for and on behalf of its wholly owned subsidi-

ary, CEAG, and that the same individual signed both agree-

ments on behalf of Clark and CEAG.

We have reviewed the record as a whole, giving particular

attention to the documents from which the bulk of the District

Court’s jurisdictional findings and inferences are derived, and

A-6

we can find no basis for rejecting these findings as clearly

erroneous.” Moreover, we believe that they provide adequate

support for the District Court’s conclusions that CEAG had

“minimum contacts” with North Dakota, which rendered in

personam jurisdiction proper, and that even though CEAG itself

was not doing business in North Dakota, CEAG and Clark were

inextricably involved with the Kellers in the negotiations and

execution of the patenting licensing agreements.

CEAG attacks the District Court’s jurisdictional conclusion

on several bases. We have considered its contentions in light of

the District Court’s careful analysis of this issue and find them

to be without merit. Presence by the defendant in the forum

state is not a jurisdictional prerequisite. McGee v. International

Life Insurance Co., 355 U.S. 220, 222-23 (1957); Electro-Craft

Corp. v. Maxwell Electronics Corp., 417 F.2d 365, 369 (8th Cir.

1969). It is only necessary that the defendant have sufficient

minimum contacts with the forum state so that requiring it to

defend itself there will not offend traditional notions of fair

play and substantial justice. Jnternational Shoe Co. v. Washing-

ton, 326 U.S. 310, 316 (1945); Aaron Ferer & Sons Co. v. Atlas

Scrap Iron & Metal Co., 558 F.2d 450, 454 (8th Cir. 1977). The

District Court found that service had been made in compliance

with the law of North Dakota® and that there were minimum

contacts between CEAG and North Dakota in CEAG’s licensing

2 CEAG takes particular exception to the District Court’s finding that

CEAG had a liaison officer at the Melroe Division of Clark in Gwinner,

North Dakota. We do not believe that this finding has been shown to be

clearly erroneous. Moreover, we note that even if it be assumed that there

was no liaison officer in North Dakota, there remains adequate factual

support in the record for the District Court’s jurisdictional conclusion.

3 Pursuant to Rule 4(d)(2)(D) of the North Dakota Rules of Civil Pro-

cedure, service of process may be made within the state on a foreign

corporation by delivering a copy of the summons “to one who acted as an

agent for the defendant with respect to the matter upon which the claim is

based and who was an agent of the defendant at the time of service.”

A-7

agreement with the Kellers, who are residents ot North Dakota,

and in its extremely close relationship to its parent corporation,

Clark, which did business in North Dakota. The District Court

did not consider the mere existence of a parent-subsidiary rela-

tionship adequate to establish minimum contacts with North

Dakota. This relationship was merely one of several factors

which added up to the requisite minimum contacts for in

personam jurisdiction. We find neither factual nor legal error in

the District Court’s disposition of CEAG’s jurisdictional

defenses and agree that there is in personam jurisdiction over

CEAG.

PATENT ISSUES

The complexity of this case compels individual analysis of

each patent. Certain facts are common to all three patents,

however, and we believe that their recitation here will provide

an appropriate general introduction to the purposes and

nuances of the individual patents.

The Kellers originally granted an exclusive license on the

three patents at issue here to Melroe Manufacturing Company

(Melroe) in 1964. In 1969, Clark acquired Melroe and suc-

ceeded to its rights under the license agreement with the

Kellers. In 1971, Clark and the Kellers entered into a new

licensing agreement which superseded the 1964 Melroe-Keller

agreement and which contained a clause based upon Lear v.

Adkins, 395 U.S. 653 (1969), specifically permitting Clark to

challenge the validity and scope of the licensed patents.

The three patents in dispute in this litigation have been

involved in two previous lawsuits. In the first action, which was

filed and concluded before Clark acquired Melroe, the Kellers

and Melroe sued Universal Manufacturing Company (Universal)

in the Eastern District of Virginia for infringement of the 503,

117 and 254 patents. This suit was settled out of court. Pur-

suant to a stipulation containing an acknowledgment of the

A-8

validity of the three patents, a consent decree and judgment

were entered. By this settlement, Universal took a sub-license

from Melroe on the three patents and agreed to pay royalties to

Melroe J. I. Case Company subsequently purchased Universal

and acquired its rights under the Melroe-Universal license agree-

ment.

In 1968, these patents engendered a second round of litiga-

tion, when Owantonna Manufacturing Company (Owantonna)

sued Melroe and Cyril Keller in the District of Minnesota in an

effort to have the 503, 117 and 254 patents declared invalid.*

Clark was substituted as party defendant after its acquisition of

Melroe in 1969. This suit also ended in a settlement which

incorporated an agreement whereby Owantonna was granted a

sub-license by Clark on the three patents.

503 PATENT

Louis Keller and his brother Cyril operated a general repair

and blacksmith shop in Rothsay, Minnesota, during the 1950’s.

In 1954, the Kellers became acquainted with Eddie Velo, a local

grain and turkey farmer. In the early summer of 1956, Velo

discussed with the Kellers the problems he had experienced in

having manure accretions removed from his turkey barns. The

barns had to be cleaned by hand, because their structure pre-

cluded the use of any mechanical loaders or tractors then avail-

able to Velo. Velo wanted to mechanize the cleaning process,

and he envisioned a light, highly maneuverable loader vehicle as

a desirable means of doing so. He described to the Kellers the

type of machine which he felt would be necessary, citing as an

example an Owantonna windrower he had once owned, which,

he believed, had had a separate reverse and forward belt drive

on each side and a caster wheel arrangement in the rear.

4 See Owantonna Mfg. Co., Inc. v. Melroe Co., 301 F. Supp. 1296 (D.

Minn. 1969), which pertains to the preliminary stages of this litigation.

A-9

After contemplating the Velo barn cleaning problem during

the summer of 1956, the Kellers presented a free-hand sketch of

a loader to Velo. Pursuant to an understanding that Velo would

pay for materials and compensate them for out-of-pocket costs

and some of their labor, the Kellers began building a self-

propelled loader in late October 1956. Because of their elemen-

tary design methods, the Kellers invented as they built. The

Velo loader, which took approximately three months to com-

plete and was delivered to Velo in February 1957, incorporated

a rear-mounted engine, a belt drive to two forward driving

wheels, and a single free-castering rear wheel. In March 1957,

Velo paid the Kellers $1,349.00 as compensation for parts,

material and some of the labor that went into building the

loader.

The relationship between the Kellers and Velo was one in

which the Kellers were kept closely advised of the loader’s per-

formance and were allowed unlimited access to the machine.

Between February 1957 and the summer of 1958, the Kellers

modified and improved the Velo loader, which manifested cer-

tain operational problems. The most serious problem concerned

the loader’s belt drive. The shifting of the loader’s idler lever

created friction and heat which caused the drive belts on each

side of the loader to stretch. The stretching resulted in a loss of

driving power in both forward and reverse. When the belt on

one side alone stretched, the loader would drive only in circles.

These problems prompted the Kellers to develop a clutch

system that would eliminate the belt drive. During the spring of

1958, they constructed a test plate resembling the side plate of

the Velo loader. Upon this plate, they began to develop the

clutch assembly which ultimately became the transmission

system covered by the 503 patent. Around the end of July

1958, the cam-actuated clutch drive mechanism recited in each

of the four claims of the 503 patent was installed in the Velo

loader. The cam-actuated cluich drive provided more positive,

responsive and reliable steering, starting and stopping control.

A-10

Prior to December 1, 1957, the critical date under 35 U.S.C.

§ 102(b)° with respect to the 503 patent, the Kellers built no

other loaders. In January or February 1958, they built several

loaders equipped with the belt drive used in the original Velo

loader rather than the cam-actuated clutch drive assembly

covered by the 503 patent. Three of these loaders were

delivered to Jenoff, Inc. of Fergus Falls, Minnesota, in the

spring of 1958, but the record contains no evidence that the

Kellers were in contact with Jenoff about their loader prior to

December 1, 1957.

The application for the 503 patent was filed on December 1,

1958. The 503 patent, entitled “transmission system”, contains

four independent claims, each of which is specifically directed

to a particular cam-actuated clutch drive mechanism having

independently rotatable propulsion wheels which may be

independently actuated by the drive mechanism for driving the

vehicle backward or forward and for steering it. The 503 patent,

which is a mechanical patent of 17 years’ duration, was granted

to the Kellers by the Patent Office on October 6, 1964. The

District Court sustained the validity of the 503 patent.

In arguing on appeal that the trial court erred in holding the

503 patent valid, Clark impugns the correctness of essentially

every step in the exhaustive factual and legal analysis made by

the District Court. We will address Clark’s contentions seriatim,

after briefly introducing the basic tenets of patent law that

must be applied to determine the validity of all three of the

patents at issue here.

In order to be patentable, an invention must be useful, novel

and nonobvious. The utility of the inventions patented here is

not in question; the parties contest only the issues of novelty,

5 To be patentable under § 102(b), the invention must not have been “in

public use or on sale in this country, more than one year prior to the date

of the application for patent in the United States.” The date one year

prior to the date of application is often referred to as the critical or

statutory bar date with respect to the invention sought to be patented.

a

A-11

or compliance with the patent requirements of §102(b), and

nonobviousness. The standards for determining whether an

invention possesses novelty are set forth in 35 U.S.C. § 102. For

the purposes of this first inquiry, we are concerned only with

that aspect of 35 U.S.C. § 102(b) which precludes patentability

where an invention has been in public use or on sale in this

country more than one year prior to the date of the application

for patent in the United States.

Insofar as the requirement of nonobviousness is concerned,

35 U.S.C. § 103 sets forth the standard for determining whether

the subject matter of an invention is nonobvious.

A patent may not be obtained though the invention is not

identically disclosed or described as set forth in section 102

of this title, if the differences between the subject matter

sought to be patented and the prior art are such that the

subject matter as a whole would have been obvious at the

time the invention was made to a person having ordinary skill

in the art to which said subject matter pertains. Patentability

shall not be negatived by the manner in which the invention

was made.

35 U.S.C. § 103. The Supreme Court has fleshed out the skele-

tal framework of §103 by providing guidelines for making an

analysis of nonobviousness.

Under § 103, the scope and content of the prior art are to be

determined; differences between the prior art and the claims

at issue are to be ascertained; and the level of ordinary skill in

the pertinent art resolved. Against this background, the obvi-

ousness or non-obviousness of the subject matter is deter-

mined. Such secondary considerations as commercial success,

long felt but unsolved needs, failure of others, etc., might be

utilized to give light to the circumstances surrounding the

origin of the subject matter sought to be patented. As indicia

of obviousness or nonobviousness, these inquiries may have

relevancy.

A-12

Graham v. John Deere Co., 383 U.S. 1, 17-18 (1966). Clearly,

the test for nonobviousness requires basic factual as well as legal

inquiries, Graham v. John Deere Co., supra at 17, and is one

that must be resolved upon a case-by-case analysis. Woodstream

Corp. v. Herter’s, Inc., 446 F.2d 1143, 1150 (8th Cir. 1971).

(1) SCOPE OF PATENT CLAIMS

The 503 patent is entitled “transmission system’. Clark

contends that the District Court misconstrued the scope of the

claims of the 503 patent by limiting them to a transmission

system only and ignoring their integral relationship to a vehicle.

A mere reading of the District Court’s construction of the scope

of the 503 patent claims belies this contention.

The 503 patent contains four independent claims. Each claim

is specifically directed to a particular cam actuated clutch

drive mechanism for a self propelled vehicle having indepen-

dently rotatable propulsion wheels which may be indepen-

dently actuated by the aforesaid drive mechanism for driving

the vehicle forward and backward, and for steering it.

Clark Equipment Co. v. Keller, Nos. 4875 and 4839, slip op. at

11 (D.N.D. Sept. 23, 1976). The District Court, in delineating

the scope of the claims of the 503 patent, explicitly recognized

that the basic purpose of the cam-actuated clutch transmission

system was the steering and driving of a vehicle. Thus, the

claims of the 503 patent were in fact construed just as appellant

Clark argues they should have been, and Clark’s contention

requires no further consideration.

(2) EXCLUSION OF VELO LOADER FROM PRIOR ART

In order to make a determination of obviousness under 35

U.S.C. §103, there must be a consideration of the differences

between the invention and the prior art. Clark contends that the

District Court erroneously excluded the Velo loader from the

A-13

prior art and, therefore, made an incorrect obviousness analysis

on the 503 patent. The basis of Clark’s contention is the

premise that the Velo loader was prior art under § 103 because

it was in public use or on sale prior to December 1, 1957, the

statutory bar date under § 102 for the 503 patent.® The trial

court held that the Velo loader was neither on sale nor in public

use prior to December 1, 1957, and that its use prior to that

date was experimental. ! Upon a thorough review of the record,

we are convinced that the trial court applied appropriate legal

principles to reach these conclusions, and that they are based

upon correct findings of fact.

Moreover, even if the trial court erred in determining that the

Velo loader was not prior art, this error leaves its obviousness

analysis unvitiated, for despite its finding that the Velo loader

was experimental, the trial court went on to assume arguendo

that the Velo loader was prior art and to analyze the obvious-

ness of the 503 patent from that standpoint. The belt-driven

Velo loader, which was not disclosed as prior art to the Patent

Office, did not contain the cam-actuated clutch mechanism on

which all four of the claims of the 503 patent were allowed.

The trial court found:

6 On appeal, Clark has specifically waived the argument that this

purported public use or on-sale activity rendered the 503 patent invalid

under § 102(b); it argues only that these activities caused the Velo loader

to be prior art under § 103. The anomaly of Clark’s position is obvious: it

relies on §102(b) for a definition of prior art applicable to » 103, but

chooses not to invoke the actual bar of § 102(b) itself. We can find no

logical or legal explanation for this peculiar argument, and our disposition

of this contention makes speculation on this point unnecessary.

7 In light of these clearly stated conclusions, we consider somewhat les

than candid Clark’s intimations in its briefs that the trial court found (he

Velo loader to have been on sale or in public use prior to the statutory bar

date.

A-14

Even if the original Velo loader as it existed prior to the

critical date of December 1, 1957, is considered prior art to

the 503 patent as having been in public use or on sale for

more than one year before the 503 application was filed, this

loader is no better prior art than the Loyd patent cited and

relied upon by the Examiner, with respect to the particular

clutch drive arrangement for a vehicle in combination with

the cam actuation mechanism on which all four claims of the

503 patent were allowed. There are more of the elements in

Loyd in the combination set forth in the claims of the 503

patent * * * than there are in the Keller Velo loader * * *.

Clark Equipment Co. v. Keller, supra at 19. Clark does not

challenge the correctness of this finding;® nor does our indepen-

dent review of the record reveal any reason to believe that it is

incorrect.

(3) EXCLUSION OF WHITE PATENT FROM PRIOR ART

The White patent, which was not cited by the Patent Office,

describes a windrower with a “steering structure for farm imple-

ments and the like.”’ At trial and on appeal, Clark has intimated

that this was the machine mentioned by Eddie Velo to the

Kellers in the summer of 1956. On this basis, Clark contends

that the White patent was prior art for the 503 patent and that

the trial court erred in refusing to consider the White patent as

prior art in its analysis of the obviousness of the 503 patent.

This contention is unconvincing for several reasons. First, we

note that its basis, the testimony of Eddie Velo, is equivocal,

for Velo could not testify with certainty that the windrower he

mentioned to the Kellers was the machine described by the

White patent. Even if we assume an identity between the White

8 Indeed, Clark does not even acknowledge the existence of this finding,

which directly contradicts its contention that the trial court erred by

failing to consider the Velo loader as prior art for the 503 patent.

A-15

patent and the windrower with which Velo was acquainted,

however, we can perceive no error in the trial court’s exclusion

of the White patent from the prior art or, indeed, a basis for any

other disposition of this issue. It appears that Clark did not

choose to argue to the trial court that the White patent was

prior art for the 503 patent. No evidence whatsoever was sub-

mitted by Clark at trial to show how the V hite patent, alone or

in combination with any other patents, right be relied upon as

prior art.

The District Court held that the Velo loader did not incorpo-

rate the claimed features of the 503 patent and was no better

prior art than the Loyd patent cited and relied on by the Patent

Examiner. It concluded that the relevancy of the White patent,

which was at best a possible forerunner of the Velo loader, was

limited, because the White patent was more significant to the

belt drive of the original Velo loader than to the cam-actuated

clutch drive of the 503 patent. We can find no error in the trial

court’s disposition of this issue.

(4) DIFFERENCES BETWEEN PRIOR ART AND CLAIMS OF

THE 503 PATENT

Graham v. John Deere Co., 383 U.S. 1 (1966), requires that

in making an obviousness analysis under § 103, the trial court

determine the scope and content of the prior art, ascertain the

differences between the prior art and the claims at issue and

resolve the level of ordinary skill in the pertinent art. On appeal

Clark alleges, in wholly conclusory fashion, that the trial court

failed to ascertain the differences between the prior art and the

claims of the 503 patent. This contention flies in the face of the

trial court’s careful examination of the claims of the 503 patent

vis-a-vis the Schreck, Heliwarth and Loyd patents, which were

the primary prior art patents relied on by the Patent Office, and

the Velo loader, which was assumed to be applicable prior art

for the purposes of an obviousness analysis. Based on this exam-

A-16

ination,? the trial court concluded:

Assuming arguendo that the Velo loader is prior art, the defi-

ciencies in that loader were easily recognized by both the

Kellers and Velo. The most significant problem involved the

heating, and subsequent expanding and slippage of the belts

which resulted in the loss of driving and steering control.

Installation of clutches was a solution, but there existed a gap

in the teaching of the prior art — Hellwarth and Schreck — as

to how to install clutches in such a way to be able to actuate

them to maintain steering and forward and reverse control in

a smooth and effective manner from the operator’s compart-

ment. The Kellers conceived a new clutch drive mechanism

which proved to be highly effective and commercially suc-

cessful. The solution by the Kellers was not readily obvious

to one having ordinary skill in the pertinent art.

Clark Equipment Co. v. Keller, supra, slip op. at 28. We believe

that the trial court complied with the requirements of Graham

v. John Deere Co., supra, by ascertaining the differences

between the prior art and the claims of the 503 patent.

9 We consider that a repetition of the detailed findings underlying the

differences ascertained by the district judge would serve no useful purpose

here. In order, however, to give some indication of the careful and pain-

staking character of his analysis of the prior art, we will set forth a mere

part of his findings on the Schreck patent. The District Court found, inter

alia, that the Schreck patent disclosed “a self-propelled dolly which is

controlled by an operator walking in front of the dolly. As disclosed by

the drawings of the Schreck patent, steering and driving control is achieved

through a draft tongue 6 having a rotatable gripping handle 61. A linkage

bar 63 connected to handle 61 serves to move a link bar for actuation of a

pair of clutch units * * * through crank arms * * * connected to the

opposite ends of link 51.” Clark Equipment Co. v. Keller, supra, slip op. at

17. We note that the findings which we have just cited represent a mere

fraction of the District Court’s exhaustive analysis of the prior art.

A-17

(5) SYNERGISTIC EFFECT OF CLAIMED TRANSMISSION

SYSTEM

Clark argues that because the 503 patent is simply a combina-

tion of old elements, the trial court had an obligation to deter-

mine whether this combination acted to produce a synergistic

or unexpected effect. Clark’s allegation of error is based upon

two premises, viz that a synergism analysis was required and

that the District Court failed to meet this requirement. Because

we find that the District Court did in fact give adequate con-

sideration to the effect of the combination of elements in the

503 patent, we need not address the question of whether or not

a synergism analysis was mandatory on the facts here. In pass-

ing, we do note, however, major differences between the basic-

ness and simplicity of the old elements combined in the cases

cited as controlling by Clark and the more complex elements of

the 503 patent.!° Moreover, it appears that hindsight alone

persuaded Clark of the necessity for a synergism analysis, for

Clark first made mention of this issue only in a post-trial reply

brief, after failing to raise any synergism claim at or before trial.

The District Court’s memorandum opinion does not contain

an explicit analysis of synergism. In light of Clark’s failure to

raise a synergism argument prior to or during trial, we find this

lack of explicit reference by the District Court unsurprising. In

the patent law context, “synergism” has no talismanic power;

synergism is merely one indication of nonobviousness. What is

required, when a synergism analysis is appropriate, is simply a

10 Sakraida v. Ag Pro, Inc., 425 U.S. 273 (1976), involved an invention

for the cleaning of dairy barns by means of flushing water down an

inclined surface. In Anderson’s-Black Rock, Inc. v. Pavement Salvage Co.,

Inc., 396 U.S. 57 (1969), the invention consisted of hanging a radiant

burner on the side of a paving machine. The invention involved in Great

Atlantic & Pacific Tea Co. v. Supermarket Equipment Corp., 340 U.S.

147 (1950), was nothing more than a U-shaped frame capable of sliding

items along a counter top.

A-18

determination that the combination of elements in a patent

produces “‘an effect greater than the sum of the several effects

taken separately.”” Anderson’s-Black Rock, Inc., v. Pavement

Salvage Co., 396 U.S. 57, 61 (1969). A careful reading of the

District Court’s opinion reveals that determinations of the

novelty and unexpectedness of the combinative effect of the

elements of the 503 patent underlie the District Court’s entire

analysis of obviousness under § 103. Form would triumph over

substance were we to hold this analysis inadequate for lack of

specific reference to synergism, particularly in view of Clark’s

failure to place the issue of synergistic effect into issue prior to

or during trial.

(6) OBVIOUSNESS OF THE 503 PATENT

Nonobviousness is one condition of patent validity; the sub-

ject matter sought to be patented must not be obvious to a

person having ordinary skill in the pertinent art. 35 U.S.C.

$103. While the question of obviousness vef non is, like the

ultimate question of patent validity, a matter of law rather than

fact, Flour City Architectural Metals v. Alpana Aluminum

Products, Inc., 454 F.2d 98, 106 (8th Cir. 1972), the obvious-

ness condition imposed by § 103 is one which “lends itself to

sevetal basic factual inquiries.” Graham v. John Deere Co.,

supra at 17. The basic factual inquiries required under § 103

include a determination of the scope and content of the prior

art, an ascertainment of the differences between the prior art

and the claims at issue and a resolution of the level of ordinary

skill in the pertinent art. Graham v. John Deere Co., supra at

17. The District Court made the factual findings required by

Graham v. John Deere Co., and nothing Clark has urged on

appeal convinces us that these findings are incorrect or lack

support in the record.

The court held that the 503 patent met the nonobviousness

requirement of § 103. Clark raises two primary challenges to

A-19

this conclusion of nonobviousness: first, that the 503 patent

constitutes only an obvious improvement over the Velo loader

combined with the Schreck anu Hellwarth patents and, second-

ly, that the 503 patent constitutes only an obvious improve-

ment over the White patent combined with the Schreck and

Hellwarth patents. We conclude that the District Court was cor-

rect in its determination of the relevant prior art and in its

rejection of Clark’s contentions that the 503 patent was obvious

in light of the original Velo loader taken in combination with

the Loyd, Schreck, Hellwarth and White patents.

Assuming arguendo that the Velo loader was prior art, the

District Court found that it did not contain the claims unique

to the 503 patent and that it was no better prior art than the

Loyd patent cited and relied upon by the Patent Examiner. The

court also found that the White patent was more relevant as

prior art to the belt-driven Velo loader than to the 503 patent

and that the most pertinent prior art consisted of the Schreck

and Hellwarth patents, which were cited. considered and

rejected by the Patent Office. On this basis, the court concluded

that Clark had failed to prove by substantial evidence how the

prior art could be combined to meet the claimed structure of

the 503 patent without hindsight.!! We have previously

rejected Clark’s piecemeal attacks made on the basis of the trial

court’s obviousness determination. A careful review of the

record convinces us that the District Court’s conclusion that the

503 patent constitutes more than a merely obvious improve-

ment over the relevant prior art is entirely correct.

11 A patent which has survived the scrutiny of the Patent Office is pre-

sumed to be valid, and one attacking validity on the basis of obviousness

carries the burden of proof on this issue. Woodstream Corp. v. Herter’s,

Inc., 446 F.2d 1143, 1149 (8th Cir. 1971).

A-20

(7) CANDOR TO THE PATENT OFFICE

Clark contends that the Kellers’ failure to disclose the Velo

loader as prior art to the Patent Office constituted a lack of

candor that necessitates invalidation of the 503 patent. A

patent applicant has an uncompromising duty toward the

Patent Office to disclose all pertinent facts. However, a party

seeking to establish fraud on the Patent Office because of a

failure of full disclosure bears a heavy burden of persuasion:

fraud on the Patent Office must be proved by clear, convincing

and substantial evidence. Norton v. Curtiss, 433 F.2d 779, 797

(C.C.P.A. 1970).

The trial court rejected Clark’s contention that the Kellers’

nondisclosure of the Velo loader to the Patent Office consti-

tuted a breach of the duty of full disclosure. The court held

that because there is no duty on a patent applicant to disclose

prior use where there is a bona fide basis for believing the use

was experimental, the Kellers had no duty to disclose the exper-

imental Velo loader. Moreover, even assuming the Velo loader

to be prior art, the court had previously found that it was

nonanticipatory. Thus, the Velo loader was of such a nature

that even if it had been disclosed to the Patent Office, it would

not have had an impact on the issuance of the patent. Tate

Engineering, Inc. v. United States, 477 F.2d 1336, 1345 (Ct. Cl.

1973). Accordingly, nondisclosure of the Velo loader did not

constitute a breach of the duty of disclosure.

We have previously expressed our agreement with the trial

court’s findings that the Velo loader was experimental or, if

considered prior art, was nonanticipatory of the 503 patent.

These findings support the conclusion that the Kellers breached

no duty of disclosure to the Patent Office. At trial, Clark failed

to prove a breach of the duty of uncompromising disclosure to

the Patent Office; on appeal, Clark has failed to demonstrate

that the trial court erred in rejecting its unproved allegation of

fraud.

A-21

117 PATENT

In May 1959, the Kellers and Melroe Manufacturing Com-

pany (Melroe) entered into an agreement whereby Melroe

acquired an exclusive license under the 503 patent. In 1959 and

1960, Melroe manufactured and sold several loader models, the

M-60, M-200 and M-400, all of which were equipped with the

transmission drive system covered by the 503 patent.!? These

loaders did not prove to be especially profitable, and Melroe

contemplated leaving the loader market. Louis Keller insisted

that Melroe try to experiment with new loaders and, due at

least partially to his insistence, Melroe decided to experiment

rather than abandon the loader field. During the course of this

experimentation in 1961, four prototypical preproduction load-

ers, designated M-440’s, were built and the machine incorporat-

ing the elements of the 117 patent was developed. Because the

18 claims of the 117 patent, entitled “tractor vehicle and drive

therefor”, were reduced to practice during the development of

the four M-440 prototypes, the individual histories of these

machines bear consideration. Application for the 117 patent

was filed on October 23, 1962, thus making October 23, 1961,

the critical statutory bar date. A mechanical patent of 17 years’

duration was granted to Louis Keller and Clifford Melroe on

January 15, 1966.

The first preproduction machine, known as the Clyde Olson

loader, was finished no later than the end of February 1961.

Although it differed somewhat from earlier models, it was

equipped with slide cam type clutch actuators identical to those

employed in its predecessors. The Clyde Olson loader, which

contained few, if any, elements of the 18 claims of the 117

12 The patent claims of the 503 patent were originally applied to a three-

wheel vehicle with two independently rotatable forward driving wheels

and a third free-castering rear wheel. By December 1960, the M-200 loader

had been modified by the addition of a rear axle and two rear drive

wheels, thus producing a four-wheel power driven skid steer loader.

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patent, was never put into production.

Between the date of completion of the Clyde Olson machine

and May 1961, a second prototype was constructed. This load-

er, known as the Gravel Pit loader, was tested extensively by

Louis Keller and employees of Melroe in a gravel pit near

Gwinner, North Dakota, as well as at the home of Cyril Keller

in Rothsay, Minnesota. The Gravel Pit loader differed from the

Clyde Olson machine in several major aspects, but not in clutch

design. It contained cam type clutch actuators and did not

embody all of the elements of the 117 patent.

A third prototype was completed sometime after July 4,

1961, and probably before August 1, 1961. This prototype

contained improvements on some of the weaknesses revealed

during the gravel pit testing of the third prototype. This testing

had made it clear to Louis Keller that there were serious limita-

tions to the tapered clutch design. In particular, the slide cam

actuators tended to stick, which would cause the machine to

cant or jerk unexpectedly, in a manner dangerous to the opera-

tor. Furthermore, the clutches would oil can)? and the side

plates bow, causing the clutches to slip. Nevertheless, the third

prototype retained the cam type clutch actuators characteristic

of its predecessors and, thus, did not reduce to practice the

essential elements of the 18 claims of the 117 patent.

Louis Keller and Clifford Melroe subsequently conceived of

and developed a threaded rotary actuator clutch, designed to

avoid the aforesaid problems experienced with the slide cam

type clutch. This threaded rotary actuator clutch was placed

into the fourth prototype, a white loader with flat clutch plates

known as the Cy Keller demo. Because of the flat clutch plates,

there was difficulty in obtaining good clutch power transmis-

sion. The clutches tended to slip and could not be solidly

13 Oil canning occurs when pressure applied to a clutch plate causes

flexion similar to that occasioned by the application of pressure to the

center of the bottom of a round oil can.

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engaged. Bench tests revealed that these problems were caused

by the oil canning of the flat clutch plates. A new dome-shaped

clutch plate was subsequently designed to avoid the oil canning

problem. To provide for lubrication of the clutch linings, the

design was also changed to provide oil pickup slots on the input

clutch, intended to pick up oil thrown about inside the gear

case by the chains.

After a period of testing, the decision was made to produce a

new loader line, which was given the same M-440 designation

that had been used for its prototypes. The M-440, which was to

be white, a color considered appealing to the fertilizer industry,

was equipped with a threaded rotary actuator clutch design.

Production on the M-440, for which the trade name “Bobcat”

was adopted, began in December 1961. The fourth prototype

was built to check out the final production tooling for the

M-440. It was the first machine to incorporate all of the ele-

ments of the threaded clutch actuator eventually put into the

M-440. It also represented the first embodiment of all of the

elements of the 18 claims of the 117 patent and, accordingly,

the date of its construction is crucial. Unfortunately, the large

amount of evidence submitted to date the construction of the

fourth prototype is contradictory. After carefully analyzing all

of the evidence on this point, the trial court found that the

most credible evidence established that the date of construction

had been near the end of the third quarter of 1961. The critical

statutory bar date under 35 U.S.C. §102(b) is October 23,

1961.

Melroe engaged in commercial promotion of the M-440

before actual production of the new loader line began,!4 and in

14 There was conflicting testimony as to whether a white Melroe loader

was exhibited at the Minnesota State Fair between August 26 and Septem-

ber 4, 1961. The trial judge deemed this evidence inconclusive and insuffi-

cient to support a finding that a white Melroe loader was on display at the

Fair. He concluded that “‘Melroe intended to display a 440 loader at the

Fair, but for some reason did not.” (Continued)

A-24

some instances negotiations for sales also preceded production.

In retrospect, the rapidity with which the M-440 began to sell

may be viewed as an early and accurate indicator of the remark-

able commercial success which this loader line has enjoyed. On

the other hand, however, the early fruition of the M-440 sales

campaign has redounded to the detriment of the holders of the

117 patent. The M-440 loader was offered for sale to both

Farmers Union Central Exchange and Midland Cooperatives

prior to October 23, 1961, and orders for future delivery were

taken from those two companies prior to October 23, 1961. On

this basis, that a machine incorporating the elements of the 117

patent had been on sale prior to the statutory bar date of

§102(b), the District Court held the 117 patent invalid. This

invalidity under § 102(b) was the sole ground for the holding

that the 117 patent was invalid; all other alleged bases for

invalidity were considered and rejected by the District Court.

The District Court’s ruling that the 117 patent was invalid

under § 102(b) is challenged on appeal by the Kellers. More-

over, Clark, which acquired Melroe in 1969 and succeeded to its

rights under the license agreement with the Kellers, attacks the

District Court’s rejection of the additional and alternative

grounds of invalidity it has proposed. We will first address the

contentions raised by the Kellers and then turn to the more

numerous contentions of Clark.

14 (Continued)

There was also evidence showing that a news release advertising the M-440

Bobcat was distributed to a large number of trade publications and news-

papers within a few days of the critical bar date of October 23, 1961. The

news release was dated October 20, and a newspaper article published

October 26 contained an almost verbatim recitation of the contents of the

news release. There was, however, no direct evidence of the date on which

the release was mailed.

A-25

(1) OFFER FOR SALE OF MACHINE EMBODYING ALL

ELEMENTS OF THE 117 PATENT PRIOR TO THE STATU-

TORY BAR DATE

The Kellers present a tripartite challenge to the District

Court’s holding that a machine incorporating the elements of

the 117 patent was on sale prior to October 23, 1961, the

statutory bar date for that patent under 35 U.S.C. §102(b).

They argue that this conclusion is not supported by the evi-

dence; that it is not supported by the trial court’s findings; and

that it is predicated upon a misconception and misapplication

of Dart Industries, Inc. v. E. I. Du Pont De Nemours & Co., 489

F.2d 1359 (7th Cir. 1973), cert. denied, 417 U.S. 933 (1974).

The parties introduced a vast amount of evidence on the 117

patent. The complex and often contradictory nature of this

evidence is reflected in the trial court’s lengthy memorandum

opinion, which contains 151 findings of fact relative to the 117

patent alone. In contending that the trial court’s holding, that

there were invalidating sales of a machine incorporating the

elements of the 117 patent, is not supported by the evidence,

the Kellers point out that Clark bore the burden of proof,

Woodstream Corp. v. Herter’s, Inc., 446 F.2d 1143, 1149 (8th

Cir. 1971); they denigrate the adequacy of almost every piece

of evidence relied upon by the District Court and point to

evidence which, they contend, should have been relied upon

instead.

We have reviewed the record in light of each of the Kellers’

specific allegations of lack of evidentiary support. This review

convinces us that the trial judge made an exhaustive analysis of

the mountainous evidence submitted on the 117 patent and

that his conclusion that a machine incorporating all the ele-

ments of the 117 patent was offered for sale prior to October

23, 1961, is adequately supported by the evidence. It would

serve no useful purpose to recite and refute each separate allega-

tion of evidentiary insufficiency urged by the Kellers; the

A-26

record, which we have read with care, contains more than ade-

quate evidence to support the District Court’s conclusion that

“the 440 loader was offered for sale to Farmers Union Central

Exchange and Midland Cooperatives prior to the October 23,

1961, §102(b) statutory bar date, and that orders for future

delivery were taken from those two companies prior to October

23, 1961.’ We deem it sufficient here simply to point out some

of the more salient evidence supportive of this conclusion.

Melroe actively promoted the M-440 Bobcat not only prior

to the commencement of production in December 1961, but at

some time extremely near the statutory bar date. While this

evidence alone is insufficient to establish that the M-440 was

offered for sale prior to October 23, it is available to buttress

the circumstantial evidence of sales activity found in the record.

Insofar as the sales involving Farmers Union Central Exchange

(Farmers Union) are concerned, a partial list of the evidence

includes: Melroe’s demonstration of a white loader to represen-

tatives of Farmers Union some time prior to October 4, 1961; a

Melroe purchase order dated October 3, 1961, for three M-440

loaders with fertilizer buckets at $2,750 each; a Farmers Union

purchase order dated October 4, 1961, for three M-440 loaders

with fertilizer buckets at $2,750 each; a Melroe invoice with an

acknowledgment date of October 4, 1961, for three M-440

loaders with fertilizer scoops at $2,750 each; and a bill of lading

showing delivery of one 440 S.P. loader with fertilizer scoop to

Farmers Union on January 4, 1962. The authenticity of these

documents was established at trial. Moreover, the Kellers sub-

mitted no evidence rebutting or explaining these documents.

Accordingly, the trial court chose to infer that the M-440 loader

was offered for sale to Farmers Union prior to October 23,

1961. In our review of the record, we have examined the docu-

mentary and other evidence underlying this inference and are

convinced that the trial court’s inference and conclusion are

fully supported by the record.

Insofar as the sales involving Midland Cooperatives are con-

A-27

cerned, a partial list of the evidence contained in the record

includes: a Melroe purchase order dated September 23, 1961,

for nine M-440 loaders with fertilizer buckets for future deliv-

ery to different locations; and seven Melroe invoices, each of

which bears an acknowledgment date of September 30, 1961,

covering the sale of seven M-440 loaders with fertilizer scoops

to Midland Cooperatives for delivery to different locations. The

trial court considered this evidence in light of the testimony of

former employees of Midland Cooperatives and Melroe on the

procedures followed by Melroe in processing orders, and made

the inference that the sales involved were processed prior to

September 30, 1961. Our own review of these documents and

15 The Kellers argue that Clark was not entitled to inferences that offers

of sale were made prior to the critical date. In its memorandum opinion,

the trial court clearly explained that its inferences of sales activity were

based upon specific sale documents. In an action tried without a jury,

inferences drawn from documents or undisputed facts shall not be set

aside unless they are clearly erroneous. United States v. U.S. Gypsum Co.,

333 U.S. 364, 394 (1948); Birdwell v. Hazelwood School Dist., 491 F.2d

490, 494 (8th Cir. 1974). Moreover, when conflicting inferences may be

drawn from the evidence, a reviewing court is not at liberty to disturb a

reasonable inference made by the trial court unless it is definitely and

firmly convinced that a mistake has been made. A. L. B. Theatre Corp. v.

Loew's Inc., 355 F.2d 495 (7th Cir. 1966). Finally, on appeal the evi-

dence, including the inferences reasonably drawn therefrom, must be

viewed in the light most favorable to the prevailing party. /mperial Cas. &

Indem. Co. v. Carolina Cas. Ins. Co., 402 F.2d 41, 44 (8th Cir. 1968). We

have reviewed the trial court's inferences of sales activity prior to October

23, 1961; we find them to be reasonable and not clearly erroneous.

In challenging the inferences drawn by the trial court, the Kellers also

argue that because of certain past behavior, Clark was not entitled to

beneficial inferences from the evidence. After a careful analysis of Clark’s

past behavior, in particular, its failure to preserve evidence or records in its

possession possibly relating to this issue, the District Court, “with some

hesitation,” gave Clark the benefit of inferences of sales activity. The

Kellers have cited no authority which suggests that the District Court erred

in deciding to draw inferences favorable to Clark. The record supports the

inferences drawn by the District Court and we can find no error in the

decision to draw inferences favorable to Clark.

A-28

the record as a whole convinces us that the trial court’s infer-

ence was reasonable! and that its conclusion that the M-440

loader was offered for sale to Midland Cooperatives prior to

October 23, 1961, is supported by the evidence.

The Kellers also argue that “the trial court’s conclusion that a

machine having all the patented features of the 117 patent was

offered for sale prior to the critical date is not supported by the

trial court’s findings.’’ In support of this contention, the Kellers

refer specifically to only two of the trial court’s 151 findings of

fact on the 117 patent, which they characterize as inconclusive.

Notably, they do not argue that these or any other findings of

fact are clearly erroneous. We can find no merit in this conten-

tion. The trial judge’s findings of fact support his conclusion

and have not been shown to be clearly erroneous.

A patent is invalid under 35 U.S.C. § 102(b) if the subject

matter of the invention has been on sale or in public use more

than one year prior to the filing of the patent application. The

District Court held that a machine embodying the elements of

the 117 patent had been on sale prior to the statutory bar date.

In discussing its conclusion that the §102(b) bar applied, the

District Court stated:

It is not necessary that the “patented product” be on hand in

commercial quantities for it to be “‘on sale” within the mean-

ing of § 102(b). In fact, it is only necessary the invention be

“essentially” completed at the time of the invalidating sale.

Exact identity between the product sold and the product

described in the patent application is not required. Dart

Industries, Inc. v. E. I. Du Pont De Nemours and Co., 489

F.2d 1359, 1364-65 (7th Cir. 1973), cert. denied, 417 U.S.

933 (1974).

Clark Equipment Co. v. Keller, supra, slip op. at 56. The Kellers

contend that the District Court’s conclusion is incorrect because

it is based upon a misapplication of Dart Industries, supra. The

crux of this contention appears to be that the District Court

relied upon Dart Industries to avoid the identity requirement of

A-29

§ 102(b). We are unable to agree.

It is undisputed that the M-440 included all of the features of

all of the claims of the 117 patent. The final prototype preced-

ing production of the M-440 was the fourth prototype, which

contained all of the elements of the threaded rotary clutch

actuator concept. The trial court found that the fourth proto-

type was constructed during the third quarter of 1961, that is,

prior to October 23. M-440 loaders were offered for sale to

both Farmers Union and Midland Cooperatives prior to October

23. This evidence fully supports the District Court’s conclusion

that a machine embodying all of the elements of the 117 patent

was on sale prior to the statutory bar date. We can find no legal

error in this conclusion. The identity requirement of § 102(b)

was met, and Dart Industries, which is merely interpretive of

§ 102(b), was not misapplied.

(2) STANDARD OF PROOF

Under 35 U.S.C. §282, a patent which has survived the

scrutiny of the Patent Office carries a presumption of validity,

and a party objecting to the validity of a patent bears the

burden of establishing invalidity. Woodstream Corp. v. Herter’s,

Inc., 446 F.2d 1143, 1149 (8th Cir. 1971). The District Court

required Clark to adduce substantial evidence of patent invalid-

ity to rebut the presumption of validity. The Kellers contend

that substantial evidence is an improper and overly lenient

standard of proof. They argue that the District Court should

have required Clark to establish patent invalidity by clear and

convincing evidence and that Clark did not adduce clear and

convincing evidence of invalidity and, therefore, failed to meet

the appropriate standard of proof.

Although courts have differed over the precise quantum of

proof necessary to overcome the presumption of patent

validity, Woodstream Corp. v. Herter’s, Inc., supra at 1149 n.4,

there is general agreement that the burden is a heavy one. In

A-30

recent years, several circuits have defined the burden of estab-

lishing patent invalidity as one which must be satisfied by clear

and convincing evidence.!® This circuit, however, has defined

the standard of proof in terms of substantial evidence. Wood-

stream Corp. v. Herter’s, Inc., supra at 1149 n4; L&A

Products, Inc. v. Britt Tech Corp., 365 F.2d 83, 86 (8th Cir.

1966).

In requiring Clark to present substantial evidence in order to

establish patent invalidity, the District Court was simply requir-

ing the quantum of proof used in this circuit in patent cases. We

cannot say that the District Court erred by imposing the

standard of proof current in this circuit rather than substituting

a standard used elsewhere. Applying the substantial evidence

standard, the District Court deemed Clark’s evidence of sales

activities prior to the statutory bar date to be sufficient to

establish the invalidity of the 117 patent under 35 U.S.C.

§ 102(b). As we have previously indicated, we find this conclu-

sion to be amply supported both by the evidence and the trial

court’s findings. Moreover, it was based upon a correct interpre-

tation of the controlling law, including the standard of proof.!?

16 See, e.g., Aluminum Co. of America v. Amerola Products Corp., 552

F.2d 1020, 1024 (3d Cir. 1977}; Chicago Rawhide Mfg. Co. v. Crane

Packing Co., 523 F.2d 454, 458 (5th Cir. 1975), cert. denied, 423 U.S.

1091 (1976); Minnesota Mining & Mfg. Co. v. Kent Indus., Inc., 409 F.2d

99, 100 (6th Cir. 1969).

17 Clear and convincing evidence and substantial evidence are not stan-

dards which lend themselves to precise definition or quantification and we

will not attempt to identify and quantify any degree of variance which

may distinguish them. We simply note that both are heavy burdens of

proof and though there is a difference in the standards, we have no doubt

that the proof which was considered adequate under the substantial evi-

dence standard here would also suffice under the clear and convincing

evidence test.

A-31

CLARK’S ALTERNATIVE CONTENTIONS ON THE

INVALIDITY OF THE 117 PATENT

Clark convinced the District Court that the 117 patent was

invalid under § 102(b) because of sales activity prior to October

23, 1961, the statutory bar date. Clark also challenged the

validity of the 117 patent on the ground that it was obvious and

did not, therefore, conform to the requirement of nonobvious-

ness imposed by 35 U.S.C. § 103.18 Under the guidelines of

Graham v. John Deere Co., supra, the District Court made an

exhaustive analysis of the obviousness issue and ultimately con-

cluded that the 18 claims of the 117 patent were nonobvious

within the meaning of 35 U.S.C. § 103. Clark now challenges

this determination and raises various miscellaneous claims of

error. We will first address these miscellaneous contentions,

which derive in large part from the trial court’s § 102(b)

analysis discussed above.

(1) DEMONSTRATION AT THE MINNESOTA STATE FAIR

There was conflicting testimony on the question of whether a

white Melroe loader was demonstrated at the Minnescta State

Fair between August 26 and September 4, 1961. The trial judge

considered this evidence to be inconclusive and insufficient to

support a finding that a Melroe loader was on display at the

Fair. He found that Melroe had intended to display a loader at

the Fair, but that it had not done so. Clark characterizes this

finding as clearly erroneous and, in support of this characteriza-

tion, cites the evidence favorable to a finding that a loader was

on display.

18 Although the invalidity issue was decided in Clark’s favor, the issue of

nonobviousness remains live in regard to the Kellers’ claim for negligence

against Clark and its predecessor, Melroe, for failure to make a timely

application for the 117 patent and in regard to Clark’s third-party claim

against the law firm of Williamson, Bains and Moore. These claims remain

with the District Court for resolution.

A-32

Upon a review of the evidence submitted on this point, we

are in full agreement with the trial judge’s assessment that the

record contained insufficient evidence to establish that a loader

was displayed at the Fair. We consider his finding of non-display

emminently correct. Moreover, even if we assume this finding to

be erroneous, we are unable to discern how Clark could have

been prejudiced thereb:. The trial court ruled in favor of Clark

by holding the 117 patent invalid under § 102(b) on the basis of

sales activity prior to the statutory bar date. A finding that a

Melroe loader was on display at the Fair would simply have

provided cumulative evidence of this invalidating activity.

(2) EXCLUSION OF TWO MIDLAND COOPERATIVES

PURCHASE ORDERS

One of the bases for the trial court’s conclusion that the 117

patent was invalid under §102(b) was the finding that the

M-440 loaders had been offered for sale to Midland Coopera-

tives prior to the statutory bar date. Two documents offered by

Clark to prove sales activity with Midland Cooperatives were

excluded from evidence for lack of adequate foundation show-

ing them to be business records prepared in the normal course

of business. Clark contends that this exclusion was erroneous

and that it reveals that the trial court imposed abnormally

stringent evidentiary requirements upon Clark.

We can find no error in this exclusion. Moreover, we are

unable to discern that this ruling had any prejudicial effect

whatsoever upon Clark, which prevailed upon the very issue to

which these excluded documents were directed. Finally, the

record is devoid of support for the contention that in this or

any other evidentiary ruling, improper evidentiary requirements

were imposed upon either party.

(3) EXCLUSION OF INTERROGATORIES AND ANSWERS

FROM UNIVERSAL LAWSUIT

Clark attempted to introduce into evidence an exhibit con-

A-33

taining discovery material from the lawsuit against Universal

which had been settled by Clark’s predecessor Melroe by way of

a sublicense agreement with Universal. This exhibit consisted of

interrogatories directed to representatives of Melroe and to the

Kellers, and their answers thereto. In opposition to the intro-

duction of this exhibit, the Kellers asserted that the Universal

lawsuit had been controlled by Melroe’s attorney; they testified

that although they had signed the interrogatory answers under

oath, they were never given or shown copies of the questions to

which these answers pertained. The District Court excluded this

exhibit from evidence, but permitted Clark to use the inter-

rogatories and answers on cross-examination of the Kellers for

impeachment purposes. Clark contends that this limitation was

erroneous.

We need not decide whether this exclusion was erroneous, for

we are convinced that if it was error, it was harmless. Clark

engaged in extensive cross-examination of the Kellers, during

which it was allowed to use the interrogatories and answers for

impeachment. Moreover, Clark was successful in obtaining a

ruling of invalidity on the 117 patent, to which this proffered

exhibit apparently pertained. Under these circumstances, we do

not believe that Clark has asserted, nor does our review o: the

record show, any prejudice flowing from the exclusion of this

exhibit from the evidence.

(4) OBVIOUSNESS OF THE 117 PATENT

At trial, Clark challenged the 117 patent not only on the

basis of invalidating activity under 35 U.S.C. § 102(b), but also

on the basis of obviousness as that term is defined by 35 U.S.C.

$103. We have already expressed our agreement with the Dis-

trict Court’s determination that the 117 patent was rendered

invalid by sales activity prior to the statutory bar date imposed

by 35 U.S.C. §102(b). Clark argues that the District Court

erred in not finding the 117 patent invalid on the additional

ground of obviousness under § 103 and asks that we remedy

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this purported error. Clark attacks the District Court’s ruling

that the 117 patent was nonobvious on three grounds. It alleges

that the District Court failed to determine the scope and

content of the prior art; that it failed to ascertain the differ-

ences between the prior art and the claims of the 117 patent;

and that it erred in failing to find the subject matter of the 117

patent to be an obvious improvement over the prior art.

A perusal of these alleged errors could easily create the

impression that the District Court chose not to consider the

obviousness of the 117 patent because of its conclusion that

this patent was invalid on other grounds. Nothing, however,

could be farther from the truth. While Clark conceded that the

117 patent was nonobvious on the basis of the prior art cited to

the Patent Office, it asserted that there was “pertinent prior

non-cited art’ upon which the 117 patent was merely an

obvious improvement. The detailed consideration given by the

District Court to this allegedly pertinent non-cited prior art,

which included preproduction loaders used as demonstrators,

the M-400 loader and a number of patents, is reflected in 23

findings of fact and a lengthy legal analysis. Adhering to the

guidelines of Graham v. John Deere Co., supra, the District

Court determined the scope and content of the prior art

asserted by Clark, ascertained the differences between this prior

art and the claims of the 117 patent and determined the level of

ordinary skill in the smail loader art. The District Court found

that Clark had failed to show how the non-cited art was more

pertinent than the prior art cited by the Patent Office. In view

of Clark’s admission that, based solely on the cited art, the

Patent Office was correct in allowing the 117 patent, the Dis-

trict Court concluded that Clark had failed to prove that the

117 patent was invalid under 35 U.S.C. § 103.

We have carefully considered each of Clark’s attacks on the

District Court’s obviousness analysis of the 117 patent and find

merit in none of them. The District Court made the findings of

fact required by Graham v. John Deere Co., supra, and nothing

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Clark has urged on appeal convinces us that these finding are

not correct and fully supported by the record. Moreover, the

District Court’s conclusion of nonobviousness reflects both a

praiseworthy understanding and proper application of the

controlling law.

(5) INDEFINITENESS OF 117 PATENT

Under 35 U.S.C. §111, a patent application must include a

specification of the patent. The requirements of this specifica-

tion are set forth, as follows, in 35 U.S.C. § 112:

The specification shall contain a written description of the

invention, and of the manner and process of making and

using it, in such full, clear, concise, and exact terms as to

enable any person skilled in the art to which it pertains * * *

to make and use the same * * *.

Clark contends that the omission from the specification for the

117 patent of any mention of the weight distribution of the

wheels of the loader rendered the 117 patent application defi-

cient under §112. When the vehicle described by the 117

patent is fully loaded, 70% of the weight is on the two front

wheels and 30% on the two rear wheels. The opposite is true in

an unloaded condition: 70% ci the weight is on the rear wheels

and 30% on the front wheels.

There is some dispute as tc who introduced the weight distri-

bution issue at trial and what significance was attributed to it

by the District Court.!9 In any event, the District Court’s brief

19 Clark alleges that at trial, the Kellers “for the first time in the history

of this patent, asserted that the key element in the 117 patent was the fact

that there was a 70%-30% weight distribution on the wheels of the loader

depending on whether the vehicle was fully loaded or unloaded.” Clark

also alleges that this weight distribution was labeled by the trial court as a

critical element of the 117 patent. The Kellers respond that they have

never asserted that the 70%-30% weight distribution is a key element and

that Clark is attempting to mislead this court by stating that the trial court

labeled the 70%-30% weight distribution as a2 critical element of the 117

patent.

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discussion of the weight distribution of the patented loader

occurred in its analysis of the obviousness of the 117 patent.?°

In response to Clark’s allegation that the 117 patent was merely

an obvious improvement over the M-400, the weight distribu-

tion of the patented loader was discussed. This aspect of the

loader was hardly a surprise to Clark, which had touted the

70%-30% weight distribution in its own promotional literature.

Nevertheless, Clark, which was also familiar with the patent

application and thus aware that it did not mention the 70%-30%

weight distribution, chose not to attack the 117 patent at trial

on the basis of an inadequate specification under § 112. It now

voices this challenge to the 117 patent for the first time on

appeal. Under the circumstances, we are hardly predisposed to

excuse Clark’s failure to raise this contention at trial, especially

in light of the fact that Clark has already succeeded in invalidat-

ing the 117 patent on other grounds. Nevertheless, because this

contention lends itself to summary disposition, we will consider

it now.

The District Court found that although the 70%-30% weight

distribution is not expressly stated in the specification of the

117 patent, the features set forth in claims 10-15 and 18 do

recite the structural features which provide this inherent condi-

tion. Thus, the weight distribution of the patented loader is

inherent in the structural features recited in claims 10-15 and

18. A patent specification must be expressed in terms that will

enable a person skilled in the art to which it pertains to make or

20 In its obviousness analysis, the District Court found the 70%-30%

weight distribution to be a functional advantage inherent in the structure

defined in claims 10-15 and 18 of the 117 patent and absent in the M-400.

The patent specification recites the structural features which provide this

functional advantage and we do not consider that the patent application

was defective under § 112 for failure to describe this inherent functional

advantage. Under these circumstances, it was proper for the District Court

to consider the weight distribution of the patented loader in determining

the obviousness of the patent.

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use the invention. Were a person skilled in the loader art to

construct a loader as described in the specification of the 117

patent with materials normally used for such construction, so as

to include the elements of claims 10-15 and 18, the resulting

structure would possess the 70%-30% weight distribution. Thus,

the specification for the 117 patent is not deficient under

§ 112.

254 PATENT

On July 25, 1962, Louis Keller, Cyril Keller and Clifford

Melroe applied for a patent on “the ornamental design for a

self-propelled loader.” This patent, the 254 patent, was issued

on May 21, 1963;2! it is a design patent covering the machine

mechanically patented in the 117 patent.22 The District Court

sustained the validity of the 254 patent.

On appeal, Clark has presented numerous arguments in favor

of reversing the District Court’s holding that the 254 patent is

valid. Because we conclude that the 254 patent did not comport

with the novelty requirement of 35 U.S.C. §171, we believe

that a recitation and discussion of Clark’s remaining allegations

of error would be superfluous. Suffice it to say that we have

scrutinized each of these other allegations of error and find

21 The record is somewhat unciear as to the duration of this design

patent. Counsel for Clark stated at oral argument that the 254 patent had

been issued for a fourteen-year period. Based on that figure, the 254

patent would have expired on May 21, 1977.

22 The history of the development of the machine which underlies both

the 117 mechanical patent and the 254 design patent has been set forth at

length in our analysis of the 117 patent and will not be repeated here.

A-38

them to be without merit.23

35 U.S.C. §171 provides that a person who invents any new,

original and ornamental design for an article of manufacture

may obtain a patent therefor, so long as the other conditions

and requirements of Title 35 have been met. It follows, under

an integration of the various requirements for patentability set

forth in Title 35, that in order to be valid, a design patent must

be new, original, ornamental, nonobvious and the result of

invention. In determining the validity of a design patent, it is

the appearance of the article taken as a whole which must meet

the statutory requirements, for “the thing invented or pro-

duced, for which a patent is given, is that which gives a peculiar

or distinctive appearance to the manufacture, or article to

which it may be applied * * *.” Gorham Co. v. White, 81 U.S.

(14 Wall.) 511, 525 (1871). Schnadig Corp. v. Gaines Manufac-

turing Co., Inc., 494 F.2d 383, 389 (6th Cir. 1974); Hadco

Products, Inc. v. Walter Kidde & Co., 462 F.2d 1265, 1269 (3d

Cir.), cert. denied, 409 U.S. 1023 (1972).

The tests by which the appearance of a design patent must be

judged vary according to the particular statutory requirement

for patentability which is at issue. The obviousness of a design

patent is determined by an analysis under the general require-

23 We note that our determination that the 254 patent is not novel, when

considered in light of the M-400 loader, does not vitiate the trial court’s

conclusion that the Kellers acted in good faith in the prosecution of the

254 design patent. Even if the M-400 is assumed to be better prior art than

the 506 patent, which was considered by the Patent Office, we do not

believe that Clark has shown that the Kellers’ nondisclosure of the M-400

constituted an act of wilful bad faith manifesting an intent to mislead the

Patent Office. The Kellers apparently considered the M-400 nothing more

than a hybrid version of the earlier Melroe loaders covered by the 506

design patent, which was cited as prior art. Although we disagree with

their appraisal of the M-400, the record does not provide support for the

conclusion that their decision not to disclose the M-400 to the Patent

Office was motivated by bad faith. Clark has not proved by clear, convinc-

ing and substantial evidence that the Kellers failed to act in good faith in

the prosecution of the 254 patent.

A-39

ments of 35 U.S.C. §103, tailored to fit the design situation:

the differences between the design patent and the prior art must

not be obvious to a designer with ordinary skill in the art. The

novelty of a design patent, on the other hand, is tested by

determining the impact of the design upon an ordinary ob-

server. A design patent is novel when the “‘average observer

takes the new design for a diffe-ent, and not a modified already

existing design.” Thabet Manufacturing Co. v. Kool Vent Metal

Awning Corp., 226 F.2d 207, 212 (6th Cir. 1955). This is the

prevailing and now well-settled test for the novelty of a design

patent. See, e.g., Schnadig Corp. v. Gaines Manufacturing Co.,

Inc., supra at 389; Rains v. Cascade Industries, Inc., 402 F.2d

241, 247 (3d Cir. 1968); Hygienic Specialties Co. v. H. G.

Salzman, Inc., 302 F.2d 614, 617 (2d Cir. 1962); Application

of Bartlett, 300 F.2d 942, 943 (C.C.P.A. 1962).

At trial, Clark contended that the 254 design patent lacked

novelty when viewed against the M-400 loader; it argued that

the M-400 loader design was so similar in overall configuration

to the design of the 254 patent that the ordinary observer could

not distinguish them.24 The District Court made the finding

that there was no substantial evidence that an ordinary observer

could not readily distinguish between the M-400 and the subse-

quent Bobcat loader covered by the 254 patent. Clark’s novelty

challenge to the 254 patent was rejected in the following terse

conclusion:

The test of the “ordinary observer’ may be relevant to deter-

mine novelty with respect to design; however, there is no

substantial evidence in this record that ordinary observers

could not readily distinguish between the M-400 and the sub-

24 The sole prior art considered by the Patent Office was the 506 design

patent, a patent on the machine mechanically patented by the 503 patent.

While the District Court held that the M-400 was no better prior art for

the 254 design patent than was the cited 506 patent, it nevertheless pro-

ceeded to consider the validity of the 254 patent from the viewpoint that

the M-400 was prior art. We will follow the same analytic approach.

A-40

sequent BOBCAT loader covered by the 254 patent. The

Court refers specifically to the sparse testimony of witnesses

Steenhoven and Van Winkle.

Clark Equipment Co. v. Keller, supra, slip op. at 79.

Although various pictures and drawings of the M-400 loader

and Bobcat loader covered by the 254 patent were introduced

at trial, there was little testimony adduced that could be

deemed applicable to the issue of the impact of the appearances

of these loaders on the ordinary observer.2° While we agree

with the District Court that the testimony on the issue of the

visual impact of these loaders was “sparse,” we are unable to

agree either with the finding that the record was devoid of

substantial evidence probative of this point or the statement

that the ordinary observer test ‘“‘may” be relevant to a deter-

mination of novelty. The impact of the design upon an ordinary

observer “may” not be relevant in aetermining novelty; as we

have previously noted, it is the test for the novelty of a design

patent. Moreover, when this test is applied to the record here, it

compels the conclusion that the 254 patent is not novel.

In emphasizing the minimal quantity of testimony on this

issue, the trial court clearly chose to base its conclusion of

novelty upon the documentary evidence illustrating the designs

of the M-400 and 254 patent. The documents depicting the

M-400 and Bobcat loaders are as available to this court as they

were to the trial court and it is our prerogative to interpret

25 The testimony of Steenhoven and Van Winkle related to a transaction

between the two in which Steenhoven painted an M-400 loader white, the

standard color for Bobcat loaders, and sold it to Van Winkle as a used

Bobcat. While we would hesitate to consider this transaction definitive

evidence that the ordinary observer could not distinguish the M-400 from

the 254 design, it can certainly be viewed as providing support for such a

conclusion. Moreover, the fact that testimony on this transaction is

“sparse”’ and that the record is not replete with evidence of actual episodes

of confusion on the part of ordinary observers hardly detracts from the

cogency of the documentary evidence illustrating the similarity of the

designs of the two loader models.

A-41

these exhibits ourselves. American Infra-Red Radiant Co. v.

Lambert Industries, Inc., 360 F.2d 977, 988 (8th Cir.) cert.

denied, 385 U.S. 920 (1966). We have reviewed and compared

this documentary evidence with care, and we are convinced that

the trial court erred in finding that the differences between the

M-400 and Bobcat loaders were sufficient to establish the

novelty of the 254 patent. The differences between the two

designs, cited by the District Court in support of its finding,

involve structural details; when the overall visual impact, which

is the appropriate reference for design patents, is considered,

the striking similarity of the designs of the M-400 and 254

patent becomes clear. Both are compact four-wheel front-end

loaders with boom arms pivoted on supports adjacent to the

rear and extending down at a low angle in the front.

While ‘“‘we do not say that six eyes are necessarily apt to

reach a more accurate assessment than are two,” Frito-Lay, Inc.

v. So Good Potato Chip Co., 540 F.2d 927, 931 (8th Cir.

1976), our observation of the documentary evidence depicting

the designs of the M-400 loader and the 254 patent convinces us

that an average observer would not view the design of the 254

patent as anything more than a modification of the M-400.

Accordingly, we conclude that the 254 patent did not meet

the requirement of novelty posited by 35 U.S.C. §171. This is

our sole disagreement with the District Court’s analysis of the

254 patent and it is on this basis alone that we hold the 254

patent invalid.

The judgment of the District Court on the 503 and 117

patents is affirmed; the judgment on the 254 patent is reversed.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIR-

CUIT.

BLANK

APPENDIX B B-1

UNITED STATES

DISTRICT COURT, D. NORTH DAKOTA, S.E. DIV.

Clark Equipment Company

Keller, et al.

Nos. 4875 and 4839

Decided Sept. 23, 1976

Benson, Chief Judge

Procedural History

A. Civil Action 4875.

This is a declaratory judgment action between Clark Equip-

ment Company, Plaintiff, and Louis and Cyril Keller, Defen-

dants, on an exclusive patent license contract entered into May

19, 1971, between Plaintiff as exclusive licensee and Louis and

Cyril Keller, Defendants, as exclusive licensors. Exhibit 504 is a

copy of the license agreement.

Involved are United States Patent Nos. 3,151,503 (herein-

after 503 patent), 3,231,117 (hereinafter 117 patent), and

Design Patent 195,254 (hereinafter 254 patent).

The licensed patents relate to a self-propelled, 4 wheel drive

skid steer loader vehicle manufactured by the Plaintiff and

others. Plaintiff manufactures the vehicle at its Melroe Division,

formerly the Melroe Company, Gwinner, North Dakota, and

sells it under the trade name “Bobcat”’.

The action was filed originally in the United States District

Court for the Western District of Michigan on October 10,

B-2

1972, seeking, in part, an adjudication as to the validity and

enforceability of the licensed patents.

Upon motion of the Defendants, the action was transferred

to the United States District Court for the District of North

Dakota on August 27, 1973.

Defendants filed their answer and counterclaim September

19, 1973.

The counterclaim, in part, is for royalties allegedly due from

Plaintiff under its license agreement with Defendants and its

sublicense agreements with Owatonna Manufacturing Company

and J. I. Case Company, the successor of the former Universal

Manufacturing Company. Case and Owatonna each have

nonexclusive license contracts with Clark Equipment Company.

The counterclaim further charged Plaintiff with negligence

alleging that Clark, or its predecessor in interest, the Melroe

Company, had been negligent in failing to file the patent

application on the 117 patent within the one-year period after

the invention had been in public use or on sale. (35 U.S.C.

$ 102(b).

The claim of negligence caused Plaintiff to file a third party

complaint against the law firm of Williamson, Bains & Moore

and George F. Williamson, Esq., as third party defendants,

alleging that if there was negligence in filing the application for

the 117 patent, the third party defendants, or predecessor

partnerships or partners, who were representing the joint

inventors, Louis J. Keller and Clifford E. Melroe, had a profes-

sional obligation to investigate the facts and see that the

application was filed on time. It is alleged that should the 117

_ patent be found invalid under 35 U.S.C. §102(b), the third

party defendants would be liable to the Plaintiff as successor of

the Melroe interest.

On April 29, 1974, the Court bifurcated the portion of the

counterclaim directed at Plaintiff for failure to file the 117

patent on time, and the third party action directed at

B-3

Williamson, Bains & Moore and George F. Williamson, Esq.,

pursuant to Rule 42(b). For reasons stated in the same order,

the third party defendants’ motion to dismiss the action as to

George F. Williamson, individually, was granted.

B. Civil Action 4839.

On July 25, 1973, the Kellers filed a separate action in this

Court against Clark Equipment Company setting forth the

corresponding allegations in the answer and counterclaim of

Civil Action 4875, and naming as additional defendant, Clark

Equipment, A.G., a Swiss corporation.

The complaint alleged that Clark Equipment A.G. had a

similar license agreement with Plaintiffs, Louis and Cyril Keller,

dated May 19, 1971, under which Clark Equipment A.G. was an

exclusive licensee under certain foreign patents corresponding

to the licensed patents in the agreements with Clark Equipment

Company, and had failed to account and pay for royalties

allegedly due under this contract. (See Exhibit 505).

Civil Action 4875, was originally transferred from the

Western District of Michigan to the southwestern division of the

District of North Dakota and moved to the southeastern

division on November 6, 1973. Civil Action 4839 was originally

filed in the southeastern division.

Upon motion of the Kellers, the two actions were consoli-

dated on December 21, 1973.

C. Consolidated Actions.

After filing of the complaint in Civil No. 4839, Clark Equip-

ment A.G. moved for dismissal, alleging lack of in personam

jurisdiction, absence of proper service of process and failure of

proper jurisdictional amount. The motions were denied. Keller

v. Clark Equipment Company, 367 F.Supp. 1350 (D. N.D.

1973). Clark Equipment A.G. continues to assert its

B-4

jurisdictional defenses by its answer.

On July 18, 1974, the Court ordered a separate trial on the

issue of validity of the three patents.

D. Trial.

The trial on the severed issue of validity of the three patents

commenced February 18, 1975. It ended May 21, 1975. The

trial ran for all or part of thirty-three days between these dates.

Five hundred and sixty-four exhibits were introduced as

evidence. The testimony of forty-six witnesses, either in court

or by deposition was received in evidence.

The typewritten transcript comprises thirty voi.sies,

totalling over 5,000 pages.

E. Jurisdiction.

The Court has jurisdiction in Civil Action 4875 under the

Declaratory Judgment Act, 28 U.S.C. §2201 and 2202; the

amount in controversy exceeds the sum of Ten Thousand

Dollars ($10,000.00) exclusive of interest and costs; is between

citizens of different states, 28 U.S.C. § 1391(a) and § 1338, and

venue lies in this judicial district pursuant to 28 U.S.C.

$1391 (a).

In Civil Action 4839, the Court has jurisdiction over the

subject matter under 28 U.S.C. § 1332(a), there being diversity

of citizenship, the amount in controversy exceeds Ten

Thousand Dollars ($10,000.00), and venue lies in this judicial

district under 28 U.S.C. § 1391(c).

Related Litigation

The three patents in dispute in this litigation have been

involved in previous litigation — the significance of which will

B-5

appear later in this Memorandum.

In the first case, Melroe Mfg. Co. and Louis J. Keller and

Cyril N. Keller v. Universal Mfg. Co., et al, Civil No. 4070,

United States District Court for the Eastern District of Virginia,

Melroe and the Kellers sued Universal for infringement of the

503, 117 and 254 patents.

The Universal suit was settled out of court, and pursuant to a

stipulation wherein the parties acknowledged the validity of the

three patents in dispute, a Consent Decree and Judgment was

entered.

By the same settlement, Universal took a license from Melroe

under the 503, 117 and 254 patents, providing for the payment

of royalties to Melroe (Exhibits 464, 465 and 93).

Subsequently, J. I. Case Company purchased Universal Mfg.

Co., and in doing so acquired the rights of Universal under the

Melroe- Universal license agreement.

The second case, Owatonna Mfg. Co. Inc. v. Clark Equipment

Co. and Cyril N. Keller, United States District Court, District of

Minnesota, identified as 4-68 Civ. 163, was a Declaratory

Judgment action by Owatonna Mfg. Co. (hereinafter

“Owatonna”) seeking to have the 503, 117 and 254 patents

declared invalid. An aspect of that case is reported in Owatonna

Mfg. Co. v. Melroe Co., 301 F.Supp. 1296, 163 USPQ 308 (D.

Minn. 1969). Melroe was the original party defendant to that

action, and in 1969, after Clark acquired Melroe, Clark was

substituted as a party defendant. (Exhibit 546). This case

resulted in an agreed dismissal without prejudice and a

licensor-licensee arrangement.

Issues

[1] The primary issue of this litigation is the validity of the

three patents. For a structure to be patentable, it must have

three qualities — utility, novelty and non-obviousness. 35 U.S.C.

$§101, 102 and 103. The 1952 Patent Act added the

B-6

requirement of non-obviousness as a statutory requirement,

although in effect the requirement arose in case law. Thus,

patentability depends, in addition to novelty and utilitv, upon

the “‘non-obvious” nature of the “subject matter sought to be

patented” to a person having ordinary skill in the pertinent art

and “at the time the invention was made”. 35 U.S.C. § 103;

Graham v. John Deere Co., 383 U.S. 1, 14, 148 USPQ 459, 465

(1966).

It cannot be seriously argued tha’ the three patents in issue

here do not satisfy the requirements of novelty and utility. The

attack on validity of each of the three patents centers generally

around two points:

1. Whether the device described in each of the patents was

“in public use or on sale in this country, more than one year

prior to the date of the application for the patent in the

Uniced States”. 35 U.S.C. § 102{b).

2. Whether ihe “subject matter sought to be patented [in the

case of each patent in questior.] and the prior art are such

that the subject matter as a whole would have been obvious

at the time the invention was made to a person having

ordinary skill in the art to which said subject matter

pertains”. 35 U.S.C. § 103.

Considerable legal discussion has surrounded the definition of

“invention”. To avoid confusion, the Court takes the position

that its function in this litigation is not to determine whether an

invention exists, an invention does exist; the issue here relates

to patentability. In its discussion in this opinion, the Court will

use the word “invention” in that light.

Burden of Proof

[2] By statute a patent “shall be presumed valid” as well as

each claim of a patent whether in dependent or independent

form, and the “burden of establishing invalidity of a patent or

any claim thereof shall rest on the party asserting it.” 35 U.S.C.

B-7

§ 282.

[3] The Eighth Circuit describes the quantum of proof

required to overcome the presumption of patent validity as

“substantial evidence”. Woodstream Corporation v. Herters,

Inc. 446 F. 2d 1143, 1149 n.4, 170 USPQ 380, 384 n.4 (8th

Cir. 1971); L & A Products, Inc. v. Britt Tech Corporation, 365

F.2d 83, 86, 150 USPQ 770, 772, 773 (8th Cir. 1966). The

Kellers urge this Court to impose upon Clark the burden of

establishing its case “beyond a reasonable doubt.” There is no

legal basis for such a standard.

Estoppel Issue

On November 26, 1974, Louis J. Keller and Cyril N. Keller

were given leave to amend their pleadings to allege a defense of

estoppel with respect to the issues of patent validity.

Specifically, the amended pleading raises the issue of whether

Clark should be precluded by doctrines of judicial and equitable

estoppel from challenging the validity of the three patents in

this suit on the basis that the exact same prior art and alleged

acts of public use and sale were asserted against Clark in the

Owatonna suit and against Clark’s predecessor-in-interest,

Melroe, in the Universal suit.

[4] In the Universal and Owatonna cases, Clark’s

predecessor-in-interest, Melroe, defended the validity of the

three patents in question here. Clark likewise defended the

patents on the validity issue in the Owatonna case, and thereby

presumably rebutted the same evidence which it now relies

upon in its attempt to invalidate the patents. Whatever the

position of the parties in those previous lawsuits, Lear v.

Adkins, 395 U.S. 653, 162 USPQ 1 (1969), permits Clark, as a

licensee, to now challenge the validity of the three licensed

patents.

The Owatonna Manufacturing Company sued Melroe and

B-8

Cyril Keller on May 15, 1968, in the United States District

Court, Fourth Division of Minnesota, seeking a declaratory

judgment that the patents were invalid. One aspect of this case

involved Louis Keller as a possible indispensable party. See

Owatonna Mfg. Co. v. Melrce Co., 301 F.Supp. 1296, 163

USPQ 308 (D. Minn. 1969). Clark entered the proceedings in

1969 after acquiring Melroe. Subsequently, a license agreement

with a Lear clause was entered into on December 16, 1970. The

license agreement settled the lawsuit and the parties stipulated a

dismissal without prejudice, terminating the litigation with each

side merely withdrawing its claims and counterclaims. (Exhibits

508 and 547). The Kellers were represented in the litigation by

the firm of Williamson, Palmatier & Bains, a predecessor of the

law firm representing them in the litigation before this Court.

[5] Clark and Kellers entered into an agreement on May 19,

1971, which superseded the 1964 agreement the Kellers had

with Melroe. The Clark-Keller agreement contains a Lear clause

specifically permitting Clark to challenge the patents (Paragraph

15 of Exhibit 504). Attempts by Keller to now limit the

application and scope of Lear v. Adkins are not supported by

later case law. To prevent Clark from challenging the patent

validity because it has previously entered into sub-license agree-

ment with J. I. Case and Owatonna would be contradictory to

the dictates of the Lear decision. Judicial estoppel is

inappropriate.

Kellers assert a more serious charge that Clark has engaged in

suspect and inequitable conduct by destroying documents after

the litigation now before this Court commenced, which relate

to the alleged invalidating acts of public use and sale relied upon

by Clark in its attack on the patents under 35 U.S.C. § 102(b).

Clark offered evidence to buttress its contention that any

destruction was inadvertent and a part of the company program

relating to document retention.

It seems a bit incredible that Clark’s legal department which

had been involved in the issue of the validity of these particular

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patents since 1969, would not have had control over all the

documents relating to it. The conduct becomes suspect because

Clark defended the validity of the patents in the Owatonna

lawsuit in which it had been involved for over a year and suc-

ceeded in getting the plaintiff in the case to take a license and

dismiss its action.

Documentary evidence has been received in the case now

before this Court which supports an inference that the device

incorporating Patent 117, although not in production, was

placed on sale prior to the critical statutory bar date. Kellers,

not being privy to the Melroe or Clark documents, are unable to

identify with the required degree of specificity any particular

document which has been destroyed and may have been

relevant and helpful to their case. An inference might arise that

in the Owatonna suit Clark had available to it evidence to rebut

the evidence it now relies on. For the Court to apply the

doctrine of equitable estoppel, it would have to adopt the

inference which, on the basis of the record, it is not willing to

do because if such evidence had been available, presumably

Kellers’ attorneys in the Owatonna suit would have been aware

of it.

Commercial Success

[6] Evidence of the commercial success of a patented device

is of significance when considering whether or not the device is

“obvious”. Graham v. John Deere Company, 383 U.S. 1, 148

USPQ 459 (1965).

“Such secondary considerations as commercial success, long

felt but unsolved needs, failure of others, etc., might be

utilized to give light to the circumstances surrounding the

origin of the subject matter sought to be patented. As indicia

of obviousness or non-obviousness, these inquiries may have

relevancy.” 383 U.S. at 17-18, 148 USPQ at 466-467.

[7] The amount of significance to attach to commercial

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success in determining the issue of obviousness is debatable.

Commercial success itself in a normal case is extremely difficult

to measure. In the instant case, however, such is not the

situation. Commercial success was not only shown, but it was

the only point upon which both parties could agree. The

significance, therefore, cannot be discounted.

The success aspect becomes particularly significant in

considering the 117 patent. In addition to the recognition given

the patent by Case (later Universal) and Owatonna, Clark itself

became engrossed in a serious developmental program to create

a skid steer loader. The need in the market in the 1960’s was

evident. The effort by Clark to create a competitive front end

loader to the M-440 loader was a failure. Clark’s own testing

persuaded them that the Melroe product was unbeatable in

substantially all phases of performance.

Clark presently applies the 503, 117 and 254 patent numbers

to the current models of their Bobcat loader. (See Exhibits 438

and 439). Current models of the Clark Bobcat loaders are

depicted in Exhibits 441 through 449. Exhibit 450 is a patent

label which is attached to all the vehicles pictured in Exhibits

441 through 449, and that label lists the 503, 117 and 254

patents.

There are a number of exhibits which were introduced

specifically to attest to commercial success of the Melroe

loader. Among these are the following:

Exhibit 438 is a Clark sales brochure entitled, ‘“‘World’s

Number 1 Skid Steer Loader”’ and shows various models of the

Bobcat loader. The cover page of this booklet shows a

photograph of the Keller shop in Rothsay, Minnesota, and pays

tribute to the original Keller loader as the forerunner leading to

the Bobcat loader models depicted in the brochure. On a page

of this brochure describing and illustrating the M-610 Bobcat

loader, there is a sketch of the M-610 variable speed chain drive

system of the arrangement covered bv the 503 and 117 patents.

Exhibit 439 is entitled, “371 Bobcat Loader” and shows

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various attachments and applications for the Model 371 loader.

That particular loader does employ the three patents contested

in this case.

Exhibit 470 is a film made by the Kellers which depicts and

describes the Melroe Bobcat in various operations. The

narration accompanying this film relates to the maneuverability

and the patented clutch drive system.

Exhibit 548 is a publication entitled, “Enginews” and

contains a written article and photograph featuring the Melroe

Bobcat and the growth of the Melroe Company.

Exhibits 543 and 544 are data sheets recording the growth

and sales of the Clark-Melroe patented loader from 1959

through 1973. These documents show the sales of the patented

loader increased from $25,000 in 1959 when Melroe first took

on the Keller loader to $26,427,000 in 1973. On Exhibit 544,

the percent market penetration by Clark-Melroe of the total

loader market is indicated to have been as high as 51.2 percent

in 1971. The large sales volume and market penetration of the

Melroe Bobcat is to be attributed in a significant degree to the

market protection provided by the licensed patents in suit and

the utility, novelty and nonobviousness of the patented

inventions incorporated in the loader.

503 Patent

The Evidence, Findings and Conclusions

1. U.S. Patent No. 3,151,503 was issued to Louis J. Keller

and Cyril N. Keller, parties to these consolidated actions. on

October 6, 1964. The 503 paten. is entitled “TRANSMISSION

SYSTEM”.

2. The application for the 503 patent was filed on December

1, 1958. A copy of the patent was received in evidence as

Exhibit 53, and is attached in the appendix to this

Memorandum. Exhibit 81 is a copy of the Patent Office file

wrapper (record) of the 503 patent.

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3. The 503 patent contains four independent claims. Each

claim is specifically directed to a particular cam actuated clutch

drive mechanism for a_ self propelled vehicle having

independently rotatable propulsion wheels which may be

independently actuated by the aforesaid drive mechanism for

driving the vehicle forward and backward, and for steering it.

4. Louis Keller was self-employed in his own general repair

and blacksmith shop in Rothsay, Minnesota, from the fall of

1947 through September, 1958. Cyril Keller joined his brother

in the business in 1953.

5. The Kellers first came into contact with an Eddy Velo in

1954 in connection with the repair of some of Velo’s automatic

turkey feeders damaged in a wind storm.

6. Velo was then, and is now, a grain and turkey farmer

living approximately seven miles northeast of Rothsay,

Minnesota. In his turkey operation, Velo utilized two types of

buildings: a quonset type barn which had a round roof, and two

floors and a pole barn, a type of structure using poles for

support. After a flock of turkeys was raised, it was necessary to

clean the barns to remove the manure accumulations. Prior to

1957, the turkey barns were cleaned by hand. The manual

cleaning was time consuming and inefficient.

7. The pole barns and two story quonset barns were

constructed in a manner that prevented the use of mechanical

loaders and other types of farm tractors in the cleaning process.

The poles and poultry feeders placed in the barns caused a

problem in maneuvering such machines. The second level of the

quonset barns could not support the weight of a tractor, and

even if they could, it would have been an almost insur-

mountable problem to get a tractor up to the second level.

8. Velo possessed mechancial skills and attempted to locate a

suitable machine to handle the barn cleaning. On one occasion,

he moved the axles of an Allis-Chalmers tractor closer together

and shortened the body of the machine in an attempt to

increase its maneuverability. All his efforts proved

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unsatisfactory.

9. In the early summer of 1956, Velo discussed his barn

cleaning problems with the Kellers. The Kellers were familiar

with the Velo premises and with the conditions in which a

machine would have to operate.

10. Veio described the type of machine he felt would be

necessary, citing as an example the operation of an Owatonna

Windrower he once owned which he believed had a separate

reverse and forward belt drive for each side of the machine as

well as a caster wheel arrangement in the rear.

11. During the summer of 1956, the Kellers contemplated

the Velo barn cleaning problem.! At the end of the summer,

Louis Keller presented a free hand sketch of a loader to Velo

with a description of his ideas for a self prop: ‘led loader.

12. In late October of 1956, the Kellers began building a self

propelled loader pursuant to an understanding with Velo that

the Kellers would be paid their ‘out of pocket” costs and some

of their labor.

13. Velo’s suggestions for the machine were general and

related to application and function rather than design. [His

reference to the Owatonna Windrower was in terms of the

machine’s favorable aspects rather than its technical details. |

His primary concerns were weight and maneuverability.

14. The Kellers took approximately three months to build

their first self-propelled loader [hereinafter called the Velo

loader]. During the months of November and December, 1956,

and January, 1957, a substantial amount of the Keller’s

1 In the words of Louis Keller:

“So we just started figuring and figuring and figuring, and didn‘t sketch

these out, We didn’t have a drafting board or anything. In fact we didn’t

even know how to run one. We took a piece of cardboard and freehand

sketching it out and using a ruler. And we spent that summer on laying

this thing out, how to put a, we knew all these posts and stuff in there and

all the feeders that he said he used all kinds of different equipment to get

in there, so we just started laying out and trying to get something that

would work in there.” Transcript May 1, 1975, Louis Keller, pg. 61-62.

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shoptime was devoted to the loader project, time for which

they were never fully compensated.

15. The loader was delivered to Velo in February of 1957.

16. Velo paid the Kellers $1,349.00 as compensation to the

Kellers for parts, materials and some of the labor that went into

building the loader. An entry made on Velo’s charge account by

the Kellers on February 4, 1957 (Plaintiff’s Exhibit 54B),

corresponds with a charge slip No. 68503 (Plaintiff’s Exhibit 3).

Payment by Velo of the $1,349.00 was made on March 7, 1957

(Plaintiff’s Exhibit 54B).

17. The Kellers devised what they believed to be a workable

design for a loader which they hoped would solve Velo’s

cleaning problems; however, they lacked the capital to build it.

Velo did have the capital and assumed the risk of capital loss

while the Kellers provided design and labor. Because of their

elementary design methods, the Kellers invented as they built,

depending on mental conceptualizations, rather than mechanical

drawings. The Kellers could not and did not guarantee success,

and Velo was willing to risk some costs involved.

18. Velo’s barn cleaning problems and his willingness to risk

capital provided the inspiration and the means for Kellers to de-

vise and build a loader. Their testing grounds was the Velo farm.

19. Prior to delivery to Velo in February of 1957, the

Kellers tested their loader within their shop.

20. The Velo-loader initially incorporated a rear mounted

engine and a belt drive to the two forward driving wheels. The

belt drive to the loader wheels was basically as depicted in

Exhibit 99.”

2 Power was transmitted to each wheel by shifting an idler pulley (E)

back and forth in an arcuate slot to bring a main drive belt (C) against one

or the other of a pair of drive pulleys (F) and (D). These two drive pulleys

(F) and (D) were mounted on separate shafts with each shaft having

another pulley (L), (K) mounted thereon. A final drive belt (I) was

wrapped over and under pulleys (L) and (K) to provide forward or reverse

drive to each vehicle wheel. (See also Exhibits 44, 46, 47, 49, 51 and 52

which show the belt drive included in the Velo loader).

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21. The overall construction of the Velo-loader is shown in

photograph Exhibits 399 and 400.

22. Between February of 1957 and the summer of 1958, the

operation of the machine brought out problems which caused

Kellers to make various modifications and improvements in the

Velo-loader. Velo was not charged for these modifications and

improvements.

23. The most serious problem encountered with the Velo

loader was in the belt drive. The drive belts on each side of the

loader would stretch as friction induced heat built up as the

idler lever was shifted back and forth. The shifting of the idler

lever was nocessary for steering and for driving the loader

forward and reverse. As a result of the belts stretching, the

loader would lose driving power in both forward and reverse. If

only the belt on one side became stretched, the loader would

simply swivel in a circle. The heating and stretching of the belts

required frequent belt replacements.

24. The belt problems led Louis and Cyril Keller to develop

a clutch system which would eliminate the belt drive that

caused the problems. During February and March of 1958, they

constructed a test plate resembling the side plates of the Velo

loader. On that test plate, they began to develop the clutch

assembly which finally became the transmission system covered

by the 503 patent.

25. In May or June of 1958, Kellers took the test plate unit

with the clutch drive on it to the Minneapolis patent attorneys,

the firm of Williamson and Palmatier.

26. At the end of July or early August, 1958, the cam

actuated clutch drive mechanism recited in each of the four

claims of the 503 patent was installed in the Velo-loader.

27. With the installation of the cam actuated clutch drive

mechanism in the Velo-loader, the following elements of the

503 patent, (identified by reference numerals on the drawings

of the 503 patent), were incorporated into the Velo-loader for

the first time.

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(a) Slide bar 18 to control the operation of the clutches.

(b) Input and output plates 11,11’ and 10,10’ respectively of

two pairs of clutches on each side of the loader.

(c) Cam elements 19 and 19’ of the 503 patent, located on

opposite ends of the slide bar 18 for engaging the clutches by

pressing the two pairs of clutch plates together, through

operation of the levers in the operating compartment.

(d) Cam followers 17 and 17’ contacted by cam elements 19

and 19’.

28. In the course of installing the clutch drive and its

actuating mechanism on the Velo-loader, various other

modifications became necessary.

(a) The pulleys and sprockets labeled 1 and 2 on Exhibit 46

were taken off the loader, from each side plate assembly.

(b) The idle tightener or swing pulley labeled on Exhibit 46

as 3 was removed and a sprocket was installed with a chain

(identified as 20 on the 503 patent drawings) to drive the

input plates 10,10’ of the clutches shown in Fig. 3 of the 503

patent.

(c) The pulley, labeled 4 on Exhibit 46, on the top jack shaft

was removed.

(d) The pivot pins or shafts for the pulleys and sprockets 1

and 2 (see (a) above) were taken off and new pins or shafts

for the clutches were installed at different locations from the

original pulley pin locations. See Exhibit 61.

(e) The lever (identified as 7 on Exhibit 52) originally used

to move the tightener or swing pulley in the arcuate slot

(identified as 8 on Exhibit 61) was welded closed.

(f) The linkage from the main operator’s control levers L

(Exhibit 53, 503 patent) was changed to properly operate the

slide bar actustor 18 (503 patent) for the clutches. The pivot

point for the main control levers was raised (See 9 on Exhibit

56), and the linkage (10 on Exhibit 56) was extended into

the framework to connect with slide bar (18).

29. The cam actuated clutch drive provided mcre positive,

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responsive and reliable steering, starting and stopping control.

Kellers made no charge to Velo for the cam actuated clutch

improvement to the Velo-loader.

30. Kellers built no other loaders prior to December 1, 1957

(the critical date under 35 U.S.C. § 102(b) with respect to the

503 patent).

31. In January or February of 1958, Kellers built several

more loaders having a belt drive of the type originaily

incorporated in the Velo-loader. Pursuant to a written agree-

ment for the sale of five loaders, three of these loaders were

delivered to Jenoff, Inc. of Fergus Falls, Minnesota, in the

spring of 1958. A retail purchase order was signed by Jenoff,

Inc., and Cyril Keller on February 27, 1958.

32. The earliest indication of any relationship or contract

between the Kellers or Jenoff relating to the loader sale was in

some December 12, 1958 Jenoff corporate minutes.

33. There is no evidence that the Kellers were in contact

with Jenoff concerning their loader prior to the § 102(b) critical

date of December 1, 1957.

34. The loaders delivered to Jenoff, Inc., in the spring of

1958 did not have the patented cam actuated clutch drive

assembly.

35. The Kellers’ primary purpose in building the first loader

was to overcome Velo’s barn cleaning problems. Kellers could

not guarantee the basic success of the loader, nor could they be

sure the loader would be able to solve the maneuverability and

weight problems Velo had been experiencing with other

machines. Velo provided the money for the materials needed to

construct the loader, and also provided the grounds upon which

to test it. The relationship between the Kellers and Velo was

one in which the Kellers were kept closely advised of the

loader’s performance and were allowed unlimited access to the

machine, enabling them to repair, improve and observe it. There

were occasions when it was necessary for the loader to be

returned to the Keller shop.

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36. During the period from February, 1957, to the time

Kellers installed the cam actuated clutch drive, the Velo loader

was in experimental use.

37. Although the testing arrangement was informal in

contrast to a testing program that might have been conducted

by a sophisticated machinery manufacturer such as Clark

Equipment Company, it was experimental and entirely

consistent with the nature of the dealings between the Kellers

and Velo.

38. Each of the claims of the 503 patent was allowed on a

specific combination of elements for transmitting power to

vehicle drive wheels, including a cam actuated clutch drive

mechanism for forward and reverse driving of propulsion

wheeis.

39. The Velo loader did not incorporate the cam actuating

elements and clutches described in the 503 patent until after

the December 1, 1957 critical date.

40. With respect to the cam actuated clutch drive features

contained in all of the claims of the 503 patent, the patents to

Schreck (Exhibit 85) and Hellwarth (Exhibit 86) are the most

pertinent prior art. Both were among those considered by the

Patent Examiner in the course of the prosecution of the

application for the 503 patent and were discussed at Pages 16,

17, 24, 51, 64-67 of the file wrapper, Exhibit 81. Both were

cited as references on the patent document, Exhibit 53.

41. In its Section 103 challenge to the validity of the 503

patent, Clark relied on the combination of the original Keller

(Velo) loader as prior art along with the patents to Schreck (Ex.

85) and Hellwarth (Ex. 86).

42. The Schreck patent discloses a self-propelled dolly

which is controlled by an operator walking in front of the dolly.

As disclosed by the drawings of the Schreck patent, steering and

driving control is achieved through a draft tongue 6 having a

rotatable gripping handle 61. A linkage bar 63 connected to

handle 61 serves to move a link bar 51 (Fig. 6) for actuation of

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a pair of clutch units 21, 31 and 22 and 32 through crank arms

49, 50 connected to the opposite ends of link 51. The two

clutch assembles are mounted on upper and lower shafts 16, 17.

Shiftable collars 39, 46 on the clutch shafts serve to engage the

clutches in response to axial displacement of those collars by

thrust pins 58 as the collars are rotated simultaneously by link

51 and crank arms 49, 50. The single dolly support wheel 4 of

Schreck is rotationally mounted for steering action by swinging

movement of the draft tongue 6. Upward movement of draft

tongue 6 stops the vehicle by urging brake shoe 68 against

wheel 4. With the draft tongue 6 in an upward position,

gripping handle 6 cannot be moved in such a way as to engage

the clutches for forward movement of the dolly. Power is

transmitted from a motor 12 through a chain 29 to the input

sprockets 26, 27 on the clutch shafts 16, 17. A final drive chain

42 to the dolley wheel 4 has its inside face wrapped around

clutch output sprocket 36 and its outside face wrapped around

lower clutch output sprocket 37. Thus wheel 4 will be driven

forwardly or rearwardly depending upon whether the upper or

lower clutch assembly is engaged by hand rotation of handle 61.

43. The description of the cited Hellwarth patent on Page

110 of the file wrapper history of the 503 patent (Ex. 81) is

reasonably accurate and is restated here as follows: :

“Hellwarth teaches a tractor transmission adapted for driving

right and left hand traction wheels in opposite directions to

produce abrupt steering or turning, plus a differential unit to

allow for conventional steering by a suitable steering gear.

Fig. 1 of Hellwarth shows a tractor transmission driven from

power input shaft 31 which, in turn drives shaft 29 and gear

28 at one of two selectable speeds, through change-speed

gears 32. Gear 28 drives gear 25 and shafts 17 through the

differential mechanism 18, 19, 20. Through gears 16 and 7,

power is transmitted to first clutch plates 8, both clutch

plates on either side of the vehicle being driven in the same

direction. Output shafts 3 and 4 are connected to second

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clutch plates 10, said second clutch plates being adapted to

be forced into engagement with first clutch plates 8, by

means of wedges 12 and 13. When each of shafts 3 or 4 is

drivingly connected to its respective clutch plate 8, gear 5 is

driven. Both gears 5 on a single side of the vehicle rotate in

the same direction, but since final drive gear 6 lies between

the two gears 5, and is in mesh with both of them (see Fig.

4), each gear 5 will rotate gear 6 in an opposite direction.

Therefore, driving through shaft 3 gives a forward drive to its

respective traction wheel (final drive gear 6 is attached

directly to the traction wheel on either side of the vehicle),

while driving through shaft 4 imparts a reverse drive to the

same traction wheel.

For normal driving and steering, the differential unit

18-14-20 is operative to allow one traction wheel to rotate

slightly faster or slower than the other, when necessary, while

the vehicle is steered by a ‘suitable steering gear’. However, if

an abrupt turn is desired, the differential mechanism is

locked out and rendered inoperative as a differential drive by

engaging clutches 21 (see Fig. 5). The traction wheels are

driven in opposite directions by operation of levers 15 (Figs.

1 and 2) to set the clutches 8 so that the forward drive shaft

3 of one of the traction members is engaged, and the reverse

driving shaft 4 of the other traction wheel is engaged. See

page 2, lines 72-93 of Hellwarth for a description of this

turning operation. Either of shafts 3 and 4 is engaged by

movement of wedge 12, forward or backward, by means of

lever 15, controlled by the operator of the tractor.”

44. The cited Loyd patent (Ex. 84) discloses a self-propelled

vehicle having independently rotatable propulsion wheels on

each side. Referring to the drawings of the cited Loyd patent, a

source of driving power 20 is connected through a belt drive 18

to a jackshaft 17 providing input power to separate transmission

systems on opposite sides of the vehicle. Output shafts 13, 14

on opposite sides of the vehicle lead from the separate trans-

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mission systems to the wheels. Each transmission system has a

pair of clutches 24, 26 and 30, 26. A belt 27 connects one of

the output plates 30 of each pair of clutches with the trans-

mission wheel shafts 13, 14; and wheels 11 can be driven in a

reverse direction by engaging the other output clutch plates 24

with input clutch plate 26. The transmission of driving power

from output clutch plates 24 through pairs of gears 22, 21

causes output wheel shafts 13, 14 to rotate in the opposite

direction from that provided by belts 27.

45. Even if the original Velo loader as it existed prior to the

critical date of December 1, 1957, is considered prior art to the

503 patent as having been in public use or on sale for more than

one year before the 503 application was filed, this loader is no

better prior art than the Loyd patent (Ex. 84), cited and relied

upon by the Examiner, with respect to the particular clutch

drive arrangement for a vehicle in combination with the cam

actuation mechanism on which all four claims of the 503 patent

were allowed. There are more of the elements in Loyd in the

combination set forth in the claims of the 503 patent, as set

forth in preceding Finding No. 44, than there are in the Keller

Velo loader depicted in Exhibits 51, 52 and 59.

46. The modified Velo loader drive mechanism as proposed

by Clark’s mechanical engineer expert, Butler, in composite

drawing sketch Ex. 100 would not operate satisfactorily.

Butler’s proposed modification to the Velo loader as shown in

Ex. 100 to arrive at the drive mechanism claimed in the 503

patent continues to use the vertical idler pulley actuating lever

found on the Velo loader and identified by the numeral 7 on

Ex. 52 and 100. Butler’s sketch shows this lever 7 anchored at

its bottom end by a pin to a forked end slide bar for actuating

the clutches. The pivotally supported lever arm 7 wouid tend to

rotate them through an arc at its bottom and when actuated by

the control linkage shown in the Butler sketch of Ex. 100; and

this would in turn raise the ends of the slide bar pinned to lever

arm 7. The up and down movement of the slide bar, as opposed

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to the required straight back and forth horizontal movement

would place excessive stress on the connecting cam following

collars engaged by the forked ends of the cam or slide to

actuate the clutches. (Exhibits 52 and 100).

47. Butler’s testimony with respect to the issue of

obviousness of the claims of the 503 patent under 35 U.S.C.

$103 constituted a hindsight reconstruction of the claimed

subject matter using the claims of the 503 patent as a guide.

Exhibit 100 illustrates Butler’s proposed modification of the

original Velo loader drive to meet the claimed subject matter

of the 503 patent. Butler acknowledged that his testimony

concerning the alleged suggestion of the Hellwarth patent link-

age mechanism for actuating clutches as called for in the claims

of the 503 patent was based on his examination of the claims of

the 503 patent. Butler was able to arrive at the overall

combination of elements set forth in all of the claims of the 503

patent only by reliance on hindsight flowing from the 503

patent itself.

[8] 48. The level of ordinary skill in the art to which the

subject matter of the 503 patent relates would be greater than

that of an operator or a mechanic. He would be someone who

has had some experience in machine design or the application of

engineering principles, a person who has been exposed to

different types of mechanical mechanisms, such as a graduate

engineer or a person with experience gained in the field.

Conclusions of Law

The Court concludes on the basis of all the evidence, the

Plaintiff, Clark Equipment Company, has failed to carry its

burden of showing by substantial evidence that the Velo-loader

was in public use and on sale within the meaning of § 102(b)

prior to December 1, 1957.

The Court further concludes that in considering the most

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pertinent prior art and the patented cam actuated clutch drive

mechanism of the 503 patent, the subject matter of the 503

patent, taken as a whole, would not, at the time the invention

was made, have been obvious, to a person havins ordinary skill

in the art to which the subject matter pertains.

503 Patent

Discussion of the Facts and Application of the Law

[9] Clark proceeds under both 35 U.S.C. § 102(b) and § 103

in its attack on the validity of the 503 patent, but in substance

directs its arguments to the $103 obviousness tests. It does,

however, also argue its § 102(b) challenge. ““Obviousness”’ and

“prior art” are separate theories, each of which must be given

separate consideration.

A. 35 U.S.C. § 102.

[10] On its contention that the 503 patent must fall under

§102(b), Clark argues the Kellers actually lost their patent

rights when the Velo loader was transported to the Velo farm.

However, the Velo loader did not incorporate the 503 trans-

mission system until after the critical date of December 1,

1957. Clark correctly contends that exact identity between the

device in public use or on sale and the claims in the patent is

not necessary, but it appears to be the law that the invention

must be “essentially completed at the time of the invalidating

sale.” Dart Industries, Inc. v. E. I. DuPont DeNemours and Co.,

489 F.2d 1359, 1365, 170 USPQ 392, 396 (7th Cir. 1973).

The belt drive system of the original Velo loader was not the

equivalent of the cam actuated clutch drive means of the 503

patent. The invention described in the 503 patent “relates to

systems for transmitting driving power from a power unit to

propulsion wheels, drive shafts and the like, and in particular to

a transmission system for self propelled vehicles having

B-24

independently rotatable propulsion or drive wheels.”

The Velo loader did not contain the essential structure of the

claimed invention. The inventicn set out by the 503 patent was

not reduced to practice in the Velo loader. There was no

physical operable embodiment of the 503 patent in existence

prior to the December 1, 1957 critical date. This was not a case

where a claimed invention was in existence and needed but a

few engineering improvements. The invention embodied in the

503 patent was not demonstrably operable. On December 1,

1957, the inventive process involved in the transmission system

described in the 503 patent had not been finished, and for all

practical purposes had not even been commenced.

If the construction of the Velo loader and its subsequent

placement on the Velo farm was a § 102(b) “public use or sale”,

it was not a “public use or sale” of the drive mechanism on

which the 503 patent issued. In its response brief, Clark

contended “[{ T]he Velo loader was in all respects a reduction to

practice of the real invention and accomplished the same pur-

poses in substantially the same way as described and claimed in

the 503 patent’’, and therefore must be considered “prior art”

under § 103. Kellers argued the Velo loader, above all, was an

experimental machine and , under the experimental use

exception to the public use and sale bar provisions of 35 U.S.C.

$102(b), it could not be considered “prior art” as to the 503

patent. See Elizabeth v. Pavement Co., 97 U.S. 126 (1878);

Swenson v. Boos, 156 F.2d 338, 70 USPQ 287 (8th Cir. 1946);

Simmons v. Hansen, 117 F.2d 49, 52, 48 USPQ 345, 348, 349

(8th Cir. 1941); Midland Flour Milling Co. v. Bobbitt, 70 F.2d

416, 21 USPQ 60 (8th Cir. 1934).

The Court, although concluding the original Velo loader to

be experimental within the concept of the developed case law

will, on the issue

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