Petition — Piher International Corp. v. CTS Corp.

F | Supreme Court, U. &y”"Y:

FILED’

| gut 17 1979 |) |

[MICHAEL RODAK, JR., CLERK

ett cela Seca

In Tue

Supreme Court of the United States

Ocroser Term, 1979

No. 9 - 7 Yew

PIHER INTERNATIONAL CORPORATION,

and PIHER SOCJEDAD ANONIMA,

Petitioners,

Vs.

OTS CORPORATION,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Ricuarp R. TRExLER

Ratrorp A. BLackstone, JR.

TREXLER, WouTEeRS, BUSHNELL

& Fossr, Lrp.

141 West Jackson Boulevard

Chicago, Illinois 60604

(312) 427-8082

Attorneys for Petitioners

Midwest Law Printing Co., Chicago 60601, Financial 6-3988

TABLE OF CONTENTS

PAGE

OPINIONS OF THE COURTS BELOW ........................ 3

Bi SERN Irae OE Ree ERE ROD 4

QUESTIONS PRESENTED me a

THE RULE AND STATUTE INVOLVED .................. 6

Rule 52(a), Federal Rules of Civil Procedure .......... 6

35 U.S.C. §102(b) 6

oy Gy ll ot Bi ivy 59 0) | Renner 7

REASONS FOR GRANTING THE WRIT .................... 11

The Court of Appeals Gave Insufficient Deference

to the Findings of the Trial Judge and Ignored the

Key Findings of the Prior Court of Appeals Deci-

sion, Contrary to the Standards and Procedures

Se 8 RAR RE) SDE ee ret yt et Sc NE OT eR IER 12

The Court of Appeals Decision Is in Direct Con-

flict With This Court’s Mandate in the Zenith Case 14

Contrary to This Court’s Mandate in Insurance —

Group Committee v. Denver & R.G.W.R.R., the

Court of Appeals Completely Disregarded the

‘‘Law of the Case’’ Set Forth in the Previous

Court of Appeals Decision, Without Finding Any

‘‘Unusual Circumstances’? .....................c.-.s---cc-ccseesee 16

The Court of Appeals Modification of Its Second

Opinion Is a Complete Non Sequitur ....................- 19

CONCLUSION 20

ii

APPENDICES:

A—Second Opinion of the United States Court of

Appeals for the Seventh Cireuit ............................ A-1

B---Order of the Court of Appeals Denying Petition

BU IN anil ceils denicscrensaetiendeaiiecgpacegbicanegiachinene B-1

C—Opinion, Upon Remand, of the United States Dis-

trict Court for the Northern District of [llinois,

Eastern Division (Honorable John F. Grady) .. C-1

D—First Opinion of the Court of Appeals .................. D-1

E—First Opinion of the District Court (Honorable

eS ae MINNIE Pais slchet okie ncoatncadehiirdsbeneeds E-i

LIST OF AUTHORITIES CITED

Cases

Commissioner v. Duberstein, 363 U.S. 278; 4 L.Ed.2d

DR By A, Te ED testa inva cinstcvregscenccneptbescinenese 10

CTS v. Piher, 527 F.2d 95; 184 USPQ 399; 593 F.2d

TEM icctitsntneiebuiaae 2, 3, 4, 5, 7, 8 9, 11, 12, 13, 14, 15, 16, 17

Insurance Group Committee v. Denver & R.G.W.R.R.,

329 U.S. 607; 67 S.Ct. 583; 91 L.Ed. 547 (1947) ........

icici aa eacacetaaeeth ade iia tardies anesthetics -siellininacdiadeeapiance 5, 11, 16, 18, 20

United States v. National Association of Real Estate

Boards, 339 U.S. 485; 94 L.Ed. 1007, 70 S.Ct. 711

ID iis cecesendgdchaa a hangs Setabecehsiaeanmiessnink aitewmmnivcesonnesainalabes 9, 10

United States v. United States Gypsum Company, 333

U.S. 364; 92 L.Ed. 746; 68 S.Ct. 525 (1948) ................ 9

Zenith v. Hazeltine, 395 U.S. 100; 23 L.Ed. 129; 89 S.

Sis RU MUIR scdceccitntntsccavcntnnbbdlssies 5, 10, 11, 14, 15, 16, 20

Statutes

35 U.S.C. §$102(b) ........... sdiastabearintaesibaie Riteetnestcer aetna 2, 6, 7, 8

SU rs I a a aig 4

Be a SI cassis ceshpcctamhclcadadpleike nicesicnenansnnpiemasacaaoed 4

CI) FUE « dcnececssensine 2, 5, 6, 9, 10, 11, 12, 14, 15, 16, 20

S.Ct. Rule 19(1) (b) +

In Tue

Supreme Court of the United States

Ocroser Term, 1979

No.

PIHER INTERNATIONAL CORPORATION,

and PIHER SOCIEDAD ANONIMA,

Petitioners,

Vs.

CTS CORPORATION,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Piher International Corporation and Piher Sociedad

Anonima pray that a Writ of Certiorari issue to review

the decision of the United States Court of Appeals for

the Seventh Circuit in the case entitled CTS Corporation

(Plaintiff-Appellant) v. Piher International Corporation

and Piher Sociedad Anonima (Defendants-Appellees),*

Appeal No. 78-1535.

* Hereinafter referred to as “CTS” and “Piher”.

ww

Briefly, the case involves a patent* that was held in-

valid by the district court in a re-trial conducted pur-

suant to an order of the Seventh Circuit Court of

Appeals, in a decision written by Mr. Justice John Paul

Stevens.** The patent was held invalid because a Piher

device*** was found to be “on sale” prior to March 16,

1969 under 35 U.S.C. § 102(b). Upon the second appeal,

the Seventh Circuit Court of Appeals reversed the

findings of fact of the district court, and of Mr. Justice

Stevens, and held the patent valid.

Although this case involves a patent, the issues

presented herein basically are not patent law issues.

Rather, this Petition raises fundamental issues of order-

ly judicial procedures in view of Rule 52(a), F.R.Civ.P.,

and two related decisions of this Court.

* United States patent No. 3,670,285, owned by CTS.

** The panel consisted of Associate Justice Tom C. Clark of

the Supreme Court of the United States (Retired), sitting by

ot aga Mr. Justice John Paul Stevens, participating in-

itially as Circuit Judge and on and after December 19, 1975

as Circuit Justice; and Senior District Judge Robert A. Grant

of the Northern District of Indiana, sitting by designation.

*** Designated the model “PT-15” potentiometer.

aliens

OPINIONS OF THE COURTS BELOW

The second opinion of the Court of Appeals, to which

this Petition is addressed, is reported at 593 F.2d 777

and is included herein as Appendix. A.

The Court of Appeals denied a Petition for Rehearing

by your Petitioners in an order dated April 18, 1979, a

copy of which is included herein as Appendix: B.

The lower court’s decision upon remand, in the Dis-

trict Court for the Northern District of Illinois, Eastern

Division, is unreported and, because the decisio:. was

rendered orally from prepared notes at the close of the

re-trial, a copy of the transcript thereof is included

herein as Appendix C.

The first opinion of the Court of Appeals, which

ordered the re-trial as to the “on sale” issue concerning

the ’285 patent, is reported at 527 F.2d 95 and a copy is

included herein as Appendix D.

The first lower court decision in the District Court for

the Northern District of Illinois, Eastern Division, in-

volving the ’285 patent and others* is reported at 184

USPQ 399 and a copy thereof is included herein as

Appendix E.

* Patents No. 2,740,027; No. 3,375,478; and No. 3,670,285.

iihliins:

JURISDICTION

Jurisdiction of the Court is invoked under Title 28,

United States Code, § 1254(a).

Jurisdiction of the Court also is invoked under

Supreme Court Rule 19%1\b) because the Court of

Appeals has so far departed from the accepted and

usual course of judicial proceedings as to call for an ex-

ercise of this Court’s power of supervision.

This Petition is filed within the 90-day period per-

mitted under Title 28, United States Code, § 2101(c),

from the order of the Court of Appeals on Petition for

Rehearing dated April 18, 1979 (Appendix B).

onclihine

QUESTIONS PRESENTED

————e

1. Did the Court of Appeals, by substituting its own

assumptions and inferences for the District Court’s find-

ings of fact, properly discharge its appellate function

under Rule 52(a), which specifies that the findings of

fact made by a district court sitting without a jury are

not to be set aside unless “clearly erroneous”, and did it

follow the mandate of this Court’s decision in Zenith v.

Hazeltine?*

2. Can the Court of Appeals remand a case for a new

trial with an express delineation of what evidence would

be sufficient for a party to prevail but, after the remand

in which the required evidence was presented and

credited, change its position as to what evidence is re-

quired for the party to prevail without giving that party

an opportunity to present the newly-required evidence?

3. In the fact situation presented in question 2, can

the Court of Appeals invoke the “adverse inference” doc-

trine and ruie against the prevailing party for not hav-

ing presented at the re-trial the now newly-required

evidence?

4. Can the Court of Appeals disregard completely the

“law of the case” set forth in a previous decision by the

same Court of Appeals in the same case involving the

same parties and the identical issue, without finding any

“unusual circumstances” as mandated by this Court in

Insurance Group Committee v. Denver & R.G.W.R.R.?**

* Infra, pages 9-10.

** Infra, pages 17-18.

a ee

THE RULE AND STATUTE INVOLVED

Rule 52(a), Federal Rules

of Civil Procedure

FINDINGS BY THE COURT

“(a) Effect. In all actions tried upon the facts

without a jury or with an advisory jury, the court

shall find the facts specifically and state separately

its conclusions of law thereon, and judgment shall

be entered pursuant to Rule 58; and in granting or

refusing interlocutory injunctions the court shall

similarly set forth the findings of fact and cen-

clusions of law which constitute the grounds of its

action. Requests for findings are not necessary for

purposes of review. Findings of fact shall not be set

aside unless clearly erroneous, and due regard shall

be given to the opportunity of the triai court judge of

the credibility of the witnesses. The findings of a

master, to the extent that the court adopts them,

shall be considered as the findings of the court. If

an opinion or memorandum of decision is filed, it

will be sufficient if the findings of fact and con-

clusions of the law appear therein. Findings of fact

and conclusions of law are unnecessary on decisions

of motions under Rules 12 or 56 or any other motion

except as provided in Rule 41(b).” (emphasis added)

35 U.S.C. § 102(b)

“A person shall be entitled to a patent unless—

(b) The invention was patented or described in a

printed publication in this or a foreign country or

in public use or on sale in this country, more than

one year prior to the date of the application for pa-

tent in the United States, or. . .” (emphasis added)

<=

STATEMENT OF THE CASE

CTS brought suit against Piher for patent infringe-

ment in August, 1972 in the District Court for the

Northern District of Illinois, Eastern Division. Upon

completion of the pleadings before the district court,

there remained the issue relevant here of whether or not

a Piher device was “on sale” before March 16, 1969

which, if proved, would invalidate the ’285 patent under

35 U.S.C. § 102(b).

The first district court decision (Appendix FE),

rendered by the Honorable Julius J. Hoffman, ruled in

favor of CTS. The first Court of Appeals decision

(Appendix D) reversed the district court decision and

remanded the case for a new trial on the “on sale” issue

because Judge Hoffman had erroneously excluded cer-

tain evidence presented by Piher. Mr. Justice Stevens

stated in the opinion:

“If the physical exhibit identified by Klass had

been admitted, and if the trial court had accepted

his oral testimony presented in an offer of proof, the

evidence would have been sufficient to support find-

ings of fact establishing Piher’s ‘on sale’ defense.”

ye 2 Spe at 105; Appendix D, page D-15; emphasis

And he concluded the decision by saying:

“Piher argues that we should therefore hold the

285 patent invalid. Such a holding, however, would

require us to make the requisite findings of fact in

the first instance and to conclude that Piher has

met its burden with clear and convincing evidence.

As we have indicated, if the proffered testimony is

credited, it appears that Piher will prevail. But the

question of credibility and the interpretation of the

%

=

exhibits are matters that must be decided in the

first instance by a trial judge. We therefore remand

for a new trial of all issues raised by Piher’s on sale

challenge to the validity of the ’285 patent” (527

ach 105; Appendix D, page D-16; emphasis

added).

Accordingly, upon remand Piher again proffered and

the district court (the Honorable John F. Grady pre-

siding) considered the same evidence that the Court

of Appeals said would be sufficient for Piher to prevail.

That evidence, including the testimony of the witness

Klass whom Judge Grady found to be a “very credible

witness”,* was proffered by Piher and credited by the

district court. Finding the CTS ’285 patent invalid, the

district court concluded its decision as follows:

“I therefore conclude that the defendant [Piher]

has established by clear and convincing evidence

that its PT-15 potentiometer, embodying the plain-

tiffs [CTS’s] ’285 invention, was on sale within the

meaning of § 102(b) of the statute prior to the

reg date, March 16, 1969.” (Appendix C, page

The second opinion of the Court of Appeals, the one to

which this Petition is specifically addressed, began by

stating:

“The only issue we reach on this appeal is whether

the evidence presented by the defendant [Piher] in

this patent infringement action is sufficient to sup-

port the district court’s finding that their variable

resistor was ‘on sale’ in the United States, within

the meaning of 35 U.S.C. § 102(b), prior to March

16, 1969. . . . We hold that the evidence was insuf-

ficient and therefore reverse.” (593 F.2d, at 778;

Appendix A, page A-1).

* Appendix C, pages C-2, C-3.

pa Yew

Thus the same evidence that Mr. Justice Stevens ruled

“would have been sufficient to support findings of fact

establishing Piher’s ‘on sale’ defense”; and the same

evidence that Judge Grady found to be “clear and con-

vincing”, including testimony from the witnesses Klass

and Adams whom Judge Grady found to be “very credi-

ble witnesses”; was held to be insufficient by the second

decision of the Court of Appeals. As pointed out in

greater detail hereinafter, the second panel of the Court

of Appeals made its own assumptions and drew its own

inferences to reverse and/or disregard the previous

findings of Judge Grady and of the first panel of the

Court of Appeals speaking through Mr. Justice Stevens.

Your Petitioners respectfully submit that this holding

by the Court of Appeals so far departs from the

accepted standards of review, as codified in Rule 52(a),

as to call for exercise of this Court’s power of supervi-

sion. Ten years ago, in an analogous fact situation, this

Court reversed a finding-of-fact reversal by the same

Court f Appeals and stated:

“In applying the clearly erroneous standard to the

findings of a district court sitting without a jury,

appellate courts must constantly have in mind that

their function is not to decide factual issues de novo.

The authority of an appellate court, when reviewing

the findings of the judge as well as those of a jury,

is circumscribed by the deference it must give to

decisions of the trier of the fact, who is usually in a

superior position to appraise and weigh the

evidence. The question for the appellate court under

Rule 52(a) is not whether it would have made the

findings the trial court did, but whether ‘on the en-

tire evidence [it] is left with the definite and firm

conviction that a mistake has been committed’,

United States v. United States Gypsum Company, 333

U.S. 364, 395, 92 L.Ed. 746, 766, 68 S.Ct. 525

(1948). See also United States v. National Associa-

ant TEN

tion of Real Estate Boards, 339 U.S. 485, 495-496,

94 L.Ed. 1007, 1016, 70 S.Ct. 711 (1950); Com-

missioner v. Duberstein, 363 U.S. 278, 289-291, 4

L.Ed.2d 1218, 1227, 1228, 80 S.Ct. 1190 (1960).”

(emphasis added)*

For the benefit of all parties who rely upon the order-

ly judicial procedure, fairness and predictability of our

long-established judicial system in their attempts to

resolve their disputes peacefully; for the benefit of dis-

trict court judges who diligently attempt to evaluate the

credibility of live witnesses, and who for their guidance

rely upon prior rulings of the Court of Appeals; and to

correct the serious injustice to Petitioners; the time has

come again, and a particularly appropriate opportunity

is hereby presented, for this Court to reaffirm the

principles of Rule 52(a) and the Zenith decision.

* Zenith v. Hazeltine, 395 U.S. 100, 132; 23 L.Ed. 129, 148;

89 S.Ct. 1562 (1969).

aa ne

REASONS FOR GRANTING THE WRIT

Petitioners respectfully submit that the Writ should

be granted because this is one of those truly exceptional

situations in which the Court of Appeals for the Seventh

Circuit has so far departed from accepted judicial stan-

dards and procedures that unless corrected, substantial

detriment could result, nut just to Petitioners, but to the

general public. Firstly, in substituting its assumptions

and inferences, the Court of Appeals gave insufficient

deference to the findings of the trial judge, and ignored

some of the key findings of the prior Court of Appeals

decision in the same case in which two members of the

panel were or are Supreme Court Justices. Secondly, the

Court of Appeals decision is in direct conflict with this

Court’s prior decision in the Zenith case* which mandates

the standards of appellate review under Rule 52(a).

Thirdly, by completely disregarding the “law of the case”

set forth in the previous Court of Appeals decision, at

least insofar as the issue of what evidence was “sufficient

to support findings of fact establishing [Petitioners’] ‘on

sale’ defense”, the Court of Appeals decision is contrary

to this Court’s mandate in the Insurance Group case**

and tends to destroy the public’s confidence in the

orderliness, predictability and fairness of our judicial

procedures; and it tends to destroy the reliance of dis-

trict court judges upon prior Court of Appeals rulings.

Finally, if the Court of Appeals decision is not corrected,

an otherwise invalid patent could be allowed to stand as

an obstacle to free competition.

* Supra, pages 9-10.

** Infra, pages 17-18.

The Court Of Appeals Gave Insufficient Deference To

The Findings Of The Trial Judge And Ignored The Key

Findings Of The. Prior Court Of Appeals Decision, Con-

trary To The Standards And Procedures Of Rule 52(a).

As set forth previously herein, this case has been tried

twice in the District Court for the Northern District of

Illinois, Eastern Division and has been appealed twice to

the Seventh Circuit Court of Appeals.

At the first trial, Piher attempted to introduce

evidence to prove that its device was “on sale” in the

United States prior to March 16, 1969. It is undisputed

by all parties and courts involved in this case that if

Piher could so prove, the CTS ’285 patent is invalid. The

trial judge, the Honorable Julius J. Hoffman, excluded

most of Piher’s evidence on this issue and ruled against

Piher.

In the first appeal, the Court of Appeals ruled that the

evidence was erroneously excluded and that, if the ex-

cluded evidence were accepted and credited, “the

evidence would have been sufficient to support findings

of fact establishing Piher’s ‘on sale’ defense”.* It then

remanded the case for a new trial stating “if the

proffered testimony is credited, it appears that Piher

will prevail.”**

Upon remand, the trial judge, the Honorable John F.

Grady, received the same testimony and documentary

evidence previously proffered by Piher and found it to

be “clear and convincing.”*** In his decision holding the

* Appendix D, page D-15.

** Appendix D, page D-16.

*** Appendix C, pages C-9, C-10.

a ae

’285 patent invalid, Judge Grady discussed at length the

testimony, demeanor and character of the witness Klass

whom he found to be “very credible’*. Judge Grady

likewise commented upon and found the witness Adams

to be “another very credible witness, a very careful man,

who I believe testified truthfully to the facts as he

recalls them and as he believes them to be.”**

The first panel of the Court speaking through Mr.

Justice Stevens ruled that if the testimony of Klass were

credited, the evidence was sufficient to support findings

of fact establishing Piher’s “on sale” defense. Judge

Grady relied heavily upon Klass’ lengthy testimony and

found him to be very credible. Nevertheless, the second

opinion by the Court of Appeals does not even mention

Klass, much less attempt to discredit his testimony or

show that Judge Grady was clearly erroneous in relying

upon it. Nor does the second opinion even attempt to

explain why Judge Grady was clearly erroneous for

relying upon this portion (7.e., Klass’ testimony) of the

prior opinion of the Court of Appeals.

Likewise, there is no mention in the second opinion

concerning the ruling in the first opinion about Klass’

testimony. This key ruling of the first opinion of the

Court of Appeals is completely ignored by the second

opinion.

Space here does not permit a complete analysis

of all the inconsistencies between the second opin-

ion, on the one hand, and the findings of Judge Grady

and Mr. Justice Stevens on the other. The following

quotes, however, are some of the examples of where

* Appendix C, pages C-2, € 3.

** Appendix C, page C-3.

ination

in the second opinion the Court of Appeals drew its own

inferences and assumptions, contrary to Rule 52(a) and

the Zenith decision,* to reverse the district court’s find-

ings of fact (emphasis added throughout):

“ .. it seems to us less likely .. .” (Appendix A,

page A-11).

“Giving appropriate weight to the inferences that

must be drawn...” (/d., page A-12).

“In view of the likelihood .. .” (Id., page A-11).

“ . . there appeared to be evidence. . .” (/d., page

A-2).

“ .. but we assume the same view carried over

... Ud., page A-5, n.3).

“. . it seems to us unlikely ...” Ud., page A-7).

“.. . apparently referring to this. . .” (/d., page A-

8).

“ .. apparently because of uncertainty .. .” (/d.,

page A-5).

Such a departure from the standards and procedures of

Rule 52(a), as mandated by this Court in the Zenith case,

calls for an exercise of this Court’s supervisory power to

restore proper standards of appellate review for

litigants in the Seventh Circuit.

The Court Of Appeals Decision Is In Direct Conflict

With This Court’s Mandate In The Zenith Case.

In the Zenith case** the district court credited the

testimony of certain witnesses to establish that Zenith

had been damaged by a foreign patent pool. The

Seventh Circuit Court of Appeals did not refuse to credit

this testimony but it considered it of insufficient weight

to prove injury to Zenith’s business and therefore reversed

* Supra, pages 9-10.

** ld. .

— 15—

the district court’s finding of fact of damage to Zenith.

In reversing the Court of Appeals, this Court held that

in this respect the Court of Appeals “gave insufficient

deference to the findings of the trial judge” and also

failed to adhere to this Court’s teachings regarding the

standard of proof in treble-damage actions.*

In the instant case, the Court of Appeals neither

credited nor discredited—it said nothing—about the

lengthy testimony of Klass, which testimony the district

court found to be “very credible” and relied upon heavi-

ly. The Court of Appeals said nothing about the key find-

ing of Mr. Justice Stevens, which was made after

careful study of Klass’ testimony** that if Klass’

testimony were credited, the evidence would be suf-

ficient to support findings of fact establishing

Petitioners’ defense. Aside from the many other in-

stances where the Court of Appeals decided factual

issues de novo, the total disregard by the Court of

Appeals of Klass’ lengthy testimony and the key finding

thereon by the prior decision of the Court of Appeals is

directly contrary to this Court’s mandate in the Zenith

decision concerning the standards of appellate review

under Rule 52(a).

Petitioners respectfully submit that this departure

from the Zenith case, and Rule 52(a), is so clear that

it calls for the exercise of this Court’s power of super-

* 395 US., at 124.

** His opinion stated:

“.... Moreover, the lengthy testimony of the witness

Klass, which we have studied with care, contains suf-

ficient assurance that the offered exhibit [DX 48] was one

of the devices ordered in January and received in April to

have justified its admissibility.” (Appendix D, page D-14;

footnote omitted).

="

vision, not just te correct an erroneous decision by the

Court of Appeals, but to reaffirm the principles of

Rule 52(a) enunciated in the Zenith decision to restore

confidence in the orderly judicial action, predictability,

and fairness of the judicial system for both trial judges

and litigants in the Seventh Circuit.

Contrary To This Court’s Mandate In /nsurance Gro

Committee v. Denver & R.G.W.R.R., The Court Of Appeals

Completely Disregarded The “Law Of The Case” Set

Forth In The Previous Court Of Appeals Decision,

Without Finding Any “Unusual Circumstances.”

Based upon documents (DX 38 and DX 39), Mr.

Justice Stevens found that the Piher devices tested in

the United States by Klass after the critical date (March

16, 1969), were shipped from Barcelona on March 3,

1969 and thus reduced to practice prior to the critical

date (Appendix D, page D-10). The Court of Appeals

said:

“Moreover, Klass’ testimony about the tests per-

formed under his direction, together with evidence

that these devices were shipped from Barcelona on

March 3, 1969, was sufficient to justify the in-

ference that the Piher control had been reduced to

practice prior to the critical date.”*

The decision of the second panel of the Court of

Appeals introduced a completely new evidence require-

ment to the case. Specifically, the second opinion

concluded:

* Appendix D, page D-14. Although Judge Grady did not

find that the devices were shipped on March 3, 1969, he was

clearly convinced that they were in existence as of March 3,

1969 (Appendix C, pages C-4 and C-6), and thus reduced to

ractice for the reasons delineated by the first panel of the

ourt of Appeals.

ae

“Giving appropriate weight to the inferences that

must be drawn from the unexplained absence of

direct evidence of reduction to practice, we cannot

say that the record supports a finding, based on

‘clear and convincing’ evidence, that the PT-15s

received by Motorola on April 7, 1969, were com-

plete and proved operable by tests conducted in

Svain prior to March 16, 1969. Accordingly, the

judgment is reversed, and the case is remanded for

the entry of an appropriate judgment in favor of

plaintiff [CTS].” (Appendix A, page A-12; emphasis

added).

Absolutely nothing was said in the first opinion about

“tests conducted in Spain”, nor was any such evidence

proffered by Piher (because of its reliance upon the first

opinion of the Court of Appeals), as now required by the

second opinion. Absolutely nothing was said in the first

opinion about any “direct evidence of reduction to prac-

tice” relied upon in the second opinion.

Moreover, not only did Judge Grady find that “the PT-

15s received by Motorola on April 7, 1969, were

complete and proved operable” (i.e., a completed device

reduced to practice), CTS expressly conceded this fact.*

The second opinion also ignored this CTS concession.

The ruling in the second opinion that Piher had

to prove testing of the devices in Spain, before the

critical date, is an unequivocal and unexplained depar-

ture from the law of the case established in the first opin-

ion. The findings of the first opinion are the “law of the

case” and findings in the second opinion contrary thereto

ordinarily are foreclosed. This Court has described this

doctrine as follows:

* Appendix C, page C-8.

~1§—

“... When matters are decided by an appellate

court, its rulings, unless reversed by it or a superior

court, bind the lower court. Thus a cause proceeds

to a final determination. While power rests in a

federal court that passes an order or decision to

change its position on a subsequent review in the

same cause, orderly judicial action, except in un-

usual circumstances, requires it to refuse to permit

the relitigation of matters or issues previously

determined on a former review.” (emphasis added)

Insurance Group Committee v. Denver & R.G.W.R.R.,

329 U.S. 607, 612, 67 S.Ct. 583, 585, 91 L.Ed. 547 (1947)

(footnote omitted). No substantial surprise evidence was

introduced upon remand, no law-modifying Supreme

Court decision was handed down between the two Court of

Appeals opinions, and there is no expressed conviction in

the second opinion that the first opinion was erroneous.

Accordingly, there are no “unusual circumstances” ren-

dering the “law of the case” doctrine inapplicable in this

case, and none were stated by the Court of Appeals.

The “law of the case” doctrine has substantial merit in

that it promotes orderly judicial action to thus give

litigants some degree of predictability in judicial

proceedings. It prevents unfair surprises. It permits dis-

trict court judges to rely upon prior rulings of the Court

of Appeals for guidance. For these reasons, also, the

Writ should be granted.*

* Petitioners were surprised, and by Petition for Rehearing

requested the right to present or explain the absence of the

newly-required evidence. This was refused.

a

The Court of Appeals Modification Of Its Second

Opinion Is A Complete Non Sequitur.

In denying Piher’s Petition for Rehearing, the Court of

Appeals modified its opinion “by adding as a penulti-

rnate sentence of the opinion the following:

The district court’s finding on this point was clearly

erroneous.” (Appendix B, page B-2)

This is the only reference in the entire second opinion to

“clearly erroneous”. The sentence immediately preceding

the added sentence states that the record does not

support a finding that the Piher devices were “complete

and proved operable by tests conducted in Spain prior to

March 16, 1969."* But the district court made no

finding in any respect regarding “tests conducted in

Spain”. Nor did the first opinion of the Court of Appeals

make any finding regarding “tests conducted in Spain”.

No evidence on the point was ever submitted.

Thus the second opinion of the Court of Appeals not

only places principal reliance upon “tests conducted in

Spain” despite the absence of consideration of any

evidence on this point in either Judge Grady’s opinion or

Mr. Justice Stevens’ opinion, but also specifically

amends its opinion to say that a nonexistent “finding” is

clearly erroneous.

* Quoted in full supra at page 17.

—2—

CONCLUSION

Wherefore, Petitioners respectfully submit that the sec-

ond opinion by the Court of Appeals is contrary to the

standards and procedures of Rule 52(a), and is in direct

conflict with this Court’s mandates in Zenith v. Hazeltine

and in Insurance Group v. Denver. The Court of Appeals

has so far departed from the accepted and usual course

of judicial proceedings with respect to Rule 52(a), and

this Court’s mandates, as to call for an exercise of this

Court’s supervisory powers and issue the Writ.

Respectfully submitted,

Ricuarp R. Trexier

Rarrorp A. Biackstone, Jr.

TrexLter, Wouters, BusHNELL

& Fosse, Lap.

141 West Jackson Boulevard

Chicago, Illinois 60604

(312) 427-8082

Attorneys for Petitioners

3n the

Gnited States Court of Appeals

For the Seventh Circuit

No. 78-1535

CTs CORPORATION,

Plaintiff-A ppellant,

Vv.

PIHER INTERNATIONAL CORPORATION and PIHER

SOCIEDAD ANONIMA,

Defendants-A ppellees.

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 72-C-1891—John F. Grady, Judge.

ARGUED JANUARY 24, 1979—DECIDED FEBRUARY 23, 1979

Before CUMMINGS, Circuit Judge, MARKEY, Chief

Judge,* and TONE, Circuit Judge.

TONE, Circuit Judge. The only issue we reach on this

appeal is whether the evidence presented by the defen-

dants in this patent infringement action is sufficient to

support the district court’s finding that their variable

resistor was “on sale” in the United States, within the

meaning of 35 nage 102(b), prior to March 16, 1969.

That finding was made after a retrial of the on-sale

wie Honorable Howard T. Markey, Chief Judge of the

United States Court of Customs and Patent Appeals, is sitting

by designation.

A-2

issue pursuant to our remand in CTS Corp. v. Piher In-

ternational Corp., 527 F.2d 95 (7th Cir. 1975), cert.

denied, 424 U.S. 978 (1976). We hold that the evidence

was insufficient and therefore reverse.

The facts leading to this litigation and the technology

involved are discussed in our prior opinion and will not

be repeated here, except as necessary to understand the

on-sale issue. Variable resistors, or potentiometers, are

“used to adjust the electrical resistance of an electronic

circuit to a desired level. The volume and tone controls

on a television or radio are examples of variable

resistors.” CTS v. Piher, supra, at 97. Variable resistors

are of two types: (1) customer adjustable (examples of

which are the volume or tone controls just described),

and (2) factory set. It is the latter type, sometimes

referred to as a “trimmer,” that is involved in this case.

[Tr. 482, 488.]

In 1972, CTS Corporation filed suit against Piher

Sociedad Anonima and its American subsidiary, Piher

International Corporation,' alleging that their PT-15

resistor infringed several CTS patents, two of which

were Patent No. 3,518,604 on “Electrical Component”

issued June 30, 1970, and Patent No. 3,670,285 on

“Variable Resistance Control with End Collector” issued

June 13, 1972. See CTS v. Piher, supra, 527 F.2d at 97-

98 & nn. 1-3 & 11. Although CTS withdrew its claim

that the PT-15 infring the ’285 patent, Piher

counterclaimed, charging that both patents were in-

valid. Jd. at 98. In the first trial of this case, the district

court upheld the validity of both patents and found that

the PT-15 infringed the ’604 patent. On appeal, we af-

firmed the judgment as it related to the ’604 patent. Jd.

at 101. But because we found that the district court had

erroneously excluded evidence supporting Piher’s con-

tention that the ’285 patent was invalid under § 102(b),

we remanded the case “for a new trial of all issues

raised by Piher’s on sale challenge to the validity of the

'285 patent.” Jd. at 105.

a two corporations are collectively referred to herein as

“Piher.”

A-3

At the first trial, Piher introduced evidence and made

offers of Ft tending to show that in the fall of 1968

Piher had shown prototypes of the PT-15 resistor to the

manager of International Materials for Motorola, Inc.

Id. at 102. Further, there appeared to be evidence that

Motorola ordered a trial run of these resistors on

January 22, 1969, that Piher shipped some resistors on

March 3, 1969, and that Motorola received some

resistors in April, 1970. After receiving the resistors in

April, Motorola tested them and found them operable.

There was evidence, however, showing that Piher’s PT- .

15 had been modified from time to time, and “{tJhus, the

character of the devices shipped by Piher on March 3,

1969, was of critical importance.” /d. at 103. This court

expressly declined to make the requisite findings of fact

because “the question of credibility and the interpretation

of the exhibits are matters that must be decided in the

first instance by a trial judge.” Jd. at 105.

On remand, the district judge, making his findings

orally, and apparently extemporaneously, immediately

following the conclusion of the trial, found that Piher

had carried its burden of proving that a PT-15 which

disclosed the essential elements of the ’285 patent, id. at

103, was “on sale in this country more than one year

prior to the application for patent in the United States,”

3° U.S.C. § 102(b), and therefore the ’285 patent was in-

valid. CTS’s assignor applied for what became the ’285

patent on March 16, 1970. CTS v. Piher, supra, at 97

n. 2. Thus the critical date for establishing the § 102(b)

claim of invalidity is March 16, 1969.

The governing rule laid down in CTS v. Pther is that

it was orignal for Piher to prove a completed sale

of the PT-15 in the United States prior to March 16,

1969, in order to establish the on-sale defense under

§ 102(b), and that if before that date Piher was

offering to prospective purchasers in the United

States a product which (a) embodied the ’285 inven-

tion and (b) was complete in the sense that it

represented a reduction of the invention to practice,

the invention was on sale within the meaning of the

statute and the ’285 patent is invalid.

A-4

527 F.2d at 103. CTS makes certain arguments concern-

ing the proper interpretation and even the correctness

of our earlier decision which we need not address. We

assume for purposes of this case that it would be enough

that the invention was reduced to practice in Spain

before the critical date even if the initial offer pursuant

to which the prospective customer placed an order was

made before the reduction to practice. Our decision is

based upon our conclusion that the evidence was insuf-

ficient to support a finding that Piher established reduc-

tion to practice in Spain before March 16, 1969.

We made it clear in our prior opinion that Piher had

the burden of proving reduction to practice before the

critical date. Jd. at 103. We noted a fact that made this

burden more onerous, vz., “there is evidence in the

record that the trimmer has been modified from time to

time.” Jd. We also indicated that the burden must be

met by clear and convincing evidence. /d. at 105; see

also Red Cross Manufacturing Corporation v. Toro Sales

Company, 525 F.2d 1135, 1139 (7th Cir. 1975).

Reduction to practice may be established without

proof that the f nde in would have been commercially

successful, if marketed. Dart Industries v. E. I. duPont

de Nemours, Inc., 489 F.2d 1359, 1365 & n.11 (7th Cir.

1973). Nevertheless, the device must be shown to have

been tested and found operable.

The district judge made two findings on dates of

reduction to practice: He found that the PT-15 had been

reduced to practice by Piher in Spain in November

1968; and he found separately that completed devices

were in existence in Piher’s possession in Spain on about

March 3, 1969. If either finding were sustainable, the

requirement of reduction to practice would be satisfied.

We therefore examine both findings.

Before addressing the evidence relevant to each

finding, we note a circumstance that weighs heavily

against Piher and diminishes the force of the evidence it

introduced. We refer to the unexplained absence of the

kind of evidence we would normally expect to see in a

ease of this kind, wiz, Piher’s records of the

A-5

development,? testing, and production of the device

Piher alleged it had reduced to practice before the

critical date. The district court refused to draw any in-

ference adverse to Piher from this circumstance, ap-

parently because of uncertainty as to record-making and

record-keeping practices in Spain.’ If Spanish business

practices were the reason for Piher’s failure to produce

the records, it was for Piher to so demonstrate, not for

the court to assume the fact without proof. Piher’s

failure either to produce the records or to offer an ex-

planation of why they could not be produced gave rise to

an inference that they were unfavorable to Piher. See 2

J. Wigmore, Evidence §§ 285, 291 (3d ed. 1961 & Supp.

1977). This inference is especially telling in view of

Piher’s burden of proving reduction to practice by clear

and convincing evidence.

If the alleged reduction to practice in Spain occurred

before the critical date, it was achieved by Piher

employees. The absence of documentation was com-

pounded by Piher’s failure to offer testimony by any per-

2 Piher perm for a Spanish patent on the PT-15 in the

summer of 1968. (It does not rely on this fact_as proof of

reduction to practice.) The question arises how Piher would

have proved the date of invention without records, if such

proof had been necessary in the Spanish patent proceeding.

$ The judge’s comments on this subject related to production

records, but we assume the same view would carry over to

development and test records as well. He said,

I think the evidence adduced by Piher could have been

more complete on this point, although again I am not sure.

But it seems to me there must have been at least at some

time some production records. Ordinarily factories do not

produce —— without some document indicating what

was produced. Maybe they do it differently in Spain. I

didn’t hear anything in the record one way or the other on

this point.

So it seems to me that there may be documents that

could have been produced that were not produced. But

that is an assumption, and I don’t think assumptions of

that kind call for the application of the adverse inference

rule. I do not apply that rule.

[Tr. 978.]

A-6

son who had participated in, or otherwise had direct

knowledge of, the alleged reduction to practice in Spain

before the critical date or to explain why testimony of

this nature was unavailable. The silence from Spain

leads to an inference unfavorable to Piher. 2 J.

Wigmore, supra, § 286.

We turn now to the evidence Piher did offer.

In support of its finding that the PT-15 was reduced

to practice in November, 1968 [Tr. 978-981], the district

court relied almost exclusively on the testimony of Joel

Adams, who was Motorola’s European buying manager

between 1966 and 1970. Adams testified that in

November of 1968 he visited Piher’s manufacturing

plant near Barcelona, Spain, where he was shown

samples of the PT-15 that “looked” complete. Adams also

stated, however, that he did not “test” the samples or

even examine their internal construction. And further,

in response to a question from the court, Adams frankly

stated that he “couldn’t attest that they really worked

electrically because I didn’t test them.” [Tr. 543-544.]

The evidence was clear that it was not until April,

1969, that Motorola received completed samples of the

device the court found was complete in November, 1968,

notwithstanding Motorola’s repeated requests for such

samples beginning in October, 1968. [D.Ex. 205.}' The

court found this evidence of — in April insufficient

to support a conclusion that the samples had been

shipped before March 16, 1969, but failed to make any

finding as to when they were shipped.

Piher introduced in evidence as Defendant’s Exhibit

48 one of the PT-15 variable resistors that the court

found had been received by Motorola by April 7, 1969,

and tested and found operable by Motorola in April,

May, and June of 1969. The court found that this group

of resistors, including Defendant’s Exhibit 48, were

‘ Adams, whose testimony the district court found “very

credible,” testified that the discussion of the PT-15 in

November, 1968 was a follow- . our request for samples

in October of that year.” [Tr. 502.)

A-7

“typical of those devices” shown to Adams in November

of 1968. Yet the court acknowledged the force of CTS’s

argument that if the PT-15 was complete in November,

1968, it was unlikely that Piher would have failed to

ship them until after March 16, 1969:

[I}f the devices were available as early as November

of 1968, why were they not given to Motorola at

that time? Why was there so much difficulty get-

ting samples? And why did they not arrive until

April of 1969?

I will tell you frankly that I think that is the

strongest part of the plaintiff's case, and I have

thought long about that.

a 980.] Adams testified that the resistors shown in the

all were not of the proper “value,” and Piher argued

that this explained why no shipments were made until

the next spring. ‘The court, however, characterized as

telling TS’s argument “that these devices were

manufactured in the first instance specifically for

Motorola and there is no reason to think they would not

have been of the proper value,” stated that it had “dif-

ficulty” with the question, but nevertheless proceeded to

find without further explanation that the devices were

completed in November but were not of the proper

value. [Tr. 980-981.]

Motorola’s October, 1968, request for working samples

[D. Ex. 205] indicated an interest in resistors i a van e

of specified values. So far as the record shows, Motorola

was Piher’s only sales prospect at that time. As early as

September, 1968, a meeting with Motorola represen-

tatives had been scheduled for November. In the

absence of any explanation, it seems to us unlikely that

Piher, which had planned for the meeting since

September and was aware in October of the values

Motorola was interested in, would produce complete

resistors to be shown to representatives of Motorola in

November with values different from any value

Motorola had specified.

During the period in question Ricardo Balil, president

of Piher’s American subsidiary, regularly sent Telexes

A-8

to Piher in Spain reporting on his selling activities in

the United States. One of these reports, dated February

17, 1969 [D. Ex. 66], relates to a prospective customer

other than Motorola and contains the following

statements:

Please send two units of each of the PT-15. It

doesn’t matter value. They are interested in the

different types of assembly or mounting.

Ten days later, go referring to this and other

similar requests by Balil, Piher responded with the

statement that when the devices were in production,

which would be in about two or three weeks, Piher

would send some of the devices to Balil. [P. Ex. 133.]

The record does not show when, if ever, this promise

was fulfilled. Nor does the record contain any explana-

tion of why, if the PT-15 was complete in November and

the only problem was the proper value, as the court

found, Piher did not promptly send Balil a few complete

samples of any value, in compliance with his request of

February 17.

In view of the events just described, it is not sur-

ce that the district court was not persuaded that

alil had brought resistors identical to the ones received

by Motorola in April, 1969 from Spain in December of

1968, despite his testimony that he had done so. The

court also refused to accept Balil’s testimony that he had

shown “completed samples” to prospective customers in

the United States during January and February, 1969,

although if completed samples had been available it is

— t to believe Balil would not have had some to

show.

We conclude that Piher fell far short of proving by

clear and convincing evidence that its PT-15 was reduc-

ed to practice in November, 1968.

We turn finally to the district court’s finding that the

PT-15s received by Motorola on or about April 7, 1969

® This report and the response described in the next sentence

of the text were in Spanish and were translated during the

testimony at trial. [Tr. 106, 243.]

A-9

were complete on or about March 3 of that year.® That

finding stands in contrast to the court’s expressed con-

clusion that the evidence was insufficient to show the

devices were shipped before March 16, 1969. The rele-

vant evidence consists of three documents: (1) a packing

slip dated March 3, 1969 listing quantities of four types

of PT-15s described by Piher’s part number but not

serial number or other reference identifying any specific

device [D. Ex. 38];’ (2) a memorandum of the same date

from the planning department of Piher’s Spanish plant

to Balil, presumably, but not explicitly, referring to the

same group of PT-15s listed in the packing — and

stating that they were “attached” [D. Ex. 39];° and (3) a

letter from someone at Piher’s Spanish plant to Adams’

assistant at Motorola dated March 7, 1969, stating that

Motorola’s purchase order number 295801, which was

for a total of 1100 resistors, 110 of each of ten types, had

6 We assume for present purposes that this finding would be

sufficient to satisfy the requirement of reduction to practice,

through the inference that what was later found operable

must have been so at the earlier, critical time.

’ The description is as follows: (1) twenty-one PT-15 LB

100Klin, (2) twenty-three PT-15 LD 1Klin, (3) twenty-eight

PT-15 MB 100Klin, and (4) thirteen PT-15 MD 1Klin.

* At trial this document, written in Spanish, was translated

by Balil as follows:

We attach samples of the PT-15, models LB, LD, MB,

MD, to be sent to Motorola to be tested. In spite of sendin

those samples, it will be open, the purchase order, 29580

of 100 units of several codes or part numbers.

[Tr. 145-146.]

® Motorola’s purchase order [D. Ex. 45] is dated January 22,

1969. At trial Adams explained that Motorola usually waited

until after it had received and tested a new product before

making a “trial run” order of this sort. Because of the

difficulty he had in getting PT-15 samples from Piher,

however, he decided to place a trial order as a stra m for

serve Piher to deliver some operable samples. [Tr. 503-

A-10

been filled and shipped on March 6, 1969 [D. Ex. 211].'°

To the extent that the letter represents that the entire

order had been filled and shipped, it is incorrect. [See P.

Ex. 136, 137.] Adams’ testimony that the first PT-15s

received by Motorola in April were only a partial ship-

ment and that the balance of the order was filled in the

succeeding months, is uncontroverted. [Tr. 512-513, 565-

566, 571.] On these three documents, which the court

considered insufficient to establish that the PT-15s

received in April were shipped on or before March 16,

1969, rests the finding that completed PT-15s existed

almost two weeks before that date, on or about March 3.

The district court found that it was “more probable

than not that the shipment of potentiometers received in

the United States and delivered to [Motorola] on or

about April 7th was the very shipment referred to in”

the packing slip [D. Ex. 38]. [Tr. 976.] After expressing

considerable doubt on the point, the court stated that it

was “inclined to believe that the shipment represented

by” the packing slip was what Motorola received by

April 7 reese there was “no evidence of any other

shipment being received at about that time.” [Tr. 977.]

It is apparent that the court applied a lower standard

of proof than required under § 102(b), but, apart from

that, we find it difficut to reconcile the court’s inability

to find from these documents that the samples referred

to in the packing slip were eas between the 3d and

6th of March, as the memorandum and letter recited,

with the finding that the samples were completed on

March 3d. We have already noted that Motorola had

been pressing for the samples for months, and Piher had

10 The letter is, in pertinent part, as follows:

Subject: P.O. 295801 new construction pot.

Dear Sir,

Regarding the status of subject potentiometers, please be

advised that mentioned parts were sent yesterday to

Ricardo Balil by air parcel post.

A-11

been promising that they would soon be available." In

view of this urgency, it seems to us less likely that if

samples had existed they would not have been shipped

than that the documents were the products of hope or

misunderstanding, or both. We have noted that the

letter was demonstrably inaccurate in one respect: the

majority of the devices ordered were not shipped until

much later. The evidence shows other instances in which

Piher’s documentation of shipment proved to be inac-

curate. [Tr. 246-247.] In view of the likelihood that the

samples would have n sent as soon as they were com-

pleted, we cannot understand how the same evidence

that failed to establish that the samples were sent before

March 16th did establish that they were completed

before that date.

The district court clearly did not rely upon the only

possible basis other than the three documents for con-

cluding that the PT-15s received by Mctorola in April

were reduced te practice before March 16, 1969, viz., the

time required in 1969 for a package shipped air parcel

post from Spain to reach the United States. The only

evidence as to transit time was Balil’s estimate of “two

to three weeks,” which the district court expressly re-

jected, presumably because it had found Balil unreliable

as a witness on other points. The court “guessed” that it

would take about seven to ten days. If the court’s guess

was accurate, the PT-15s received on April 7 might not

have been completed and tested until March 29, 1969,

after the critical date.'

1! On October 15 Piher said the samples would be available

in 20 to 25 days, on October 23, in about a month, and on

December 16, in about a week. Yet we find Balil expressing

surprise in February “about the new delay” because a Piher

representative had said samples would be prepared by

February 15. [P. Ex. 132; Tr. 244-245.]

‘2 The district court also relied on its finding that Adams

had seen what “looked” like complete devices in November of

1968 to corroborate its Seg ca that “complete” PT-15s existed

as of March 3, 1969. No further discussion of that finding is

necessary.

A-12

Giving appropriate weight to the inferences that must

drawn from the unexplained absence of direct

evidence of reduction to practice, we cannot say that the

record supports a finding, based on “clear and convinc-

ing” evidence, that the PT-15s received by Motorola on

April 7, 1969, were complete and proved operable by

tests conducted in Spain prior to March 16, 1969.

Accordingly, the judgment is reversed, and the case is

remanded for the entry of an appropriate judgment in

favor of plaintiff.

REVERSED AND REMANDED.

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Circuit

B-1

APPENDIX B

in the

United States Court of Appeals

For the Seventh Cirruit

April 18, 1979.

Before

Hon. Water J. Cumminas, Circuit Judge

Hon. Howarp T. Markey, Chief Judge*

Hon. Pamir W. Tone, Circuit Judge

No. 78-1535

CTs CORPORATION,

Plaintiff-A ppellant.

Vv.

PIHER INTERNATIONAL CORPORATION and PIHER

SOCIEDAD ANONIMA,

Defendants-A ppellees.

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 72-C-1891—John F. Grady, Judge.

* The Honorable Howard T. Markey, Chief Judge of the United

States Court of Customs and Patents Appeals, is sitting by des

ignation.

B-2

ORDER

The opinion in this cause issued February 23, 1979, is

modified by adding as a penultimate sentence of the opin-

ion the following:

The district court’s finding on this point was clearly

erroneous,

Except for the foregoing modification of the opinion, the

petition of defendants-appellees for rehearing and sugges-

tion for rehearing in bane, no judge in active service hav-

ing requested a vote thereon, is Denied,

970

971

C-1

APPENDIX ©

Before | announce my findings of faet and eonelu-

sions of law, | would like to say that in this ease, as

in the other two patent cases | have tried, it has been

a great pleasure for me to preside due to the quality

of the lawyering on both sides, All counsel were well

prepared on the facts and on the law and presented

the case in an interesting and intelligible fashion.

In telling you what I believe the facts are, I think

1 will start my time elock in Christmas of 1968, I

am not satisfied from the evidence that Mr. Balil

brought back with him from Spain devices identical

to Exhibit 48. The only evidence we have of that is

Mr. Balil’s own recollection, and T regard his reeol-

lection in that respect as not being sufficiently corrobo-

rated by other evidence to justify a finding that he

is correct about it.

Had he shown these completed devices to other com-

panies, it seems to me that witnesses from those com-

panies could have been produced. Perhaps even doeu-

ments from those other companies could have been

produced to substantiate that faet.

T am influenced in this particular finding by the

fact that this testimony about bringing PT’s home

from Spain at Christmastime is a new bit of evi-

dence at this trial. It was not previously testified to,

and it is so entirely self-serving that I think the Court

should regard it with a proper degree of skep*icism.

I have no doubt that Mr. Balil was making sales

trips, because those sales trips in January and Feb-

ruary are corroborated by his memoranda to the home

office. But there is nothing in those memoranda which

leads me to believe that he was showing completed

samples. | do not say he wasn’t. It is just that T am

not convinced that he was.

His testimony at this trial was that the mechanical,

non-electrical sample was just as good for purposes

for showing customers as was the completed device.

972

C-2

So on that particular aspect of the case I find the

fact against the defendant.

Now, the nex¢ thing I would like to talk about is

what Mr. Adams and Mr. Klass received in April of

1969. Mr. Klass testified clearly. that it was a group

of devices identical to Exhibit 48. When. I refer, to

Exhibit 48 in this discussion, I will be intending to

include both 48 and 48-A, and that, of course, is cor-

roborated by the fact that Exhibit 48 and Exhibit 48-A

were in his file, attached to his file, and bore numbers

corresponding to the very items that were tested by

the Motorola laboratory.

Moreover, Mr. Klass testified that he took the device

apart before he sent it to the other laboratory for

testing. He said that was his practice, because, had

he not been satisfied with the internal composition of

the device, he would not have carried the process any

further. :

So I find on the basis of what T believe to be clear

and convineing evidence that what Mr. Klass received

in April of 1969 was a group of devices which included

and which were identical to Defendants’ Exhibit 48.

I would like to comment briefly on the credibility of

Mr. Klass. I found him to be a very credible witness.

The fact that he relied so heavily upon documents in

testifying to transactions which occurred nine years

ago and was reluctant to commit himself under oath

as to anything very specific that was not supported

by a document was, in my view, something which en-

hanced his credibility, rather than detracted from it.

The record wili not show this, but Mr. Klass fre-

quently hesitated before answering questions, and it

was apparent to me that some of the questions asked

by counsel for both parties seemed to him to be some-

what strange, and he would think awhile before he

would answer, and he would want to check the docu-

ment to make sure that he was right.

He spoke with a foreign accent, which I take to be

Scandinavian, perhaps Swedish.

Mr. Rohrback: German, your Honor.

973

974

C-3

The Court: German? Is that it? It sounded more —

like a Swedish accent.

He reminds me of tool and die makers T have known.

They are very precise and methodical people. He

struck me as that kind of person. And when he says

that based upon the documents that he looked at

and based upon his own recollection of the matter,

he is satisfied that he had Exhibit 48 in his posses-

sion on or before April 7, 1969, I have no doubt what-

ever that he is correct in that.

Mr. Adams also identified Exhibit 48 as apparently

being identical to the potentiometers he saw in April

of 1969, and I regard Mr. Adams as another very

credible witness, a very careful man, who I believe

testified truthfully to the facts as he recalls them and

as he believes them to be.

I am not unmindful that although these two wit-

nesses have no personal stake in this controversy, cer-

tainly the company for which they work has an ap-

parent stake in the success of the Piher potentiometer,

and I of course have considered that fact in evalu-

ating their testimony.

But notwithstanding that apparent reason for some

bias, I do not believe these witnesses displayed any

bias.

Now, if a shipment of devices identical to Exhibit

48 was received in the United States by April 7, 1969,

it follows that they must have been shipped from Spain

prior to that time. The question is when.

Here again I think the defendant may have been

able to do a better job in adducing evidence on this

question. Its reliance upon the shipping document and

its failure to call any witness who may have had first

hand knowledge of the date of shipment is something

that I have taken into consideration.

On the other hand, I am also cognizant of the fact

that very often all a witness can say under those cir-

cumstances is, ‘‘Here is a document. I haven’t the

slightest recollection of having ever seen it before in

my life, and al] I can tell you is that this is the kind

975

976

C-4

of document wé use in the circumstances, and the

meaning of it, according to our custom and usage, is

as follows.’’

So I do not believe this is a case that calls for the

application of the rule that the failure to adduce

evidence raises the inference that had it been adduced,

it would have been adverse to the proponent of the

proposition.

Now returning to the question I posed a few minutes

ago, ‘‘When did this shipment occur?’’ I am not per-

suaded from Exhibit 38 and from Exhibit 39 or from

Exhibit 211, or a combination thereof, that it oc-

‘curred on or about March 3, 1969. I do not think

those documents will establish that fact. Nor docs

the testimony of Mr. Balil establish that fact. It is

not even clear to me that the date on the shipping

document is intended to designate the date of ship-

ment as distinguished from the date of the prepara-

tion of the document, because the word ‘‘fecha’’ that

I asked about simply means ‘‘date’’. One could assume

that ‘‘date’’ is intended to mean the date of ship-

ment. But when you are talking about clear and con-

vineing evidence, I could not find from clear and

convincing evidence that this shipment took place on

March 3, 1969, or even within a day of two after that

date.

What I do believe these documents indicate is an

intention on the part of Piher to ship these poten-

tiometers described in Exhibit 38 at about that point

in time. There is nothing about those documents that

has any of the earmarks of non-regularity. Exhibit

38, Exhibit 39, and the letter, Exhibit 211, were ob-

viously prepared in the ordinary course of business

by persons who were not manufacturing evidence, by

persons who were not contemplating litigation, and by

persons who I believe thought they were recording

actual facts and actual transactions that were taking

place contemporaneously.

Now, on the basis of these documents, and on the

basis of the whole evidence in the case, I cannot find

C-5

that this shipment of potentiometers left Spain prior

to the critical date, March 16, 1969. They may have

left before March 16th. They may not have left before

March 16th. It would take a gambler to bet either way

on that proposition.

Therefore, all I can say, on the basis of the ship-

ping evidence, is that the shipment of potentiometers

received at Motorola in the United States on or prior

to April 7, 1969, obviously left Spain the minimum

time prior to that which would be necessary to fly them

over here by air parcel post.

The evidence as to how long that is is not satis-

factory. Mr. Balil gave an estimate. I think he said

two to three weeks. I do not accept that as proof that

this shipment left Spain two to three weeks prior to

April 7th.

If I were to guess, I would say it would have had

to have left Spain seven to 10 days before April

7th, but that would be a guess.

Turning to the next subject, I think it is probable

and certainly more probable than not that the ship-

ment of potentiometers received in the United States

and delivered to Mr. Klass on or about April 7th was

the very shipment referred to in Exhibit 38.

I confess one can argue either way about these num-

bers and the number of potentiometers you would have

had to have had to perform these tests. When I was

listening to Mr. Wyss I was impressed with his ar-

gument. When I listened to Mr. Trexler, I was im-

pressed with his argument.

I frankly would have to take more time to study the

documents and study the mathematics involved than

I have to come to a definite’ conclusion on it, and may-

be I couldn’t come to a definite conclusion even then.

But simply on the basis that there is no evidence

of any other shipment being received at about that

time, there are no other documents, on that basis I

am inclined to believe that the shipment represented

by Exhibit 38 is what Mr. Klass received.

978

C-6

But be that as it may, there is absolutely no doubt

that what he did receive he received from Piher.

Now, the next question is when was Exhibit 48 and

its companion potentiometers that were reecived in

April in the United States manufactured? Obviously

they had to have been manufactured prior to that

minimum time that was necessary to ship them here

and have them arrive by April 7th.

I think the evidence adduced by Piher could have

been more complete on this point, although again I[

am not sure. But it seems to me there must have

been at least at some time some production records. Or-

dinarily factories do not produce things without some

document indicating what was produced. Maybe they

do it differently in Spain. T didn’t hear anything in

the record one way or the other on this point.

So it seems to me that there may be documents

that could have been produced that were not produced.

But that is an assumption, and I don’t think assump-

tions of that kind eall for the application of the adverse

inference rule. | do not apply that rule.

Now, there are documents which convince me that

Exhibit 48 and its companions were in existence as

early as March 3, 1969. I agree with Mr. Trexler’s

argument on the matter of the significance of these

shipping documents, Exhibits 38, 39, and the letter

Exhibit 211. Regardless of what they indicate about

the shipping date, they clearly indicate the existence

of the potentiometers referred to therein.

There is another factor that corroborates the docu-

ments in this regard, and we now come full circle to

Mr. Adams’ trip to Spain in November of 1968. I

have no doubt on the basis of Mr. Adams’ testimony

that he saw at Piher in Spain in November of 1968

devices which looked to him to be identical to those

979 devices he later saw in April of 1969 in Tllinois. This

was a major item in Mr. Adams’ business life at that

time. He spent a half day, he said, discussing these

potentiometers at Piher, and he satisfied me that he

does indeed remember seeing these various devices

C-7

or devices which looked identical to Exhibit 48 at that

time.

Now, the Plaintiff questioned whether these devices

were complete, whether they contained all of the com-

ponents, and I believe that there is no reason to

doubt that they did. They appeared to be complete

devices. Obviously nothing was said by Piher at that

time to the effect that they were not completed de-

vices. Otherwise, Mr. Adams would not have left there

with the impression that they were completed devices.

[ am not violating my ruling on hearsay by saying

that, because T am not taking into consideration any-

thing Viher said at that time. But I do think it is sig-

nificant that Mr. Adams left there with the impres-

sion that these were completed devices, and had he

been informed otherwise, he wouldn’t have had that

impression.

There is no evidence that Piher was attempting to

dissemble about the matter. They had used incom-

pleted or uncompleted devices as samples before this

time and had made no bones about it. Indeed, Mr.

Adams himself had seen such non-electrical devices

and had been impressed by them, and they had been

sufficient to engender his interest in buying the device.

I find, therefore, that completed devices identical to

Exhibit 48 were shown to Mr. Adams in Spain in No-

vember of 1968.

Mr. Adams had been confused earlier, at the earlier

trial, about when he went to Spain. His explanation

of that was reasonable. I think it was an innocent mis-

take. I do not regard his credibility as having been im-

peached by the disclosure he was wrong about that.

The question arises, if the devices were available

as early as November of 1968, why were they not given

to Motorola at that time? Why was there so much

diffeulty getting samples? And why did they not ar-

rive until April of 19697

T will tell you frankly that I think that is the strong-

est part of the plaintiff’s case, and T have thought

long about that.

981

982

C-8

The explanation offered by the defendant is that the

devices that were available were not of the proper

value. Mr. Wyss made a telling argument to the ef-

fect that these devices were manufactured in the first

instance specifically for Motorola and there was no

reason to think they would not have been of the prop-

er value.

I have difficulty with that argument, and notwith-

standing that difficulty, I still have concluded and am

convinced that these completed devices were available

at the Adams’ meeting in November of 1968, and I

can only conclude that Mr. Adams is correct when he

says that they were not of the proper value.

The next question is whether what was delivered iu

April of 1969 was a completed device reduced to

practice within the meaning of the statute and within

the meaning of the Court of Appeals’ decision in this

case, There is no question about that. It has been con-

ceded by the plaintiff that that is the case.

The next question is whether this device was being

offered for sale by Piher prior to the critical date,

March 16, 1969. I realize that ‘‘offered for sale’’ is

really a mixed question of law and fact, but I find

that there is absolutely no doubt that it was being

so offered, if I understand the term ‘‘offered’’. It

was offered for sale in the November meeting in Spain.

The correspondence by Mr. Balil to his home office

requesting the samples indicates a continuing concern

by a Piher representative that these items will be

delivered, that they be shown, that they be offered to

the customer.

Finally, the letter, Exhibit 211, is clear evidence

that Piher is offering these devices for sale to Motorola.

Now, I do not believe that the law, in talking about

offer and sale in this context, is talking about the

strict contractual or is using those terms in the strict

contractual sense of offer and acceptance. Indeed, the

very case which plaintiff gave me last night, the case

of Wende against Horeen indicates that it is not neces-

sary that there be a sale or delivery, and certainly Jus-

C-9

tice Stevens’ language in the CTS against Piher case

indicates that that is so.

To conclude the factual portion of the discussion,

then, I find by evidence which I regard as on the whole

clear and convincing that Piher had on hand in Spain

prior to the critical date completed potentiometers, that

it was offering to sell and had offered prior to the

critical date to sell to Motorola in the United States,

and that Motorola was interested in purchasing those

potentiometers.

Turning to the conclusions of law that one draws or

applies to these facts, I think first I would like to ex-

clude what I think the legal issues are not.

First of all, I do not believe the issue is whether

the devices were shipped prior to the critical date.

The evidence does not prove that they were, and if

that were the legal issue, clearly the plaintiff would

be entitled to prevail.

Secondly, I do not believe the issue is whether the

983 devices were received in the United States prior to the

critical date. We know that they were not, and if that

were the issue, again the plaintiff would be entitled

to prevail. In fact, I think this case would not have

been remanded if that were the issue.

IT do not think that the question of whether the de-

vices received by Motorola are the same devices that

were shipped pursuant to the shipping or packing slip,

Exhibit 38, is the issue.

If these devices had come over in some manner total-

ly aside from the documents upon which I have spent

some time here, they would still have arrived by

April 7th, and they still would have been typical of

those devices which were in existence as early as No-

vember of 1968, and that would be sufficient.

Moreover, I do not think the issue is whether or not

the shipment represented by Exhibit 38 was made pur-

suant to the order shown in Exhibit 45. I think the

significance of Exhibit 45 is that it demonstrates by a

document the interest that Motorola had in acquiring

C-10

these devices. But had there been no written order at

all, I do not see that it makes any difference.

984 So if there is a discrepancy between Exhibit 45 and

Exhibit 38, I regard that as immaterial. Obviously,

Exhibit 38 can only be a partial filling of the order

represented by Exhibit 45. But I do not regard that

as a material fact in the case.

Those, I think, are the non-issues. I will now tell

you what I think the issue is.

I believe that the issue is whether there was a com-

pleted device reduced to practice that was in existence

anywhere in the world and being offered for sale by

Piher on or before the critical date.

That is the single issue that the case boils down to,

in my view of it, and the answer to that question is

clearly and convincingly in the affirmative, in my view

of the evidence.

I therefore conclude that the Defendant has estab-

lished by clear and convincing evidence that its PT 15

potentiometer, embodying the Plaintiff’s 285 inven-

tion, was on-sale within the meaning of Section 102

(b) of the statute prior to the critical date, March 16,

1969.

Now, if there are any other facts that I should find,

if you will tell me what they are, I will make findings.

Mr. Wyss: I don’t think so, your Honor.

Mr. Trexler: I know of none.

The Court: All right.

985 Now, the other case, the 1976 case, tell me about

that.

Mr. Blackstone: That is an infringement case, and

we have stipulated that if the Plaintiff were to pre-

vail in this and the Patent Office, the Defendant would

concede infringement. Since the Defendant has pre-

vailed here, that stipulation would wash out the 1976

case, in my opinion. It should be dismissed with prej-

udice.

Mr. Wyss: In the 1976 case, your Honor, the stip-

ulation is that when this issue was finally disposed of

C-11

—so I think it just has to set and wait to see whether

an appeal is taken in this case. Je eink

The Court: I am wondering if we can dismiss it

at this time, obviously on the understanding that if

there is a reversal here, everything gets reinstated,

including the 1976 case.

Mr. Wyss: We have no objection to that.

The Court: Why don’t we do that? That way we’ll

get it off my call. ,

Mr. Wyss: There is one other item, and that is the

item of costs.

As you recall, the cost item was before the Court of

Appeals. We won on three issues, but because of the

cost situation, costs were awaiting the decision of this

urt.

ie assume under the Seventh Circuit Rule no costs

will be awarded, because there is no prevailing party.

The Court: That sounds reasonable to me.

Mr. Blackstone: We won’t object, your Honor.

The Court: All right. Then we will provide that

there shall be no costs to either side.

Thank you, gentlemen, for a very interesting case.

Tam sorry you could not both have won.

Mr. Wyss: Thank you, your Honor.

Mr. Rohrback: Thank you, your Honor.

The Court: Surely you have factual findings that

squarely present the question of law that you really

have some differences about.

Mr. Wyss: Yes.

The Court: All right. Thank you.

Mr. Rohrback: Thank you for your thoughtful con-

sideration, your Honor. i

Mr. Trexler: And thank you for your attention.

You had a lot of thinking to do on a case of this kind.

(Which Were All Of The Proceedings In The

Above-Entitled Cause On The Days And Dates

Aforesaid.)

987 [Certificate of Court Reporter.]

D-1

APPENDIX D

In the

Guited States Court of Appeals

For the Seventh Circuit

No. 75-1100

CTS Corpvoratton,

Plaintiff-A ppellee,

v.

Pinen Internationa, Corroration and

Piner Socrepan ANonIMA,

Defendants-A ppellants.

Appeal from the United States District Court for the

Northern District of [llinois, Mastern Division

No. 72 C 189]

Junius J. Horrman, Judge

Arnavurmp Junne Tl. 1975 — Decioey Deceapen 17, 1975

Before Crark, Associate Justice (Retired)*, Stevens,

Circuit Judge, and Grant, Senior District Judge.**

Srevens, Circuit Judge. Appellants contend that the

district court erroneously rejected their attacks on the

validity of the '604' and '285? patents on variable resistance

* Associate Justice Tom C. Clark of the Supreme Court of the United

States (Retired) is sitting by designation.

** Senior District Judge Robert A. Grant of the Northern District

of Indiana is sitting by designation.

1 Patent — —" on “Electrical Component” issued to appellee

a & Beaver and Van Benthuysen on June 30, 1970, pursuant

to application filed February 12, 1968.

*Patent No. 3,670,285 on “Variable Resistance Control With End

Collector” issued to appellee as assignee of English on June 13, 1972,

pursuant to application filed March 16, 1970.

1-2

controls and erroneously found that their “PT-15" trim-

mer infringed the former patent. The ‘604 patent discloses

a flared bearing used as a dust excluding seal of an aper-

ture in the housing enclosing the control. The "285 patent

describes a mechanical assembly which uses a metallic

collector—an essential component of the control—as the

hase of the housing.

The principal issues on appeal are (1) whether one of

appellee's earlier patents (4d8)* which disclosed the use

of a flared bearing to hold the components of the control

together, made the '604 improvement obvious; (2) whether

the failure to cite '478 to the Patent Office during the pro-

cessing of the ‘604 application breached ee s duty of

disclosure; (3) whether reversal of the finding that the

‘604 patent has been infringed is required hy cither (a)

the fact that appellants’ PTs trimmer (which appar-

ently is similar to appellee’s "285 device) uses a metal-

lio collector as a base, whereas the device described

in the ‘604 specifications uses a nonconductor and adimit-

tedly would not function with a metal base, or (b) the

fact that the P'T-15 trimmer uses a flared bearing to seal

only one of two openings in its housing; (4) whether the

erroneous exclusion of critical evidence frustrated the pre-

sentation of a meritorious “on sale” challenge to the valid-

of the "285 patent;* and (5) whether appellee's develop-

ment of the '285 device was so abortive that either (a) it

was not “useful” within the meaning of § 101;° or (b)

the patent specifications failed to describe “the best mode”

of carrying out the invention as required by §112;° or

* Patent No. 478 on “Electrical Control And Method of Making

the Same” to appellee as assi of Van Benthuysen and Barden

on March 26, 1968, pursuant to tion filed May il, 1964.

‘35 US.C. § 102(b) provides that a person shall be entitled to a

patent unless the invention was “. . . on sale in this country, more

then one year prior to the date of the application for patent in the

United States... .” ;

*35 USC. 101 provides that one who “invents or discovers any

new and machine, manufacture, or composition of matter,

or any new and ; Sa may en 2 yetene

therefor, subject to the and requirements this title.

*35 USC. § 112 provides, in :

“The aor cakes 6 ets Gieteee ft te

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, or with which it is

D-3

(c) the invention was “abandoned” within the meaning of

$ 102(¢).’ We shall briefly describe the product, the par-

ties, and the posture of the case, and then discuss the facts

in greater cletail in connection with our consideration of

the several issues.

A variable resistor—soinetimes called a “potentiometer”

or a “trimmer”—is used to adjust the electrical resistance

of an electronic circuit to a desired level. The volume and

tone controls on a television or radio set are examples of

variable resistors. The essential elements of such a con-

trol include (1) a driver, or shaft, which tay be turned

manually or with a tool, such as a serewdriver; (2) a

contactor, which is affixed to, and may be rotated by, the

driver, and which makes electrical contact between the

collector and the resistance clement; (3) the collector,

which must be a conductor of electrical current and ix

installed in a fixed position; and (4) the resistance ele.

ment, which may he a horseshoe shaped sliver of carbon

affording varying degrees of electrical resistance, depent-

ing upon the location of the contactor which may be swept

from one end of the resistance element to the other by

turning the driver. These elements may be arranged in

a variety of configurations and sizes; in some designs

they are enclosed within a dust excluding housing. The

patents in suit relate to the mechanical structure rather

than the electrical technology of the controls.

The parties are con,petitors in the manufacture and sale

of electrical components for television sets. The appellants

are a Spanish mozufacturing corporation® and its affiliated

American distvibutor,” which the district court found to be

the “alter ego” of its parent. Since that finding is not

challenge, we shall refer to the two simply as “Viher.”

* (Continued)

most nearly connected, to make and use the same, and shall set

forth the best mode contemplated by the inventor of carrying

out hiv invention.”

"Ss USC. 102(¢) provides that a person shall be entitled to a

at wm ts te leer We

*Piher Sociedad Anonima.

*Pther Ip‘ernational an Illinois corporation with offices

ee

D-4

Appellee (“CTS”), an Indiana corporation," originally

accused Piher of infringing four of its patents."' Since one

of these has now expired, and since only minimal damages

are recoverable as a result of infringement of the second,

Piher has not appealed from the holding that those two

patents were valid and infringed. Moreover, by stipula-

tion the parties withdrew the question whether Piher’s

PT-15 trimmer infringes the "285 patent, as well as the

question of priority of invention of what we infer to be

essentially the same disclosure in the CTS ‘285 patent

and in Piher’s Spanish patent describing the PT-15 trim-

mer; that priority issue is the subject of an interference

proceeding pending in the Patent Office. Specific attacks

on the validity of the "285 patent were, however, raised

by Piher’s counterclaim and decided by the district court.

The issues on appeal, thercfore, involve the validity of

‘604 and '285 and infringement of '604. We turn to those

issues.

IL.

The specifications in the 604 patent describe a variable

resistor which is completely enclosed in a tiny boxlike

plastic housing containing one round opening through

which a plastic driver or shaft projects. That projection

of the shaft is in the form of a barrel which includes a

flared bearing extending outwardly from the periphery

of the opening. The bearing fits against the surface of the

housing with sufficient firmness to hold the components of

the device securely together and yet be smoothly rotatable;

it also performs the function of preventing dust or other

foreign matter from entering the component.

Piher argues that the '604 improvement was obvious

hecause (a) with one exception, the general arrangement

of its components within a dust excluding housing was

disclosed by Barden-'140," and (b) that one exception,

namely the flared bearing, was disclosed by appellee’s

‘°CTS Corporation has its principal place of business in Elkhart,

Indiana.

18 The ‘604, '285, and ‘478 patents identified in notes 1, 2, and 3, and

an earlier patent, No. 2,740,027, which has since expired.

19 Patent No. 3,237,140 on “Variable Resistance Control” issued on

Febuary 22, 1966, to CTS as assignee of Barden and Snyder pursuant

to application filed on May 20, 1963.

D-5

"$78 patent. We agree with Piher's premises hut not with

its conclusion.

In Barden-'140 the sealing function was performed by

a thrust washer encircling the driver just inside the open-

ing in the housing. Both the ‘478 patent and the ‘G04

patent deseribe unsatisfactory characteristics of such a

washer and disclose a construction which substitutes a

flared bearing—i.e., an enlargement of a portion of the

driver—for the washer. That substitution having been dis-

closed by ‘478, Piher argues that the same substitution

disclosed in ‘604 must surely be classified as obvious.

_Tf the flared bearing in ‘604 merely performed the fune-

tion of maintaining a secure relationship among the com-

ponents during adjustment, Piher’s argument would be

valid. But in '604 the flared bearing is designed to per-

form the additional dust exeluding function, a function

not even arguably performed by its anteeedent in ‘478.

Indeed, since the '478 device is not enclosed in a housing,

that patent does not concern itself with the use of any

sealing member, and therefore neither implicitly nor ex-

nye suggests that the enlarged portion of the shaft may

e used to perform a sealing function.

Although each of the elements of the ‘604 coinbination

was disclosed by either Barden-’140 or by the ‘478 patent,

the fact that the fared bearing would successfully perform

a sealing function was disclosed by neither. According to

expert testimony which the trial judge credited, that fact

was not obvious to persons skilled in the art when the

invention was made, Since the sealing function of the

hearing in the ‘604 device was of critieal importance in the

Examiner's decision to allow the claims,'* and since his

3 In ‘478 what we refer to as a “flared bearing” is actually described

as an “enlarged portion” of the shaft. (See column 4, lines 34-38; it is

element 3le in 1 and 3.)

“Claim 1 of ‘604, which reads as* follows was allowed only alter

an amendment which added the italicized language:

“1. A variable resistance control comprising a dust excluding

housing en | a plurality of walls, a base clomng the housing and

forming a thereof, an aperture in one of the walls, a driver

supported by the housing for rotation relative thereto, resistance

means supported within the housing, and a contactor wipingly

engaging the resistance means »»i constrained to rotate with the

driver, the driver comprising a ‘ody portion and a barrel integral

with the body portion, the barrel extending through the aperture

D-6

decision is presumptively correct, the nonobviousness of

that application of a flared bearing in a variable resistance

control justifies the district court’s conclusion that the

concept was patentable.

II.

As we have already pointed out, the flared bearing in

604 performed both a structural function and a sealing

function. If only the former were involved, CTS clearly

would have been obligated to call the Patent Examiner’s

attention to '478. Indeed, in view of the discussion of the

structural importance of the flared bearing in ’604, we are

somewhat surprised and troubled by the failure even to

cite '478 during the prosecution of the ‘604 application.

Nevertheless, we accept appellee’s argument that since

178 described a component which was not enclosed in a

housing, and therefore had no relevance to the function

of sealing an opening in a housing, prior art which dis-

closed the use of comparable closures to scal openings in

other enctosed devices was more pertinent than '478."

That conclusion does not necessarily lead to the further

conclusion that the failure to cite 478 did not violate the

applicant’s duty of disclosure. We must assume that the

applicant deliberately decided not to call the Examiner’s

altention to '478, since it was one of its own patents, cf.

Armour & Company v. Swift & Company, 466 F.2d 767,

777-779 (7th Cir. 1972), and we are unwilling to assume

that the Examiner was familiar with it, id. at 779. Not-

withstanding these assumptions, the patentce is correct in

emphasizing the improbability that a patent on an unen-

closed control would affect the Examiner’s evaluation of

a means for effectively sealing the opening in a housing

during adjustment of the control. We therefore conclude

14 (Continued)

with a portion of the barrel securing the driver to the housing,

said portion of the barrel including a flared bearing extending

outwardly from the yp tend of the yon nel

The im ce of the dust-exciuding function is repeatedly em-

oy the specifications. See, eg, Col. I, lines 17, 44-56, 69-70;

II, lines 12-15, 32-35.

CTS cited Patent No. 3,215,303 on “Closure for Openings in the

Walls of Electrical Outlet Boxes and the Like” (see ially column

2, lines 59-69) and Petent No. 3,099,057 on “Retaining Fasteners” (see

especially column 4, lines 12-19).

Mi Lin De neon OFT LEE BTCA E EE joe! Bi Boies ctl Natit.

Ae ae ate Ne

ee ere eras

D-7

that it was a permissible exercise of judgment for CTS

tu omit the citation of the ’478 patent during the process-

ing of the '604 application.

III.

Our reasons for affirming the district court’s infringe-

ment finding may be briefly stated.

In the device disclosed in the ’604 specifications, and

in the components actually marketed by CTS, the base of

the housing is made of plastic and has the resistance ele-

ment affixed to it. In contrast, in Piher’s PT-15 trimmer,

the metal collector also serves as the base of the housing.

Unquestionably, if a metal base were used in the CTS

device, it would not function. There is, therefore, a rather

dramatic difference between the two devices.

The question of infringement, however, is answered by

comparing the accused device with the claims of the patent,

not with any particular embodiment—even the preferred

embodiment—of the invention."® The claims in the ’604

patent do not require that the base of the housing be a

nonconductor. Despite the different arrangement of the

elements of the Pilter trimmer, each of the elements de-

scribed in the '604 claims may be found therein. The dis-

trict court so found, and that finding is supported by the

testimony of plaintiff’s expert. Most importantly, the ar-

rangement of the base of the housing, the collector, and

the resistance clement is really not relevant to the ques-

tion whether the accused device uses a flared bearing on

a driver to perform a sealing function. The critical ele-

ment of the invention is found in Piher’s trimmer,

Piher’s second attack on the infringement finding was

first advanced in its reply brief in this court. Piher points

out that the shaft in the PT-15 trimmer protrudes through

an opening in the bottom as well as through a second

1° The phrase “infringement of a patent” is somewhat misleading since

it is the claims of the patent which define the boundaries of the patent

t. See Deller’s Walker on Patents, 2d Ed., §509, p. 165. Although

ere are situations in which the scope of the claim may be limited

by construing it in the light of the specifications, see McClain v. Ort-

mayer, 141 "OS. 419, 424, we see no reason why the portions of the

claim describing the use of the flared bearing to seal in aperture

in the housing should be limited by a description in the specifications

relating to another wall of the housing.

D-8

opening in the top of its housing, and that the flared bear-

ing seals only one of the two holes." Tt would seem to

follow that the housing was not designed to exelude dust.

In contrast, the ‘604 device has only one opening in its

housing and the ‘604 claims refer to “an aperture in one

of the walls” and deseribe the location of the flared bear-

ing with reference to the periphery of “the aperture.”

It ix not the fact that the Piher deviee has two holes

rather than only one that casts doubt on the infringement

finding; for surely if both holes were sealed with flared

hearings, there would be infringement. Rather, it is the

Fact that there appears to be no seal at ati over one of

the holes that raises the question whether Piher’s housing

is intended to exclude dust. But this question was unequiv-

ovally answered in the trial court when Piher's counsel

acknowledged that Piher had made no ettempt to prove

that the Piher trimmer does not have a dust excluding

housing."* Thus, we must assume that the seeond opening is

effectively sealed against dust by a noninfringing means—

perhaps merely a close adjustment between the driver and

the aperture. That assumption, however, does not under-

mine the sufficiency of the finding that the flared bearing,

when it does perform a sealing function, infringes the ‘G04

patent.

We conclude that the record adequately supports the

finding of infringement.

IV.

The fourth and fifth issues relate to the validity of the

"285 patent. That patent describes a control which differs

from the prior art in two important respects. The metal

collector serves as the base of the housing, thereby redue-

ing the number of parts,’ and the contactor is pinched

7 Actually, in the trial court Piher’s theory of noninfringement

appears to have been that its fiared bearing did not even seal one

of the holes. The district court rejected that theory and we do not

understand appellants to pursue it on appeal.

8See Tr. 2346-2347. This position in the trial court was apparently

compelled by a representation made by Piher to the Tariff Commission

with respect to the dust excluding character of its product.

1?“Another object of the present invention is to provide a variable

resistance control utilizing a minimum number of parts by using

i. Yavae vp as a cover for the housing.” Col. 1, lines 73-75; column

, line 1.

D-9

between the collector and the resistance element which are

in parallel planes, thereby maintaining a more constant

sressure between those two elements than when the spring-

ike contactor is employed between the two elements ar-

ranged concentrically in the same plane.*® Both of these

functions are also found in Piher’s P'T-15 trimmer.*' As

already noted, there is an interference proceeding pend-

ing in the Patent Office to decide the question of priority

of invention.

CTS may have been the first to ag, Re with the ’285

construction, but Piher appears to have been the first to

exploit it commercially.

In 1967, CTS commenced a “low cost 450” project which

eventually resulted in the "285 patent. After rudimentary

testing of the handmade model, detailed drawings of the

device shown in the ‘285 patent were prepared, about

$20,000 was invested in the acquisition of temporary pro-

7"Yet another object of the present invention is to provide a variable

resistance control with the contactor pinched between the resistance

element and the collector to thereby maintain equalized contact

1 ie on the resistance element and collector.” Colurnn 2, lines

3-17.

Both of the features mentioned in the text are identified in claim 1 of

the '285 patent which reads as follows:

“1. A variable resistance control comprising a housing defined

A a skirt and an end wall integral with said skirt, a resistance

element mop | in a plane and supported flatwise against the end

wall of said housing, a collector supported by said skirt and having

a diameter slightly larger than the diameter of the resistance

element and closing one end of the housing, said collector being

provided with an aperture, said collector being substantially flatwise

and lying in a plane in spaced parallel relationship to said plane

contain said resistance element, a contactor rotatable about an

axis a positioned between said resistance element and said

collector, and driver means for rotating said contactor whereby

upon rotation of said driver means said contractor wipingly engages

said resistance element and said collector, said collector rotatably

supporting said driver means in said aperture.”

21 These features were plainly identified in the testimony and exhibits

presented by plaintiff's expert witness in support of the claim that

the PT-15 trimmer infringed the ‘604 patent. Of course, as CTS argues,

the fact that the trimmer which Piher was marketing at the time

the litigation was commenced contained the same features as those

discussed by the ‘285 patent does not necessarily prove that earlier

models of the trimmer contained the same features. However, an

examination of the Piher patent application filed in the United States

on Jul , 1969, claiming the benefit of filing dates of July 30, 1968,

and May 13, 1968, for corresponding Spanish patents, together with

testimony in the record, strongly indicates that these essential features

were embodied in Piher’s device from its inception.

D-10

duction tools, and a number of prototypes were assembled.

These samples were tested in May of 1968. Although a

defect was found in the samples, CTS determined that the

defeet was casily correctable and that the samples were

commercially satisfactory. There is also testimony that

other samples tested in January of 1969 were found to

he fully operable. On the basis of that evidence, the dis-

trict court found that the invention had been reduced to

practice in May, 1968, and again in January, 1969. The

‘285 patent application was filed on March 16, 1970, and

the patent issued in 1972. CTS has not yet marketed its

“low cost 450” control, but one of its witnesses testified

_ that it plans to do so in the future.

Piher filed a Spanish application on its PT-15 trimmer

in July of 1968. In the fall of that year, the witness

Adams, who was the manager of International Materials

for Motorola, visited Piher’s facilities in Bareelona ani

was shown prototypes of the new trimmer. Toward the

end of the year he received samples from Piher and placed

an order for a production trial run in January of 1969.

A portion of that order was shipped from Barcelona on

March 3, 1969, and was delivered to Motorola in April.

Piher’s principal attack on the validity of the '285 patent

is based on evidence relating to this thimnent which left

Barcelona more than a year before the date of the appli-

cation for the patent but did not arrive in the United

States until after the critical date. Some of this evidence

was admitted and some is in the record as part of Piher’s

several offers of proof which the trial judge rejected.

Before discussing the specifics of that evidence it is impor-

tant to identify the material issues.

The challenge rests on §102(b) which defines the so-

ealled “on sale’’ detense. The statute speaks in terms of

“the invention” being on sale in the United States more

than one year prior to the application date.” It might more

Sy of § 102(b) reads as follows:

7 \ person shall be entitled to a patent unless—

“(b) the invention was patented or described in a printed

— in this or a foreign country or in public use or on sale

this country, more than one year prior to the date of the

application for patent in the Uni States, or... .”

D-11

recisely have referred to a device embodying or disclos-

ing the invention. In any event, the defense is most fre-

quently asserted on the Lessin of evidence that the paten-

tee’s own product was on sale more than a year before the

patent application was filed.**7 The statutory purpose in

such cases is to make sure that the inventor may not extend

the period of patent protection for the commercial exploi-

tation of his monopoly beyond the statutory term.’'

But the defense may also be predicated on evidence that

the invention was disclosed in a product sold by someone

other than the patentce more than a year before the filing

date. Dunlop Holdings, Ltd. v. Ram Golf Corp., ...... F.2d

weeey No. 74-2024 (7th Cir., Oct. 20, 1975). In such cases,

the statutory purpose is to preclude tlhe award of a patent

to a person who is not actually the inventor; proof that

a product was on sale in the United States more than a

year before the application date conclusively places that

wvoduct in the category of prior art of which the inventor

is presumed to have had knowledge. See Judge Duffy’s

opinion in Illinois Tool Works, Inc. vy. Solo Cup Co., Ine.,

461 F.2d 265, 270-271 (7th Cir. 1972). The “on sale” de-

fense in this case* in effect raises the question whether

Piher’s PT-15 trimmer must be regarded as prior art be-

cause it was on sale before the critical date of March 16,

1969.

We first put to one side an arguinent that CTS repeat-

edly asserted in the district court and which may have

provided an erroneous predicate for some of the trial

judge’s evidentiary rulings. CTS contended that Piher

was required to prove a completed sale in the United

23 See, ¢.g., Amphenol Corp. v. General Time Corp., 397 F.2d 431

(7th Cir. 1968); Frantz Mfg. Co. v. Phenix Mfg. Co., 457 F.2d 314 (7th

Cir. 1972); Dart Industries, Inc. v. E. I. DuPont De Nemours and Co.,

489 F.2d 1359 (7th Cir. 1973); The Red Cross Mfg. Corp. v. Toro Sales

Ca, . F.2d. , No. 73-1900 (7th Cir. November 12, 1975).

“The policy underlying the ‘on sale’ bar is to prevent an inventor

from holding back the secrets of his invention from general public

knowledge while at the same time exploiting it commercially

thereby extending the duration of his legal monopoly.” The Red

Cross Mfg. Corp. v. Toro Sales Co., supra, slip op. at 6.

See, also, Frantz Mio. Co. v. Phenix Mfg. Co., supra, 457 F.2d at 320.

25Since the “on sale” issue was raised by Piher’s counterclaim, it is

not actually a “defense” in this case; however, since the issue is

normally raised by the defendant, it seems appropriate to follow the

practice of referring to it as a defense.

D-12

States prior to the critical date. Admittedly, Piher proved

no such sale. But if it was then offering to prospective

rn in the United States a product which (a) em-

odied the ’285 invention and (b) was complete in the sense

that it represented u reduction of the invention to practice,

the invention was on sale within the meaning of the statute

and the '285 patent is invalid.**

There is substantial evidence in the record supporting

the conclusion that Piher’s PT-15 trimmer disclosed the

essential elements claimed in the ‘285 patent. Piher’s trim-

mer was described in detail by the S expert who ex-

plained why it infringed the '604 patent; his testimony

and the exhibits he prepared clearly disclosed the use of

a metal collector as a base for the housing, and also the

contactor pinched between the collector and the resistance

element in separate parallel planes. Moreover, in its origi-

nal complaint, CTS alleged that the PT-15 trimmer in-

fringed the ’285 patent.

CTS points out, however, that the fact that the invention

was disclosed in Piher’s trimmer in 1972 when the suit

was filed does not necessarily establish the fact that it

was embodied in any device which was on sale prior to

March 16, 1969. For there is evidence in the record that

the trimmer has been modified from time to time, and

Piher had the burden of proving that it reduced the con-

cept to practice before the critical date. See Dart Indus-

tries, [ie. v. LE. I. DuPont De Nemours and Co., 489 F.2d

1359, 1364 (7th Cir. 1973). Thus, the character of the

devices shipped by Piher on March 3, 1969, was of critical

importance.

Adams testified that after those devices were delivered

te Motorola in April of 1969, they were turned over to

Gunar Klass for evaluation. Klass testified that he con-

ducted a series of tests in ‘April, May and June of 1969.

CTS scems to have persuaded the trial judge that evidence

regarding these tests was irrelevant because the product

did not arrive in the United States until after the critical

date.” CTS convinced the trial judge that a copy of the

2¢See cases cited in n. 23, supra |

77 “MR. WYSS: I ject to the so-called offer of proof for a

number of reasons. of this device, according to the

witness’ own testimony, was — it was — received by him on

i dee

D-13

Motorola purchase order issued on Junuary 22, 1969, re-

lating to the March shipment was inadmissible because it

did not constitute “the best evidence” of what Motorola Ifad

ordered, and its relevance was not manifest froin the face

of the document. CTS also persuaded the court to exclude

testimony hy Klass, who had been responsible for Motor-

ola’s testing of the Piher device, in which Klass described

the essential features of that device.** The court also sus-

tained objections to the admissibility of one of the devices

which the witness identified as having been tested in 1969

on the ground that it had not been in the personal custody

of the witness for about a year, but rather had been in

the custody of Motorola’s patent department, and there

was no absolute assurance that the offered exhibit was tlie

one he had tested. The arguments over the adiissibility

of these exhibits and this testimony were extensive and

we are not entirely sure that we understand the basis for

the various restrictive rulings made by the trial judge. We

have no doubt, however, that the purchase order was rele-

vant and that the faet that it was a carbon rather than

27 (Continued)

or about April 11, 1969, so it is much too late for anything in

connection with this lawsuit and is therefore, under the provisions

of Rule 43(E) not admissible on any ground.

MR. ROHRBACK: (C).

s* «ese

THE COURT: I sustain the objection of the plaintiff to the

offer of proof made by the defendant in connection with the offer

of Defendant’s Exhibit 48 for identification.” (Tr. 1602-1603).

2* During the offer of proof, the witness disassembled the exhibit

while he was on the witness stand and identified the collector as a

part of the base and the contactor’s location pinched between the

resistance element and the collector. The testimony was in part:

“Q Would you tell us what is inside Defendant’s Exhibit 48

for identification?

A Inside we see the contactor, which is mounted on the plastic

rotor. I will remove that, with the rotor, and we also

see the resistive element with the two terminals attached to

them internally.

Q Where is the resistance element?

A The resistance element is mounted within the plastic body,

cavity and is retained by a terminal on both sides.

Q Where was the contactor with respect to the resistive element

and the collector when you opened up?

A The contactor is —

Q Defendant’s Exhibit 48 for identification.

A The contactor is positioned on top of the rotor and is between

the resistance element and the collector.” (Tr. 1601-1602)

D-14

a ribbon copy did not justify its exclusion.” Moreover, the

mo | testimony of the witness Klass, which we have

studied with care, contains sufficient assurance that the

offered exhibit was one of the devices ordered in January

and received in April to have justified its admissibility.”

** The misnamed “best evidence” rule is found in Rules 1002, 1003,

and 1004 of the new Federal Rules of Evidence. Since the excluded

copy of the purchase order was a duplicate, its admissibility was

covered by Rule 1003, which provides:

“A — is admissible to the same extent as an original

unless (1) a genuine question is raised as to the authenticity

of the original or (2) in the circumstances it would be unfair

to admit the duplicate in lieu of the original.”

A “duplicate” is defined in Rule 1001(a)(4) as:

“. . | @ counterpart produced by the same impression as the

original, or from the same matrix, or by means of photography,

including enlargements and miniatures, or by mechanical or elec-

tronic re-recording, or by chemical reproduction, or bv other

uivalent techniques which accurately reproduces the original.”

We d no basis in the record for questioning the authenticity of

the purchase order. At the time the purchase order was offered, a

Motorola employee, Adams, was on the stand and in the offer of

proof testified that the order was made by a Mr. Pinter under Adams’

direction. Adams also testified as to when the order arrived, what

devices were ordered (Motorola part numbers appear on the order

rather than Piher numbers), and when he had first seen the Piher

devices which are the subject of the order. Although there is no direct

testimony describing the document as a “carbon copy,” in the absence

of any evidence to the contrary, we draw this inference from the copy

of the document which was offered for examination in light of the

testimony of the witnesses from Motorola. CTS, however, on remand,

retains the right to question the document's authenticity

°"By Mr. Jones:

rf Mr. Klass, [ hand you Defendant's Exhibit 48 and ask you

to describe it from its visual appearance from the exterior.

A It is a PT type — PT-15 Piher molded housing potentiometer,

has our production part number on it, has our test lab number

4 test tag on it, has a molded-in Piher Spain name on it.

Q Can you tell us what parts are visible from the exterior?

A The parts visible from the exterior is the molded plastic

body, the collector, which is sealed with the body, has a plastic

rotor and has two terminals.

Q Is there any doubt in your mind, Mr. Klass, as to whether

or not that is the same number 4-PT trimmer that was tested

in or about April of 1969 and reported on in Defendant's Exhibit

47 for identification?

A That is my testimony. That is the device I removed from

my —

THE COURT: Did you hear the question?

THE WITNESS: Please read it.

(Question read.)

A There is no doubt in my mind.” (Tr. 1598-1599)

For discussion of identification and chain custody of “Real” evidence

in civil cases see Admission of Demonstrative Evidence, 61 Nw ULR

472, 478-479 (1966).

aa

— —

D-15

As CTS argues, the record cloes not entirely foreclose the

remote possibility that this particular device was mis-

labeled, or confused with another device when it was in

the custody of Motorola’s patent department; such a possi-

bility affects the probative value of the exhibit, but in

view of the positive character of the witness’s testimony

that it was one of the devices which had been tested in

1969, and that it was one that had been received pursuant

to the January order, it should have been admitted.

Surely, in a case tried to the court without a jury, discre-

tion in such evidentiary rulings should be exercised in

favor of admissibility, pattlenlasy when the record is

more apt to be encumbered by extensive argument over

issues of admissibility than by the evidence itself."

If the physical exhibit identified by Klass had been

admitted, and if the trial court had accepted his oral testi-

mony presented in an offer of proof, the evidence would

have been sufficient to support findings of fact establishing

Piher’s “on sale” defense. For that evidence tended to

rove that the device which Motorola received in thie

nited States in April of 1969 disclosed the '285 invention.

Moreover, Klass’ testimony about the tests performed

under his direction, together with evidence that these

devices were shipped from Barcelona on Mareh 3, 1969,

was sufficient to justify the inference that the Piler control

had been reduced to practice prior to the critical date.”

Thus, the erroneous evidentiary rulings prevented Piher

from presenting a possibly meritorious defense.”

"See generally Brubeck v. Pennsylvania R. Co. 346 F.2d 238, 241

(7th Cir. 1965); Reid v. Quebec Paper Sales & Transp. Co., 440 F.2d

4 (2d Cir. 1965); New York Life Ins. Co. v. Harrington, 299 F.2d 803,

806 (9th Cir. 1962); McCormick, Evidence, 1954, § 60; see also Davis,

Hearsay in Nonjury Cases, 1970, 83 Harv. L. Rev. 1362.

47We have not found it necessary to decide whether error was

committed in the exclusion of the reports written in Spanish by the

former president of Piher describing his sales activities in the United

States during early 1969. Our disposition of the case will enable

Piher to make a fresh offer of this evidence and the trial judge who

will hear the new trial to make a fresh appraisal of these evidentiary

rulings which appear to have been unnecessarily restrictive in a case

tried by the court without a jury.

43 Although a substantial portion of the cross-examination of Klass

was directed to demonstrating that most of the tests were not com-

eted until May or June, instead of during the month of April, as

testified on direct examination, the timing of those tests is really

of no relevance if it is assumed that Piher’s evidence was adequate

to sustain a finding that the devices being tested had left Piher's

factory in a completed form prior to the critical date.

D-16

Piher argues that we should therefore hold the ‘285

patent invalid. Such a holding, however, would require

us to make the requisite findings of fact in the first in-

stance and to conclude that Piher has met its burden with

clear and convincing evidence. As we have indicated, if

the proffered testimony is credited, it appears that Piher

will prevail. But the question of credibility and the inter-

pretation of the exhibits are matters that must be decided

in the first instance by a trial judge. We therefore remand

for a new trial of all issues raised by Piher’s on sale

challenge to the validity of the '285 patent.

V.

As already noted, CTS has never marketed its “low

cost 450” control commercially. Moreover, there were

defects, »beit correctable, in the prototypes which CTS

tested. Piher therefore argues that the invention was not

useful, that the best mode of carrying it out was not

described in the "285 patent specifications, and that the

invention was abandoned. The trial judge rejected each

of these contentions and we cannot say that his findings

are clearly crroneous.

The fact that there was a defect in the prototypes

surely does not demonstrate that the tmvention was not

useful. Indeed, since the basic features of the invention

appear to be embodied in Piher’s PT-15 trimmer—as may

fairly be inferred from Piher’s on sale defense and CTS’

original charge that the PT-15 infringes the "285 patent—

and since Piher’s trimmer is evidently a commercial sue-

eoss, it seems logical to infer that the subject matter of the

invention is ul within the meaning of § 102.

Similarly, even if the CTS prototypes are not the best

possible embodiment of the invention, we find nothing in

the record to support the argument that the inventors con-

templated a better mode than that disclosed in the speci-

fications. Section 112 merely requires that the patent

disclose “the best mole contemplated by the inventor of

carrying out his invention.”

Finally, the fact that CTS promptly filed its patent

application forecloses the contention that the invention

was abandoned within the meaning of § 102(c). There are,

D-17

of course, cases in which the character of the commercial

exploitation of an invention will be relevant to the issue

of abandonment, cf. Dunlop Holdings, Ltd. v. Ram Golf

ae F.26 .....2.. , No. 74-2024 at 6 (7th Cir., Oct. 20,

ae but if the application is promptly filed and dili-

ntly prosecuted, the decision to postpone commercial

evelopment does not constitute abandonment.

VI.

The district court refused to award costs to CTS, even

though it prevailed on all issues decided by the district

court. has therefore filed a cross appeal, relying

heavily on our recent decision in Popiel Bros., Inc. v.

Schick Electric, Inc., 516 F.2d 772 (1975). In view of our

remand for a new trial of the on sale defense, we believe

that the question of what costs, if any, CTS should recover,

can _— the conclusion of the proceedings in the trial

cour

The judgment of the district court is affirmed in part

and reversed in part.

Salata deh hhh

Clerk of the United States Court of

Appeals for the Seventh Circuit

ty

E-1

APPENDIX E

District Court, N. D. Illinois, E. Div.

CTS Corporation v. Prner INTERNATIONAL

Corporation et al.

72 C 1891 Decided Sept. 25, 1974;

as amended Jan. 8, 1975

PATENTS

1. Infringement Tests of — Comparison with claim

(839.803)

General rule is that infringement is made out if accused

device falls clearly within claim.

2. Infringement — In general (§39.01)

Even though United States customer placed order with

foreign manufacturer before patent issued, infringement

exists where infringing devices were delivered to customer

in United States afte: issuance of patent; fact that cus-

tomer later returned most, if not all, of such devices and

was reimbursed by manufacturer does not change conclu

sion that manufacturer infringed patent.

3. Infringement — Identity of function or operation

($39.50)

Devices are same in eyes of patent law if accused and

patented devices achieve substantially same result in sub-

stantially same way.

4. Infringement — Divided and integral parts (§39.40)

Infringement is not avoided by combining functions into

one part where separate parts in patented device perform

such functions.

5. Pleading and practice in courts — Burden of proof —

Validity (§53.138)

Alleged infringers have burden to overcome statutory

presumption of patent validity by clear and convincing

evidence.

E-2

6. Patentability — Utility (§51.75)

For patent to be useful under 35 U.S.C. 101, it need not

be perfect for commercial use; alleged infringer has heavy

burden to establish lack of utility.

7. Specification — Sufficiency of disclosure (§62.7)

Failure of some sample devices, without more, is inade-

quate to permit court to find specification defective under

35 U.S.C. 112.

8. Use and sale — Wharacter of evidence to prove (§69.3)

Use and sale — (§69.8)

Staudard required for proof that invention was in publie

use or on sale, under 35 U.S.C. 102(b), prior to application

is clear and convincing evidence; while a consummated sale

is unnecessary, and placing on sale only is required, de-

vice must have existed as a finished article for sale, on

hand ready for delivery; even assuming offers for sale,

part of a device is insufficient predicate for a finding of

on sale; moreover, device must have been on sale in United

States.

9. Abandonment — In general (§10.1)

Inventor abandons invention when he dedicates it to pub-

lic; failure commercially to exploit invention does not

establish abandonment; delay in filing application after

reduction to practice (not more than two years in instant

case) does not constitute abandonment.

Particular patents — Electrical Control

2,740,027, Budd, Stackhouse, and Slough, Radio and Tele-

vision Receiver Component Adapted Especially for Use

with Printed Wiring, claim 5 valid and infringed.

3,375,478, Van Benthuysen and Barden, Electrical Con-

trol and Method of Making the Same, claims 1 to 3, 7, 8, and

10 infringed.

3,518,604, Beaver and Van Benthuysen, Electrical Com-

ponent, claims 1, 5, 7, 8, and 10 valid and infringed.

3,670,285, English, Variable Resistance Control with End

Collector, ‘valid.

E-3

Action by CTS Corporation against Piher International

Corporation and Piher Sociedad Anonima for patent in-

fringement in which defendants counterclaim for declara-

tory judgment*of patent invalidity and non-infringement.

Judgment for plaintiff.

See also 178 USPQ 64.

Warner E. Wyss, Ropert L. Ronreack, Josepx Kriecer,

and Mason, KoLEHMAINEN, RatuHspurn & Wyss, all of

Chicago, Ill., and Jonn J. Gaypos, Elkhart, Ind., for

plaintiff.

Rosert B. Jones, Rarrorp A. Biackstone, Jr., and Fircn,

Even, Tasrn & Luepexka, all of Chicago, Il., for defend-

ants.

Horrman, Senior District Judge.

This is an action for patent infringement with counter-

claims of invalidity and non-infringement. Original juris-

diction of patent cases is conferred on the District Courts

by 28 U.S.C. § 1338(a). Venue is properly laid in this dis-

trict under 28 U.S.C. § 1400(b). The plaintiff, CTS Cor-

poration, is an Indiana corporation with its principal place

of business at Elkhart, Indiana. Defendant, Piher Inter-

national Corporation (PIC or Piher), an Illinois corpo-

ration, has a regular and established place of business

in Park Ridge, Illinois. The second named defendant, Piher

Sociedad Anonima, (PSA) is a Spanish corporation.

Originally, plaintiff alleged infringement of four Unit-

ed States Letters Patent, 2,740,027 (’027), 3,375,478 (’478),

3,518,604 (’604) and 3,670,285 (’285). After answer, stip-

ulation, trial and amended complaint and answer, respec-

tively, infringement of the ’027, ’478, and ’604 patents re-

mained at issue, together with counterclaims denying va-

lidity and infringement of the ’027 and ’604 patents, in-

fringement of the ’478 patent, and validity of the ’285

patent. Additionally, to permit joinder of PSA as a party

defendant, plaintiff alleged that Piher was the ‘‘alter

ego’’ of the Spanish corporation, PSA. The prayer is for

an accounting for damages, including costs and attorneys’

fees, and injunctive relief.

E-4

I. Piher Sociedad Anonima (PSA)

Plaintiff alleges that PSA is the ‘‘alter ego’’ of Piher

and therefore properly joined as a defendant. Facts re-

lating to this issue must be viewed in their entirety, and

if the appearance of PIC’s autonomy is merely superficial,

PSA is properly before this court. Frazier v. Alabama

Motor Club, Inc., 349 F.2d 456 (5th Cir. 1965). See also

8.0.8. v. Bolta, 117 F.Supp. 59, 100 USPQ 261 (N.D. Iil.

1953). The network of interrelationships between Piher

and its Spanish parent is ample foundation for the con-

clusion that Piher was autonomous in form only. The facts

show joint ownership, interlocking officers and directors,

employee confusion as to the source of compensation, and

customer treatment of the corporations as identical.

The wholly-owned subsidiary of PSA, Piher, was or-

ganized, by its parent, as an Illinois corporation on July

11, 1968 to serve as a marketing organization in the United

States. Sales by Piher were restricted to PSA products.

PSA designated Piher’s office as its own on invoices and

’ business correspondence. Two brothers, Juan Luis Heredero

and Jose Antonio Heredero, own the substantial portion of

both corporations. One brother is a director of PSA and

an officer of Piher, while the other has been PSA’s chair- -

man of the board at the same time he was vice-president

of Piher.

Other personnel serve in interrelated capacities. Piher’s

president, Garcia Nictro, is PSA’s export manager, as

was his predecessor Ricardo Balil. During their respective

terms as president of Piher, Nictro and Balil resided in

Spain. The managing director of Piher served as the PSA

managing director for the United States. Customers ap-

parently dealt with officers of Piher not in their capacity

as officers of Piher, but as representatives of PSA. Piher

employees were unsure whether their compensation came

from Piher or PSA. The evidence shows that one com-

pany sometimes paid obligations of the other. For example,

PSA paid the expenses of Balil to travel to the United

States to testify on deposition in this suit. Viewing these

facts in their entirety, the court must find that Piher and

its parent are, for jurisdictional purposes in this action,

the same.

E-5

II. Patent No. 3,375,478 (’478)

United States Letters Patent No. 3,375,478 issued in

the names of John Van Benthuysen and Wayne A. Barden

on March 26, 1968. Plaintiff holds all rights in this patent

for variable resistor controls. Because of the small size

of these devices, the plaintiff marked the numbers of the

’478 patent either on containers for the resistors or on

inserts placed in the containers. |

[1] 28 U.S.C. § 271 defines an infringer as anyone who,

without authority, makes, uses or sells any patented in-

vention within the United States during the term of the

patent. The ‘‘claims measure the invention.’’ Continental

Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405

(1908). The general rule is that if the accused device falls

clearly within the claim, infringement is made out. 7 Del-

ler’s Walker on Patents $511. Graver Tank Co. v. Linde

Air Products Co., 339 U.S. 605, 85 USPQ 328 (1950). The

plaintiff contends that the aeccised PAB 15 devices sold

by defendants in the United States infringe claims 1, 3,

4, 7, 8, and 10 of the ’478 patent.

Defendants’ Model PAB 15 reproduces almost exactly

two of plaintiff’s CTS Model 201 Series controls. Plain-

tiff’s expert demonstrated that the elements of claims 1,

2, 3, 7, 8, and 10 of the ’478 patent correspond in term

and substance to the elements of each of the several forms

of defendants’ Model PAB 15 controls. Each element of

the two forms of defendants’ Model PAB 15 performs the

same function in the same manner as the corresponding

element in each of claims 1, 2, 3, 7, 8, and 10 of the °478

patent.

While defendants did not refute this testimony establish-

ing the similarity between plaintiff’s claims and the ele-

ments of defendants’ PAB 15 controls, they did argue that

no infringing act occurred in the United States after the

478 patent was issued on March 18, 1968.

Prior to the issue of the patent, PSA obtained from

Motorola Corporation samples of plaintiff’s Model 201

Series variable resistors. From these samples, it produced

the PAB 15 controls. Defendants sold approximately 200,-

E-6

000 of the PAB 15’s to Motorola Corporation, who placed

its last order with PSA March 8, 1968, ten days before

the patent issued.

[2] The majority were then delivered to Motorola, in

the United States, in or after mid-April of 1968, after de-

fendant had been notified of the ’478 patent and their in-

fringement thereof. Sales activities continued in the Unit-

ed States until the summer of 1969. Motorola subsequently

returned most, if not all, of the devices and was reimbursed

by a check drawn by Piher. Although the actual damages

may therefore be slight, the court finds that plaintiff has

proved infringement under 35 U.S.C. § 271.

III. Patent No. 2,740,027 ('027)

CTS holds all rights in United States Letters Patent

No. 2,740,027 (’027) issued in the names of Wilbert H.

Budd, Robert A. Stackhouse and Herbert L. Slough on

March 27, 1956. The patent has three basic components: a

variable resistor control, trimmer potentiometer, and metal

encased coil. It allows temporary mounting of the compo-

nents in proper position until they are permanently soldered

into a cireuit panel.

Plaintiff marked the numbers of the ’027 patent either

on containers or on inserts included with the devices.

Plaintiff alleges that defendants’ PT 15 devices infringe

claim 5 of the 027 patent. The questions presented are

the infringement of claim 5 and the validity of the °027

patent, the validity issue having been raised via counter-

claim for declaratory relief.

A. Infringement

[3] As noted earlier, if the accused device ‘ails clearly

within the claim, infringement is made out. Graver Tank

Co. v. Linde Air Products Co., 339 U.S. 605, 85 USPQ 328

(1950). When the accused device achieves substantially

the same result in substantially the same way as the

patented device, the devices are the same in the eyes of

patent law. King-Seeley Thermos Co. v. Tastee Freeze

Industries, Inc., 357 F.2d 875, 880, 149 USPQ 4, 7-8 (7th

Cir. 1966) Graver, supra, 339 U.S. at 608, 609, 85 USPQ

E-7

at 330-331. Plaintiff’s expert testified that all elements of

claim 5' of the ’027 patent read in term and substance

upon corresponding elements of defendants PT 15 LB. As

will become apparent, corresponding elements perform the

same function(s) in the same way.

The unique contribution of 027 is an improved struc-

ture for mounting coi.ponents on a printed cireuit board

or panel. It permits temporary mounting, in proper posi-

tion, until the control can be permanently soldered. The

mounting structure on defendants’ Model PT 15 LB con-

trol achieves the same results with essentially the same

structure. As in, 027, the control shaft on Model PT 15

LB is adapted for positioning with its axis paralled to a

printed circuit panel. Also, the Model PT 15 LB has ‘‘sup-

porting means’’ with panel engaging abutments for ae-

curately positioning the contro! and limiting the penetra-

tion of the terminals. It has ‘‘snap-in’’ fingers to provide

detent like engagement with the panel.

Tn the patented structure, the snap-in fingers, formed on

the supporting means, also serve as terminals providing

1 Subelassified according to its elements, claim 5 reads:

“In a eireuit component for radio and television sets hav-

ing a rotatable control shaft:

|1] supporting means for the component fixed with respect

thereto and having panel engaging abutments with surfaces

thereon lying in a common plane spaced from the control

shaft but parallel to its axis, said abutments being adapted

to seat upon a panel and thereby position the control shaft

of the component at a definite distance from the panel;

[2] terminals for the component projecting therefrom sub-

stantially perpendicular to and beyond said plane of the panel

engaging surfaces of said abutments whereby said terminals

are adapted to enter holes in a panel upon which the abut-

ments seat; and

[3] snap-in fin,ers on the supporting means projecting

therefrom beyond the plane of the panel engaging surfaces

of the abutments to have detent like engagement in holes in ~

a panel upon which the abutments seat, and thereby coact

with said abutments to hold the component on the panel with

its control shaft and terminals properly positioned with re-

spect to the panel.’’

E-8

connection to the ground conductor portion of the printed

circuit panel. In the Model PT 15 LB, the snap-in fingers

are formed on the ends of the terminals, one of which is

normally a ground terminal joined to a ground conductor

on the printed cireuit panel. The difference between the

devices is that on defendants’ PT 15 LB the snap-in fingers

are formed directly on each terminal of the variable resistor

control, whereas in the patented structure, the snap-in fin-

gers are formed on the supporting means. Defendants’ de-

vice combines the snap-in fingers and terminals, elimi-

nating the deed for the supporting legs found on plaintiff’s

device. This difference is not legally significant. The ac-

cused device achieves substantially the same result in sub-

stantially the same way as the patented device. King-

Seeley Thermos Co.,

[4] supra. More narrowly put, infringement is not

avoided by combining functions into one part where sepa-

rate parts in the patented device performed the functions

now combined. Zysset v. Popeil Brothers, Ine., 276 F.2d

354, 125 USPQ 152 (7th Cir. 1960). Even acknowledging

the difference, claim 5 reads in term and substance upon

defendants’ structure. For example, the snap-in fingers on

defendants’ PT 15 LB controls provide detent like en-

gagement with the panel, thereby positioning the con-

trol on the panel until permanent soldering is complete.

Defendants sold the accused device in the United States

after issuance of the patent and notification of infringe-

ment. The court finds, therefore, that plaintiff has proved

infringement of claim 5 of 027.

B. Validity

[5] Defendants nevertheless claim that ’027 is invalid

under 35 U.S.C. § 103. The burden rests on thém to over-

come, by clear and convincing evidence, the statutory pre-

sumption of validity. 35 U.S.C. § 282; Mumm v. Decker &

Sons, 301 U.S. 168, 171, 33 USPQ 247, 248-249 (1937);

Ortman v. Maass, 391 F.2d 677, 681, 157 USPQ 1, 45

(7th Cir. 1968). A patent is valid if the differences be-

tween the prior art and the claimed subject matter are

E-9

such that the subject matter as a whole would not have been

obvious to a person having ordinary skill in the art to

which the subject matter pertains at the time when the in-

vention was made. 35 U.S.C. § 103, Graham v. John Deere

Co., 383 U.S. 1, 17, 148 USPQ 459, 466-467 (1966).

To support its counterclaim for declaratory judgment

of invalidity under § 103, defendant offered testimony of

a patent lawyer, four reference patents and the prior art

wiz by ro Peeige a This evidence does not sustain

e heavy burden of proof imposed on the defen

U.S.C. § 282. . sates’ so a a

First, the conclusion of defendants’ witness, a patent law-

yer, that ’027 was obvious in light of the prior art is en-

titled to no weight. Disqualified at the trial, the witness

lacked qualifications as an expert on electronics compo-

nents, his technical education being limited to one or two

basic mathematics and drafting « irses. Moreover, defend-

ants did not comply with Rule 26(e)(1)(b), Federal Rules

of Civil Procedure, requesting them to supply the substance

and subject matter of this witness’ testimony in response

to plaintiff’s interrogatories. Even if admitted, the offer

would have substantive defects. For example, the witness’

conclusion made no reference to the subject matter as a

whole, obviousness to a person of ordinary skill in the art,

and the time of invention, all important elements of 35

U.S.C. § 103, the basis of the counterclaim. In 1968, the

Court of Appeals for the Sevent’. Circuit noted its relue-

tance to rely on ‘‘* * * the sole testimony in this regard

* * provided by a patent lawyer who admittedly was not

an expert * * *.’? National Dairy Products Corporation v.

Borden Company, 394 F.2d 887, 890, 157 USPQ 227, 229-

230 (7th Cir. 1968).

It was, on the other hand, the opinion of plaintiff’s ex-

pert that the subject matter claimed in ’027 patent would

not have been obvious to a person of ordinary skill in the

art at the time when the respective inventions were made.

See Thexton Manufacturing Company v. Soland, 39 USPQ

104, 107 (Minn. 1938).

E-10

Three of the four reference patents cited by defendant

were not admitted.2 The one reference admitted, O’Cal-

laghan, United States Letters Patent No. 2,169,708 relates

to a structure for mounting a coil shield upon a metal chas-

sis, not an insulating board generally used with printed

circuits. Plaintiff’s expert testified that the ‘‘shoulders’’

on O'Callaghan, which perform the detent like holding fune-

tion, are ‘‘radically different’’ from the abutments on 027.

Moreover, O'Callaghan is not directed to accurate tem-

porary positioning of the control shaft. It does not show

abutments on supporting means the purpose of which is

to engage the panel to enable positioning of the control

shaft.

No evidence shows that the prior art patents listed by the

Patent Office anticipated claim 5 of '027. Each fails to show

several elements of claim 5.8

2 Lazzery et al., United States No. 2,742,627; Del Camp United

States No. 2,790,961; Hathorn United States No. 2,754,486.

The ground for the objection was that each of the patents was

issued after ‘027 was filed Additionally, no foundation was laid.

Plaintiff's counsel offered to withdraw the objection if, prior to

filing post trial memoranda, defendants’ counsel could offer as-

surance that the applications for the patents were not substan-

tantially changed during their prosecution. Counsel for plaintiff

has indicated no such assurance has been received.

Moreover, none of these rejected patents relates to variable re-

sistor controls, and none is directed to accurate temporary posi-

tioning of the control shaft. None shows abutments on supporting

means the purpose of which is to engage the panel to enable posi-

tioning of the control shaft. None shows an electronic circuit com-

ponent having a rotatable control shaft. None of the references

shows certain elements of claim 5 (see footnote 3, infra).

% The elements are (1) ‘‘panel engaging abutments with sur-

faces thereon' lying in a common plane spaced from the control

shaft but parallel to its axis, said abutments being adapted to

seat upon a panel and thereby position the control shaft of the

component a definite distance from the panel.’’ (2) terminals

projecting ‘‘substantially perpendicular to and beyond said plane

(footnote continued on following page)

E-11

IV. Patent No. 3,518,604 (’604)

A. Infringement

United States Letters Patent No. 3,618,604 issued in the

names of Thomas R. Beaver and John D. Van Benthuysen

on June 30, 1970 for ‘‘ Electrical Component”’ on an appli-

cation filed February 12, 1968. CTS holds all rights in

the °604 patent. Plaintiff marked the ’604 patent number

on either containers or inserts. The plaintiff alleges in-

fringement of ’604 under 35 U.S.C. § 271. The question

presented is thus whether defendants’ PT 15 device em-

bodies the 604 patent and whether it was ‘‘made, used or

sold’? in the United States. Additionally, defendants coun-

terclaim for declaratory judgment of invalidity.

The PT 15 LB was sold by the defendant in the United

States after June 30, 1970, the date the °604 patent issued.

The invention represented by '604 achieved qn efficient, rela-

tively inexpensive variable resistor control. Essentially,

the invention is comprised of a housing with closure mem-

ber forming the housing wall. An aperture extends through

one wall on the housing to accommodate a barrel portion

of the driver. CTS markets the ’604 invention as its Model

360 Series Control.

Every element in Claims 1, 5, 7, 8, and 10 of the ‘604

patent reads upon a corresponding element of defendant’s

Model UT 15 LB control. Graver Tank v. Linde Air Prod-

ucts Company, supra. The elements in the PT 15 LB

achieved the same results as corresponding elements in the

604 invention. See King-Seeley Thermos Company v. Ta2-

tee-Freeze Industries, Incorporated, supra. the PT con-

of the panel engaging surfaces of said abutments whereby said

terminals are adapted to enter hoies in a panel on which the

abutments seat.’’ and (3) snapping fingers projecting ‘‘beyond

the plane of the panel engaging surfaces of the abutments to

have detent like engagement in holes in a panel upon which the

abutments seat, and thereby coact with said abutments to hold

the component on the panel with its control shaft and terminals

properly positioned with respect to the panel.’’

E-12

trols include, for example, a housing on one end which is a

metal closure forming a wall of the housing. Also an

aperture for accommodating the barrel position of the

driver appears in the enc of the closure member. The bar-

rel portion protruding beyond the aperture is flared out-

ward, forming, together with the housing, a seal against

dust. The driver is composed of heat deformable material.

The defendant offered, to rebut plaintiff’s claim of

infringement as to ’604, the testimony of the patent law-

yer, Mr. Lucas. As noted above, the Court disqualified Mr.

Lucas because of insufficient qualifications as an expert

on electronic components. See National Dairy Products

Corporation v. Borden & Company, supra. Even if re-

ceived, the testimony of Mr. Lucas would not have been

persuasive as to infringement of ’604. During an offer of

proof, Lucas stated that it was his opinion that the claims

of the ’604 patent are not infringed by an electrical com-

ponent with a shaft secured in one wall of the housing

by a flange formed from the shaft, if the flange abuts at

right angles from the axis of the shaft. Regardless of

whether the flange is perpendicular to the axis or tapered

at less th = 90 degrees, it performs the same function in

the same way.

B. Validity

Defendants seek declaratory judgment of invalidity as

to the ’604 patent, alleging that the patent fails to comply

with 35 U.S.C. § 103. It bears repeating that defendants

must show that the differences between the prior art and

the claimed subject matter are such that the subject matter

as a whole would have been obvious to a person having

ordinary skill in the art at the time the invention was made.

35 U.S.C. § 103. Graham v. John Deere Co., 383 U.S. 1, 17,

148 USPQ 459, 466467 (1966). Defendants have not met

their heavy burden of proof. 35 U.S.C. § 282; Mumm v.

Decker & Sons, supra. Ortman v. Maass, supra.

Plaintiff’s expert testified unequivocally that the sub-

ject matter would not have been obvious to a person of

ordinary skill in the art at the time the invention was

made. In contrast, defendants, through offer of proof, of-

E-13

fered the testimony of the patent lawyer disqualified by

the court for reasons noted earlier.*

Although defendants attempted to show that another form

of plaintiff’s Model 201 Series controls using a hollow

shaft with a deformed end portion was prior art to the

’604 patent, they failed to establish, by clear and convincing

evidence, the dates of first sale or public use of this de-

vice. There are no available records or testimony showing

any sales or public use, as distinguished from date coding,®

of the CTS Model 201 Series controls having a hollow

shaft prior to February 12, 1967 (more than one year prior

to the application for the ’604 patent). See, Julian v. Driv-

oh epg Co., 346 F.2d 336, 145 USPQ 631 (7th Cir.

Defendants relied principally on the references listed by

the Patent Office at the end of the '604 patent, and the ’478

patent. The plaintiff’s expert clarified the differences be-

tween the subject matter of Claims 1, 5, 7, 8, and 10 of the

’604 and the prior art cited which fails to show a variable

resistor control with a driver equipped with a barrel pro-

truding through an aperture in the wall of an enclosed

housing, the protruding portion of which is deformed into

a bearing that seals the housing to exclude dust.

4 See text at page 402. Even if the testimony had been admit-

ted, it would not have been persuasive. The witness misstated con-

tents of claim 1 of ‘604. Also, he contradicted the dictionary defi-

nition, cited by him, of the important term ‘‘flared bearing.’’

5 The date coding applicable to plaintiff’s devices shows only

the approximate date of the stamping or making of a particular

part. It does not indicate the assembly date of the complete com-

ponent. The date coding does not show the sale date of the com-

ponent or the date placement in public use. Moreover, the

sold or used or may be sold or used more

i

ae

rogatory 60 to establish date of sale or public use is misplaced.

That set of interrogatories related to antitrust issues no longer

in the case, not sales of hollow shaft controls.

E-14

Moreover, because the ’478 patent discloses fewer of the

claimed elements, it is less pertinent than the Patent Office

references.

Admittedly, the prior art relied upon by defendants in-

cludes a flared bearing or deformed portion. The purpose

of the flared bearing in the prior art, however, was hold-

ing parts together, not providing a dust-excluding seal

for an enclosed housing. At the time ’604 issued, deformed

portions or flared bearings for holding parts were old

and well-known. Moreover, plaintiff’s expert testified that

the prior art cited does not anticipate or fully meet the

subject matter of any of claims 1, 5, 7, 8, and 10 of the ’604.

Even during their offer of proof, defendants offered no

evidence tending to show that any of the references an-

ticipated the subject matter of these claims.

V. Patent No. 3,670,285 ('285)

The remaining questions focus on defendants’ counter-

claim for declaratory judgment of invalidity of plaintiff’s

United States Letters Patent No. 3,670, 285. The counter-

claim is brought under 35 U.S.C. §§ 101, 102(b) and (ce)

and 112.

[6] Defendants assert that ’285 lacks utility and there-

fore validity under 35 U.S.C. § 101. ’285 was developed

with the intent of producing a resistor that could be manu-

factured less expensively than other CTS resistors. While

the court acknowledges evidence indicating that some of

the models produced did not perform satisfactorily on

certain ‘‘gradient’’ tests, defendants have not met the

heavy burden of proof required to establish lack of utility.

For a patent to be ‘‘useful’’ under § 101, it need not be

perfect for commercial use. Field v. Knowles, 183 F.2d

593, 86 USPQ 373 (CCPA 1950). Mr. Barden, vice-presi-

dent of CTS in charge of engineering and development,

testified that samples of ’285 were commercially satis-

factory as a variable resistor control. Moreover, an original

model functioned properly, with test results confirming this

result on subsequent occasions.

~ ae

E-15

Defendants have also failed to sustain the burden of

proving invalidity under 35 U.S.C. § 112. That section

provides in part:

_‘*The specifications shall contain a written descrip-

tion of the invention, and of the manner and process

of ma. ng and using it, in such full, clear, concise and

exact terms as to enable any person skilled in the art

to which it pertains, or with which it is most nearly

connected, to make and use the same * * *.’’

(7] The court has not had the benefit of expert testi-

mony as to whether the specifications satisfy Section 112.

See Lorenz v. General Steel Products Company, Inc., 337

F.2d 726, 143 USPQ 140 (5th Cir. 1964). Defendants’ re-

liance upon the failure of some of the samples is, without

more, inadequate to permit the court to find the specifica-

tions defective under the statute. See Williams v. Admin-

istrator of National Aeronautics and Space Administration,

463 F.2d 1391, 175 USPQ 5 (CCPA 1972).

[8] Defendants also contend that the Piher PT 15 vari-

able resistor was on sale or sold in the United States more

than a year prior to the filing date of the application for

the ’285 patent, March 16, 1970, and therefore invalid un-

der 35 U.S.C. § 102(b). Under § 102(b), a person is entitled

to a patent unless the invention was ‘‘* * * in public use or

on sale in this country more than one year prior to date.

of the application for patent in the United States.’’ The

standard required for proof that the invention of ’285 was

in public use or placed ‘‘on sale’’ prior to application is

‘‘elear and convinecing’’ evidence. Julian v. Drying Sys-

tems Co., 346 F.2d 336, 338, 145 USPQ 631, 632-633 (7th

Cir. 1965).

While it is settled that a consummated sale is unneces-

sary, and the placing ‘‘on sale’’ only is required, Burke

Electric Co. v. Independent Pneumatic Tool Co., 234 F.

93 (2nd Cir., 1916), Wende v. Horine, 225 F. 501 (7th Cir.,

1915), it is also established that a device must have existed

as a finished article for sale, on hand ready for delivery.

Burke, supra; Conn. Paper Products, Inc. v. N. Y. Paper

Co., 39 F.Supp. 127, 50 USPQ 180 (Md.), modified on other

grounds, 127 F.2d 423, 54 USPQ 271 (4th Cir. 1942). The

E-16

device must be ‘‘on sale’’ in this country. 35 U.S.C. § 102

(b).

The evidence shows that Piher received part (plastic

housing) of a proposed PT variable resistor in October,

1968. Merely a part of a device is insufficient predicate for

a finding of ‘‘on sale.’’ Part of a device cannot anticipate

a patent, or be ready for delivery, even assuming offers

for sale. See, Reo Motor Car Co. v. Gear Grinding Ma-

chine Co., 42 F.2d 965, 6 USPQ 9 (6th Cir. 1930). No com-

plete samples were available in the United States until

March 25, 1969, less than a year prior to the application

date. Moreover, defendants’ witness, Ricardo Balil, former

president of Piher, admitted that samples sent to Motorola

as late as July, 1969, although complete, were unsatis-

factory.

Defendants’ evidence does show some sales activity more

than a year prior to the application date. For example,

Balil testified to quoting prices to prospective customers

beginning in January, 1969. There is evidence that a sample

was ordered March 3, 1969, and sent from Spain there-

after. On balance, however, and with defendants’ heavy

burden of proof in mind, the court must find that defend-

ants have failed to prove invalidity under § 102(b). There

is no clear and convincing evidence of an anticipating device

that was complete and ready for delivery within the stat-

utory period.

[9] Finally, defendants contend under 35 U.S.C. 102(c)

that plaintiff abandoned ’285. Section 102(c) provides

that a person shall be entitled to a patent unless he has

‘‘abandoned the invention.’’ In theory, an inventor aban-

dons an invention when he has dedicated his invention to

the public. See, 2 Deller’s Walker on Patents § 128 (2d ed.

1964). ‘‘No abandonment of an invention after the issue

of Letters Patent has ever been judicially decided to exist

in the United States.’’ Id. § 151. Failure commercially to

exploit an invention of the ’285 patent does not establish

abandonment. Imperial Brass Mfg. Co. v. Bonney Forge

& Tool Works, 38 F.Supp. 829, 49 USPQ 144 (E.D., Pa.

1941).

E-17

Applying these principles, the court finds that defend-

ants have not proved abandonment either prior to or after

’285 issued. It is true that CTS has yet to bring ’285 into

production. However, the device had been ‘‘reduced to

practice’? in May, 1968 and again in January, 1969. See

Dart Industries, Inc. v. E. I. DuPont De Nemours and Co.,

489 F.2d 1359, 1365, 179 USPQ 392, 396 (7th Cir. 1973),

quoting 24 Stan. L. Rev. 730, 743 (1972) (invention reduced

to practice when there is a ‘‘completely operable physical

embodiment’’). Dela, in filing application after reduction

to practice (not more than two years in the instant case)

does not constitute abandonment. Lowell v. Peer, 148 F.

2d 212, 213-214, 65 USPQ 127, 128-129 (CCPA 1945) (over

4 years). Without more, the court cannot conclude that

CTS’ failure to exploit commercially ’285 amounts to a

dedication of the device to the public.