Petition — Kock v. Quaker Oats Co.

NDER L. 6TEVAS

CLERK

In the Supreme Court

OF THE

United States

Ocroser Term, 1982

Bruce A. Kock,

Petitioner,

vs.

Tue Quaker Oats Company, et al.,

Respondents.

Petition For A Writ Of Certiorari

to the United States Court of Appeals

for the Ninth Circuit

Siwney F. DeGorr

100 Bush Street, 20th Floor

San Francisco, CA 94104

Telephone: (415) 421-2345

Counsel for Petitioner

BOWNE OF SAN FRANCISCO, INC. © I90 NINTH ST. © &S.F..CA 94103 ¢ (415) 864-2300

QUESTIONS PRESENTED

1. Was Kock’s invention on sale in this country more

than one year prior to the date of his application for a

patent in the United States?

2. Did the agreements between Kock, as the inventor,

and Merzy Manufacturing Company (“Merry”) for the de-

velopment of a new mechanical watch movement and the

sale to Merry for testing and experimenting with a pro-

totype under the terms of secrecy constitute a public use

or sale within the meaning of 35 U.S.C. § 102(b)?

Opinion below

Jurisdiction ....... 6

Parties 1

Statutory provisions involve

Statement of the case

Reasons for granting the writt

Conclusion

— ä———— !:

ili

TABLE OF AUTHORITIES CITED

Cases

Page

Ajem Laboratories, Inc. v. C. M. Ladd (6th Cir.) 424

F.2d 1124, cert. denied, 400 U.S. 830 (19700) 6

Amerio Contact Plate Freezers, Inc. v. Belt-Ice Corp.

(9th Cir.) 316 F.2d 459, cert. denied, 373 U.S. 902

% —T—T—TPñ 0 6

Baker-Commack Hosiery Mills, Ine. v. pet Co.

(4th Cir.) 181 F.2d 550, cert. denied, 340 U.S. 824

% ( 7

Cataphote Corporation v. DeSoto Chemical Coatings,

Inc. (9th Cir.) 356 F.2d 24, cert. denied, 385 U.S. 832

SIITIED Ycseineucsichcbieihinidsihepeestemnieneieseiianetmenebataaniiaslbteasiibintesilaassidisi 6

City of Elizabeth v. American Nicholson Pavement

r 8, 9

Del Mar Engineering v. Physio-tronics (9th Cir.) 642

aE RE ree eee a ee en 7

In Re Yarn Processing Patent Validity Litigation (5th

Cir.) 498 F.2d 271, cert. denied, 419 U.S. 1057

— 6

Jack Winter, Inc. v. Koratran Company, ty (X. b.

Cal. 1974) 375 F.Supp. 1, Supp. Ob. 409 F.Supp. 1019

— . . 7, 8

Pickering v. Holman (9th Cir.) 459 F. 2d 40 7

Robbins v. Lawrence (9th Cir.) 482 F.2d 426 (1973)

b ee e eee eee 5, 6, 7

Statutes

United States Code:

Title 28, Section 1254 (1) ; —

Z : 2

r 2

I — — i, 2, 7

Section 281 2

In the Supreme Court

OF THE

United States

Ocroser Term, 1982

Bruce A. Kock,

Petitioner,

vs.

Tue Quaker Oats Company, et al.,

Respondents.

Petition For A Writ Of Certiorari

to the United States Court of Appeals

for the Ninth Circuit

The petitioner, Bruce A. Kock, respectfully prays that a

writ of certiorari issue to review the judgment and opinion

of the United States Court of Appeals for the Ninth Circuit

entered in this proceeding on July 15, 1982.

OPINION BELOW

The majority opinion of the Court of Appeals and dis-

senting opinion are reported in 681 F.2d 649, and for con-

venience appear in the appendix hereto.

JURISDICTION

The judgment of the Court of Appeals for the Ninth Cir-

cuit was entered on July 15, 1982. A timely petition for

rehearing was denied on August 23, 1982, and this petition

for certiorari was filed within ninety days of that date.

Jurisdiction of the case originally arose under the pro-

visions of Title 35, Section 281 and Title 28, Section 1338,

United States Code.

Jurisdiction over the appeal arose under the provisions

of Title 28, Section 1291, United States Code.

Jurisdiction over this petition arises under the provisions

of Title 28, Section 1254(1), United States Code.

PARTIES

The sole party plaintiff is Bruce A. Kock.

The parties defendant are:

Quaker Oats Co., a New Jersey corporation

Disney (Walt) Productions, a California corporation

F. W. Woolworth, Inc., a New York corporation

Marcor, a Delaware corporation

Dunbee-Combex-Marx, a British corporation

Aurora Products Co., a New York corporation

Louis A. Marx, an individual

GLJ Toy Co., a New York corporation

Lash Tamoran Distributors, a New York corporation

Emporium-Capwell Co., a California corporation

Sears Roebuck Co., a New York corporation

Long’s Drug Stores, Inc., a California corporation

STATUTORY PROVISIONS INVOLVED

United States Code, Title 35, § 102(b), provides in part:

“A person shall be entitled to a patent unless

(b) the invention was... in public use or on sale in

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

the application for a patent in the United States.”

STATEMENT OF THE CASE

On September 15, 1966 Kock entered into a written let-

ter agreement with Merry Manufacturing Company to de-

velop a toy watch movement exclusively for and satisfac-

tory to Merry. The performance requirements of the inven-

tions were:

1. Keep time to 10% accuracy;

Make noise or tick when running;

Run for one hour or more per winding;

Have resettable hands ;

5. Easy assembly.

— 2p

In addition, the commercial (cost) requirements were:

6. Capable of production at Merry’s normal profit level

of 30% ;

7. Cost of movement must complete watch to retail for

$1.00, with 50% plus 10% discount to toy trade.

At the time of the letter agreement, Kock received

$1,000.00 to cover a portion of the projected out-of-pocket

costs to build the model.

Kock completed the model in approximately ninety days

after September 15, 1966. On January 10, 1967 he described

it in confidence to his patent attorney.

On April 28, 1967 he revealed the model for the first time

to Merry for whom he had developed the movement under

exclusive contract, and entered into a written contract with

Merry. Although couched in terms of “sale”, the model was

delivered to Merry to be kept secret pursuant to the initial

development letter agreement for experimental purposes

and to determine whether it met Merry's performance and

cost criteria.

4

Under the terms of the April 28, 1967 agreement, Merry

for whom the watch had been exclusively developed, ac-

cepted the model for research and study, and Kock also

continued to work on the invention’s final form. At the time

he intended to use a plastic liquid piston-cylinder in the

power train, but the idea was not successful and the pro-

posed change was abandoned. Under the manufacturing

agreement executed contemporaneously with the delivery

of the model to Merry, Merry paid Kock $1,500.00 to cover

additional development costs and agreed to determine

within ninety days thereafter whether the invention con-

formed to its criteria. Merry further agreed to report back

to Kock all improvements and changes in design made by it

as a result of its testing and experimentation. After a delay

of more than ninety days, Merry accepted the invention,

and paid Kock $1,800.00 as an advance against royalties to

be earned from commercial sales and exploitation of the

model. This payment was made long after the critical date.

The first public or trade sale of the invention was made

by Merry during the quarter beginning April 13, 1970 and

ending April 26, 1970, reported to Kock in his first royalty

report.

The written agreement of April 28, 1967 further pro-

vided for the payment of a 3% royalty to Kock in the

event Merry put the watch into production. Merry was to

patent the watch in Kock's name at its sole cost. However,

Kock was not satisfied with the patent application re-

quired to be submitted by Merry to him, and retained

bis own patent attorney to complete the application. Under

the terms of the agreement, in such event, Kock reserved

title to the invention and patent application.

5

The suit patent was duly filed in the Patent Office on

May 2, 1968. The critical date is, therefore, May 2, 1967.

On these facts, which must be accepted as true, the

District Court granted a summary judgment against peti-

tioner, which was affirmed on appeal, with a dissenting

opinion.

REASONS FOR GRANTING THE WRIT

The decision of the District Court was based on the

court’s misunderstanding of the holding in Robbins v.

Lawrence (9th Cir.) 482 F.2d 426 (1973), which the court

believed controlled this case. In granting summary judg-

ment against petitioner, the District Court said that “a

sale precludes any inquiry into the experimental nature

of the sale unless the contract of sale contains an express

or clearly implied condition, that the sale is made primarily

for experimental use.”

The foregoing reasoning was repudiated by the Court

of Appeals, which nevertheless inconsistently affirmed the

summary judgment. In rejecting the reasoning of the Dis-

trict Court, the Court of Appeals said:

“In this case, the affidavits of the inventor in oppo-

sition to summary judgment stated that:

When I sold the prototype to Merry, it was for

research and study. We did not know at the time

that the protoype would be in its final form. It was

only after considerable study and work on my part,

and research on Merry’s part, that the prototype

was adopted as the final form of the toy watch that

would be offered for sale to the public.’

This would support the view that Kock’s purpose

in transferring the invention to Merry was to see if

the invention could be improved, or if it was worth

patenting in its present form.”

The Court of Appeals, however, affirmed the judgment

on the grounds that regardless of the purpose of the “sale”,

Merry had the right of immediate commercial exploitation,

and thus the transaction between Kock and Merry was a

public sale. This issue was neither urged, briefed nor

argued by any party, and as we shall demonstrate is

unsupported by and in conflict with decisions in most of

the circuits, and requires a decision by this court to secure

uniformity.

The decision in this case, if it is allowed to remain the

law, will discourage and frustrate an independent inventor

who seeks to market his invention, test its merits and reap

the rewards of his invention.

Whether a sale has an experimental purpose depends

on the totality of evidence presented by the parties to the

transaction, the nature of the acts performed prior to the

contract date, and the motivation therefor. Cataphote Cor-

poration v. DeSoto Chemical Coatings, Inc. (9th Cir.) 356

F.2d 24, 26, cert. denied, 385 U.S. 832 (1966). These factors

include the following:

(a) conditions placed on sale, Robbins v. Lawrence (9th

Cir.) 482 F.2d 426, 432;

(b) requirement for further product testing, Amerio

Contact Plate Freezers, Inc. v. Belt-Ice Corp. (9th Cir.)

316 F.2d 459, 464, cert. denied, 373 U.S. 902 (1963) ;

(e) inventor’s intent that transfer be for experimenta-

tion, In Re. Yarn Processing Patent Validity Litigation

(5th Cir.) 498 F.2d 271, 288, cert. denied, 419 U.S. 1057

(1974) ;

(d) requirement of confidentiality, Ajem Laboratories,

Inc. v. C. M. Ladd (6th Cir.) 424 F.2d 1124, 1125-6, cert.

denied, 400 U.S. 830 (1970);

7

(e) further experimentation on the invention, Del Mar

Engineering v. Physio-tronics (9th Cir.) 642 F.2d 1167,

1169;

(f) commercial motive secondary to the experimental or

testing motive, Pickering v. Holman (9th Cir.) 459 F.2d

403 ;

(g) reports to the inventor on transferee’s use or test

of the invention, Robbins v. Lawrence, supra.

All of these factors existed in this case. The April 28th

agreement required Merry to notify Kock of all improve-

ments and design changes and secure his approval of the

patent application. The transfer mandated secrecy. The

product, an unmarketable prototype, had not been tested

to verify that it was operable and commercially market-

able. Merry had ninety days to test the product, and accept

it for commercial production. The transfer was to test the

feasibility of commercial production, and to improve the

invention. The payments received by Kock merely reim-

bursed him for a portion of his out-of-pocket expenses and

were incidental. Kock received no purchase price, only

reimbursement for some expenses, and an advance royalty

to be earned if the invention were commercially produced

and the product sold to the public. What Kock received

was minor compared to the eventual profits he hoped to

gain from royalties generated by the sale of the actual

product.

The invention was created exclusively for Merry to meet

its specific requirements and criteria. Merry and Kock

constituted a production entity. Any transfer within such

entity does not constitute a sale under Section 102(b).

Baker-Commack Hesiery Mills, Inc. v. Davis Co. (4th Cir.)

181 F.2d 550, 558, cert. denied, 340 U.S. 824 (1950); Jack

Winter, Inc. v. Koratran Company, Inc. (N.D. Cal. 1974)

375 F.Supp. 1, Supp. Ob. 409 F.Supp. 1019 (1976).

Moreover, Kock was required to act as a consultant

during Merry’s ninety-day testing period, and to furnish

additional prototypes if required.

There was no unconditional sale of the invention or

prototype to Merry, nor did the transaction create any

opportunity for public use.

Merry did not accept the movement for commercial pro-

duction for more than ninety days after it was delivered to

Merry, until Merry had completely tested it. Kock applied

for a patent within one year of that date.

The majority opinion is based upon an asserted principle

of law which misinterprets a decision of this court.

The majority states:

“(i]t is not, however, enough that an inventor demon-

strates by objective evidence that further experiment

was necessary and was in fact performed by the trans-

feree. To avoid the on-sale bar, the inventor must

further show that the transferee lacked authority to

use and invention or exploit its commercial value.”

In enunciating this rule, the majority relied most heav-

ily on the classic and leading case of City of Elizabeth v.

American Nicholson Pavement Co., 97 U.S. 126 (1878)

which the majority interprets to hold “that tests made by

one other than the inventor must be under his direction if

there is to be an experimental purpose.”

The foregoing, we respectfully submit, is an inaccurate

reading of City of Elizabeth, and if allowed to stand, will

undermine the law of patents painstakingly established in a

multitude of decisions to protect and encourage inventions.

The court in City of Elizabeth simply noted that when

experiments are under the inventor’s direction, no publie

use occurs. It does not logically follow that where experi-

ments are outside the inventor’s direction, that a public use

necessarily occurs. In fact, such a rule would be unrealistic

and impractical, especially where an independent and im-

pecunious inventor seeks the aid of a well-financed organ-

ization, with its own superior testing facilities, to develop

and exploit his invention. Since most contracts between in-

dependent inventors and companies with their own testing

laboratories provide for the right te test an invention with-

out let or interference from the inventor, every such

transaction would, under the majority’s interpretation, be a

publie sale. Patent laws to protect the inventor would be

undermined and subverted. American ingenuity would be

unfairly penalized. Industrial innovation and technology

are responsible for 23 percent of all new jobs. Winning

technologies should, therefore, become the chief focus of

state and federal administrative, legislative and judicial

policies to encourage innovation and invention by streng-

thening patent policies, not weakening or destroying them.

10

CONCLUSION

For all of the foregoing reasons, a writ of certiorari

should issue to review the judgment and opinion of the

Ninth Circuit.

Respectfully submitted,

Swxkx F. DeGorr

Counsel for Petitioner

November „ 1982

(Appendix follows)