Petition for Writ of Certiorari — Evans Cooling Systems, Inc. v. General Motors Corp.

() FILED.

97 1038 DE 15 1997

No. OFFICE OF THE CLERK

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1997

EVANS COOLING SYSTEMS, INC.

and PATENT ENFORCEMENT FUND, INC.,

Petitioners,

Vv.

GENERAL MOTORS CORPORATION,

Respondent.

On Petition for a Writ of Certiorari to the United

States Court of Appeals for the Federal Circuit

PETITION FOR A WRIT OF CERTIORARI

KARL R. FINK

(Counsel of Record)

JOHN F. FLANNERY

FITCH, EVEN, TABIN

& FLANNERY

135 South LaSalle Street

Suite 900

Chicago, Illinois 60603-4277

(312) 372-7842

Attorneys for Petitioners

Midwest Law Printing Co., Chicago 60610, (312) 321-0220

i

QUESTION PRESENTED

Can a patent be invalidated by a party who surrepti-

tiously and fraudulently steals an invention while it is a

trade secret and puts the invention on sale more than

one year before the inventor files a patent application?

il

LIST OF PARTIES

AND RULE 29.6 STATEMENT

The parties to the proceeding are the parties shown in

the caption of this Petition. The following are parent

companies, subsidiaries and/or affiliates (except wholly

owned subsidiaries) of certain corporate petitioners:

Patent Enforcement Fund, Inc. is a subsidiary of Valu-

tron N.V.

iit

TABLE OF CONTENTS

PAGE

QUESTION PRESENTED .........-----+-+-++:: i

LIST OF PARTIES AND

RULE 29.6 STATEMENT ..........----++-- ii

TABLE OF CONTENTS ......------eeeeece> iii

CONTENT OF APPENDIX .........------+++:: Vv

TABLE OF AUTHORITIES ..........---+-++-- vi

OPINIONS BELOW ... 0.2... ccc cccccccccces 1

ee ee 1

CONSTITUTIONAL PROVISION AND

STATUTE INVOLVED ........---2eesee0e- 2

STATEMENT OF THE CASE ...........++++-: 2

I. Nature Of The Case ...........-----0-- 2

Il. The Course Of Proceedings Below......... 3

Ill. Statement Of Facts ...........---e+0-: 4

A. The Technology Involved In This Case .. 4

B. Evans’ Development And Ownership Of

The Invention As A Trade Secret ...... 5

C. GM’s Theft Of Evans’ Trade Secret ..... 5

iv

D. GM’s Alleged Sales Activities ......... 8

E. Evans’ Assertion Of His Rights Against

RRR ERR TR Mir oe Secs ee RY a 9

REASONS FOR GRANTING THE WRIT ........ 10

I. Supreme Court Precedent Precludes Invali-

dation Of A Patent By Surreptitious And

Fraudulent Theft And Use Of The Inven-

WN ee ae S eee ee oe 11

II. The Court Of Appeals Has Not Followed

The Rule Of Law Established By This

ComrOe FROGRGOEES 60 ce ccc cesses 14

III. The Decision Of The Court Of Appeals De-

feats The Goals Of Our Patent Laws Of

Fostering Technological Growth And Indus-

eee oe rrr re 18

[AE Awb4k bik 4s ORAS we eS Rae 20

Vv

CONTENT OF APPENDIX

Opinion of the Court of Appeals for the

Federal Circuit, dated September 16, 1997 . . . . App. 1

Opinion of the District Court,

dated September 30,1996 ......-.-.+-+:+:: App. 14

Judgment of the District Court,

dated November 4, 1996 ........---++e+e App. 19

vi

TABLE OF AUTHORITIES

Cases:

Anderson v. Liberty Lobby, Inc.,

BS | ee ee

Andrews v. Hovey,

pg a a eee errr

City of Elizabeth et al. v. American

Nicholson Pavement Co., 97 U.S.

EE Se ee O pew ides sees eee

Eastman v. Mayor of N.Y.,

134 F. 544 (2d Cir. 1904) ..........

Graver Tank & Mfg. Co., Inc. v. Linde Air

Products Co., 339 U.S. 605 (1949) ....

In re Martin,

74 F.2d 951 (CCPA 1935) ..........

Kendall v. Winsor,

62 U.S. (21 How.) 322 (1859) .......

Kewannee Oil Co. v. Bicron Corp.,

So ee

Lorenz v. Colgate-Palmolive-Peet Co.,

167 F.2d 423 (3d Cir. 1948) ........

Markman v. Westview,

617 U.S. 370, 116 S.Ct. 1384 (1996) ..

National Tube Co. v. Eastern Tube Co.,

3 Ohio CC NS 459 (1902), aff'd, 69

Ohio St. 560, 70 N.E. 1127 (1903)....

Pennock v. Dialogue,

27 U.S. (2 Pet.) 1 (1829) ..........

PAGE

er ee 18

a nh ae areal

Shaw v. Cooper,

39 U.S. (7 Pet.) 292 (1833) ....-----++>: 11-17

Smith v. Goodyear Dental Vulcanite Co.,

93 U.S. 486 (1876) ....--- eee e rere rr reree 18

Warner-Jenkinson Co. v. Hilton Davis

Chemical Co., 117 S.Ct. 1040 (1997) ......--- 21

Woodbury Patent Planing-Machine Co. v.

Keith, 101 U.S. 479 (1880) ...-----+-+sseee: 18

Zenith Radio Corporation v. Hazeltine

Research, Inc., 395 U.S. 100 (1969) .....---- 20

Constitutional Provisions:

U.S. Const. art. I, § 8, cl. 8 ...--- ee errr rere 2,18

Statutes:

98 U.S.C. § 1295(aX1) ...- cee eee eee rete ees 2

98 U.S.C. § 1254(1) .... eee eee r ee terreeees 1

98 U.S.C. § 1988la) .... eer r cece eeserereeees 2

95 U.S.C. § 102(D) .. cece reece reece: 2,3, 14

OR U.S.C. 6 BTUa) ..cccccccscrcrscrresosers 20

Rules:

Supreme Court Rule 10(c) ...-.----++esrerere 11

ee

a a ed

iio.

1

PETITION FOR WRIT OF CERTIORARI

Petitioners (hereinafter “Evans”) respectfully pray that

a writ of certiorari issue to review the judgment of the

United States Court of Appeals for the Federal Circuit,

entered in Case No. 97-1146 pursuant to its opinion

dated September 16, 1997.

OPINIONS BELOW

The Opinion of the Court of Appeals for the Federal

Circuit dated September 16, 1997 is reported at 125 F.3d

1448, and is reprinted in the Appendix at App. 1.

The Opinion of the United States District Court for the

District of Connecticut (Chatigny, J.) dated September

30, 1996 is reported at 939 F.Supp. 154, and is reprinted

in the Appendix at App. 14.

The judgment of the United States District Court for

the District of Connecticut dated November 4, 1996 is

reprinted in the Appendix at App. 19.

JURISDICTION

The judgment of the Court of Appeals for the Federal

Circuit was entered on September 16, 1997. This Court

has jurisdiction under 28 U.S.C. § 1254(1).

————————

2

CONSTITUTIONAL PROVISION

AND STATUTE INVOLVED

U.S. Const. art. I, § 8, cl. 8

The Congress shall have Power . . . To promote the

Progress of Science and Useful Arts, by securing for

limited Times to Authors and Inventors the exclusive

Right to their respective Writings and Discoveries... .

35 U.S.C. § 102

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 patent in the United

States. ...

STATEMENT OF THE CASE

I. Nature Of The Case

This a patent infringement action brought by Evans

against the Respondent, General Motors Corporation

(“GM”). The District Court had jurisdiction pursuant to

28 U.S.C. § 1338(a), and the Court of Appeals for the

Federal Circuit had jurisdiction of the appeal pursuant

to 28 U.S.C. § 1295(a)(1).

Evans” patent-in-suit, U.S. Patent No. 5,255,636 (“the

636 patent”), covers a cooling system for internal com-

bustion engines. It issued on October 26, 1993, from an

application filed on July 1, 1992. Evans alleges that GM

* Petitioners, Evans Cooling Systems, Inc. and Patent En-

forcement Fund, Inc., are co-owners of the patent-in-suit.

3

has infringed the 636 patent in the manufacture and

sale of numerous automobiles, including the Chevrolet

Corvette, Chevrolet Caprice, Chevrolet Camaro, Buick

Roadmaster and Pontiac Firebird. Evans seeks an in-

junction and/or damages resulting from the infringement.

Il. The Course Of Proceedings Below

After a period of discovery, GM moved for summary

judgment of invalidity of the 636 patent contending that

GM’s sales activities and other activities regarding the

1992 Corve’ te more than one year before Evans filed his

patent application (i.e., before the critical date of July 1,

1991) constitute on sale and public use bars under 35

U.S.C. § 102(b).

Evans responded to GM’s motion for summary judg-

ment by arguing, among other things, that GM is barred

from asserting the on sale and public use bars under 35

U.S.C. § 102(b) because GM surreptitiously and fraudu-

lently stole Evans’ invention and incorporated it into the

1992 Corvette that GM contends was on sale and in

public use before the critical date of July 1, 1991. In

reply, GM did not contest that there is sufficient evi-

dence to present a triable issue of fact as to whether it

had misappropriated Evans’ invention and used it in the

1992 Corvette. Instead, GM only argued that even if it

stole the invention and incorporated it into the 1992

Corvette, it may nevertheless assert that its activities

regarding the 1992 Corvette constitute on sale and pub-

lic use bars under § 102(b).

The District Court, in its order dated September 30,

1996 (App. 14), granted GM’s motion for summary judg-

ment based on the on sale defense (without determining

+

the applicability of the alleged public use defense). The

District Court’s opinion did not address or mention

Evans’ argument that GM should be barred from assert-

ing the on sale and public use defenses because GM stole

Evans’ invention.

In Evans’ appeal of the District Court decision, the

Court of Appeals for the Federal Circuit affirmed the

District Court decision, and declined to create an “excep-

tion” to the on sale bar based on trade secret misappro-

priation (App. 1).

Ill. Statement Of Facts

A. The Technology Involved In This Case

The subject matter of the 636 patent is a reverse flow

cooling system for an internal combustion engine. The

coolant flows from the radiator into the cylinder heads at

the top of the engine, downwardly through the engine

block, and back into the radiator. The cooling system is

“reverse flow” because the generally top-to-bottom cool-

ant flow through the engine is reversed from the general-

ly bottom-to-top coolant flow that has been the standard

in the automobile industry since the beginning of mass

production of automobiles.

Evans’ unique configuration of a reverse flow cooling

system improves cooling in the cylinder heads at the top

of the engine (the hottest area of the engine) because the

coolant flows from the radiator directly to the cylinder

heads, and is not pre-warmed in the engine block as in

conventional flow systems. As a result, Evans’ reverse

flow cooling system cools an automobile engine more effi-

ciently than a conventional flow cooling system, and pro-

5

vides significant advantages including increased horse-

power and fuel economy. GM’s widespread use of Evans’

reverse flow cooling system on GM’s automobiles, be-

ginning with the 1992 Corvette, has proven the value

and worth of Evans’ invention.

B. Evans’ Development And Ownership Of The

Invention As A Trade Secret

Evans conceived the invention of the ’636 patent in

1984. He reduced the invention to practice when he tried

it on a test car in 1986. He tested the invention on an

engine dynamometer in 1987. He further tested the in-

vention on a GM-owned Corvette in a confidential “black

box” demonstration in 1989, as discussed in detail below.

Evans recorded his activities, including the develop-

ment and testing of the invention, in an inventor's log

book. Evans preserved the secrecy of his invention at all

times by requiring all persons having contact with him

and his company to sign confidentiality agreements.

C. GM’s Theft Of Evans’ Trade Secret

In February, 1989, GM requested that Evans demon-

strate his reverse flow cooling system at GM's test fa-

cility. GM stated that the purpose of the demonstration

was to compare Evans’ reverse flow cooling system to

conventional flow systems, and further to compare it to

another cooling system (a “propylene glycol” cooling sys-

tem) that Evans had designed and applied to GM vehi-

cles over the previous several years.

Evans expressed reservations about conducting such a

demonstration because his reverse flow cooling system

6

was a proprietary trade secret that he did not wish to

disclose to GM. In response, GM stated that compliance

with GM’s request for demonstration of Evans’ reverse

flow cooling system would help “resolve” a dispute over

a large receivable owed by GM to Evans’ company.

Evans’ company, MECCA Development, Inc. (“MECCA”),

had worked with GM over the previous several years on

the propylene glycol cooling system, and GM owed over

$800,000 to MECCA for such work. As a compromise,

Evans agreed to demonstrate his reverse flow cooling

system at GM’s test facility on a confidential “black box”

basis.

Under the confidential “black box” arrangement, Evans

was to install his system on a GM Corvette at the GM

test facility, and then allow the system to be tested by

GM personnel to determine its efficacy. The hood of the

engine was to be kept closed so that the design and con-

figuration of the reverse flow cooling system would be

shielded from the view of GM test personnel, and thus

kept in a confidential “black box.” At the end of the black

box demonstration, Evans was to dismantle the reverse

flow cooling system and return the test car’s cooling

system to its previous configuration.

Unbeknownst to Evans, CM’s hidden agenda in re-

questing the black box demonstration was to provide an

opportunity for GM to steal Evans’ trade secret embodied

in the reverse flow cooling system. GM did not disclose

that, for several years, GM had been working on a secret

project to develop a reverse flow cooling system for use

in GM’s new “Gen II” engine, which was scheduled to be

introduced as the new LT1 engine in the 1992 Corvette.

However, GM was having trouble making its own reverse

7

flow cooling system work, and needed Evans’ unwitting

“help” in making it work.

The motive for theft was privately communicated to

Evans and his employee during the course of the 2-day

black box demonstration at the GM test facility. GM

technicians, who were working on the Gen II engine in

a neighboring test cell at the test facility, took Evans

and his employee aside and volunteered that GM engi-

neers were developing the Gen II engine, but they could

not make it work; they were getting scared regarding

being able to meet the due date for gearing up to pro-

duce hardware; they needed Evans to make it work; and

they are going to “take” Evans’ technology. They told

Evans that the GM engineers were going to “steal you

blind.” After the test of Evans’ system proved successful,

the technicians told Evans privately, “you just cut your

own throat,” but did not say how or why.

These startling admissions of the GM technicians are

consistent with circumstantial evidence regarding the

“black box” demonstration. The two-day demonstration

was performed on March 16-17, 1989 at the GM test fa-

cility. After Evans and his employee installed the reverse

flow cooling system on GM's test Corvette on the first

day, the Corvette was supposed to be secured in a GM

test cell overnight. No one but GM had access to the test

cell. However, when Evans arrived at the test cell the

next morning, he found that an access panel for the test

cell, which had been left closed for the night, was open,

indicating that someone had surreptitiously entered the

test cell. The Corvette was owned by GM, and GM had

access to the key codes.

8

After the black box demonstration was concluded, GM

changed the as-yet unsuccessful design of its secret re-

verse flow cooling system and incorporated Evans’ stolen

trade secret. GM did not publicly release details about

its reverse flow cooling system, as incorporated in the

LT1 engine, until it released information about the 1992

Corvette in August, 1991. Evans was unaware that GM

had incorporated his invention into a GM vehicle until

he saw a September, 1991 article in a monthly periodical

that described the cooling system for the 1992 Corvette.

D. GM’s Alleged Sales Activities

GM began making and selling Evans’ stolen reverse

flow cooling system when GM introduced the 1992 Cor-

vette with the LT1 engine in August and September of

1991. GM did not publicly announce or otherwise reveal

the details of Evans’ invention until then, which is after

the critical date of July 1, 1991. GM started receiving

orders for the 1992 Corvette with the LT1 engine in May

and June of 1991, with production scheduled to begin in

August, 1991.

In holding that Evans’ invention embodied in the 1992

Corvette was offered for sale before the critical date of

July 1, 1991, the Court of Appeals relied on an order

placed by a customer named Aram Najarian with a GM

dealer on June 13, 1991. It is undisputed that neither

Mr. Najarian nor the dealer knew the details of Evans’

invention in the reverse flow cooling system for the 1992

Corvette at the time Mr. Najarian placed the order.

9

E. Evans’ Assertion Of His Rights Against GM

Notwithstanding his suspicion that GM had stolen his

invention in the March, 1989 black box demonstration,

Evans did not immediately file a patent application be-

cause GM repeatedly disclaimed interest in his inven-

tion, because Evans had no hard evidence of theft, and

because he was financially broke.

Until September, 1991, Evans had no direct knowledge

of GM’s use of his reverse flow cooling system. GM had

repeatedly disclaimed any interest in Evans’ proprietary

system in response to Evans’ inquiries over a period from

1984 to May, 1989. Evans did not have any hard evi-

dence that GM had actually stolen his invention until he

read the September, 1991 article describing how his in-

vention was to be incorporated into the 1992 Corvette.

The primary cause for Evans’ financial straits from

1989 to 1992 was GM’s refusal to pay a $804,000 debt

owed to Evans’ company, MECCA, for work done for GM.

GM refused to pay the $804,000 receivable, and forced

Evans to settle for $150,000 after the black box demon-

stration. Since GM had been the only source of income

for Evans, this $654,000 compromise caused Evans and

the company to go into a financial tailspin. Evans closed

the company and laid off the employees. Creditors sent

dunning letters and filed lawsuits to collect debts. Evans’

wife pawned her engagement ring. Evans’ bank threat-

ened to foreclose on its loan and seize the assets of

Evans and his company. Evans solicited investors and

advised them of the proprietary reverse flow cooling

system, but potential investors were scared off by the

apparently imminent financial collapse of Evans and his

company.

10

After Evans learned of GM’s publication of his inven-

' tion in the September, 1991 periodical describing the

cooling system of the 1992 Corvette, he immediately

wrote to GM to advise of his impending patent applica-

tion, and to request a meeting to discuss the matter. GM

ignored Evans, and shielded from Evans any information

about its alleged sales activities before the critical date

of July 1, 1991.

Thereafter, Evans filed the application for the 636

patent on July 1, 1992, nine months after he learned

that GM had in fact stolen his invention and used it in

the 1992 Corvette. Since GM did not publicly disclose or

commercialize the 1992 Corvette with the LT1 e:gine

until after July 1, 1991, Evans believed that he had

timely filed his patent application to avoid any allegation

that GM’s sales activities would constitute an on sale

bar. It is undisputed that Evans was unaware of the pre-

July 1, 1991 sales activities until such activities were

revealed during discovery in this action.

REASONS FOR GRANTING THE WRIT

This Court’s precedent precludes invalidation of a

patent by surreptitious and fraudulent theft and use of

the invention. The Court of Appeals erroneously refused

to accept that this Court’s precedent establishes such a

rule of law. Also, the Court of Appeals’ decision errone-

ously undermines the goals of the U.S. patent laws in

fostering technological growth and industrial innovation.

To the contrary, the Court of Appeals’ decision defeats

such goals by encouraging trade secret misappropriation

as a means of destroying otherwise valid patent rights.

Therefore, this Court should grant a petition for a writ

11

of certiorari pursuant to Supreme Court Rule 10(c) to

correct the errors in the Court of Appeals’ decision.

I. Supreme Court Precedent Precludes Invalidation

Of A Patent By Surreptitious And Fraudulent

Theft And Use Of The Invention

This Court, in a series of cases decided in the 19th

century, repeatedly stated that surreptitious and fraudu-

lent use of an invention by a misappropriator of_the

invention cannot invalidate an inventor’s patent on the

invention. See Pennock v. Dialogue, 27 U.S. (2 Pet.) 1

(1829); Shaw v. Cooper, 32 U.S. (7 Pet.) 292 (1833),

Kendall v. Winsor, 62 U.S. (21 How.) 322 (1859).

In Pennock, the Patent Act of 17 93 authorized the

issuance of patents “not known or used before the [filing

of the patent] application.” In discussing the statutory

language, the Court stated,

(I]f before his application for a patent his invention

should be pirated by another, or used without his

consent; it can scarcely be supposed that the Legisla-

ture had within its contemplation such knowl “ze or

use . .. The use here referred to has always -cen

understood to be a public use, and not ap »=-2 OF

surreptitious use in fraud of the inventor.

27 US. at 19, 20.

In Shaw, the Court examined again the Patent Act of

1793, as well as the Act of 1800 extending patent rights

to foreigners with the proviso that the patent shall be

void if the invention “had been known or used previous

to such application for a patent.” The Court stated,

But there may be cases, in which a knowledge of the

invention may be surreptitiously obtained and com-

12

municated to the public, that do not affect the right

of the inventes. Under such circumstances no pre-

sumption can arise in favor of abandonment of the

right to the public by the inventor; though an acqui-

escence on his part will lay the foundation for such

a presumption .. . And if the invention, through

fraudulent means, shall be made known to the pub-

lic, he should assert his right immediately, and take

the necessary steps to legalize it. . . If the right were

asserted by him who fraudulently obtained it, per-

haps no lapse of time could give it validity.

32 US. at 319, 320.

In Kendall, the Seventh Section of the Patent Act of

1839 was at issue. It afforded immunity from suit to

prior users of a patented invention as follows,

That every person or corporation who has or shall

have purchased or constructed any newly invented

machine, manufacture, or composition of matter,

prior to the application of the inventor or discoverer

for a patent, shall be held to possess the right to use,

and vend to others to be used, the specific machine,

manufacture, or composition of matter, so made or

purchased, without liability therefor to the inventor

or any other person interested in such invention.

The Court upheld a jury instruction providing that the

defendants would have no right to continue to use the

invention after issuance of the patent if the defendants

obtained the invention by instigating a surreptitious act

in violation of a pledge of secrecy made to the plaintiff.

The Court stated,

But whilst inventors are bound to diligence and

fairness in their dealings with the public with refer-

ence to their discoveries, on the other hand, they are

by obligations equally strong entitled to protection

—————e ee

13

against frauds or wrongs practised to pirate from

them the results of thought and labor, in which near-

ly a lifetime may have been exhausted; the fruits of

more than the viginti annorum lucubrationes, which

fruits the public are ultimately to gather. The shield

ALLS : aS “< ~1F288h

: cf

nverpos ‘

DTOVECULOL J

between the inventor and fraudulent spoliator by the

courts in England, and most signally and effectually

has this been done by this court, as is seen in the

cases of Pennock & Sellers v. Dialogue, 2 Pet. 1, and

of Shaw v. Cooper, 7 Pet. 292.

62 U.S. at 329 (underlining added).

The later case of Andrews v. Hovey, 124 U.S. 694, 702-

03 (1888) touched on this issue, and confirmed that

a trade secret thief cannot invalidate a patent. In

Andrews, the Court addressed the second clause of the

Seventh Section of the Patent Act of 1839, which invali-

dated a patent if the invention had been purchased, sold

or used “more than two years prior to such application

for a patent.” The plaintiff argued that use more than

two years before the application for patent should not

invalidate the patent where such use was without the

knowledge, consent or allowance of the patentee. The

plaintiff did not allege that such use was the result of

piracy or misappropriation. To the contrary, the plaintiff

himself had installed several of the patented “driven

wells” on the property of third persons, and had publicly

exhibited the invention, more than 2 years before filing

his patent application. Thereafter, others made and used

the invention, without the inventor's “consent” after

learning about the prior installations.

The Supreme Court held that the patent was invalid

based on public use more than two years before the

application for the patent, which use was without the

14

consent or allowance of the inventor. However, the Court

distinguished use “without consent or knowledge of the

inventor” from use that derives from misappropriation of

the invention, and stated,

It may well be that a fraudulent, surreptitious and

piratical purchase or construction or use of an inven- |

tion prior to the application for the patent would not

affect the rights of the patentee under either clause

of the 7th section; but the present is not such a case

as that which existed in Kendall v. Winsor. In the

use of driven wells in public, at Cortland, by others

than Green, more than two years before his applica-

tion, we see nothing in the evidence under which

such use can properly be characterized as fraudulent,

piratical, or surreptitious.

124 U.S. at 708. Therefore, Andrews reaffirms the prin-

ciples established in Pennock, Shaw and Kendall.

Thus, these U.S. Supreme Court cases clearly stand for

the principle that, under the Patent Act, a patent cannot

be invalidated by surreptitious and fraudulent theft and

use of the invention.

Ii. The Court Of Appeals Has Not Followed The Rule

Of Law Established By This Court’s Precedents

The Court of Appeals in this action did not accept that

this Court’s precedents establish such a rule of law, and

claimed that Evans was urging a “new exception” (App.

8, 13) to the on sale bar. The Court of Appeals stated

that this Court’s statements in Pennock and Shaw were

mere dicta, and stated that Kendall is not on point

because of a difference between the section of the Patent

Act of 1839 at issue therein and § 102(b) of today’s

Patent Act at issue herein. The Court of Appeals relied

—————

15

on the decisions of Eastman v. Mayor of N.Y., 134 F. 844

(2d Cir. 1904), Lorenz v. Colgate-Palmolive-Peet Co., 167

F.2d 423 (3d Cir. 1948) and In re Martin, 74 F.2d 951

(CCPA 1935) in declining to follow this Court’s prece-

dent.

This Court should issue a writ of certicrari to correct

the error of the Court of Appeals in failing to follow this

Court’s precedent. While this Court's statements in

Pennock and Shaw on the issue presented herein may

have been dicta, this Court’s decision on this issue in

Kendall is a holding that affirmed a finding of patent

infringement, and upheld a jury instruction that stated,

That if Aldridge, under a pledge of secrecy, obtained

knowledge of the plaintiff's machine—and he had not

abandoned it to the public—and thereupon, at the

instigation of the defendants, and with the knowl-

edge, on their part, of the surreptitiousness of his

acts, constructed machines for the defendants, they

would not have the right to continue to use the same

after the date of the plaintiff's letters patent.

The Court went on to expressly hold that the jury in-

struction was,

in strict conformity with the principles hereinbefore

propounded, and with the doctrines of [t]his court, as

declared in the cases of Pennock v. Dialogue and

Shaw v. Cooper.

62 U.S. at 331. Thus, notwithstanding the fact that

Kendall addressed a provision of the Patent Act permit-

ting a defendant to continue to use an invention after a

patent issues (which is no longer in the Patent Act),

rather than a statutory on sale bar, the Court, in sup-

port of its holding, resoundingly confirmed the principle

that a patent cannot be invalidated by surreptitious and

16

fraudulent theft and use of the invention. Therefore, the

Court of Appeals’ decision herein is in conflict with the

holding of Kendall.

The Court of Appeals’ reliance on Eastman, Lorenz and

Martin is unwarranted, not only because they are lower

court decisions that do not justify a failure to follow this

Court’s precedent, but also because they are factually

quite different. In Eastman, the court found that the

facts, unlike the facts here, are similar to the facts in

Andrews, i.e., it was not a case of “fraudulent and pira-

tical” theft. 134 F. at 856.

In Lorenz, unlike here, the inventor had voluntarily

disclosed his invention to a fellow employee without a

pledge of secrecy 14 years before the filing of the appli-

cation for the patent-in-suit. Further, the plaintiff in

Lorenz, unlike Evans, had abandoned an earlier timely-

filed patent application on his invention, which is con-

trary to the strictures in Shaw requiring an inventor to

not abandon his invention.

In Martin, unlike here, the inventor had disclosed the

invention te his employer more than 11 years before

filing a patent application, and there was an agreement

that he would not file any patent application except

through his employer. As stated by the court in Martin,

This, however, was appellant’s voluntary act and

affords no excuse for his not filing or causing to be

filed an application for patent in time to avoid the

bar of public use.

74 F.2d at 956. Thus, Martin is not properly relied upon

here because the claimed inventor, unlike Evans here,

failed to follow the strictures of Shaw requiring that the

inventor not abandon the invention.

17

Here, contrary to the facts in Eastman and Lorenz, it

is assumed for the purposes of this appeal that GM’s

theft and sale of Evans’ invention has been fraudulent

and piratical. Further, Evans, unlike the patentees in

Lorenz and Martin, followed the strictures of Shaw by

not abandoning his invention and by acting immediately

to assert his rights after he learned of GM’s use of the

invention.

The Court of Appeals’ decision, in relying on Martin,

focused on the fact that GM’s dealers were “innocent

users who put the invention on sale by placing orders for

innocent retail customers like Najarian” (App. 12). How-

ever, merely placing orders is not a “use” of the invention

by either the dealers or the customers. To the contrary,

there was no “use” by them of the invention during the

time frame in question because the 1992 Corvette had

not yet been built (it was built for customers for the first

time in August, 1991, after the critical date of July 1,

1991). There had been no delivery or disclosure of the

invention to dealers or customers at the time the alleged

orders were being placed. Thus, during this time frame,

GM is clearly the only party (other than Evans) with

knowledge of the invention, and is the “guilty” party

instigating the alleged offer for sale of the invention

before the critical date. Therefore, the Court of Appeals’

reliance on the “innocence” of dealers and customers who

have not gained knowledge or possession of the invention

is no basis to depart from this Court’s clear pronounce-

ments in Pennock, Shaw and Kendall.

The Court of Appeals wrongfully claims that Evans

“knew GM stole the invention at the very time it was

allegedly stolen” (App. 13). However, the District Court

made no such finding, and there is no basis for such a

18

finding by the Court of Appeals, particularly in a sum-

mary judgment motion where inferences are to be con-

strued in favor of the non-movant Evans. Anderson uv.

Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

Finally, the Court of Appeals implies that Evans im-

properly delayed in filing his patent application “two

years after the [black box] demonstration and some six

years after [the invention] was reduced to practice” (App.

13). However, under this Court’s precedent, such delay

is permitted to test and develop the invention, Kendall,

62 U.S. at 328-29; City of Elizabeth et al. v. American

Nicholson Pavement Co., 97 U.S. 126, 137 (1878), and

delay is permitted where the inventor is broke and does

not abandon the invention, Smith v. Goodyear Dental

Vulcanite Co., 93 U.S. 486, 501 (1876) and Woodbury

Patent Planing-Machine Co. v. Keith, 101 U.S. 479, 485-

86 (1880). Thus, the Court of Appeals’ decision is also in-

consistent with Supreme Court precedent in this regard.

Ill. The Decision Of The Court Of Appeals Defeats

The Goals Of Our Patent Laws Of Fostering

Technological Growth And Industrial Innova-

tion

The “true policy and ends of the patent laws enacted

under this government” is to “promote the Progress of

Science and Useful Arts” under U.S. CONSsT., art. I, § 8,

cl. 8. Kendall, 62 U.S. (21 How.) at 328. This is consis-

tent with the Congressional goal in creating the Court of

Appeals for the Federal Circuit of strengthening the

United States patent system “in such a way to foster

technological growth and industrial innovation.” Mark-

man v. Westview, 517 U.S. 370, 116 S.Ct. 1384 (1996)

(quoting from H.R. Rep. No. 97-312, pp. 20-23 (1981)).

ee ee

19

The goals of our patent laws are consistent with the

goals of our trade secret laws. As stated in Kewannee Oil

Co. v. Bicron Corp., 416 U.S. 470, 481-82 (1974) (quoting

from National Tube Co. v. Eastern Tube Co., 3 Ohio CC

NS 459, 462 (1902), aff'd, 69 Ohio St. 560, 70 N.E. 1127

(1903)),

The maintenance of standards of commercial ethics

and the encouragement of invention are the broadly-

stated policies behind trade secret law. “The necessi-

ty of good faith and honest, fair dealing, is the very

life and spirit of the commercial world.”

These goals are insidiously undermined by allowing a

trade secret thief to surreptitiously and fraudulently

steal an invention and then put the invention on sale so

as to invalidate any patent on the invention. There can

be no justification for allowing such wrongful activity to

undermine the goals of our patent laws.

The Court of Appeals’ decision in this case effectively

encourages such an insidious undermining of our patent

laws (and trade secret laws). This Court should reverse

the Court of Appeals’ decision to prevent such a result.

As stated in Kewannee Oil,

A most fundamental right, that of privacy, is threat-

ened when industrial espionage is condoned or made

profitable; the state interest in denying profit to such

illegal ventures is unchallengeable.

416 U.S. at 487.

The Court of Appeals, in justifying its rejection of

Evans’ contention that a trade secret thief should be

barred from invalidating Evans’ patent, and in admitting

that “such a result may not seem fair,” stated that Evans

“is not without recourse” because he “would have an ade-

20

quate remedy in state court for misappropriation of a

trade secret” (App. 13). However, Evans’ right of action

against GM for trade secret misappropriation does not

prevent erosion of the goal of promoting technological

growth and industrial innovation. Third parties, who are

not subject to liability for trade secret misappropriation,

receive a windfall in being permitted to practice the in-

vention without any restrictions—a sort of unrestricted,

royalty-free license. Such windfall, without any effort or

technological advance by such third parties, deprives the

true inventor of reaping the benefits of his own creative

efforts, and is antithetical to the policies of encouraging

technological growth and industrial innovation.

Further, contrary to the Court of Appeals’ decision,

Evans’ trade secret claim is no solace for losing powerful

patent rights. The very essence of a patent is the right

to exclude others from making, using, offering to sell, or

selling the patented invention. 35 U.S.C. §271(a); Zenith

Radio Corporation v. Hazeltine Research, Inc., 395 U.S.

100, 135 (1969) (“The heart of his legal monopoly is the

right to invoke the State’s power to prevent others from

utilizing his discovery without his consent”).

CONCLUSION

As repeatedly stated in the 19th Century cases dis-

cussed above, this Court has always interposed a “shield

of protection” between an inventor and a fraudulent

spoliator so as to foster and protect the policies of the

patent laws, and to prevent injustice. In this century,

this Court has continued to protect these policies of the

patent laws, and prevent injustice. See Graver Tank &

Mfg. Co., Inc. v. Linde Air Products Co., 339 U.S. 605,

21

607-08 (1949) and Warner-Jenkinson Co. v. Hilton Davis

Chemical Co., 117 S.Ct. 1040 (1997), where the Court

twice held that the doctrine of equivalents permits a

finding of infringement even when there is no literal

infringement, so as to prevent a “fraud on the patent”

that would “pirate an invention.” Graver Tank, 339 U.S.

at 607-08.

The Court of Appeals’ decision in this action does not

follow, and effectively guts, this Court’s above-noted

precedents. Further, it insidiously undermines the goals

of both the patent laws and the trade secret laws, and

encourages trade secret misappropriation as a means for

invalidating a patent.

Therefore, this Court should grant this Petition for a

Writ of Certiorari, and reverse the decision of the Court

of Appeals in this action.

Respectfully submitted,

KARL R. FINK

(Counsel of Record)

JOHN F. FLANNERY

FITCH, EVEN, TABIN

& FLANNERY

135 South LaSalle Street

Suite 900

Chicago, Illinois 60603-4277

(312) 372-7842

Attorneys for Petitioners

Date: December 15, 1997

Os c ple paar ares pea Poe:

APPENDIX

nom

ad

App. 1

United States Court of Appeals

for the Federal Circuit

97-1146

EVANS COOLING SYSTEMS, INC. and

PATENT ENFORCEMENT FUND, INC.

Plaintiffs-Appellants,

v.

GENERAL MOTORS CORP.

Defendant-Appellee.

Decided: September 16, 1997

Before ARCHER, Chief Judge, MICHEL and LOURIE,

Circuit Judges.

MICHEL, Circuit Judge.

Evans Cooling Systems, Inc. and Patent Enforcement

Fund, Inc. (collectively, “Evans”) appeal the September

30, 1996 order of the United States District Court for the

District of Connecticut granting summary judgment to

General Motors Corporation (“GM”) of invalidity based

on the “on sale” bar under 35 U.S.C. § 102(b). The appeal

was submitted for our decision after oral argument on

July 1, 1997. Because there were no materially disputed

questions of fact regerding whether the patented inven-

tion was offered for sale more than one year prior to the

critical date and because we decline to create an excep-

tion to the on sale bar for those instances in which a

App. 2

third party misappropriates the invention and later

places the invention on sale or causes an innocent third

party to place the invention on sale, we affirm.

BACKGROUND

United States Patent Number 5,255,636 (“the ’636 pat-

ent”) issued on October 26, 1993 and claims an aqueous

reverse flow cooling system for internal combustion en-

gines. An understanding of the technology is not neces-

sary to this appeal and we therefore do not discuss it.

John Evans, the named inventor, admits he conceived

the patented invention in 1984 and reduced it to practice

in 1986. Mr. Evans did not file a patent application,

however, until July 1, 1992.

In early 1994, Evans filed the present lawsuit alleging

that GM infringed the ’636 patent by the manufacture

and sale of cars having GM’s “LT 1” and “L99” engines.

GM counterclaimed for a declaration of invalidity and

non-infringement. GM asserted that the 636 patent was

invalid because GM and its independent dealers had

placed the patented invention on sale prior to the critical

date with the introduction of its 1992 Corvette. Specifi-

cally, GM sent an “Order Guide” for the 1992 Corvette to

its independent dealers in late April or early May, 1991

to be used for ordering the vehicle described in the Order

Guide. At about the same time, GM sent its dealers a

supplemental brochure that provided additional ordering

information for the 1992 Corvette, specifically stating

that the car had reverse flow engine cooling. A represen-

tative of GM testified that it expected the dealers would

start ordering the vehicles as soon as the Order Guide

was sent to them. A sales representative at a GM deal-

App. 3

ership also testified that it was the dealership’s common

practice to order new cars and enter into agreements to

sell new cars shortly after receiving the Guide. GM pro-

duced computer records documenting over 2000 orders

placed by dealers around the country for the 1992 Cor-

vette before the critical date. The orders, over 300 of

which were placed on behalf of specific retail customers,

were placed through a computer network and GM trans-

mitted an acknowledgment back to the dealer after re-

ceiving the order. As a specific example, GM introduced

evidence regarding a retail customer named Aram Najar-

ian who visited a Corvette dealer in West Bloomfield,

Michigan in June, 1991. Mr. Najarian entered into a con-

tract with a GM dealer on June 13, 1991 in which GM

agreed to sell and Mr. Najarian agreed to buy a Corvette

with an LT1 engine. Although a firm price was not es-

tablished at that time, Mr. Najarian was informed that

the price would be up to $2000 higher than the 1991

model and he placed a deposit on the car at that time.

The order was transmitted to GM, and GM sent back an

acknowledgment on June 14, 1991.

Evans asserted before the trial court that GM should

not be allowed to invalidate the ’636 patent because GM,

in fact, stole the invention from Evans. Specifically, GM

allegedly requested that Evans demonstrate its aqueous

reverse flow cooling system at GM’s test facility in the

spring of 1989, and Evans alleges that GM stole the

invention during this demonstration.

The district court granted summary judgment in favor

of GM on September 30, 1996, because the record estab-

lished that GM and its dealers placed the 1992 Corvette

with the LT1 engine on sale prior to the critical date.

The district court relied on the facts that Mr. Najarian

App. 4

entered into a contract with a GM dealer, the dealer

agreed to sell and Mr. Najarian agreed to buy a 1992

Corvette, and Mr. Najarian paid a deposit and the dealer

transmitted the order to GM. The court also noted that

even an offer to sell will raise the on sale bar and that

this transaction went beyond mere indefinite discussions

about a possible sale. Turning to the policies underlying

the on sale bar, the district court noted that John Evans

claimed he reduced the invention to practice in 1986 but

failed to file an application for some six years.

DISCUSSION

We review the district court’s grant of summary judg-

ment de novo. Petrolite Corp. v. Baker Hughes, Inc., 96

F.3d 1423, 1425, 40 USPQ2d 1201, 1203 (Fed. Cir. 1996).

A person is not entitled to a patent if “the invention was

... on sale in this country, more than one year prior to

the date of the application for patent in the United

States.” 35 U.S.C. § 102(b)(1994). In order for a patent to

be invalid under this statute, the claimed invention as-

serted to have been on sale must be substantially com-

pleted with reason to expect it would work for its intend-

ed purpose, Micro Chem.., Inc. v. Great Plains Chem. Co.,

103 F.3d 1538, 1545, 41 USPQ2d 1238, 1244 (Fed. Cir.

1997), must have been embodied in or obvious from the

device offered for sale, and the sale must have been pri-

marily for profit, id. at 1544, 41 USPQ2d 1243; Keystone

Retaining Wall Sys., Inc. v. Westrock, Inc., 997 F.2d

1444, 1451, 27 USPQ2d 1297, 1303 (Fed. Cir. 1993).

Whether an invention was placed on sale prior to the

critical date is ultimately a conclusion of law that we

review de novo, although it is based on underlying facts.

App. 5

Micro Chem., 103 F.3d at 1544, 41 USPQ2d at 1249:

Ferag AG v. Quipp, Inc., 45 F.3d 1562, 1566, 33 USPQ2d

1512, 1514-15 (Fed. Cir. 1995), cert. denied, 116 S. Ct. 71

(1995).

I.

GM argues, and the trial court held, that the 636

patent is invalid because the independent dealers placed

the accused engine on sale to retail customers. As dis-

cussed more fully in the fact section, this argument in-

volves the contract for sale entered into on June 13, 1991

between Mr. Najarian and Jack Cauley Chevrolet, Inc.,

which had received the 1992 Corvette Order Guide and

a brochure containing ordering information for the 1992

Corvette and the LT1 engine around April 30, 1991.

Evans makes no argument that the LT1 engine in the

1992 Corvette was not substantially complete. Nor does

Evans argue that the pre-critical date sales were for a

non-commercial purpose.

Evans does, however, argue that summary judgment

was inappropriate because GM did not meet its burden

of proving by clear and convincing evidence that the

engine of the 1992 Corvette anticipated the claims of the

’636 patent. Although GM conceded infringement for pur-

poses of the summary judgment motion, it denied in-

fringement in its answer and stated in sworn answers to

interrogatories that the claims of the ’636 patent were

not infringed because the LT1 engine lacked certain ele-

ments of the claims. Evans argues, therefore, that GM

has necessarily admitted, or at least created a genuine

issue of material fact, that the engine of the 1992 Cor-

vette does not anticipate any of the asserted claims.

App. 6

We do not agree. This is not the typical case where the

patentee has placed some device on sale prior to the

critical date and the accused infringer must demonstrate

that this device actually embodied or rendered obvious

the patented invention. Here, the entire basis of the law-

suit is Evans’—the patentee’s—contention that the LT1

engine—the device that was put on sale—contains a cool-

ing system that infringes. GM denied that the LTi en-

gine infringed the ’636 patent but, by conceding infringe-

ment for purposes of the summary judgment and its on

sale defense, properly pled in the alternative. See Fed.

R.Civ.P. 8(e) (1997) (“A party may set forth two or more

statements of a claim or defense alternatively or hypo-

thetically, either in one count or defense or in separate

counts or defenses.”). Although GM bore the burden of

proving that the LT1 engine embodied the patented in-

vention or rendered it obvious for purposes of the sum-

mary judgment motion, this burden is met by Evans’

allegation, forming the sole basis for the complaint, that

the LT1 engine infringes. Indeed, even on appeal, Evans

states in its brief, directed only to the on sale issue, that

“GM uses an aqueous reverse flow cooling system in its

LT1 engine.”

Evans also argues, in effect, that there was no “sale” or

offer for sale of the LT1 engine. Evans argues that,

based on the totality of the circumstances, a reasonable

jury could conclude that “the Najarian ‘order’ was an ad-

vance, non-binding order, cancelable by either party, that

was not finalized until after July 1, 1991” and that it

was void to the extent that it was an offer for sale. We

have often stated that the totality of the circumstances

and the policies underlying the bar must be considered

in determining whether a definite offer for sale trigger-

App. 7

ing section 102(b) has been made. See, e.g., Envirotech

Corp. v. Westech Eng’g Inc., 904 F.2d 1571, 1574, 15

USPQ2d 1230, 1232 (Fed. Cir. 1990). However, where

there is a specific and definite offer for sale of a success-

fully tested device, such as that evidenced by a com-

pleted contract for sale, that embodies every limitation

of the later patented invention as claimed prior to the

critical date and that sale is clearly for commercial pur-

poses, the analysis need not go any further. It is not that

the totality of the circumstances test is not to be applied

in such a case, but that there are then no circumstances,

short of fraud or duress, that could turn such an offer

into something other than a barring event.

Even if we were otherwise to consider the totality of

the circumstances, Evans’ relevant arguments on this

point are easily discarded. Evans argues that Mr. Najar-

ian’s order is ineffective as a sale because it stated that

“{alny provisions of this order prohibited by Michigan or

Federal law shall be ineffective to the extent of such

prohibition” and the Federal Fuel Economy Regulations

and the Clean Air Act prohibited any offer for sale as of

this date because GM had not yet received fuel economy

labels or a Certificate of Conformity from the EPA. Even

assuming this to be the case, the mere fact that the offer

for sale was illegal or ineffective does not remove it from

the purview of the section 102(b) bar. Jack Cauley Chev-

rolet thought it was offering to sell a 1992 Corvette to

Mr. Najarian and Mr. Najarian thought he was agreeing

to buy such a car. Moreover, there is no evidence that

Mr. Najarian did not receive the car or that the offer was

actually invalidated. Likewise, neither the fact that the

price was not firm nor that the color had not been chosen

avoids the section 102(b) bar. Mr. Najarian was given an

App. 8

estimated price range and it is not uncommon for car

buyers to change their minds about the desired color.

Similarly, the fact that the contract was cancelable or

changeable under certain circumstances does not mean

that it does not evidence a definite offer for sale. Finally,

even if the independent dealership violated internal

procedures by offering the 1992 Corvette for sale prior to

the model announcement date GM had set, this does not

make the offer for sale any less an offer.

Thus, we hold that the order entered into by Mr.

Najarian and Jack Cauley Chevrolet on June 13, 1991—

nearly a month prior to the critical date—evidences an

effective offer for sale that invalidates the 636 patent.

Although GM also argues that the ’636 patent is invalid

because GM placed the reverse flow cooling system in its

engines on sale when it sent the Order Guide and

supplemental information brochure to its dealers across

the country in late April or early May of 1991, we do not

reach or decide that issue here. See Intel Corp. v. Inter-

national Trade Comm’n, 946 F.2d 821, 829, 20 USPQ2d

1161, 1169 (Fed. Cir. 1991) (“A single sale or offer to sell

is enough to bar patentability.”).

Il.

Although our analysis would normally be complete

once we had concluded there was an invalidating offer

for sale, Evans urges this court to create a new exception

to the on sale bar. Specifically, Evans asks us to rule

that an otherwise invalidating offer for sale does not

invalidate a patent “where a third party surreptitiously

steals an invention while it is a trade secret and then,

unbeknownst to the inventor, allegedly puts the inven-

|

App. 9

tion on sale [more than one year] before the inventor

files a patent application covering the stolen invention.”

Evans cited three Supreme Court cases and asserts

that they state that prior use of an invention by one who

misappropriates the invention cannot invalidate a pat-

ent. See Pennock v. Dialogue, 27 U.S. (2 Pet.) 1, 19-20

(1829) (“[I}f before his application for a patent his inven-

tion should be pirated by another, or used without his

consent; it can scarcely be supposed, that the legislature

had within its contemplation such knowledge or use . . .

The use here referred to has always been understood to

be a public use, and not a private or surreptitious use in

fraud of the inventor.”); Shaw v. Cooper, 32 U.S. (7 Pet.)

292, 319-20 (1833) (“But there may be cases, in which a

knowledge of the invention may be surreptitiously ob-

tained, and communicated to the public, that do not

affect the right of the inventor. . . . If the right were

asserted by him who fraudulently obtained it, perhaps no

lapse of time could give it validity.”); Kendall v. Winsor,

62 U.S. (21 How.) 322, 329 (1859) (affording immunity

from suit to prior third party users of a patented inven-

tion but refusing to extend such immunity to those who

received knowledge of the patented invention through

fraud). Evans argues that these Supreme Court cases

have never been expressly overruled and, in fact, the one

time the Court of Customs and Patent Appeals ad-

dressed the issue it expressly left it open, stating:

We do not find it here necessary to decide whether a

fraudulent use of an invention for more than two

years [then the bar period] prior to an application for

a patent therefor bars the issue of the patent upon

such application . .. . It may be that . . . said Miner-

als Separation should have been held to be estopped

App. 10

to bring a public use proceeding. But even so, as to

this we express no opinion... .

In re Martin, 74 F.2d 951, 955-56 (CCPA 1935).

We, however, do not find any of these cases dispositive

of the issue presented by this case. In Pennock, the

Supreme Court actually invalidated the patents in suit

under the public use bar, and in that case the use had

been with the permission of the patentee, thereby ren-

dering any statements regarding piracy mere dicta.

Likewise, the statements relied on by Evans in Shaw are

dicta, as there too the patent was invalidated because

the innocent public had come to know and use the in-

vention, although there was some evidence that the in-

vention had first become known to the public by fraudu-

lent means. The statutory on sale bar wasn’t even in

issue in Kendall. Rather, the issue was whether the de-

fendant had the right to continue to use the invention

after the patent issued. See also Eastman v. Mayor of

N.Y., 134 F. 844, 852-55 (2d Cir. 1904) (discussing

whether “fraudulent, surreptitious, or piratical” use of an

invention could raise the public use bar and rejecting

statements in above Supreme Court cases as dicta).

We note as well that the one other court that has ad-

dressed this precise issue has rejected arguments similar

to Evans’ arguments. See Lorenz v. Colgate-Palmolive-

Peet Co., 167 F.2d 423, 77 USPQ 138 (3d Cir. 1947).

There, the court addressed the following question: “Was

it the intention of Congress that public use by one who

employs a process in breach of a fiduciary relationship,

who tortiously appropriates it or who pirates it, should

bar the inventor from the fruits of his monopoly?” 167

F.2d at 426, 77 USPQ at 141. Lorenz had disclosed his

invention to Colgate. Although Colgate told Lorenz the

App. 11

idea was rejected, it later made substantial commercial

use of Lorenz’s invention and then sought to invalidate

Lorenz’s patent based on this use. Jd. at 424-25, 77

USPQ at 140-41. After reviewing the Supreme Court and

other relevant case law, the court rejected an exception

to the statutory bar, stating:

The prior-public use proviso . . . contains no qualifi-

cation or exception which limits the nature of the

public use. We think that Congress intended that if

an inventor does not protect his discovery by an

application for patent within the period prescribed by

the Act, and an intervening public use arises from

any source whatsoever, the inventor must be barred

from a patent or from the fruits of his monopoly, if a

patent has issued to him. There is not a single word

in the statute which would tend to put an inventor,

whose disclosures have been pirated, in any different

position from one who has permitted the use of his

process. . . [I]solated instances of injustice may result

if the law be strictly applied, but the inventor’s

remedy is sure. He is master of the situation and by

prompt action [in filing a patent application] can

protect himself fully and render the defense of prior

public use impossible.

Id. at 429-30, 77 USPQ at 144 (footnote omitted). Al-

though this decision is not binding on this court, it is

persuasive.

Even if we were to create an exception to the on sale

bar such that third parties accused of misappropriating

an invention could not invalidate a patent based upon

sales by the guilty third party, GM correctly asserts that

Martin squarely holds that activities of third parties

uninvolved in the alleged misappropriation raise the

statutory bar, even if those activities are instigated by

App. 12

the one who allegedly misappropriated the invention. In

Martin, Martin’s employer stole Martin’s invention and

filed an application on it and disclosed it to a third party.

74 F.2d at 952-53. After learning of his employer's ac-

tivities, Martin filed his own application. After an in-

terference was declared, the employer argued Martin’s

application was barred based on the activities of the

third party. Martin conceded his invention had been in

public use, but argued that the bar should not apply

because the third party’s use was “instigated by [his]

employer and was a surreptitious and fraudulent public

use against him” Jd. at 953. After reviewing the Supreme

Court and other relevant case law, the Court of Customs

and Patent Appeals noted it had “been unable to find

any authoritative decisions upon the question of whether

a fraudulent public use of an invention . . . prior to the

filing of an application . . ., or such public use of an

invention instigated by fraud, bars the issuance of a

patent .. .” Id. at 955. Although the Court of Customs

and Patent Appeals did not address that precise issue,

the Court of Customs and Patent Appeals did hold that

allowance of the application was barred because the

third party’s public use had been innocent, even though

it had obtained the technology from the employer. Jd.

As discussed below, this holding is dispositive here

because, although Evans has charged GM with misap-

propriation, it has never contended that the independent

dealers had any participation in or knowledge of the al-

leged theft; nor is there any indication that Mr. Najarian

had such knowledge. Thus, the independent dealers are

innocent users who put the invention on sale by placing

orders for innocent retail customers like Najarian.

icant ilaidalaidiiaiaaiit |

App. 13

While such a result may not seem fair, Evans is not

without recourse if GM in fact misappropriated his

invention. Evans would have an appropriate remedy in

state court for misappropriation of a trade secret. We

note as well that the facts Evans alleges in support of its

misappropriation claim demonstrate that Evans knew

GM stole the invention at the very time it was allegedly

stolen because during the demonstration GM employees

allegedly told Mr. Evans they intended to steal the in-

vention and a sealed room was unsealed during the night

between the tests. Evans’ patent rights would have nev-

ertheless been protected if Mr. Evans had filed a patent

application no more than one year from the date of the

demonstration. This he did not do; instead Mr. Evans

waited for more than two years after the demonstration

and some six years after it was reduced to practice.

CONCLUSION

The ’636 patent is invalid due to the pre-critical date

contract entered into between the independent GM

dealership and Mr. Najarian whereby the dealership

offered to sell and Mr. Najarian agreed to buy a 1992

Corvette containing the LT1 engine. Even if GM mis-

appropriated the idea behind the LT1 engine cooling

system from Mr. Evans, the invention was nevertheless

on sale and we decline to create the suggested new

exception to the 102(b) bar which has no basis in the

language of the statute. The trial court’s decision is

therefore affirmed.

AFFIRMED

App. 14

~ [Dated September 30, 1996]

UNITED STATES DISTRICT COURT

DISTRICT OF CONNECTICUT

EVANS COOLING SYSTEMS, INC. and :

PATENT ENFORCEMENT FUND, INC., :

: CASE NO.

Plaintiffs, : $:94CV35 (RNC)

GENERAL MOTORS CORPORATION,

Defendant.

ENDORSEMENT RULING AND ORDER

This is a patent infringement case. The patent at issue,

U.S. Patent No, 5,255,636 (the “636 patent”) claims an

apparatus and method for cooling an internal combustion

engine. Plaintiffs allege that General Motors Corporation

has infringed the patent by making and selling cars,

such as the 1992 Corvette, that contain an “LT1 engine

cooling system.”’ GM has moved for summary judgment

[doc. #117] on the ground that it placed the 1992 Cor-

vette with its LT1 engine cooling system “on sale” more

than one year before July 1, 1992, the day the applica-

tion for the 636 patent was filed. After careful consider-

ation of the parties’ briefs and oral arguments, GM’s

motion for summary judgment is granted.

' Plaintiffs contend that GM stole the “technology” from the

named inventor, John W. Evans. Evans has sued GM in a

separate action for misappropriation of trade secrets.

App. 15

An inventor who does not promptly seek a patent runs

the risk of losing the right to obtain a patent. Under 35

U.S.C. § 102(b), an inventor loses his or her right to ob-

tain a patent if the invention was “on sale” more than

one year prior to the date of the patent application. The

on sale bar “is not limited to sales by the inventor or one

under his control, but may result from activities of a

third party.” J.A. LaPorte, Inc. v. Norfolk Dredging Co

787 F.2d 1577, 1581 (Fed. Cir.), cert. denied, 479 U.S.

884 (1986); In re Caveney, 761 F.2d 671, 675 (Fed. Cir.

1985).

In this case, summary judgment is appropriate because

the record establishes that GM and its dealers placed the

1992 Corvette with its LT1 engine cooling system on sale

more than a year before the patent application was filed.

It is undisputed that on June 13, 1991, a retail customer

named Najarian entered into a contract with a GM

dealer relating to the purchase of a 1992 Corvette with

the LT1 engine cooling system. in executing the contract,

the dealer “agree[d] to sell” and the customer “agree[d]

to purchase” a 1992 Corvette with an “LT1” engine. The

customer paid a deposit of $500 and the dealer transmit-

ted the order to GM.?

* GM contends that the Najarian transaction is typical of

hundreds of orders for 1992 Corvettes with the LT1 engine

cooling system that were placed by retail customers prior to

the critical date of July 1, 1991. Computer records show that

as of June 30, 1991, GM received from its dealers a total of

2,078 orders for 1992 Corvettes with the LT1 engine cooling

system. Of those, 318 were placed for specifically identified

retail customers and marked “sold.” Under § 102(b), a single

offer to sell is enough to bar patentability. A.B. Chance Co. v.

RTE Corp., 854 F.2d 1307, 1311 (Fed. Cir. 1988).

App. 16

Plaintiffs contend that the on sale bar does not apply

to the Najarian transaction because the dealer’s agree-

ment to sell was merely a step in preparation for a sale

and not an offer to sell. See Intel Corp. v. U.S. Int'l

Trade Comm'n, 946 F.2d 821, 830 (Fed. Cir. 1991). How-

ever, an offer to sell will raise the on sale bar even

though the product is not on hand and ready for deliv-

ery. See Barmag Barmer Maschinefabrik AG v. Murata

Mach., Ltd., 731 F.2d 831, 837 (Fed. Cir. 1984). More-

over, the dealer’s agreement to sell went beyond the level

of merely indefinite or nebulous discussions about a

possible sale. TRW Fin. Sys., Inc. v. Unisys Corp., 835 F.

Supp. 994, 1003 (E.D. Mich. 1993). It is undisputed that

the dealer, in entering into the transaction, intended to

deliver the car to the customer when it became available.

See Transcript of Oral Argument of May 10, 1996, at 61.

Though this case involves sales activities by third

parties, rather than the inventor or someone under his

control, the policies underlying the on sale bar justify its

application here.’ Plaintiff Evans, the inventor named in

the 636 patent, claims that he reduced the patented

cooling system to practice by July 1986. However, he did

° In determining whether the on sale bar applies, it is neces-

sary to consider the policies underlying the bar. Manville Sales

Corp. v. Paramount Sys., Inc., 917 F.2d 544, 549 (Fed. Cir.

1990). They are: (1) a policy against removing inventions from

the public domain that the public has justifiably come to be-

lieve are freely available due to commercialization by the in-

ventor or others; (2) a policy favoring prompt and widespread

disclosure of inventions to the public; (3) a policy against

allowing an inventor to extend the patent period; and (4) a

policy of giving an inventor a reasonable time following sales

activity to determine whether a patent would be worthwhile.

App. 17

not file an application for a patent until approximately

six years later.* By the time Evans filed his application,

GM’s dealers and retail customers had come to believe

that the 1992 Corvette and its LT1 engine cooling sys-

tem were freely available.* In these circumstances, appli-

cation of the on sale bar serves the important policy of

encouraging early filing of patent applications as well as

the policy against removing inventions from the public

domain. See J.A. LaPorte, Inc., 787 F.2d at 1583; In re

Caveney, 761 F.2d at 676.

GM argues that summary judgment is also appropriate

because the claimed invention was in “public use” more

than a year before the patent application was filed. 35

U.S.C. § 102(b). It is undisputed that in May and June

1991, numerous 1992 Corvettes with the LT1 engine

cooling system were driven by test drivers on public

highways and roads. Because summary judgment is ap-

propriate based on the on sale bar, it is unnecessary to

address this question whether summary judgment would

also be appropriate based on the public use bar.

Accordingly, defendant’s motion for summary judgment

is hereby granted.

* Plaintiffs contend that Evans did not attempt to commer-

cialize or file a patent application on his invention because he

was testing the technology, working on related technology, was

in poor financial condition and could not obtain financial back-

ing.

* At his deposition, Evans testified that he was prompted to

file the application after learning in September 1991 that GM

had disclosed his “technology” to the public.

App. 18

So ordered.

Dated at Hartford, Connecticut this 30th day of Sep-

tember 1996.

Robert N. Chatigny

United States District Judge

App. 19

[Dated November 4, 1996]

UNITED STATES DISTRICT COURT

DISTRICT OF CONNECTICUT

EVANS COOLING SYSTEMS, INC. AND :

PATENT ENFORCEMENT FUND, INC.

CASE NO.

Vv. : 3:94CV-35(RNC)

GENERAL MOTORS CORPORATION

JUDGMENT

This action having come on for consideration of the

defendant’s motion for summary judgment before the

Honorable Robert N. Chatigny, United States District

Judge and,

The Court having considered the full record of the case

including applicable principles of law, and having filed

an Endorsement Ruling and Order granting the motion,

it is therefore,

ORDERED, ADJUDGED, and DECREED that judg-

ment be and is hereby entered in favor of the defendant.

Dated at Hartford, Connecticut, this 4th day of Novem-

ber, 1996.

KEVIN F. ROWE, Clerk

By:

Robin D. Tabora

Deputy in Charge