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May 18, 2010

Sales Assistant Killed

Jerome Johnson got thoughtful while working "at a farm equipment dealership." 5,367,627 claims a computerized sales assistance system for finding particular parts. Jerome sold the patent to Orion in 2004. Orion sued Hyundai and 20 other automakers. The 20 others settled, but Hyundai fought on. Hyundai lost, to the tune of $34 million, plus interest and ongoing 2% royalty. Failing post-judgment JMOL, Hyundai appealed over anticipation and inequitable conduct.

Orion v. Hyundai Motor America (CAFC 2009-1130) precedential

The district court found that Hyundai had "waived its right to JMOL on anticipation and obviousness because it failed to make a sufficiently specific pre-submission motion under Rule 50(a)," but the CAFC overturned that.


On JMOL, Hyundai had argued that the evidence presented to the jury established that the '627 patent was anticipated by prior art electronic parts catalogs, specifically the Bell & Howell IDB2000 system. Bell & Howell developed and sold the IDB2000 system in 1987. Under a 1987 distribution agreement between Bell & Howell and Reynolds & Reynolds, the latter distributed and supported the IDB2000 electronic parts catalog under the Reynolds & Reynolds PartsVision private label. The IDB2000 system, as described in a Reynolds & Reynolds promotional publication entitled "Electronic Parts Catalog," was identified as an automated system for the sale of parts that allowed salespersons to sell parts faster and with more accuracy.

Under 35 U.S.C. § 102(b), a patent is invalid as anticipated if "the invention was patented or described in a printed publication in this or a foreign country . . . more than one year prior to the date of the application for patent in the United States." Although § 102 refers to "the invention" generally, the anticipation inquiry proceeds on a claim-by-claim basis. See Hakim v. Cannon Avent Group, PLC, 479 F.3d 1313, 1319 (Fed. Cir. 2007).

Whether a document constitutes a printed publication under § 102 is a question of law based upon the underlying facts of each particular case. Cordis Corp. v. Boston Scientific Corp., 561 F.3d 1319, 1332-33 (Fed. Cir. 2009). Here, to qualify as a printed publication, the Electronic Parts Catalog promotional publication must have been disseminated or otherwise made accessible to persons interested and ordinarily skilled in the subject matter to which the advertisement relates prior to the critical date. See Kyocera Wireless Corp. v. Int'l Trade Comm'n, 545 F.3d 1340, 1350 (Fed. Cir. 2008); In re Hall, 781 F.2d 897, 899 (Fed. Cir. 1986) (explaining that public accessibility is the "touchstone in determining whether a reference constitutes a 'printed publication' bar under 35 U.S.C. § 102(b)"). The critical date is defined as the date one year prior to the filing date of the patent application. Constant v. Advanced Micro-Devices, Inc., 848 F.2d 1560, 1568 (Fed. Cir. 1988).

Orion argued that the prices were for wholesale vendors, not "customers," but the CAFC blew past that as reading into claim 1 a limitation non-extant.

Thus, testimonial and documentary evidence regarding the Electronic Parts Catalog reference establish that the Electronic Parts Catalog reference anticipates claim 1 of the '627 patent. See Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1319- 20 (Fed. Cir. 2009) (reversing a jury verdict and finding a method patent anticipated where a plaintiff tried to distinguish the prior art based on disclosed functions "in addition" to those claimed by the patent).

Other claims were readily knocked down.

The evidence also required JMOL on dependent claim 7 that states the additional element of "price information." It is undisputed that the IDB2000 system generated price information; the only question was whether the price information was "intended for conveyance to a customer" because it revealed a markup. Again, the claim did not specify what type of price information was intended for conveyance to a customer. It is unquestionable that wholesale customers would be interested in the wholesale price as well as the retail price. Moreover, any salesperson would have known the advantages of conveying only the retail price to a retail customer.

With regards to dependent claim 8 that requires "graphical information," because steps 7 and 9 of the IDB2000 system required selecting appropriate illustrations and the Electronic Parts Catalog reference showed large screen shots of part diagrams as examples, it is clear that the IDB2000 system allowed both the customer and the salesperson to see graphical information. Therefore, dependent claims 7 and 8 are also anticipated by the Electronic Parts Catalog reference.

Thus, the record reveals that a reasonable jury would not have a legally sufficient evidentiary basis to find that the claims at issue were not anticipated.

Inequitable Conduct

To prove inequitable conduct, Hyundai must provide clear and convincing evidence of (1) affirmative misrepresentations of a material fact, failure to disclose material information, or submission of false material information and (2) an intent to deceive the United States Patent and Trademark Office ("PTO"). Impax Labs., Inc. v. Aventis Pharm. Inc., 468 F.3d 1366, 1374 (Fed. Cir. 2006). Where a judgment regarding inequitable conduct follows a bench trial, as it did here, we review the district court's findings on the issues of materiality and intent for clear error. Id. at 1375. The ultimate decision regarding inequitable conduct is reviewed for abuse of discretion. Id.

Johnson's company, Clear with Computers, had licensed technology to develop software more than a year before the critical date, and had a showing at a parts fair, but disclose neither to the PTO during prosecution. The "district court rejected the materiality of both the license and the public use activity at the parts fair, and found no evidence that Mr. Johnson considered the pre-critical date activities material but chose not to disclose them anyway."

The district court did not clearly err by finding that the Case-1H agreement and the parts fair were not material given the evidence showing that the invention was not ready for patenting until after the critical date. After weighing the evidence, the court credited Mr. Johnson's testimony, which it described as "very believable" and "candid, straight-forward and very credible."

The district court also did not clearly err in finding no deceptive intent based on the pre-critical date activities alone. Rather, there must be clear and convincing evidence of "culpable" conduct. Halliburton Co. v. Schlumberger Tech. Corp., 925 F.2d 1435, 1443 (Fed. Cir. 1991). Nor could the district court have conclusively inferred an intent to deceive based upon the allegedly conflicting statement to the PTO. To make an inference of intent to deceive, the inference must not only be based on sufficient evidence and be reasonable in light of that evidence, but it must also be the single most reasonable inference able to be drawn from the evidence to meet the clear and convincing standard. See Scanner Techs. Corp. v. ICOS Vision Sys. Corp., 528 F.3d 1365, 1376 (Fed. Cir. 2008). Here, the court found Mr. Johnson truthfully stated to the PTO that the invention was not on sale or in public use before the critical date, despite weak evidence of pre-critical date activity, because from Mr. Johnson's perspective, the agreement and the parts fair did not entail the actual invention. Because Hyundai failed to establish threshold levels of either materiality or intent to deceive, the district court did not abuse its discretion in finding that Mr. Johnson did not engage in inequitable conduct. Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008) ("If a threshold level of intent to deceive or materiality is not established by clear and convincing evidence, the district court does not have any discretion to exercise and cannot hold the patent unenforceable regardless of the relative equities or how it might balance them.").

Dead patent, but no inequitable conduct. Damages vacated.

Posted by Patent Hawk at May 18, 2010 12:04 PM | Prior Art



I about fell over laughing when I saw this post. Great title and graphic!

Posted by: EG at May 19, 2010 3:33 AM