Opinion
Civil Action No. 99-301-SLR
December 13, 2000
Richard L. Horwitz, Esquire of Potter Anderson and Corroon LLP, Wilmington, Delaware, for plaintiff, of Counsel: James R. Atwood, Esquire, William D. Iverson, Esquire, Christopher N. Sipes, Esquire, of Covington Burling, Washington, D.C.
R. Franklin Balotti, Esquire, Frederick L. Cottrell, III, Esquire of Richards, Layton Finger, Wilmington, Delaware, for defendant, of Counsel: Evan R. Chesler, Esquire, Daniel Slifkin, Esquire of Cravath, Swaine Moore, New York, New York.
MEMORANDUM OPINION
I. INTRODUCTION
Plaintiff Pechiney Rhenalu filed this action against defendant Alcoa Inc. on May 12, 1999, seeking a declaration of invalidity and noninfringement of defendant's U.S. Patent No. 5,213,639 (the "`639 patent"), as well as damages for tortious interference with business relations. (D.I. 1) Plaintiff filed an amended complaint in March 2000 adding a claim of inequitable conduct. (D.I. 175) Defendant filed a counterclaim for infringement. (D.I. 189) Defendant has moved to dismiss plaintiff's complaint for lack of subject matter jurisdiction under the Declaratory Judgment Act, 28 U.S.C. § 2201 (a). (D.I. 265).
The parties later stipulated that they "withdraw with prejudice their pending requests for monetary relief, and further agree that no monetary relief (including damages) will be sought in this litigation." (D.I. 245)
Defendant has agreed to withdraw its counterclaim if the court grants defendant's motion to dismiss. (D.I. 266 at 11)
II. BACKGROUND
A. Field of the Invention
Aluminum alloy products have "long been used as the primary building material for commercial aircraft" because of their strength and high damage tolerance. (D.I. 175 at ¶ 6) For decades, the fuselages of such aircraft have been manufactured using "2024" aluminum alloy products. (Id. at ¶ 7) The 2024 designation refers to the international Alloy Designation System, developed by the Aluminum Association headquartered in Washington, D.C. to "designate the allowable range of composition of various common aluminum alloys." (Id.)
Damage tolerance is "the ability of a component to resist failure due to the presence of flaws, cracks, or other damage for a specified period of usage." (D.I. 175 at ¶ 6)
Before purchasing an aluminum alloy, an aircraft manufacturer subjects the alloy to a qualification process to determine whether it has consistent, reproducible properties, and whether those properties are suitable for the alloy's intended uses. (D.I. 267 at A90) The alloy must also satisfy the manufacturer's specification, which mandates the process that must be used to develop the product, and the properties that the product must possess in order to be used by the aircraft manufacturer. (Id. at A6-A28, A101)
B. The `639 Patent
Defendant's `639 patent, issued on May 25, 1993 and entitled "Damage Tolerant Aluminum Alloy Products Useful for Aircraft Applications Such as Skin," discloses and claims a new aluminum alloy product to replace 2024, particularly for fuselage skin applications. (`639 patent, col. 9, lns. 30-31; col. 1, lns. 47-54) The new alloy possesses improved damage tolerance properties such as fracture toughness and fatigue crack growth resistance. (Id. col. 1, lns. 12-18, 62-66) The improved damage tolerance properties enable aircraft manufacturers to save weight by reducing or eliminating the need for "crack stoppers," metal strips that are attached inside the fuselage skin to prevent the growth of cracks. (Id., col. 21, lns. 23-42)
"Fracture toughness" is the ability of a material to resist ripping a pre-existing crack all the way through the material. (`639 patent, col. 9, lns. 55-58) "Fatigue crack growth resistance" refers to the ability of a material to resist the slow advance of a crack during cycles of stressing and relaxing, such as changes in pressurization. (Id., col. 11, lns. 56-67)
The `639 patent also discloses and claims processes for producing the alloy. (Id., claim 22) The patent provides processes for fabricating "clad" products having a thin outer layer to provide added corrosion protection, and "bare" products without an outer layer. (Id., col. 4, lns. 36-42)
C. Defendant's 2524 Alloy
Defendant's commercial embodiment of the `639 patent has been designated "2524" by the Aluminum Association. 2524 is principally sold as a thin, clad product used as fuselage skin. (D.I. 266 at 5) The Boeing Company ("Boeing") is currently using 2524 as the fuselage skin on its 777-model aircraft. (D.I. 267 at A83). 2524 has also been selected by DaimlerChrysler Aerospace Airbus GmbH ("DaimlerChrysler") for use as the fuselage skin on the Airbus A340-500 and A340-600 jets ("A340-500/600"). (D.I. 290 at B195-B202)
Plaintiff has also conducted internal trials to evaluate modifications of its 2024A processes and products. (D.I. 267 at A69-A69b) Plaintiff admits that those products have not yet been marketed and there are no current plans to use the modified processes in the United States. Therefore, plaintiff concedes lack of subject matter jurisdiction over these trials. (D.I. 289 at 4)
Plaintiff, a French corporation, produces aluminum and aluminum alloys for the aerospace industry as well as other end-users. Plaintiff's principal customers have been the members of the Airbus consortium ("Airbus", including Aerospatiale Matra S.A. ("Aerospatiale") and DaimlerChrysler. (D.I. 290 at B6) Boeing has also qualified plaintiff as a supplier of 2024 plate and wing skin products. (Id. at B3)
Plaintiff's facilities for fabricating 2024A are in Issoire, France. In 1999, plaintiff purchased a rolling mill in Ravenswood, West Virginia, and a cast plate facility in Vernon, California. (D.I. 267 at A110c) Plaintiff also supplies U.S. aerospace companies from Europe through distributors located in the United States. (D.I. 290 at B7, B20-21)
1. Sales to Airbus
In 1996, Airbus requested that plaintiff create an improved damage tolerant aluminum alloy for potential use on the A340-500/600, which was being developed at the time. (D.I. 267 at A85; D.I. 290 at B55) Plaintiff created what was later designated the "2024A" alloy, and submitted qualification reports on 2024A products, designed to meet Airbus specifications, to Aerospatiale and DaimlerChrysler in July 1997. (D.I. 267 at A6) In early 1998, Airbus qualified plaintiff's 2024A processes and products for the A340-500/600. (Id. at A84) Airbus also issued a product specification governing sales and delivery to Airbus of 2024A using plaintiff's qualified processes. (Id. at A51-A56)
Aerospatiale purchased 2024A for use on the prototype A340-500/600. (Id. at A114a) However, in late 1998, Aerospatiale shifted orders for aluminum alloy plates from plaintiff to defendant. (D.I. 290 at B206) Similarly, DaimlerChrysler ultimately chose defendant's 2524 alloy, despite a policy of dual-sourcing. (Id. at B196, B136) Frédéric Bréda ("Bréda"), general sales manager for aerospace rolled products for Pechiney, testified in an affidavit that:
Upon the advice of counsel, plaintiff permitted the use of 2024A only on A340-500/600 aircraft that "are not destined to American, Canadian, Australian or Brazilian companies." (D.I. 267 at A104b, A59) Aerospatiale originally ordered 2024A for three test aircraft, one of which was to be sold into the commercial market. (D.I. 290 at B122) Aerospatiale ultimately cancelled the order for the third aircraft, allegedly because of its concern that the aircraft could never be sold in the United States due to Alcoa's patent. (D.I. 289 at 14)
Plaintiff argues that defendant forced Aerospatiale and DaimlerChrysler to purchase 2524 by threatening to enforce the `639 patent if they chose plaintiff's 2024A alloy. (D.I. 289 at 5-12) Defendant argues that they purchased 2524 because plaintiff refused to indemnify them in the event its 2024A alloy infringed the `639 patent. (D.I. 311 at 8)
The A340-500/600 series of aircraft are now in commercial production, and Airbus is offering the aircraft for sale to airline and aircraft leasing companies worldwide, including . . . in the United States. The first deliveries are expected in early 2002. Firm orders for approximately 65 aircraft have been publicly announced, including orders for 11 aircraft by International Lease Finance Corporation ("ILFC"), a subsidiary of American International Group, Inc. ILFC is located in California and is a leading aircraft leasing company.
(D.I. 290 at B2)
Airbus is also presently considering both the 2024A and 2524 alloys for use as fuselage skin on its proposed double-decker Airbus A3XX jet. (D.I. 267 at A62) Although Airbus has not yet made a final decision on which alloy it will use, the A3XX is currently under development and is first expected to fly in 2005. (Id. at A104, A90)
Bréda also testified that "[i]n June 2000, . . . Airbus decided to commence marketing the [A3XX jet], with a target of 50 orders before proceeding with commercial production. [In October 2000], Airbus announced that it had already received 32 orders and anticipated that its target would easily be reached. Five of the orders are from ILFC." (D.I. 290 at B3)
2. Marketing to Boeing
In 1997, plaintiff met with Boeing representatives in France and at Boeing's Seattle plant and, although the focus of the meetings was on other products, the parties discussed the possibility of substituting plaintiff's 2024A for defendant's 2524. (D.I. 290 at 812-15, 832-33) In November 1997, Boeing sent plaintiff a "Request for Proposal," seeking bids for a range of aluminum alloy plate and sheet products. (Id. at 895-8114) On December 23, 1997, plaintiff bid on various items in the Boeing request, and quoted prices for 2024A where Boeing listed 2524. (Id. at B94a-B94r) Plaintiff then gave a presentation at Boeing headquarters in Seattle in January 1998, in which plaintiff mentioned its ability to manufacture 2024A wing skins and fuselage sheet. (Id. at 3115, 817-19) Although Boeing has not purchased 2024A from plaintiff, plaintiff states that it is "ready, willing and able to supply 2024A clad sheet products to Boeing on a large-scale commercial basis." (Id. at 84)
In the bid for body skins, plaintiff stated, "We are offering 2024A instead of 2524 at a premium of 12% above the cost of 2024." (D.I. 290 at B94e, B121a) Bréda testified in his deposition that "in [his] opinion, it is not an offer for sale; it is an offer to talk about it if Boeing is interested." (D.I. 267 at A106)
E. Defendant's Covenant Not to Sue
Defendant admits that plaintiff's 2024A processes do not infringe the `639 patent process claims or product-by-process claim, and that plaintiff's 2024A products do not infringe certain of the `639 product claims. (D.I. 266 at 16) Thus, defendant offered the following covenant:
1. Alcoa unconditionally promises not to sue Pechiney for infringement, direct or contributory, based on any of the `639 patent process claims (claims 1-69 and 104-123) or the product-by-process claim (claim 124), with respect to Pechiney's use of its qualified "commercial" 2024A production processes, as specifically defined by both (1) the compositional limits, contained at Bates number PE 322075, for the 2014-15 ingot type, and (2) the process specifically identified in Appendix D (beginning at Bates number PE 177017) of Pechiney's "Qualification Report of 2024A-T3 Clad Sheets and Plates According to A.I.M.S. 03-04-022", dated July 21, 1997, submitted to Airbus, and Appendix I (beginning at Bates number PE 167587) of Pechiney's "Qualification Report of 2024A-T351 Plates According to A.I.M.S. — 03-04-014 Ed. March 1997", dated July 25, 1997, submitted to Airbus, and as further defined by Sections 1.1 to 1.14 and 2.1 to 2.12 of Pechiney's Response to Interrogatory No. 19 in Alcoa's Seventh Set of Interrogatories; provided, however, that Pechiney not subtract from, add to, or otherwise deviate in any way, from the particular processes as defined above (e.g., Pechiney may not add to the process a reheating step, between hot working steps, within the temperature ranges of the `639 patent).
2. Alcoa unconditionally promises not to sue Pechiney for infringement, direct or contributory, of product claims 70, 71, 76, 77, 83, 84, 85, 88, 90, 92, 94, 96, 98, 100, 102, 125-135, 167-191, 196-213, 217 and 231-232 with respect to Pechiney's "commercial" 2024A products, as defined by both (1) the compositional limits, contained at Bates number FE 322075, for the 2024-15 ingot type, and (2) the processes specifically identified in Appendix D (beginning at Bates number PE 177017) of "Qualification Report of 2024A-T3 Clad Sheets and Plates According to A.I.M.S. 03-04-022", dated July 21, 1997, submitted to Airbus, and Appendix 1 (beginning at Bates number FE 167587) of Pechiney's "Qualification Report of 2024A-T351 Plates According to A.I.M.S. 03-04-014 Ed. March 1997", dated July 25, 1997, submitted to Airbus, and as further defined by Sections 1.1 to 1.14 and 2.1 to 2.12 of Pechiney's Response to Interrogatory No. 19 in Alcoa's Seventh Set of Interrogatories; provided, however, that Pechiney not subtract from, add to, or otherwise deviate in any way, from the particular processes as defined above (e.g., Pechiney may not add to the process a reheating step, between hot working steps, within the temperature ranges of the `639 patent).
(Id. at 16-17)
III. STANDARD OF REVIEW
Not only may the lack of subject matter jurisdiction be raised at any time, it cannot be waived and the court is obliged to address the issue on its own motion. See Moodie v. Fed. Reserve Bank of NY, 58 F.3d 879, 882 (2d Cir. 1995). Once jurisdiction is challenged, the party asserting subject matter jurisdiction has the burden of proving its existence. See Carpet Group Int'l v. Oriental Rug Importers Ass'n Inc., 227 F.3d 62, 69 (3d Cir. 2000).
Under Rule 12(b)(1), the court's jurisdiction may be challenged either facially (based on the legal sufficiency of the claim) or factually (based on the sufficiency of jurisdictional fact). See 2 James W. Moore, Moore's Federal Practice § 12.30[4] (3d ed. 1997). Under a facial challenge to jurisdiction, the court must accept as true the allegations contained in the complaint. See id. Dismissal for a facial challenge to jurisdiction is "proper only when the claim "clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or . . . is wholly insubstantial and frivolous.'" Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1408-1409 (3d Cir. 1991) (quoting Bell v. Hood, 327 U.S. 678, 682 (1946)).
Under a factual attack, however, the court is not "confine[d] to allegations in the . . . complaint, but [can] consider affidavits, depositions, and testimony to resolve factual issues bearing on jurisdiction." Gotha v. United States, 115 F.3d 176, 179 (3d Cir. 1997).See also Mortensen v. First Fed. Sav. Loan Ass'n, 549 F.2d 884, 891-892 (3d Cir. 1977). In such a situation, "no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims." Carpet Group, 227 F.3d at 69 (quoting Mortensen, 549 F.2d at 891). Although the court should determine subject matter jurisdiction at the outset of a case, "the truth of jurisdictional allegations need not always be determined with finality at the threshold of litigation." Moore at § 12.30[1]. Rather, a party may first establish jurisdiction "by means of a nonfrivolous assertion of jurisdictional elements and any litigation of a contested subject-matter jurisdictional fact issue occurs in comparatively summary procedure before a judge alone (as distinct from litigation of the same fact issue as an element of the cause of action, if the claim survives the jurisdictional objection)." Jerome B. Grubart, Inc. v. Great Lakes Dredae Dock Co., 513 U.S. 527, 537-38 (1995) (citations omitted).
IV. DISCUSSION
Jurisdiction by this court over plaintiff's complaint can only arise from the Declaratory Judgment Act (the "Act"). The Act provides:
In a case of actual controversy within its jurisdiction, . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.28 U.S.C. § 2201(a). "The existence of an actual controversy is an absolute predicate for declaratory judgment jurisdiction. When there is no actual controversy the court has no jurisdiction to decide the case. When there is an actual controversy and thus jurisdiction, the exercise of that jurisdiction is discretionary." Spectronics Corp. v. H.B. Fuller Co., 940 F.2d 631, 633-634 (Fed. Cir. 1991) (citations omitted). No absolute right to a declaratory judgment exists. See Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846 F.2d 731, 733 n. 6 (Fed. Cir. 1988)
When a defendant challenges the court's jurisdiction pursuant to Rule 12(b)(1), the plaintiff has the burden of proof and must establish an actual case or controversy on the "totality of the circumstances."Spectronics, 940 F.2d at 634 (quoting Maryland Cas. Co. v. Pacific Coal Oil Co., 312 U.S. 270, 272 (1941)). Moreover, since an actual controversy must be extant at all stages of review, the burden is on the plaintiff "to establish that jurisdiction over its declaratory judgment action existed at, and has continued since, the time the complaint was filed."Id. at 635 (quoting Int'l Med. Prosthetics Research Assocs., Inc. v. Gore Enter. Holdings, Inc., 787 F.2d 572, 575 (Fed. Cir. 1986)). When a factual dispute exists, it is plaintiff's burden to establish jurisdiction by the preponderance of the evidence. See West Interactive Corp. v. First Data Resources, Inc., 972 F.2d 1295, 1297 (Fed. Cir. 1992).
The Federal Circuit has established a two-pronged test for evaluating whether a court has jurisdiction to grant declaratory judgment in a patent case. First, the accused infringer must have actually produced or be prepared to produce an allegedly infringing product. Jervis B. Webb Co. v. Southern Sys., Inc., 792 F.2d 1388, 1398-99 (Fed. Cir. 1984). In other words, the plaintiff must have taken "concrete steps" or "meaningful preparation" toward infringing activity. Lang v. Pacific Marine Supply Co., 895 F.2d 761, 764 (Fed. Cir. 1990). To satisfy this requirement, the plaintiff's level of preparation must be such that "but for a finding that the product infringes or for extraordinary and unforeseen contingencies, the plaintiff would and could begin production immediately." Int'l Harvester Co. v. Deere Co., 623 F.2d 1207, 1210 (7th Cir. 1980) (citations omitted). Second, the patent holder's conduct must "create an objectively reasonable apprehension on the part of the accused infringer that the patent holder will initiate suit if the allegedly infringing activity continues." Spectronics, 940 F.2d at 634 (citations omitted). The court is to consider the "totality of the circumstances" in addressing these issues, taking into account "the realities of business life." Arrowhead, 846 F.2d at 736. See also Sherwood Med. Indus., Inc. v. Deknatal, Inc., 512 F.2d 724, 728 (8th Cir. 1975) (stating that in declaratory judgment actions, "courts should make a pragmatic judgment, aware of the business realities that are involved"). Furthermore, "the existence of a controversy must be evaluated on a claim-by-claim basis." Jervis B. Webb Co., 742 F.2d at 1399 (citations omitted).
The existence of a sufficiently concrete dispute between the parties vanishes when subsequent events render the threat of infringement nonexistent. See Super Sack Mfg. Corp. v. Chase Packaging Corp., 57 F.3d 1054, 1058 (Fed. Cir. 1995). The Federal Circuit has held that
a patentee defending against an action for a declaratory judgment of invalidity can divest the trial court of jurisdiction over the case by filing a covenant not to assert the patent at issue against the putative infringer with respect to any of its past, present, or future acts . . . The legal effect of [the patentee's] promise not to sue is the heart of the matter. . . .Id. at 1058-59.
Defendant admits that plaintiff has a reasonable apprehension of suit. (D.I. 311 at 5) Therefore, the only issues remaining are whether plaintiff has taken concrete steps to make, use, sell, or offer to sell 2024A within the United States, and whether defendant's covenant to sue removes plaintiff's reasonable apprehension of suit.
A. Concrete Steps or Meaningful Preparation Toward Infringing Activity
Because the United States patent laws apply only to activities occurring in the United States, plaintiff must have undertaken "concrete steps" or "meaningful preparation" to infringe the `639 patent in the United States. See 35 U.S.C. § 271. This issue is a question of degree to be resolved on a case-by-case basis." Arrowhead, 846 F.2d at 736.
In the case at bar, plaintiff has sufficiently demonstrated "meaningful preparation" toward infringing activity through its sales and marketing of 2024A to Airbus and Boeing. Plaintiff marketed 2024A to Airbus for use on the A340-500/600 aircraft, which are now in commercial production and have been sold to American companies, although Airbus will not be using 2024A on those aircraft. Airbus is presently evaluating 2024A for use on the A3XX, for which Airbus has already received orders from American companies. Finally, plaintiff clearly made an offer to sell 2024A to Boeing, an American aircraft manufacturer. See 3D Systems, Inc. v. Aarotech Labs., Inc., 160 F.3d 1373, 1379 (Fed. Cir. 1998) (holding that price quotation letters are offers to sell under § 271 "based on the substance conveyed in the letters, i.e., a description of the allegedly infringing merchandise and the price at which it can be purchased"); Dow Chemical Co. v. Exxon Chemical Patents, Inc., 1995 WL 562289 at *6 (D. Del. August 16, 1995) (citations omitted) ("The law does not offer bright guidelines for determining what actions by a possible patent infringer adequately constitute `meaningful preparation.' It is clear that a plaintiff need not have engaged in the actual manufacture, use, or sale of an infringing product.").
Plaintiff argues that Airbus's decision not to use 2024A on A340-500/600 sold to American companies was prompted by defendant's threats of enforcement of the `639 patent against Airbus. Defendant, in turn, argues that Airbus purchased the 2524 alloy instead of plaintiff's 2024A because plaintiff refused to indemnify Airbus if 2024A infringed the `639 patent. Either way, the central issue is infringement of the `639 patent, supporting the existence of a case or controversy under the Declaratory Judgment Act.
A plaintiff seeking a declaration of noninfringement should not be denied subject matter jurisdiction for failure to engage in infringing activity when that "failure" was a direct result of a patentee's threats of enforcement. In this case, plaintiff did present sufficient "concrete steps" toward infringing activity in the United States to establish a case or controversy under the Declaratory Judgment Act.
Judge Markey described the "sad and saddening scenario that led to the enactment of the Act as follows:
[A] patent owner engages in a danse macabre, brandishing a Damoclean threat with a sheathed sword. . . . Guerrilla-like, the patent owner attempts extrajudicial patent enforcement with scare-the-customer-and-run tactics that infect the competitive environment of the business community with uncertainty and insecurity. . . . Before the Act, competitors victimized by that tactic were rendered helpless and immobile so long as the patent owner refused to grasp the nettle and sue. After the Act, those competitors were no longer restricted to an in terrorem choice between the incurrence of a growing potential liability for patent infringement and abandonment of their enterprises; they could clear the air by suing for a judgment that would settle the conflict of interests. The sole requirement for jurisdiction under the Act is that the conflict be real and immediate, i.e., that there be a true, actual "controversy" required by the Act.Arrowhead, 846 F.2d 731, 734-735 (Fed. Cir. 1988).
Defendant's reliance on Akzona Inc. v. E.I. de Pont de Nemours Co., 662 F. Supp. 603 (D. Del. 1987) and Enka B.V. v. E.I. du Pont de Nemours Co., 519 F. Supp. 356 CD. Del. 1981) is misplaced, as those cases were decided prior to the 1994 amendments to 35 U.S.C. § 271(a) which added "offers to sell" as an infringing activity.
B. Covenant Not to Sue and Reasonable Apprehension of Suit
Defendant has effectively removed plaintiff's reasonable apprehension of suit on certain patent claims by offering plaintiff a covenant not to sue on those claims. Plaintiff argues that the covenant is not broad enough in scope, as it does not apply to end-users of 2024A who can be indemnified by plaintiff, and it is unfairly conditioned on plaintiff not modifying its alloy. First, there is no precedent requiring a covenant not to sue to include end-users, and the Federal Circuit has upheld covenants that do not apply to end-users of potentially infringing products. See e.g., Amana Refrigeration, Inc. v. Quadlux, Inc., 172 F.3d 852, 855 (Fed. Cir. 1999); Super Sack, 57 F.3d at 1057. Second, a covenant not to sue is legally sufficient if it removes a reasonable apprehension of suit for all present and past activity; it need not cover "speculative" future activity. See Super Sack, 57 F.3d at 1059 (holding a covenant not to sue valid where "although [the plaintiff] may have some cause to fear an infringement suit . . . based on products it may develop in the future, [the plaintiff] has no cause for concern that it can be held liable for any infringing acts involving products that it made, sold, or used on or before the day (the defendant] filed its motion to dismiss for lack of an actual controversy."). See also Amana Refrigeration, 172 F.3d at 855 ("[A]n actual controversy cannot be based on a fear of litigation over future products.").
In short, plaintiff has failed to establish, in light of defendant's covenant not to sue, a "reasonable apprehension" that defendant will enforce the enumerated claims as required to establish the justiciable controversy necessary for maintenance of a declaratory judgment action. Accordingly, the court lacks subject matter jurisdiction over those claims under the Declaratory Judgment Act. Furthermore, defendant is "forever estopped by its counsel's statement of nonliability" from asserting infringement of the patent claims enumerated in its covenant not to sue. Super Sack, 57 F.3d at 1059.
Plaintiff argued, and defendant agrees, that plaintiff may rely on all claims of the `639 patent to sustain its inequitable conduct claim.
V. CONCLUSION
For the reasons stated, defendant's motion to dismiss is granted in part and denied in part. An appropriate order shall issue.
ORDER
At Wilmington this 13th day of December, 2000, consistent with the memorandum opinion issued this same day,IT IS ORDERED that defendant's motion to dismiss (D.I. 265) is granted in part and denied in part as follows:
1. Defendant's motion to dismiss is granted with respect to the following claims of the `639 patent: 1-71, 76, 77, 83-85, 88, 90, 92, 94, 96, 98, 100, 102, 104-135, 167-191, 196-213, 217, 231 and 232.
2. Defendant's motion to dismiss is denied with respect to the remaining claims of the `639 patent.
ORDER
At Wilmington this 13th day of December, 2000, having reviewed plaintiff's motions for summary judgment submitted in this case; and recognizing that the following legal principles govern these summary judgment proceedings, to wit:
1. Summary judgment is appropriate only "if the pleadings, depositions, answers to interrogatories, and admissions on file, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). "The evidence must be viewed in the light most favorable to the nonmoving party." Southwall Techs., Inc. v. Cardinal IG Co., 54 F.3d 1570, 1575 (Fed. Cir. 1995).
2. An issued patent is presumed valid. See 35 U.S.C. § 282. In order to overcome this presumption, the party challenging validity bears the burden of proving by clear and convincing evidence that the invention fails to meet the requirements of patentability. See Hewlett-Packard Co. v. Bausch Lomb, 909 F.2d 1464, 1467 (Fed. Cir. 1990). Clear and convincing evidence is evidence that "could place in the ultimate fact finder an abiding conviction that the truth of [the] factual contentions are `highly probable.'" Colorado v. New Mexico, 467 U.S. 310, 316 (1984).
3. Section 102(a) of the patent statute provides that a person shall be entitled to a patent unless
the invention was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent.35 U.S.C. § 102(a). Anticipation under this section requires the presence of every element of a properly construed claim in a single prior art reference. See Glaverbel Societe Anonvme v. Northlake Mktg. Supply, Inc., 45 F.3d 1550, 1554 (Fed. Cir. 1995). See also Scripps Clinic Research Found. v. Genentech, Inc., 927 F.2d 1565, 1576 (Fed. Cir. 1991) ("There must be no difference between the claimed invention and the reference disclosure, as viewed by a person of ordinary skill in the field of the invention."). The prior art reference must teach "each and every element as set forth in the claim[s]" at issue. Orthokinetics, Inc. v. Safety Travel Chairs, Inc., 806 F.2d 1565, 1574 (Fed. Cir. 1986).
4. Section 102(b) of the patent statute provides that a person shall be entitled to a patent unless
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.35 U.S.C. § 102 (b). A patent is invalid due to the "on sale" bar when: (1) an embodiment of the patent is the subject of a commercial offer for sale more than one year before the patent application date; and (2) the invention is ready for patenting. See Pfaff v. Wells Elecs., Inc., 119 S.Ct. 304, 306-312 (1998). To establish a commercial offer for sale, one "must demonstrate by clear and convincing evidence that there was a definite sale or offer to sell more than one year before the application for the subject patent, and that the subject matter of the sale or offer to sell fully anticipated the claimed invention or would have rendered the claimed invention obvious by its addition to the prior art." STX, LLC v. Brine, Inc., 211 F.3d 588, 590 (Fed. Cir. 2000) (citations omitted). A single sale or even a single offer to sell primarily for profits is sufficient to trigger the on sale bar. See In re Caveney, 761 F.2d 671, 675 (Fed. Cir. 1985).
5. By contrast, a product offered for sale more than one year before the filing date may escape the statutory bar where such sale was primarily for a bona fide experimental purpose to perfect the invention.See U.S. Envtl. Prods., Inc. v. Westall, 911 F.2d 713, 716 (Fed. Cir. 1990). An experimental use is one performed to perfect or complete an invention to the point of determining that it will work for its intended purpose. See RCA Corp. v. Data Gen. Corp., 887 F.2d 1056, 1061 (Fed. Cir. 1989). It is well-settled that testing of a device to determine suitability for a customer's particular need is not an experimental use that will negate commercialization by the inventor. See La Bounty Mfp., Inc. v. United States Int'l Trade Comm'n, 958 F.2d 1066, 1074 (Fed. Cir. 1992).
6. Inequitable conduct consists of an "affirmative misrepresentation of a material fact, failure to disclose material information, or submission of false material information, coupled with an intent to deceive" the Patent Office. B.F. Goodrich Co. v. Aircraft Braking Sys., 72 F.3d 1577, 1584 (Fed. Cir. 1986) (citation omitted). One alleging inequitable conduct must prove the threshold elements of materiality and intent by clear and convincing evidence, and then the trial court must weigh the threshold findings of materiality and intent in light of all the circumstances to determine whether the equities warrant a conclusion that inequitable conduct occurred. See Halliburton Co. v. Schlumberqer Tech. Corp., 925 F.2d 1435, 1439 (Fed. Cir. 1991) (footnote and citations omitted). A fact or information is material if there is a substantial likelihood that a reasonable examiner would consider it important in deciding whether to allow the application to issue as a patent. See 37 C.F.R. § 1.56. In addition, one must demonstrate that the inventors acted with an intent to deceive or mislead the Patent Office.See La Bounty Mfg., 958 F.2d at 1076. Because direct evidence of intent is rarely available, intent may be inferred from clear and convincing evidence of the surrounding circumstances. See id. However, the determination that an undisclosed reference is material does not presume an intent to deceive. See Halliburton Co., 925 F.2d at 1442. Furthermore, a showing that references with some degree of materiality were not disclosed is insufficient to establish inequitable conduct. See id.
7. Section 112, ¶ 2 of the patent statute provides that "[t]he specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention." 35 U.S.C. § 112, ¶ 2. The Federal Circuit has explained the "definiteness" requirement as follows:
The operative standard for determining whether [the definiteness] requirement has been met is "whether those skilled in the art would understand what is claimed when the claim is read in light of the specification."Beachcombers Int'l, Inc. v. Wildewood Creative Prods., 31 F.3d 1154, 1158 (Fed. Cir. 1994) (quoting Orthokinetics, Inc. v. Safety Travel Chairs, Inc., 806 F.2d 1565, 1576 (Fed. Cir. 1986)). "If the claims read in light of the specification reasonably apprise those skilled in the art of the scope of the inventions, § 112 demands no more." Personalized Media Communications, L.L.C. v. United States Int'l Trade Comm'n, 161 F.3d 696, 705 (Fed. Cir. 1998) (quoting Miles Lab, Inc. v. Shandon, Inc., 997 F.2d 870, 875 (Fed. Cir. 1993).
NOW, THEREFORE, IT IS ORDERED that plaintiff's motion for summary judgment based on the "on sale" bar under 35 U.S.C. § 102 (b) (D.I. 276) is denied, for the reasons that follow:
1. For the purposes of this motion, the court assumes a relevant critical date of March 6, 1991, although the court declines to decide the issue based on the record presented.
2. Defendant began selling samples of C188, the embodiment of the `639 patent at the time, to Boeing in 1990. Defendant contends that these sales were solely for experimental purposes. Plaintiff argues that the sales were primarily for the benefit of Boeing and not to perfect the invention; therefore, the experimental use exception does not apply.
3. Based on this record, the court concludes that there are genuine issues of material fact as to whether the experimental use exception applies to defendant's sales of the embodiment of the `639 patent prior to the critical date.
IT IS FURTHER ORDERED that plaintiff's motion for summary judgment based on anticipation and noninfringement under 35 U.S.C. § 102 (D.I. 278) is denied, for the reasons that follow:
1. Plaintiff argues that the claims of the `639 patent are anticipated by two prior art references: defendant's "417 Process, a commercial fabrication process for high purity 2124 aluminum alloy products, and a 1976 publication by Alcoa engineer Dr. James Staley, entitled, "Microstructure and Toughness of High-Strength Aluminum Alloys."
2. Defendant argues that the 417 Process does not anticipate the `639 patent because it does not apply to clad products, the material made from the 417 Process exceeds the maximum thickness allowed under the `639 patent, and the 417 Process allows an extended "reset" step not permitted in the `639 process claims. Defendant further argues that the Staley article makes reference only to "thermal mechanical treatments," which does not disclose the steps of the `639 patent process claims, nor enables one skilled in the art to practice them.
3. Plaintiff also claims that since its 2024A alloy embodies the prior art of the `639 patent, it necessarily does not infringe the `639 patent. Defendant maintains that its expert has concluded that the 2024A alloy infringes the `639 patent, and offers evidence of willful copying by plaintiff.
4. Based on this record, the court concludes that there are genuine issues of material fact as to whether every element of the claims at issue are embodied and enabled by the alleged prior art references, and whether plaintiff's 2024A alloy infringes the `639 patent.
IT IS FURTHER ORDERED that plaintiff's motion for summary judgment based on inequitable conduct under 37 C.F.R. § 1.56 (D.I. 274) is denied, for the reasons that follow:
1. Plaintiff claims that defendant failed to disclose material information to the Patent Office regarding the use by defendant of high temperature reheating in its 2024 and 2124 processes, the Staley article, and its commercialization of the C188 embodiment of the `639 patent prior to the critical date of March 6, 1991. Defendant argues that none of this information is material, since plaintiff mischaracterizes the circumstances of invention of the alloy; the reheating processes and Staley article are not prior art and are cumulative to what was already submitted to the Patent Office; and the "commercialization" of C188 was actually an experimental use. Defendant also disputes plaintiff's allegation that defendant intended to deceive the Patent Office.
2. Based on this record, the court concludes that there are genuine issues of material fact as to whether the alleged prior art is material and whether defendant intended to deceive the Patent Office.
IT IS FURTHER ORDERED that plaintiff's motion for summary judgment based on indefiniteness under 35 U.S.C. § 112, ¶ 2 (D.I. 271) is denied, for the reasons that follow:
1. Plaintiff argues that the `639 patent claim limitations to a "5% improvement over 2024 alloy" are indefinite because a person of ordinary skill in the art could not determine the benchmark fracture toughness and fatigue crack growth rate for "2024 alloy," and whether "fracture toughness" refers to Kc or Kapp values, or both. Defendant contends that a person of ordinary skill would understand typical property values for "2024 alloy" are Kc of 125 ksiin, Kapp of 79 ksiin, and a fatigue crack growth rate derived from Figure 8a in the patent. Defendant further claims that the failure to specify Kc or Kapp values means that the claim is satisfied by either value.
2. Plaintiff also claims that the `639 patent claim limitations requiring certain absolute values of "fracture toughness" are indefinite because a person of ordinary skill in the art could not determine the initial crack length and sample thickness, both of which cause variation in the Kc and Kapp values. Defendant argues that these claims are not indefinite because a person of ordinary skill would test a sample having the same thickness as the product, using an initial crack length of 0.25 times the width of the sample.
3. Plaintiff further argues that the `639 patent claim limitations requiring certain absolute values of "fatigue crack growth rate" are indefinite because a person of ordinary skill in the art could not determine the frequency for "constant K gradient" testing, and the thickness of a test sample. Defendant contends that these claims are not indefinite because a person of ordinary skill would understand how to modulate the frequency for "constant K gradient" testing, and use a test sample having the same thickness as the product.
4. Plaintiff also claims that typographical errors in claims 81 and 82 render those claims invalid until corrected by a statutory Certificate of Correction. Defendant argues that a person skilled in the art would recognize the obvious errors and turn to the specification to properly construe the claims.
5. Based on this record, the court concludes that there exist genuine issues of material fact as to whether certain claims of the `639 patent are invalid because of indefiniteness.