2008-1167 Lacks Indus. v. McKenzie Wheel
ED/MI 96-CV-75692
Judge John Feikens
An on-sale bar case where the court concluded that plaintiff’s product quotes—while not likely to be accepted without significant negotiations, back-and-forth, etc.--could have been accepted to create a binding contract, and thus qualify under Group One and establish an on-sale bar.
Oral argument is scheduled for Thursday, November 6, 2008 at 10:00 A.M., San Francisco Federal Court.
Summary of the Argument from Lacks Industries. Steven L. Underwood, Matthew J. Gipson and Andrea W. Zydron of Price, Heneveld, Cooper, DeWitt & Litton, LLP, (Grand Rapids, MI) and David W. Wicklund of Shumaker, Loop & Kendrick, LLP (Toledo, OH) on brief.
The District Court erred in ruling that the Remaining Claims of the ‘213 Patent are invalid under 35 U.S.C. § 102(b) because of Lacks' own activities before the critical date. The District Court adopted the findings of fact and the conclusions of law of the Special Master, wherein the Special Master found the Remaining Claims invalid based upon alleged on-sale bars. The District Court also endorsed the analysis and conclusions of the Special Master in his “Additional Considerations” section of the Report and Recommendation, wherein the Special Master criticized the Federal Circuit's Group One decision.
Unfortunately, the Special Master's hostility to Group One infected his analysis. As a consequence, he has refused to follow the Federal Circuit's mandate to apply the Group One standard to the record in this case. Although the Federal Circuit has repeatedly affirmed and further clarified Group One and the Supreme Court has had the opportunity to review the Group One standard multiple times (see, e.g., Group One, Ltd. v. Hallmark Cards, Inc., 254 F.3d 1041 (Fed. Cir. 2001), cert. denied, 534 U.S. 1127 (2002); Linear Tech. Corp. v. Micrel, Inc., 275 F.3d 1040 (Fed. Cir. 2001), cert. denied, 538 U.S. 1052 (2003)), the Special Master seemingly believes that the Federal Circuit should follow his reasoning and abandon Group One.
The Special Master has relied upon five documents, which were not litigated until after the previous appeal, as alleged “offers,” in conducting his “totality of the circumstances” analysis in finding the Remaining Claims to be invalid based upon alleged on-sale bars. However, separate and apart from applying the wrong legal standard, and failing to follow the mandate, the five documents cannot render the claims invalid under § 102(b), because they are not “offers” and do not unambiguously require practice of any of the methods of the Remaining Claims.
None of the five documents are “offers,” since numerous essential terms are missing. More importantly, none of the five alleged offers can be made into a legally binding contract by mere acceptance (assuming consideration). In addition, the Special Master's analysis fails to truly recognize the fact that the Remaining Claims are method claims. In Plumtree Software, Inc. v. Datamize, LLC, 473 F.3d 1152, 1163 (Fed. Cir. 2006), the Federal Circuit addressed the on-sale bar in the context of method claims, holding that there are two ways in which a claimed method can be offered for sale before the critical date: (1) if a pre-critical date offer unambiguously required the patent holder to use the claimed method; or (2) if prior to the critical date the patent holder practiced the claimed method, pursuant to a contract. There is no dispute that Lacks did not practice any of the claimed methods of the Remaining Claims, pursuant to a contract, prior to the critical date. Thus, the issue in this case concerns the first Plumtree theory.
The Special Master makes no attempt to show that the cladding discussed in these five alleged “offers” unambiguously required Lacks to use any of the claimed methods of the Remaining Claims in assembling a composite wheel. Indeed, there is no dispute that Lacks could not have performed any method of the Remaining Claims in assembling a composite wheel prior to the critical date, because Lacks did not have a wheel supplier lined up to provide the wheel needed to perform the steps in the claimed methods until well after the critical date. It is important to note that all of the Remaining Claims require that the inboard surface of the overlay be “configured to face said outboard surface [of the wheel],” meaning that Lacks could not practice the different methods set forth in the Remaining Claims until a wheel supplier was lined up to provide a wheel that had an outboard surface that would configure with the inboard surface of a yet to be approved overlay. Claim 25 is set forth below with the representative language highlighted:
In addition, as discussed above, there are numerous different claimed methods set forth in the ‘213 Patent. Also, as discussed above, Lacks had many different methods of assembly available prior to the critical date. As discussed in the ‘809 and ‘906 Patents, Lacks was practicing a full-surface adhesive method for attaching the overlay to the wheel. In addition, Lacks was testing a foaming process, which is the subject of yet additional patents, for attaching the overlay to the wheel. The Special Master utterly failed to establish any correlation of the five alleged “offers” and any of the methods disclosed and claimed in the ‘213 Patent, let alone the methods of the Remaining Claims of the ‘213 Patent. Instead, the Special Master concocts a law-of-the-case argument as a substitute for clear and convincing evidence that there is a nexus between the five alleged “offers,” litigated after the prior appeal, and the methods of the Remaining Claims. However, just because the methods of the ‘213 Patent were allegedly “ready for patenting” prior to the critical date, does not mean that the five alleged “offers” unambiguously required Lacks to use the methods of the Remaining Claims, especially given all the methods available to Lacks and Mr. Chase at that time.
Unfortunately, the Special Master's hostility to Group One infected his analysis. As a consequence, he has refused to follow the Federal Circuit's mandate to apply the Group One standard to the record in this case. Although the Federal Circuit has repeatedly affirmed and further clarified Group One and the Supreme Court has had the opportunity to review the Group One standard multiple times (see, e.g., Group One, Ltd. v. Hallmark Cards, Inc., 254 F.3d 1041 (Fed. Cir. 2001), cert. denied, 534 U.S. 1127 (2002); Linear Tech. Corp. v. Micrel, Inc., 275 F.3d 1040 (Fed. Cir. 2001), cert. denied, 538 U.S. 1052 (2003)), the Special Master seemingly believes that the Federal Circuit should follow his reasoning and abandon Group One.
The Special Master has relied upon five documents, which were not litigated until after the previous appeal, as alleged “offers,” in conducting his “totality of the circumstances” analysis in finding the Remaining Claims to be invalid based upon alleged on-sale bars. However, separate and apart from applying the wrong legal standard, and failing to follow the mandate, the five documents cannot render the claims invalid under § 102(b), because they are not “offers” and do not unambiguously require practice of any of the methods of the Remaining Claims.
None of the five documents are “offers,” since numerous essential terms are missing. More importantly, none of the five alleged offers can be made into a legally binding contract by mere acceptance (assuming consideration). In addition, the Special Master's analysis fails to truly recognize the fact that the Remaining Claims are method claims. In Plumtree Software, Inc. v. Datamize, LLC, 473 F.3d 1152, 1163 (Fed. Cir. 2006), the Federal Circuit addressed the on-sale bar in the context of method claims, holding that there are two ways in which a claimed method can be offered for sale before the critical date: (1) if a pre-critical date offer unambiguously required the patent holder to use the claimed method; or (2) if prior to the critical date the patent holder practiced the claimed method, pursuant to a contract. There is no dispute that Lacks did not practice any of the claimed methods of the Remaining Claims, pursuant to a contract, prior to the critical date. Thus, the issue in this case concerns the first Plumtree theory.
The Special Master makes no attempt to show that the cladding discussed in these five alleged “offers” unambiguously required Lacks to use any of the claimed methods of the Remaining Claims in assembling a composite wheel. Indeed, there is no dispute that Lacks could not have performed any method of the Remaining Claims in assembling a composite wheel prior to the critical date, because Lacks did not have a wheel supplier lined up to provide the wheel needed to perform the steps in the claimed methods until well after the critical date. It is important to note that all of the Remaining Claims require that the inboard surface of the overlay be “configured to face said outboard surface [of the wheel],” meaning that Lacks could not practice the different methods set forth in the Remaining Claims until a wheel supplier was lined up to provide a wheel that had an outboard surface that would configure with the inboard surface of a yet to be approved overlay. Claim 25 is set forth below with the representative language highlighted:
25. A method for assembling an overlay to a wheel, said method comprising the steps of:
forming said wheel to have a disk portion and a rim portion circumscribing said disk portion, said disk and rim portions defining an outboard surface of said wheel, said outboard surface having apertures formed therein;
forming said overlay to have an inboard surface configured to face said outboard surface upon assembling said overlay to said wheel, said overlay being configured so as to form a gap between said inboard and outboard surfaces upon assembling said overlay to said wheel;
depositing a curable adhesive on said outboard surface such that said curable adhesive is between said overlay and said wheel upon assembling said overlay with said wheel, said curable adhesive being selectively deposited along a peripheral edge of said outboard surface and around said apertures so as to exclude water and dirt from said gap upon assembling said overlay to said wheel; and
assembling said overlay to said outboard surface of said wheel with said curable adhesive so as to form said gap and permanently secure said overlay to said wheel, at least one void being present between said overlay and said outboard surface of said wheel, said at least one void entrapping air between said overlay and said wheel. (Emphasis added).
forming said wheel to have a disk portion and a rim portion circumscribing said disk portion, said disk and rim portions defining an outboard surface of said wheel, said outboard surface having apertures formed therein;
forming said overlay to have an inboard surface configured to face said outboard surface upon assembling said overlay to said wheel, said overlay being configured so as to form a gap between said inboard and outboard surfaces upon assembling said overlay to said wheel;
depositing a curable adhesive on said outboard surface such that said curable adhesive is between said overlay and said wheel upon assembling said overlay with said wheel, said curable adhesive being selectively deposited along a peripheral edge of said outboard surface and around said apertures so as to exclude water and dirt from said gap upon assembling said overlay to said wheel; and
assembling said overlay to said outboard surface of said wheel with said curable adhesive so as to form said gap and permanently secure said overlay to said wheel, at least one void being present between said overlay and said outboard surface of said wheel, said at least one void entrapping air between said overlay and said wheel. (Emphasis added).
In addition, as discussed above, there are numerous different claimed methods set forth in the ‘213 Patent. Also, as discussed above, Lacks had many different methods of assembly available prior to the critical date. As discussed in the ‘809 and ‘906 Patents, Lacks was practicing a full-surface adhesive method for attaching the overlay to the wheel. In addition, Lacks was testing a foaming process, which is the subject of yet additional patents, for attaching the overlay to the wheel. The Special Master utterly failed to establish any correlation of the five alleged “offers” and any of the methods disclosed and claimed in the ‘213 Patent, let alone the methods of the Remaining Claims of the ‘213 Patent. Instead, the Special Master concocts a law-of-the-case argument as a substitute for clear and convincing evidence that there is a nexus between the five alleged “offers,” litigated after the prior appeal, and the methods of the Remaining Claims. However, just because the methods of the ‘213 Patent were allegedly “ready for patenting” prior to the critical date, does not mean that the five alleged “offers” unambiguously required Lacks to use the methods of the Remaining Claims, especially given all the methods available to Lacks and Mr. Chase at that time.
Summary of the Argument from Hayes Wheel. J. Michael Huget and John C. Blattner of Butzel Long, PC (Ann Arbor, MI), and Stephen Glazek, Josh Moss of Barris Sott Denn &, Driker, LLC (Detroit, MI) on brief.
The District Court correctly found that there is no genuine issue of material fact that each of five separate and distinct commercial transactions between Lacks and various third parties constituted a pre-critical date “commercial offer for sale” of the invention of the Remaining Claims of the ‘213 Patent as defined in Group One (the “Five Offers”). Any one of the Five Offers is sufficient invalidate those claims under 35 U.S.C. § 102(b).
Lacks raises two basic challenges to the District Court's determinations.
First, Lacks argues that none of the Five Offers rises to the level of a Group One commercial offer for sale under contract law principles. In so arguing, Lacks rejects the clear mandate of this Court to consider the realities of sales practice in the automotive industry; ignores or misapplies basic principles of contract law and the on-sale jurisprudence of this Court; and misstates the legal standard regarding an offer for sale of a patented method. The approach advocated by Lacks eviscerates the policies underlying the on-sale doctrine as enunciated by the Supreme Court.
Lacks's second challenge is that Defendants have not proven that the Five Offers pertained to the invention of the Remaining Claims. This is wrong both legally and factually. Defendants proved this element of their case by clear and convincing evidence at trial in 2000, and this Court affirmed the District Court's finding in its 2003 opinion, making it part of the mandate in this proceeding. Moreover, Lacks waived further consideration of these issues by failing to raise them in its first appeal. Finally, even if Lacks were not legally foreclosed from raising these issues, the record shows that Lacks has never offered evidence sufficient to rebut Defendants powerful prima facie showing.
The District Court correctly found that there was no genuine issue of material fact that each of the Five Offers triggered the on-sale bar of Section 102(b), rendering the Remaining Claims of the ‘213 patent invalid. Accordingly, the District Court's grant of summary judgment in favor of defendants should be affirmed. At the very least, genuine issues of material fact preclude summary judgment in favor of Lacks, such that at minimum the District Court's denial of Lacks's motion should be affirmed.
Lacks raises two basic challenges to the District Court's determinations.
First, Lacks argues that none of the Five Offers rises to the level of a Group One commercial offer for sale under contract law principles. In so arguing, Lacks rejects the clear mandate of this Court to consider the realities of sales practice in the automotive industry; ignores or misapplies basic principles of contract law and the on-sale jurisprudence of this Court; and misstates the legal standard regarding an offer for sale of a patented method. The approach advocated by Lacks eviscerates the policies underlying the on-sale doctrine as enunciated by the Supreme Court.
Lacks's second challenge is that Defendants have not proven that the Five Offers pertained to the invention of the Remaining Claims. This is wrong both legally and factually. Defendants proved this element of their case by clear and convincing evidence at trial in 2000, and this Court affirmed the District Court's finding in its 2003 opinion, making it part of the mandate in this proceeding. Moreover, Lacks waived further consideration of these issues by failing to raise them in its first appeal. Finally, even if Lacks were not legally foreclosed from raising these issues, the record shows that Lacks has never offered evidence sufficient to rebut Defendants powerful prima facie showing.
The District Court correctly found that there was no genuine issue of material fact that each of the Five Offers triggered the on-sale bar of Section 102(b), rendering the Remaining Claims of the ‘213 patent invalid. Accordingly, the District Court's grant of summary judgment in favor of defendants should be affirmed. At the very least, genuine issues of material fact preclude summary judgment in favor of Lacks, such that at minimum the District Court's denial of Lacks's motion should be affirmed.
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