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Patentee Cannot Assert That an Allegedly Infringed Claim Element Is a Trade Secret

October 06, 2011
Watwe Ph.D., Abhay A.

Decision icon Decision

Last Month at the Federal Circuit - November 2011

Judges: Prost (author), Mayer, O’Malley

[Appealed from: D. Mass., Judge Saris]

In Atlantic Research Marketing Systems, Inc. v. Troy, Nos. 11-1002, -1003 (Fed. Cir. Oct. 6, 2011), the Federal Circuit affirmed the district court’s grant of SJ of invalidity of certain patent claims on written description grounds, and the district court’s denial of defendants Stephen P. Troy, Jr. and Troy Industries, Inc.’s (collectively “Troy”) motion for JMOL. The Court also vacated the jury’s verdict in favor of Atlantic Research Marketing Systems, Inc. (“Atlantic Research”) and reversed the district court’s denial of Troy’s motion for a mistrial on the ground that the district court did not properly address a jury taint issue.

Atlantic Research is an arms manufacturing company that focuses on accessories for small arms weaponry, including handguards that attach to military rifles. Richard Swan founded Atlantic Research and is the named inventor of U.S. Patent No. 6,499,245 (“the ’245 patent”) and its reissue, U.S. Reissue Patent No. 39,465 (“the ’465 patent”), both of which are directed to a handguard device. Mr. Troy, initially a distributor for Atlantic Research, eventually became an employee of Atlantic Research. As part of his employment, Mr. Troy signed a nondisclosure agreement. Mr. Troy also became familiar with Atlantic Research’s products, product designs, and prototypes. While employed at Atlantic Research, Mr. Troy also developed a weapons product for his own company, Troy Industries, Inc. Mr. Swan was aware of this and permitted Mr. Troy to promote his product from Atlantic Research’s booth at a weapons industry trade show. Soon after the trade show, however, Mr. Swan terminated Mr. Troy’s employment with Atlantic Research. Thereafter, Troy Industries, Inc. began offering handguards that attached to rifles solely by clamping to the barrel nut, which is used to attach the barrel to the firearm. Mr. Troy also sought a patent for this invention, and U.S. Patent No. 7,216,451 issued in May 2007 with Mr. Troy as the named inventor.

Atlantic Research filed a complaint against Troy alleging infringement of the ’465 patent and alleging misappropriation of trade secrets. Troy, in turn, alleged that the ’465 patent was invalid. The district court found claims 31-36 of the ’465 patent invalid for failing to meet the written description and best mode requirements at the SJ stage. Atlantic Research’s trade secret claim survived SJ and proceeded to trial, where a jury awarded Atlantic Research more than $1.8M in damages.

Troy filed a motion for mistrial, alleging that the district court had twice charged the jury with coercive instructions contrary to the law and had failed to properly address potential jury taint arising from the presence of extraneous evidence in the jury room during deliberations. Troy also renewed its request for JMOL because Atlantic Research had failed to identify a trade secret. Finally, Troy filed a motion for remittitur, contending that the jury improperly calculated damages. The district court denied all three motions.

Atlantic Research appealed the district court’s SJ decision invalidating claims 31-36 of the ’465 patent. Troy cross-appealed the district court’s denial of its three motions regarding the trade secret trial.

The Federal Circuit first affirmed the district court’s grant of SJ invalidating claims 31-36 of the ’465 patent under 35 U.S.C. § 112 for failing to meet the written description requirement. The Court noted that the invention disclosed in the ’465 patent involved a “sleeve” accessory consisting of three primary components: a receiver sleeve, an upper handguard piece, and a bottom handguard piece. The Court also noted that the ’465 patent specification disclosed a receiver sleeve attached through its rear portion to the top of the firearm, the front portion of the receiver being connected to the upper handguard piece, and the bottom handguard piece being attached to the upper handguard piece. In addition, the Court understood the ’465 patent specification as indicating that additional support could be provided by a special yoke (also referred to as a “clamp”) that engaged the firearm’s barrel nut. The Court concluded that the ’465 patent disclosed an invention with two support points, one at the receiver sleeve and one at the yoke/barrel nut, which permitted the upper and bottom handguard pieces to surround the barrel of the gun without touching it. The Court also noted that, during oral argument, Atlantic Research admitted that the ’465 patent did not disclose an invention where the yoke/barrel nut attachment point provided complete support for the handguard accessory.

The Federal Circuit further concluded that, although the specification did not disclose a handguard accessory completely supported by the barrel nut, the district court had properly construed claims 31-36 as covering such a design. The Court found that, whereas claims 1-29 of the ’465 patent explicitly required two attachment points and claim 30 explicitly required a receiver sleeve attachment point, claims 31-36, added on reissue, mentioned nothing about a receiver sleeve attachment point. Instead, the Court found that claims 31-36 disclosed only a yoke/barrel nut attachment point that supported the upper handguard piece. Based on the differences in scope between claims 1-30 and 31-36, the Court concluded that importing a receiver sleeve limitation into claims 31-36 was inappropriate because to do so would eviscerate the plain meaning of the claim language.

The Court also acknowledged that Atlantic Research made conflicting claim construction arguments at trial and during appeal. Atlantic Research had sought from the district court a claim construction that covered a barrel nut-only design, but, on appeal, Atlantic Research argued for a construction that precluded the barrel nut-only design. The Court stated that it “view[ed] such tactics with ‘extreme disfavor.’” Slip op. at 15.

The Court incorporated the barrel nut-only claim construction into its written description analysis and concluded that the written description for the ’465 patent did not disclose, to a person of ordinary skill in the art, an invention where the yoke/barrel nut attachment point provided complete support for the handguard accessory. Noting that its conclusion was supported by the fact that Atlantic Research viewed the barrel nut-only attachment design as a trade secret, the Court stated, “Mr. Swan cannot now ‘have it both ways’ by reaching back and relying on the disclosures in the ’245 patent to claim an invention he was purposely shielding from the public.” Id. at 16-17. Because claims 31-36 claimed a handguard accessory attached only at the barrel nut, the Court held that these claims exceeded in scope the subject matter that the inventor had chosen to disclose to the public in the written description. The Court therefore affirmed the district court’s grant of SJ invalidating claims 31-36 for failing to satisfy the written description requirement. The Court did not address the district court’s best mode ruling.

The Federal Circuit next addressed the district court’s denial of Troy’s motion for JMOL on Atlantic Research’s trade secret claims, applying Massachusetts state law. The Court observed that, under Massachusetts law, the range of what may be considered a trade secret is broad. The Court explained that “[t]he focus is whether what is claimed as the trade secret is in fact secret.” Id. at 18. Troy argued that Atlantic Research failed to identify any trade secrets at trial, but the Court found otherwise. Mr. Swan testified that nobody had ever attached directly to the barrel nut for a handguard system and that doing so was a trade secret. Troy also argued that clamping a handguard to a gun at the barrel nut cannot be a trade secret because the ’245 patent discloses this type of device. Acknowledging the inherent tension Atlantic Research created by contending that Troy misappropriated trade secrets while simultaneously asserting that the products Troy developed with the trade secrets infringes Atlantic Research’s patent, the Court reminded that “[t]hat which is disclosed in a patent cannot be a trade secret.” Id. at 19. Thus, the Court agreed with the district court that Atlantic Research must have demonstrated that something beyond what was disclosed in the ’245 patent was a trade secret. Viewing the evidence at trial in a light most favorable to Atlantic Research, the Court was not able to say that no reasonable jury could have been persuaded that Atlantic Research was in possession of its alleged trade secret. Accordingly, the Court affirmed the denial of Troy’s motion for JMOL.

Finally, the Federal Circuit considered Troy’s motion for a mistrial on two grounds: (1) that the district court erred as a matter of law by giving two improper Allen charges, named for Allen v. United States, 164 U.S. 492 (1896); and (2) that the district court failed to properly investigate the possibility of jury taint due to the presence of an extraneous clamp in the jury room during deliberations. The Court rejected Troy’s argument that the district court erred by giving the jury two coercive Allen charges, which are intended to prevent a hung jury by encouraging jurors in the minority to reexamine their positions and give careful consideration to the evidence. The Court stated that it did not believe that there was an absolute prohibition in the First Circuit against giving more than one Allen charge.

With regard to the clamp in the jury room, the Court determined that the district court had failed to conduct an adequate investigation after becoming aware that the clamp was in the jury room during deliberations. Specifically, the Court found that the district court failed to take any steps to determine the possible prejudicial effect of the clamp prior to the issuance of the verdict and never even asked if the jurors could remain impartial after viewing the clamp. The Court therefore concluded that the district court did not investigate the issue in a satisfactory manner. Finding abuse of the district court’s discretion, the Federal Circuit reversed the district court and granted Troy’s motion for a mistrial. The Court did not address the district court’s judgments on the best mode and damages issues in light of its other decisions.

Summary authored by Abhay A. Watwe, Ph.D., Esq.