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Industry Practice Considered to Assess Offer for Sale Under On-Sale Bar

March 13, 2003
Vance, Andrew J.

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Last Month at the Federal Circuit - April 2003

Judges: Michel (author), Newman (concurringin- part and dissenting-in-part), and Clevenger (dissenting-in-part)

In Lacks Industries, Inc. v. McKechnie Vehicle Components USA, Inc., No. 01-1371 (Fed. Cir. Mar. 13, 2003), the Federal Circuit affirmed-in-part and vacated-in-part the district court’s judgment and then remanded the case for further proceedings.

Lacks Industries, Inc. (“Lacks”) sued McKechnie Vehicle Components USA, Inc. (“McKechnie”) and Hayes Wheel International, Inc. (“Hayes”) for infringement of U.S. Patent Nos. 5,577,809 (“the ’809 patent”), 5,636,906 (“the ’906 patent”), and 5,597,213 (“the ’213 patent”), which cover various aspects of cladding for automobile wheels. Wheel cladding is a plastic or metal skin that fits over the outer face of a wheel to provide a chrome-like appearance on a wheel at less cost than plating the entire wheel.

Prior to trial, the district court granted SJ of (1) noninfringement of the asserted claims of the ’809 and ’906 patents; (2) invalidity of claims 1, 3, and 8 of the ’213 patent; and (3) invalidity of the asserted claims of the ’809 and ’906 patents. By agreement, the remaining infringement and validity issues for the ’213 patent were tried by a SM, who found claims 11-13, 20, 24, and 25 literally infringed, but who also found these same claims and claims 21 and 22 invalid. The district court adopted the SM’s findings in their entirety and entered judgment accordingly.

On appeal, Lacks argued that the district court had based its SJ of noninfringement of the ’809 and ’906 patents on an improper interpretation of the claim terms “axial peripheral lip” and “wheel face outer surface.” Relying on dictionary definitions and the prosecution history, Lacks argued that the district court had construed the claims too narrowly. Affirming the district court’s SJ of noninfringement, however, the Federal Circuit rejected Lacks’s proposed interpretation, holding that the weight of the intrinsic evidence supported the district court’s interpretation. The Federal Circuit observed that Lacks’s proposed construction of “axial peripheral lip” was inconsistent with the patent drawings and that its proposed construction of “wheel face outer surface” was inconsistent with the plain language of the claims.

McKechnie and Hayes cross-appealed the district court’s finding that they literally infringed claims 11-13, 20, 24, and 25 of the ’213 patent, arguing that their products did not satisfy a limitation requiring adhesive to “permanently secure” the cladding to the wheel. The district court held that this limitation required the adhesive itself to be capable of securing the cladding to the wheel.
Although not disputing the district court’s claim interpretation, the cross appellants argued that the SM had erred by adopting an infringement test that impermissibly read out the requirement that the adhesive secure the cladding by itself. The cross appellants also argued that the evidence of record was insufficient to find infringement under the SM’s infringement test. Rejecting these arguments, the Federal Circuit held that the SM’s infringement test was proper and that there was sufficient evidence to support the infringement findings. Judge Clevenger dissented, agreeing with the cross appellants that the evidence of record was insufficient.

Turning to validity, the Federal Circuit vacated the SJ of invalidity of the ’809 and ’906 patents since McKechnie and Hayes raised invalidity only as an affirmative defense and the Court affirmed the SJ of noninfringement. Citing Cardinal Chemical Co. v. Morton International, Inc., 508 U.S. 83 (1993), the Federal Circuit observed that it need not reach validity issues under such circumstances.

Lacks also appealed the district court’s SJ of invalidity of claims 1, 3, and 8 of the ’213 patent, which held the claims anticipated by Lacks’s own published foreign patent application under the statutory bar of § 102(b). Rejecting Lacks’s contention that its foreign applications did not disclose all of the claim limitations, the Federal Circuit affirmed the district court’s invalidity decision. Judge Newman dissented from this aspect of the decision, arguing that, in her view, an inventor’s own published foreign application should not constitute a statutory bar to the inventor’s U.S. application.

Additionally, Lacks appealed the district court’s SJ of invalidity of claims 11-13, 20-22, 24, and 25 of the ’213 patent, which held that Lacks’s sales promotion activities prior to the critical date created an on-sale bar under § 102(b). Lacks disagreed with the district court’s holding that it had made a “commercial offer for sale,” arguing that the district court had applied the wrong legal standard. The Federal Circuit ruled that sales promotional activity must rise to the level of a commercial offer for sale, as defined by contract law, to constitute an on-sale bar. Since the district court’s standard did not require a formal offer for sale under contract law, the Federal Circuit vacated the district court’s invalidity decision and remanded it for consideration under the proper standard, suggesting that the district court consider additional evidence of industry practice. In dissenting, Judge Newman argued that the proper standard for determining an offer should not include analysis of industry practice.

Finally, McKechnie and Hayes cross-appealed the district court’s findings that their own activities, prior to the critical date, did not give rise to a § 102(b) statutory bar, because the cross appellants failed to introduce sufficient evidence to corroborate such activities. The cross appellants argued that the district court had erred by refusing to permit oral testimony of one witness to corroborate oral testimony of another and by finding their documentary evidence insufficient to corroborate the oral testimony. Affirming the district court’s findings, however, the Federal Circuit noted that oral testimony of interested witnesses requires documentary corroboration and concluded that the SM’s findings that the cross appellants’ documentary evidence failed to corroborate the oral testimony were thorough.