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First Sale Doctrine Did Not Preclude Recovery Even Though Patentee’s Predecessor Initially Sold Accused Infringing Product

08-5181
February 18, 2010
Hendrix, Justin A.

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Last Month at the Federal Circuit - March 2010

Judges: Mayer (dissenting-in-part), Prost, Moore (author)

[Appealed from: Court of Federal Claims, Judge Braden]

In Honeywell International, Inc. v. United States, No. 08-5181 (Fed. Cir. Feb. 18, 2010), the Federal Circuit reversed the Court of Federal Claims’ holding of invalidity based on obviousness and failure to satisfy the written description requirement under 35 U.S.C. § 112, and remanded to determine damages.  The Court also reversed the holdings that Honeywell International, Inc. (“Honeywell”) lacked standing under the Invention Secrecy Act (“the Act”), and that the first sale doctrine precluded Honeywell from seeking damages for infringement by the accused device in F-16 aircraft. 

Honeywell owns U.S. Patent No. 6,467,914 (“the ’914 patent”), which is directed to night vision goggles that are compatible with a full-color display in an aircraft cockpit.  The ’914 patent was originally filed in 1985 by Allied Corporation (“Allied”) as Patent Application No. 06/786,269 (“the ’269 application”).  The government reviewed the application under the Act and concluded that a secrecy order should be imposed.  The PTO imposed secrecy orders—which prevented the patent from issuing—every year until 2000.  Following a series of mergers, Allied eventually became Honeywell.  Honeywell amended the claims before the ’269 application issued as the ’914 patent.  Honeywell then filed a complaint against the United States seeking compensation (1) for preissuance use of the invention under the Act, and (2) for postissuance infringement under 28 U.S.C. § 1498(a).  The Court of Federal Claims held that the systems of three different aircraft infringed claim 2, but that the claim was invalid for obviousness, and in the alternative, failed to satisfy the written description requirement under 35 U.S.C. § 112.  Additionally, it held that Honeywell lacked standing under the Act because the ’914 patent did not issue upon an application that was subject to a secrecy order.  Finally, it held that the first sale doctrine precluded Honeywell from recovering damages for infringing devices in F-16 aircraft because Honeywell manufactured and sold the devices at issue.

On appeal, the Federal Circuit held that the Court of Federal Claims erred in finding claim 2 obvious because it applied a faulty claim construction that did not require the passing of “perceptible red light.”  Because the prior art did not disclose the passing of perceptible red light, the Court found that claim 2 would not have been obvious to one of skill in the art. 

The Federal Circuit also found that the Court of Federal Claims erred in invalidating claim 2 under the written description requirement of 35 U.S.C. § 112, ¶ 1.  During prosecution, Honeywell replaced a figure in the original application that showed a display using cathode ray tubes.  The Court of Federal Claims found that while claim 2 encompassed a variety of displays, the originally filed application disclosed only displays using cathode ray tubes; nothing indicated that the inventor conceived of the invention used with anything else.  The Federal Circuit disagreed, noting that while the original figure 3 may have disclosed this type of display, there was no reason, in light of other statements in the specification, to limit the disclosure. 

The government contended that the Federal Circuit could alternatively affirm the invalidity finding by finding claim 2 indefinite.  According to the government, “perceptible” was a subjective standard amenable to two different interpretations—color and brightness.  But the Federal Circuit disagreed, noting that claim 2 requires a “local color display” and only the court’s construction used the term “perceptible.”  And because “local color display” was amenable to construction and not insolubly ambiguous, the claim is not indefinite. 

After considering invalidity, the Federal Circuit turned to the Court of Federal Claims’ conclusion that Honeywell lacked standing under the Act.  The Act allows a patent owner to seek compensation for a patent “issued upon an application” subject to a secrecy order.  According to the Court of Federal Claims, the ’914 patent did not issue “upon” or “on” the ’269 application because the claims of the ’914 patent are different from those in the original application.  The Federal Circuit rejected this interpretation, noting that it contradicted the plain language of the statute.  Accordingly, the Court held that Honeywell had standing under the Act.

Finally, the Federal Circuit held that the Court of Federal Claims erred in concluding that the first sale doctrine precluded Honeywell from recovering damages for infringing devices in F-16 aircraft.  For the first sale doctrine to apply, there must be an authorized first sale.  According to the Court, Honeywell’s sale of infringing devices was not authorized because, at the time of the sale, Honeywell had no rights under the ’914 patent, which Allied owned.  The fact that Honeywell now owns the ’914 patent did not retroactively authorize the first sale.  Therefore, the Court held that the first sale doctrine did not preclude Honeywell from recovering damages. 

Judge Mayer dissented-in-part.  Disagreeing with the majority’s obviousness conclusion, Judge Mayer concluded, based on the testimony of experts for both sides, that one of skill in the art would have known how to adjust light sources while using the filters disclosed in the prior art to increase the perceptibility of red light.   Judge Mayer further noted that the written description requirement was not satisfied because the ’269 application did not describe filtering a single light source carrying multiple color bands, the subject matter of claim 2.  Regarding the first sale doctrine, Judge Mayer would have affirmed the decision that Honeywell was precluded from recovering damages for certain products.  The patentee and the seller of the patented product are now the same corporate entity.  And because Honeywell itself is the ultimate recipient of the profits from the sale of the infringing products, Judge Mayer reasoned, its patent rights in those products should now be extinguished.

Summary authored by Justin A. Hendrix, Esq.