Plastic Container Corporation ("Plastic") appeals from an adverse judgment in its patent infringement suit against Continental Plastics of Oklahoma, Inc. ("Continental"). In an order of August 5, 1977, without opinion, the district court denied Plastic's cross-motion for summary judgment, dismissed its complaint, entered judgment in favor of Continental, and awarded Continental costs and attorney fees. We reverse and remand.
The Subject Matter of the Patent in Issue
The infringement suit involves Reissue Patent No. 28,861 to Samuel Hall, Jr. ("Hall Reissue").1 The Hall Reissue, obtained pursuant to 35 U.S.C. § 251,2 is based on Patent No. 3,473,6813 ("Hall Patent"), which was held invalid in the prior litigation of Plastic Container Corp. v. Continental Plastics of Oklahoma, Inc., Civil Action No. 72-825 (W.D.Okl. December 13, 1973), affirmed in an unpublished opinion of this court, No. 74-1123, October 30, 1974. The subject matter of the Hall Reissue is a container or vial employing a safety plug and a cover which snaps on and off the container. Such containers are used by pharmacists in dispensing medicaments, such as capsules or tablets, as a precaution against access by young children. Figure 1 of the Hall Reissue is illustrative of an embodiment of the claimed invention:
In order to remove the safety plug (internal closure 20), the external closure cap 36 (snap cover) is snapped off container 10 using abutment key 44, which depends from the side of the external closure cap. With the cap removed, the abutment key is used to remove the safety plug by inserting it into recess 28 of the safety plug and pulling the plug out. Although such manipulations are relatively simple for an adult, they are too complex for most young children. Because the abutment key serves the dual function of a key and a thumb tab, the same external closure cap may be used when there is no safety plug, thus providing the pharmacist with an option to omit the safety plug for a "non-childproof" container.
Claims 5 and 8, the only two claims that remain in the Hall Reissue, are illustrative:4
5. The safety container closure of claim 1 wherein said external closure cap is provided with a peripheral skirt, the lowermost part of said skirt carrying said key, the interior of said skirt carrying an annular bead which snaps over a complementary bead around an outer periphery of the container opening, whereby the key carried by the external cap functions as a tab against which the thumb is pressed in a generally upward direction to remove the external cap from the container and functions additionally as a key for cooperation with the key recess of the internal closure to thereby permit the internal closure to be removed from its position within the opening of the container.
8. A safety container closure assembly including,
(a) a container having an opening,
(b) an internal closure in the form of a plug positioned within said opening, said closure having a key recess therein,
(c) an outer closure in the form of an external cap positioned over said opening,
(d) said external cap having a skirt integral therewith and depending from the top of said cap, the interior of said skirt carrying an annular bead which snaps over a complimentary bead on the outer periphery of container opening,
(e) a combination thumb abutment-key integral with and extending substantially horizontally outwardly from said skirt at the lower portion of the skirt, said thumb abutment-key functioning as a tab against which the thumb is pressed in a generally upwardly direction to remove the said external cap from the container and functioning additionally as a key for cooperation with the said key recess of said internal closure to thereby permit said internal closure to be removed from its position within the opening of said container.
An understanding of the previous litigation involving the Hall Patent is necessary for consideration of the issues presented by this appeal involving the Hall Reissue. In its December 13, 1973, unpublished opinion, the district court stated the following conclusions of law: (1) Claims 1-4 and 7 are invalid under 35 U.S.C. § 102 because they "define structures which are devoid of novelty in that they are clearly anticipated by the prior art." (2) Claims 1-5 and 7 are invalid under 35 U.S.C. § 103 "as being directed to structures which lack invention and were `obvious'."6 (3) Claims 1-77 are invalid under (the second paragraph of) 35 U.S.C. § 1128 because they "fail to particularly point out and distinctly claim the subject matter which the applicant regarded as his invention." The court somewhat amorphously stated that the invention is not distinctly claimed if "the dictionary meanings of the term `coincident' are not used in construing the claims," because the specification fails "to explain or set forth the meaning" of that term. (4) Claims 1-7 are invalid for being "in contravention of the provisions of Rule 75(d)(1)," 37 C.F.R. § 1.75(d)(1),9 because all claims contain terms ("at a location not coincident with the location of the key recess," "coincident," and "recess") which do not find clear support or antecedent basis in the description set forth in the specification. (5) Claims 1-7 are invalid under 35 U.S.C. § 112, first paragraph, for failure to set forth the best mode of carrying out the invention ("to provide ribs on the skirt portion of the stopper or internal closure") as contemplated by the inventor at the time of filing his application.
On appeal, this court stated in its unpublished opinion (No. 74-1123, Oct. 30, 1974, at 7):
We hold that the Trial Court did not err in finding that the entire patent was anticipated by the prior art. We have considered Plastic's contention raised in its reply brief that the "prior art fails to show an element that functions both as a key which enters a key recess and as a thumb abutment." We agree. However, such an element, i. e., an abutment functioning as a key and a thumb tab, was never claimed. [Emphasis added.]
The court discussed further testimony at trial and said (supra at 9):
Applying the prior art of Velt and Mostoller, and the differences between the prior art and Claim 5, considered together with the ordinary skill in the pertinent art, we hold that the Trial Court did not err in finding '681 [Hall Patent No. 3,473,681] invalid as obvious.
We have carefully considered the remaining allegations of error advanced by Plastic. They are without merit.
Thus, it is clear that this court affirmed the district court in its conclusion that all claims were invalid under 35 U.S.C. § 103. The court particularly pointed out that the claims failed to recite the limitation on which Plastic relied as evidence of nonobviousness. Moreover, the statement in section III of the opinion indicates that this court intended to reject all of Plastic's allegations of error and to affirm each of the other bases for the district court's holding that the claims were invalid.11
Acting on the above-quoted statement in this court's previous opinion, that "an abutment functioning as a key and a thumb tab, was never obtained" in the Hall Patent, Plastic returned to the Patent and Trademark Office ("PTO") and filed an application for reissue. Following issuance of the Hall Reissue, Plastic filed this action for patent infringement against Continental.
District Court Proceedings
In the district court,12 Continental moved for summary judgment and requested an award of costs and attorney fees, arguing: (1) that as a result of the prior litigation between the same parties, Plastic "is barred from relief as a result of the application of one or more of the doctrines of res judicata, collateral estoppel, estoppel by record and/or law of the case"; (2) that the claims of the Hall Reissue are invalid because Plastic did not discharge "the heavy duty of complete good faith, and full and open disclosure of all pertinent and material facts to the Patent Examiner during the prosecution of the reissue application"; and (3) even assuming, arguendo, that the Hall Reissue is infringed, Continental "is vested with certain statutorily recognized intervening rights [pursuant to 35 U.S.C. § 25213] which immunize" Continental. Plastic cross-moved for summary judgment: (1) on infringement because Continental had admitted that its device is readable upon both claims 5 and 8 of the Hall Reissue; and (2) on validity because reissue claims 5 and 8 are "now purged of the defect" noted in the previous Tenth Circuit opinion.
As related earlier, the district court denied Plastic's motion for summary judgment, dismissed its complaint, granted Continental's motion for summary judgment, and awarded Continental costs and attorney fees.
Because the district court did not indicate which of Continental's arguments it found persuasive,14 this court must consider each argument and, in order for the lower court's decision to be reversed, Plastic must prevail on each issue.
(1) Collateral Estoppel Issue15
Continental argues that Plastic should be collaterally estopped from asserting Hall Reissue claims 5 and 8 because "these claims substantively define the same invention as did the claims involved in the first suit." It notes that "the written specifications and the drawings of both the original and reissue patents are identical" and suggests that the two claims issued in the Hall Reissue are identical to the claims of the Hall Patent "except for slight differences of wording." Further, Continental asserts that the basis for the Supreme Court's decision in Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788, 169 U.S. P.Q. 513 (1971), was "the policy that the patentee should only be allowed one opportunity to litigate any given issue, unless he can show that his first opportunity was unfair procedurally, substantively or evidentially"; and that the courts have applied this policy in allowing collateral estoppel as a defense to an infringement suit based on claims which, themselves, were not previously adjudicated invalid.
Indeed, the Court in Blonder-Tongue, supra at 332-33, 91 S.Ct. at 1445, 169 U.S.P.Q. at 521, did speak in terms of "issues" and "questions," saying:
Moreover, we do not suggest, without legislative guidance, that a plea of estoppel by an infringement or royalty suit defendant must automatically be accepted once the defendant in support of his plea identifies the issue in suit as the identical question finally decided against the patentee or one of his privies in previous litigation. Rather, the patentee-plaintiff must be permitted to demonstrate, if he can, that he did not have "a fair opportunity procedurally, substantively and evidentially to pursue his claim the first time." [Emphasis added; footnote omitted.]
Also, it is true that, because collateral estoppel is grounded on public policy, particularly as it relates to judicial economy, some courts have not limited its application to adjudicated claims only. See, e. g., Westwood Chemical, Inc. v. Molded Fiber Glass Body Co., 498 F.2d 1115, 182 U.S.P.Q. 517 (6th Cir. 1974). The essential element of collateral estoppel is substantial identity of the issue or issues in each action. Partmar Corp. v. Paramount Pictures Theatres Corp., 347 U.S. 89, 74 S.Ct. 414, 98 L.Ed. 532 (1954); Carter-Wallace, Inc. v. United States, 496 F.2d 535, 204 Ct.Cl. 341, 182 U.S.P.Q. 172 (1974). Thus, the public interest in upholding valid patents, including reissued patents, outweighs the public interest underlying collateral estoppel where the issue or issues in each action are not substantially identical. In re Russell, 439 F.2d 1228, 58 C.C.P.A. 1081, 169 U.S.P.Q. 426 (1971); In re Craig, 411 F.2d 1333, 56 C.C. P.A. 1438, 162 U.S.P.Q. 157 (1969).
Accordingly, we agree with Continental that collateral estoppel may apply, under certain circumstances, to previously unadjudicated claims. However, it seeks to apply this defense too broadly here.16 It is basic patent law doctrine that claims of a patent define the invention and the "metes and bounds" of the grant. See Brenner v. Manson, 383 U.S. 519, 534, 86 S.Ct. 1033, 1041, 16 L.Ed.2d 69, 79, 148 U.S.P.Q. 689, 695 (1966); Deyerle v. Wright Manufacturing Co., 496 F.2d 45, 49, 181 U.S.P.Q. 685, 688 (6th Cir. 1974); Citizens Trust Co. v. Lear Jet Corp., 403 F.2d 956, 958, 160 U.S. P.Q. 11, 13 (10th Cir. 1968), cert. denied, 394 U.S. 960, 89 S.Ct. 1308, 22 L.Ed.2d 561, 161 U.S.P.Q. 832 (1969). Accordingly, any determination of whether collateral estoppel applies must be directed to the claimed invention, i. e., the invention defined by the claims, rather than to a broader invention that may be disclosed in the application. As the Sixth Circuit said in Westwood Chemical, Inc. v. Molded Fiber Glass Body Co., supra at 1117, 182 U.S.P.Q. at 518:
[C]ollateral estoppel is available as a defense when unadjudicated claims present questions of fact identical to the questions presented in the adjudicated claims; when each unadjudicated claim merely restates, without significant difference, an adjudicated claim; and when none of the unadjudicated claims defines an invention separate and apart from the invention defined in the adjudicated claims. [Emphasis added.]
Accord, Westwood Chemical, Inc. v. United States, 525 F.2d 1367, 207 Ct.Cl. 791, 187 U.S.P.Q. 656 (1975); In re Clark, 522 F.2d 623, 628, 187 U.S.P.Q. 209, 213 (C.C.P.A. 1975) (Miller, J., concurring); Bourns, Inc. v. United States, 187 U.S.P.Q. 174 (Ct.Cl. Trial Div.1975), opinion adopted per curiam, 537 F.2d 486, 210 Ct.Cl. 642, 199 U.S.P.Q. 256 (1976); see Technograph Printed Circuits, Ltd. v. Methode Electronics, 484 F.2d 905, 908-09, 179 U.S.P.Q. 206, 208-09 (7th Cir. 1973). Moreover, unlike the above-cited precedents, this appeal involves a reissue patent which the PTO has reexamined and issued, presumably after consideration of the prior art on which the original patent was held invalid.17 Thus, to the reissued claims, a presumption of validity has attached. 35 U.S.C. § 282. Recognizing that this court's review must take into account the differences between the claimed inventions of the Hall Reissue and the Hall Patent, we now consider the holdings of invalidity in the prior litigation.18
A. Obviousness under 35 U.S.C. § 103
The Court of Claims in Westwood Chemical, Inc. v. United States, supra at 1375,19 indicated how, when faced with a prior holding of invalidity for obviousness, a court should determine whether the unadjudicated claims are substantially identical to the adjudicated claims:
In approaching that question, it should be noted that, while it is convenient to refer to the "issue of patent validity," that can be misleading. Where obviousness is the basis for the prior invalidity holding, an inquiry into the identity of the validity issue is more properly phrased in terms of the factual inquiries mandated by Graham v. John Deere Co., 383 U.S. 1, 17, 86 S.Ct. 684, 15 L.Ed.2d 545 [148 U.S.P.Q. 459, 466-467] (1966), as a prerequisite to such a validity determination. Thus, the inquiry should be whether the nonlitigated claims present new issues as to the art pertinent to the nonlitigated claims; as to the scope and content of that art; as to the differences between the prior art and the nonlitigated claims; and as to the level of ordinary skill in that art. If none of these inquiries raises any new triable issues, then the obviousness determination in the prior proceeding should be equally applicable to the nonlitigated claims.
. . . If they are of identical scope, it readily follows that no new issues bearing on the obviousness determination are presented. On the other hand, such a comparison may reveal some differences of a substantive nature. In that event, it will be necessary to go a step further and determine whether those differences are of a kind that would have been itemized in a Graham analysis as a difference between the claim and the prior art, or whether it was known in the prior art and is only a part of the claimed combination as a whole that provides the context in which the obviousness determination is made. If it is only of the latter character, i. e., it is known in the prior art and does not alter the issue as to the differences between the claimed subject matter and the prior art, it is still necessary to assess the importance of the difference to the combination as a whole since it is from that standpoint that the obviousness determination must be made. [Citations omitted.]
The following limitation in Hall Reissue claim 5 is not found in Hall Patent claim 5:
whereby the key carried by the external cap functions as a tab against which the thumb is pressed in a generally upward direction to remove the external cap from the container and functions additionally as a key for cooperation with the key recess of the internal closure to thereby permit the internal closure to be removed from its position within the opening of the container.
Claim 8, which was added as a new, independent claim during the reissue prosecution, contains comparable language directed to the dual function of the abutment as a key and a thumb tab. In the previous case, this court agreed with Plastic that such a function was not shown in the cited prior art, but held Plastic's claims invalid for obviousness because of Plastic's failure to claim this dual function and to thus distinguish its claims over the prior art. From the opinion, Plastic could reasonably draw a suggestion to further limit its claims by incorporating in them this dual function feature. We are persuaded that this feature in the unadjudicated Hall Reissue claims is of such significance as to require a new analysis of these claims as prescribed by Graham v. John Deere Co., supra. Therefore, we conclude that the claimed invention of the Hall Reissue cannot be considered substantially identical to the claimed invention of the Hall patent for purposes of collateral estoppel.
B. Indefiniteness under 35 U.S.C. § 112, 2d paragraph
This section requires that there be claims "particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention." It is essentially a requirement for "precision and definiteness of claim language." In re Conley, 490 F.2d 972, 180 U.S.P.Q. 454 (Cust. & Pat.App.1974); see Hinde v. Hot Sulphur Springs, Colorado, 482 F.2d 829, 837, 178 U.S.P.Q. 584, 588 (10th Cir. 1973). If the scope of the subject matter embraced by a claim is clear and if the applicant has not otherwise indicated that he intends the claim to be of a different scope, the claim satisfies this requirement. In re Borkowski, 422 F.2d 904, 909, 57 C.C.P.A. 946, 952, 164 U.S.P.Q. 642, 645-46 (1970). In other words, claims must make "clear the subject matter from which they would preclude others." In re Hammack, 427 F.2d 1378, 1382, 57 C.C.P.A. 1225, 1230-31, 166 U.S. P.Q. 204, 208 (1970).20
As related above, in the earlier district court opinion, the court concluded that the term "coincident," as used in the claims ("said external cap carrying a key at a location not coincident with the location of said key recess") is indefinite.21 However, we conclude that any ambiguity or indefiniteness has been rectified in new claim 5.22 With the additional claim language, it is now clear that the abutment key carried on the lowermost part of the skirt of the external closure cap is located in such a position that it can function "as a tab against which the thumb is pressed in a generally upward direction to remove the external cap from the container." Such a position is necessarily removed from the recess or aperture in the safety plug. Thus, the ambiguity found by the district court has been eliminated. Moreover, in light of the additional claim language, the statements of Plastic and its expert witness (see supra note 21) appear consistent.
C. Lack of description under 35 U.S.C. § 112, 1st paragraph
To satisfy the description requirement of this section of the statute, an application must contain sufficient disclosure, expressly or inherently, to make it clear to one skilled in the art that the patentee was in possession of the claimed subject matter at the time of the filing of the application. In re Mott, 539 F.2d 1291, 1296-97, 190 U.S.P.Q. 536, 541 (Cust. & Pat.App.1976); In re Smythe, 480 F.2d 1376, 1382, 178 U.S.P.Q. 279, 284 (Cust. & Pat.App.1973). For essentially the same reasons that the language added to Hall Reissue claim 5 is sufficient to rectify any ambiguity or indefiniteness, we conclude that it enables appellant's specification to meet the description requirement of 35 U.S.C. § 112, first paragraph. We merely add that the additional claim language demonstrates the correspondence of the phrase in the claims ("at a location not coincident with the location of the key recess") with statements in the specification (column 1, lines 42-57):23
The outer closure is provided with a tab or key, preferably integral therewith and which is inserted into a complementary aperture in the plug. The key is slightly rotated and is then pulled, thereby dislodging the plug. . . . Specifically, the key tab is an integral part of the outer closure to thereby preclude loss of the key. Further, it not only performs the function above described, but additionally serves as an abutment against which the thumb of the user may be placed to effect dislodgment of the closure from the container.
So, too, with the summary of the subject matter of the application in the abstract:
A safety container closure for small plastic medicine bottles. A plug is inserted into the top or neck, in a tight friction-fit. The plug carries a key recess. An outer cap fits over the top of the container, and carries a key molded to it. The key is placed into the recess, and the plug engaged for withdrawal.
D. Failure to disclose the best mode under 35 U.S.C. § 112
This section requires the application to "set forth the best mode contemplated by the inventor of carrying out his invention." Such a disclosure is calculated to insure that the public will receive the benefits intended in exchange for the grant to the patentee of limited economic privileges. Union Carbide Corp. v. Borg-Warner Corp., 550 F.2d 355, 193 U.S.P.Q. 1 (6th Cir. 1977); Ziegler v. Phillips Petroleum Co., 483 F.2d 858, 177 U.S.P.Q. 481 (5th Cir.), cert. denied, 414 U.S. 1079, 94 S.Ct. 597, 38 L.Ed.2d 485, 180 U.S.P.Q. 1 (1973). There is no requirement that the "best" mode disclosed in fact be the optimum mode of carrying out the invention. "Even if there is a better method, his [the patentee's] failure to disclose it will not invalidate his patent if he does not know of it or if he does not appreciate that it is the best method." Benger Laboratories, Ltd. v. R. K. Laros Co., 209 F.Supp. 639, 644, 135 U.S.P.Q. 11, 15 (E.D.Pa.1962), aff'd per curiam, 317 F.2d 455, 137 U.S.P.Q. 693 (3d Cir.), cert. denied, 375 U.S. 833, 84 S.Ct. 69, 11 L.Ed.2d 64, 139 U.S.P.Q. 566 (1963).
In the previous litigation, the district court concluded that the best mode of carrying out the invention claimed in the Hall Patent was not set forth because the "inventor Hall knew, at the time of filing his patent application which ultimately matured to the patent here in suit, that it was of advantage to provide ribs on the skirt portion of the stopper or internal closure, and that this provided advantage over internal closures carrying no such ribs." Continental argues that, because "the specification and drawings in the reissue application, and in the application which culminated in the issuance of the original Hall patent, are identical, the documents contain identical deficiencies which were found fatal by the Trial Court in the initial litigation"; that, therefore, collateral estoppel based on the prior holding of invalidity due to failure to set forth the best mode is proper. The theory of Continental's argument is that, absent a change in the specification or drawing of the original patent during reissue prosecution, a holding that there was a failure to set forth the best mode cannot be overcome. However, this simply overlooks that it is the best mode of carrying out the claimed invention that must be set forth pursuant to section 112. Dale Electronics, Inc. v. R. C. L. Electronics, Inc., 488 F.2d 382, 389, 180 U.S.P.Q. 225, 229-30 (1st Cir. 1973) (best mode requirement was satisfied by disclosure of "a specific material that will make possible the successful reproduction of the effects claimed by [the] patent"); see Weil v. Fritz, 601 F.2d 551, 555 n.11, 202 U.S.P.Q. 447, 451 n.11 (Cust. & Pat.App.1979); Maxon v. Maxon Construction Co., 395 F.2d 330, 334-35, 158 U.S.P.Q. 77, 80 (6th Cir. 1968). The new language added to claim 5 (and incorporated in claim 8) has narrowed the scope of the claimed invention to a safety container that features an abutment on the external closure cap having the dual function of a key and a thumb tab. Whether there are ribs on the skirt of the safety plug is irrelevant to this critical feature of the Hall Reissue claimed invention. Moreover, since this feature is clearly described in appellant's specification, we conclude that the specification meets the best mode requirement of 35 U.S.C. § 112 for the Hall Reissue claimed invention,24 and that this is so regardless of the fact that the same specification may have set forth the best mode for carrying out the invalidated Hall Patent claimed invention.
In view of the foregoing, we hold that Plastic is not collaterally estopped from asserting the validity of claims 5 and 8 of the Hall Reissue.
(2) Issue of Fraud on the PTO
In the district court proceeding, Continental argued that Plastic is precluded from enforcing the Hall Reissue because it failed to discharge "the heavy duty of complete good faith, and full and open disclosure of all pertinent and material facts to the Patent Examiner during the prosecution of the reissue application." During that prosecution, Plastic furnished the examiner with copies of the unpublished Tenth Circuit opinion of October 30, 1974, and of the prior art references cited during the course of the litigation. However, it did not submit a copy of the district court's findings of fact and conclusions of law (although it specifically referred to the district court case in the discussion of the prior art). Continental now argues (brief at 31) that this failure resulted in the reissue patent being fraudulently procured, saying:
In prosecuting its application for Reissue, Plaintiff [Plastic] misled the Patent and Trademark Office by telling the Patent Examiner that the basis for the holding of invalidity of the original patent was merely a technicality, namely that Plaintiff had failed to claim a combination key-thumb abutment. It is clear from a reading of this Court of Appeals' opinion in the prior litigation that this Court made no such "holding", and that the statement, taken from context in the appellate opinion, and upon which Plaintiff based his case for Reissue, was merely an offhanded dicta [sic]. Plaintiff, however, in this most deceptive fashion, told the Patent and Trademark Office only that the original patent was held invalid for anticipation, and that this Court had said that such anticipation could be avoided by adding to the claims language covering a combination key-thumb abutment.
. . . [Plastic's "misleading presentation" to the PTO] is, however, much compounded by the additional fact that Plaintiff did not inform the Patent and Trademark Office that the original patent had also been held invalid on the grounds of obviousness, failure to disclose the best mode and indefiniteness. [Emphasis in the original.]
It is true, of course, that fraud in the prosecution of a patent (sometimes referred to as "inequitable conduct" or "bad faith") will, if established, result in the patent being held invalid and/or unenforceable. See Precision Instrument Manufacturing Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806, 65 S.Ct. 993, 89 L.Ed. 1381, 65 U.S.P.Q. 133 (1945); Admiral Corp. v. Zenith Radio Corp., 296 F.2d 708, 716, 131 U.S.P.Q. 456, 462 (10th Cir. 1961).25 For a defense founded on fraud to succeed, both materiality and intent must be established.
In determining materiality, the courts are not in agreement on the test to be applied. Three different tests have been used. The first is the objective "but for" test, i. e., the misrepresentation was so material that, but for the misrepresentation, the patent not only would not have been issued but should not have been issued.26 The second is the subjective "but for" test, i. e., the misrepresentation caused the examiner to approve the application for patent when he would not otherwise have done so.27 Thus, the subjective test does not permit the reviewing court to conclude that, notwithstanding the misrepresentation, the patent was properly issued.28 The third test has been labeled the "but it might have been" test, i. e., the misrepresentation in the course of the patent prosecution might have influenced the examiner.29
Recently, this court in True Temper Corp. v. CF&I Steel Corp., 601 F.2d 495, 412 U.S. P.Q. 202 (10th Cir. 1979) (hereinafter "True Temper") had occasion to consider the defense of fraud in the prosecution of a patent application and made the following statement regarding the element of materiality of fraud, 601 F.2d at 504, 202 U.S.P.Q. at 419:30
True Temper argues that information is material . . . only if the examiner would not have issued the patent "but for" the applicant's failure to disclose the information in question, and that this was not shown here.
We feel, however, that the Fee and Sutch affidavits were clearly shown to be material to issuance of the '690 patent.10
10 The Fee affidavit was submitted in an effort to overcome the Patent Examiner's initial rejection of True Temper's claims — a rejection based largely on his view that the perceptible differences between the Channeloc anchor and the pre-existing Williams patent were "of no significance and a variation in design within the realm of one skilled in the art." (IV App. 314). Although the patent was not granted immediately on receipt of that affidavit, the Examiner did state that "a showing that the [True Temper] anchor is more easily applied than prior art structures but maintains the prior art's holding character would be influential in the determination of patentability" (Id. at 326, emphasis added).
The Sutch affidavit was thereupon submitted together with remarks of counsel making reference to both the Fee and Sutch affidavits (id. 329, 343), and the subject patent was issued. It is reasonable to conclude that, had he known that the reported comparisons were inherently unreliable, the Examiner would have again denied the patent — at the least requiring True Temper to conduct more meaningful tests. [Emphasis added.]
We note that the trial judge found that "[p]laintiff failed to disclose material facts to the Patent Office and submitted evidence which was inaccurate, incomplete and misleading." And the court found "the failure of plaintiff to disclose relevant information to be substantial in nature." Although the trial judge here did not phrase his findings in strict terms of "but-for" causality, see Norton v. Curtiss, supra, 433 F.2d at 795, we feel that the findings and the record here adequately support the denial of enforcement of the patent. See Timely Products Corp. v. Arron, 523 F.2d 288, 297-98 [187 U.S.P.Q. 257, 263-64] (2d Cir. ); SCM Corp. v. Radio Corporation of America, 318 F.Supp. 433, 449-50 [167 U.S.P.Q. 196, 207-08] (S.D.N.Y. ). The withheld information was material in that it was relevant and clearly significant to the consideration of the application by the Patent Office. See Monsanto Co. v. Rohm & Haas Co., supra, 456 F.2d at 599-600 [172 U.S.P.Q. at 328-29]. [Emphasis added.]
The foregoing indicates that the True Temper court applied the subjective "but for" test and clearly did not apply the objective "but for" test. Although an argument can be made for the "but it might have been" test, we conclude that such a test is too speculative and that the more practical test is whether the examiner would have rejected the claims had he known all of the facts.31 At the same time, the subjective "but for" test holds a patent applicant to the obligation of candor and good faith required because of the "paramount [public] interest in seeing that patent monopolies spring from backgrounds free from fraud or other inequitable conduct." Precision Instrument Manufacturing Co. v. Automotive Maintenance Machinery Co., supra 324 U.S. at 816, 65 S.Ct. at 998, 65 U.S.P.Q. at 138.
On the facts before us, we are not persuaded that Plastic misrepresented to the PTO the previous holding of invalidity of this court.32 Continental's argument that this court's holding in the previous litigation was not based on a mere technicality (failure "to claim a combination key-thumb abutment") does not overcome the fact that any representation by Plastic regarding this court's opinion was subject to an independent evaluation by the examiner who, as related above, was furnished a copy of that opinion.33
Moreover, we are not persuaded that it was Plastic's duty, under penalty of invalidation or nonenforcement of its reissue patent for fraudulent prosecution, to provide the examiner with a copy of the district court's decision. To the extent that the district court's findings of fact and conclusions of law were material to the prosecution of the reissue application, we regard it as decisive that the examiner was put on notice of the district court's opinion by the copy of this court's opinion and by Plastic's specific reference to the district court case during that prosecution. The examiner could readily have obtained a copy of the district court's opinion, along with the briefs, record transcript, exhibits, and other documents associated with the trial, from Plastic or from the district court itself. At the same time, the record does not disclose a reasonable probability that the examiner would have rejected the claims had a copy of the district court's findings of fact and conclusions of law been submitted to him.34 Accordingly, we hold that the Hall Reissue was not fraudulently procured.
(3) Intervening Rights Issue
As related earlier, Continental argues that it has acquired intervening rights under 35 U.S.C. § 25235 and, thus, should not be held liable for damages for infringement of the Hall Reissue claims, saying (brief at 45):
In the instant case, it would be a travesty of justice and a denial of equity to hold that the Defendant herein [Continental] should pay any damages or compensation to this Plaintiff [Plastic] on the ground that the Defendant has infringed the reissue patent of the Plaintiff, when the Defendant made and sold only the same structure after the date of issuance of the reissue patent which it had been making and selling for at least four years prior to the time that the Plaintiff obtained its reissue patent, and which structure, in fairly and fully contested litigation between these same parties, was held not to be an infringement of the Plaintiff's originally issued, subsequently held invalid patent upon which the reissue patent is based.
This raises the question of whether equity requires that Continental be allowed to continue to make, use, and sell the infringing goods "for the protection of investments made or business commenced before the grant of the reissue."36 Section 252 is an exception to the general grant to the reissue patentee of the right to exclude others from making, using, or selling the patented invention (35 U.S.C. § 271) and, as such, may only be invoked when equity requires.
The district court made no findings of fact on this question, and, assuming, arguendo, the truth of Continental's allegations, the record is insufficient for this court to determine whether equity requires that Continental be given the right to continue to infringe the Hall Reissue claims.37 On the basis of an affidavit of the president of Continental which was attached to its motion for summary judgment, Continental alleges that it "embarked upon an extensive market investigation, and investigation of various types of safety closure," beginning in 1970; that its first "Med-Guard" safety closures38 were produced and sold in August 1972, as were the Continental "Med-Vials" (the medicine containers); that, "[i]n the course of the market research and product research and development, including the patenting of certain other safety closure structures, Continental Plastics expended an amount of approximately $33,000"; that, "[i]n tooling up for the initial production of the `Med-Guard' safety closure structure, Continental Plastics invested approximately $31,398";39 that, in the first year of production, it invested $9,872 in advertising the "Med-Guard" safety closure structure;40 and that, as of early 1977, its "total investment in tooling and equipment necessary to manufacture, sort and sell the `Med-Guard' safety closure structure was $75,000."41
Continental seeks to continue to infringe the Hall Reissue and even expand its operations throughout the remainder of the life of the Hall Reissue without royalty fees or damages. This would effectively extinguish the patentee's rights under the guise of protecting the investment of an infringer. See Wayne-Gossard Corp. v. Sondra, Inc., supra at 1363, 195 U.S.P.Q. at 797. Continental's activities in the safety closure field commenced subsequent to issuance of the Hall Patent in 1969,42 and Continental has had the benefit of several years' production for which no damages can be assessed. During that time its sales greatly increased, possibly resulting in profits sufficient to recover what appears to have been a minimal investment.43 Cf. Wayne-Gossard Corp. v. Sondra, Inc., supra. Moreover, from the record it appears that other noninfringing goods can be manufactured from the same equipment currently being used to manufacture the infringing goods, so that not all of Continental's investment would be lost if it were precluded from infringing the Hall Reissue. Cf. Wayne-Gossard Corp. v. Moretz Hosiery Mills, Inc., 447 F.Supp. 12, 16, 199 U.S.P.Q. 87, 89-90 (W.D.N.C.1976), after remand from 539 F.2d 986, 191 U.S.P.Q. 543 (4th Cir. 1976).
In view of the foregoing and assuming the Hall Reissue is valid, we hold that Continental has not acquired intervening rights sufficient to justify continuing the manufacture of the infringing goods; nevertheless, equity requires that Continental be entitled to recoup its investment and to offset, against any infringement damages, the reasonable cost of converting or replacing its present equipment in order to produce noninfringing goods. Id. Because Continental's investments, expenditures, and recoupment through profits have not been proved with the requisite precision, and, further, because the reasonable costs of conversion have not been demonstrated, the case must be remanded for further proceedings consistent with this opinion with respect to these matters. Cf. Wayne-Gossard v. Moretz Hosiery Mills, Inc., 539 F.2d 986, 991-92, 191 U.S.P.Q. 543, 547 (4th Cir. 1976); Rohm & Haas Co. v. Chemical Insecticide Corp., 171 F.Supp. 426, 120 U.S.P.Q. 435 (D.Del.1959).
(4) Plastic's Cross-Motion for Summary Judgment
As noted supra in the proceedings before the district court, Plastic cross-moved for summary judgment on infringement and validity. Because we conclude that the district court improperly granted Continental's motion for summary judgment, it is necessary to consider Plastic's motion.
In "DEFENDANT'S ANSWER TO PLAINTIFF'S REQUESTS FOR ADMISSIONS UNDER RULE 36 OF THE RULES OF CIVIL PROCEDURE," filed February 22, 1977, Continental admitted that subsequent to June 15, 1976, it made, used, and sold a container ensemble on which claims 5 and 8 of the Hall reissue can literally be read. It specifically admitted infringement of claim 8; and regarding claim 5, it said:44
The character of claim 5 of the reissue patent is not susceptible to precise determination or understanding. It is noted that claim 1 does not form any part of the reissue patent, and yet it is further noted that claim 5 refers to "the safety closure of claim 1 wherein", followed by a description of certain structure. It is thus not possible to determine to what structure claim 5 refers. It would appear that this claim is indefinite and incomplete on its face, and in such respect it is not possible to determine whether this claim "can literally be read" upon any container ensemble which the Defendant has made subsequent to June 15, 1976.
If claim 5 be interpreted to include all of the structural limitations from claim 1 of the original Hall patent, it is not believed that this claim can literally be read upon a container ensemble which the Defendant has made subsequent to June 15, 1976, if a key recess is interpreted to mean a hole formed through the internal closure in the manner that such recess is illustrated and described in the Reissue patent 28,861.
Further, if the structural limitations and description appearing in claim 1 of the original Hall patent be construed as incorporated into claim 5 of the reissue patent in suit, and if the second definition found in Webster's International Dictionary and the American Heritage Dictionary of the English Language be taken as the meaning of the word "coincident," then Defendant denies that claim 5 of Plaintiff's Reissue patent 28,861 can literally be read upon any container ensemble which the Defendant has made subsequent to June 15, 1976.
If the term "coincident," as used in an integrated combination of claim 1 of the original Hall patent and claim 5 of the reissue patent, means that the recess is at the top of the container assembly while the key is at the side of the container assembly, such claim cannot be literally read on any structure which the Defendant has made since June 15, 1976.
If the term "coincident" appearing in claim 1, for purposes of attempting to answer this request for admissions, is assumed to mean "alongside" as it has been previously defined by Mr. Hall, the inventor, then claim 5 cannot literally be read upon any structure which has been manufactured or sold by the Defendant since June 15, 1976.
If the term "coincident" as used in claim 1 of the original Hall patent, assumed for purposes of attempting to answer this request for admissions to be incorporated in claim 5, means "occupying the same position simultaneously," and provided that all of the limitations of claim 1 are so incorporated in claim 5, then claim 5 of the reissue patent in suit can be literally read upon container ensembles which have been made by the Defendant since June 15, 1976. [Emphasis added.]
Since we concluded earlier that the language added to claim 5 during the reissue prosecution corrected any ambiguity regarding the definition of "coincident" and that claim 1 is specifically incorporated into claim 5, it is clear that infringement of claim 5 is admitted and that the district court should have entered summary judgment for Plastic on the infringement issue.
Although we already have concluded that the adjudication of obviousness in the prior litigation has no collateral estoppel effect upon Hall Reissue claims 5 and 8, the question remains whether the subject matter as a whole of these claims would have been obvious to one of ordinary skill in the art at the time the invention was made. Plastic correctly states that the Hall Reissue claims are presumed valid (35 U.S.C. § 282); and this is particularly so where the PTO considered all of the prior art before the courts in the previous litigation. See Scaramucci v. Dresser Industries, Inc., 427 F.2d 1309, 1313, 165 U.S.P.Q. 759, 762-63 (10th Cir. 1970). Nevertheless, Continental should have an opportunity to show the obviousness of the Hall Reissue claims by presenting to the district court additional prior art (not before the PTO) which it considers pertinent. See Solder Removal Co. v. United States International Trade Commission, 582 F.2d 628, 632, 199 U.S.P.Q. 129, 133 (Cust. & Pat.App.1978). The obviousness or nonobviousness of the Hall Reissue claims can then be determined in accordance with the analytical guidelines established by the Supreme Court in Graham v. John Deere Co., supra.45 We note that these guidelines do not require that, for a combination of known elements46 to be nonobvious, the result achieved by the combination must be synergistic.47 Champion Spark Plug Co. v. Gyromat Corp., 603 F.2d 361, 372, 202 U.S.P.Q. 785, 793 (2d Cir. 1979); Republic Industries, Inc. v. Schlage Lock Co., 592 F.2d 963, 970, 200 U.S.P.Q. 769, 777 (7th Cir. 1979).48 "If the level of skill of a person of ordinary skill in the pertinent art is such that the differences between the subject matter sought to be patented and the prior art would not have been obvious to that person, the test for nonobviousness is met." Champion Spark Plug Co. v. Gyromat Corp., supra, 603 F.2d at 372, 202 U.S.P.Q. at 793.
Accordingly, the case must be remanded for determination, consistent with this opinion, of the question of obviousness of the subject matter as a whole of Hall Reissue claims 5 and 8.49
(5) Attorney Fees
In its August 5, 1977, order, the district court awarded Continental its attorney fees, apparently in accordance with 35 U.S.C. § 285, which states that "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." Entitlement to attorney fees arises from "such misconduct upon the part of the losing party as to constitute fraud on the Patent Office or [conduct] so unfair and reckless as to make it unconscionable for the prevailing party to sustain the expense of counsel."50 Q-Panel Co. v. Newfield, 482 F.2d 210, 211, 178 U.S.P.Q. 521, 522 (10th Cir. 1973). The award of attorney fees under section 285 is compensatory rather than punitive. Halliburton Co. v. Dow Chemical Co., 514 F.2d 377, 382, 185 U.S.P.Q. 769, 773 (10th Cir. 1975). Although the award of attorney fees is discretionary with the trial court, such an award is proper only when the case is exceptional. Id.; Iron Ore Co. of Canada v. Dow Chemical Co., 500 F.2d 189, 195, 182 U.S.P.Q. 520, 524 (10th Cir. 1974).
It is apparent from the record that the district court set forth no conclusion of law that this case was "exceptional" within the meaning of section 285; nor did the court make any findings of fact that would support such a conclusion.
This, coupled with our holdings and conclusions set forth above, prompts us to hold that the district court's award of attorney fees to Continental was improper.
The district court's denial of Plastic's cross-motion for summary judgment is reversed on the issue of infringement; its dismissal of Plastic's complaint and entry of summary judgment in favor of Continental are reversed; its award to Continental of attorney fees is reversed; and the case is remanded for further proceedings, consistent with this opinion, on the question of validity of the Hall Reissue and (in the event the presumption of validity of the Hall Reissue is not overcome by Continental) on the matters pertaining to Continental's intervening rights, discussed supra.
REVERSED and REMANDED.
Before SETH, Chief Judge, McWILLIAMS, BARRETT, DOYLE, McKAY and LOGAN, Circuit Judges, and MILLER, Judge.*
Appellee Continental Plastics of Oklahoma, Inc., has filed a Petition for Rehearing with respect to this court's opinion filed August 8, 1979, which, among other matters, reversed the district court's dismissal of appellant Plastic Container Corporation's complaint and its entry of summary judgment in favor of appellee; and reversed the district court's denial of appellant's cross-motion for summary judgment on the issue of infringement.
The petition is essentially grounded on this court's statement:
Therefore, we conclude that the claimed invention of the Hall Reissue cannot be considered substantially identical to the claimed invention of the Hall patent for purposes of collateral estoppel.
Petitioner argues that appellant has made a "binding factual admission" in its brief on appeal (Intervening Rights Issue), stating:
Here . . . the scope of a reissue claim (reissue claim 5) is identical or substantially identical to the scope of an original claim (original claim 5). The only difference is the addition of a—whereby—clause.
Petitioner also points out that appellant made the same "admission" in its OPPOSITION TO DEFENDANT'S MOTION FOR SUMMARY JUDGMENT before the district court. However, it is not apparent from the district court's order granting the motion of Continental Plastics for summary judgment that the court considered the "admission."
Briefs are not a part of the record,1 and in those cases in which statements in a brief were considered as admissions, it appears that the court did so as a matter of discretion. See Leslie v. Knight Soda Fountain Co., 55 F.2d 224, 225 (2d Cir. 1932); Young & Vann Supply Co. v. Gulf, F. & A. Railway Co., 5 F.2d 421, 423 (5th Cir. 1925). Moreover, the alleged "admission" of appellant here appears to be contrary to the argument in its brief (p. 9) that—
The claims here in issue, i. e., claims 5 and 8 of the Reissue patent, were not in issue in the prior litigation and were redrafted specifically to avoid the basis on which this Court of Appeals held original Claim 5 invalid. . . . collateral estoppel . . . does not and cannot apply to the validity of claims 5 and 8 of the Reissue patent.
Considering that this case is on appeal from an order granting summary judgment, the court has, in furtherance of the proper administration of justice, decided the issue of collateral estoppel on the merits of the case. In its petition, appellee seeks to further argue the merits, pointing out that the language added to reissue claim 5 consists of a "whereby" clause and asserting that such a clause "cannot be anything more than a statement of an inherent function of the structure defined prior to the `whereby' clause" (citing In re Mason, 244 F.2d 733, 735, 44 C.C.P.A. 937, 940, 114 U.S. P.Q. 127, 129 (1957)). However, Mason does not stand for such a broad proposition; and the idea that functional language ipso facto cannot precisely define novelty in structure was laid to rest in In re Swinehart, 439 F.2d 210, 58 C.C.P.A. 1027, 169 U.S.P.Q. 226 (1971).2 It is clear that the added language in reissue claim 5, "the key carried by the external cap functions as a tab against which the thumb is pressed in a generally upward direction to remove the external cap," defines and limits structure of the key carried by the external cap so that the thumb can be pressed in an upward direction. Such a structural limitation is not inherent in original claim 5 (which, e. g., permits structure for a rotational or downward direction for cap removal), as urged by petitioner. See In re Mott, 557 F.2d 266, 194 U.S.P.Q. 305 (C.C.P.A. 1977).
In view of the foregoing, it is ORDERED:
That the petition is granted to the extent that the court has considered petitioner's arguments and, in all other respects, is hereby denied.