Brand v. Miller ( 2007 )

United States Court of Appeals for the Federal Circuit
2006-1419
(Interference No. 105,215)
ROBERT D. BRAND, CAPITAL MACHINE CO., INC.,
and INDIANA FORGE, LLC,
Appellants,
v.
THOMAS A. MILLER, DARREL C. PINKSTON,
and MILLER VENEERS, INC.,
Appellees.
Meredith Martin Addy, Brinks Hofer Gilson & Lione, of Chicago, Illinois, argued for
appellants. With him on the brief was Raymond W. Green.
Clifford W. Browning, Krieg Devault LLP, of Indianapolis, Indiana, argued for
appellees.
Appealed from: United States Patent and Trademark Office, Board of Patent Appeals and
Interferences
United States Court of Appeals for the Federal Circuit
2006-1419
(Interference No. 105,215)
ROBERT D. BRAND, CAPITAL MACHINE CO., INC.,
and INDIANA FORGE, LLC,
Appellants,
v.
THOMAS A. MILLER, DARREL C. PINKSTON,
and MILLER VENEERS, INC.,
Appellees.
___________________________
DECIDED: May 14, 2007
___________________________
Before MICHEL, Chief Judge, ARCHER, Senior Judge, and DYK, Circuit Judge.
DYK, Circuit Judge.
Appellants Robert D. Brand, Capital Machine Co., Inc. and Indiana Forge, LLC
(“Brand”) appeal from the judgment of the Board of Patent Appeals and Interferences
(“Board”) of the U.S. Patent and Trademark Office (“PTO”) in Interference No. 105,215,
entering judgment for appellees Thomas A. Miller, Darrel C. Pinkston, and Miller
Veneers, Inc. (“Miller”) on the issue of priority. The Board concluded that Brand derived
the subject matter of the single count from Miller. We hold that the Board impermissibly
relied on its own expertise in determining the question of derivation and that the Board’s
conclusion is not supported by substantial record evidence. We therefore reverse and
remand for further proceedings consistent with this opinion.
BACKGROUND
The invention here relates to methods of cutting veneer from logs of wood.
Typically logs are cut lengthwise into a pair of “flitches,” which are then mounted onto
the rotating “staylog” of a veneer cutting machine. The flitch is held in place on the
staylog by clamping “dogs.” The veneer-cutting knife then cuts off slices of veneer from
the flitch as it rotates on the staylog.
Because logs are typically thicker at their base than at their end, traditionally the
butt-ends of the resulting tapered flitches were cut off in order to make them more
uniform in cross-section from end to end. The ends that had been cut off were then
discarded. The invention at issue allows a tapered flitch to be mounted on a staylog
such that the flitch’s veneer-producing face (the uppermost surface region of 16 in the
diagram below from U.S. Patent No. 5,865,232 (“’232 patent”)) is parallel to the veneer-
cutting knife. This results in more efficient use of the flitches.
Traditional dogs could not be used to mount a tapered flitch (16) onto a staylog (10)
because traditional dogs did not allow the length of the dog extending from the staylog
to vary based on the flitch’s taper. The inventors here used different types of dogs to
2006-1419 2
solve that problem.
During the relevant period Robert Brand was the Chief Engineer for Capital
Machine Co. (“Capital”), which makes machines for cutting veneer. He is now retired
from Capital and works as an unpaid consultant with Miller Veneers. Brand is the
named inventor of U.S. Patent Application No. 09/377,120 (’120 application). Thomas
Miller was Production Manager of Miller Veneers, a customer of Capital. Miller is the
named inventor of the ’232 patent. The two companies had a close working
relationship, and Thomas Miller on occasion communicated new design concepts to
Capital.
On April 28, 2004, the Board declared an interference with a single count to
determine whether Miller or Brand should have priority. The count, which is claim 1 of
Miller’s ’232 patent and the identical claim 38 of Brand’s ’120 application. The count
reads:
A method for cutting veneer sheets from a tapered flitch,
comprising the steps of
providing a staylog for a veneer slicing machine having a
veneer slicing knife;
attaching a flitch having a tapered veneer producing face to
the staylog with the tapered veneer producing face affixed in a
stable, parallel relationship with the veneer slicing knife; and
cutting veneer sheets with the veneer slicing knife from the
tapered veneer producing face of the flitch.
While the same claim appears in both the ’232 patent and the ’120 application,
the inventors used different methods to solve the problem of attaching a tapered flitch to
a staylog. Miller’s ’232 patent employs radially-expandable round “collett dogs”
(depicted below at left) to support the flitch while Brand’s ’120 application uses multi-
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headed tall pin dogs (depicted below at right) for the same purpose.
In the interference proceeding, Brand was the Senior Party, having filed his
application on May 31, 1995. 1 Miller, the Junior Party, made two arguments for priority.
Miller argued it was entitled to priority as the party first to conceive and first to reduce to
practice, and also argued it was entitled to priority because Brand derived the invention
from Miller. The Board first addressed Miller’s argument that it was first to conceive and
first to reduce to practice, and determined the respective conception and reduction to
practice dates of Brand and Miller. The Board held that Miller’s conception date was no
earlier than October 27, 1994, and denied Miller’s attempt to amend its priority
statement to claim an earlier date. The Board held that Miller failed to prove an actual
reduction to practice prior to Brand’s May 31, 1995, benefit date. The Board concluded
that, since Junior Party Miller failed to prove it reduced to practice first, it failed to
establish that it was entitled to an award of priority as the party first to conceive and first
to reduce to practice. Miller has not raised this issue on appeal.
The Board then turned to Miller’s other argument, that Miller was entitled to
priority because Brand derived the invention from Miller. Miller’s case for derivation was
1
The Board then held that Brand failed to prove a conception date earlier
than its May 31, 1995, constructive reduction to practice date. The Board reasoned
that, while several Brand drawings did demonstrate conception of the subject matter of
the count, there was no corroborated evidence of the completion dates of these
drawings because witness William Koss, the Executive Vice President of Capital, did not
distinguish between commencement and completion dates. In light of our holding that
Brand was entitled to priority, we need not describe or address Brand’s alternate
argument that he was entitled to an earlier date for conception and reduction to practice.
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based primarily on two drawings that Miller allegedly showed Brand before Brand’s own
conception. The first, Miller Exhibit 2001 (“MX2001”), depicts an end view of a tapered
flitch:
The Board found that Miller showed Brand and Koss (the Executive Vice President of
Capital), the drawing in MX2001 at a meeting held sometime between October 7, 1994
and October 12, 1994, well before Brand’s conception date of May 31, 1995. The
drawing in MX2001 does not depict any dogs or any holes in the flitch for receiving
dogs.
The second drawing that Miller alleged supported its case for derivation was
Miller Exhibit 2002 (“MX2002”), which the Board found was contained in a fax from
Miller to Brand on October 7, 1994, and which depicts a type of screw called a “bugle
headed screw dog:”
The Board addressed whether Miller had proven that Brand derived the invention
from Miller based on the information in Miller Exhibits [“MX”] 2001 and 2002, either
separately or taken together. While Brand was aware that the bugle-headed dogs
2006-1419 5
depicted in MX2002 were intended as substitutes for standard dogs, the Board rejected
as uncorroborated the testimony of Miller that he explicitly told Brand how to practice
the invention of the count by using the bugle-headed dogs to support a tapered flitch.
The Board nonetheless held that Miller had established derivation based on the
combination of MX2001 and 2002. The Board reasoned that “one skilled in the art . . .
would have recognized [the] suitability [of Miller’s bugle-headed screw dogs MX2002]
for securely supporting a tapered flitch in the position depicted in [MX2001].” J.A. at 62.
The Board did not cite any testimony or record evidence to support its conclusion. The
Board further held that “[t]he ability of the bugle-headed screw dogs to tightly clamp the
flitch would have been readily apparent.” Id.The Board also held, in the alternative, that the information in MX2001, taken
alone, was sufficient to teach one of ordinary skill in the art how to practice the method
of the count. Again without citing record evidence, the Board concluded that the
drawing in MX2001 disclosed the invention. Although MX2001 does not depict the
relationship between a flitch and the veneer-cutting knife, the Board concluded that
“[a]lthough not discussed in the exhibit, it is apparent that the flitch is supported [in the
required position].” While MX2001 does not show the size and shape of supporting
dogs, the Board concluded that “it is nevertheless clear that the position of the flitch is
due to the fact that the dogging holes have different depths.” Id. at 60-61.
Brand filed a request for rehearing, arguing principally that the Board failed to
take into account declarations by witnesses that favored Brand’s position, inter alia, on
the derivation issue. The Board denied the request. In particular, on the question of
derivation, the Board described as “unconvincing” the declaration of witness Bobby
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Deckard, who stated that “there is no way one could deduce from [MX2001] how to
build a machine or attach a tapered flitch to the machine,” because it failed to explain
why an artisan “would not have known to use screw dogs which are longer than the
screw dog depicted in MX2002.” J.A. at 77-78. Brand timely filed this appeal. We have
jurisdiction pursuant to 28 U.S.C. § 1295(a)(4)(A).
DISCUSSION
I
Under § 554 of the Administrative Procedure Act (“APA”), if an agency
adjudication is “required by statute to be determined on the record after opportunity for
an agency hearing,” the adjudication becomes a formal proceeding, subject to the
requirements of §§ 556 and 557 of the APA. 5 U.S.C. § 554. Sections 554, 556 and
557 require hearings to be held, impose detailed conditions for the creation of a written
record and forbid ex parte communications. 5 U.S.C. §§ 554, 556-557.
As the Supreme Court has held, adjudicatory proceedings before the Board are
governed by the requirements of the APA. Dickinson v. Zurko, 527 U.S. 150, 154
(1999). In In re Gartside, 203 F.3d 1305 (Fed. Cir. 2000), an appeal from an
interference proceeding, we held that PTO proceedings are not formal adjudications
governed by §§ 556 and 557 of the APA. Id. at 1313. We reasoned that APA § 554
excludes from formal adjudications under §§ 556 and 557 those proceedings that are
subject to subsequent trial de novo, and that the patent statute allows applicants to
obtain in district court such trials after PTO proceedings. Id.; see 35 U.S.C. §§ 145-146.
Although PTO proceedings are not formal adjudications governed by §§ 556 and
557 of the APA, the Supreme Court has held that our review of those proceedings is
2006-1419 7
governed by another section of the APA, § 706. Dickinson, 527 U.S. at 152. The
Supreme Court in Dickinson did not decide which of the several standards of review in
APA § 706 applies to PTO proceedings. We first considered that question in Gartside,
an appeal from a Board interference proceeding. We noted that APA § 706 provides
that “[t]he reviewing court shall . . . hold unlawful and set aside agency action, findings,
and conclusions found to be . . . unsupported by substantial evidence in a case subject
to sections 556 and 557 of this title or otherwise reviewed on the record of an agency
hearing provided by statute.” Gartside, 203 F.3d at 1311; 5 U.S.C. § 706 (emphasis
added). We then noted that 35 U.S.C. § 144 directs us to review “on the record” the
decisions of the Board. Id., quoting 35 U.S.C. § 144 (“The United States Court of
Appeals for the Federal Circuit shall review the decision from which an appeal is taken
on the record before the Patent and Trademark Office.”) (emphasis added). We
concluded that findings of fact by the Board must in all cases be supported by
substantial evidence in the record.
Under the substantial evidence standard of review, we search for evidence,
clearly set forth in the record below, to justify the conclusions that the Board has drawn.
See Gartside, 203 F.3d at 1312. As we noted in Gartside, “[i]n appeals from the Board,
we have before us a comprehensive [factual] record . . . including all of the relevant
information upon which the Board relied in rendering its decision.” Id. at 1314.
Crucially, we held that “[t]hat record, when before us, is closed, in that the Board’s
decision must be justified within the four corners of that record.” Id.; see also Ass’n of
Data Processing Serv. Orgs., Inc. v. Bd. of Governors of Fed. Reserve Sys., 745 F.2d
677, 683 (D.C. Cir. 1984) (“[When cases are governed by the substantial evidence
2006-1419 8
standard of review] the factual support must be found in the closed record as opposed
to elsewhere.”).
The fact that section 706 of the APA requires that the Board’s decision be
reviewed on the record does not directly answer the question whether the Board’s
decisions may be based on the Board’s substantive expertise reflected in the record.
However, in a contested proceeding involving “resolution of conflicting private claims to
a valuable privilege,” it is particularly important that the agency’s decision on issues of
fact be limited to the written record made before the agency. See Sangamon Valley
Television Corp. v. United States, 269 F.2d 221, 224 (D.C. Cir. 1959). 2 The Supreme
Court rejected an agency’s attempt to rely on its own expertise in a contested
proceeding in Baltimore & Ohio R.R. Co. v. Aberdeen & Rockfish R.R. Co., 393 U.S. 87,
91-92 (1968). The Interstate Commerce Commission (“ICC”), in a ratemaking
proceeding involving competing claims by Northern and Southern railroads, determined
that the costs of North-South traffic were fairly represented by territorial average costs.
The Supreme Court held that the ICC’s decision was not supported by record evidence,
and that in such a context agency expertise cannot substitute for record evidence
because “[t]he requirement for administrative decisions based on substantial evidence
and reasoned findings—which alone make effective judicial review possible—would
become lost in the haze of so-called expertise.” Baltimore & Ohio R.R. Co., 393 U.S. at
2
That case held that letters that “did not go into the public record” fatally
tainted the Federal Communication Commission’s proceedings because the proceeding
involved “resolution of conflicting private claims to a valuable privilege and . . . basic
fairness requires such a proceeding to be carried on in the open.” Sangamon Valley,
269 F.2d at 224.
2006-1419 9
92 . 3
The detailed PTO regulations governing interferences and other contested
proceedings also highlight the importance of the comprehensive record that is required
in contested administrative proceedings before the Board. See 37 C.F.R. §§ 41.100-
41.158 (regulations governing contested cases); 37 C.F.R. § 41.200(a) (“A patent
interference is a contested case.”); 37 C.F.R. §§ 41.200-41.208 (regulations specific to
patent interferences). All motions must be accompanied with “appropriate evidence,
such that, if unrebutted, it would justify the relief sought.” 37 C.F.R. § 41.208. Detailed
rules govern depositions and the taking of testimony, requiring objections to be served
and entered on the record, and permitting parties to move to exclude evidence from the
record. 37 C.F.R. § 41.155. Transcripts of such testimony serve as the “true record of
the testimony given by the witnesses.” 37 C.F.R. § 41.157(e)(6)(ii). Finally, the Federal
Rules of Evidence apply to contested proceedings unless regulations specifically
provide otherwise. 37 C.F.R. § 41.152. These detailed regulations governing contested
cases highlight the Board’s role in such cases as an impartial adjudicator of an
adversarial dispute between two parties.
We therefore hold that, in the context of a contested case, it is impermissible for
the Board to base its factual findings on its expertise, rather than on evidence in the
record, although the Board’s expertise appropriately plays a role in interpreting record
3
Quite a different standard applies when agencies interpret ambiguous
statutes. See Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837(1984). In most situations deference is due to agency positions on a legal question.
But this is not a Chevron situation both because the issue is factual, not legal, and
because we have held in any event that the Board does not earn Chevron deference on
questions of substantive patent law. Merck & Co. v. Kessler, 80 F.3d 1543, 1549-50
(Fed. Cir. 1996).
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evidence. We do not—and need not—decide here the extent to which the Board in ex
parte proceedings is so limited.
II
We now turn to the facts of this case. The Board here adjudicated the questions
of priority of invention and derivation. Priority of invention is awarded “to the first party
to reduce an invention to practice unless the other party can show that it was the first to
conceive of the invention and that it exercised reasonable diligence in later reducing that
invention to practice.” Medichem, S.A. v. Rolabo, S.L., 437 F.3d 1157, 1169 (Fed. Cir.
2006); 35 U.S.C. § 102(g). Priority is a question of law which is determined based on
underlying factual determinations. Price v. Symsek, 988 F.2d 1187, 1190 (Fed. Cir.
1993).
A party may also assert that the patentee did not invent the patented invention by
showing derivation. Id. In an interference proceeding, the person challenging the
Senior Party’s priority date bears the burden of proof on derivation and must make two
showings. Id. First, he must “establish prior conception of the claimed subject matter.” 4
Id. Second, he must prove “communication of that conception to the patentee that is
sufficient to enable [him] to construct and successfully operate the invention.” Int’l
Rectifier Corp. v. IXYS Corp., 361 F.3d 1363, 1376 (Fed. Cir. 2004) (internal quotation
marks omitted). This court reviews a finding of derivation as a question of fact. Gambro
4
Conception is defined as “formation in the mind of the inventor, of a
definite and permanent idea of the complete and operative invention, as it is hereafter to
be applied in practice. Conception is complete when the idea is so clearly defined in the
inventor's mind that only ordinary skill would be necessary to reduce the invention to
practice, without extensive research or experimentation.” Stern v. Trustees of Columbia
University in New York, 434 F.3d 1375, 1378 (Fed. Cir. 2006) (internal citations and
quotation marks omitted).
2006-1419 11
Lundia AB v. Baxter Healthcare Corp., 110 F.3d 1573, 1576 (Fed. Cir. 1997).
The Board decision here turns on the second issue—communication. On this
issue Brand argues that the Board improperly substituted its own opinion for evidence of
the knowledge of one of ordinary skill in the art. We agree. As the Board correctly
noted, in this case, “Miller, as the proponent of derivation by Brand . . . bears the burden
of proving that one skilled in the art would have been capable, without undue
experimentation, of making a staylog for securely supporting a tapered flitch in the
position depicted [in MX2001].” J.A. at 61. The Board rejected as unconvincing the
only relevant testimony, Miller’s testimony that he explicitly told Brand how to practice
the invention of the count. There was also no testimony from one skilled in the art that
the drawings communicated an enabling invention to a skilled recipient of the drawings.
The Board’s conclusion that “one skilled in the art . . . would have recognized
[the] suitability [of Miller’s bugle-headed screw dogs MX2002] for securely supporting a
tapered flitch in the position depicted in [MX2001]” was not supported by any citation to
the record. J.A. at 62. Similarly, the Board did not anchor in the record its conclusion
that an artisan would have deduced from the drawing of a flitch in MX2001 standing
alone a method of securely fastening a tapered flitch to a staylog, given that the drawing
did not depict any dogs or holes in the flitch. The Board here did not just interpret the
drawings in MX2001 and MX2002 from the standpoint of one skilled in the art. Those
drawings simply depicted a flitch (without dogs) and a bugle-headed dog (without a
flitch), and did not show the relationship between the two or the position of the flitch with
respect to the veneer-cutting knife. Indeed, the Board’s own description of MX2001
2006-1419 12
notes specifically that these relationships were “not shown.” J.A. at 60. 5
Lacking an explanation in the record as to how the depicted flitch or dogs would
be arranged to perform the claimed method, the Board substituted its own expertise for
record evidence that Miller was obligated to provide. The Board’s finding that an artisan
would have known how to securely fasten a tapered flitch to a staylog using bugle-
headed dogs does not represent a simple substitution of bugle-headed dogs for existing
dogs, but detailed inferences as to the mounting process. The detailed nature of the
findings that the Board found necessary to make demonstrates the inappropriateness of
its approach. 6 Finally, the path that the Board determined that a skilled artisan would
5
The Board found that “[a]lthough not discussed in the exhibit, it is apparent
that the flitch is supported by the dogs (not shown) with its uppermost surface region
parallel to the staylog mounting surface (not shown) and thus parallel to the edge of the
veneer-cutting knife (not shown). J.A. at 60 (emphases added).
6
Among its multiple findings the Board found that:
we are persuaded that one skilled in the art, having been informed
of Miller's proposed bugle-headed screw dogs, would have
recognized their suitability for securely supporting a tapered flitch in
the position depicted in that exhibit. Furthermore, the artisan further
would have recognized that Miller's dogs would permit the dogging
holes to take the form of round holes or longitudinal pockets, with
round holes offering the advantage of requiring less time and effort
to form. The ability of the bugle-headed screw dogs to tightly clamp
the flitch would have been readily apparent, since the hydraulic
transverse clamping action would be expected to drive the facing
parts of the edges of each pair of dogs into the walls of the dogging
holes, whether formed as round holes or as longitudinal pockets.
(…)
Although an artisan would have recognized that increasing the
transverse dimension of the dogging holes while maintaining the
two-inch transverse spacing shown in the exhibit would come at the
expense of part or perhaps all of the expected increase in yield the
exhibit attributes to a "reduced staylog, shallower dogs, and closer
spacing of dogs" (shown in blue in the original sketch), the artisan
would have recognized that this modification would have little, if
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follow has, so far as the record reflects, never been followed. The Board found that
bugle-headed dogs were not depicted in either Miller’s application or Miller’s ’232 patent
as used to support a tapered flitch, and the Board found no evidence that bugle-headed
dogs had been used for the purpose of supporting a tapered flitch. 7 Under such
circumstances the Board’s decision was not supported by substantial evidence in the
record.
Accordingly, we reverse the Board’s award of judgment to Miller, order that
judgment be entered for Brand and remand to the Board for entry of judgment and
appropriate orders.
CONCLUSION
For the foregoing reasons, the decision below is reversed and remanded.
REVERSED AND REMANDED
COSTS
No costs.
any, effect on the expected increase in yield the exhibit attributes to
"keeping wedge, deep dogging holes, and less severe milling of
sides of flitch" (shown in yellow in the original sketch).
J.A. at 62-64.
7
The Board stated: “We did not overlook fact [sic] that the record includes
no allegation, let alone proof, that Miller’s proposed bugle-headed dogs were used
(either successfully or unsuccessfully) to support a tapered flitch or a nontapered flitch
on a staylog prior to Brand’s May 31, 1995, benefit date.” J.A. at 79.
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