Slip Track Systems, Inc. v. Metal Lite, Inc. , 113 F. App'x 930 ( 2004 )

NOTE: Pursuant to Fed. Cir. R. 47.6, this disposition
is not citable as precedent. It is a public record.
United States Court of Appeals for the Federal Circuit
04-1070
SLIP TRACK SYSTEMS, INC.,
Plaintiff-Appellee,
v.
METAL LITE, INC.,
Defendant-Appellant.
__________________________
DECIDED: December 1, 2004
__________________________
Before NEWMAN, Circuit Judge, FRIEDMAN, Senior Circuit Judge, and SCHALL,
Circuit Judge.
Opinion for the court filed by Circuit Judge SCHALL. Opinion dissenting-in-part filed by
Circuit Judge NEWMAN.
SCHALL, Circuit Judge.
DECISION
Metal Lite, Inc. (“Metal Lite”) appeals the final judgment of the United States
District Court for the Central District of California (1) that U.S. Patent No. 5,127,760(“the ‘760 patent”), owned by Slip Track Systems, Inc. (“Slip Track”), has priority over
U.S. Patent. No. 5,127,203 (“the ‘203 patent”), owned by both Metal Lite and Slip Track;
and (2) that Metal Lite infringed the ‘760 patent and is liable for damages in the amount
of $7,000,000 by reason of that infringement. Slip Track Sys., Inc. v. Metal Lite, Inc.,
No. SA CV 98-20 AHS (C.D. Cal. Oct. 22, 2003) (“Final Judgment”). For the reasons
set forth below, we affirm the judgment of the district court on the priority issue.
However, we vacate the judgment of infringement and the award of damages in favor of
Slip Track and remand the case to the district court for further proceedings on the issue
of infringement based upon the claim construction set forth in this opinion.
DISCUSSION
I.
After remand following our decision in Slip Track Systems, Inc. v. Metal Lite, Inc.,
304 F.3d 1256 (Fed. Cir. 2002) (“Slip Track II”), the district court awarded the ‘760
patent priority over the ‘203 patent. The district court’s award of priority was based on a
jury’s finding that the invention of the ‘760 patent was reduced to practice before the
invention of the ‘203 patent. Metal Lite’s sole argument on appeal with respect to the
priority issue is that the district court erred in not granting its motion in limine to bar Slip
Track, an assignee and 50% owner of the ‘203 patent, from challenging the validity of
the ‘203 patent based upon the doctrine of assignee estoppel. We find no error in the
district court’s decision.
Assignee estoppel is an equitable doctrine which, under appropriate
circumstances, bars the assignee of a patent from contesting the validity of the
assigned patent. C.f. Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220, 1225
(Fed. Cir. 1988) (“[D]espite the public policy encouraging people to challenge potentially
invalid patents, there are still circumstances in which the equities of the contractual
04-1070 2
relationships between the parties should deprive one party . . . of the right to bring that
challenge.”). For example, circumstance may warrant application of the doctrine to
prevent an assignee from avoiding royalty payments otherwise due under an
assignment contract by challenging the validity of the assigned patent. See Baladevon,
Inc. v. Abbott Labs., Inc., 871 F. Supp. 89, 96 (D. Mass. 1994); Sybron Transition Corp.
v. Nixon, 770 F. Supp. 803, 811-12 (W.D.N.Y. 1991). This case, however, does not
present such circumstances. Slip Track only asserted invalidity of the ‘203 patent after
Metal Lite put Slip Track’s ‘760 patent into reexamination before the Patent and
Trademark Office on the grounds that it was invalid in view of the ‘203 patent. See Slip
Track Sys., Inc. v. Metal Lite, Inc., 159 F.3d 1337, 1338-39 (Fed. Cir. 1998) (“Slip Track
I”). Moreover, Slip Track owns 100% of the ‘760 patent but only 50% of the ‘203 patent.
The reexamination consequently forced Slip Track to choose between protecting the
validity of either the ‘760 patent or the ‘203 patent. Slip Track made the natural decision
to protect its greater of two property interests, the ‘760 patent. There is nothing
inequitable here. Having rejected Metal Lite’s assignee estoppel argument, we affirm
the judgment of the district court on the priority issue.
II.
After determining that the ‘760 patent has priority over the ‘203 patent, the district
court granted Slip Track’s motion in limine barring Metal Lite from contesting
infringement and subsequently entered judgment against Metal Lite for infringement of
the ‘760 patent. The district court based its decision to grant the motion on three
separate grounds: (1) the doctrine of marking estoppel; (2) our decision in Slip Track II;
and (3) Metal Lite’s litigation conduct. Slip Track Sys., Inc. v. Metal Lite, Inc., No. SA
04-1070 3
CV 98-20 AHS, slip op. at 6-13 (C.D. Cal. Dec. 11, 2003) (“Order Denying Motion for
New Trial”). For the reasons that follow, we reject each of the grounds upon which the
district court relied in granting Slip Track’s motion in limine. We consequently vacate
the judgment of infringement and damages in favor of Slip Track and remand the case
to the district court for proceedings on the issue of infringement.
A. Marking Estoppel
The district court determined that Metal Lite’s marking of its product with the ‘760
and ‘203 patents estopped it from contesting infringement of the ‘760 patent under the
doctrine of marking estoppel. Specifically, the court determined that the combination of
(1) Metal Lite’s deliberate marking with the ‘760 patent from 1994 to September of 1995,
while in partnership with Slip Track; and (2) Metal Lite’s continued marking with the ‘203
patent following dissolution of the partnership in September of 1995, justified estopping
Metal Lite from subsequently denying infringement of the ‘760 patent. The district court
reasoned that marking with the ‘203 patent was tantamount to marking with the ‘760
patent because Metal Lite had argued invalidity of the ‘760 patent during the priority
dispute based on overlapping subject matter with the ‘203 patent. Order Denying
Motion for New Trial, slip op. at 7-9.
At the outset, we note that the parties dispute the continued viability of the
doctrine of marking estoppel. We find it unnecessary to address this issue because,
even assuming the doctrine remains viable, it does not apply to the facts of this case.
“[The doctrine of] marking estoppel, like other varieties of estoppel, should arise only
when a consideration of all aspects of a defendant’s pertinent conduct makes it
inequitable for him to take a position contrary to his prior statements or actions.” Boyd
04-1070 4
v. Shildkraut Giftware Corp., 936 F.2d 76, 79 (2d Cir. 1991). The doctrine serves to
protect the public by cautioning manufacturers that “care must be taken in avoiding
misrepresentation to the public that goods are protected by a patent.” Smithkline
Diagnostics, Inc. v. Helena Labs. Corp., 859 F.2d 878, 890-91 (Fed. Cir. 1988) (quoting
Crane Co. v. Aeroquip Corp., 364 F. Supp. 547, 560 (N.D. Ill. 1973)).
It is undisputed that Metal Lite only marked its product with the ‘760 patent for a
period of about one year while in partnership with Slip Track. This marking was
deliberate. Indeed, Slip Track consented to the marking. There is no evidence,
however, that Metal Lite deliberately mismarked its products during this time. In other
words, nothing indicates Metal Lite believed its product to fall outside the scope of the
‘760 patent’s claims when it made the decision to mark with the ‘760 patent. See Boyd,
936 F.2d at 79 (explaining that “deliberate mismarking” may provide grounds for
applying estoppel); see also Crane, 364 F. Supp. at 560 (applying marking estoppel to a
licensee who continued marking its product with the licensed patent after designing
around the claimed invention). The similarities between the ‘203 and ‘760 patents also
fail to provide a sufficient basis for applying estoppel. In particular, the record does not
indicate that marking with the ‘203 patent created a risk to the public—that is, a risk of
misleading the public to believe the accused product was also covered by the ‘760
patent—sufficient to warrant application of estoppel.
B. The Decision of the Federal Circuit in Slip Track II
Having concluded that the district court erred in its application of marking
estoppel, we turn to the court’s second basis for granting Slip Track’s motion in limine:
04-1070 5
this court’s decision in Slip Track II.1 The district court stated that in Slip Track II we
determined that, with the exception of the wallboard limitation of the ‘203 patent, the
‘203 and ‘760 patents cover identical subject matter. Order Denying Motion for New
Trial, slip op. at 10. The court reasoned that the necessary implication of this is that the
claims of the two patents are virtually identical. Id. The district court further reasoned
that since Metal Lite made its product pursuant to the ‘203 patent, it must also infringe
the ‘760 patent. Id.The district court’s decision suffers from two errors: (1) equating the scope of the
interfering subject matter with the scope of the claims of the two patents; and (2)
equating the scope of the interfering subject matter with the elements of the accused
product. With respect to the first issue, although this case involves an interference
proceeding filed in district court as opposed to the PTO, we have explained that “the
count is not a claim to an invention.” In re Van Geuns, 988 F.2d 1181, 1184 (Fed. Cir.
1993). Rather, the overlapping subject matter “of an interference is merely the vehicle
for contesting the priority of invention and determining what evidence is relevant to the
issue of priority.” Id. (emphasis added). The definition of interfering subject matter is
not relevant to the separate issue of infringement. Therefore, after determining priority,
the district court had an obligation to interpret the claims of the ‘760 patent in order to
address the separate issue of infringement.
After construing the claims, the second step in the infringement analysis requires
the court to compare the properly construed claims to the accused product. Markman v.
Westview Instruments, Inc., 52 F.3d 967, 976 (Fed. Cir. 1995) (en banc), aff’d, 517 U.S.
1The appeal in Slip Track II concerned the scope of interfering subject
matter between the ‘760 and ‘203 patents.
04-1070 6
370, 116 S. Ct. 1384, 134 L.Ed.2d 577 (1996). In bypassing this step, the district court
failed to consider that even assuming virtually identical breadth of the claims of the ‘203
and ‘760 patents, Metal Lite’s products do not necessarily infringe the ‘760 patent. In
other words, the fact that the accused product was made pursuant to the ‘203 patent
and, under the district court’s reasoning, pursuant to the virtually identical ‘760 patent,
does not necessarily mean the completed product actually contains all of the limitations
of the ‘760 patent. In sum, the district court was required to determine the issue of
infringement using our two-step analysis of (1) construing the claims and (2) comparing
the accused product to the properly construed claims. Id.C. Metal Lite’s Litigation Conduct
The district court cited Metal Lite’s litigation conduct as a third reason for barring
Metal Lite from contesting infringement. The court noted that Metal Lite’s sole defense
up until three months before trial was invalidity of the ‘760 patent based upon priority of
the ‘203 patent. The court also noted that it was not until May 12, 2003, that Metal Lite
requested a claim construction, and not until July of 2003 that Metal Lite raised its
specific “claims-based theory of non-infringement.”2 Order Denying Motion for New
Trial, slip op. at 12. The court found Metal Lite’s tardiness in presenting its claims-
based theory of non-infringement contrary to the objective reflected in Rule 26 of the
Federal Rules of Civil Procedure of “fully air[ing] each parties’ theories of the case well
in advance of trial.” Id. at 13.
2
The district court distinguished between invalidity-based and claims-based
theories of non-infringement, the invalidity-based theory being premised on invalidity of
the ‘760 patent and the claims-based theory being premised on a traditional non-
infringement position.
04-1070 7
An evidentiary ruling based on a party’s litigation conduct is not unique to patent
law, so we apply the standard of review of the regional circuit of the district court.
Sulzer Textil A.G. v. Picanol N.V., 358 F.3d 1356, 1363 (Fed. Cir. 2004). The Ninth
Circuit reviews evidentiary rulings for an abuse of discretion. Heyne v. Caruso, 69 F.3d
1475, 1478 (9th Cir. 1995). In this case, we conclude that the district court erred in
granting Slip Track’s motion in limine based on Metal Lite’s litigation conduct and that
the error rose to the level of an abuse of discretion. We so hold because the record
does not support the district court’s position that, up until three months before trial,
Metal Lite’s sole defense of non-infringement was invalidity of the ‘760 patent.
In its answer to Slip Track’s complaint for patent infringement, Metal Lite denied
infringement of the ‘760 patent (Answer and Countercl. at 3) and separately sought a
declaration of invalidity (Answer and Countercl. at 9). Metal Lite’s delay after that in
presenting its claims-based theory of non-infringement is explained by the long
procedural history of this case. Until recently in the case, the focus of both parties was
on the issue of priority. (Decl. Ronald P. Oines at 7.) This was a logical focal point
considering that the issue of infringement would only become relevant in the event the
‘760 patent was declared senior to the ‘203 patent.3 Indeed, it is telling that, as of our
remand in Slip Track II, Slip Track had not come forward with its claims-based theory of
infringement. Accordingly, we hold that the district court abused its discretion in
granting Slip Track’s motion in limine barring Metal Lite from contesting infringement.
3
This is because Slip Track, as a co-owner of the ‘203 patent, could not be
sued for infringing the ‘203 patent.
04-1070 8
III.
The district court entered judgment of infringement of the ‘760 patent without
having construed the pertinent claim terms at issue. On appeal, Metal Lite argues that
under the claim construction it urges, its accused product does not infringe the ‘760
patent. Slip Track, on the other hand, argues that under its proposed claim
construction, the accused product does infringe the ‘760 patent. Both parties urge us to
construe the pertinent claim terms at this time. In view of the relatively straightforward
nature of the claim construction issue and the interest in bringing this litigation to a
conclusion, we accept the parties’ invitation to construe the claims.
The ‘760 patent relates to a “slotted track” or “slotted header” wall assembly used
to alleviate stress on a wall’s infrastructure caused by environmental forces, such as
earthquakes. Slip Track alleges that Metal Lite’s product, a particular slotted track wall
assembly, infringes the claims of the ‘760 patent. The patent contains two independent
claims and eight dependent claims. Claim 1 of the ‘760 patent is representative of the
claims at issue and reads:
A building construction assembly that includes a header and
a stud wherein the header is capable of vertical movement
relative to said assembly comprising:
a header having a web and flanges with said flanges
connected to said web;
at least one of said flanges having at least one
vertical slot therein;
a stud having a width less than the distance between
said flanges of said header and having a top end;
said stud having at least one hole formed therein
proximal to said top end;
said top end fitting between said flanges
perpendicular to said header positioned so that
said hole is aligned with said vertical slot; and
04-1070 9
an attachment means passing through said slot and
through said hole to slideably unite said header to
said stud whereby said slot permits said header to
move vertically with respect to said stud while
restricting horizontal movement of said header.
The sole claim construction issue relates to the limitation “said stud having at
least one hole formed therein proximal to said top end.” Metal Lite argues that the
prosecution history requires the stud to have a “pre-existing hole,” meaning a stud with
a hole in existence prior to inserting the stud between the flanges of the header. Slip
Track argues that the limitation in no way requires a pre-existing hole and that the claim
encompasses assemblies wherein the hole is formed before or after inserting the stud
between the flanges. Requiring a pre-existing hole, Slip Track argues, would
impermissibly limit the apparatus claim to a product-by-process claim and also would
exclude the preferred embodiment.
We agree with Metal Lite that claim 1 is limited to a stud having a hole in
existence prior to inserting the stud between the flanges of the header. Claim
construction starts with the language of the claims as understood by one of ordinary skill
in the art. See ResQNet.com, Inc. v. Lansa, Inc., 346 F.3d 1374, 1378 (Fed. Cir. 2003);
CCS Fitness, Inc. v. Brunswick Corp., 288 F.3d 1359, 1366 (Fed. Cir. 2002); Johnson
Worldwide Assocs., Inc. v. Zebco Corp., 175 F.3d 985, 989 (Fed. Cir. 1999). Intrinsic
evidence—namely, the specification and, if in evidence, the prosecution history—are
also highly relevant to claim construction. See Victronics, Corp. v. Conceptronic, Inc.,
90 F.3d 1576, 1582 (Fed. Cir. 1996). One reason “[t]his court . . . considers the
prosecution history . . . [is] to determine whether the applicant clearly and
unambiguously ‘disclaimed or disavowed [any interpretation] during prosecution in order
04-1070 10
to obtain claim allowance.’” Middleton, Inc. v. Minn. Mining & Mfg. Co., 311 F.3d 1384,
1388 (Fed. Cir. 2002) (quoting Standard Oil Co. v. Am. Cyanamid Co., 774 F.2d 448,
452 (Fed. Cir. 1985)); see also Omega Eng’g, Inc. v. Raytek Corp., 334 F.3d 1314,
1324 (Fed. Cir. 2003) (explaining that prosecution disclaimer does not apply “where the
alleged disavowel of claim scope is ambiguous”).
In this case, the prosecution history of the ‘760 patent reveals that the patentee
limited its invention to studs having pre-existing holes. Claim 1, as originally drafted,
read, in pertinent part, “said stud being aligned with said vertical slot.” On March 29,
1991, the Examiner issued a first rejection finding the claim obvious and “indefinite for
failing to particularly point out and distinctly claim the subject matter which applicant
regards as the invention.” The Examiner specifically asked: “Re: claim 1 . . . line 10,
how is the stud ‘aligned’ with the vertical slot . . . ?” The patentee responded by
amending claim 1 to read: “said stud having at least one hole formed therein proximal to
said top end; said top end fitting between said flanges perpendicular to said header
positioned so that said hole is aligned with said vertical slot.” The patentee also made
the following remark accompanying the amendment:
First, the Examiner’s question of how the stud is aligned with
the vertical slot has been answered by adding hole 22
proximal to top end 40 of the stud as an element of the
claims. The hole 22 serves as a reference point on the stud
which is used to align the stud and the slot. This
amendment should overcome the Examiner’s § 112 rejection
based upon indefiteness with respect to claim 1 and the
claims dependent therefrom.
This amendment and accompanying statement provide clear and unambiguous
evidence that the patentee limited the claim to a stud with a pre-existing hole.
04-1070 11
Slip Track’s argument that such a construction improperly limits its apparatus
claim to a product-by-process claim is unavailing. Our case law makes clear that
statements made during prosecution may limit what began as an apparatus claim to a
product-by-process claim. See Minn. Mining & Mfg. Co. v. Avery Dennison Corp., 350
F.3d 1365, 1373 (Fed. Cir. 2003); Vanguard Prods. Corp. v. Parker Hannifin Corp., 234
F.3d 1370, 1372 (Fed. Cir. 2000). This is exactly what Slip Track did in this case. By
making the above amendment, the patentee overcame the Examiner’s obviousness and
indefiniteness rejection, but did so at the price of limiting its claim to a product made by
a particular process. We also reject Slip Track’s argument that our claim construction is
wrong because it excludes the preferred method of assembly. This is because, while
recognizing the general rule disfavoring a claim construction that excludes a preferred
embodiment, the prosecution disclaimer in this case provides “highly persuasive
evidentiary support” for our construction. See Vitronics, 90 F.3d at 1583.
In short, we hold that the limitation “said stud having at least one hole formed
therein proximal to said top end,” means that a hole must be formed in the stud prior to
insertion of the stud between the flanges so that the hole can be used to align the stud
with the vertical slot before passing the attachment means through the vertical slot and
into the stud. In the infringement proceedings that are to follow on remand, the district
court is to apply this claim construction.
IV.
In sum,
(1) We affirm the district court’s grant of Slip Track’s motion in limine
precluding Metal Lite from offering evidence on the issue of assignee estoppel. We
04-1070 12
consequently affirm the district court’s judgment on the issue of priority of the ‘760
patent over the ‘203 patent.
(2) Because we find error in the district court’s grant of Slip Track’s motion in
limine precluding Metal Lite from contesting infringement, we vacate the district court’s
judgment of infringement and award of damages in favor of Slip Track.
(3) We consequently remand the case to the district court for further
proceedings on the issue of infringement based upon the claim construction set forth in
this opinion.
We thus affirm-in-part, vacate-in-part, and remand.
04-1070 13
NOTE: Pursuant to Fed. Cir. R. 47.6, this disposition
is not citable as precedent. It is a public record.
United States Court of Appeals for the Federal Circuit
04-1070
SLIP TRACK SYSTEMS, INC.,
Plaintiff-Appellee,
v.
METAL LITE, INC.,
Defendant-Appellant.
NEWMAN, Circuit Judge, dissenting in part.
In this exceedingly complex and multi-issued case, I do not discern reversible error
in the district court's opinion, and would affirm it in the major respects presented on this
appeal.