Troy v. Samson Manufacturing Corp.

United States Court of Appeals
for the Federal Circuit
______________________
STEPHEN P. TROY, JR.,
Plaintiff-Appellant,
v.
SAMSON MANUFACTURING CORPORATION,
Defendant-Appellee.
______________________
2013-1565
______________________
Appeal from the United States District Court for the
District of Massachusetts in No. 11-CV-10384, Judge
William G. Young.
______________________
Decided: July 11, 2014
______________________
DAMIAN R. LAPLACA, Nelson Kinder + Mosseau PC, of
Boston, Massachusetts, argued for plaintiff-appellant.
LAURA L. CARROLL, Burns & Levinson LLP, of Boston,
Massachusetts, argued for defendant-appellee. With her
on the brief was ZACHARY R. GATES. Of counsel was
HOWARD SUSSER.
ROBERT J. MCMANUS, Associate Solicitor, United
States Patent and Trademark Office, of Alexandria,
Virginia, argued for amicus curiae. With him on the brief
were NATHAN K. KELLEY, Solicitor, THOMAS W. KRAUSE,
2 TROY v. SAMSON MANUFACTURING CORP.
Special Counsel for IP Litigation. Of counsel on the brief
were STUART F. DELERY, Assistant Attorney General,
MARK R. FREEMAN and SAMANTHA L. CHAIFETZ, Attorneys,
Commercial Litigation Branch, Civil Division, United
States Department of Justice, of Washington, DC.
______________________
Before PROST, Chief Judge, BRYSON and MOORE, Circuit
Judges.
MOORE, Circuit Judge.
Stephen P. Troy, Jr. appeals from the district court’s
judgment in a civil action under 35 U.S.C. § 146 and
challenges the court’s conclusion that the Board of Patent
Appeals and Interferences (Board) properly cancelled the
claims of U.S. Patent No. 7,216,451 (’451 patent) in an
interference proceeding with Samson Manufacturing
Corp. (Samson). Because the district court erred in
refusing to consider evidence pertinent to the determina-
tion of priority, we vacate and remand.
BACKGROUND
The Board declared an interference between Mr.
Troy’s ’451 patent and Samson’s U.S. Patent Application
No. 11/326,665 (’665 application). 1 The ’451 patent claims
priority to a provisional application filed on February 11,
2005. The ’665 application claims priority to a provisional
application filed on January 18, 2005. Because the ’665
application has an earlier priority date than the ’451
patent, Samson was named the senior party. Mr. Troy’s
priority motion alleged reduction to practice in early
February 2004, conception at several dates prior to Feb-
ruary 2004, inurement, and derivation. Samson’s priority
motion alleged reduction to practice in late February or
1The ’665 application recently issued as U.S. Pa-
tent No. 8,276,304.
TROY v. SAMSON MANUFACTURING CORP. 3
early March 2004 and conception in early February 2004.
The Board concluded that Mr. Troy failed to prove actual
reduction to practice in February 2004, and also rejected
Mr. Troy’s claims of inurement and derivation because he
did not establish prior conception. The Board therefore
entered judgment against Mr. Troy and ordered all claims
of the ’451 patent cancelled.
Mr. Troy challenged the Board’s decision in district
court under § 146. Mr. Troy proffered new evidence of
prior conception at the various conception dates he as-
serted at the Board and new evidence of actual reduction
to practice in February 2004. He also introduced new
evidence of actual reduction to practice in July 2004—the
Chin affidavit and the Conley deposition testimony.
Additionally, Mr. Troy argued Samson engaged in “ineq-
uitable conduct” by including in its provisional application
confidential drawings that Samson misappropriated from
Mr. Troy. Mr. Troy contended that he proved in state
court that Samson misappropriated his company’s trade
secrets, which included the subject matter of the count.
He argued that this state court finding of misappropria-
tion established that Samson “derived its alleged inven-
tion from Troy.” J.A. 4527; see Troy Indus., Inc. v.
Samson Mfg. Corp., 963 N.E.2d 777 (Table), 2012 WL
931641 (Mass. App. Ct. Mar. 21, 2012).
The district court affirmed the Board’s order canceling
all claims of Mr. Troy’s patent. Troy v. Samson Mfg.
Corp., 942 F. Supp. 2d 189, 201 (D. Mass. 2013). After
reviewing the record before the Board and some of the
new evidence proffered by Mr. Troy, the district court
concluded that Mr. Troy failed to carry his burden of
showing prior conception or February 2004 reduction to
practice. The court, however, refused to consider the Chin
affidavit or the Conley deposition. It concluded that this
evidence, which pertained to an alleged July 2004 reduc-
tion to practice, was barred because “[a] party is generally
precluded from raising issues or theories of law in a
4 TROY v. SAMSON MANUFACTURING CORP.
Section 146 proceeding that were not previously raised
before the board.” Id. at 198. The court also rejected as a
new issue Mr. Troy’s argument that Samson used Mr.
Troy’s confidential proprietary drawings in its provisional
application, which Troy alleged demonstrated Samson’s
inequitable conduct. The district court concluded that Mr.
Troy “failed . . . to articulate where in the record he actu-
ally presented arguments to the Board regarding the
alleged inequitable conduct of Samson.” Id. at 197. In a
different part of its opinion, the district court acknowl-
edged that Mr. Troy proved in state court “(1) that Sam-
son improperly submitted to the PTO as its own at least
one drawing of Troy’s and (2) that Samson violated a
confidentiality agreement with Troy Industries in the
course of developing its patented inventions,” and noted
that “these actions may constitute inequitable conduct by
Samson.” Id. at 200 n.7. But it concluded that “neither
action proves Troy conceived of all the elements of [the
Count] and timely reduced them to practice.” Id. Accord-
ingly, the district court entered judgment against Mr.
Troy.
Mr. Troy appeals. We have jurisdiction under 28
U.S.C. § 1295(a)(4)(C).
DISCUSSION
“The district court’s determination of priority in a
§ 146 action is reviewed de novo on appeal, and the court’s
factual findings supporting its legal conclusions are
reviewed for clear error.” Streck, Inc. v. Research &
Diagnostic Sys., Inc., 659 F.3d 1186, 1192 (Fed. Cir.
2011). In a § 146 proceeding, the burden of persuasion
rests on the junior party. Id. at 1191.
Mr. Troy challenges the district court’s refusal to con-
sider evidence pertaining to issues not raised before the
Board. He contends that the Supreme Court rejected the
rule against new issues when it held that “there are no
limitations on a patent applicant’s ability to introduce
TROY v. SAMSON MANUFACTURING CORP. 5
new evidence in a § 145 proceeding beyond those already
present in the Federal Rules of Evidence and the Federal
Rules of Civil Procedure.” Kappos v. Hyatt, 132 S. Ct.
1690, 1700–01 (2012).
Samson contends that the district court correctly ap-
plied our precedent when it refused to consider issues not
raised before the Board. In its amicus brief, the PTO
argues that our opinion in Hyatt “expressly endorsed the
district court’s ability to prohibit parties from raising new
issues during its review of Board decisions.” PTO Br. 3
(citing Hyatt v. Kappos, 625 F.3d 1320, 1335 (Fed. Cir.
2010) (en banc), aff’d, 132 S. Ct. 1690). The PTO argues
that the Supreme Court’s affirmance of Hyatt did not
overrule our holding regarding new issues because the
Hyatt case concerned only the presentation of new evi-
dence on issues that were raised before the Board.
We conclude that the Supreme Court’s decision in Hy-
att permits new evidence to be admitted without regard to
whether the issue was raised before the Board. The
Supreme Court held, without qualification, that “there
are no evidentiary restrictions beyond those already
imposed by the Federal Rules of Evidence and the Federal
Rules of Civil Procedure.” Hyatt, 132 S. Ct. at 1694; see
also id. at 1700 (“[W]e agree with the Federal Circuit that
‘Congress intended that applicants would be free to intro-
duce new evidence in § 145 proceedings subject only to the
rules applicable to all civil actions, the Federal Rules of
Evidence and the Federal Rules of Civil Procedure.’”)
(quoting 625 F.3d at 1331); id. at 1700–01 (“[W]e conclude
that there are no limitations on a patent applicant’s
ability to introduce new evidence in a § 145 proceeding
beyond those already present in the Federal Rules of
Evidence and the Federal Rules of Civil Procedure.”).
Analyzing the language of § 145, the Court concluded:
“By its terms, § 145 neither imposes unique evidentiary
limits in district court proceedings nor establishes a
heightened standard of review for factual findings by the
6 TROY v. SAMSON MANUFACTURING CORP.
PTO.” Id. at 1696. The Court expressly rejected the
notion that administrative law principles could form the
basis for limiting the evidence admissible in a § 145
proceeding: “We reject the Director’s contention that
background principles of administrative law govern the
admissibility of new evidence. . . . Consequently, the
district court must make its own findings de novo and
does not act as the ‘reviewing court’ envisioned by the
APA. We also conclude that the principles of administra-
tive exhaustion do not apply in a § 145 proceeding.” Id.
(citation omitted).
Based on the Supreme Court’s holding in Hyatt that
there are no limits on the admissibility of evidence in
such civil actions except those in the Federal Rules of
Evidence and Federal Rules of Civil Procedure, we con-
clude that new evidence on new issues is admissible in
such proceedings. Accord Disney Enters., Inc. v. Kappos,
923 F. Supp. 2d 788, 802 (E.D. Va. 2013) (holding that
prohibiting a party from raising new issues would be
contrary to Hyatt). Introducing new evidence on a new
issue in a civil action is not barred by any Federal Rule of
Evidence or Federal Rule of Civil Procedure. Relying
essentially on the same administrative exhaustion and
Administrative Procedure Act arguments that the Su-
preme Court rejected in Hyatt, Samson and the PTO
argue that evidence on new issues ought to be prohibited.
We find it impossible to reconcile the limitation on evi-
dence that Samson and the PTO seek with the Supreme
Court’s unequivocal language, analysis, and holding in
Hyatt.
We conclude that to the extent that our prior prece-
dent, see, e.g., Conservolite v. Widmayer, 21 F.3d 1098,
1102 (Fed. Cir. 1994), held that new evidence on an issue
not presented to the Board was generally to be excluded
in district court proceedings, it is no longer viable follow-
ing the Supreme Court’s Hyatt decision. It is established
that a later panel can recognize that the court’s earlier
TROY v. SAMSON MANUFACTURING CORP. 7
decision has been implicitly overruled as inconsistent
with intervening Supreme Court authority. See, e.g.,
Miller v. Gammie, 335 F.3d 889, 899 (9th Cir. 2003) (en
banc) (“[C]ircuit precedent, authoritative at the time that
it has issued, can be effectively overruled by subsequent
Supreme Court decisions that are closely on point, even
though those decisions do not expressly overrule the prior
circuit precedent.”) (internal quotation marks omitted);
see also United States v. Fisher, 502 F.3d 293, 296, 306–07
(3d Cir. 2007); Dawson v. Scott, 50 F.3d 884, 892 n.20
(11th Cir. 1995) (“In view of these intervening Supreme
Court precedents, [the prior panel decision] does not
control and appears to be overruled.”). We have adopted
and applied this principle. See, e.g., Doe v. United States,
372 F.3d 1347, 1354–57 (Fed. Cir. 2004) (concluding that
prior precedent has been undermined by intervening
Supreme Court decisions, and was therefore “no longer
good law”); see also Conforto v. Merit Sys. Prot. Bd., 713
F.3d 1111, 1116–17, 1123–25 (Fed. Cir. 2013) (majority
and dissent disagreeing over whether an intervening
Supreme Court decision has sub silentio overruled our
prior precedent).
“[T]he issues decided by the higher court need not be
identical to be controlling. Rather, the relevant court of
last resort must have undercut the theory or reasoning
underlying the prior circuit precedent in such a way that
the cases are clearly irreconcilable.” Miller, 335 F.3d at
900. Indeed, lower courts are “bound not only by the
holdings of higher courts’ decisions but also by their ‘mode
of analysis.’” Id. (citing Antonin Scalia, The Rule of Law
as the Law of Rules, 56 U. Chi. L. Rev. 1175, 1177 (1989));
see also United States v. Lindsey, 634 F.3d 541, 550 (9th
Cir. 2011) (“W]e are an intermediate court within the
federal system, and as such, we must take our cue from
the Supreme Court. . . . . Setting [a prior panel’s] holding
aside for a moment, in our estimation the case’s reasoning
8 TROY v. SAMSON MANUFACTURING CORP.
has been fatally undercut by the Supreme Court.”) (em-
phasis in original).
This, of course, only addresses whether the Supreme
Court’s decision in Hyatt prevents a limitation on evi-
dence based on administrative law principles where such
a limitation does not exist in the Federal Rules of Evi-
dence or Federal Rules of Civil Procedure. We conclude
that this limitation is inconsistent with the Supreme
Court’s decision in Hyatt.
Samson also argues that even if Hyatt requires that
the district court admit such new evidence, this holding is
applicable to § 145 actions only. Samson argues that the
proceeding at issue in this case, an interference arising
under § 146, ought not be governed by the same rules.
Troy responds that there is no meaningful difference
between § 145 and § 146 and that both types of proceed-
ings ought to be subject to the same evidentiary rules.
The PTO argues that, in its view, our ruling on new issues
will apply to both § 145 and § 146; it contends that any
distinction on admissible evidence between the two sec-
tions would be “difficult” to make. Oral Argument at
45:10–45:19, available at http://cafc.uscourts.gov/oral-
argument-recordings/all/troy.html.
Section 146 and its predecessor statutes date back to
the Patent Act of 1836. Act of July 4, 1836, ch. 357, 5
Stat. 117 (1836 Act). The 1836 Act provided an applicant
who was dissatisfied with a PTO decision in an interfer-
ence a “remedy by bill of equity.” Id. § 16, 5 Stat. at 123–
24. This statute provided that the court with jurisdiction
over such a bill of equity could “adjudge . . . the fact of
priority of right or invention.” Id. § 16, 5 Stat. at 124.
This is the origin of the current § 146. Three years later,
Congress expanded the applicant’s remedy of a bill of
equity to ex parte actions (currently covered under § 145).
See Act of Mar. 3, 1839, ch. 88, § 10, 5 Stat. 353, 354.
Hence, what is now covered by two separate provisions,
TROY v. SAMSON MANUFACTURING CORP. 9
§ 145 and § 146, began in a single statutory section,
where there was no distinction in the form of the bill of
equity that would ensue. The 1952 Patent Act broke this
single statutory section into two sections, § 145 (ex parte
proceedings) and § 146 (interferences). Act of July 19,
1952, ch. 950, §§ 145–46, 66 Stat. 792, 803. The question
we confront is whether there are differences between §
145 and § 146 such that the evidentiary rules that apply
to § 145 actions ought not to similarly apply to § 146
actions. We see no basis in the language of the statutes
for differing treatment with regard to the types of evi-
dence that ought to be admitted.
Section 146 states:
Any party to an interference dissatisfied with the
decision of the Board of Patent Appeals and Inter-
ferences on the interference, may have remedy by
civil action, if commenced within such time after
such decision, not less than sixty days, as the Di-
rector appoints or as provided in section 141 of
this title, unless he has appealed to the United
States Court of Appeals for the Federal Circuit,
and such appeal is pending or has been decided.
In such suits the record in the Patent and Trade-
mark Office shall be admitted on motion of either
party upon the terms and conditions as to costs,
expenses, and the further cross-examination of
the witnesses as the court imposes, without preju-
dice to the right of the parties to take further testi-
mony. The testimony and exhibits of the record in
the Patent and Trademark Office when admitted
shall have the same effect as if originally taken
and produced in the suit. . . .
35 U.S.C. § 146 (2006) (emphases added). Exactly like
§ 145, § 146 provides for a “remedy by civil action.”
Section 145 further states that the district court “may
adjudge that such applicant is entitled to receive a patent
10 TROY v. SAMSON MANUFACTURING CORP.
for his invention . . . as the facts in the case may appear.”
It is true that § 146 does not contain this “adjudge” lan-
guage. However, we conclude that the language of § 146
is stronger in its indication that new evidence be admissi-
ble. Section 146 explains: “In such suits the record in the
Patent and Trademark Office shall be admitted on motion
of either party . . . [and] when admitted shall have the
same effect if originally taken and produced in the suit.”
By its express terms, the PTO record is not required to be
part of the § 146 civil action at the district court. We
interpret this language as contemplating a fresh start in
the district court. Moreover, § 146 expressly states that
the parties have “the right . . . to take further testimony.”
Section 145 has no explicit mention of the permissibility
of additional evidence. Based upon the language of the
statute, we see no basis for concluding that new evidence
is permitted in § 145, but not in § 146. We thus conclude
that the Supreme Court’s decision in Hyatt applies with
equal force to both § 145 and § 146 actions.
We are mindful of the fact that the Supreme Court in
Hyatt discussed possible tension between language in two
of its precedents—Butterworth v. United States ex rel.
Hoe, 112 U.S. 50 (1884), and Morgan v. Daniels, 153 U.S.
120 (1894). The Court explained that although both arose
under Rev. Stat. § 4915 (which combined interferences
and ex parte actions), the two cases addressed different
circumstances. Hyatt, 132 S. Ct. at 1699. It is correct
that these cases came to the Supreme Court in different
postures. Morgan was an interference proceeding, 153
U.S. at 122, whereas Butterworth concerned a proceeding
in which a disappointed patent applicant challenged
whether the Secretary of the Interior had the authority to
reverse a decision of the Commissioner of Patents in an
interference, 112 U.S. at 54. Butterworth stated that the
applicant’s challenge “is a proceeding in a court of the
United States having original equity jurisdiction under
the patent laws, according to the ordinary course of equity
TROY v. SAMSON MANUFACTURING CORP. 11
practice and procedure. It is not a technical appeal from
the Patent-Office . . . confined to the case as made in the
record of that office, but is prepared and heard upon all
competent evidence adduced and upon the whole merits.”
112 U.S. at 61 (quoted in Hyatt, 132 S. Ct. at 1698).
There is no logical or textual reason to limit the Butter-
worth new evidence principles to § 145 actions. There
was no discussion in Hyatt of the language of § 146, or
any conclusion that there was any basis for differentiating
the two statutes as they relate to the type of evidence that
is admissible. In fact, the Court indicated that “in this
case we are concerned only with § 145 proceedings in
which new evidence has been presented to the District
Court.” Hyatt, 132 S. Ct. at 1699.
We conclude that the Supreme Court’s decision ought
not to be read to create an evidentiary chasm between
§ 145 and § 146. The Court explained that “Morgan did
not involve a proceeding in which new evidence was
presented to the District Court.” Id. at 1699. Morgan
involved the standard of review that ought to apply in
interferences when no new evidence has been introduced.
153 U.S. at 124–25. It is in this context that Morgan
stated that a suit under § 4915, the predecessor to both
§ 145 and § 146, is “something in the nature of a suit to
set aside a judgment.” Id. at 124. The Morgan Court was
not making any determinations about admissibility of
evidence, but rather was considering the appropriate
standard of review the district court should use when
reviewing a PTO decision based on the same record. See
Dickinson v. Zurko, 527 U.S. 150, 158–60 (1999) (explain-
ing that Morgan stands for the principle that the deferen-
tial court/agency standard of review applies where the
district court decided the case “without additional testi-
mony”). In Hyatt, the Supreme Court decided that when
new evidence is introduced, the district court must make
de novo fact findings. Hyatt, 132 S. Ct. at 1701. Our
decision today, like the Supreme Court’s decision in
12 TROY v. SAMSON MANUFACTURING CORP.
Hyatt, is consistent with Morgan. To be clear, our deci-
sion today is not concerned with the standards of review
enunciated in either Hyatt (de novo if new evidence is
admitted) or Morgan (deferential if on the same record).
Turning to the case before us, we vacate the district
court’s decision and remand with instructions to consider
the new evidence and arguments raised by Mr. Troy in his
district court filings. Mr. Troy is not prohibited from
arguing that he established reduction to practice at least
as of July 2004. On remand, the district court should
consider all evidence presented by Mr. Troy including the
Conley deposition and the Chin affidavit to establish a
July 2004 reduction to practice. Mr. Troy also argues that
the misappropriated material is evidence that supports
his claimed dates of conception. On remand, the court
should consider Mr. Troy’s arguments and evidence
regarding Samson’s alleged inequitable conduct based
upon the misappropriation. 2
VACATED AND REMANDED
2 We see no error in the district court’s finding that
Troy failed to establish a February 2004 reduction to
practice date. The court considered all evidence presented
on this issue, and it need not be revisited on remand.