Sundance v. DeMonte: Federal Circuit Overrules District Court's Holding of Non-obviousness

On Dec. 24, 2008, the Federal Circuit issued its decision in Sundance v. DeMonte, 2008 WL 5351734 (Fed. Cir. 2008), overruling the district court's holding of non-obviousness. Applying the standard set forth in KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398 (2007), the Federal Circuit found that the patent was an obvious combination of the prior art and noted that the district court committed two errors by: 1) erroneously allowing a patent attorney, who was not skilled in the relevant technology, to testify regarding obviousness; and 2) vacating the jury verdict of obviousness and granting judgment as a matter of law on non-obviousness, based on its erroneous interpretation of the prior art. The Federal Circuit also held a patent attorney, lacking the relevant expertise, could not testify as an expert witness regarding non-infringement and invalidity.

The District Court Decision

Sundance, Inc. and Merlot Tarpaulin and Sidekit Manufacturing Co., Inc. (collectively “Sundance”), the owners of U.S. Patent No. 5,026,109 (“the '109 patent”), sued DeMonte Fabricating Ltd. and Quick Draw Tarpaulin Systems, Inc. (collectively “DeMonte”) in the District Court for the Eastern District of Michigan for infringement of claim 1 of the '109 patent. Claim 1 recited “a retractable, segmented cover system used with a truck,” from which cover sections could be removed “independent of the other cover sections.” Sundance, 2008 WL 5351734 at *1. At trial, DeMonte argued that the '109 patent was obvious in light of two prior art references, U.S. Patent Nos. 4,189,178 (“Cramaro”) and 3,415,260 (“Hall”). Cramaro disclosed a retractable cover for use in trucks, and Hall disclosed a cover system divided into sections. DeMonte's patent attorney, Daniel Bliss, testified that there would have been motivation to combine Cramaro and Hall. However, Bliss did not have experience in cover systems.

DeMonte submitted an expert report indicating that Bliss would testify to a number of items, including: patent office practices and procedures; non-infringement; and invalidity, including obviousness. Sundance moved to exclude such testimony because Bliss lacked a technical background in the field of the invention. In opposition, DeMonte agreed that Bliss did not have experience with segmented cover systems, but his qualifications would be subject to cross-examination. The district court denied Sundance's motion without comment and allowed Bliss to testify as to obviousness. However, at trial, Bliss did not testify regarding patent office procedures and practices as indicated in the expert report. Rather, Bliss testified largely to issues regarding invalidity and infringement.

After the trial, the jury found claim 1 obvious. Sundance moved for judgment as a matter of law (“JMOL”) that the '109 patent was not invalid due to obviousness, and DeMonte moved for JMOL that it did not infringe. The district court granted Sundance's motion and denied DeMonte's motion, holding there was insufficient evidence to support finding a motivation to combine Hall and Cramaro to achieve the invention of claim 1 of the '109 patent. The Federal Circuit noted that Bliss did not cite any support for providing a motivation to combine the prior art, nor was there any suggestion in the art to combine Hall and Cramaro.

After the U.S. Supreme Court ruled on obviousness in KSR, DeMonte moved for reconsideration, but the district court denied the motion. DeMonte then appealed to the Federal Circuit.

The Federal Circuit Decision

The Federal Circuit found the district court abused its discretion by allowing Bliss to testify regarding obviousness. Under Federal Rule of Evidence 702, the court should act as a gatekeeper to ensure that admitted expert testimony is both relevant and reliable. To testify as an expert on validity or infringement, the witness must have technical expertise in the field of the invention. The Federal Circuit noted that it is contradictory to Rule 702 to allow a patent attorney, lacking expertise in the pertinent art, to testify on infringement or invalidity issues. Here, Bliss was a patent attorney who had “no technical experience in the field of truck[s] or tarps and practiced as an engineer for but a year and a half in unrelated areas.” Id. at *4 (citations omitted). The Federal Circuit concluded that while Bliss was qualified to testify as an expert on issues regarding patent office procedures, he was not qualified to testify as an expert witness on issues regarding validity and infringement, including obviousness. The Federal Circuit admonished the district court for potentially causing mischief and confusion to the jury by admitting a patent attorney's testimony as to obviousness when that attorney lacked expertise in the pertinent art.

The Federal Circuit rejected DeMonte's argument that Snellman v. Ricoh Co., 862 F.2d 283 (Fed. Cir. 1988) supported admission of Bliss' testimony as to obviousness. Id. at *5. The Federal Circuit found Snellman did not address the admissibility of a patent lawyer's testimony. In Snellman, the court upheld a jury verdict “which included testimony from a patent law expert” on claim interpretation. Id. The Federal Circuit noted that Snellman did not discuss the admissibility of the testimony, and that numerous previous Federal Circuit decisions had upheld the exclusion of testimony by a patent law expert.

Finally, the Federal Circuit stated that having ordinary skill in the art would not automatically qualify a witness to testify as an expert on infringement or invalidity matters. As the court explained:

The court, in its role as gatekeeper, must exclude expert testimony that is not reliable and not specialized, and which invades the province of the jury to find facts and that of the court to make ultimate legal conclusions. Allowing a patent law expert without any technical expertise to testify on the issues of infringement and validity amounts to nothing more than advocacy from the witness stand. Id. at *6.

Incorrect District Court Holding

The Federal Circuit reversed the district court's JMOL holding of non-obviousness and found the patent was invalid and obvious in light of Cramaro and Hall. First, the Federal Circuit found that Hall and Cramaro contained every element of claim 1 of the '109 patent. Second, the Federal Circuit determined that the invention would have been obvious in light of Hall and Cramaro. The Federal Circuit noted that the dismissal of Bliss' testimony was inconsequential because the technology was simple and neither party claimed expert testimony was required.

The Federal Circuit found that Hall and Cramaro disclosed every element of claim 1 of the '109 patent. Sundance argued that all of the claim elements were not disclosed because the divided sections in Hall could not be removed without removing other cover sections. Under Sundance's interpretation, removal of a cover section under Hall required releasing one edge of the adjacent cover sections. However, the Federal Circuit determined that even under Sundance's interpretation of Hall, the combination of Hall and Cramaro would satisfy every limitation of claim 1 because the focus of the claim was whether a section was removed, regardless of whether the adjacent cover sections were released. Thus, the Federal Circuit found that under Hall, even if a first cover section was removed and the adjacent cover sections were attached to the cover, the two remaining cover sections were not removed.

The Federal Circuit reversed the district court's finding of obviousness because the district court misunderstood the teachings of Hall. The district court incorrectly interpreted Hall to be outside the truck environment. Hall mentioned several times that the cover system might be used in a truck. For example, the specification mentioned multiple times that the cover may be used as “a truck cover.” Id. at *7. Additionally, in the field of invention section, the Hall patent mentioned the cover may be used for “land vehicles.” Id. The Federal Circuit found the district court erroneously interpreted Hall and based its finding of non-obviousness on that incorrect interpretation.

Discussion of KSR

Under KSR, a combination “is more likely to be obvious where it 'simply arranges old elements with each performing the same function it had been known to perform' and yields no more than one would expect from such an arrangement.'” Id. at *8 (citations omitted). Applying KSR, the Federal Circuit found that the cover systems in Cramaro and Hall each performed the same function in combination as they did independent of one another. Thus, the combination of Cramaro and Hall would have been obvious because it simply mechanized the covers in Cramaro and Hall.

The Federal Circuit reiterated that under KSR a combination is obvious if a “person having ordinary skill in the art could have combined the [prior art] in a fashion encompassed by [the claim] and would have seen the benefits of doing so.” Id. Analogizing KSR to the present issues, the Federal Circuit found that the benefits of replacing the one-piece, retractable cover in Cramaro with a segmented cover in Hall would have been obvious to one with ordinary skill. Adding the segmented cover of Hall to Cramaro “would give the resulting design exactly the same benefit as Hall ' individually replaceable cover sections.” Id. at *9. The Federal Circuit noted that Hall even suggested the segmented cover could be prepared for easy replacement. Thus, the incorporation of the prepared cover in Hall with Cramaro would have been the work of a skilled mechanic. The Federal Circuit noted that the prima facie case for obviousness was so strong that it could not be overcome by secondary considerations.

Conclusion

Patent attorneys who lack skill in the patent's technology are not qualified to testify regarding infringement or invalidity. Additionally, under KSR, it is likely that a combination of prior art will be obvious if the combination provides the same benefits and functions as provided by each piece of prior art respectively.

Angie M. Hankins (212-806-5580) is a partner and Iuliana Tanase is an associate in the Intellectual Property Practice Group of Stroock & Stroock & Lavan LLC. The opinions expressed are those of the authors and do not necessarily reflect the views of their firm or any of its clients.

On Dec. 24, 2008, the Federal Circuit issued its decision in Sundance v. DeMonte, 2008 WL 5351734 (Fed. Cir. 2008), overruling the district court's holding of non-obviousness. Applying the standard set forth in KSR Int'l Co. v. Teleflex Inc. , 550 U.S. 398 (2007), the Federal Circuit found that the patent was an obvious combination of the prior art and noted that the district court committed two errors by: 1) erroneously allowing a patent attorney, who was not skilled in the relevant technology, to testify regarding obviousness; and 2) vacating the jury verdict of obviousness and granting judgment as a matter of law on non-obviousness, based on its erroneous interpretation of the prior art. The Federal Circuit also held a patent attorney, lacking the relevant expertise, could not testify as an expert witness regarding non-infringement and invalidity.

The District Court Decision

Sundance, Inc. and Merlot Tarpaulin and Sidekit Manufacturing Co., Inc. (collectively “Sundance”), the owners of U.S. Patent No. 5,026,109 (“the '109 patent”), sued DeMonte Fabricating Ltd. and Quick Draw Tarpaulin Systems, Inc. (collectively “DeMonte”) in the District Court for the Eastern District of Michigan for infringement of claim 1 of the '109 patent. Claim 1 recited “a retractable, segmented cover system used with a truck,” from which cover sections could be removed “independent of the other cover sections.” Sundance, 2008 WL 5351734 at *1. At trial, DeMonte argued that the '109 patent was obvious in light of two prior art references, U.S. Patent Nos. 4,189,178 (“Cramaro”) and 3,415,260 (“Hall”). Cramaro disclosed a retractable cover for use in trucks, and Hall disclosed a cover system divided into sections. DeMonte's patent attorney, Daniel Bliss, testified that there would have been motivation to combine Cramaro and Hall. However, Bliss did not have experience in cover systems.

DeMonte submitted an expert report indicating that Bliss would testify to a number of items, including: patent office practices and procedures; non-infringement; and invalidity, including obviousness. Sundance moved to exclude such testimony because Bliss lacked a technical background in the field of the invention. In opposition, DeMonte agreed that Bliss did not have experience with segmented cover systems, but his qualifications would be subject to cross-examination. The district court denied Sundance's motion without comment and allowed Bliss to testify as to obviousness. However, at trial, Bliss did not testify regarding patent office procedures and practices as indicated in the expert report. Rather, Bliss testified largely to issues regarding invalidity and infringement.

After the trial, the jury found claim 1 obvious. Sundance moved for judgment as a matter of law (“JMOL”) that the '109 patent was not invalid due to obviousness, and DeMonte moved for JMOL that it did not infringe. The district court granted Sundance's motion and denied DeMonte's motion, holding there was insufficient evidence to support finding a motivation to combine Hall and Cramaro to achieve the invention of claim 1 of the '109 patent. The Federal Circuit noted that Bliss did not cite any support for providing a motivation to combine the prior art, nor was there any suggestion in the art to combine Hall and Cramaro.

After the U.S. Supreme Court ruled on obviousness in KSR, DeMonte moved for reconsideration, but the district court denied the motion. DeMonte then appealed to the Federal Circuit.

The Federal Circuit Decision

The Federal Circuit found the district court abused its discretion by allowing Bliss to testify regarding obviousness. Under Federal Rule of Evidence 702, the court should act as a gatekeeper to ensure that admitted expert testimony is both relevant and reliable. To testify as an expert on validity or infringement, the witness must have technical expertise in the field of the invention. The Federal Circuit noted that it is contradictory to Rule 702 to allow a patent attorney, lacking expertise in the pertinent art, to testify on infringement or invalidity issues. Here, Bliss was a patent attorney who had “no technical experience in the field of truck[s] or tarps and practiced as an engineer for but a year and a half in unrelated areas.” Id. at *4 (citations omitted). The Federal Circuit concluded that while Bliss was qualified to testify as an expert on issues regarding patent office procedures, he was not qualified to testify as an expert witness on issues regarding validity and infringement, including obviousness. The Federal Circuit admonished the district court for potentially causing mischief and confusion to the jury by admitting a patent attorney's testimony as to obviousness when that attorney lacked expertise in the pertinent art.

The Federal Circuit rejected DeMonte's argument that Snellman v. Ricoh Co. , 862 F.2d 283 (Fed. Cir. 1988) supported admission of Bliss' testimony as to obviousness. Id. at *5. The Federal Circuit found Snellman did not address the admissibility of a patent lawyer's testimony. In Snellman, the court upheld a jury verdict “which included testimony from a patent law expert” on claim interpretation. Id. The Federal Circuit noted that Snellman did not discuss the admissibility of the testimony, and that numerous previous Federal Circuit decisions had upheld the exclusion of testimony by a patent law expert.

Finally, the Federal Circuit stated that having ordinary skill in the art would not automatically qualify a witness to testify as an expert on infringement or invalidity matters. As the court explained:

The court, in its role as gatekeeper, must exclude expert testimony that is not reliable and not specialized, and which invades the province of the jury to find facts and that of the court to make ultimate legal conclusions. Allowing a patent law expert without any technical expertise to testify on the issues of infringement and validity amounts to nothing more than advocacy from the witness stand. Id. at *6.

Incorrect District Court Holding

The Federal Circuit reversed the district court's JMOL holding of non-obviousness and found the patent was invalid and obvious in light of Cramaro and Hall. First, the Federal Circuit found that Hall and Cramaro contained every element of claim 1 of the '109 patent. Second, the Federal Circuit determined that the invention would have been obvious in light of Hall and Cramaro. The Federal Circuit noted that the dismissal of Bliss' testimony was inconsequential because the technology was simple and neither party claimed expert testimony was required.

The Federal Circuit found that Hall and Cramaro disclosed every element of claim 1 of the '109 patent. Sundance argued that all of the claim elements were not disclosed because the divided sections in Hall could not be removed without removing other cover sections. Under Sundance's interpretation, removal of a cover section under Hall required releasing one edge of the adjacent cover sections. However, the Federal Circuit determined that even under Sundance's interpretation of Hall, the combination of Hall and Cramaro would satisfy every limitation of claim 1 because the focus of the claim was whether a section was removed, regardless of whether the adjacent cover sections were released. Thus, the Federal Circuit found that under Hall, even if a first cover section was removed and the adjacent cover sections were attached to the cover, the two remaining cover sections were not removed.

The Federal Circuit reversed the district court's finding of obviousness because the district court misunderstood the teachings of Hall. The district court incorrectly interpreted Hall to be outside the truck environment. Hall mentioned several times that the cover system might be used in a truck. For example, the specification mentioned multiple times that the cover may be used as “a truck cover.” Id. at *7. Additionally, in the field of invention section, the Hall patent mentioned the cover may be used for “land vehicles.” Id. The Federal Circuit found the district court erroneously interpreted Hall and based its finding of non-obviousness on that incorrect interpretation.

Discussion of KSR

Under KSR, a combination “is more likely to be obvious where it 'simply arranges old elements with each performing the same function it had been known to perform' and yields no more than one would expect from such an arrangement.'” Id. at *8 (citations omitted). Applying KSR, the Federal Circuit found that the cover systems in Cramaro and Hall each performed the same function in combination as they did independent of one another. Thus, the combination of Cramaro and Hall would have been obvious because it simply mechanized the covers in Cramaro and Hall.

The Federal Circuit reiterated that under KSR a combination is obvious if a “person having ordinary skill in the art could have combined the [prior art] in a fashion encompassed by [the claim] and would have seen the benefits of doing so.” Id. Analogizing KSR to the present issues, the Federal Circuit found that the benefits of replacing the one-piece, retractable cover in Cramaro with a segmented cover in Hall would have been obvious to one with ordinary skill. Adding the segmented cover of Hall to Cramaro “would give the resulting design exactly the same benefit as Hall ' individually replaceable cover sections.” Id. at *9. The Federal Circuit noted that Hall even suggested the segmented cover could be prepared for easy replacement. Thus, the incorporation of the prepared cover in Hall with Cramaro would have been the work of a skilled mechanic. The Federal Circuit noted that the prima facie case for obviousness was so strong that it could not be overcome by secondary considerations.

Conclusion

Patent attorneys who lack skill in the patent's technology are not qualified to testify regarding infringement or invalidity. Additionally, under KSR, it is likely that a combination of prior art will be obvious if the combination provides the same benefits and functions as provided by each piece of prior art respectively.

Angie M. Hankins (212-806-5580) is a partner and Iuliana Tanase is an associate in the Intellectual Property Practice Group of Stroock & Stroock & Lavan LLC. The opinions expressed are those of the authors and do not necessarily reflect the views of their firm or any of its clients.