WAYNE K. PFAFF, Petitioner, v. WELLS ELECTRONICS, INC., Respondent.

No. 97-1130

October Term, 1998

December 4, 1998

On Writ Of Certiorari To The United States Court Of Appeals For The Federal Circuit.

PETITION FOR REHEARING

JERRY R. SELINGER, Counsel of Record

SUSAN E. POWLEY, JENKENS & GILCHRIST, A Professional Corporation, 1445 Ross Avenue, Suite 3200, Dallas, Texas 75202, (214) 855-4500

JACK A. KANZ, 502 S. Cottonwood Drive, Richardson, Texas 75080, (972) 234-1394

Counsel for Petitioner [*i]

[*1] I. LIMITED REHEARING IS NECESSARY TO PROVIDE INVENTORS WITH THE INTENDED CLEAR TEST.

There are three reasons for granting the Petition for Rehearing. First, the Court's "drawings or other description" test does not fulfill the statutory interest of providing inventors with a clear and definite standard for determining when the grace period to the on-sale bar begins. It does not give inventors seeking the benefit of the one-year grace period (i.e., postponement of the legal fees and expenses associated with a patent application while an invention's commercial viability is being ascertained) fair warning as to how long they can safely delay before involving patent counsel. Second, under close scrutiny, the "drawings or other description" test is contrary to the public interest. Third, actual reduction to practice was presumptively elevated to a statutory prerequisite in Section 102(b) through decades of consistent holdings by the appellate courts, during which time Congress twice reenacted the on-sale bar.

Petitioner's request for rehearing is limited in scope. Petitioner here seeks rehearing only on the Court's determination that the "ready for patenting" requirement can be satisfied by the existence of "drawings or other descriptions that were sufficiently specific to enable a person skilled in the art to practice the invention." n1

n1 Pfaff v. Wells Elecs., Inc., No. 97-1130, slip op. at 12 (U.S., November 10, 1998) (hereinafter "Pfaff, slip op.").

The Court's "drawings or other description" test, which parallels statutory language governing the minimum disclosure required in a patent application, may appear to be [*2] reasonably clear and precise. n2 In practice, however, this test will prove highly detrimental to the many individual inventors and small businesses who wish to protect only those inventions having commercial potential. n3

n2 Title 35, section 112 of the United States Code inter alia, requires that a patent application

contain a written description of the invention, and the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any [hypothetical] person skilled in the art . . . to make and use the same . . . .

35 U.S.C. § 112(1). Yet, until the actual patent claims, which define the "invention," have been drafted, even a patent attorney cannot determine whether a "written description" meets this enabling disclosure requirement. See Mowry v. Whitney, 81 U.S. (14 Wall.) 620, 646 (1872) (holding that the patent "specification sufficiently describes the process invented and claimed") (emphasis added).

n3 "Approximately 50% of all the innovations introduced in the U.S. on an annual basis are developed by companies of less than 500 employees." Coe A. Bloomberg, In Defense of the First-to-Invent Rule, 21 AIPLA Q.J. 255, 258 n.29 (1993). Moreover, the individual invetor is "the engine that drives innovative new industries in the U.S. . . . ." Id. at 261. For Fiscal Year 1997, the Patent and Trademark Office reported that a total of 237,045 patent applications were filed, of which 134,796 represented patent applications by U.S. residents. U.S. Pat. & Trademark Off., Fiscal Year 1997, A Patent and Trademark Office Review, at 85,88 (1998) (FY 1997 Workload Tables 2 & 7). According to statistical information compiled by the PTO, approximately 24% of total applications filed (both U.S. and foreign) were U.S. applications claiming "small entity" status, which includes individual inventors (16%), small businesses (7%), and non-profit organizations (1%). U.S. Pat. & Trademark Off., Memorandum on Technology Assessment Forecast Data for Small Entity Filings, at 6 (August 31, 1998).

The grace period benefits inventors by providing them with an opportunity to determine whether an invention is sufficiently saleable to justify the expense of preparing and filing a patent application. See Brief for the Petitioner at [*3] 28-30. n4 Individual inventors and small businesses are the primary beneficiaries of the grace period. Larger companies that desire and can afford to seek patent protection in foreign countries n5 typically file their United States' patent applications before any public disclosure or use of the invention. This is because many foreign countries deem any pre-filing public disclosure or use of an invention a forfeiture of the right to patent that invention. n6

n4 In 1997, the American Intellectual Property Law Association (the "AIPLA") reported survey results indicating that the average attorney fees for conducting a patent search and preparing and filing a patent application and Information Disclosure Statement run approximately $ 8,750 and that the average attorney fees for preparing and filing an amendment to the application (an event that almost inevitably occurs at least once during the prosecution of a patent application) run approximately $ 1,500. (Patent and Trademark Office fees are in addition to these amounts.) AIPLA, Report of Economic Survey 1997 61-63 (1997); see also Nelson R. Capes, The Software Copyright 'Super Patent', 12 Computer Law. 8, 12 (June 1995) (noting that, a U.S. "patent typically costs the patentee between $ 5,000 and $ 10,000 to file" and that, including required maintenance fees, "basic patent protection has a term cost of approximately $ 13,000 to $ 18,000" per patent).

n5 The cost for a foreign patent program on even a single invention may reach hundreds of thousands of dollars. See Edwin F. Berrier, Jr., Global Patent Costs Must Be Reduced, 36 Idea 473, 474-75 (1996). Individual inventors and small companies "often have limited funds for U.S. patent filing on each idea. Foreign filings may be out of the question." Bloomberg, supra note 3, at 261 (emphasis added).

n6 Among others, foreign countries adhering to the European Patent Convention deem any pre-filing public disclosure or use of an invention a forfeiture of the right to patent the invention. 1 & 3 Peter D. Rosenberg, Patent Law Fundamentals, § 1.10[4], at 1-58 to 1-60; § 19.04, at 19-85 to 19-86 & 19-93 to 19-95 (2d ed. 1996).

Inventors often keep ongoing records of their inventive efforts. n7 The reality, however, is that most inventors cannot determine without legal assistance when (over the weeks, [*4] months, or perhaps years of development efforts) their notes or drawings become sufficient "to enable a [hypothetical] person skilled in the art to practice the invention" ultimately claimed in the patent. n8 Under the Court's "drawings or other description" test, individual inventors and those working for small companies will no longer be able to postpone incurring the expense of involving patent counsel until an invention has proven to be of real commercial value. For this reason, the "drawings or other description" test provides no more real guidance to inventors than the Federal Circuit's vague "substantially complete" test that this Court has rejected. Both tests deprive inventors of the practical benefit of the statutory grace period. n9

n7 Inventors are encouraged to keep such records. See, e.g., 1 Rosenberg, supra note 6, § 2.02, at 2-6; Earl W. Kintner & Jack L. Lahr, An Intellectual Property Law Primer 38-39 (2d ed. 1982).

n8 See Wendell R. Guffey, How to Use Invention Disclosure Forms, 42 Practical Law. 51, 51 (December 1996) (noting that inventors typically "are unfamiliar with the process of obtaining patent protection for an invention").

n9 Lough v. Brunswick Corp., 86 F.3d 1113 (Fed. Cir. 1996), an experimental use case, readily demonstrates the potential loss the typical sole inventor may experience as a result of a lack of familiarity with the patent law. See id. at 1123-24 (Plager, J., dissenting), cert. denied,     U.S.    , 118 S.Ct. 43 (1997).

In The Telephone Cases, 126 U.S. 1, 535-36 (1888), this Court recognized that an invention may be capable of description in a patent application (typically drafted by a patent attorney) with sufficient specificity to comply with statutory disclosure requirements. This holding, however, does not justify imposing upon inventors the obligation of guessing which of their routinely recorded laboratory notes constitute "drawings or other descriptions" sufficient to make their invention "ready for patenting" for purposes of the on-sale bar. Indeed, in The Telephone Cases, not only had a patent application been prepared by patent counsel, n10 the Patent Office already had completed its substantive review of the application's sufficiency. Without the advice of patent counsel at all stages of the inventive process, however, the only point at which an [*5] inventor can be reasonably certain that an invention is complete (and, thus, subject to forfeiture of rights under the on-sale bar) is when that invention is actually made and works as the inventor intended, i.e., when the invention is actually reduced to practice. n11

n10 United States Patent No. 174,465 identifies the attorney (Mr. Bailey) on its first page.

n11 See Andrews v. Hovey [The Driven Well Cases], 123 U.S. 267, 274 (1887) (the "evident purpose" of the grace period "was to fix a period of limitation that should be certain").

When considered in context, Judge Learned Hand's opinion in Metallizing Engineering Co. v. Kenyon Bearing & Auto Parts Co., 153 F.2d 516 (2d Cir.), cert. denied, 328 U.S. 840 (1946), clearly involved a different balance of policies than those here at issue. In Metallizing Engineering, Judge Hand considered the patentability of a process performed by a machine that was actually used commercially (albeit secretly) before the critical date. Relying on this Court's decision in Pennock v. Dialogue, 27 U.S. (2 Pet.) 1 (1829), Judge Hand concluded that a patent application should have been, but was not, filed when the invention was "ready for patenting." Thus, the patent was invalid under the "prior use" provision of Section 102(b)'s predecessor, R.S. 4886. Metallizing Eng'g, 153 F.2d at 517, 519-20. In Pennock, the Court similarly found invalid a patent for an invention sold publicly for a number of years prior to the time application for patent was filed. 27 U.S. (2 Pet.) at 19-20. Both cases involved inventions actually reduced to practice and commercially exploited some years before the inventors sought the protection of the patent system, not "sales" of inventions that existed only on paper at the time of an offer for sale. n12

n12 There is an enormous difference between a bright idea and a commercially successful product. See John F. Sweeney & Charles H. Sanders, The On-Sale Bar to Patentability: Understanding the Doctrine's Past, Present, and Future, Fourth Annual Institute for Intellectual Property Law, at 157, 174 and n.149 (PLI Patents, Copyrights, Trademarks, and Literary Property Course Handbook Series No. G-532, 1998) (inter alia, observing that because litigation typically involves only commercially successful inventions, courts may "develop a skewed notion of obviousness since, according to their experience, research and development invariably leads to a marketable product"). The Patent Office records are replete with issued patents for inventions that never achieved commercial viability. See UMC Elecs. Co. v. United States, 816 F.2d 647, 664-65 (Fed. Cir. 1987) (Smith, J., dissenting), cert. denied, 484 U.S. 1025 (1988) ("Paper patents merely add to the clutter of unproved patents in the PTO and in the courts, requiring fees, examinations, lawyers, trials and appeals, all of which disserve both the inventing and the using communities").

[*6] The policy considerations raised in these cases, then, are different and distinct from those at issue in the case at bar. Judge Easterbrook, sitting by designation in In re Mahurkar Double Lumen Hemodialysis Catheter Patent Litigation, 831 F. Supp. 1354 (N.D. Ill.), aff'd, 71 F.3d 1573 (Fed Cir. 1993), cogently explained the different balance of policies at issue during the time an invention is moving "from the drawing board to production."

One more purpose of patent law requires consideration: the dominant purpose of them all, the purpose of encouraging innovation by rewarding it. Advances in technology are not born market-ready. While ideas are being translated from the drawing board to production, manufacturers will consult with their customers in order to find out which lines of development will be most useful. They will make samples and prototypes. Many such endeavors can be characterized as offers or sales. . . . But reading "on sale" to cover these exploratory discussions or transactions would either reduce the incentive to invent (by increasing the risk that persons who make valuable discoveries will not obtain valid patents) or discourage inventors from engaging in the [*7] very discussions with customers that may increase the commercial and hence social value of their work. Neither outcome is desirable.

Id. at 1370 (emphasis added). The interaction between inventors and customers described by Judge Easterbrook cannot fairly be described as "experimental" in purpose. Moreover, such activities often implicate the creation of "drawings or other descriptions" as a product evolves from idea to reality. At various stages of development, these drawings and descriptions may be sufficiently specific to enable a hypothetical person skilled in the art to practice that iteration of the invention (regardless of its commercial viability at that stage).

Yet, under the Court's "drawings or other description" test, an inventor seeking to meet a long-felt need in the marketplace cannot now risk waiting to file an application for patent until the product is fully, or even nearly, developed and perfected. n13 Rather, to guard against forfeiture, inventors will be well-advised to file applications as soon as any drawing or description exists and, if necessary, to continue filing additional applications in seriatim as their products are further developed and refined. Increased burden on both patent applicants and the Patent Office is likely. n14 Of course, the [*8] additional cost of following this preventative procedure may simply prove prohibitive for individuals and small businesses. n15

n13 See, e.g., Steve Lash, Supreme Court Decision a Setback for Inventors' Rights, Houston Chronicle, November 11, 1998, at 4C.

n14 Thomas K. Landry, Certainty and Discretion in Patent Law: The On Sale Bar, the Doctrine of Equivalents and Judicial Power in the Federal Circuit, 67 S. Cal. L. Rev. 1151, 1172 (1994) (as a result of forcing inventors to file before reduction to practice, "inventors file more applications, incur more expenses, and acquire weaker patents, while the public gets shoddier disclosure"); see also Kewanee Oil Corp. v. Bicron Corp., 416 U.S. 470, 485 (1974) (opining that there is no public interest in encouraging filing of applications "doomed to be turned down" by an overburdened Patent Office); UMC Elecs., 816 F.2d at 660 (Smith, J., dissenting) ("The public interest is not served by a system that wastes the resources of inventors . . . or by 'the waste of Patent Office resources in processing halfbaked inventions' ") (citations omitted); Bloomberg, supra note 3, at 260 ("the scientific community stands to gain much more from a patent based on a carefully prepared disclosure of a complete invention as opposed to a hastily written disclosure of a concept that is still in its infancy and filed to win a race to the patent office").

n15 See supra note 4.

Unless the Court's "ready for patenting" test accommodates such discussions with customers one of three outcomes seems certain. Either (1) as Judge Easterbrook cautions, inventors will be discouraged from engaging in the discussions that are so important to encourage commercially viable and, hence, socially valuable innovation; (2) untutored inventors will unknowingly forfeit their patent rights; or (3) inventors who can afford ongoing interaction with counsel will likely contrive to characterize any discussion with customers as "for experimental purposes." No such outcome was intended by Congress; nor do any of these alternatives ultimately serve to promote the progress of science and useful arts.

Finally, rehearing is necessary to honor the intent of Congress. At the times Congress reenacted the on-sale bar in the Patent Acts of 1939 and 1952, actual reduction to practice had been recognized and uniformly applied by the appellate courts as a statutory condition precedent to the start of the grace period. In 1939, Congress reduced the grace period to the on-sale bar from two years to one, but left the statute otherwise substantively unchanged. n16 The Patent Act of 1952 [*9] recodified the on-sale bar without substantive change. n17 A substantial body of regional circuit case law spanning from 1912 to 1982 (when the Federal Circuit was formed) consistently recognized actual reduction to practice as an absolute condition to the start of the grace period. n18

n16 Patent Act of 1939, ch. 450, § 1, 53 Stat. 1212.

n17 35 U.S.C. § 102(b). The Senate Report accompanying the 1952 Act specifically states that "Section 102 in paragraphs (a), (b), and (c) repeats the conditions in the existing law relating to novelty." S. Rep. No. 1979, 82d Cong., 2d Sess. (1952), reprinted in, 1952 U.S.C.C.A.N. 2394, 2399. The only change in these paragraphs is "that due to division into lettered paragraphs." Id. at 2410 (revision notes to Section 102).

n18 See Brief for the Petitioner at 23-24 & nn. 27-28, Reply Brief for the Petitioner at 11-12 & nn. 22-23; see also National Cash Register Co. v. American Cash Register Co., 178 F. 79, 81-18 (2d Cir. 1910); Monroe v. Bresee, 239 F. 727-29 (7th Cir. 1917).

As this Court has held, Congress is presumed to be aware of administrative and judicial interpretations of statutes and to adopt such interpretations when it reenacts statutes without substantive change (as it did in the Patent Act of 1952). Similarly, when Congress adopts a new law incorporating sections of prior law (as Congress did in 1939, when it reduced the grace period to the on-sale bar from two years to one), Congress normally can be presumed to have had knowledge of and accepted the interpretation given to the incorporated law, at least insofar as it affects the new statute. See, e.g., Lorillard v. Pons, 434 U.S. 573, 580 (1973); c.f. Brogan v. United States,     U.S.    , 118 S. Ct. 805, 813-14 (1998) (Ginsburg, J., concurring); id. at 817 (Stevens, J., dissenting). The Lorillard presumptions, unless implicitly overruled in this case, are applicable here. The long-standing, uniform judicial gloss recognizing actual reduction to practice as a prerequisite to the on-sale bar should be accorded due statutory consideration.

[*10] V. CONCLUSION

The Court properly seeks a conclusion that balances several competing policies, including the interests in providing inventors with a clear standard for determining when a patent application must be filed and encouraging innovation, on the one hand, and "the interest in avoiding monopolies that unnecessarily stifle competition on the other. . . ." Pfaff, slip op. at 7-8. In its effort to reach that conclusion, however, the Court inadvertently has created indefiniteness and uncertainty similar to that it found unacceptable in the Federal Circuit's analysis. With the hindsight of this Court's opinion, Mr. Pfaff should have filed his patent application more promptly. In reality, many other inventors, especially those without the luxury of routine (and early) access to patent counsel, will be unable to avail themselves of the statutory grace period Congress sought to provide without substantial risk of forfeiture. The petition for rehearing should be granted on this issue, and the judgment of the Court of Appeals for the Federal Circuit should be reversed.

Respectfully submitted,

JERRY R. SELINGER, Counsel of Record

SUSAN E. POWLEY, JENKENS & GILCHRIST, A Professional Corporation, 1445 Ross Avenue, Suite 3200, Dallas, Texas 75202, (214) 855-4500

JACK A. KANZ, 502 S. Cottonwood Drive, Richardson, Texas 75080, (972) 234-1394

Counsel for Petitioner

[*11] CERTIFICATION

I, Jerry R. Selinger, Counsel of Record for Petitioner Wayne K. Pfaff, hereby certify that the foregoing Petition for Rehearing is presented in good faith and not for purposes of delay.

JERRY R. SELINGER

Counsel of Record

SUSAN E. POWLEY

JENKENS & GILCHRIST

A Professional Corporation

1445 Ross Avenue, Suite 3200

Dallas, Texas 75202

(214) 855-4500

JACK A. KANZ

502 S. Cottonwood Drive

Richardson, Texas 75080

(972) 234-1394

Counsel for Petitioner

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