8th U.S. Circuit Court of Appeals rules inventor's patent valid but

St. Louis Daily Record & St. Louis Countian, Jul 20, 2005 by Erin Suess

A flurry of problems surrounding an inventor, his patent and the company using it caused the 8th U.S. Circuit Court of Appeals to split the baby, affirming the validity of the patent and its inventor's conduct before the U.S. Patent and Trademark Office but denying the inventor's claim of patent infringement.

Walter Schinzing came up with the concept of his wheelchair- washing machine in 1987, which he attempted to patent under '091 in August 1988, December 1988, January 1989 and July 1989. Every time he applied, however, the U.S. Patent and Trademark Office denied the application, calling the proposal obvious. Despite the rejection, Schinzing made an agreement with Elm Springs Enterprises to manufacture his invention.

Schinzing then collaborated with students from the University of Northern Iowa, who designed improvements for a two-semester class, and resubmitted the design with the new adaptations, '119 along with '091, to the PTO without crediting the students. Again, the PTO rejected his patent application.

Finally, in November 1990, Schinzing and his Elm Springs partners submitted an improved third patent application, '757, along with amendments to that application, which the PTO granted in July 1992, issuing them the patent number '375.

In April 1993, Schinzing teamed up with Sue Spaulding to create S/ S Products, which entered into a license agreement with Mid-State Stainless Inc. to develop, manufacture, use and market the washer. S/ S would receive $400 for each washer installed. Mid-State manufactured, sold and paid royalties on 99 washers before S/S terminated the agreement in February 1998. After that time, Mid- State sold 232 more washers but refused to pay royalties on them.

Schinzing sued Mid-State for breach of the license agreement, and Mid-State counterclaimed for a declaratory judgment of patent invalidity and noninfringement. The district court found Mid-State breached the agreement but ruled the '375 patent invalid. Mid-State filed a motion to amend to include a declaratory judgment of noninfringement and a judgment that Mid-State had not breached the license agreement, which the district court denied.

On appeal, Mid-State offered four arguments as to why the patent is invalid: (1) inventorship (because Schinzing failed to name the students as co-inventors); (2) prior publication (based on the student report); (3) public use (based on the student demonstration); and (4) inequitable conduct. The 8th Circuit, however, could little address the issue, as the district court failed to construe the claims of the '375 patent.

Because neither Schinzing nor Mid-State contests the meaning of any terms or words used in the description of the '375 patent, the threshold claim construction is not essential for purposes of defining the claim. What is indispensable, however, is an element- by-element comparison of the '375 patent to: (1) the aspects of the modified washer that the evidence showed were proposed by the students; (2) the device shown in the student demonstration; and (3) the device described in the student report, wrote Judge Roger Wollman, remanding the issue back to the district court for its determination with an instruction to consider 35 U.S.C. Section 102(b) and Graham vs. John Deere Co.

The Court of Appeals next took up Mid-State's claim that Schinzing engaged in inequitable conduct before the PTO by omitting from his '757 patent application his previously rejected patent applications, his use of a prior patent and the students' participation in developing the patent. To prove this allegation, Mid-State must show the omission would have impacted the PTO's decision and was an intentional omission, according to Under Sea Indus. Inc. vs. Dacor Corp.

In this, the 8th Circuit deferred to the district court's finding that any omission was unintentional and that the students' input was not a significant part of the patent and was part of their college course.

Turning to the district court's denial of Mid-State's counterclaim for a declaratory judgment of noninfringement, the appellate court reminded Schinzing that the responsibility for showing Mid-State's infringement lay with him, despite his assertion that Mid-State abandoned its counterclaim when it did not reassert its request for a declaratory judgment.

Irrespective of Mid-State's subsequent action or inaction, Schinzing, having failed to counterclaim or present any evidence of infringement at trial, has not proved infringement and is now barred from bringing a future infringement action, Wollman wrote.

Accordingly, Mid-State is entitled to a declaratory judgment of non-infringement, added Wollamn, and thus the district court abused its discretion in denying Mid-State's motion to amend the judgment. Moreover, because it is entitled to a declaratory judgment of noninfringement, Mid-State, as a matter of law, could not have infringed the '375 patent.

The final point examined by the appeals court involved whether Mid-State breached the license agreement. The district court found it had and ordered a calculation of a reasonable royalty on all machines sold with the license patent or its technology. Here, the 8th Circuit parted ways with the lower court, finding the district court missed the distinction between breach and infringement.