Proving the Accused Device Practices the Prior Art Does Not Prove Anticipation

Zenith Electronics Corporation v. PDI Communication Systems, Inc., [2007-1288, -1321] (April 16, 2008) [SCHALL, Newman, Lourie] The Federal Circuit affirmed the district court’s grant of summary judgment of invalidity of claim 1 of the ’301 patent; grant of summary judgment of noninfringement of the ’301 patent; and dismissal with prejudice of PDI’s counterclaim of inequitable conduct with respect to claims 2–8 of the ’513 patent, and vacated the district court’s (1) grant of summary judgment of invalidity of claim 1 of the ’513 patent; (2) grant of summary judgment of noninfringement of claim 1 of the ’513 patent; (3) dismissal without prejudice of PDI’s counterclaim of inequitable conduct with respect to the ’301 patent and claim 1 of the ’513 patent; and (4) denial of PDI’s motion for costs.
SIGNIFICANCE: Implied license to users stems for express license to manufacture. Practicing the prior art does not prove anticipation under 102.
BRIEF: The Federal Circuit did not have any difficulty rejecting Zenith’s appeal of invalidity of the ‘301 patent. Regarding infringement, the Federal Circuit considered the implied license defense, which it said was typically presented “when a patentee or its licensee sells an article and the question is whether the sale carries with it a license to engage in conduct that would infringe the patent owner's rights.” The Federal Circuit said there are two requirements for the grant of an implied license. First, the equipment involved must have no noninfringing uses. “If there is no noninfringing use, it may be reasonable to infer that there has been ‘a relinquishment of the patent monopoly with respect to the article sold. Second, the circumstances of the sale must “plainly indicate that the grant of a license should be inferred.”
Here, however, the Federal Circuit found that the implied license stemmed from the express license granted by Zenith to the various manufacturers. The Federal Circuit observed that no restrictions are placed upon the grants. For example, the agreements could have required the manufacturers to label each pillow speaker with a disclaimer informing purchasers that they are only licensed to use the pillow speakers with Zenith televisions. In the absence of a contractual restriction, the Federal Circuit found that evidence of Zenith’s intent was irrelevant, representing simply the seller’s hope or wish, rather than an enforceable restriction.
Turning to the ‘513 patent the Federal Circuit held that PDI did not provide clear and convincing evidence of invalidity, stating that anticipation cannot be proved by merely establishing that one “practices the prior art. The Federal Circuit said that mere proof that the prior art is identical, in all material respects, to an allegedly infringing product cannot constitute clear and convincing evidence of invalidity. Anticipation requires a showing that each element of the claim at issue, properly construed, is found in a single prior art reference. It is the presence of the prior art and its relationship to the claim language that matters for invalidity. The Federal Circuit found no such showing.Regarding infringement of the ‘513 patent the Federal Circuit found no implied license because it was not part of the express license to the manufacturers, and it was directed to components that were not made and sold by the licensed manufacturers.