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Cognex Corp. v. Vcode Holdings, Inc.: US District Court : PATENT - patent invalidity, unenforceability; Minnesota Deceptive Trade Practices; business defamation

1
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Cognex Corporation,
Plaintiff,
v. Civ. No. 06-1040 (JNE/JJG)
ORDER
VCode Holdings, Inc., VData LLC,
Acacia Research Corporation, and
Veritec Inc.,
Defendants.
James T. Nikolai, Esq., and Peter G. Nikolai, Esq., Nikolai & Mersereau, and Martin J.
ODonnell, Esq., and Thomas C. OKonski, Esq., Cesari & McKenna, LLP, appeared for
Plaintiff Cognex Corporation.
Edward E. Casto, Jr., Esq., and Jonathan T. Suder, Esq., Friedman, Suder & Cooke,1 and Lora
Mitchell Friedeman, Esq., Fredrikson & Byron, PA, appeared for Defendants VCode Holdings,
Inc., VData LLC, Acacia Research Corporation, and Veritec Inc.
This patent lawsuit concerns data matrix symbols and reader products. Cognex
Corporation brings this action against VCode Holdings, Inc., VData LLC, Acacia Research
Corporation, and Veritec Inc., (collectively Defendants) seeking a declaration that U.S Patent
No. 5,612,524 (filed March 18, 1997) (524 patent) is not infringed by Cognex or its customers
for its data matrix symbol reader products, and that, in any event, the allegedly infringed claims
of the 524 patent are invalid and the patent is unenforceable. Cognex also asserts claims against
Defendant Acacia Research Corporation (Acacia) for violation of the Minnesota Uniform
Deceptive Trade Practices Act (MDTPA), Minn. Stat. 325D.43-.48 (2006), and for business
defamation. Defendants VCode Holdings (VCode) and VData assert a counterclaim against
1 Subsequent to oral argument on the pending motions, Edward E. Casto, Jr., Esq., counsel
for Defendants, informed the Court that he is now an attorney with the law firm of Nelson
Bumgardner Casto, P.C.
2
Cognex alleging infringement of claims 1, 4, 5, 19, 22, 25, 27, 28, and 29 of the 524 patent
(collectively Asserted Claims).
Before the Court are two motions for partial summary judgment brought by Cognex. The
first seeks summary judgment on Count II of the First Supplemental Complaint due to invalidity;
the second on Count III due to unenforceability. Also before the Court is Defendants motion for
partial summary judgment on the issue of infringement regarding claims 1, 4, 5, and 29, and
summary judgment on Cognexs claims against Acacia for violation of the MDTPA and for
business defamation. For the reasons stated below, Cognexs motions are granted. Defendants
motion for partial summary judgment on infringement of certain asserted claims is denied as
moot. Defendants motion for summary judgment is granted as to Cognexs claim against
Acacia for violation of the MDTPA and denied as to Cognexs claim of business defamation
against Acacia.
I. INTRODUCTION
A. The Invention
The United States Patent and Trademark Office (PTO) issued the 524 patent, titled
Identification Symbol System and Method with Orientation Mechanism, on March 18, 1997.
The 524 patent issued from a continuation application and claims priority to U.S. Application
Ser. No. 07/125,616, now U.S. Patent No. 4,924,078 (issued May 8, 1990) (the 078 patent),
filed on November 25, 1987.2 The 524 patent is directed to a symbol identification system that
2 The 524 patent issued from U.S. Application Ser. No. 08/412,091, which is a
continuation of Application Ser. No. 239,932, May 9, 1994, abandoned, which is a continuation
of Ser. No. 97,629, July 27, 1993, abandoned, which is a continuation of Ser. No. 892,409, Jun.
1, 1992, abandoned, which is a continuation of Ser. No. 423,900, Oct. 19, 1989, abandoned,
which is a continuation of Ser. No. 125,616, Nov. 25, 1987, Pat. No. 4,924,078. Veritec
previously owned both the 078 and 524 patents. Veritec assigned the patents to VCode, which
is a wholly-owned subsidiary of Veritec. In 2003, VCode granted an exclusive license to VData
3
includes a computer-readable two-dimensional data matrix symbol with an orientation
mechanism that can be attached or affixed to an object and a method and apparatus for capturing
an image of the symbol and identifying the object from the information in the symbol. A twodimensional
data matrix symbol represents an improvement over traditional bar codes in that it
has much higher information density and can contain significantly more data than a traditional
bar code. Also, unlike a bar code, a two-dimensional data matrix symbol does not have a
preferred scanning direction and is capable of being read from various orientations.
Claim 1 of the 524 patent is representative of the asserted symbol system claims of the
524 patent.3 It reads:
An identification symbol system for an object, comprising: an
identification symbol comprising: a substrate associated with the object; a
computer readable data matrix data field formed on said substrate and providing
symbol information for uniquely identifying the symbol; and computer readable
orientation means, formed on said substrate and positioned adjacent said field on
at least one side, for providing orientation information from a substantially omnidirectional
three-dimensional orientation of capture; and a device for capturing
the symbol, identifying the object from the symbol information.
An example of the identification symbol, as asserted and depicted in these claims is
reproduced in Figure 1. See First Supplemental Complaint at Ex. A.
in the patents, in exchange for receipt of a certain percentage of the net profits and proceeds
obtained by VData in the exploitation and enforcement of the patents. VData is a subsidiary of
Acacia.
3 Claim 1 requires that the symbol comprise orientation means. Claims 4 and 5 both
require that the symbol comprise an orientation border. Claim 29 requires that the symbol
comprise an orientation indicator. The orientation element of claim 22 states in its entirety as
follows: orientation information, formed on said substrate, indicating an orientation of said data
field from any direction of image capture.
4
Figure 1
Claims 19 and 25 both address an apparatus for capturing and reading the identification
symbol. Claim 19 asserts:
An apparatus, comprising: image capture means for obtaining image data
representing an image field including a symbol comprising a rectilinear data
matrix field of information data cells and an orientation border on at least one
side of the data field; and decoding means for processing the image data to
identify the border, determine orientation and timing information from the border
and sample the data cells.
Claim 25 more generally asserts:
An apparatus, comprising: image capture means for obtaining image data
representing an image field including a symbol comprising a data field of
information data cells and orientation means for indicating an orientation of said
field; and decoding means for processing the image data to determine orientation
and sample the data cells.
Finally, claim 27, an independent claim, and claim 28, a dependent claim, assert a
decoding process. Claim 27 reads:
A decoding process, comprising the steps of: (a) scanning a symbol
comprising a data field of information data cells and orientation means for
indicating an orientation of the field; (b) identifying the location of the data cells;
and (c) decoding the symbol from the located data cells.
Claim 28 reads:
A process as recited in claim 27, wherein step (b) comprises: (b1)
determining an orientation of the symbol; and (b2) determining a timing of the
data cells.
5
B. The present litigation
Cognex manufactures and sells products designed to capture and read two-dimensional
data matrix symbols. Cognex alleges Defendants have improperly attempted to enforce the 524
patent extra-judicially by contacting Cognexs current and potential data matrix reader customers
and threatening them with patent litigation unless they purchase a license under the 524 patent.
Cognex claims these actions have affected its ability to solicit and retain customers. Cognex also
alleges that individuals associated with Acacia told certain third parties that Cognex attempted to
purchase patents from Veritec, including the 524 patent, for an eight-figure amount. Cognex
contends these statements were defamatory and made in violation of the MDTPA. Cognex seeks
a declaration that its symbol reader products do not infringe the 524 patent. Cognex also seeks a
declaration that the Asserted Claims of the 524 patent are invalid and that the 524 patent is
unenforceable.
In their counterclaim, Defendants allege that various Cognex symbol reader products
infringe the Asserted Claims. These products include the DataMan ID Reader series products,
the In-Sight Reader series products, the DVT Vision Sensor series products, the VisionSpy
Reader series products, and VisionPro systems. Defendants also allege that Cognex infringes the
524 patent by using data matrix symbols and Cognex symbol readers to identify its own
products during their manufacture, packaging, and distribution.
II. DISCUSSION
Summary judgment in a patent case, as in other cases, is proper if the pleadings, the
discovery and disclosure materials on file, and any affidavits show that there is no genuine issue
as to any material fact and that the movant is entitled to judgment as a matter of law. Fed. R.
Civ. P. 56(c); see Nike Inc. v. Wolverine World Wide, Inc., 43 F.3d 644, 646 (Fed. Cir. 1994).
6
The movant bears the initial responsibility of informing the district court of the basis for its
motion, and must identify those portions of [the record] which it believes demonstrate the
absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
If the movant satisfies its burden, the party opposing the motion must respond by submitting
evidentiary materials that set out specific facts showing a genuine issue for trial. Fed. R. Civ.
P. 56(e)(2); see Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). In
determining whether summary judgment is appropriate, a court must look at the record and any
inferences to be drawn from it in the light most favorable to the party opposing the motion.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
A. Claim construction
The first step in any invalidity or infringement analysis is claim construction. See
Rockwell Intl Corp. v. United States, 147 F.3d 1358, 1362 (Fed. Cir. 1998). In its Markman
Order, issued October 9, 2007, the Court construed the disputed claim terms of the 524 patent.
Cognex Corp. v. VCode Holdings, Inc., Civ. No. 06-1040, 2007 WL 2973834 (D. Minn. Oct. 9,
2007). Three of these terms are particularly relevant here. First, the Court determined that the
term computer readable orientation means recites the function providing orientation
information from a substantially omni-directional three-dimensional orientation of capture with
a corresponding structure of computer readable borders, cells, or cell patterns. Next, the Court
construed the term providing orientation information from a substantially omni-directional
three-dimensional orientation of capture as providing orientation information from
substantially any direction of capture. Finally, the Court construed the term a device for
capturing the symbol, identifying the object from the symbol information, as recited in claims 1,
4, 5, 22 and 29, as a device that captures symbol image and identifies an object upon which the
7
symbol is affixed, attached, etched, and/or engraved from the information contained within the
symbol. Here, the Court adopted the construction that the parties agreed upon prior to the
Markman hearing after finding it to be derived from the language in the claims. In doing so, the
Court rejected additional orientation-related language urged by Cognex.
Despite the Courts Markman Order, the parties continue to dispute the meaning of the
term a device for capturing the symbol, identifying the object from the symbol information.
Cognex argues that the omni-directional three-dimensional orientation aspect of the claimed
invention resides exclusively in the structure of the claimed symbol and that the device for
capturing and decoding the symbol is a generic device that is not required to possess the ability
to read and decode a symbol from a substantially omni-directional three-dimensional orientation
of capture. Defendants respond that the Asserted Claims, as well as the preferred embodiments
in the written description of the 524 patent, disclose a capturing device that must be capable of
receiving the omni-directional three-dimensional orientation information provided by the symbol
and decoding that information. They contend that it would be improper to read this limitation
out of the Asserted Claims.
Defendants incorrectly interpret the device for capturing language, as written and
construed. While the written description of the 524 patent suggests that a goal of the inventors
was to invent a system comprised of a two-dimensional symbol and a process for capturing and
decoding the symbol without first having to orient it in a predefined configuration, it is wellsettled
that the claims of a patent, not the written description, define the scope of the patentees
right to exclude. See STX, LLC v. Brine, Inc., 211 F.3d 588, 591 (Fed. Cir. 2000) ([W]here a
patentee defines a structurally complete invention in the claim body and uses the preamble only
to state a purpose or intended use for the invention, the preamble is not a claim limitation.
8
(quoting Rowe v. Dror, 112 F.3d 473, 478 (Fed. Cir. 1997))); E.I. du Pont de Nemours & Co. v.
Phillips Petroleum Co., 849 F.2d 1430, 1433 (Fed. Cir. 1988). Where a specification does not
require a limitation, that limitation should not be read from the specification into the claims.
Intel Corp. v. U.S. Intl. Trade Commn, 946 F.2d 821, 836 (Fed. Cir. 1991) (citations omitted).
The language reciting the symbol capturing device in claims 1, 4, 5, 22, and 29 of the
524 patent is broad and general. It does not include language limiting the device to one that
specifically utilizes particular information in the symbol in identifying the object from the
symbol information. It describes a generic device. Furthermore, the language does not require
the capturing device to actually make an orientation determination or use the orientation
information contained within the symbol in identifying the object from the symbol information.
The language merely requires a device that captures the symbol and identifies the object from the
information that is in the symbol.4
Defendants assertions that the preferred embodiments read an orientation-reading
limitation on the capturing device are unavailing. While examples disclosed in the preferred
embodiment may aid in the proper interpretation of a claim term, the scope of a claim is not
necessarily limited by such examples. Ekchian v. Home Depot, Inc., 104 F.3d 1299, 1303 (Fed.
Cir. 1997). In any event, it is well-established that claims are not to be interpreted by adding
4 On December 4, 2007, the PTO issued an Office Action that comports with this
construction. In the Office Action, the reexaminer concludes that these claims recite a generic
device that does not require the use of the omni-directional three-dimensional orientation
information provided by the symbol to identify the object from the symbol information. In fact,
the patent reexaminer goes further and concludes that the claim does not even require that the
captured symbol be used to identify the object. It merely requires that the object be identified
from the symbol information. Office Action in Ex Parte Reexamination, Control No.
90/007,980, at 14 (U.S. Patent and Trademark Office, Dec. 4, 2007). The Office Action rejected
claims 1-5, 8-10, 15, 20-24, and 26-32 of the 524 patent under 35 U.S.C. 102(b) as anticipated
by prior art, namely the Vericode brochure. The reexamination process continues and, as of the
date of this Order, a final action has not yet been issued.
9
limitations appearing only in the specification. Phillips v. AWH Corp., 415 F.3d 1303, 1323
(Fed. Cir. 2005) (en banc), cert. denied, 546 U.S. 1170 (2006).
Here, the specification of the 524 patent describes multiple preferred embodiments. In
addition to the identification of an object from a two-dimensional symbol that is both rotated and
skewed about the image capture plane, the specification includes an embodiment that identifies
an object from a two-dimensional symbol when the symbol is in a pre-determined and fixed
orientation. See 524 patent, col.5, l.63 through col.6, l.12. It also includes an embodiment that
identifies an object from a two-dimensional symbol that is in a plane parallel to the image
capture plane but is rotated. See 524 patent, col.3, ll.44-62; col.5, ll.15-35. Each of these
embodiments relies on the claimed two-dimensional data matrix symbol. This symbol, as
claimed and construed, is a symbol that is capable of providing omni-directional threedimensional
orientation information through a border, data cells, or cell patterns. However,
according to the specification, the receiving and utilization of the omni-directional threedimensional
orientation information is not a necessary part of the identification process for every
embodiment described.5 The limiting language of the claims requires only that the symbol be
capable of providing the omni-directional three-dimensional orientation information.
Nothing in the prosecution history indicates that the patentees meant to exclude from the
scope of the device claimed every device that was not capable of reading the omni-directional
three-dimensional information in the symbol. See SuperGuide Corp. v. DirecTV Enters., Inc.,
358 F.3d 870, 875 (Fed. Cir. 2004) (indicating that prosecution history may not be used to infer
5 For example, the specification teaches that the capture and identification of a symbol in
an environment in which the symbol is strictly aligned with the image plane can be accomplished
through a timing determination but without a determination of orientation. 524 patent, col.5, l.63
through col.6, l.8. The specification further teaches that in an environment where the exact
location of the symbol is known in advance along with the symbol size and data density, the
orientation border of the symbol can be completely eliminated. 524 patent, col.6, ll.8-12.
10
intentional narrowing absent a clear disavowal of claim coverage. (quoting Amgen Inc. v.
Hoechst Marion Roussel, Inc., 314 F.3d 1313, 1327 (Fed. Cir. 2003))). When the patentees
added a device for capturing the symbol and identifying the object from the symbol
information to the symbol system claims near the end of the application process, they did so in
broad terms and did not include specific claim language requiring the device to receive and to
use the omni-directional three-dimensional orientation information in the symbol in order to
identify the object to which the symbol is attached or affixed.
In sum, as written and construed, asserted claims 1, 4, 5, 22, and 29 recite the invention
of a symbol identification system comprising (1) a two-dimensional data matrix symbol affixed
to a substrate associated with an object that contains information for uniquely identifying the
object and computer readable borders, cells, or cell patterns for providing orientation information
from substantially any direction of capture, and (2) a device that captures the symbol image and
identifies the object to which the symbol is affixed, attached, etched, and/or engraved from the
information contained within the symbol. In addition, although asserted claims 19, 25, and 28
recite decoding processes that include a determination of symbol orientation, none of these
claims requires that the orientation determination be from a substantially omni-directional threedimensional
orientation of capture. Asserted claim 27 recites a decoding process that does not
require an orientation determination at all.
B. Cognexs motion for summary judgment on the grounds of invalidity
Cognex seeks a declaration that the Asserted Claims are invalid under 35 U.S.C. 102(b)
(2000).6 Cognex alleges that prior to the critical date of the 524 patent,7 Defendants offered for
6 35 U.S.C. 102(b) provides that [a] person shall be entitled to a patent unless (b) the
invention was patented or described in a printed publication in this or a foreign country or in
11
sale and publicly used systems for capturing, orienting, and decoding two-dimensional data
matrix identification symbols that fully embodied the invention later claimed in the Asserted
Claims. Cognex also contends the written description of the 524 patent fails to enable the
invention, and asserts that the invention was anticipated by prior art. Defendants assert the
symbol identification system invention recited in the Asserted Claims could not have been on
sale or publicly used prior to the critical date because critical aspects of the invention were not
fully developed until after November 25, 1986. Defendants assert that the pre-critical date
activity relied upon by Cognex to establish invalidity under section 102(b) fails to demonstrate
the sale or public use of a product that embodied all of the limitations recited in the Asserted
Claims. Defendants further argue the invention recited in the 524 patent is fully enabled by the
written description and that the invention was not anticipated by any of the prior art referenced
by Cognex.
1. Relevant activities occurring prior to November 25, 19868
In late 1985, Veritec began discussions with Advanced Vision Systems, Inc. (AVS), for
the development of a video/optical scanning and processing system (VOSP System) that could
find, orient, and read two-dimensional data matrix symbols and report the decoded results. A
memorandum dated November 13, 1985, sent from Veritec President Robert Stander to coinventors
Carl Sant Anselmo (Carl Anselmo) and Robert Sant Anselmo (Robert Anselmo)
public use or on sale in this country, more than one year prior to the date of the application for
patent in the United States.
7 Here, the filing date of the 078 patent, to which the 524 patent claims priority, was
November 25, 1987. Therefore, the critical date of the 524 patent for the purposes of section
102(b) is November 25, 1986.
8 The facts pertinent to the allegations of invalidity are either undisputed or construed in a
light most favorable to non-movant Defendants. See Anderson, 477 U.S. at 255. In addition,
Defendants raised objections to the summary claim charts submitted in the report of Cognex
expert Dr. David Allais. The Court gives no evidentiary weight to these summary charts here.
12
states, Carl delivered to Advanced and reviewed in detail a specification covering the
requirements for a scanner to read Vericodes. AVS software programmer Shawn Makanvand
participated in these discussions.
In January 1986, Veritec and AVS entered into a Memorandum Agreement for the
development of the VOSP System. The technical specification attached to the agreement
required the system to scan a two-dimensional object, decode the information contained in the
object, and report the decoded information using four main components: a camera system, a
lighting system, a data processor, and a monitor. The object to be captured was described in the
specification as follows:
Object Definition: The object shall be as defined in Figure 3-3. The code will be
placed within a high contrast border. The veri-code printed within the border
may have a mis-registration of the size of an element. The object shall consist
of a synchronization frame data field. The characteristics of the synchronization
frame shall remain fixed for all objects appearing within the field of view . . .
Each code shall have an orientation mark in the upper left hand corner. The data
field shall vary from one object to the next.
Element Definition: Within the area defined for the Object . . . the object
shall be comprised of 100 grid elements. Some of the grid elements (36
total) shall represent the synchronization frame while the remainder
shall represent the data field (64 total). The last element in each
horizontal row with the exception of the first and tenth rows, will be a
parity bit (odd) to aid in determining if the information read in that row
was correct. All of the elements will be equal in size to a tolerance agreed
upon between parties. Refer to Figure 3-3 (a) and (b).
Figure 3-3 (a) and (b), see Declaration of Kevin Gannon In Support of Plaintiffs Motion for
Partial Summary Judgment on Count II at Ex. 5, are reproduced in Figure 2 below:
13
Figure 2
AVS subsequently developed the software for the VOSP System. Makanvand testified
that the VOSP system included a camera that captured a black and white binary image of the
specified object, referred to as a symbol or Vericode, when it was affixed to a piece of paper.
The systems software program, running on a microcomputer, then decoded the symbol from the
captured image using the information in the symbol. The information from the decoded data
cells could then be displayed on a monitor and logged to a computer file.
AVS delivered the VOSP system to Veritec in March of 1986. The delivered system
included a camera, a frame grabber, and capturing and decoding software. An internal Veritec
memorandum dated March 24, 1986, and addressed to Carl Anselmo states that the AVS
equipment has been set up in the conference room and is up and running. To demonstrate the
functionality of the system, AVS also provided Veritec with a computer monitor and a
14
phonograph turntable. Patrick Dalton, Veritecs National Accounts Sales Manager in 1985 and
1986, and Robert Anselmo both testified that they observed the delivered VOSP system
successfully capture and decode data matrix symbols printed on pieces of paper when they were
carefully aligned with the capturing camera. The VOSP System specification also required the
ability to capture and decode a symbol that was rotated up to fifteen degrees or skewed up to ten
degrees in relation to the image capture plane. There is conflicting testimony in the record
regarding the extent of the VOSP Systems ability to decode rotated or skewed symbols.
On February 18, 1986, while the VOSP System was under development, Carl Anselmo
sent a document titled Portable Scanning and Printing System (PSAPS document) to his
brother and co-inventor Robert. The PSAPS document provided a description of a hand-held
sensor head that could capture and decode an object. In language similar but more specific than
the language in the VOSP System specification, the PSAPS document defines the object as
follows:
Object Definition: The object shall be as defined in Figure 5. The object,
hereafter called a Vericode will be placed within a high contrast border. The
Vericode printed within that border may have a mis-registration of the size of
an element. The Vericode shall consist of a synchronization frame and a data
field. The characteristics of the synchronization frame shall remain fixed for all
objects appearing within the field of view . . . Each Vericode will have a fixed
orientation sequence in the first and last rows as shown in Figure 5. The data
field will vary from one Vericode to another.
Figure 5 of the PSAPS document, see Declaration of Kevin Gannon In Support of Plaintiffs
Motion for Partial Summary Judgment on Count II at Ex. 35, is reproduced in Figure 3 below:
15
Figure 3
The PSAPS document goes on to describe the Element aspect of the object.
Element Definition: Within the area defined for the Vericode . . . the Vericode
shall be comprised of 100 grid elements. The peripheral elements (36 in number)
representing the synchronization frame, shall be used to identify Vericode
orientation and detect and correct element transmission and scanning errors. The
inner elements (64 in number) shall contain variable information. The last
element in each row [sic] horizontal row, with the exception of the first and tenth
rows, will be a parity bit (odd) to aid in error detection. All elements shall be of
the same size.
The PSAPS document includes requirements for a capturing component, an image
processing and decoding component, and an output and display component. It also describes a
printer component for printing Vericodes onto labels. The PSAPS document describes the handheld
sensor head as capable of acquiring and processing a Vericode independent of the
direction that the sensor passes over the Vericode. The specification further describes this
capability as the ability to process the Vericode when the sensor head is passed over it from
left-to-right, right-to-left, top-to-bottom, or bottom-to-top. The specification also requires the
system to be capable of capturing and decoding Vericodes that are skewed +/- 15 degrees about
a plane perpendicular to the axis through the sensor head and rotated about this axis by +/- 15
degrees.
16
On February 24, 1986, Dalton sent a letter to the Chairman of Scientific Games, Inc.,
stating Veritecs recently printed new product literature was enclosed. One of the enclosures,
titled Vericode Identification System, describes a system that includes a computer generated
verification code called a Vericode that can be affixed or etched onto objects and then verified
using existing computer techniques. The brochure indicates that the same type of technology
used in scanning bar codes is applied with the Vericode Identification System and depicts a bar
code reader. The Vericode depicted in the brochure, see Declaration of Kevin Gannon In
Support of Plaintiffs Motion for Partial Summary Judgment on Count II at Ex. 66, is reproduced
in Figure 4 below:
Figure 4
In June 1986, Dalton and Robert Anselmo demonstrated the functionality of the VOSP
System at the June 1986 Vision 86 trade show in Detroit, Michigan. To demonstrate the
system, two-dimensional data matrix symbols affixed to sheets of paper were attached to a
turntable and the turntable was put into motion. An image of a symbol was captured as it moved
in front of a camera positioned adjacent to the turntable. The symbol image was then decoded
by the systems software and the decoded information, a sequence of numbers, was displayed on
a monitor. The VOSP System was demonstrated again at the October 1986 SCAN-TECH 86
trade show in San Francisco, California.
17
On September 10, 1986, a document titled A New Technique for the Generation and
Acquisition of Compact Machine Readable Codes and Symbols was sent to Veritec by
facsimile. The sender is identified as Carl Anselmo and the Notes section of the facsimile
cover sheet includes the following: Preliminary Copy of Patent disclosure to be entered in safe
deposit box. This document provides a detailed description of a highly compact machine
readable data matrix comprised of binary data bits suitably arranged in geometric array form
called a Vericode. According to the preliminary disclosure, a Vericode includes a data field
and a registration or synchronization frame placed around the data field to guarantee that the
code is read right side up and not upside down, etc. The disclosure specifically states:
If the registration frame is made up to be unique in the sense that its upper edge is
distinguishable from the lower edge and the left half from the right half, and a
knowledge of this uniqueness is imparted to the Vericode reader, then correct
Vericode reading can always be guaranteed.
The depiction of the Vericode included in the preliminary patent disclosure see Declaration of
Kevin Gannon In Support of Plaintiffs Motion for Partial Summary Judgment on Count II at Ex.
36, is reproduced as clearly as possible in Figure 5 below:
Figure 5
18
On September 24, 1986, Veritec filed its annual 10K report with the Securities and
Exchange Commission (SEC) for the fiscal year ending June 30, 1986. The signatures of
Veritecs President, Robert Stander, and Veritecs Executive Vice President, Robert Anselmo,
appear on the report. Under the section titled Research and Development the report states as
follows:
Vericodes The Company has developed a Video Scanning and Processing
(VOSP) System to visually capture, process and decode Vericodes. After the
Vericode is decoded, the VSOP System will output the decoded data for external
processing by the VOSP operator. The Company has also developed and owns
Vericode generating software, as well as the software that controls the VSOP
System.
On November 11, 1986, Dalton sent a letter to the Chairman and Managing Director of
Norton & Wright Limited (Norton & Wright), proposing that Veritec design, deliver, test, and
install a system for identifying and tracking lottery sheets using Veritecs proprietary
VERICODE symbology and the VERICODE IDENTIFICATION SYSTEM. The letter
included a Proposal indicating the lottery sheet tracking system would included 500
VERICODE symbol images, software for capturing an image of a symbol and processing the
captured image, software for decoding the symbol image to identify the lottery sheet
identification information stored within it, and hardware for scanning, processing, and sorting the
symbols. The proposal also included a software license for the VERICODETM system software
and provisions concerning fixtures, installation and training, and testing of the system. Daltons
letter contained a price quotation that totaled ,000, and included itemized descriptions with
specific quantities and prices, as well as payment terms and delivery terms. Norton & Wright
subsequently agreed and Veritec delivered and installed the lottery sheet tracking system in July
1987.
19
2. Section 102(b) Invalidity: On-sale bar/ public use
The Patent Act grants a presumption of validity to patents. 35 U.S.C. 282 (2000). This
presumption can only be overcome by clear and convincing evidence to the contrary. See, e.g.,
WMS Gaming, Inc. v. Intl Game Tech., 184 F.3d 1339, 1355 (Fed. Cir. 1999). The Patent Act
also prevents issuance of any patent for an invention that was on sale or used in public in the
United States more than one year before the date on which the patent application was filed. 35
U.S.C. 102(b). Thus, a party may overcome the presumption of a patents validity by
presenting clear and convincing evidence of facts showing that the patented invention was
offered for sale or used in public before such critical date. EZ Dock, Inc. v. Schafer Sys., Inc.,
276 F.3d 1347, 1351 (Fed. Cir. 2002). A determination that a product was placed on sale or used
in public prior to the critical date is a conclusion of law based on underlying findings of fact.
Linear Tech. Corp. v. Micrel, Inc., 275 F.3d 1040, 1047 (Fed. Cir. 2001) (on-sale bar); Baxter
Intl, Inc. v. Cobe Labs., Inc., 88 F.3d 1054, 1058 (Fed. Cir. 1996) (public use bar).
a. On-sale bar
The overriding concern of the on-sale bar is an inventors attempt to commercialize his
invention beyond the statutory term. Netscape Comm. Corp. v. Konrad, 295 F.3d 1315, 1323
(Fed. Cir. 2002). The on-sale bar applies when two conditions are satisfied before the critical
date. Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 67 (1998). First, the product must be the subject
of a commercial offer for sale. Id. Second, the invention must be ready for patenting. Id.
i. Ready for patenting
The parties devote significant attention to the second part of the Pfaff test. Thus, the
Court first turns to the ready for patenting requirement. The purpose of the ready for patenting
inquiry is to determine if there was an invention at the time of the sale. Invitrogen Corp. v.
20
Biocrest Mfg., L.P., 424 F.3d 1374, 1379 (Fed. Cir. 2005). This requirement may be satisfied in
at least two ways: by proof of reduction to practice before the critical date or by proof that prior
to the critical date the inventor had prepared drawings or other descriptions of the invention that
were sufficiently specific to enable a person skilled in the art to practice the invention. Pfaff, 525
U.S. at 59; EZ Dock, 276 F.3d at 1351.9
Cognex argues that the invention of the Asserted Claims was ready for patenting because
the pre-critical date documents prepared by Carl Anselmo were sufficiently specific to enable the
practice of the invention. Defendants respond that none of these documents describe a system
capable of decoding a symbol from an omni-directional three-dimension orientation of capture
and did not, therefore, sufficiently enable the invention. Defendants also assert that the inventors
did not possess any kind of prototype of the claimed invention prior to November 25, 1986.
Thus, Defendants argue, the invention of the Asserted Claims was not ready for patenting within
the meaning of Pfaff.
The Court has already determined that the omni-directional three-dimensional orientation
aspect of the claimed invention pertains only to the structure of the symbol in asserted claims 1,
4, 5, 22, and 29, and is not a limitation recited on the systems capturing device. Therefore,
whether the pre-critical date documents and diagrams presented by Cognex describe a system
capable of decoding a symbol from substantially any direction of capture is not material to the
9 Neither party expressly raises the issue of the definition of a person of ordinary skill in
the art for the 524 patent. Defendants expert, Dr. Val DiEuliis, opined that such a person in
the 1986-87 time frame is an individual with a B.S. degree in electrical engineering, computer
engineering, or computer science with two to three years of experience in the development of
microprocessor systems including hardware and software. Plaintiffs expert, Dr. Allais, opined
that this persons qualifications should also include the development of algorithms or software
for decoding bar code symbols or recognizing objects. For the purposes of Cognexs motions
for partial summary judgment, the Court applies the definition provided by Dr. DiEuliis. See
Anderson, 477 U.S. at 255.
21
application of the on-sale bar or public use bar. The proper inquiry is whether pre-critical date
drawings and diagrams prepared by the inventors were sufficiently specific to allow a person
skilled in the art to practice the claimed invention. See Pfaff, 525 U.S. at 59, 62-63; EZ Dock,
276 F.3d at 1351.
The VOSP System specification described the requirements for a video/optical scanning
and processing system. The specification described the object to be scanned as a twodimensional
matrix of one hundred equally-sized grid elements, or data cells, surrounded by a
high contrast border. Thirty-six of these data cells comprised a fixed synchronization frame.
The other sixty-four data cells, the data field, contained information that varied from one
object to the next such that the cells could be coded to uniquely identify the symbol and thus
distinguish the object to which the symbol would be affixed from all others.
Makanvand testified that the distinguishing features of the data matrix symbol were the
solid border around the date field, the synchronization cells within the border, and a fixed corner
cell pattern of black upper left, lower left and lower right corners and a white upper right corner.
According to Makanvand, the fixed pattern of cells in the corners and in the synchronization
frame could provide information about the size of the individual data cells in the matrix and
information about the objects orientation. Makanvand testified that the VOSP System software
did not need to use the synchronization frame for determining orientation because the ten/fifteen
degree skew and rotation requirements of the VOSP System did not require its use. He testified
that in the VOSP System the synchronization cells were only used to provide information about
the size of the individual date cells in the symbol.
The testimony and pre-critical date descriptions of co-inventors Carl Anselmo and Robert
Anselmo corroborate Makanvands testimony regarding the presence of structures capable of
22
providing orientation information in the VOSP System symbol. Robert Anselmo testified that
the synchronization frame element of a Vericode symbol allows a determination of the
orientation of the symbol, and that, more generally, data cells within the border of the Vericode
allow one to determine orientation of the symbol. Like Makanvand, he testified that there was
no need to put internal orientation data cells in the VOSP System code because the code was
already aligned with the capturing camera and not in need of orienting.
The language Carl Anselmo used to describe the symbol in the VOSP System
specification is almost identical to the object and element description he provided in the PSAPS
document dated February 18, 1986. The PSAPS document, however, expressly indicates that the
objects synchronization frame can be used to identify Vericode orientation and detect and
correct element transmission and scanning errors. The fixed pattern of the synchronization
frame identified in the PSAPS document, a top row that alternates white and black and a bottom
row that alternates black-black-white-white, is identically depicted and described in the diagram
of the symbol in the VOSP System specification.
Carl Anselmo reiterated a symbols ability to provide orientation information through
these structural elements in the preliminary patent disclosure delivered to Veritec on September
10, 1986. This disclosure provides a detailed description of a highly compact machine readable
data matrix code called a Vericode. It describes the Vericodes data field and a registration or
synchronization frame that guarantee[s] that the code is read right side up and not upside down,
etc. It specifically discloses that when uniqueness is built into the registration frame such that
each edge of the symbol is different from the others, and knowledge of the uniqueness is
imparted to the Vericode reader, then correct Vericode reading can always be guaranteed. The
diagram of the Vericode in the preliminary disclosure, see Figure 5 above, includes a solid
23
border surrounding the Vericode. A synchronization frame is located just inside the border, and
includes a unique pattern of black and white data cells for each side of the symbol.10
In sum, whether or not the VOSP System could actually decode symbols from
substantially any orientation of capture is immaterial here, as it is the structure of the symbol that
is critical in examining the presence of this limitation in asserted claims 1, 4, 5, 22, and 29. The
solid border surrounding the data matrix and the fixed cell patterns in the four corners of the
matrix are clearly visible in the VOSP System specifications symbol diagrams. The unused
synchronization frame is also clearly visible and specifically identified in the specifications
depictions of the symbol. The Court concludes that there is no genuine dispute of material fact
that the VOSP System specification described a symbol that included a border, cells, or cell
patterns that embodied the orientation means, orientation border, orientation indicator, and
orientation information required in the symbol element recited in asserted claims 1, 4, 5, 22, and
29. Thus, the Court concludes that the VOSP System specification provided a description of a
data matrix symbol that is sufficiently specific for a person skilled in the art to construct a
symbol that fully embodied each of the limitations recited on the symbol in asserted claims 1, 4,
5, 22, and 29.
Cognex argues that because the pre-critical date drawings and diagrams disclosed
everything one skilled in the art needed to know about the structure of the identification symbol
in order for it to provide orientation information from a substantially omni-directional threedimensional
orientation of capture, the Court should conclude that these drawings and diagrams
were also sufficiently specific to enable a person skilled in the art to practice the capturing and
10 The Court notes that the testimony and expert report of Defendants expert, Dr. DiEuliis,
confirms that the symbols border as well as data cells within the data matrix can provide
orientation, size, and distortion information that allows a symbol to be reliably read even if it is
upside-down or sideways with respect to the focal plane of the capturing device.
24
decoding processes recited in the other asserted claims. Cognex argues the 524 patent and
Defendants own expert, Dr. DiEuliis, advocate that once the symbol structure is known, one
skilled in the art need only refer to well known principles in the prior art to understand how to
determine the orientation of a captured symbol. Therefore, Cognex asserts, the invention of the
Asserted Claims was ready for patenting prior to the critical date.
The Court agrees. The four-step decoding process recited in asserted claims 19 and 25
includes a microprocessor programmed to (1) search for the edge of the symbol; (2) determine
the orientation of the symbol using known graphics techniques when the location of three
corners of the symbol is known, or standard slope formulas or the algorithm in Fig. 5 when the
symbol is in a plane parallel to the image capture plane,11 or well-known rotational
decomposition algorithms when the symbol plane and the image plane are not parallel and the
size of the symbol is known; (3) calculate the size and spacing of the data cells within the
symbol; and (4) sample the data cells.12
Defendants expert, Dr. DiEuliis, repeatedly indicated in his testimony regarding the
sufficiency of the enablement of the 524 patent that a person skilled in the art in the first half of
the 1980s would have known to use the information provided by the symbols border and the
location of the symbols corners in conjunction with standard slope formulas and known graphic
11 Figure 5 of the 524 patent is a flow chart representation of an algorithm that (1) searches
for the symbol edge and validates it; (2) searches for three corners and validates them; (3)
defines/calculates timing sequence (the size and spacing of the data cells); (4) reads the contents
of the individual cells for decoding; (5) verifies the correctness of the read; and (6) translates the
cell data to user form and transmits it for further processing.
12 These claims also require image capture means. Pursuant to the Markman Order, the
structure of this means-plus-function limitation is a two-dimensional reader, camera, video
camera, line scan image device, or other imaging device with sufficient resolution to discern the
individual data cells, or other equivalent imaging device. Cognex Corp. v. VCode Holdings,
Inc., et al., Civ. No. 06-1040, 2007 WL 2973834, slip op. at 9 (D. Minn. Oct. 9, 2007). There is
no dispute that the VOSP System embodied this element of the Asserted Claims.
25
techniques to determine the orientation of a symbol when the symbol was captured in two
dimensions. The description of the decoding process Makanvand developed for the VOSP
System in early 1986 after his discussion with Carl Anselmo and review of the VOSP System
specification demonstrates his understanding of these concepts:
We are talking about a camera looking at a code and the image of that
camera is stored in the computers memory and at that time we were talking
about a binary image so everything was black and white. So the memory contents
called pixel, what I was proposing was to scan downward from top to bottom of
the image and also scan sideways from left to right of the image. . . . By scanning
if you will in memory I was creating a virtual shadow that gave a footprint of the
where the code resides in the screen. So if you scan downward and everything is
white then there was no code. If you hit something thats black then you know
where the beginning of the code is and you follow that until you get to the other
side and it turns white again.
So by creating these so-called shadows, I was able to then identify where
the code was going to be horizontally and vertically within the screen. That
doesnt tell you how its oriented but it tells you where its roughly going to be.
So that was the first step.
And then the second step is once you know roughly where it is then going
in and zeroing in on that area and finding then the corners of the code, what is the
upper left, what is the upper right, lower left, lower right and again you are kind
of scanning down looking for black which is where the contents is [sic] and
where there is white there is no content until you reach those borders that we
talked about. And then youve now identified where these four coordinates are
for upper left, upper right, lower left and lower right corners.
By this point Ive identified where the code is fully and then we are ready
to start going into the code to look at the contents. . . .
The next step is finding the cell size or those little squares that I talked
about, we refer to those as a cell, and you have to find out how many cells there
are and therefore be able to read the contents of the code. So you know there is a
border around it and per agreement we had decided that the border was going to
be the same thickness as the cells. So by starting to again scan through the border
and down as well as left to right you can then find where there is a transition from
black to white that tells you the thickness of the border and therefore the
thickness of a cell, and because the cells are all square you then know both the
height and width of each cell. . . .
26
Once you know the thickness of the border and the thickness of the cells
and you know the entire width and height of the code because youve determined
the four corners of the code, you know the height and width, you know the cell
size and then by dividing out it tells you how many elements there are inside of
the code, basically how many rows there are, how many columns there are and
where the location of each element is within that code. . . .
One of the requirements that we had to meet was to allow for I believe it
was a 10 or 15 degree skew or rotation in the code. Although there was talk of
eventually doing a fully, you know, handling a code thats rotated up to 360
degrees at the time the system specifications as I remember them was to handle
about 10 or 15 degrees. So you have an upper left, an upper right, lets just stay
with those two coordinates, you know from their Y coordinates if they are the
same then the code is perfectly straight. If they are not the same then you know
that the code is skewed. Therefore you know the angle of skew or rotation so
based on those coordinates, you can calculate the angle. And then when you are
scanning across to either find the thickness of the border or eventually locate the
cells you can scan at that angle. . . .
[For example] [y]ou have lets say a length which is 100 pixels or 100
dots long and you know that the angle is lets say 10 degrees. 10 degrees
translates into so many dots down and so many dots over. You basically create a
stair step effect. If the angle is zero, you go straight across. If it is not zero then
you calculate how far you have to go before you step up to the next, you know,
stair step if you will. So you go across lets say five pixels, up on, across five
pixels, up one, across five, up one, based on whatever the angle of calculation is.
You calculate how many over, how many up and then thats how you can
determine how you are going to scan along a particular angle. . . .
I believe I double-checked it with the lower left and lower right [corners]
just to make sure that the calculation was consistent. But, yeah, you can determine
all of that from the upper left and upper right [corners].
Makanvands recitation of this decoding process demonstrates that his discussions with
Carl Anselmo and the VOSP System specification were sufficiently specific to enable him to
practice the decoding process recited in the Asserted Claims. Claims 1, 4, 5, 22, and 29 require
a device that captures the symbol image and identifies the object from the information
contained within the symbol, and these limitations are clearly present in Makanvands decoding
program. Also present are the limitations recited in asserted claim 27, which require a decoding
process that scans a symbol, identifies the location of the data cells, and decodes the symbol
27
from the located data cells. Claims 19, 25, and 28 require an orientation determination and a
timing determination. Makanvands description of comparison of the y-axis coordinates to
identify and calculate any necessary angle for scanning embodies the orientation limitation as it
has been construed. His explanation of using the border thickness and height and width of the
symbol to determine individual cell size and location embodies the timing limitation as it has
been construed.
Defendants argue that there is a genuine issue of material fact regarding whether the
software program written by Makanvand could actually decode symbols that were not perfectly
aligned with the plane of the capturing camera, and they assert that no such software existed
prior to the critical date to enable the invention of the Asserted Claims. This argument is without
merit. First, Defendants overstate the conflict in the testimony. Makanvand and Dalton testified
that informal testing was performed on the VOSP System when it was delivered to Veritec. This
testing demonstrated that the system could successfully capture and decode symbols that were
rotated or skewed to some extent, but could not decode symbols that were upside-down or omnidirectional.
Their testimony merely indicates that no formal measurements of the specific
rotation and skew were taken during the testing process, not that the system was only functional
as a perfectly-aligned system. Co-inventor Robert Anselmo testified the codes had to be
precisely aligned with the camera, but, when asked if the VOSP System was capable of reading a
system if it was skewed or tilted to some degree, he could not recall the tolerances. Coinventor
Carl Anselmo testified that the VOSP System could not read Vericodes from multiple
orientations if multiple orientations meant skewed. There is no testimony from Carl Anselmo
in the record regarding the VOSP Systems ability to capture and decode Vericodes that were
parallel to the image capture plane but slightly rotated.
28
Moreover, the software program for decoding rotated or skewed symbols need not have
been written prior to the critical date for the invention to be ready for patenting under Pfaff. In
Robotic Vision Systems Inc. v. View Engineering, Inc., 249 F.3d 1307, 1311 (Fed. Cir. 2001), the
Federal Circuit Court of Appeals affirmed a lower courts determination that an invention can be
ready for patenting when an inventors explanation is given in a manner sufficiently specific to
enable a person skilled in the art to understand and write software code necessary to implement a
method of the invention. In other words, a software program need not be written prior to the
critical date for an invention utilizing the software to be deemed ready for patenting.
Robotic involved a patent directed to a method for scanning leads on integrated circuit
devices. The method included a process called full-tray scanning. Id. at 1308. The software
to carry out this full tray scanning was not written one year prior to the filing of the patent
application. Id. at 1311. However, prior to that critical date, a co-inventor explained the
invention to a software programmer at Robotics and asked him to write the software for full-tray
scanning. Id. The programmer did so, but not until after the critical date. Id. The district court
concluded that the co-inventors explanation was given in a manner sufficiently specific to
enable a person skilled in the art to understand and write the software code for the full-tray
scanning method. Id. The Federal Circuit Court of Appeals agreed. Citing Pfaff, the Court
concluded that the invention was ready for patenting prior to the critical date, stating whether or
not the software needed to implement the claimed method existed at the time of the disclosure is
irrelevant, provided the disclosure of the invention was made prior to the critical date and was
sufficiently specific to enable a person skilled in the art to practice the invention. Id.
Here, Carl Anselmo discussed the invention with Makanvand and provided a technical
specification for the system in early 1986. The data processor section of the VOSP System
29
specification described a row-by-row processing scheme for reading and decoding the contents
of each individual data cell. During the discussions a programming approach for accomplishing
the requirements of the system was discussed, reviewed, and agreed to as potentially workable.
Makanvand then developed a decoding process for the system that he described as capable of
decoding a symbol that was slightly skewed or rotated in relation to the image capture plane by
scanning to find the symbols border and the coordinates of the symbols corners and using them
to determine the angle of the symbols orientation. This information led to the use of an
algorithm that calculated the angle of rotation and used a stair-step formula to scan the symbol at
the identified angle to locate and read the individual data cells. Recalling that the orientation
determination methods recited in asserted claims 19 and 25 include the determination of the
symbols orientation using standard slope formulas when the symbol is in a plane parallel to the
image capture plane, the Court concludes that Makanvands description of the VOSP Systems
decoding process clearly evidences his understanding of the inventions orientation
determination process in a manner sufficient to practice the decoding process claimed in the
invention of these asserted claims. Indeed, Dr. DiEuliis testified that standard slope formulas
can be used to determine the rotation of a symbol and anyone of ordinary skill in the art
would certainly understand that you can take a symbol, take it out of the plane, take a picture of
it . . . and you can use these standard formulas on that.
The Court concludes that Cognex has established by clear and convincing evidence that
the descriptions and diagrams in pre-critical date discussions and documents prepared by Carl
Anselmo were sufficiently specific to enable a person skilled in the art to practice the invention
of the Asserted Claims. Specifically, the discussions between Carl Anselmo and Makanvand and
the VOSP System specification provided in early 1986 were sufficiently specific to enable
30
Makanvand, a software programmer, to understand and practice the decoding of symbols as
claimed in the invention of the Asserted Claims. Thus, the Court concludes that the invention of
the Asserted Claims was ready for patenting prior to November 25, 1986, the critical date of the
524 patent.13
Finally, as previously noted, both Robert Anselmo and Dalton testified that the VOSP
System delivered in March 1986 successfully captured and decoded Vericodes in a fixedalignment
environment. Defendants do not dispute that the VOSP System software program
preformed as described by Makanvand in a fixed-alignment environment. An invention is
reduced to practice when it works for its intended purpose. Honeywell Intl Inc. v. Universal
Avionics Sys. Corp., 488 F.3d 982, 997 (Fed. Cir. 2007) (citing Eaton v. Evans, 204 F.3d 1094,
1097 (Fed. Cir. 2000)). An invention is said to work for its intended purpose when there is a
demonstration of its workability or utility. Id. (citing Fujikawa v. Wattanasin, 93 F.3d 1559,
1563 (Fed. Cir. 1996)). The up and running VOSP System demonstrated the workability and
utility of the invention claimed in asserted claims 1, 4, 5, 22, 27, and 29. Makanvand testified
that this system captured and decoded two-dimensional symbols known as Vericodes affixed to
sheets of paper when the symbols were pre-aligned with the capturing camera. Both co-inventor
Robert Anselmo and Dalton also testified to this capability. Co-inventor Robert Anselmo
expressly stated that the VOSP System sufficiently proved the concept can you read a Vericode
symbol with a CCD [charged coupled device] camera and decode it with software. The fact
13 The VOSP System specification described a camera system and data processor that
includes a camera capable of being focused on an object resident within its field of view and
producing a video image of the object for subsequent processing by the data processor or
computer, and a microprocessor based computer system capable of controlling the operation of
the system, processing the image data, and outputting processed image data to external data
processing equipment. The parties have not contested the sufficiency of this description and the
Court concludes that clear and convincing evidence establishes that it fully embodies the
capturing device and image capture means recited in asserted claims 1, 4, 5, 19, 22, 25, and 29.
31
that the VOSP System might have only been operable in a pre-aligned capturing environment
does not alter the determination that the claimed invention was reduced to practicean invention
can be considered reduced to practice even though it may later be refined or improved. New
Railhead Mfg,. L.L.C. v. Vermeer Mfg. Co., 298 F.3d 1290, 1297 (Fed. Cir. 2002) (indicating that
while improvements were possible and ultimately manufactured into the fourth prototype, these
deficiencies in the third prototype did not prevent reduction to practice of the invention actually
claimed). The Court concludes that the actual delivery of the working VOSP System to Veritec
in March of 1986 is clear and convincing evidence of a reduction to practice of the invention
claimed in asserted claims 1, 4, 5, 22, 27, and 29. Under these circumstances, Cognex has met
its burden of demonstrating that the invention of the Asserted Claims was ready for patenting
before the critical date of the 524 patent.
ii. Commercial offer for sale
The Court thus turns to the first prong of Pfaff, which requires that the claimed invention
be the subject of a commercial offer for sale. 525 U.S. at 67. Cognex submits numerous
letters it claims are offers from Veritec to sell the invention of the Asserted Claims prior to
November 25, 1986. Defendants contend these letters do not represent commercial offers
because they do not meet the definition of a commercial offer for sale and because Veritec did
not possess any product to sell at the time the letters were allegedly sent.
To be a commercial offer, the offer must be sufficiently definite that another party
could make a binding contract by simple acceptance, assuming consideration. See Netscape, 295
F.3d at 1323. In determining such definiteness, the Court reviews the language of the proposal
in accordance with the principles of general contract law. Group One, Ltd. v. Hallmark Cards,
Inc., 254 F.3d 1041, 1048 (Fed. Cir. 2001). Here, many of the offer letters purportedly sent by
32
Veritec are unsigned and Cognex has failed to provide clear and convincing evidence that they
were actually sent by Veritec. In addition, many of the letters appear to contain marketing and
promotional information only. Such letters are not evidence of an offer of sale. See id.
(indicating that mere advertising and promotion of a product may be nothing more than an
invitation for offers). However, the November 11, 1986 letter, signed by Dalton and sent to
Norton & Wright, warrants closer attention.
The Norton & Wright letter included a detailed proposal to design and deliver a lottery
sheet identification system that would read Vericodes affixed to Norton & Wrights lottery
sheets to ensure that the sheets were in the proper sequence and orientation during the printing
process. The system was comprised of Veritecs proprietary VERICODE symbology and the
VERICODE IDENTIFICATION SYSTEM. The proposed system included Vericode
symbols and the hardware and software for capturing, processing, and decoding the symbols.
The proposal included provisions for a software license for the VERICODETM system software.
It addressed installation, training, and testing of the system. The included Quotation stated a
specific price. It listed the primary components of the proposed system and provided
corresponding quantity and price information for each. The quotation stated specific payment
terms of 50% Upon Receipt of Order and 50% Upon Acceptance, and indicated that the
quotation is effective for 30 days from the date shown above [November 11, 1986].
The Court concludes that under general contract principles there is no genuine issue of
material fact in dispute that the Norton & Wright proposal dated November 11, 1986, was
sufficiently definite such that another party could make a binding contract by simple acceptance,
assuming consideration. See Netscape, 295 F.3d at 1323. The Norton & Wright letter is clear
33
and convincing evidence of a commercial offer from Veritec within the meaning of 35 U.S.C.
102(b).
Under the first prong of Pfaff, Cognex must also establish that the offer to Norton &
Wright was an offer to sell the invention of the Asserted Claims. See Vanmoor v. Wal-Mart
Stores, 201 F.3d 1363, 1366 (Fed. Cir. 2000) (indicating that an invalidating sale must involve a
device that actually embodied or rendered obvious the patented invention (quoting Evans
Cooling Sys., Inc. v. Gen. Motors Corp., 125 F.3d 1448, 1451 (Fed Cir. 1997)). To do so,
Cognex must demonstrate that the system offered for sale fully anticipated the invention of the
Asserted Claims or would have rendered the invention obvious by its addition to the prior art.
See Allen Engg Corp. v. Bartell Indus., Inc., 299 F.3d 1136, 1652 (Fed. Cir. 2002).
Cognex argues that the VERICODE symbology and the VERICODE
IDENTIFICATION SYSTEM components of the proposed lottery sheet tracking system that
Veritec offered to sell to Norton & Wright was, in reality, an application of the VOSP Systems
symbol identification system custom developed to suit the business needs of Norton & Wright.
Cognex asserts that the Norton & Wright system thus fully embodied the symbol identification
system recited in the Asserted Claims, and that the offer to Norton & Wright was, therefore, an
offer to sell the invention of the Asserted Claims. The Court agrees.
Contrary to Defendants contentions that the Norton & Wright proposal does not
contemplate the claimed invention because it does not provide a sufficient description of the
symbol, the proposal plainly identifies the systems symbol as a VERICODE. This description
is sufficient. See Abbott Labs. v. Geneva Pharm., Inc., 182 F.3d 1315, 1319 (Fed. Cir. 1999)
(indicating that there is no requirement that a sales offer specifically identify all of the
characteristics of an invention offered for sale). Co-inventors Robert Anselmo and David
34
Hooper, the Veritec software programmer involved in the installation of the Norton & Wright
system, both testified that the Norton & Wright system was a fixed-alignment or linear
system that captured and decoded two-dimensional symbols that were presented to the
capturing camera in a fixed and pre-determined orientation. Robert Anselmo also testified that
Veritecs aligned Vericode was the same symbol that was used in the VOSP System.
Moreover, the question is not whether the sale discloses the invention at the time of the
sale, but whether the sale relates to a device that embodies the invention. Id. According to the
Operators Manual, the Norton & Wright system was designed to read and decode
VERICODEs that are printed on foil stock. The manual states that VERICODE is an
abbreviation for verification code. Each VERICODE uniquely identifies the printing plate
identification number so that faults during the printing process may be automatically detected at
time of production. The Operators Manual indicates that each VERICODE is a 10x12
matrix of equal sized data cells surrounded by a black registration frame with 120 data cells
including parity row and parity column (99 data cells for data). The registration frame is
defined in the manual as a border of data cells different in contrast from the background and the
same color as a data cell defined as binary 1, that defines the top, left, bottom, and right edges
of the VERICODE. Hooper testified that such a black border was a part of the symbol used
in the Norton & Wright system, although it was not used for orientation determinations because
the Norton & Wright system was an aligned system with little tolerance for visual rotation.
The Court concludes that the symbol in the proposed Norton & Wright system was a twodimensional
data matrix with orientation means in the form of borders, cells, or cell patterns
capable of providing orientation information from substantially any direction of capture. Cf. id.
(stating that if a product that is offered for sale inherently possesses each of the limitations of
35
the claims, then the invention is on sale). Like the VOSP System, the orientation mechanism
was not utilized by the software, but the evidence clearly establishes that the symbols structure
included the ability to provide orientation information from substantially any direction of
capture. Thus, there are no genuine issues of material fact in dispute that the symbol of the
proposed Norton & Wright system possessed each of the limitations of the symbol recited in
asserted claims 1, 4, 5, 22, and 29.
Similarly, the capturing device of the proposed Norton & Wright system possessed all of
the limitations of the asserted device. Dalton and Hooper both testified that the device, a camera,
was to capture the image of the symbol as it passed by on the printing press in a pre-determined
orientation and identify the object to which it was affixedhere a particular lottery sheetfrom
the symbol information. This is identical to the capturing and decoding process of the thenexisting
VOSP System. There is no genuine issue of material fact that the proposed Norton &
Wright system fully embodied the device limitation recited in asserted claims 1, 4, 5, 22, and 29
and the image capture means limitation recited in asserted claims 19 and 25.
As for the systems decoding process, the description in the proposal is limited. It refers
to image capture/processing software that rebuilds the captured image into a pure blackand-
white image that is then decoded. Veritec states that a more detailed description of how
this software works will be supplied after receipt of Purchase Order. In a subsequent letter,
dated November 20, 1986, Dalton responded to Norton & Wrights request for this further detail
as follows:
This [statement] was not meant to imply that the code listing would be delivered to
Norton & Wright, but rather that a more detailed description of the decoding
process would be given and that not immediately after the receipt of Purchase
Order. VERICODE decoding algorithms are unique to each individual
VERITEC customer and are not ready for any type of distribution for some time
after receipt of a Purchase Order. Aside from that, in our previous discussions I
36
have point out that the software is part and parcel of the proprietary nature of the
system and is distributed on a right to use basis only. No right to monitor or
modify is implied. If we had not, up to this time, protected our system in this
manner, we would not now have anything to offer Norton & Wright.
Nonetheless, Robert Anselmo testified that prior to 1987, the decoding software provided
in the VOSP System was the extent of Veritecs ability to actually decode a Vericode symbol.
Hooper testified that the system was an aligned system designed to capture and decode symbols
that were aligned in a pre-determined fashion. Dalton testified the techniques and algorithms
used by the VOSP System formed the foundation for fixed-alignment systems subsequently
offered to customers, including the fixed-alignment lottery sheet system proposed to Norton &
Wright. As already discussed, the undisputed testimony of Makanvand, the author of the VOSP
System software, establishes that the decoding process of the VOSP system embodied all of the
limitations recited in asserted claims 19, 25, 27, and 28.
The Court concludes that there is no genuine factual dispute that the fixed-alignment
symbol identification environment of the proposed Norton & Wright system possessed all of the
limitations of the invention claimed in the Asserted Claims. As a fixed-alignment system, the
proposed system would fully carry out one of the embodiments recited in the 524 patent
specification. See 524 patent, col. 5, l.63 through col.6, l.12. It is not necessary to show that
all embodiments of the invention were on sale more than one year before filing. It is sufficient to
show that one embodiment of the invention was offered for sale during the one-year period.
Scaltech, Inc. v. Retec/Tetra, LLC, 269 F.3d 1321, 1330 (Fed. Cir. 2001). The fact that Veritec
enhanced the invention by developing software that enabled a device to decode symbol
information from a substantially omni-directional three-dimensional orientation of capture does
not preclude the application of the on-sale bar because this capability is not a claimed limitation
of the invention and because changes to a product that do not address the matter claimed will not
37
preclude the application of the on-sale bar. See New Railhead, 298 F.3d at 1297-98 (perfecting
or completing an invention to the point of determining that it will work for its intended purpose
ends with an actual reduction to practice). Viewing the record in the light most favorable to
Defendants, the Court concludes Cognex has demonstrated by clear and convincing evidence
that the invention of the Asserted Claims was on sale within the meaning of 35 U.S.C. 102(b)
because it was offered for sale prior to November 11, 1986, the critical date of the 524 patent.
Defendants assert the proposed Norton & Wright system was not an offer for sale within
the meaning of section 102(b) because the system was intended for experimental purposes. A
sale that is primarily for experimental purposes, as opposed to commercial exploitation, does not
raise an on-sale bar. Allen Engg, 299 F.3d at 1652; see also Pfaff, 525 U.S. at 64 (The law has
long recognized the distinction between inventions put to experimental use and products sold
commercially.). The experimental use exception is intended to give the inventor an opportunity
to reduce the invention to practice. See Contl Plastic Containers v. Owens Brockway Plastic
Prods., Inc., 141 F.3d 1073, 1079 (Fed. Cir. 1998).
In distinguishing commercial from experimental sales, a court must consider a variety of
factors, including: (a) the necessity for public testing; (b) the amount of control over the
experiment retained by the inventor; (c) the nature of the invention; (d) the length of the test
period; (e) whether payment was made; (f) whether there was a secrecy obligation; (g) whether
records of the experiment were kept; (h) who conducted the experiment; (i) the degree of
commercial exploitation during testing; (j) whether the invention reasonably requires evaluation
under actual conditions of use; (k) whether testing was systematically performed; (l) whether the
inventor continually monitored the invention during testing; and (m) the nature of contacts made
with potential customers. See EZ Dock, 276 F.3d at 1357 (Linn, J., concurring). Because these
38
factors are illustrative rather than mandatory, a court should look to the facts of its specific case
to determine what is relevant. Amgen, Inc., v. Chugai Pharm. Co., 927 F.2d 1200, 1213 (Fed.
Cir. 1991).
Here, there is no evidence that public testing was required to determine that the invention
of the Asserted Claims performed for its intended purpose. The patent indicates that the purpose
of the invention is to provide a symbol that can be detected from any orientation and does not
require a preferred direction of scanning, and a system for capturing and decoding the contents of
the symbol. Veritec contracted with AVS to develop such a system and Robert Anselmo,
testified that the VOSP System proved the concept can you read a Vericode symbol with a CCD
camera and decode it with software. The VOSP System, like the proposed Norton & Wright
system, decoded Vericodes in a fixed-alignment environment. Thus, the utility of the invention
had been demonstrated in the VOSP System delivered to Veritec in March 1986. As the Court
already determined, the VOSP System constituted a reduction to practice of asserted claims 1, 4,
5, 22, 27, and 29. It is well settled that once an invention is reduced to practice, there can be no
experimental use negation. See, e.g., Zacharin v. United States, 213 F.3d 1366, 1369 (Fed. Cir.
2000); Atl. Thermoplastics Co. v. Faytex Corp., 5 F.3d 1477, 1480 (Fed. Cir. 1993).
Moreover, the evidence regarding testing of the Norton & Wright system only
demonstrates that testing of the system took place during its installation. Cf. EZ Dock, 276 F.3d
at 1352 (Experimentation evidence includes tests needed to convince the inventor that the
invention is capable of performing its intended purpose in its intended environment.). There is
no dispute that Hooper and Dalton participated in the installation of the Norton & Wright system,
and Daltons testimony that Norton & Wrights chief engineers conducted the testing of the
system with respect to Norton & Wrights lottery sheet printing needs stands undisputed. There
39
is no evidence suggesting that Norton & Wright and Veritec collaborated to test and modify the
proposed system during its development. Daltons November 20, 1986 letter demonstrates that
Veritec viewed the decoding software to be its own proprietary property that it would customize
according to the needs of Norton & Wright after an agreement to do so in exchange for payment
had been reached. The only evidence of testing by Veritec concerns difficulties that arose during
installation of the system associated with the highly reflective foil substrate used on the lottery
sheets. Dalton testified that after some lighting adjustments were made to accommodate the foil
substrate, the Norton & Wright system delivered in June of 1987 worked perfectly. The
evidence indicates that the installation process lasted one week.
Experimental use negation applies if there is genuine experimentation directed to
perfecting the features of the claimed invention. See Contl Plastic, 141 F.3d at 1079. Highly
reflective substrate is not an element of the claimed invention. According to Hooper, prior to the
Norton & Wright deal, Veritec could capture Vericodes on paper so it turned to harder to read
surfaces to remain competitive. In short, if an inventor can show changes during
experimentation that result in features later claimed in the patent application, this evidence is a
strong indication that the activities of the inventor negated any evidence of premature
commercial exploitation of an invention ready for patenting. EZ Dock, 276 F.3d at 1353. There
is no evidence of any such experimentation and changes in the record here.
This evidence clearly and convincingly establishes that the lottery sheet tracking system
Veritec proposed to design and develop for Norton & Wright embodied each of the elements of
the invention or rendered the invention obvious by its addition to the prior art and was, therefore,
an offer to sell the invention of the Asserted Claims. Cf. Allen Engg, 299 F.3d at 1652. Thus,
the Court concludes that Cognex has met its burden of demonstrating a commercial offer for sale
40
within the meaning of Pfaff, and has therefore demonstrated that the invention of the Asserted
Claims was on sale and ready for patenting prior to November 25, 1986. See Electromotive Div.
of Gen. Motors Corp. v. Transp. Sys. Div. of Gen. Elec. Co., 417 F.3d 1203, 1209 (Fed. Cir.
2005) (proper evidence of a single offer is sufficient under the on-sale bar). Therefore, the
Asserted Claims, claims 1, 4, 5, 19, 22, 25, 27, 28, and 29 of the 524 patent, are, as a matter of
law, invalid under the on-sale bar set forth in 35 U.S.C. 102(b), and Cognex is entitled to
summary judgment on Count II of the First Supplemental Complaint.
b. Public use bar
Section 102(b) of the Patent Act creates a bar to patentability where, before the critical
date, the invention was ready for patenting and was publicly used by a person other than the
inventor who is under no confidentiality obligation to the inventor. Invitrogen, 424 F.3d at 1379.
Public use is any one public use of the claimed invention in its natural and intended manner. Id.
at 1380; Lough v. Brunswick Corp., 86 F.3d 1113, 1119 (Fed. Cir. 1996) (indicating that the
statutory phrase public use includes any use of the claimed invention by a person other than
the inventor who is under no limitation, restriction, or obligation of secrecy to the inventor). As
with the on-sale bar, a device that is publicly used before the critical date may bar patentability
either by anticipation, if the device used includes every element of the later claimed invention, or
by obviousness of the difference between the claimed invention and the device used to one
skilled in the art. Netscape, 295 F.3d at 1321. Courts that have considered the demonstration of
a later-claimed invention at a trade show have found that such demonstrations are public uses
within the meaning of section 102(b). See, e.g., Faulkner v. Baldwin Piano & Organ Co., 561
F.2d 677, 683 (7th Cir. 1977); Agrizap, Inc. v. Woodstream Corp., 431 F. Supp. 2d 518, 535
(E.D. Pa. 2006); Constr. Specialties, Inc. v. Arden Architectural Specialties, Inc., No. 4-90-536,
41
WL 303471 (D. Minn., Aug. 5, 1991); see also Adenta GmbH v. OrthoArm, Inc., 501 F.3d 1364,
1371-73 (Fed. Cir. 2007) (affirming denial of motion for judgment as a matter of law seeking to
overturn jurys verdict that displaying a product at a trade show constituted invalidating public
use where patentee only disputed sufficiency of corroborating testimony and not whether display
at trade show was public use). Whether a patent is invalid due to public use under section 102(b)
is a question of law based on underlying questions of fact. Netscape, 295 F.3d at 1321.
Defendants concede that the VOSP System was demonstrated at the Vision 86 and
SCAN TECH 86 trade shows, but argue that this rudimentary system did not have the omnidirectional
three-dimensional aspects of the 524 patent. Therefore, Defendants contend, the
VOSP System did not embody what was ultimately claimed by the patentees in the 524 patent.
Pursuant to the reasoning set forth above, the Court concludes that the VOSP System
demonstrated publicly at the Vision 86 and SCAN TECH 86 trade shows fully anticipated the
invention either because it embodied each of the elements claimed in the Asserted Claims or
because the differences between the claimed invention and the demonstrated device would have
been obvious to one skilled in the art. There is no dispute that these trade show demonstrations
occurred prior to the critical date of the 524 patent. Because the invention of the Asserted
Claims was also ready for patenting prior to the critical date, as discussed above, the Court
concludes that the record establishes by clear and convincing evidence that the invention of the
Asserted Claims was used in public and was ready for patenting prior to November 25, 1986,
rendering claims 1, 4, 5, 19, 22, 25, 27, 28, and 29 invalid pursuant to the public use bar set forth
in 35 U.S.C. 102(b). Cognex is therefore entitled to summary judgment on Count II of the First
Supplemental Complaint.
42
3. Section 102(b) Invalidity: Anticipation
Section 102(b) of the Patent Act provides that a person is entitled to a patent unless the
invention is patented or described in a printed publication in this or a foreign country more
than one year prior to the date of the application for patent in the United States. 35 U.S.C.
102(b). Anticipation is a question of fact and is determined by construing the claims and then
comparing the claims to the prior art. See In re Cruciferous Sprout Litig., 301 F.3d 1343, 1346
(Fed. Cir. 2002). A determination that a patent is invalid as being anticipated under 35 U.S.C.
102 requires a finding that each and every limitation is found either expressly or inherently in a
single prior art reference. Id. (quoting Celeritas Techs., Ltd. v. Rockwell Intl Corp., 150 F.3d
1354, 1360 (Fed. Cir. 1998)). To anticipate, the reference must also enable one of skill in the
art to make and use the claimed invention. Id. Without much discussion, Cognex asserts that
that the Asserted Claims are invalid under 35 U.S.C. 102(b) because each and every element of
these claims, as construed by the Court, is found in the Vericode brochure, as well as in each of
two Japanese patents.
Simultaneous to this litigation is an ex parte reexamination of the 524 patent. In an
Office Action dated December 4, 2007, the reexaminer rejected claims 1-5, 8-10, 15, 20-24, and
26-32 as being anticipated by the Vericode brochure and therefore invalid under 35 U.S.C.
102. See (Second Supplemental Decl. of Kevin Gannon at Ex. A). On February 1, 2008, the
patent owners filed a response to the Office Action, in which they argue that the reexaminer
erroneously equated the bar code scanner technology referenced in the Vericode brochure with
the device for capturing element recited in the claims of the 524 patent. In an argument similar
to the one presented to and reject by this Court herein, the patent owners assert that the device
for capturing element in the rejected claims properly includes the use by the capturing device of
43
the omni-directional three-dimensional orientation information provided by the symbol. As of
the date of this Order, the reexaminer has yet to take additional action. Because the ex parte
reexamination of the 524 patent on the grounds of anticipation by prior art is on-going, and
because this Court has determined that the Asserted Claims are invalid pursuant to 35 U.S.C.
102(b) on grounds wholly independent of any printed publications of prior art, the Court declines
to consider whether the Asserted Claims are also invalid under section 102(b) as anticipated by
prior publication.
C. Cognexs motion for partial summary judgment on the grounds of
unenforceability
Cognex seeks a declaration that the 524 patent is unenforceable due to the inequitable
conduct of the patentees during proceedings before the PTO. Cognex claims the patentees failed
to disclose material information and made material misrepresentations to the PTO during the
examination of the five continuing applications that led to issuance of the 524 patent as well as
the application that led to the issuance of the 078 patent, Application Ser. No. 125,616 (the 616
application), to which the 524 patent claims priority. Defendants argue that the 078 patent is
not relevant to the unenforceability claims in this matter. Defendants further deny that any
inequitable conduct occurred during the examination of the applications for the 078 or 524
patents or that any inequitable conduct that the Court determines did occur was properly cured.
1. Legal Standards
Applicants for patents are required to prosecute patent applications in the PTO with
candor, good faith, and honesty. Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed. Cir.
1995). A patent may be found unenforceable if inequitable conduct before the PTO has been
committed in connection with it. Dayco Prods., Inc. v. Total Containment, Inc., 329 F.3d 1358
(Fed. Cir. 2003). The party asserting inequitable conduct must prove a threshold level of
44
materiality and intent by clear and convincing evidence. Molins, 48 F.3d at 1178. While
precedent urges caution in the grant of summary judgment with respect to a claim of inequitable
conduct, summary judgment is not foreclosed. See, e.g., Ferring B.V. v. Barr Labs., Inc., 437
F.3d 1181, 1187 (Fed. Cir. 2006); Digital Control, Inc. v. Charles Mach. Works, 437 F.3d 1309
(Fed. Cir. 2006) (Determining at summary judgment that a patent is unenforceable for
inequitable conduct is permissible, but uncommon.).
Inequitable conduct arises by the failure to disclose material information or the
submission of false material information with the intent to deceive. Baxter Intl, Inc. v. McGraw,
Inc., 149 F.3d 1321, 1327 (Fed. Cir. 1998). The inequitable conduct analysis consists of two
steps: (1) a determination of whether the conduct meets a threshold level of materiality and
intent to mislead and (2) a weighing of the materiality and intent in light of all of the
circumstances to determine whether the applicants conduct is so culpable as to render the patent
unenforceable. See Purdue Pharma L.P. v. Boehringer Ingelheim GMBH, 237 F.3d 1359, 1366
(Fed. Cir. 2001).
Information is material if there is a substantial likelihood that a reasonable examiner
would have considered the information important in deciding whether to allow the application to
issue as a patent, or under the newer standard set forth in the 1992 amendment to PTO Rule 56.
See Digital Control, 437 F.3d at 1314-16. Amended Rule 56 provides that information is
material if it is not cumulative to information already of record or being made of record in the
application, and (1) it establishes, by itself or in combination with other information, a prima
facie case of unpatentability of a claim; or (2) it refutes, or is inconsistent with, a position the
applicant takes in: (i) opposing an argument of unpatentability relied upon by the Office, or (ii)
asserting an argument of patentability. 37 C.F.R. 1.56(b) (2007). The more material the
45
omission, the less evidence of intent will be required in order to find that inequitable conduct has
occurred. Baxter, 149 F.3d at 1327.
Materiality is not limited to prior art but embraces any information that a reasonable
examiner would be substantially likely to consider important in deciding whether to allow an
application to issue as a patent. Bristol-Myers Squibb Co. v. Rhone-Poulenc Rorer, Inc., 326
F.3d 1226, 1234 (Fed. Cir. 2003). The examiner need not rely on a misrepresentation for the
misrepresentation to be material. See Molins, 48 F.3d at 1180. A patentee need not cite an
otherwise material reference to the PTO if that reference is merely cumulative or is less material
than other references already before the examiner. Baxter, 149 F.3d at 1328.
Materiality does not presume intent, which is a separate and essential component of
inequitable conduct. Ferring, 437 F.3d at 1191. Even if an omission is found to be material, the
omission must also be found to have been made with the intent to deceive. Id. at 1190. Intent
commonly means: Design, resolve, or determination with which [a] person acts[; a] state of
mind in which a person seeks to accomplish a given result through a course of action. Molins,
48 F.3d at 1180-81 (quoting Blacks Law Dictionary 810 (6th ed. 1990)). Because of the ease
with which an accused infringer may magnify oversights during patent prosecution, intent to
deceive is determined in view of the realities of patent practice before the PTO and not as a
matter of strict liability. N. Telecom, Inc. v. Datapoint Corp., 908 F.2d 931, 939 (Fed. Cir.
1990).
Direct evidence of intent to mislead or deceive is rare. Intent may be inferred from clear
and convincing evidence of the surrounding circumstances. See Purdue Pharma L.P. v. Endo
Pharm. Inc., 438 F.3d 1123, 1133-34 (Fed. Cir. 2006). The surrounding circumstances include
the facts and circumstances surrounding the applicants conduct. Molins, 48 F.3d at 1181.
46
However, intent cannot be inferred solely from the fact that the material information was not
disclosed; instead, there must be some factual basis for finding intent to mislead or deceive.
Endo Pharm., 438 F.3d at 1134. When determining intent, the court must weigh all of the
evidence, including evidence of good faith. Id. Summary judgment is appropriate on the issue
of intent if there has been a failure to supply highly material information and if the summary
judgment record establishes that (1) the applicant knew of the information; (2) the applicant
knew or should have known of the materiality of the information; and (3) the applicant has not
proffered a credible explanation for the withholding. Ferring, 437 F.3d at 1191.
2. Relevance of the prosecution of the 078 patent
Conduct pertaining to one patent can taint another patent. Agfa Corp. v. Creo Prods.
Inc., 451 F.3d 1366, 1379 (Fed. Cir. 2006) (finding continuation patent unenforceable based on
inequitable conduct found in the prosecution of the parent application); Fox Indus., Inc. v.
Structural Pres. Sys., Inc., 922 F.2d 801 (Fed. Cir. 1990) (indicating inequitable conduct early
in the prosecution may render unenforceable all claims which eventually issue from the same or
a related application). A patent that issues from a continuation or divisional application may be
held unenforceable where (1) the applicant engaged in inequitable conduct with respect to the
prosecution of an earlier related application in the chain leading to the challenged patent and (2)
the inequitable conduct relates to the asserted claims of that patent. See Consol. Aluminum Corp.
v. Foseco Intl Ltd., 910 F.2d 804, 812 (Fed. Cir. 1990); Semiconductor EnergyLab. Co. v.
Samsung Elecs. Co., 24 F. Supp. 2d 537, 543-44 (E.D. Va. 1998). However, later applications
are not always tainted by the inequitable conduct of earlier applications. See Agfa, 451 F.3d at
1379. For example, where the claims are subsequently separated from those tainted by
inequitable conduct through a divisional application, and where the issued claims have no
47
relation to the omitted prior art, the patent issued from the divisional application will not also be
unenforceable due to inequitable conduct committed in the parent application. Baxter Intl, 149
F.3d at 1332. The relevant inquiry is whether the inequitable conduct in prosecuting the
[parent] patent had immediate and necessary relation to the . . . enforcement of the [child]
patents. Consol. Aluminum, 910 F.2d at 812.
Cognex alleges that the patentees knowingly concealed and withheld information
material to the examination of the 616 application and that this inequitable conduct in the
prosecution of the 078 patent carries over to and taints the 524 patent. Defendants argue that
the examination of the 616 application is not relevant to the enforceability of the 524 patent
because the two patents claim different subject matter. The Court disagrees with Defendants.
The application for the 524 patent is a continuation application of the 616 application,
which issued as the 078 patent. As such, its disclosure is essentially identical to that of the 616
application, to which it claims priority. See 35 U.S.C. 132 (2000). Indeed, these two patents
share almost identical written descriptions with identical diagrams. In a 1991 Office Action
issued early in the prosecution proceedings, the examiner of the application for the 524 patent
rejected numerous claims on the grounds that claims 1-18, 21, 22 and 29 in the 078 patent
recite[] nearly word for word the claims pending in the instant application except for the omnidirectional
scanning ability of the optical codes. In response, the applicants claimed priority to
the 078 patent. In doing so, the patentees were able to eliminate a reference used by the patent
examiner to reject the first continuation application for the 524 patent.
Moreover, during the prosecution of the fifth and final continuation application of the
524 patent, Application Ser. No. 412,091, the patent examiner rejected then pending claims 1-23
and 25-29 as obvious modifications of the invention claimed in the 078 patent. In rejecting
48
these claims in an Office Action dated May 16, 1995, the patent examiner informed the patentees
of the following:
This obviousness-type double patenting rejection is a judicially established
doctrine based upon public policy and is primarily intended to prevent
prolongation of the patent term by prohibiting claims not patentably distinct from
claims in the first patent. A timely filed terminal disclaimer in compliance with 37
C.F.R. 1.321(b) would overcome an actual or provisional rejection on this
ground provided the conflicting application or patent is shown to be commonly
owned with this application. See 37 C.F.R. 1.78(d).
In response to this rejection, the patentees filed a terminal disclaimer. By doing so, the
patentees avoided the rejection of the 524 patents claims due to a finding that they were not
patentably distinct from the claims of the 078 patent. See In re Longi, 759 F.2d 887, 892 (Fed.
Cir. 1985) (indicating that [t]his rejection prevents the extension of the term of a patent by
prohibiting the issuance of the claims in a second patent not patentably distinct from the claims
of the first patent). Under these circumstances, the Court concludes that the claims of the 078
patent and the claims of the 524 patent are sufficiently related to connect and make relevant the
conduct of the patentees during the prosecution of the 078 patent to the question of
enforceability of the 524 patent.
3. Inequitable conduct during prosecution of 078 patent
A finding of inequitable conduct as to a single claim of a patent renders all claims of that
patent unenforceable, even as to those claims not tainted by the inequitable conduct. See
Pharmacia Corp. v. Par Pharm., Inc., 417 F.3d 1369, 1374-75 (Fed. Cir. 2005). Cognex appears
to direct its allegations of inequitable conduct to claim 1 of the 078 patent,14 which recites the
following:
14 An embodiment of the symbol depicted in the 078 patent is identical to the symbol
depicted in Figure 1 of the 524 patent reproduced above in Figure 1.
49
An identification symbol comprising: a computer readable data matrix data
field providing symbol information for uniquely identifying the symbol; and a
computer readable orientation border positioned adjacent said field on at least two
sides.
Cognex submits a large amount of documentary evidence in support of its allegations of
nondisclosure of material information by the applicants during the prosecution of the 078 patent.
This evidence includes sales letters allegedly sent by Veritec to various automotive corporations
prior to the critical date promoting the Vericode Identification System. Many of these letters
are unsigned; others bear the signature of Robert Dalton, Veritecs National Accounts Sales
Manager. Even if the substance of these letters indicates a sufficient level of materiality, Cognex
has failed to present evidence establishing that the patent applicants had specific knowledge of
these letters at the time they were sent or during the examination proceedings before the PTO.
Absent evidence of knowledge of the material information by the applicants, these letters do not
provide clear and convincing evidence of inequitable conduct during the prosecution of the 078
patent. See Endo Pharm., 438 F.3d at 1134.
On the other hand, the applicants failure to disclose information about the public
demonstrations of the Vericode technology, as reflected in the VOSP System, at trade shows
prior to the critical date does sufficiently raise questions of inequitable conduct. The VOSP
System, as delivered to Veritec in March 1986, actually demonstrated the decoding of a
computer-readable symbol comprised of a data matrix with an orientation border and data cells.
Co-inventors Robert Anselmo and Hooper both testified to this capability. As such, information
about the public demonstration of the VOSP System would have been highly material to the
examination of claim 1 of the 078 patent. Moreover, the VOSP System specification contained
substantial information regarding the structure of Veritecs Vericode in March 1986, more than
six months before the critical date of the 078 patent. Thus it was highly material to the 616
50
application examiners consideration of patentability under 35 U.S.C. 102(b). See Fox Indus.,
922 F.2d at 801 (A finding that a withheld reference anticipates a claim in a patent satisfies the
most stringent standard of materiality.).
The nondisclosure of the VOSP System is also problematic in the context of disclosures
made to the 616 application examiner regarding the Norton & Wright sale. In an Information
Disclosure Statement submitted by the applicants in June 1988, the applicants sought to remove
the Norton & Wright system from the reach of the on-sale bar under 35 U.S.C. 102(b). The
applicants thus described the Norton & Wright sale as a test environment for the development
of a prototype system related to the invention. The prototype, according to the applicants, was
an experimental system designed to test the concept of a two-dimensional symbol as an
information carrier in a practical environment. In making this disclosure, the applicants failed
to also disclose to the examiner information about the VOSP System, which they knew had
demonstrated the decoding of the same symbol technology in the same pre-aligned environment
more than six months earlier. Veritec declared in its annual 10K report submitted to the SEC
that as of June 30, 1986, the company had developed a Video Scanning and Processing
(VOSP) System to visually capture, process and decode Vericodes. However, rather than
disclose the VOSP System, the applicants withheld information about the up and running
VOSP System from the examiner.
Defendants argue that the applicants fulfilled their duty of disclosure regarding Veritecs
dealings with Norton & Wright during the prosecution of the 078 patent and that the examiner
reviewed this information in determining that the 078 patent should issue. Defendants attempt
to explain the applicants failure to disclose the VOSP System information as cumulative to the
Norton & Wright information because both systems could only capture symbols that were in
51
fixed-orientations, and as immaterial because the VOSP System lacked the three-dimensional
orientation aspect of the invention of the Asserted Claims. These explanations do not satisfy the
plausibility requirements of Ferring. Undisclosed references that had more relevant features
than disclosed references are not cumulative of references before the examiner. Labounty Mfg.,
Inc. v. U.S. Intl Trade Commn, 958 F.2d 1066, 1075 (Fed. Cir. 1992). The VOSP System
specification clearly included significantly more detail regarding the structure of the data matrix
symbol than the Norton & Wright proposal. The structure of the data matrix code identified the
symbols ability to provide orientation information from any direction of capture and the
delivered system demonstrated the ability to capture and decode the symbol.
The Court concludes that the record sufficiently reveals that the applicants intended to
deceive the examiner by withholding the VOSP System information. See Endo Pharm., 438
F.3d at 1134. The record clearly establishes that Carl Anselmo had intimate knowledge of the
capabilities of the orientation mechanism in the structure of the Vericode symbol. He
demonstrated it in the VOSP System specification, the PSAPS document, and the preliminary
patent disclosure, all of which he prepared prior to the critical date. He participated in the
development of the VOSP System. He discussed its design and functionality with AVS in late
1985, delivered the technical specification from which the system was developed, and signed off
on the completion and delivery of the system in April 1986. Robert Anselmo also had
knowledge of the functionality of the VOSP System. He participated in the testing of the system,
as well as the demonstration of the system at the Vision 86 trade show. At his deposition, he
testified that the VOSP System delivered to Veritec in April 1986 proved the concept can you
read a Vericode symbol with a CCD camera and decode it with software. Armed with this
knowledge, Robert Anselmo participated in discussions with Norton & Wright regarding the
52
design and delivery of the lottery sheet tracking system. With full knowledge of an already
existing prototype of the symbol invention, as well as a decoding method, in the form of the
VOSP System, the applicants represented to the examiner of the 616 application that the Norton
& Wright system was a test system intended to develop a prototype of the invention without also
disclosing the VOSP System for the examiners consideration. The omission aided the
avoidance of rejection of the proposed claims by the examiner under section 102(b).
The applicants failures regarding disclosure of their Norton & Wright dealings is further
evidenced in their lack of disclosure to the 616 application examiner that a separate examiner in
a related patent application determined that the Norton & Wright sale was not an experimental
use.15 Although the related patent application is expressly identified on the first page of the 078
patent application and the patent was again identified in an Information Disclosure Statement
filed by the 616 applicants on June 6, 1989, there is no evidence that the patentees brought the
specific determination, one directly adverse to the patentability of the invention asserted in the
078 patent, to the attention of the examiner of the 616 application. The Court concludes that a
general reference to the related patent was not sufficient to bring the adverse decision on a
related application to the attention of the examiner. See Li Second Family Ltd. Pship v. Toshiba
Corp., 231 F.3d 1373, 1379 (Fed. Cir. 2000). Instead, the patentees withheld this highly material
information from the examiner during the prosecution of the 078 patent.
Not only did the applicants fail to provide the examiner with a full record regarding their
Norton & Wright dealings, but their submissions were also false and misleading. The
15 This determination would have constituted a statutory bar in the related application but
for the fact that that application had a priority date sufficiently early to antedate the applicable
critical date.
53
declaration from Robert Anselmo, submitted with a June 6, 1989 Statement Under 37 C.F.R.
1.56, stated the following:
7. The marketing referred to in the Newsweek article published April 21, 1986
was continued efforts by Veritec in obtaining a beta test site where the laser
marking and symbol capture could be tested and proven as a concept.
8. During internal testing, which occurred around April 1986, it was discovered
that the borderless symbol as represented by the North and Ward patents was
not decodable as constructed. It became clear at that time that a method of
determining the orientation of the two dimensional symbol was necessary.
Efforts in this direction were started and culminated in confirmation of the
operability of the orientation border in a strictly controlled Veritec Lab test
system and validated in the beta test site conducted with Norton & Wright.
From the information and evidence in the record regarding the design and development
of the VOSP System in late 1985 and early 1986, discussed above, it is obvious that these
statements were both incomplete and false. Robert Anselmo testified at his deposition that the
VOSP System delivered to Veritec in April 1986 proved the concept of Vericodes being
captured by a camera and decoded with software. Veritec included the ability to scan, capture,
and decode Vericodes using the VOSP System in the 10K report submitted to the SEC in
September 1986 for the year ending June 1986. It is undisputed that the Vericode of the VOSP
System contained an orientation border that could provide information for determining a
symbols orientation. The misrepresentation in Robert Anselmos declaration distorted the record
before the examiner of the 616 application.
An inference of deceptive intent is inescapable under these facts and circumstances. See
Molins, 48 F.3d at 1181. Carl and Robert Anselmo knew about the VOSP System, and, as
officers of Veritec, knew or should have known of the adverse determination regarding the
Norton & Wright sale in the related application, which involved a patent application by Veritec.
Both knew or should have known of the materiality of the information given their involvement in
54
the development of the VOSP System and in Veritecs development and sales of its technologies.
Co-inventor Hooper knew of Veritecs ability to read Vericodes on paper prior to the Norton &
Wright sale, and knew Veritec sought to develop the Norton & Wright system, which required a
foil substrate, because it would help Veritec stay competitive. The applicants should have
known that full disclosure of the Norton & Wright sale during the prosecution of the 078 patent
would have alerted the examiner to the need for further inquiry as to whether the Vericode
technology claimed in the application for the 078 patent was in fact still experimental as of
November 25, 1986, as asserted by the applicants. It is clear that the undisclosed information
had the potential of providing independent grounds for rejection of at least one of the claims
asserted in the 616 patent application.
Finally, the applicants have failed to provide a credible explanation for the withholding of
highly material information from the patent examiner. See Ferring, 437 F.3d at 1191 (citing
Bruno Indep. Living Aids, Inc. v. Acorn Mobility Servs., Ltd., 394 F.3d 1354 (Fed. Cir. 2005)
(finding that where the patentee has not proffered a credible explanation for the nondisclosure .
. . an inference of deceptive intent may fairly be drawn in the absence of such an explanation));
id. (citing Critikon, Inc. v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253, 1257 (Fed.
Cir. 1997) (A patentee facing a high level of materiality and clear proof that it knew or should
have known of that materiality, can expect to find it difficult to establish subjective good faith
sufficient to prevent the drawing of an inference of intent to mislead.)); cf. Dayco Prods., 329
F.3d at 1367 (Intent to deceive cannot be inferred simply from the decision to withhold the
reference where the reasons given for the withholding are plausible.). Instead, the evidence
reveals an effort on the part of the applicants to disclose to the PTO only that information
relating to the Norton & Wright sale that would enhance the chances of allowance of the claims
55
and withhold that which would detract from them. The applicants have not provided the Court
with a credible explanation for the withholding of highly material information from the examiner
during the prosecution of the 616 application, and the Court concludes that the evidence clearly
and convincingly supports an inference of an intent to deceive on the part of the patentees. See
Ferring, 437 F.3d at 1191.
4. Weighing materiality and intent
Having concluded that the threshold levels of materiality and intent have been
established, the Court weighs them to determine whether the equities warrant a conclusion that
inequitable conduct occurred. See Molins, 48 F.3d at 1178. Here, the evidence demonstrates the
high materiality of the undisclosed information. Thus, a lesser showing of intent to deceive on
the part of the applicants is sufficient to tip the balance to unenforceability. See Baxter, 149 F.3d
at 1327. The Court concludes the record sufficiently establishes culpable intent on the part of the
applicants in withholding information regarding the Norton & Wright sale and the VOSP System
and in misrepresenting the state of the art to the examiner during the prosecution of the 078
patent. See Labounty, 958 F.2d at 1076 (affirming lower courts finding of inequitable conduct
in light of clear and convincing evidence of a culpable lack of candor on the basis of misleading
arguments made to the PTO for the allowance of claims coupled with the withholding of
contemporaneously known prior art which was highly pertinent to the prosecution of the patent
application). Because Cognex has sufficiently demonstrated inequitable conduct by the
applicants during the examination of the application leading to the 078 patent, the entire 078
patent is rendered unenforceable. See Pharmacia, 417 F.3d at 1374-75. Consequently, because
the subject matter of the 524 patent closely relates to that of the 078 patent, the Court concludes
56
that the inequitable conduct in the prosecution of the 616 application taints the 524 patent and
renders it unenforceable. See Agfa, 451 F.3d at 1379.
5. Curing the inequitable conduct
Inequitable conduct can be cured by an applicant by: (1) expressly advising the PTO of
the misrepresentations existence, (2) advising the PTO of what the actual facts are and making it
clear that further examination in light thereof may be required if any PTO action has been based
on the misrepresentation, and (3) establishing patentability on the basis of the factually accurate
record. See Rohm & Haas Co. v. Crystal Chem. Co., 722 F.2d 1556, 1572 (Fed. Cir. 1983).
Defendants have demonstrated that the applicants notified the PTO during the prosecution of the
524 patent application of a pending lawsuit in which charges of inequitable conduct during the
prosecution of the 078 patent had been raised. The patentees then submitted an Information
Disclosure Statement, dated November 17, 1995, which provided the summary judgment
briefings and factual evidence supporting the charges of inequitable conduct raised in the
pending lawsuit. Defendants contend that the submissions included all of the information now
alleged by Cognex as improperly withheld during the prosecution of the 078 and 524 patent
applications. Because the examiner of the application for the 524 patent had access to and
indicated his consideration of the submitted information, Defendants argue that any
nondisclosure of the information during the prosecution of the 078 patent has no bearing on the
enforceability of the 524 patent. The Court disagrees.
Defendants have failed to provide any evidence that the patentees notified the PTO of the
existence of a misrepresentation during the prosecution of the 078 patent, the first step in
effectuating a cure. See id. Nor is there any indication that the patentees did anything more than
deliver a large volume of documents to the PTO in November 1995. There is no evidence that
57
the patentees advised the PTO of the existence of the VOSP System information or pointed out
its location within the larger submission of documents and materials. Finally, there is nothing in
the record demonstrating the patentees attempts to establish patentability on the basis of the
record that included the information in the Information Disclosure Statement. While the Court
does not question the examiners consideration of the disclosed information, see N. Telecom, 908
F.2d at 939 (It is presumed that public officials do their assigned jobs.), the Court notes that
the patentees disclosure was made only after a Notice of Allowance was issued by the PTO and
over five years after the initial continuation application for the patent was filed in October 1989.
Moreover, it was made following the examiners clear indication that the rejection of many of
the claims could be overcome and would be allowable if certain structural amendments were
made to the claims and a terminal disclaimer regarding the 078 patent submitted by the
patentees. On this record, the Court concludes that Defendants have failed to sufficiently
demonstrate a cure of the inequitable conduct of the applicants in the prosecution of the 078
patent that would serve to prevent that conduct from tainting the 524 patent at issue in this
matter. Rather, the applicants inequitable conduct in connection with the prosecution of the
078 patent taints the continuation applications for the 524 patent and that taint renders the 524
patent unenforceable. Cognex is thus entitled to summary judgment on Count III of the First
Supplemental Complaint.
D. Defendants motion for partial summary judgment on certain asserted
claims
Defendants move for partial summary judgment of infringement on asserted claims 1, 4,
5, and 29. Because all of the Asserted Claims of the 524 patent, claims 1, 4, 5, 19, 22, 25, and
27-29, have been found to be invalid, the issue of infringement of these claims is moot. See
Optivus Tech., Inc. v. Ion Bean Applications S.A., 469 F.3d 978, 991 (Fed. Cir. 2006) (citing
58
Stratoflex, Inc. v. Aeroquip Corp., 713 F.2d 1530, 1541 (Fed. Cir. 1983) (The claims having
been found invalid, the issue [of infringement] is moot.)). Defendants request for summary
judgment on the issue of infringement of certain asserted claims is therefore denied.
E. Defendants motion for partial summary judgment on claims against Acacia
In the First Supplemental Complaint, Cognex alleges that Acacias Vice President of
Licensing, Tisha DeRaimo, sent emails that contained false and misleading statements to at least
two Cognex customers who had been accused by Acacia of infringing the 524 patent through
the use of Cognexs products. Specifically, Cognex alleges that DeRaimo sent an email to a
representative of Proctor and Gamble in April 2007, which stated the following:
Your information regarding Cognex is very interesting. I hope their attorney told
you that as recently as last summer, Cognex attempted to buy the 078 and 524
patents from Veritec for an eight-figure purchase price. In other words, they saw
value in having the patents back then. But now, as Veritec has emerged out of
bankruptcy and is able to enforce its rights regarding the patents, Cognex alleges
the patents are invalid. Its incongruous.
Cognex also alleges that DeRaimo sent a demand letter to a representative of Allison Payment
Systems, another Cognex customer, stating that Veritec was in possession of a letter of intent
evidencing an offer by Cognex to purchase the 078 and 524 patents for an eight-figure sum.
Cognex alleges these statements falsely represented that Cognex had recently offered to
buy the patents for a substantial sum, and that Acacia made these statements in order to convince
Cognex customers that they should not rely on patent invalidity contentions made by Cognex
because they were insincerely made. Cognex claims it never authored any such letter of intent
and that the letter was instead prepared by Veritec as a sham without the consent of Cognex.
Cognex claims DeRaimos statements were made with the intent to cause harm to its business
reputation by lowering Cognex in the estimation of the business community in which it operates
and by deterring third parties from associating or dealing with Cognex. It contends the
59
statements undermined the credibility of Cognex in view of its published statements with respect
to the invalidity of and unenforceability of the 524 patent, and were calculated to prejudice
Cognexs business and cast doubt on its professed loyalty to its customers. Cognex alleges the
statements violated Minn. Stat. 325D.44, subd. 1,16 and constituted business defamation.
Defendants assert that DeRaimos statements regarding Cognexs offer to purchase the 078 and
524 patents referred to conversations between Veritec and Cognex, and that these conversations
included discussions about Cognex purchasing Veritec, including its patents, for a sum of
million. Defendants assert DeRaimo made the statements based on information received from
Veritec and that she had no reason to believe the information was anything but true at the time
she made them. Defendants move for summary judgment on both the MDTPA and business
defamation claims.
1. Violation of the MDTPA
In support of their motion of summary judgment on the MDTPA claim, Defendants assert
that the MDTPA is not applicable to Acacias actions because they occurred entirely outside of
Minnesota. Defendants correctly point out that the emails at issue originated at Acacias
headquarters in Newport Beach, California, and were received by Cognex customers in
Cincinnati, Ohio, and Indianapolis, Indiana. Moreover, the subject of the emails, Cognex and its
data-matrix reading products, is a Massachusetts company.
16 Cognex points specifically to provisions (8) and (13) of section 325D.44, subd.1, which
provide as follows:
A person engages in a deceptive trade practice when, in the course of business,
vocation, or occupation, the person: (8) disparages the goods, services, or
business of another by false or misleading representation of fact; (13) engages
in any other conduct which similarly creates a likelihood of confusion or of
misunderstanding.
60
For a states substantive law to be applied in a constitutionally permissible manner, that
State must have a significant contact or significant aggregation of contacts, creating state
interests, such that choice of its law is neither arbitrary nor fundamentally unfair. Jepson v.
Gen. Cas. Co. of Wisc., 513 N.W.2d 467, 469-70 (Minn. 1994) (quoting Allstate Ins. Co. v.
Hague, 449 U.S. 302, 312-13 (1981)). Application of a forums law has been upheld where
relevant contacts consisted of plaintiffs residence and the place of the injury. Allstate, 449
U.S. at 313 n.17.
From these principles, the Court concludes that the application of the MDTPA to
Acacias actions is not constitutionally permissible because Minnesota does not have a
significant contact or a significant aggregation of contacts with Acacia or its conduct. The
emails were sent and received entirely outside of Minnesota by parties that are not Minnesota
residents. Injury to Cognex, if any, was not sustained in Minnesota.
Cognex argues that under the doctrine of respondeat superior the MDTPA applies to
Acacia through VDatas licensing relationship with VCode, a Minnesota company.17 However,
Cognex has not asserted MDTPA claims against VCode pursuant to a theory of vicarious
liability. Even if a sufficient employment relationship could be established between Acacia and
VCode, a finding the Court need not make here, respondeat superior is inapplicable unless an
employer is provided sufficient notice in a claim that vicarious liability is sought. See Waag v.
Thomas Pontiac, Buick, GMC, Inc., 930 F. Supp. 393, 408 (D. Minn. 1996) (granting summary
judgment to employer where neither the complaint nor the amended complaint alleged that
17 The doctrine of respondeat superior is a common law doctrine under which an employer
may be vicariously liable for the torts of an employee committed within the course and scope of
employment. Urban v. Am. Legion Dept. of Minn., 723 N.W.2d 1, 3 (Minn. 2006). The Court
previously determined that VData, an Illinois limited liability company, is the alter ego of
Acacia.
61
employer was vicariously liable for the actions of its employee). Here, the allegations in the
First Supplemental Complaint do not assert that VCode or any other Minnesota entity is liable
for the actions of Acacia under the doctrine of respondeat superior. Thus, the doctrine of
respondeat superior cannot be applied to the MDTPA claim asserted by Cognex against Acacia.
Defendants motion for summary judgment on the MDTPA claim, Count IV, is granted.
2. Business Defamation
Defendants claim summary judgment is warranted on the business defamation claim
against Acacia because Cognex has failed to provide proof of actual damages and none of the
alleged statements qualify as defamation per se. Cognex argues that Acacias statements to
Cognex customers regarding Cognexs intentions and beliefs with respect to the 524 patent and
suggesting Cognex was incongruous in bringing its declaratory judgment action disparages
Cognexs business reputation for honesty and fair dealing. Cognex asserts that the statements
therefore constitute defamation per se.18
Relying on Minnesotas choice of law principles, Cognex argues Minnesota or
Massachusetts common law applies to the defamation claims against Acacia while Defendants
argue that Californias common law of defamation applies. Under Minnesotas choice of law
rules, the first consideration is whether the choice of one states law over anothers creates an
actual conflict. Richie v. Paramount Pictures Corp., 544 N.W.2d 21, 29 (Minn. 1996) (citing
Jepson, 513 N.W.2d at 469). Where there is no true conflict, the law of the forum is applied.
Davis by Davis v. Outboard Marine Corp., 415 N.W.2d 719, 723 (Minn. Ct. App. 1987). Each
18 Cognex, without citation to any legal authority, also asserts it has sufficiently established
economic damages by demonstrating the amount of attorney fees and costs it had to incur in
proceeding with the instant declaratory judgment action in the face of Acacias defamatory
statements. Cognex asserts Acacias statements compelled Cognex to see this litigation through
to completion, which made it impossible for Cognex to negotiate a reasonable settlement with
Defendants. In the absence of legal support, the Court rejects Cognexs argument.
62
contemplates the availability of a cause of action for damages without proof of actual economic
loss. See Cal. Civ. Code 44-48 (2007) (stating that a statement is libel per se if it defames the
plaintiff on its face and that if libel is defamatory per se then it is actionable without special
damages); W. Broad Co. v. Times-Mirror Co., 57 P.2d 977, 978 (Cal. Ct. App. 1936); Ravnikar
v. Bogojavlensky, 782 N.E.2d 508, 510-11 (Mass. 2003) (indicating statements the may prejudice
a plaintiffs profession or business are actionable without proof of economic loss); Advanced
Training Sys., Inc. v. Caswell Equip. Co., 352 N.W.2d 1, 10 (Minn. 1984) (indicating that a
statement that tends to injure a corporations credit, property, or business is defamatory per se
and proof of special damages is not required). Consequently, the Court applies the law of the
forum in this action.
A statement constitutes defamation if (1) it is communicated to someone other than the
plaintiff, (2) it is false, and (3) it tends to harm the plaintiffs reputation and lower him in the
estimation of the community. See Stuempges v. Parke, Davis & Co., 297 N.W.2d 252, 255
(Minn. 1980). Corporate plaintiffs stand on the same footing as individuals in defamation
actions. See Advanced Training, 352 N.W.2d at 10. To recover, a corporation must show that a
defendants written statements directly tended to prejudice it in the conduct of its business or to
deter third persons from dealing with it, and the corporation need not prove any special
pecuniary damages to do so. Id. at 9-10. Whether a defamatory meaning is conveyed is
dependent upon how an ordinary person understands the language used in the light of
surrounding circumstances. Harman v. Heartland Food Co., 614 N.W.2d 236, 240 (Minn. Ct.
App. 2000) (quoting Gadach v. Benton County Co-op. Assn, 53 N.W.2d 230, 232 (Minn.
1952)). Statements alleged to be defamatory that cannot be proven false or which cannot
63
reasonably be interpreted as stating facts are not actionable. Huyen v. Driscoll, 479 N.W.2d 76,
80 (Minn. Ct. App. 1991).
There is no dispute between the parties that DeRaimo made the allegedly false statements
to third parties. Moreover, DeRaimo admitted during her deposition that one of her objectives in
mentioning Cognexs alleged offer to purchase the 078 and 524 patents was to suggest that
Cognex was not sincere in its contentions that the 078 and 524 patents were invalid and not
infringed. This motive is direct evidence that the statements were made with the intent to
prejudice Cognex in the conduct of its business and to deter Cognexs customers from continuing
to believe Cognexs representations regarding the validity of the patents and refusing to purchase
a license from Acacia. However, questions of fact regarding the veracity of DeRaimos
statements remain unresolved. There is conflicting testimony regarding the nature and substance
of the discussions between Cognex and Veritec regarding purchase of Veritec, during the time
that Veritec was involved in bankruptcy proceeding, or purchase of the 078 and 524 patents by
Cognex. Factual disputes also remain regarding the circumstances surrounding the creation of
the letter of intent referred to by DeRaimo. Because factual questions for the jury remain,
Defendants motion for summary judgment on Cognexs business defamation claim against
Acacia is denied.
F. Remaining Claims
The remaining claims are Count I, which is not presently before the Court, and Count V,
Cognexs business defamation claim against Acacia.19 Should the parties wish to file dispositive
motions concerning these remaining claims so as to minimize a delay in seeking appellate
review, the Court grants the parties leave to file and brief any such motion pursuant to the
19 The Court also notes that there is no pending motion for dismissal of the Counterclaim
asserted by VCode and VData.
64
following briefing schedule: (1) motion and opening memorandum of law filed and served no
later than June 6, 2008; (2) response memorandum filed and served no later than June 13, 2008;
and (3) reply memorandum filed and served no later than June 20, 2008. Absent a determination
by the Court that a hearing on any such motion is necessary, any such motion shall be decided on
the submitted papers.
III. CONCLUSION
Based on the files, records, and proceedings herein, and for the reasons stated above, IT
IS ORDERED THAT:
1. Defendants Motion for Partial Summary Judgment on the Issues of (A)
Infringement of Certain Claims of U.S. Patent No. 5,612,524; (B)
Defamation and (C) Minnesota DTPA [Docket No. 180] is GRANTED
IN PART, DENIED IN PART, and DENIED IN PART AS MOOT.
2. Plaintiffs Motion for Partial Summary Judgment on Count II of its First
Supplemental Complaint/Invalidity [Docket No. 192] is GRANTED.
3. Plaintiffs Motion for Partial Summary Judgment on Count III of Its First
Supplemental Complaint/Unenforceability [Docket No. 196] is
GRANTED.
4. Claims 1, 4, 5, 19, 22, 25, 27, 28, and 29 of U.S. Patent No. 5,612,524
(filed March 18, 1997) are declared invalid.
5. U.S. Patent No. 5,612,524 (filed March 18, 1997) is declared
unenforceable.
6. Cognexs claim against Acacia Research Corporation for violation of the
Minnesota Uniform Deceptive Trade Practices Act, Minn. Stat.
325D.43-.48, is dismissed with prejudice.
Dated: May 19, 2008
s/ Joan N. Ericksen
JOAN N. ERICKSEN
United States District Judge
 

 
 
 

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