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The United States Court of Appeals for the Federal Circuit observes that the first prong of the Pfaff test entails an assessment of whether the circumstances surrounding a pre-critical date sale objectively show that it was primarily made for experimentation. The question posed by the experimental use doctrine, assessed under the first prong of the two-part on-sale bar test of Pfaff, is not whether the invention was under development, subject to testing, or otherwise still in its experimental stage at the time of the asserted sale. Instead, the question is whether the transaction constituting the sale was not incidental to the primary purpose of experimentation, i.e., whether the primary purpose of the inventor at the time of the sale, as determined from an objective evaluation of the facts surrounding the transaction, was to conduct experimentation.
The Electromotive Division of General Motors Corporation ("EMD") is a division of General Motors Corporation focused on the design and production of locomotives. As part of that business, EMD designs and manufactures component parts for locomotive engines, including the two kinds of bearings at issue in this case. Both types of bearings are embedded in turbochargers, which are in turn embedded in the engines of locomotives that EMD sells. After developing a new bearing, EMD typically initiates a two-phase testing program before releasing the new bearing for commercial production.
In the late 1980s, EMD developed a new compressor bearing for use in diesel locomotive turbochargers. On July 17, 1989, James L. Blase, an EMD employee and one of the named inventors on the two asserted patents, reported during an internal meeting that he had tested the new compressor bearings for approximately 3000 hours in a twelve-cylinder multiple unit locomotive engine. The minutes of that meeting document that the in-house program had been completed. Thus, EMD decided to proceed with the field program by substituting the new compressor bearings into locomotive orders previously placed by Norfolk Southern, Go Transit, and LXO railroads. EMD contacted Norfolk Southern, Go Transit, and LXO for permission to substitute the prior art bearings, originally to be used in the purchased locomotives, with the new compressor bearings. According to Mr. Blase, the three railroads agreed to accept the new bearings. None of the three companies, however, signed a confidentiality agreement or any other contract consenting to participate in the field program. They likewise were not given any design details or other documentation regarding the new compressor bearings. Further, Norfolk Southern, Go Transit, and LXO were not restricted or supervised in their use of the new compressor bearings and were not under any obligation to collect data, keep progress records, or even operate the subject locomotives during the time of the field program. Between January 1989 and November 1989, EMD purchased a total of 303 new compressor bearings from Allison Gas & Turbine ("Allison"), another division of General Motors Corporation, for a price of $ 298.80 each. Allison manufactured these bearings according to specifications provided by EMD. After receiving the new compressor bearings from Allison, EMD substituted them into locomotives previously sold to Norfolk Southern, Go Transit, and LXO. Thereafter, EMD shipped the subject locomotives to the three railroads. On November 27, 1990, EMD filed a patent application for its new compressor bearings. Based upon this filing date, the critical date for applying the on-sale bar for the '242 patent is November 27, 1989. The '242 patent issued on December 8, 1992. On August 19, 1991, EMD released the new compressor bearings for production. All locomotive sales involving diesel engines after August 1991 included the new compressor bearings. Before this release, however, EMD employed prior art bearings in all customer orders, except the Norfolk Southern, Go Transit, and LXO order s discussed above. EMD likewise did not advertise, market, or create promotional materials for the new compressor bearings prior to the August 1991 release.
In September 1992, EMD designed a new planetary bearing for use in turbocharger planetary drive trains. In January 1993, EMD initiated the in-house program for this new bearing type. In March 1993, EMD decided to proceed with the field program. To do so, EMD approached Union Pacific railroad for permission to substitute its new planetary bearings for prior art bearings in an order for two locomotives that Union Pacific placed earlier in 1992. Union Pacific allegedly agreed. Nevertheless, it did not sign a confidentiality agreement or any other type of a contract consenting to participate in the field program. Union Pacific also was not placed under any restrictions or supervision regarding the use of the locomotives containing new planetary bearings. Nor was Union Pacific given any design details for the new planetary bearings or required to monitor or document its usage of the subject locomotives during the field program. On July 6, 1993, EMD ordered 105 new planetary bearings at $ 88.87 per bearing from its supplier Glacier, now Daido Industrial Bearings, Ltd. ("Daido"). On August 6, 1993, EMD installed six planetary bearings that it had purchased from Daido into turbochargers for the two locomotives destined for Union Pacific. EMD shipped those locomotives to Union Pacific that same day. On September 7, 1994, EMD released the planetary bearings for production, meaning that the new planetary bearings were included in all future locomotive sales involving turbocharger planetary drive trains. On September 29, 1994, EM D filed a patent application for its new planetary bearings. Based upon this filing date, the critical date for the '056 patent is September 29, 1993. The '056 patent issued on October 22, 1996.
In March 2003, EMD filed a patent infringement action against the Transportation Systems Division of General Electric Company and Daido, asserting infringement of the '242 and '056 patents. GE and Daido moved for summary judgment that the ‘242 and ‘056 patents were invalid under the on-sale bar of 35 U.S.C. § 102(b). The district court granted this motion.
Were the subject sales sufficient to raise the bar of Sec. 102(b)?
First, the record, as the district court noted, was devoid of any evidence that EMD, or Union Pacific under EMD's direction, controlled the field program for its new planetary bearings. EMD did not provide any protocols to Union Pacific directing their use of locomotives containing the new planetary bearings. EMD likewise neither supervised nor restricted Union Pacific's use of the new planetary bearings in any way. Mr. Blase testified that the railroads involved in the field testing were not required to run the subject locomotives under any specific conditions. The record also showed that EMD made no attempt to monitor the conditions under which Union Pacific used the "test" locomotives. EMD explained away its lack of oversight by arguing that the field program was conducted solely to verify the durability of its new planetary bearings as measured by the number of turbocharger failures, not by the daily use of its new planetary bearings. Such an argument was, however, unconvincing. EMD did not request or receive any comments or data from Union Pacific concerning the operation or durability of its new planetary bearings. Without obligating Union Pacific to provide such feedback, it could be reasonably said that EMD exercised any monitoring over the field program. That Union Pacific returned failed turbochargers to EMD for teardown and inspection is insufficient to establish EMD's control over the field program. Union Pacific voluntarily returned failed turbochargers under the basic warranty given by EMD to all of its customers. It was not, however, under any obligation to do so. Mr. Blasé testified that EMD requested the return of failed components from all customers in the ordinary course of business. Union Pacific thus would have returned all failed turbochargers whether it was participating in experimentation or was merely an ordinary customer. What is more, EMD's teardown reports focused only on the appearance and features of the new planetary bearings without any correlation to the field conditions. Nothing in the teardown reports thus distinguish them from any other failure reports prepared outside the field program. Accordingly, the district court did not err in finding that EMD exercised no control over Union Pacific's use of the new bearings.
Second, the record was insufficient, even on summary judgment, to objectively establish Union Pacific's awareness of the field program. The only evidence regarding communications with Union Pacific concerning the field program came from Mr. Blase's deposition testimony and an internal memo he prepared. Neither Mr. Blase's testimony nor his memo establishes awareness by Union Pacific that the new planetary bearings were substituted into their pre-existing order for the purpose of testing those bearings in actual use rather than as part of a commercial sale. Mr. Blase's testimony simply suggests the possibility that an unidentified EMD employee may have engaged in a conversation with one or more unidentified employees of Union Pacific about substituting the new planetary bearings.
Finally, the record failed to show any objective evidence supporting Mr. Blase's inference that Union Pacific was "aware" of the field testing. It did not contain even the hint of a written agreement with Union Pacific, testimony from any representative of Union Pacific describing the railroad's awareness of the field program, or any other form of corroborating documentation held by Union Pacific regarding the field program. The lack of such evidence to corroborate Mr. Blase's conclusory testimony and memo thus validated the lack of customer awareness.
Because the facts do not show the existence of control or customer awareness, the court did not consider the other experimentation factors. Thus, EMD's sale to Union Pacific of the new planetary bearings was not made primarily for experimentation. Daido's sale to EMD therefpre could not have been made primarily for experimentation, since the purpose for the upstream sale was to make the downstream sale possible. Accordingly, the district court did not err in holding the '056 patent invalid under the on-sale bar of § 102(b).