Steven Sculler filed for the design patent on October 2, 1991. On October 4, 1990, Marc Sculler sent a letter to Wilson Tse enclosing a "recent newsletter" that depicted the design patent. Wilson Tse Decl. Exh. S. In the letter, Marc Sculler indicated that the newsletter "is sent to 2,500 customers." Id. Defendants argue that it is likely that the publication was mailed before October 2, 1990.
Steven Sculler testified that M&R did not disclose the watch crystal lens concept to the public until a trade show on October 4, 1990 and did not send the newsletter until after the trade show. See also Marc Sculler Supp. Aff. P8, 14. The date of mailing is irrelevant, however, because Steven Sculler credibly testified that the mount depicted in the newsletter has a convex lens, not the flat lens covered by the design patent.
Although the plaintiff has established that 4 of defendants' 5 challenges to the design patent's validity are likely to fail, the plaintiff has not demonstrated a reasonable likelihood that defendants' obviousness challenge will fail. Thus, the plaintiff has not demonstrated a likelihood of success on the merits with respect to the design patent.
b. Mechanical Patent
Defendants argue that the mechanical patent is invalid because: (1) the patent is anticipated by the prior art; (2) Steven Sculler was not the inventor; (3) the patent was obvious; and (4) the invention was known by others in this country.
All four challenges relate to a core set of facts. Defendants contend that a stamp mount manufactured by a Chinese company, Shenzen Modern Seal Materials Factory ("SMS mount") contains every element of the mechanical patent. Weir Decl. P19-11. Specifically, the SMS mount includes a handle, spring, adjuster, nut, stop, case, stem, and platen that are arranged and interact in the same manner as the elements in the mechanical patent.
In September, 1993, Steven Sculler and Alexander C. Wall submitted the patent application for the mechanical patent. Wilson Tse testified that prior to filing the patent application, Steven Sculler saw several mounts on display when Sculler and his father were visiting Claimchop's premises in Hong Kong in March, 1991. W. Tse Decl. P35. Wilson Tse also indicated that Steven Sculler examined the SMS mount and discussed its operation with Wilson Tse. Id. Steven Sculler even disassembled some of the mounts. Id. Wilson Tse did not, however, produce the SMS mount.
Because Steven Sculler allegedly saw the SMS mount prior to filing the patent application, defendants argue that Steven Sculler and Alexander C. Wall, the co-inventors named in the mechanical patent, were not the true inventors of the patent. Steven Sculler credibly testified that he has never seen the SMS mount before this litigation. His testimony is supported by his father's testimony who was present with Steven Sculler when Wilson Tse allegedly showed him the SMS mount.
Steven Sculler and Alexander C. Wall have also submitted affidavits and documents indicating that they began to develop the adjustable hand stamp prior to Steven Sculler's trip to Hong Kong. Pursuant to a contract between Wall and M&R, M&R is obligated to pay Wall royalties on its sales of the mechanical patent for five years, from January 1, 1993 to December 31, 1997. See Wall Aff. P4; S. Sculler Supp. Aff. P14. This contract undercuts Wilson Tse's testimony that Steven Sculler stole the patent because it would be irrational for M&R to pay royalties to a non-inventor. Thus, the plaintiff has met its burden of showing that this challenge to the mechanical patent's validity is likely to fail.
The defendants also argue that the mechanical patent is invalid because it was anticipated by the SMS mount. An invention is not patentable if it is anticipated by the prior art or if the invention is obvious in light of the prior art. 35 U.S.C. § 102. "Anticipation requires that all limitations of the claim are found in the reference, or fully met by it." Standard Havens Products, Inc. v. Gencor Indust., Inc., 953 F.2d 1360, 1367 (Fed. Cir. 1991) cert. denied 506 U.S. 817, 121 L. Ed. 2d 28, 113 S. Ct. 60 (1992) (internal quotations omitted). The Weir affidavit indicates that the SMS mount contains every element of the mechanical patent. The plaintiff has not contested the Weir affidavit or argued that the SMS mount and the mechanical patent are different.
Even if they are identical, the defendant has not submitted any evidence that the SMS mount is "prior art." Prior art includes a printed publication or patent anywhere in the world, any item in public use or on sale within the United States more than one year before the patent application, and anything known or used in a publicly accessible form in the United States. 35 U.S.C. § 102 (emphasis added). The defendants have not identified any authority for including an item in public use in a foreign country within the definition of prior art. Therefore, the fact that the mount was known in foreign countries does not invalidate the patent. The defendants have also not provided any evidence that the SMS mount is identified in a printed publication or patented. Thus, the challenges to the mechanical patent's validity based on the prior art are likely to fail.
Defendants also contend that the item is unpatentable because it "was known" in this country before Steven Sculler invented it. 35 U.S.C. § 102. Only "knowledge or use which is accessible to the public" is included within the purview of 35 U.S.C. § 102. Carella v. Starlight Archery and Pro Line Co., 804 F.2d 135, 139 (Fed. Cir. 1986). Edison Tse, Wilson's Tse's brother, is a resident of California. He alleges that he knew about the SMS mount prior to September, 1993, when Sculler and Wall filed the patent application. Edison Tse Decl. P14(b). He has not contended, however, that his knowledge was accessible to the public. Thus, Edison Tse's knowledge of the SMS mount is not likely to invalidate the mechanical patent.
c. Objections to Both Patents
Defendants also contend that both patents are unenforceable because the plaintiff engaged in inequitable conduct in acquiring the patents. Patent applicants owe a duty of good faith and candor to the United States Patent and Trademark Office ("PTO"). 37 C.F.R. § 1.56. "Inequitable conduct includes affirmative misrepresentation (sic) of material fact, failure to disclose material information, or submission of false material information, coupled with an intent to deceive." Molins PLC v. Textron, Inc., 48 F.3d 1172 (Fed. Cir. 1995).
Defendants assert that the plaintiff withheld or misrepresented material information regarding the prior art, sale and publication of the invention, and the identity of the inventor. The allegations of inequitable conduct are based on the same facts as the challenges to validity. As discussed above, the plaintiff has rebutted each allegation and made a preliminary showing that the defendants' challenges to the patent's validity will fail. Thus, it is likely that the defendants' arguments regarding inequitable conduct will also fail.
In addition to demonstrating a likelihood of success on validity, the plaintiff also must establish a likelihood of success on infringement. The plaintiff has submitted the affidavit of Frederick W. Dour that compares the allegedly infringing materials with the patented products. Dour concludes that Top Stamp's materials infringe both the design and mechanical patent.
The defendants have not submitted any analysis to contradict Dour's affidavit. They apparently do not dispute that their product infringes both patents. Instead, they argue that the patents are invalid.
Based on the uncontradicted analysis contained in the Dour affidavit, the court concludes that the plaintiff has demonstrated a reasonable likelihood of success on infringement.
C. Irreparable Harm
"Where validity and continuing infringement have been clearly established . . . immediate and irreparable harm is presumed." Smith Int'l Inc. v. Hughes Tool Co., 718 F.2d 1573 (Fed. Cir.) cert. denied 464 U.S. 996, 78 L. Ed. 2d 687, 104 S. Ct. 493 (1983). Plaintiff argues that it has made a strong showing and thus, is entitled to the benefit of the presumption.
In addition to relying on the presumption, the plaintiff indicates that the defendants are marketing their infringing products by directly comparing the plaintiff and defendants' products and emphasizing the lower cost of the infringing products. Plaintiff has identified at least one customer who has already switched to the infringing products. Tice Aff. M&R asserts that in the absence of an injunction M&R will lose more customers and valuable goodwill. The court concludes that the plaintiff has established irreparable harm.
D. Balance of the Equities
In evaluating the balance of the hardships, the court weighs "the magnitude of the threatened injury to the patent owner . . ., in the light of the strength of the showing of likelihood of success on the merits, against the injury to the accused infringer if the preliminary decision is in error." H.H. Robertson, 820 F.2d at 390 (citation and internal quotations omitted). The plaintiff has made a strong showing of a likelihood of success on the merits with respect to the mechanical patent. The plaintiff is likely to suffer irreparable harm to its business reputation and goodwill if Top Stamp is not enjoined from selling products which infringe the mechanical patent.
Top Stamp alleges that no equities favor M&R because M&R copied the SMS mount and patented it. As discussed above, the court has made a preliminary determination that this allegation is false. Top Stamp is part of the Tse brothers' group of stamp companies, which allegedly comprise one of the largest pre-inked stamp mount companies in the world. Top Stamp has not argued that a preliminary injunction would drive it out of business.
E. The Public Interest
The "protection of patents furthers a strong public policy . . . advanced by granting preliminary injunctive relief when it appears that, absent such relief, patent rights will be flagrantly violated." H.H. Robertson, 820 F.2d at 391. Because the plaintiff has made a strong showing that the defendants are infringing a valid patent, public policy favors an injunction.
Based upon the foregoing, plaintiff's motion for a preliminary injunction is GRANTED with respect to the mechanical patent and DENIED with respect to the design patent. An appropriate order follows.
Date: May 10th, 1996
WILLIAM G. BASSLER, U.S.D.J.
This matter having come before the Court on the application of plaintiff M&R Marking Systems for a preliminary injunction; and
For the reasons set forth in the attached opinion; and
For good cause shown;
It is on this 10th day of May, 1996 ORDERED that plaintiff's application for a preliminary injunction is granted with respect to patent # 5,377,599 ("mechanical patent") issued on January 3, 1995 is GRANTED; and
It is further ORDERED that plaintiff's application for a preliminary injunction with respect to patent DES.346,396 is DENIED; and
It is further ORDERED that defendant Top Stamp, Inc. and its agents, successors, and assigns, are enjoined from importing, making, using, offering to sell, or selling products which infringe the mechanical patent; and
It is further ORDERED that plaintiff M&R Marking Systems, Inc. shall post a bond of $ 250,000 pursuant to Federal Rule of Civil Procedure 65(c).
WILLIAM G. BASSLER, U.S.D.J.