United States: § 102(b) On-Sale Bar Does Not Require An Invention To Be Ready For Patenting When Offered For Sale

This article previously appeared in Last Month at the Federal Circuit, September 2011

Judges: Dyk, Moore (author), O'Malley

[Appealed from D. Minn., Chief Judge Davis]

In August Technology Corp. v. Camtek, Ltd., No. 10-1458 (Fed. Cir. Aug. 22, 2011), the Federal Circuit affirmed-in-part, vacated-in-part, and remanded for further proceedings. The Court affirmed the district court's denials of JMOL and a new trial on invalidity, while also affirming the district court's dismissal of Camtek, Ltd.'s ("Camtek") inequitable conduct defense and counterclaim. Finding the district court erred in its claim construction of the term "wafer," the Court vacated the district court's judgment of infringement, its award of damages, and its grant of a permanent injunction, and remanded for further proceedings.

August Technology Corporation and Rudolph Technologies, Inc. (collectively "August Tech") sued Camtek for infringing claims 1 and 3 of U.S. Patent No. 6,826,298 ("the '298 patent"). A jury found that Camtek literally infringed both claims, the infringement was not willful, and awarded damages. The jury also found Camtek failed to prove the asserted claims were obvious, and that August Tech's NSX-80 device was not on sale prior to the critical date of the '298 patent. The district court then permanently enjoined Camtek from making, using, selling, and offering for sale its infringing Falcon machines. The district court also held that there was no need for a separate trial on inequitable conduct, since the jury found that the NSX-80 device was not prior art. The district court then denied Camtek's post-trial motions for JMOL or a new trial on infringement, damages, and obviousness.

Claims 1 and 3 of the '298 patent are directed to a system and a method for inspecting integrated circuits printed on substrates such as wafers. The claim construction of the district court focused on two claim limitations, "wafer" and "strobes . . . based on velocity." The first claim construction dispute centered upon whether a "wafer" is also a "plurality of wafers." The district court construed a wafer to be "a thin slice of semiconductor material with circuitry thereon that is ready for electrical testing, or any part thereof. However, a 'wafer' is not the same as a 'die.'" Slip op. at 5 (citation omitted). The district court further explained that a "wafer should be construed to include a part of a wafer. Throughout the patent, reference is made to wafers, in whole or in part." Id. (citation omitted). The district court also explained that this definition does not improperly give the same meaning to "die" and "wafer" because it requires the wafer or portion of a wafer to include multiple dies. Since the claim included a "plurality of known good quality wafers" limitation, the district court's construction allowed a single wafer to be a plurality of wafers.

On appeal, the Federal Circuit began its review with the claim language itself. Though the claims' preambles listed example "wafers," the Court could not conclude that wafers were not discrete objects. The Court found the claim itself distinguished between a single wafer and multiple wafers, where it uses "a wafer" and "a plurality of . . . wafers." Other claims of the '298 patent lent further support that a single wafer is not also multiple wafers. Claims 18 and 26 required "each and every wafer" to be aligned at the exact same location and orientation. The Court noted that if a wafer included a plurality of wafers, then some of the wafers could not be aligned to the exact same location. The '298 patent specification consistently treated wafers as discrete objects. Based upon these readings, the Court concluded that "a wafer is a discrete object, and thus a single wafer, even though it may later be diced into hundreds of separate dies, is not itself also a plurality of wafers." Id. at 10.

"The issue presented in this case is whether the invention must be ready for patenting at the time the alleged offer is made. We conclude that it does not." Slip op. at 17.

The Court rejected assertions by August Tech that this claim construction was incorrect because it excluded the preferred embodiment. "The mere fact that there is an alternative embodiment disclosed in the [asserted patent] that is not encompassed by [our] claim construction does not outweigh the language of the claim, especially when the court's construction is supported by the intrinsic evidence." Id. at 11 (alterations in original) (quoting TIP Sys., LLC v. Phillips & Brooks/Gladwin, Inc., 529 F.3d 1364, 1373 (Fed. Cir. 2008)). This is "especially true where, as here, other unasserted claims in the parent patent cover the excluded embodiments." Id.

The Court construed a "wafer" as "a thin, discrete slice of semiconductor material with circuitry thereon that is ready for electrical testing having one or more dies. A plurality of wafers means more than one physically distinct wafer." Id. at 11-12. Based upon the district court's flawed claim construction, the infringement verdict was vacated and remanded for a limited trial on infringement with respect to this claim element.

The district court additionally construed the claim limitation "strobes . . . based on velocity." The district court found the limitation to require strobing based at least in part on "the rate of change of the position of the wafer." Id. at 12 (citation omitted). As long as the strobing was based upon the wafer's velocity, it did not matter whether the strobing also depended upon the wafer's position. Both parties agreed that the claimed invention periodically strobed based on a wafer's velocity. Camtek argued that the asserted claims precluded strobing based on the wafer's position, because August Tech disclaimed that during prosecution.

The Federal Circuit found no clear disavowal of strobing according to position during prosecution and agreed with the district court's construction of strobing based on velocity. The Court also rejected an argument by Camtek that no evidence supported the jury's verdict of infringement with respect to the strobing limitation. The Court found no error in the district court's analysis and concluded that "the jury was presented with substantial evidence that the Falcon strobes [were] based on the rate of change of the position of the wafer." Id. at 14. Accordingly, the Court did not direct the district court to include the strobing limitation in its retrial on infringement.

The Court also reviewed the jury's finding that Camtek failed to show that the asserted claims would have been obvious by clear and convincing evidence over U.S. Patent Nos. 5,859,698 and 5,298,963. The district court denied Camtek's motion for JMOL, finding there was substantial evidence that the cited prior art failed to teach the strobing limitation. The Court agreed that there was substantial evidence, including expert testimony, supporting the jury's fact-finding and affirmed the denial of a JMOL and a new trial on the issue.

The jury also found August Tech's NSX-80 wafer inspection machine was not on sale prior to the critical date of the '298 patent, causing the district court to dismiss Camtek's inequitable conduct charges based on nondisclosure of the NSX-80. The district court also denied JMOL and a new trial on invalidity for obviousness. Though the Court could not rule on whether the NSX-80 constituted prior art, the Court affirmed and noted no need for a retrial on the issue of whether the NSX-80 was on sale prior to the critical date.

Camtek argued that the district court erred as a matter of law in the jury instructions, where it defined "on sale" to mean the NSX-80 must have been ready for patenting at the time an alleged offer for sale was made. The Federal Circuit first considered whether the NSX-80 qualified as § 102(b) prior art. The Court used a two-part test for determining whether the § 102(b) on-sale bar applies: (1) the product is the subject of a commercial offer for sale, and (2) the invention is ready for patenting. Id. at 16 (citing Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 67 (1998)). The key issue was whether the invention must be ready for patenting at the time the alleged offer is made. The Court concluded it does not.

The Court noted that requiring that an invention must be ready for patenting at the time of an offer for sale would render the second prong of Pfaff "superfluous." Id. at 17. Citing Robotic Vision Systems v. View Engineering, Inc., 249 F.3d 1307, 1313 (Fed. Cir. 2001), the Court noted that completion of the invention prior to the critical date pursuant to an offer to sell would create a bar. While an invention need not be ready for patenting, the Court held that "there is no offer for sale until such time as the invention is conceived." Slip op. at 18. Before that conception date, the seller is merely offering to sell an idea for a product.

Because the record on appeal was not clear as to whether August Tech conceived of the NSX-80 prior to the critical date, the Court left that question of fact to be decided by a fact-finder in the first instance. Nor could the Court evaluate whether the jury based their decision on the experimental use exception, as argued by August Tech. The Court did note the NSX-80 did not disclose the claimed strobing limitation, which was the missing element for purposes of the obviousness analysis. The Court concluded that even if the NSX-80 was on sale and prior art, as a matter of law based on the undisputed facts, it would not render the asserted claims obvious in view of the prior art. On this basis, the Court affirmed the district court's denial of JMOL and a new trial on invalidity for obviousness. This same reasoning led the Court to conclude that the NSX-80 is not material prior art and affirmed the district court's dismissal of Camtek's inequitable conduct counterclaims.

Since the Court vacated and remanded for further proceedings under the correct claim construction, the Court did not reach the parties' contentions regarding damages and the permanent injunction.

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