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AMERICAN BANK NOTE HOLOGRAPHICS, INC. v. UPPER DEC

August 8, 1996

AMERICAN BANK NOTE HOLOGRAPHICS, INC., Plaintiff, against THE UPPER DECK COMPANY, Defendant.


The opinion of the court was delivered by: KOELTL

 JOHN G. KOELTL, District Judge:1

 This is a patent infringement action brought by American Bank Note Holographics, Inc., ("ABN"), against The Upper Deck Co., ("Upper Deck") based on two patents relating to certain hologram embossing techniques. ABN is the assignee for both patents, No. 4,728,377 (the "'377 Patent"), and No. 4,913,504 (the "'504 Patent"). In its First Amended Complaint, ABN only asserts claims under the '377 patent. Upper Deck asserts a counterclaim for a declaratory judgment on the issue of invalidity of both the '377 and '504 patents. Upper Deck now moves for summary judgment on two grounds. First, Upper Deck argues that the patents are invalid under 35 U.S.C. § 112 because of the alleged failure by the inventor, Terence J. Gallagher, to disclose the best mode of carrying out the invention in the patent specification. Second, Upper Deck argues that the patents are invalid under § 112 for lack of enabling disclosure, specifically that the patent specifications differ from the patent claims in their disclosure of the layer structure of the embossing material. ABN resists the motion on both grounds and argues that it is entitled to partial summary judgment on the issues raised by Upper Deck. ABN has not formally moved for summary judgment, however, and has not filed a Rule 3(g) statement or a notice of motion. Instead, ABN relies on authority that permits a court to grant summary judgment sua sponte against a party moving for summary judgment.

 I.

 Summary judgment may not be granted unless "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986); Johnston v. IVAC Corp., 885 F.2d 1574, 1576-77 (Fed. Cir. 1989). "The trial court's task at the summary judgment motion stage of the litigation is carefully limited to discerning whether there are genuine issues of material fact to be tried, not to deciding them. Its duty, in short, is confined at this point to issue-finding; it does not extend to issue-resolution." Gallo v. Prudential Residential Servs. Ltd. Partnership, 22 F.3d 1219, 1224 (2d Cir. 1994); see Johnston, 885 F.2d at 1576-77 (summary judgment is "appropriate in a patent case where no genuine issue of material fact exists and the movant is entitled to judgment as a matter of law").

 The moving party bears the initial burden of "informing the district court of the basis for its motion" and identifying the matter that "it believes demonstrate[s] the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323. The substantive law governing the case will identify those facts which are material and "only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986) (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 8 L. Ed. 2d 176, 82 S. Ct. 993 (1962)); see also Transmatic, Inc. v. Gulton Indus., Inc., 53 F.3d 1270, 1274 (Fed. Cir. 1995).

 If the moving party meets its burden, the burden shifts to the nonmoving party to come forward with "specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). With respect to the issues on which summary judgment is sought, if there is any evidence in the record from any source from which a reasonable inference could be drawn in favor of the nonmoving party, summary judgment is improper. See Chambers v. TRM Copy Centers Corp., 43 F.3d 29, 37 (2d Cir. 1994). In a patent case on the issue of validity, the burden of proof at trial must be considered. National Presto Indus., Inc. v. The West Bend Co., 76 F.3d 1185, 1189 (Fed. Cir. 1996). In this case, the parties agree that the burden of proof for establishing patent invalidity based on noncompliance with the best mode requirement is clear and convincing evidence. See Transco Prods. Inc. v. Performance Contracting, Inc., 38 F.3d 551, 560 (Fed. Cir. 1994) (citing Scripps Clinic & Research Found. v. Genentech, Inc., 927 F.2d 1565, 1578 (Fed. Cir. 1991)).

 II.

 Upper Deck's first argument is based on the concept of best mode. The best mode requirement is set forth in 35 U.S.C. § 112 para. 1, which provides:

 
The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.

 To establish the invalidity of the '377 and '504 patents for failure to comply with the best mode requirement of § 112, Upper Deck must satisfy a two-part test. First, Upper Deck must prove that at the time the patent application was filed the inventor had a best mode of practicing the claimed invention. See United States Gypsum Co. v. National Gypsum Co., 74 F.3d 1209, 1212 (Fed. Cir. 1996); Engel Indus., Inc. v. The Lockformer Co., 946 F.2d 1528, 1531 (Fed. Cir. 1991). "This inquiry is wholly subjective and addresses whether the inventor must disclose any facts in addition to those sufficient for enablement." U.S. Gypsum, 74 F.3d at 1212. Second, Upper Deck must prove that the patent specification fails to disclose adequately what the inventor contemplated as the best mode from the perspective of a person having ordinary skill in the art. Id. ; Engel, 946 F.2d at 1531; Chemcast Corp. v. Arco Indus. Corp., 913 F.2d 923, 926-27 (Fed. Cir. 1990). Whether the best mode requirement of § 112 has been met is a determination of fact. U.S. Gypsum, 74 F.3d at 1212; Engel, 946 F.2d at 1531.

 Upper Deck argues that the inventor, Gallagher, had in mind two specific developments that were not disclosed in either the '377 or '504 patent. The first was the three-roller rotary embossing press originally acquired by ABN from Old Dominion Foils, ("Old Dominion"), in 1982. (Declaration of Terence J. Gallagher, dated Jan. 19, 1996, [Gallagher Decl. I], at P 8.) The second was the hot stamping foil formulation designated X-5649 provided by Dri Print Foils ("Dri Print"), which Gallagher evidently found superior to other formulations for embossing holographic images. (Gallagher Decl. I, at P 14.) Upper Deck contends that Gallagher contemplated both of these features as the best mode of carrying out his invention at the time he applied for his patents. Upper Deck argues that neither feature is disclosed in the patents and thus the patents are invalid for failure to comply with § 112.

 A.

 With respect to the use of the rotary press, ABN argues that the use of that particular mechanism for producing the holographic images is not truly a part of the claimed invention and need not be disclosed as the best mode. Instead, the rotary press was simply one of the ways that the invention could be practiced. ABN concedes that the rotary press provided a low-cost, high-speed commercial embossing technique but argues that the rotary press was a routine manufacturing choice that need not have been disclosed. Furthermore, ABN argues that even if such a disclosure were required under § 112, Gallagher did not in fact contemplate the use of the rotary press as the best mode of carrying out his invention. ABN relies on Gallagher's own testimony that he expected that other embossing machines could produce holograms of equal quality.

 As ABN correctly observes, the best mode requirement of § 112 is directed at the "best mode of practicing the claimed invention." U.S. Gypsum, 74 F.3d at 1212; see Chemcast, 913 F.2d at 927-28 ("Both the level of skill in the art and the scope of the claimed invention [are] additional, objective metes and bounds of a best mode disclosure."). In this vein, "the particulars of making a prototype or even a commercial embodiment do not necessarily equate with the 'best mode' of 'carrying out' an invention." Wahl Instruments, Inc. v. Acvious, Inc., 950 F.2d 1575, 1579 (Fed. Cir. 1991). ...


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