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Milwaukee Electric Tool Corp. v. Snap-On Inc.

United States District Court, E.D. Wisconsin

October 12, 2017

MILWAUKEE ELECTRIC TOOL CORPORATION, METCO BATTERY TECHNOLOGIES LLC, AC MACAO COMMERCIAL OFFSHORE LIMITED, and TECHTRONIC INDUSTRIES CO. LTD., Plaintiffs,
v.
SNAP-ON INCORPORATED, Defendant.

          ORDER

          J. P. Stadtmueller U.S. District Judge.

         This is a patent case about lithium-ion batteries used in power tools. Trial is scheduled to begin on Monday, October 16, 2017. The parties have filed voluminous motions in limine and Daubert motions in anticipation of trial. See (Docket #234, #235, #238, #241, #242, #248, #250, #264).

         During the final pretrial conference, held on October 10, 2017, the Court indicated that it would take up each disputed issue before selection of the jury, or when such matters arose during trial, as appropriate. See (Docket #271). At the parties' request, however, the Court now issues a decision on the most pertinent of the pretrial motions in an effort to streamline the parties' trial preparation and perhaps aid their efforts to seek a mutually agreeable pretrial resolution of this matter. See (Docket #272). The Court will address each motion in turn.

         1. Moli Evidence as Prior Art for Purposes of Obviousness

         Section 102 of the Patent Act establishes certain types of prior art that may be used in various ways to attack the validity of a patent.[1] Section 102(f) defines one such type of prior art. It provides that a person is not eligible for a patent if “he did not himself invent the subject matter sought to be patented.” 35 U.S.C. § 102(f) (2006). Put differently, one who derives an invention from another cannot patent it. Price v. Symsek, 988 F.2d 1187, 1190 (Fed. Cir. 1993). In order to establish derivation, the challenger must prove, by clear and convincing evidence, “both prior conception of the invention by another and communication of that conception to the patentee.” Eaton Corp. v. Rockwell Int'l Corp., 323 F.3d 1332, 1334 (Fed. Cir. 2003); Cumberland Pharm. Inc. v. Mylan Institutional LLC, 846 F.3d 1213, 1218 (Fed. Cir. 2017).

         “Conception is the formation in the mind of the inventor of a definite and permanent idea of the complete and operative invention, as it is therefore to be applied in practice.” Singh v. Brake, 317 F.3d 1334, 1340 (Fed. Cir. 2003). A conception must encompass all limitations of the claimed invention. Id. Critically, “derivation is not proved by showing conception and communication of an idea different from the claimed invention even where that idea would make the claimed idea obvious.” Cumberland Pharm., 846 F.3d at 1219.

         Obviousness, which is a challenge to the validity of a patent made pursuant to Section 103, is established “if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.” 35 U.S.C. § 103(a) (2006). To prove obviousness, one must show that a skilled artisan “would have found it obvious to bridge the differences between the subject matter of the claims and the prior art[.]” Ohio Willow Wood Co. v. Alps S., LLC, 735 F.3d 1333, 1343 (Fed. Cir. 2013). This entails consideration of several factors, including “(1) the scope and content of the prior art, (2) the differences between the prior art and the claims at issue, (3) the level of ordinary skill in the art, and (4) any relevant secondary considerations, such as commercial success, long felt but unsolved needs, and the failure of others.” Wyers v. Master Lock Co., 616 F.3d 1231, 1237 (Fed. Cir. 2010); Graham v. John Deere Co., 383 U.S. 1, 17- 18 (1966).

         Important here, Section 103 also provides that subject matter defined in Section 102 may be used to support an obviousness argument although “the invention is not identically disclosed or described as set forth in section 102.” 35 U.S.C. § 103(a) (2006). In other words, even if a prior art reference fails to establish that the patent is invalid based on an analysis of Section 102 alone, that prior art may still be used to support a contention that the invention is obvious under Section 103. See Net MoneyIn, Inc. v. VeriSign, Inc., 545 F.3d 1359, 1371 (Fed. Cir. 2008) (while a court cannot combine two prior art references to find anticipation, they can be combined to argue obviousness); Application of Arkney, 455 F.2d 586, 587 (C.C.P.A. 1972).

         In its recent decision on claim construction and summary judgment, the Court found that certain lithium-ion battery cells manufactured by a Canadian firm, E-One Moli Energy (Canada) Ltd. (“Moli”), were insufficient to establish a derivation defense under Section 102(f) for Defendant Snap-On Incorporated (“Snap-On”). Milwaukee Elec. Tool v. Snap-On Inc., Case No. 14-CV-1296-JPS, 2017 WL 4220457, at *15-17 (E.D. Wis. Sept. 22, 2017). The Court found that the Moli cells did not constitute a prior conception of Plaintiffs' patented invention for two reasons. First, the early cells were not capable of meeting the 20 Amp Limitation. Id. at *17.[2] Second, the later-developed, more powerful cells were not equivalent to battery packs, which are the subject of the patents-in-suit. Id.

         On this second point, key to the Court's decision was that, to establish derivation, the complete and operative invention must be communicated to the inventor. Id. Rendering the patented invention obvious is not enough. Id. Applied here, the Court determined that even assuming a skilled artisan could extrapolate a battery pack from the Moli cells that would be housed inside it, this would at most render the invention obvious. Id. The cells were not themselves the complete and operative invention. Consequently, the Court dismissed Snap-On's derivation defense.

         Now, Snap-On seeks to use the same Moli evidence to pursue a different theory of invalidity: that the Moli cells rendered the patented invention obvious under Section 103.[3] Plaintiffs oppose this, arguing that the Moli evidence should not be admitted for any purpose. Their opposition appears to be twofold, but their arguments are not easily parsed. First, argue Plaintiffs, because the Moli cells do not establish a derivation defense, they do not qualify as prior art under Section 102(f). As a result, they cannot now be leveraged in a Section 103 obviousness claim. Second, because Milwaukee asked Moli to prepare the cells, the cells are part of Milwaukee's own inventive contributions. In Plaintiffs' view, they cannot simultaneously be prior art.

         Snap-On responds that the Court did not grant summary judgment on its obviousness challenge, only derivation. According to Snap-On, the Moli cells qualify as Section 102(f) prior art even if they could not sustain a derivation defense. As Snap-On reads the Court's recent ruling, the Court only found that the patented invention was not derived from the cells and said nothing about whether the cells rendered the packs obvious.

         In light of the statutory text and structure, against the backdrop of the relevant precedent, the Court finds Snap-On's position more persuasive. In OddzOn Products, Inc. v. Just Toys, Inc., 122 F.3d 1396, 1403 (Fed. Cir. 1997), the Federal Circuit explained the operation of Section 102(f) subject matter as used in an obviousness defense:

It means that an invention, A', that is obvious in view of subject matter A, derived from another, is also unpatentable. The obvious invention, A', may not be unpatentable to the inventor of A, and it may not be unpatentable to a third party who did not receive the disclosure of A, but it is unpatentable to the party who did receive the disclosure.

Id. The court also held that Section 102(f) subject matter, although it encompasses private communications to the inventor, can nevertheless constitute prior art for purposes of Section 103. Id. at 1401-02. In this case, Snap-On's theory is that Moli communicated its cells, A, to Plaintiffs, and Plaintiffs then developed their battery pack, A', from them.

         This explanation resolves the first question Plaintiffs raise about how to define Section 102(f) prior art. Initially, the Court rejects Plaintiffs' bald suggestion that any non-public information cannot qualify as prior art. This is precisely the opposite of what the Federal Circuit said in OddzOn. Id. Admittedly, most prior art is public information, but the Court of Appeals found that Section 102(f) subject matter, even if “secret, ” could be used in a Section 103 obviousness claim. Id. Consequently, this Court will not reject any of the Moli evidence simply because it was non-public, including drawing distinctions between certain cells that were or were not covered by a confidentiality agreement between Moli and Plaintiffs. See (Docket #248-2 at 5-7).

         Another aspect of Plaintiffs' definitional argument appears to suggest that only complete inventions, not any communications or information, can count as Section 102(f) prior art. Yet this position is inconsistent with a plain reading of OddzOn, which states the Section 102(f) covers “subject matter, ” not only inventions. Id. at 1403. The Court agrees with Snap-On that whether or not Plaintiffs derived their invention from Moli's cells, the cells and related communications and information are of the Section-102(f) type, having been communicated to the inventor by another in confidence.

         The text of Section 103(a) confirms that even if certain prior art references fall short of invalidating a patent when considered under the relevant subsection of Section 102, they nevertheless can be used to make out an obviousness challenge. Indeed, Plaintiffs' own cited case, The Medicines Company v. Mylan Inc., 72 F.Supp.3d 387, 859-60 (N.D. Ill. 2014), rev'd on other grounds, 853 F.3d 1296 (Fed. Cir. 2017), recognized that different standards apply “when a party is attempting to prove invalidity by derivation under § 102(f)” as opposed to “when a party is attempting to use the disclosure as prior art under § 102(f) in an obviousness ...


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