Judges: Rader (author), Gajarsa, Dyk [Appealed from D. Del., Magistrate Judge Thynge]

In Honeywell International Inc. v. Universal Avionics Systems Corp., Nos. 05-1112, -1151, -1152 (Fed. Cir. May 25, 2007), the Federal Circuit vacated the district court’s claim construction and remanded for a new infringement determination. Further, the Federal Circuit affirmed the district court’s grant of SJ of invalidity for claims that had been withdrawn from the litigation. Lastly, the Federal Circuit affirmed the district court’s decision that Honeywell International Inc.’s (“Honeywell”) proposals and demonstrations of its system did not constitute an offer for sale or public use under 35 U.S.C. § 102(b) because Honeywell was experimenting at the time to determine if the invention worked for its intended purpose.

In 1995, Honeywell received the five patents at issue (U.S. Patent Nos. 5,839,080; 6,092,009; 6,122,570; 6,138,060; and 6,219,592), all directed to a “look ahead” terrain warning system. This terrain warning system provides a reliable warning when detecting abruptly changing terrain by comparing the aircraft’s position with an on-board digitized map of the earth’s terrain and man-made obstacles. After the Federal Aviation Administration required that certain aircraft include this terrain warning system, Universal Avionics Systems Corporation (“Universal”) and Sandel Avionics Inc. (“Sandel”) developed competing technologies. Honeywell then sued Universal and Sandel, claiming that they infringed the patents at issue.

After construing the claims, the district court granted defendants’ motions for (1) SJ of invalidity of certain claims that had been withdrawn from the litigation, and (2) SJ of noninfringement. Only two of the five contested terms contributed to the district court’s infringement determination. Before the Federal Circuit, Universal argued that these two terms should be the only terms considered for claim construction. The Federal Circuit rejected this argument and held that it had the power to evaluate all five contested terms because the three remaining terms concerned factual issues in dispute.

When construing the five contested terms, the Federal Circuit determined that the district court correctly construed two of the terms. But even under the district court’s correct claim construction, the Federal Circuit determined that genuine issues of material fact remained concerning whether the accused devices infringed the patents at issue. Accordingly, the Court held that the granting of SJ of noninfringement was improper. Regarding the district court’s construction of the three other terms, the Federal Circuit determined that the district court unduly narrowed the claims by reading in limitations from the specification. Consequently, the Federal Circuit remanded for the district court to apply this broader claim construction.

Further, Honeywell appealed the district court’s decision to preclude Honeywell from relying on the DOE. The district court reasoned that Honeywell’s expert’s belated testimony on the DOE was defective because it was not included in his expert report. Because evidentiary rulings do not generally raise issues unique to patent law, the Federal Circuit used Third Circuit precedent, which required an abuse of discretion standard of review. When considering that Honeywell’s expert had no opinion regarding DOE during cross examination for his deposition and that his expert report did not mention DOE, the Federal Circuit held that the district court did not abuse its discretion in excluding Honeywell’s deposition testimony concerning the DOE.

Honeywell further appealed the district court’s decision granting SJ of invalidity for claims withdrawn from the litigation from two of the patents. Specifically, Honeywell argued that the district court erred by exercising jurisdiction over defendants’ request for declaratory relief on the withdrawn claims. Applying the Supreme Court’s recent decision in MedImmune, Inc. v. Genentech Inc., 127 S. Ct. 764 (2007), the Federal Circuit considered whether there was an actual controversy between the parties, as required by the DJ Act and Article III of the Constitution. The Court explained that infringement of a dependent claim also entails infringement of its associated independent claim. When Honeywell withdrew some independent claims from the litigation, it also chose to maintain causes of action based on certain dependent claims. Thus, the Court found, Honeywell left the entire subject matter of the claims of those patents at issue. Accordingly, the Federal Circuit affirmed the district court’s decision to retain jurisdiction over the withdrawn claims.

Sandel and Universal cross-appealed the district court’s denial of invalidity for Honeywell’s patents under the “on-sale” and “public use” portions of 35 U.S.C. § 102(b). The on-sale bar prohibits the patenting of an invention that has been the subject of an offer for sale before the critical date. According to the Supreme Court in Pfaff v. Wells Electronics, Inc., 525 U.S. 55 (1998), the on-sale bar requires that (1) the invention be the subject of a commercial offer for sale and (2) the invention be “ready for patenting” at the time of the offer or sale. Universal and Sandel pointed to Honeywell’s proposals to airplane manufacturer customers to develop Honeywell’s system with their luxury airplanes.

The Federal Circuit upheld the district court’s ruling because Honeywell was still experimenting with its terrain warning system when it was negotiating with its customers. Honeywell entered into these negotiations to facilitate its programs to test its new system with human pilots in a genuine cockpit setting and to determine whether the invention worked for its intended purpose. If, and only if, those tests were successful, Honeywell proposed commercial terms for the supply of new systems. If the tests were not successful, Honeywell proposed to supply its nonpatented system instead. “Although the experimentation did not alter any specific part of Honeywell’s claimed system,” the Court held that “this aspect of the record does not prejudice Honeywell’s invocation of experimentation to negate any on-sale bar.” Slip op. at 21.

Regarding the second prong of the Pfaff test, the Court concluded that the invention was not “ready for patenting” before the critical date. A video showing the invention in operation before the critical date illustrated that Honeywell performed tests to determine that the invention worked for its intended purpose. The Court found that these tests, however, were part of Honeywell’s effort to reduce the invention to practice, rather than an actual reduction. “In sum,” the Court stated, “Honeywell used computer simulations, test aircraft, and demonstrations to those with expertise in air safety such as pilots to move the invention toward a reduction to practice.” Id. at 22.

Therefore, the Federal Circuit determined that the record supported the district court’s findings that Honeywell’s patented inventions were not on sale before the critical date.

Regarding the public-use bar, Universal and Sandel argued that Honeywell’s flight demonstrations had a commercial purpose. They further argued that one of these flights, in which a reporter was aboard, constituted public disclosure because the reporter published an article about the flight and the terrain warning system. But the article further stated that the terrain warning system was still under development, and the district court relied on this fact to determine that the terrain warning system was still under experimentation. The Federal Circuit agreed, concluding that Honeywell’s demonstrations were experimental and not barring public uses. The Court further explained that “[a]lthough these demonstrations did not always relate to [the] claimed features, this court permits testing to determine the workability of an invention even if the claims do not expressly set forth the intended use under examination.” Id. at 24.

Moreover, Sandel appealed the district court’s determination that Honeywell had not committed inequitable conduct by failing to disclose to the PTO documentation about the demonstrations and the article published by the reporter. The Federal Circuit affirmed the district court’s decision, noting that Honeywell did provide the PTO with express statements about its commercial flights and about the industry demonstrations, and thus the undisclosed documentation and article were merely cumulative.

Finally, Universal appealed the district court’s decision that Honeywell filed the suit in bad faith with the knowledge that these patents were invalid under § 102(b) and inequitable conduct as part of a scheme to monopolize the market. The district court determined that Universal had not shown by clear and convincing evidence that Honeywell used the litigation for anticompetitive purposes and, in fact, that the record illustrated that Honeywell conducted a reasonable presuit investigation. The Federal Circuit agreed with the district court that Universal’s arguments were without merit.