Netscape Communications Corp. v. Konrad

Alan M. Konrad owns U.S patents 5,544,320; 5,696,901; 5,974,444; all concerning a system for accessing and searching a database residing on a remote computer. On February 8, 2000, Konrad filed a patent infringement suit in U.S. District Court for the Eastern District of Texas against thirty-nine customers of Netscape Communications Corp., including Microsoft Corp. and America Online, Inc. Netscape, acting in the interest of its customer relationships, asked the U.S. District Court for the Northern District of California to invalidate Konrad's patents via a declaratory judgment. Netscape argued that Konrad's system was in public use and on sale before Jan. 8, 1992—exactly one year before he filed the first patent for this invention. According to , a patent is valid unless "the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year before the date of the application for patent in the United States". Netscape prevailed in its argument; the district court judged the patent to be invalid on June 18, 2001. Konrad then appealed the decision to the U.S Court of Appeals for the Federal Circuit. == Facts ==

Konrad began his employment at Lawrence Berkeley National Laboratory (LBNL) in 1977. On September 8, 1990, Konrad tested a method for searching a database residing on a remote computer. Shortly thereafter, Konrad disclosed his invention to LBNL's patent office (October 1990), but filed for the first of his three patents only on January 8, 1993, thus establishing a January 8, 1992 (i.e., one year prior) bar date for public use and sale under . In the time between the first successful test and bar date, Konrad demonstrated his invention to University of California computing personnel without having them execute a confidentiality agreement, and offered to adapt his invention for use at the University Research Association Superconducting Super Collider Laboratory and Stanford Linear Accelerator Center in exchange for money. == Issues ==

In his appeal, Konrad argued that the district court was wrong to conclude that his patents were invalid. In particular, he argued that he did not publicly use or attempt to sell his patents before the critical date, as required by . By the legal precedent set in Petrolite Corp. v. Baker Hugher, Inc., An invention has been publicly used if it was used by "a person other than the inventor who is under no limitation, restriction or obligation of secrecy to the inventor". By legal precedent set in Group One, Ltd. v. Hallmark Cards, Inc., an invention has been offered for sale if "it rises to the level of a commercial offer for sale, one which the other party could make into a binding contract by simple acceptance." Furthermore, the sale must be between two separate legal entities per In re Caveney. Public use Konrad's argument Konrad admitted demonstrating his invention before the critical date without explicitly communicating to his audience that it was confidential. Regardless, Konrad argued that this demonstration does not meet the public use criteria for three reasons. First, he argued that because LBNL and the demonstration audience were both funded by the U.S. Department of Energy, the invention disclosure he made to the LBNL patent office before the demonstration allowed for an implicit expectation of confidentiality. Second, he argued that the demonstration was an experiment and thus cannot be considered public use under legal precedent established in Baxter v. Cobe. Finally, he argued that he did not disclose every limitation of his invention. Court's decision The appeals court rejected all three of Konrad's arguments. First, the court noted that even though Konrad disclosed his invention to LBNL, a common funding source is not sufficient to carry an expectation of confidentiality. In particular, the contract between LBNL and the U.S. Department of Energy requires that LBNL "provide for the protection of government property", Here the court leveraged Konrad's own testimony that the starter client used in the actual invention "is very similar to, if not the same as, software program icons created to quickly initiate a program", In this case, however, the court concluded that the Department of Energy doesn't exercise enough control over the labs to prevent them from leaking the invention to the public: "All indications are that the DoE funded specific projects at Lawrence Berkeley Laboratory, the Superconducting Super Collider Laboratory, and Stanford Linear Accelerator Center, but never exercised such control over them, as to render all part of the same entity." == Impact ==

Separate entities The application of the on-sale bar requires that the buyer and seller be "separate entities". In fact, courts had traditionally used a "totality of circumstances" test (one in which all the facts are examined) to determine whether buyer and seller are indeed separate entities. A major impact of this case was that it clarified what it means to be separate entities. In particular, the Netscape appeals court formulated a test to determine whether buyer and seller are in fact two separate entities as follows: Where, as in this case, both parties to an alleged commercial offer for sale, receive research funds from the same entity, it may be more difficult to determine whether the inventor is attempting to commercialize his invention. Accordingly, in such cases whether there is a bar depends on whether the seller so controls the purchaser that the invention remains out of the public's hands. Despite the clarification, the test still requires a fact-based analysis of the degree to which one entity "controls" the other. In Netscape, the fact that the Department of Energy does not hold the national labs to a confidentiality agreement (at least, not to non-funded projects) was deemed a lack of control. == References ==