The opinion of the court was delivered by: Patel, Chief Judge.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
On May 9, 1994, plaintiff Linear Technology Corporation brought
this action against defendant Micrel, Inc., alleging that the MIC
2172 and MIC 3172 products infringed United States Patent No.
4,775,741 ("'741 patent") and Reexamination Certificate B1
4,755,741. This action was originally assigned to United States
District Court Judge Eugene F. Lynch. Judge Lynch denied Micrel's
motion for summary judgment on whether the '741 patent is invalid
due to an on-sale bar pursuant to 35 U.S.C. § 102. See
Order dated February 26, 1997. In the same order, Judge Lynch
bifurcated this action for trial on the issue of whether the '741
patent is invalid due to an on-sale bar, and stayed all other
issues for later discovery and trial. See id. at 2. On July 15,
1997, the action was reassigned to this court. The court
conducted a bench trial on the limited issue of whether the '741
patent is invalid due to an on-sale bar.
Having considered the testimony presented at trial and the
other evidence submitted by the parties, the court FINDS for
defendant Micrel and enters the following findings of fact and
conclusions of law in accordance with its obligations under
Federal Rule of Civil Procedure 52(c). Fed. R.Civ.P. 52(c)
(requiring judgment under Rule 52(c) to be supported by findings
of fact and conclusions of law).
1. Plaintiff Linear Technology Corporation ("LTC") is a
corporation organized and existing under the laws of the State of
California and having a principal place of business in Milpitas,
California. Jt. Pretrial Conf. Stmt., at 3 ¶ 1.
2. Defendant Micrel, Inc. ("Micrel") is a corporation organized
and existing under the laws of the State of California having its
principal place of business in San Jose, California. Jt. Pretrial
Conf. Stmt., at 3 ¶ 2.
II. Development Of '741 Patent And LT1070
3. The patent at issue in this case is United States Patent No.
4,755,741 ("'741 patent"), entitled "Adaptive Transistor Drive
Circuit," as amended by Reexamination Certificates B1 4,755,741
and B2 4,755,741. The named inventor is Carl Nelson and LTC is
the assignee of all right, title and interest in the '741 patent.
Def.Exh. A-33; Nelson Testimony, 192:25-193:1.
5. The application that resulted in the '741 patent was filed
on November 18, 1986. Def.Exh. A-33.
6. The '741 patent originally issued on July 5, 1988. The first
reexamination certificate issued on May 14, 1991, following a
request for reexamination filed by a third party on June 1, 1990.
The second reexamination certificate issued on December 26, 1995,
following additional requests for reexamination filed by a third
party and by Micrel on April 28, 1994 and September 9, 1994,
respectively. Pl.Exhs. 1-3.
7. The '741 patent discloses an "adaptive transistor drive
circuit." Def. Exh. A-33 at 1:5-21. The adaptive transistor drive
circuit disclosed in the '741 patent describes "switching
regulator circuitry" used to provide regulated voltages or
currents. Nelson Testimony, 143:1-2.
8. The LT1070 chip manufactured by LTC is a switching voltage
regulator invented by Nelson and embodies an aspect of every
claim contained in the '741 patent, except for claims 2 and 12.
Nelson Testimony, 139:20-141:18; 199:20-200:17. However, the
LT1070 switching regulator circuit embodies the inventions
claimed in all of the claims of the '741 patent that LTC asserts
are infringed by Micrel. Jt. Pretrial Conf. Stmt. at ¶ 7. The
LT1070 silicon chip initially constructed and tested by Nelson
was essentially a functioning version of the '741 patent. Nelson
Testimony, at 142:18-25.
9. In essence, the '741 patent "grew out" of Nelson's
development of the LT1070 chip. Nelson Testimony, 139:17-19.
Figure 5 of the '741 patent illustrates how the invention is used
in the LT1070. Nelson Testimony, 198:11-17.
10. Nelson originally designed the LT1070 on paper, but later
converted the design as envisioned on paper into silicon or chip
form in approximately April, 1985. Nelson Testimony, 142:1-20. In
an entry dated April 18, 1985, Nelson noted in his workbook that
the "silicon looks good," indicating that the chip functioned
well enough to run tests on it to determine whether any problems
or abnormalities existed in the silicon. Nelson Testimony, at
142:11-17; Def.Exh. A-31, at LIN 01299. At that stage, Nelson was
confident that the LT1070 could eventually be made to work,
although he remained uncertain as to whether it would meet all
the initial design goals. Nelson Testimony, 212:4-16.
11. Although the LT1070 chip performed "basically" as Nelson
had intended it to, he identified an extensive list of problems
with the LT1070 chip which had to be "work[ed] out" before it
would be fully functional. Nelson Testimony, 194:18-21; Def.Exh.
A-31, at LIN 01299. Because of these problems, the LT1070 was not
sufficiently "functional enough" to be ready for manufacture.
Nelson Testimony, 194:22-195:1. Nelson later made a first "round"
of "fixes" to the LT1070 chip. Def.Exh. A-31, at LIN 01311-01314.
12. Despite having constructed a LT1070 chip which was
essentially functional, Nelson discovered additional problems
with the LT1070 in early November 1985, including a low
oscillator frequency, an overlong "delay in the current sense
comparator," a "leakage problem in the power transistor," and
other "small adjustments." Nelson Testimony, 194:3-196:16;
Def.Exh. A-31 at LIN 01331 and 0334. These problems caused delays
in the release of the LT1070 to production. Nelson Testimony,
13. On November 11, 1985, Nelson recorded methods for fixing
these problems in the LT1070 in his engineering notebook.
Def.Exh. A-31 at LIN 0134; Nelson Testimony, 195:12-197:11. Once
these problems were resolved, LTC issued a Release Product
Listing ("RPL") for the LT1070 on November 18, 1985. The RPL
essentially released the product into LTC's
product line. Nelson Testimony, 198:1-7; Def.Exh. A-34.
14. Although Nelson testified that the LT1070 was not ready for
manufacturing until well into 1986, LTC "does not dispute that
the invention of the '741 patent was reduced to practice before
November 18, 1985." LTC's Post-Trial Prop. Findings of Fact and
Concl. of Law, at ¶ 29.
III. Efforts To Sell And Sales
A. LTC's Sales Organizational Structure
15. In 1985, LTC's sales force primarily consisted of
independent sales representatives and distributors. Zapf
Testimony, 241:7-242:19 (international distributors); Scott
Testimony, 447:9-20 (sales force included domestic sales
representatives and distributors). LTC's distributors purchased
devices from LTC and resold the devices to end-user customers.
Zapf Testimony, 241:20-25.
16. In 1985, LTC employed four Area Sales Managers in the
United States and two in Europe. Exh. 201; Zapf Testimony,
242:11-25; 336:2-13. The Area Sales Managers were responsible for
managing LTC's sales efforts within their sales territories. Zapf
Testimony, 242:17-25. LTC's Area Sales Managers in Europe were
Tom Lane and Andreas Meinelt, both of whom reported directly to
Zapf. Zapf Testimony, 242:11-25.
17. In 1985, LTC's domestic sales network included twenty-two
independent sales representative firms divided into four
geographic territories and sixteen independent distributor firms.
Pl.Exhs. 55 & 202.
18. In 1985, LTC also had a network of international
distributors, acting as both LTC's sales representatives and
distributors for LTC's products. Zapf Testimony, 241:7-19. These
distributors included Svensk, Jermyn, Amitron, Stolz, Bacher,
Neye, Henskes, Success Electric and Eltron. Zapf Testimony,
19. Each of LTC's international distributors had a written
distributorship agreement with LTC, containing substantially the
same terms as in Exhibit A-70. Zapf Testimony, 267:3-12. Those
agreements provided that the contracts were governed by
California law. Zapf Testimony, 267:22-268:7; Def.Exh. A-70 at
LIN 16445 ¶ 10.1. The written distributor agreements also
provided that the distributors take title to the goods FOB LTC's
plant or nearest warehouse duty unpaid, referring to LTC's plant
in Milpitas where LTC manufactured its products. Zapf Testimony,
268:8-17; Def.Exh. A-70 at paragraph 4.3, LIN 16437.
20. LTC's international distributors purchased products from
LTC and resold those products to their own customers in their
territories. Zapf Testimony, 241:20-25. To purchase the products,
the distributors sent their orders to LTC in California by telex.
Zapf Testimony, 260:18-24. LTC received these orders at its plant
in Milpitas, California. Zapf Testimony, 260:25-261:2. LTC
accepted those orders in Milpitas and entered the orders into
LTC's bookings system in Milpitas. Zapf Testimony, 261:3-8. Once
the orders were entered into LTC's bookings system,
acknowledgments were automatically generated by the system. Zapf
Testimony, 261:9-13. Those acknowledgment forms were then sent
back to the international distributors, acknowledging that the
orders had been entered and booked by LTC. Zapf Testimony,
261:14-17. The international distributorship agreement provides
that "all order for LINEAR Products from DISTRIBUTOR are subject
to acceptance." Def.Exh. A-70, at LIN 16437 ¶ 4.4.
21. LTC's acknowledgments included an express provision that
the purchaser is to take title to the goods in Milpitas,
California. Def.Exh. A-74; Zapf Testimony, 261:21-262:25.
Defendant's Exhibit A-74 is typical of the acknowledgment forms
sent by LTC in 1985.
22. Invoices on shipments were issued by LTC from California.
Zapf Testimony, 266:12-17.
23. In 1985, LTC used product data sheets as one of its primary
selling tools to provide information to potential customers about
LTC's products in order to enable manufacturers to use LTC's
component products in their own products. Nelson Testimony,
138:25-139:2; Def.Exh. A-32 [Nelson Decl.] at ¶ 7.
24. The LT1070 "preliminary" data sheet lists features of the
LT1070 and provides technical information about the device, its
applications, its electrical characteristics and its operation.
Def.Exh. A-4 [LT1070 Preliminary Data Sheet]. The information is
important to customers and was designed to grab the attention of
customers and their engineers. Nelson Testimony,
25. Nelson explained that a preliminary data sheet is intended
to be an introduction of what the part does, but does not
"typically" contain full information on certain particulars.
Nelson Testimony, 215:13-22. The preliminary data sheet shows
customers what the product will do so that if the customer is at
a point in their design phase when they are trying to decide how
to do a particular function, the customer can look at the
preliminary data sheet and determine whether they think the
device would work for them. Nelson Testimony, 215:23-216:6. If a
customer determined that the device would have some applicability
to their needs, it could request samples and "a real data sheet"
from LTC. Nelson Testimony, 216:1-7; see Def.Exh. A-12 [March
1985 Newsline], at LIN 06890.
26. Sales representative Mike Walters testified by deposition
regarding the process he used to sell component products, such as
those manufactured by LTC. In order to sell a product of a
company like LTC, Walters stated that generally the approval of
an employee in the purchasing company's engineering and
purchasing departments was necessary. Walters Depo., 13:17-21.
This process of getting a design engineer at a company to use a
component product in one of the engineer's applications is known
as a "design-in." Walters Depo., 14:10-20; 16:3-18; Stenstrom
27. Walters also testified that in the course of his business
he sometimes used preliminary data sheets to generate interest in
a customer for a part. Walters Depo., 40:4-13. According to
Walters, a "preliminary data sheet" is "a data sheet with
specifications on a part that says `preliminary' some place on
it, meaning that to the customer it's probably not in production
and something might change." Walters Depo., 39:24-40:9.
28. Nelson wrote the preliminary LT1070 data sheet, drafting
the text and drawings to be included. Nelson Testimony, 160:9-15;
166:16-167:3. LTC worked with an outside "art house" to prepare
the proof sheet for the preliminary LT1070 data sheet. Nelson
Testimony, 167:2-9; Williams Testimony, 115:9-15. The drafts of
the preliminary data sheet were subject to a process of internal
review, a process which could take as long as three or four
months. Nelson Testimony, 168:2-14.
29. On October 14, 1985, LTC initiated a purchase order for the
printing of 500 copies of the LT1070 data sheet by Globe Printing
Company. Def.Exh. A-55 [Globe Data Sheet File], at p. G0013;
Williams Testimony, 105:25-106:23. On October 21, 1985, LTC
provided Globe with the artwork for the Preliminary LT1070 data
sheet, along with a photocopy. Williams Testimony, 106:24-107:3;
30. Globe was not responsible for preparing any of the text,
diagrams, or layout of the LT1070 data sheet, other than masking
out page numbers. Williams Testimony, 109:18-110:20. Globe simply
took the original artwork as received from LTC and printed it in
paper form. Id. Globe delivered 500 copies of the Preliminary
LT1070 data sheet to LTC on October 25, 1985. Def.Exh. A-55
[Globe's Data Sheet File, Delivery Record] at p. G0007; Williams
C. LT1070 Information Conveyed To Sales Force
31. Robert Scott was LTC's Product Marketing Manager in 1985.
Scott Testimony, 442:7-15. In the Spring of 1985, Scott informed
LTC's independent sales representatives that a product named the
LT1070, a switch mode control chip, would be coming out. Scott
Testimony, 444:15-24. Scott anticipated that the sales
representatives and international distributors would then talk
with customers and familiarize themselves with companies that
might use the LT1070. Scott Testimony, 445:10-16. At this point,
LTC began its efforts to commercialize the inventions of the '741
patent embodied within the LT1070.
32. On July 21-23, 1985, LTC hosted a three-day sales
conference at the Marriott Hotel in Santa Clara, California.
Def.Exh. A-13; Zapf Testimony, 269:22-24. All LTC independent
sales representatives and international distributors were urged
to attend, and many did so. Zapf Testimony, 271:4-16; Def.Exh.
A-13 [Sales Conference Binder at ¶ 5-7, listing attendees];
Def.Exh. A-19 [Declaration of Robert Scott at ¶ 4] (purpose of
meeting was "to inform those attending of new and future LTC
products, including . . . unannounced products which were still
being developed but which were not yet available for sale"). The
domestic sales representatives who attended the sales conference
included Richard Beals and Dan Zenor of Gassner & Clark Co.
Def.Exh. A-13 [Sales Conference Binder at ¶ 5-7, listing
attendees]. The international distributors who attended included
representatives from Neye, Svensk, Microlog, Henskes and Stolz.
Def.Exh. A-13; Zapf Testimony, 271:13-16, 272:16-273:2.
33. Two of the presentations during the July 1985 sales
conference discussed the LT1070: (1) a Voltage Regulators and
References clinic, and (2) a Marketing clinic taught by Robert
Scott. Def.Exh. A-20 [July 1985 Sales Conference Binder at LIN
07020] (listing Carl Nelson as the presenter at the VR & REF
Clinic); Def. Exh. A-13 [Sales Conference Binder], at GC0030 and
34. During the Voltage Regulators and References Clinic, an
application circuit diagram was displayed to the attendees
showing how the LT1070 could be used. Def.Exh. A-13 [Sales
Conference Binder at GC0136-37]. Richard Beals, an independent
sales representative, sketched the LT1070 application circuit
into his copy of the sales conference binder. Beals Depo.,
45:12-48:16. The international distributors also attended the
Voltage Regulators and References clinic and received the same
training at the session given to everyone else. Zapf Testimony,
35. During a Marketing clinic, Robert Scott discussed the
LT1070 as an upcoming product. He informed LTC's sales
representatives and international distributors that LT1070 data
sheets and samples were expected in the Fourth Quarter and that
production quantities were expected by the First Quarter.
Def.Exh. A-13 [Sales Conference Binder at GC 0030]; Scott
Testimony, 447:14-25; 450:8-15.
36. Scott presented the information about the LT1070 so that
the sales representatives and international distributors would
identify and familiarize themselves with customers who might be
able to use the LT1070. Scott Testimony, 448:1-4. The sales
representatives and distributors were allowed and expected to
discuss the LT1070 and its function with customers, and they were
asked to explore possible applications for the LT1070. Scott
D. Sales Representatives Promotion Of The LT1070
38. Following the July 1985 sales conference, from July 17 to
November 18, 1985, LTC received 26 separate requests for LT1070
samples from its domestic and international sales force, 25 of
which identified the specific customer for whom the samples were
intended. Def.Exh. A-79 [summary chart of sample requests].
(a) On July 17, 1985, domestic sales representative
Tom Szwajkos ordered five LT1070s for customer
(b) On October 8, 1985, domestic sales representative
Harvey King ordered three LT1070 samples for U.S.
customer "HP." Foreign Area Sales Manager Tom
Lane also ordered two LT1070 samples each for
customers Racal, GEC AV/MAILSEA, Eurotherm and
(c) On October 17, 1985, domestic sales
representative Nancy Lee ordered two LT1070
samples for customer "Sperry Mil."
(d) On October 25, 1985, foreign Area Sales Manager
Tom Lane ordered two LT1070s samples customer
Marconi. Def.Exh. A-6 [December 1985 Sample
(e) On October 28, 1985, domestic sales
representative Bill Highsmith ordered two LT1070
samples for U.S. customer "DCA."
(f) On October 30, 1985, domestic sales
representative Allan Horne placed two orders for
two LT1070 samples for U.S. customers ...