Minton v. Gunn

301 S.W.3d 702, 2009 WL 3246708
CourtCourt of Appeals of Texas
DecidedJanuary 15, 2010
Docket2-06-443-CV
StatusPublished
Cited by5 cases

This text of 301 S.W.3d 702 (Minton v. Gunn) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Minton v. Gunn, 301 S.W.3d 702, 2009 WL 3246708 (Tex. Ct. App. 2010).

Opinions

OPINION

JOHN CAYCE, Chief Justice.

This is a legal malpractice case in which the trial court rendered take-nothing summary judgment against appellant Vernon F. Minton in favor of appellees Jerry W. Gunn, individually, Williams Squire & Wren, LLP, James E. Wren, individually, Slusser & Frost, L.L.P., William C. Slus-ser, individually, Slusser Wilson & Partridge LLP, and Michael E. Wilson, individually, all of whom represented appellant in a prior patent infringement action. We affirm.

I. Brief Summary of Relevant Patent Law Rules

A. The On Sale Bar Rule

This legal malpractice case involves application of a rule of federal patent law commonly referred to as the “on sale bar rule.” This rule provides that a patent is invalid if it was put into commercial use through a commercial offer for sale more than one year before the inventor applied for the patent.1 Under federal patent law, the date one year prior to the patent application’s filing is commonly referred to as the “critical date.”2 A single commercial offer for sale before the critical date is generally sufficient to satisfy the on sale bar.3

B. The Experimental Use Doctrine

This case also involves the “experimental use doctrine.” This doctrine provides that if the purpose of an offer for sale is primarily experimental, as opposed to commercial, the patent is not invalidated under the on sale bar rule.4

The ultimate question of whether a transaction is primarily for experimental use is one for the court to decide.5 When patent holders or inventors contend that the experimental use doctrine applies, they are arguing that the on sale bar does not apply because it has been negated by the primarily experimental purpose of the commercial offer for sale.6

In determining whether the experimental use doctrine negates application of the on sale bar, the controlling issue is the pui'pose of the offer for sale, not the developmental status of the claimed invention.7

[705]*705In other words, the question posed by the experimental use doctrine is not whether the invention is “under development, subject to testing, or otherwise still in its experimental stage” at the time of alleged sale, but whether the primary purpose of the inventor at the time of the sale was to conduct experimentation.8 “Commercial exploitation, if not incidental to the primary purpose of experimentation, will result in an on sale bar, even if the invention was still in its experimental stage.”9

II. Factual and Procedural Background

A.The TEXCEN Lease

In the early 1990s, appellant Vernon Minton, a former securities broker, formed a company called Texas International Stock Exchange, Inc. (TISE) and began developing a telecommunications network and software program called the Texas Computer Exchange Network (TEXCEN). TEXCEN was designed to allow individuals to trade securities through a computer network.

In 1994, Minton approached R.M. Stark & Co. (Stark), a National Association of Securities Dealers, Inc. (NASD) brokerage/dealer, regarding a potential lease of the TEXCEN system. In January 1995, Minton sent Stark a letter stating that “[ajfter five years of development, TEX-CEN is scheduled to be on-line during March or April of this year,” and that, “[a]s we discussed, [TISE] would appreciate your consideration in utilizing this program as an exclusive opportunity for enhanced order flow.” Minton attached a draft lease agreement that stated it was intended “for the purpose of opening brokerage accounts and executing trades for individuals using TEXCEN.”

Throughout negotiations, Minton never told Stark that the TEXCEN lease would be for experimental purposes, although Stark was aware that the system needed to be reviewed and approved by NASD before he could use it. Stark and TISE entered the TEXCEN lease on March 8, 1995 (the TEXCEN Lease). The lease provided in part that (1) Stark had the right to open brokerage accounts and execute trades for its individual customers using TEXCEN, (2) TEXCEN would perform in a workmanlike manner, and (3) Stark would pay the lesser of $2,000.00 or thirty percent of his gross revenues derived from TEXCEN per month for the term of the lease.

B. The '643 Patent

On June 28, 1996, Minton filed his provisional application for United States Patent No. 6,014,643 (the '643 Patent), more than one year after signing the TEXCEN Lease. The '643 Patent was for an interactive securities trading system based substantially on TEXCEN. Indeed, Minton stated in his deposition that he provided a copy of the TEXCEN software assistance guide to his patent attorney, who used it to prepare the '643 Patent application. On January 11, 2000, the United States Patent and Trademark Office issued the '643 Patent.

C. The Underlying Patent Litigation

Minton filed suit against NASD in the United States District Court for the Eastern District of Texas to enforce the '643 Patent (the Patent Litigation), and later named NASDAQ Stock Market, Inc. (NASDAQ) as an additional defendant. Minton’s lawyers in the Patent Litigation, the appellees in this case, filed suit without [706]*706knowledge of the TEXCEN Lease. Min-ton did not disclose the lease to appellees until after NASD and NASDAQ first revealed its existence in discovery conducted in the Patent Litigation.

NASD and NASDAQ moved for summary judgment on Minton’s infringement claims on the ground that the '643 Patent was invalid under the on sale bar set forth in 35 U.S.C. § 102(b). They specifically contended that TEXCEN embodied Min-ton’s invention and that the lease, signed March 8, 1995, was a commercial offer for sale prior to the '643 Patent’s critical date of June 28, 1995. Appellees contend that, among other things, NASD and NASDAQ asserted that the TEXCEN Lease: (1) stated that TEXCEN was already developed; (2) offei’ed TEXCEN for use with customers; (3) established payment terms; (4) warranted that TEXCEN would perform; and (5) stated that the lease was entered for the purpose of allowing individuals to open brokerage accounts and execute trades.

Minton testified in the Patent Litigation that he expected to “benefit financially” from the lease and that, subject to regulatory approval, the lease allowed Stark to use TEXCEN “commercially.” Minton conceded that TEXCEN was offered for sale more than one year before his patent was filed, but argued that TEXCEN did not include all of the elements of the '643 Patent’s claims and thus the on sale bar did not apply. The district court granted NASD and NASDAQ’s motion for summary judgment based upon the on sale bar.

Following the district court’s order, Minton asked his attorneys to consider defense of the on sale bar on a new ground: that the purpose of the TEX-CEN Lease was primarily experimental rather than commercial, and, therefore, the experimental use doctrine negated the on sale bar. A motion for reconsideration was filed on Minton’s behalf, with the experimental use issue briefed by new counsel.

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Bluebook (online)
301 S.W.3d 702, 2009 WL 3246708, Counsel Stack Legal Research, https://law.counselstack.com/opinion/minton-v-gunn-texapp-2010.