Appellants contend that the district court erroneously rejected their attacks on the validity of the '6041 and '2852 patents on variable resistance controls and erroneously found that their 'PT--15' trimmer infringed the former patent. The '604 patent discloses a flared bearing used as a dust excluding seal of an aperture in the housing enclosing the control. The '285 patent describes a mechanical assembly which uses a metallic collector--an essential component of the control--as the base of the housing.

The principal issues on appeal are (1) whether one of appellee's earlier patents ('478)3, which disclosed the use of a flared bearing to hold the components of the control together, made the '604 improvement obvious; (2) whether the failure to cite '478 to the Patent Office during the processing of the '604 application breached appellee's duty of disclosure; (3) whether reversal of the finding that the '604 patent has been infringed is required by either (a) the fact that appellants' PT--15 trimmer (which apparently is similar to appellee's '285 device) uses a metallic collector as a base, whereas the device described in the '604 specifications uses a nonconductor and admittedly would not function with a metal base, or (b) the fact that the PT--15 trimmer uses a flared bearing to seal only one of two openings in its housing; (4) whether the erroneous exclusion of critical evidence frustrated the presentation of a meritorious 'on sale' challenge to the validity of the '285 patent;4 and (5) whether appellee's development of the '285 device was so abortive that either (a) it was not 'useful' within the meaning of § 101;5 or (b) the patent specifications failed to describe 'the best mode' of carrying out the invention as required by § 112;6 or (c) the invention was 'abandoned' within the meaning of § 102(c).7 We shall briefly describe the product, the parties, and the posture of the case, and then discuss the facts in greater detail in connection with our consideration of the several issues.

A variable resistor--sometimes called a 'potentiometer' or a 'trimmer'--is used to adjust the electrical resistance of an electronic circuit to a desired level. The volume and tone controls on a television or radio set are examples of variable resistors. The essential elements of such a control include (1) a driver, or shaft, which way be turned manually or with a tool, such as a screwdriver; (2) a contactor, which is affixed to, and may be rotated by, the driver, and which makes electrical contact between the collector and the resistance element; (3) the collector, which must be a conductor of electrical current and is installed in a fixed position; and (4) the resistance element, which may be a horseshoe shaped sliver of carbon affording varying degrees of electrical resistance, depending upon the location of the contactor which may be swept from one end of the resistance element to the other by turning the driver. These elements may be arranged in a variety of configurations and sizes; in some designs they are enclosed within a dust excluding housing. The patents in suit relate to the mechanical structure rather than the electrical technology of the controls.

The parties are competitors in the manufacture and sale of electrical components for television sets. The appellants are a Spanish manufacturing corporation8 and its affiliated American distributor,9 which the district court found to be the 'alter ego' of its parent. Since that finding is not challenged, we shall refer to the two simply as 'Piher.' Appellee ('CTS'), an Indiana corporation,10 originally accused Piher of infringing four of its patents.11 Since one of these has now expired, and since only minimal damages are recoverable as a result of infringement of the second, Piher has not appealed from the holding that those two patents were valid and infringed. Moreover, by stipulation the parties withdrew the question whether Piher's PT--15 trimmer infringes the '285 patent, as well as the question of priority of invention of what we infer to be essentially the same disclosure in the CTS '285 patent and in Piher's Spanish patent describing the PT--15 trimmer; that priority issue is the subject of an interference proceeding pending in the Patent Office. Specific attacks on the validity of the '285 patent were, however, raised by Piher's counterclaim and decided by the district court. The issues on appeal, therefore, involve the validity of '604 and '285 and infringement of '604. We turn to those issues.

The specifications in the '604 patent describe a variable resistor which is completely enclosed in a tiny boxlike plastic housing containing one round opening through which a plastic driver or shaft projects. That projection of the shaft is in the form of a barrel which includes a flared bearing extending outwardly from the periphery of the opening. The bearing fits against the surface of the housing with sufficient firmness to hold the components of the device securely together and yet be smoothly rotatable; it also performs the function of preventing dust or other foreign matter from entering the component.

Piher argues that the '604 improvement was obvious because (a) with one exception, the general arrangement of its components within a dust excluding housing was disclosed by Barden--'140,12 and (b) that one exception, namely the flared bearing, was disclosed by appellee's '478 patent. We agree with Piher's premises but not with its conclusion.

In Barden--'140 the sealing function was performed by a thrust washer encircling the driver just inside the opening in the housing. Both the '478 patent and the '604 patent describe unsatisfactory characteristics of such a washer and disclose a construction which substitutes a flared bearing--i.e., an enlargement of a portion of the driver--for the washer. That substitution having been disclosed by '478, Piher argues that the same substitution disclosed in '604 must surely be classified as obvious.

If the flared bearing in '604 merely performed the function of maintaining a secure relationship among the components during adjustment, Piher's argument would be valid. But in '604 the flared bearing is designed to perform the additional dust excluding function, a function not even arguably performed by its antecedent in '478.13 Indeed, since the '478 device is not enclosed in a housing, that patent does not concern itself with the use of any sealing member, and therefore neither implicitly nor explicitly suggests that the enlarged portion of the shaft may be used to perform a sealing function.

Although each of the elements of the '604 combination was disclosed by either Barden--'140 or by the '478 patent, the fact that the flared bearing would successfully perform a sealing function was disclosed by neither. According to expert testimony which the trial judge credited, that fact was not obvious to persons skilled in the art when the invention was made. Since the sealing function of the bearing in the '604 device was of critical importance in the Examiner's decision to allow the claims,14 and since his decision is presumptively correct, the nonobviousness of that application of a flared bearing in a variable resistance control justifies the district court's conclusion that the concept was patentable.

As we have already pointed out, the flared bearing in '604 performed both a structural function and a sealing function. If only the former were involved, CTS clearly would have been obligated to call the Patent Examiner's attention to '478. Indeed, in view of the discussion of the structural importance of the flared bearing in '604, we are somewhat surprised and troubled by the failure even to cite '478 during the prosecution of the '604 application. Nevertheless, we accept appellee's argument that since '478 described a component which was not enclosed in a housing, and therefore had no relevance to the function of sealing an opening in a housing, prior art which disclosed the use of comparable closures to seal openings in other enclosed devices was more pertinent than '478.15

That conclusion does not necessarily lead to the further conclusion that the failure to cite '478 did not violate the applicant's duty of disclosure. We must assume that the applicant deliberately decided not to call the Examiner's attention to '478, since it was one of its own patents, cf. Armour & Company v. Swift & Company, 466 F.2d 767, 777--779 (7th Cir. 1972), and we are unwilling to assume that the Examiner was familiar with it, id. at 779. Notwithstanding these assumptions, the patentee is correct in emphasizing the improbability that a patent on an unenclosed control would affect the Examiner's evaluation of a means for effectively sealing the opening in a housing during adjustment of the control. We therefore conclude that it was a permissible exercise of judgment for CTS to omit the citation of the '478 patent during the processing of the '604 application.

Our reasons for affirming the district court's infringement finding may be briefly stated.

In the device disclosed in the '604 specifications, and in the components actually marketed by CTS, the base of the housing is made of plastic and has the resistance element affixed to it. In contrast, in Piher's PT--15 trimmer, the metal collector also serves as the base of the housing. Unquestionably, if a metal base were used in the CTS device, it would not function. There is, therefore, a rather dramatic difference between the two devices.

The question of infringement, however, is answered by comparing the accused device with the claims of the patent, not with any particular embodiment--even the preferred embodiment--of the invention.16 The claims in the '604 patent do not require that the base of the housing be a nonconductor. Despite the different arrangement of the elements of the Piher trimmer, each of the elements described in the '604 claims may be found therein. The district court so found, and that finding is supported by the testimony of plaintiff's expert. Most importantly, the arrangement of the base of the housing, the collector, and the resistance element is really not relevant to the question whether the accused device uses a flared bearing on a driver to perform a sealing function. The critical element of the invention is found in Piher's trimmer.

Piher's second attack on the infringement finding was first advanced in its reply brief in this court. Piher points out that the shaft in the PT--15 trimmer protrudes through an opening in the bottom as well as through a second opening in the top of its housing, and that the flared bearing seals only one of the two holes.17 It would seem to follow that the housing was not designed to exclude dust. In contrast, the '604 device has only one opening in its housing and the '604 claims refer to 'an aperture in one of the walls' and described the location of the flared bearing with reference to the periphery of 'the aperture.'

It is not the fact that the Piher device has two holes rather than only one that casts doubt on the infringement finding; for surely if both holes were sealed with flared bearings, there would be infringement. Rather, it is the fact that there appears to be no seal at all over one of the holes that raises the question whether Piher's housing is intended to exclude dust. But this question was unequivocally answered in the trial court when Piher's counsel acknowledged that Piher had made no attempt to prove that the Piher trimmer does not have a dust excluding housing.18 Thus, we must assume that the second opening is effectively sealed against dust by a noninfringing means--perhaps merely a close adjustment between the driver and the aperture. That assumption, however, does not undermine the sufficiency of the finding that the flared bearing, when it does perform a sealing function, infringes the '604 patent.

We conclude that the record adequately supports the finding of infringement.

The fourth and fifth issues relate to the validity of the '285 patent. That patent describes a control which differs from the prior art in two important respects. The metal collector serves as the base of the housing, thereby reducing the number of parts,19 and the contactor is pinched between the collector and the resistance element which are in parallel planes, thereby maintaining a more constant pressure between those two elements than when the spring-like contactor is employed between the two elements arranged concentrically in the same plain.20 Both of these functions are also found in Piher's PT--15 trimmer.21 As already noted, there is an interference proceeding pending in the Patent Office to decide the question of priority of invention.

CTS may have been the first to experiment with the '285 construction, but Piher appears to have been the first to exploit it commercially.

In 1967, CTS commenced a 'low cost 450' project which eventually resulted in the '285 patent. After rudimentary testing of the handmade model, detailed drawings of the device shown in the '285 patent were prepared, about $20,000 was invested in the acquisition of temporary production tools, and a number of prototypes were assembled. These samples were tested in May of 1968. Although a defect was found in the samples, CTS determined that the defect was easily correctable and that the samples were commercially satisfactory. There is also testimony that other samples tested in January of 1969 were found to be fully operable. On the basis of that evidence, the district court found that the invention had been reduced to practice in May, 1968, and again in January, 1969. The '285 patent application was filed on March 16, 1970, and the patent issued in 1972. CTS has not yet marketed its 'low cost 450' control, but one of its witnesses testified that it plans to do so in the future.

Piher filed a Spanish application on its PT--15 trimmer in July of 1968. In the fall of that year, the witness Adams, who was the manager of International Materials for Motorola, visited Piher's facilities in Barcelona and was shown prototypes of the new trimmer. Toward the end of the year he received samples from Piher and placed an order for a production trial run in January of 1969. A portion of that order was shipped from Barcelona on March 3, 1969, and was delivered to Motorola in April.

Piher's principal attack on the validity of the '285 patent is based on evidence relating to this shipment which left Barcelona more than a year before the date of the application for the patent but did not arrive in the United States until after the critical date. Some of this evidence was admitted and some is in the record as part of Piher's several offers of proof which the trial judge rejected. Before discussing the specifics of that evidence it is important to identify the material issues.

The challenge rests on § 102(b) which defines the so-called 'on sale' defense. The statute speaks in terms of 'the invention' being on sale in the United States more than one year prior to the application date.22 It might more precisely have referred to a device embodying or disclosing the invention. In any event, the defense is most frequently asserted on the basis of evidence that the patentee's own product was on sale more than a year before the patent application was filed.23 The statutory purpose in such cases is to make sure that the inventor may not extend the period of patent protection for the commercial exploitation of his monopoly beyond the statutory term.24

But the defense may also be predicated on evidence that the invention was disclosed in a product sold by someone other than the patentee more than a year before the filing date. Dunlop Holdings, Ltd. v. Ram Golf Corp., 524 F.2d 33, No. 74--2024 (7th Cir. 1975). In such cases, the statutory purpose is to preclude the award of a patent to a person who is not actually the inventor; proof that a product was on sale in the United States more than a year before the application date conclusively places that product in the category of prior art of which the inventor is presumed to have had knowledge. See Judge Duffy's opinion in Illinois Tool Works, Inc. v. Solo Cup Co., Inc., 461 F.2d 265, 270--271 (7th Cir. 1972). The 'on sale' defense in this case25 in effect raises the question whether Piher's PT--15 trimmer must be regarded as prior art because it was on sale before the critical date of March 16, 1969.

We first put to one side an argument that CTS repeatedly asserted in the district court and which may have provided an erroneous predicate for some of the trial judge's evidentiary rulings. CTS contended that Piher was required to prove a completed sale in the United States prior to the critical date. Admittedly, Piher proved no such sale. But if it was then offering to prospective purchasers in the United States a product which (a) embodied the '285 invention and (b) was complete in the sense that it represented a reduction of the invention to practice, the invention was on sale within the meaning of the statute and the '285 patent is invalid.26

There is substantial evidence in the record supporting the conclusion that Piher's PT--15 trimmer disclosed the essential elements claimed in the '285 patent. Piher's trimmer was described in detail by the CTS expert who explained why it infringed the '604 patent; his testimony and the exhibits he prepared clearly disclosed the use of a metal collector as a base for the housing, and also the contactor pinched between the collector and the resistance element in separate paralel planes. Moreover, in its original complaint, CTS alleged that the PT--15 trimmer infringed the '285 patent.

CTS points out, however, that the fact that the invention was disclosed in Piher's trimmer in 1972 when the suit was filed does not necessarily establish the fact that it was embodied in any device which was on sale prior to March 16, 1969. For there is evidence in the record that the trimmer has been modified from time to time, and Piher had the burden of proving that it reduced the concept to practice before the critical date. See Dart Industries, Inc. v. E. I. DuPont De Nemours and Co., 489 F.2d 1359, 1364 (7th Cir. 1973). Thus, the character of the devices shipped by Piher on March 3, 1969, was of critical importance.

Adams testified that after those devices were delivered to Motorola in April of 1969, they were turned over to Gunar Klass for evaluation. Klass testified that he conducted a series of tests in April, May and June of 1969. CTS seems to have persuaded the trial judge that evidence regarding these tests was irrelevant because the product did not arrive in the United States until after the critical date.27 CTS convinced the trial judge that a copy of the Motorola purchase order issued on January 22, 1969, relating to the March shipment was inadmissible because it did not constitute 'the best evidence' of what Motorola had ordered, and its relevance was not manifest from the face of the document. CTS also persuaded the court to exclude testimony by Klass, who had been responsible for Motorola's testing of the Piher device, in which Klass described the essential features of that device.28 The court also sustained objections to the admissibility of one of the devices which the witness identified as having been tested in 1969 on the ground that it had not been in the personal custody of the witness for about a year, but rather had been in the custody of Motorola's patent department, and there was no absolute assurance that the offered exhibit was the one he had tested. The arguments over the admissibility of these exhibits and this testimony were extensive and we are not entirely sure that we understand the basis for the various restrictive rulings made by the trial judge. We have no doubt, however, that the purchase order was relevant and that the fact that it was a carbon rather than a ribbon copy did not justify its exclusion.29 Moreover, the lengthy testimony of the witness Klass, which we have studied with care, contains sufficient assurance that the offered exhibit was one of the devices ordered in January and received in April to have justified its admissibility.30 As CTS argues, the record does not entirely foreclose the remote possibility that this particular device was mislabeled, or confused with another device when it was in the custody of Motorola's patent department; such a possibility affects the probative value of the exhibit, but in view of the positive character of the witness's testimony that it was one of the devices which had been tested in 1969, and that it was one that had been received pursuant to the January order, it should have been admitted. Surely, in a case tried to the court without a jury, discretion in such evidentiary rulings should be exercised in favor of admissibility, particularly when the record is more apt to be encumbered by extensive argument over issues of admissibility than by the evidence itself.31

If the physical exhibit idenitified by Klass had been admitted, and if the trial court had accepted his oral testimony presented in an offer of proof, the evidence would have been sufficient to support findings of fact establishing Piher's 'on sale' defense. For that evidence tended to prove that the device which Motorola received in the United States in April of 1969 disclosed the '285 invention. Moreover, Klass' testimony about the tests performed under his direction, together with evidence that these devices were shipped from Barcelona on March 3, 1969, was sufficient to justify the inference that the Piher control had been reduced to practice prior to the critical date.32 Thus, the erroneous evidentiary rulings prevented Piher from presenting a possibly meritorious defense.33

Piher argues that we should therefore hold the '285 patent invalid. Such a holding, however, would require us to make the requisite findings of fact in the first instance and to conclude that Piher has met its burden with clear and convincing evidence. As we have indicated, if the proffered testimony is credited, it appears that Piher will prevail. But the question of credibility and the interpretation of the exhibits are matters that must be decided in the first instance by a trail judge. We therefore remand for a new trial of all issues raised by Piher's on sale challenge to the validity of the '285 patent.

As already noted, CTS has never marketed its 'low cost 450' control commercially. Moreover, there were defects, albeit correctable, in the prototypes which CTS tested. Piher therefore argues that the invention was not useful, that the best mode of carrying it out was not described in the '285 patent specifications, and that the invention was abandoned. The trial judge rejected each of these contentions and we cannot say that his findings are clearly erroneous.

The fact that there was a defect in the prototypes surely does not demonstrate that the invention was not useful. Indeed, since the basic features of the invention appear to be embodied in Piher's PT--15 trimmer--as may fairly be inferred from Piher's on sale defense and CTS' original charge that the PT--15 infringes the '285 patent--and since Piher's trimmer is evidently a commercial success, it seems logical to infer that the subject matter of the invention is useful within the meaning of § 102.

Similarly, even if the CTS prototypes are not the best possible embodiment of the invention, we find nothing in the record to support the argument that the inventors contemplated a better mode than that disclosed in the specifications. Section 112 merely requires that the patent disclose 'the best mode contemplated by the inventor of carrying out his invention.'

Finally, the fact that CTS promptly filed its patent application forecloses the contention that the invention was abandoned within the meaning of § 102(c). There are, of course, cases in which the character of the commercial exploitation of an invention will be relevant to the issue of abandonment, cf. Dunlop Holdings, Ltd. v. Ram Golf Corp., 524 F.2d 33, No. 74--2024 (7th Cir. 1975), but if the application is promptly filed and diligently prosecuted, the decision to postpone commercial development does not constitute abandonment.

The district court refused to award costs to CTS, even though it prevailed on all issues decided by the district court. CTS has therefore filed a cross appeal, relying heavily on our recent decision in Popeil Bros., Inc. v. Schick Electric, Inc., 516 F.2d 772 (1975). In view of our remand for a new trial of the on sale defense, we believe that the question of what costs, if any, CTS should recover, can await the conclusion of the proceedings in the trial court.

The judgment of the district court is affirmed in part and reversed in part.