Definitive Holdings v. PowerTEQ — Federal Circuit Affirms Engine Tuning Patent Invalidity Under On-Sale Bar

Background

Definitive Holdings sued Powerteq LLC — a subsidiary of Holley Performance Products, the automotive aftermarket company behind the Edge and Superchips tuning brands — for infringement of U.S. Patent No. 8,458,689. The ‘689 patent, with a priority date of March 30, 2001, claims methods and apparatus for upgrading the software in a vehicle’s engine controller by connecting a device that can replace portions of the stock engine control software with new performance-tuned data blocks while retaining an image of the original software for restoration.

Powerteq moved for summary judgment, arguing that a third party, Hypertech Inc., had sold a substantially identical device — the “Power Programmer III” (PP3) — since at least 1996, well before the patent’s March 30, 2000 critical date for the on-sale bar. The PP3 allowed car enthusiasts to reprogram their engine control units (ECUs) using the same upgrade-and-restore approach claimed in the ‘689 patent.

Definitive did not dispute the underlying facts about the PP3’s capabilities. Instead, it challenged the admissibility of the evidence: (1) the deposition testimony of Hypertech’s CEO, Mr. Ramsey, who joined the company years after the PP3 was discontinued, arguing he lacked personal knowledge; (2) the PP3’s source code, arguing it was inadmissible hearsay; and (3) the legal theory that a sale of a device whose internal software functionality was not publicly disclosed could trigger the on-sale bar at all. The District of Utah (Judge Barlow) rejected all three arguments and granted summary judgment of invalidity.

The Court’s Holding

Affirmed.

On the deposition testimony: Without reaching the broader question of whether Rule 30(b)(6) corporate representative testimony can be used at summary judgment when the witness lacks personal knowledge, the Federal Circuit held that the relevant portions of Mr. Ramsey’s testimony were within his personal knowledge. He had personally reviewed sales records from a server dating to the 2000s, personally examined a 1996 PP3 still in its original packaging with installation guide, and personally compared the device’s software version number to a revision list showing it was from April 1996. These portions alone were sufficient to authenticate the sales records and establish that the analyzed source code was running on devices sold before the critical date.

On source code as hearsay: In a notable evidentiary ruling, the court held that source code commands are not hearsay. Drawing on Tenth Circuit precedent that “an order or instruction is, by its nature, neither true nor false and thus cannot be offered for its truth,” the court analogized source code instructions to verbal commands like “dispose of a bag” — they are directives, not assertions. While descriptive comments embedded in source code could potentially be hearsay, the operative commands themselves are not. The court distinguished its earlier decision in Wi-Lan v. Sharp, which addressed the trustworthiness of printed source code excerpts under the business records exception, not whether source code commands are statements at all.

On the on-sale bar: The court rejected Definitive’s argument that the on-sale bar under pre-AIA § 102(b) requires the seller to publicly disclose how the sold device works. Citing Pfaff v. Wells Electronics and J.A. LaPorte v. Norfolk Dredging, the court reaffirmed that “the question is not whether the sale ‘discloses’ the invention at the time of sale, but whether the sale relates to a device that embodies the invention.” Because the PP3 was sold directly to the public and the public was “directly making use of the patented features” — connecting the device to reprogram their engines — the on-sale bar applied. This was not a secret-process case where only a product manufactured by a secret method was sold.

Key Takeaways

• Source code commands are not hearsay. The Federal Circuit clarified that executable source code instructions — the actual commands telling a computer what to do — are not “statements” under the hearsay rules because they are neither true nor false. This is an important evidentiary precedent for patent cases involving software prior art.
• The on-sale bar doesn’t require disclosure of how a device works. When a product embodying a patented invention is sold to the public, the on-sale bar is triggered regardless of whether the buyer can reverse-engineer the internal functionality. The distinction matters only when a secret process is used to manufacture a product that doesn’t itself embody the claimed invention.
• Challenging evidence admissibility is not a substitute for disputing the facts. Definitive chose not to dispute any of Powerteq’s material facts and relied entirely on evidentiary challenges. Having lost those challenges, it could not establish a genuine dispute of material fact on appeal.
• Personal knowledge of records can be established through hands-on examination. A corporate representative who personally reviews records, examines physical devices, and compares version numbers has sufficient personal knowledge to authenticate those materials — even if he wasn’t with the company when the records were created.

Why It Matters

This decision is significant for anyone holding software-related patents, particularly in the automotive aftermarket space. It reinforces that selling a device to the public that performs the patented method is a sale of the method itself — you cannot patent what the public was already buying and using just because buyers didn’t understand the source code under the hood. The ruling on source code and hearsay also has broader implications for software patent litigation: litigants can now cite this precedential decision to rebut blanket hearsay objections to prior art source code, streamlining the use of legacy code as invalidity evidence.