text:
    PLY-GEM INDUSTRIES, INC., Plaintiff-Appellant, v. Bernard A. GREEN, as Executor of the Estate of John J. Albert, et al., Defendants-Appellees.
    No. 715, Docket 73-2151.
    United States Court of Appeals, Second Circuit.
    Argued March 14, 1974.
    Decided July 9, 1974.

      Thomas W. Hill, Jr., New York City (Spear & Hill, New York City, on the brief), for plaintiff-appellant.
    Edward Brodsky, New York City (Edwin L. Schwartz and Goldstein, Shames & Hyde, New York City, on the brief), for defendants-appellees.
    Before HAYS and TIMBERS, Circuit Judges, and DAVIS, Judge.

       Hon. Oscar II. Davis, of the United States Court of Claims, sitting by designation.

   TIMBERS, Circuit Judge:

On this appeal from a judgment entered July 12, 1973 after a bench trial in the Southern District of New York, Edmund L. Palmieri, District Judge, (1) which dismissed a complaint in an action brought to recover damages for alleged violations of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) (1970), and Rule 10b-5 promulgated under the 1934 Act, 17 C.F.R. § 240.10b-5 (1973), and related pendent state claims, all in connection with defendants’ sale in 1968 of common stock in their closely held corporation, and (2) which awarded defendants $529,940 damages, plus interest from June 5, 1970, on their counterclaims which alleged a breach by plaintiff of its obligations under a stock purchase agreement, the principal issues are whether the record supports the district court’s findings that there were no material misrepresentations or omissions and whether the district court correctly computed defendants’ damages.

We affirm in part, and remand in part for a minor reeomputation of damages.

I.

The action arises from the 1968 purchase by Ply-Gem Industries, Inc. (Ply-Gem) of 90% of the common stock of •Harcord Manufacturing Company, Inc. (Harcord) from John J. Albert and Maxwell B. Gold. Ply-Gem is a publicly held corporation. It is engaged in the manufacture and distribution of plywood and related products. Its common stock is traded on the American Stock Exchange. Harcord is engaged in the manufacture of cardboard and fibre containers.

After months of discussions, appraisals and negotiations between representatives of Ply-Gem and Harcord and pursuant to a formal stock purchase agreement, Ply-Gem acquired the 90% interest of Albert and Gold in Harcord on June 5, 1968. In accordance with the agreement, Albert and Gold received $450,000 in cash and 22,500 shares of Ply-Gem common stock at the closing on June 5. The agreement guaranteed that Albert and Gold would receive from Ply-Gem $20 per share for their 22,500 shares of Ply-Gem stock. Moreover, the agreement provided that, if on the second anniversary of the June 5, 1968 closing (the valuation date) the 10 day average closing price for Ply-Gem stock was less than $20 per share, Ply-Gem at its option would pay the sellers either $20 per share, or the difference between $20 and the average market price. The agreement further provided that, in the event Ply-Gem stock were selling below $15 per share on the valuation date, Ply-Gem could elect to pay the sums due under the alternate repayment options outlined above in four annual installments, with interest at 5% per annum commencing on the valuation date. Finally, Albert and Gold were guaranteed under the agreement an annual 5% cash or stock dividend, or an annual $1.00 per share increase in the $20 guaranteed repurchase price, for “each year . so long as the stock is not repurchased”.

On June 2, 1970, three days prior to the valuation date, Ply-Gem notified Albert and Gold that it elected to rescind the purchase agreement because of allegedly material misrepresentations and omissions made in 1968. This notification- — Ply-Gem’s first hint of dissatisfaction with its acquisition of Harcord— was given when Ply-Gem stock was selling at approximately $6.50 per share and shortly before Ply-Gem would have been required under the agreement to make substantial payments to Albert and Gold.

Ply-Gem on July 30, 1970 commenced the instant action, alleging that Albert and Gold had induced it to purchase Harcord by misrepresentations and omissions of material facts, and seeking either rescission or damages. Albert and Gold counterclaimed for the amount due them under the agreement.

After a bench trial, Judge Palmieri filed a comprehensive opinion which included detailed findings of fact and conclusions of law. He rejected Ply-Gem’s numerous allegations of fraud, deceit, negligent misrepresentation and breach of warranty, and he awarded Albert and Gold recovery on their counterclaims. The crux of the judge’s holding is the following:

“On the basis of the entire record, the conclusion is inescapable that Ply-Gem’s last minute attempt [s] to rescind its contract and its subsequent repudiation of its terms were afterthoughts designed . to obviate the fulfillment of its commitments. . . . Ply-Gem’s charges of fraud and misrepresentation are unsubstantiated by any credible proof in the case.”

II.

On appeal Ply-Gem has narrowed its position. It now claims only that Albert and Gold failed to disclose to Ply-Gem the fact that Harcord had committed a major portion of its 1968 production capacity to two allegedly unfavorable government contracts for the manufacture of ammunition containers. This claim is contrary to specific and unchallenged findings of the district court as to what was told to and known by Ply-Gem before the agreement was entered into.

The district court found, and the record fully supports the finding, that Ply-Gem had been told that Harcord had a backlog of orders of approximately $600,000; that the government ammunition container business was a substantial but rapidly declining factor in Harcord’s total mix of products; that competition in the industry was increasing; and that a “price decline in government business was already occurring.” Such disclosures clearly were sufficient to apprise Ply-Gem of what it now claims to be the unfavorable aspects of the two government contracts in question. In short, we hold that the record adequately supports the determination of the district court that “Ply-tíem had knowledge of all of the facts concerning the claimed omissions” and that its Section 10(b), Rule 10b-5 and pendent state claims are totally without merit.

III.

Ply-Gem also claims that the district court improperly computed Albert’s and Gold’s damages. The record shows that Judge Palmieri reached his award of damages as follows: (1) he determined the total number of shares to which Albert and Gold were entitled on June 5, 1970 (22,892); (2) he added the three 5% stock dividends for the years 1971-73 (3605 shares); (3) he multiplied the 26,497 share total by $20 per share and arrived at the sum of $529,940. He then awarded interest on the total sum at the statutory rate from June 5, 1970 to the date of judgment. The total award was $644,098.04.

Ply-Gem claims that these computations are incorrect in three material respects. First, it claims that the court erroneously included a total of five 5% stock dividends, rather than the two which it says is provided for in the agreement. Second, it claims that it was entitled to the benefit of the installment repayment option and the 5% interest rate provided for in the agreement. Third, it claims that the court erred in awarding interest from June 5, 1970 on stock dividends to which Albert and Gold were entitled in 1971, 1972 and 1973.

The answer to Ply-Gem’s first claim is found in the express terms of the purchase agreement which provides that the 5% dividend is to be paid “each year ... so long as the stock is not repurchased”. This unambiguous language clearly negates the claim that the parties intended dividend payments to cease on the June 5, 1970 valuation date.

With respect to Ply-Gem’s second claim, of course under elemental principles of contract law, where a contract gives the promisor an option of alternate performances, damages for its breach are computed in accordance with that alternative which results in the smaller recovery. E. g., Branhill Realty Co., Inc. v. Montgomery Ward & Co., 60 F.2d 922, 923 (2 Cir. 1932); Restatement of Contracts § 344, at 565-66 (1932). Under the terms of the instant agreement, however, Ply-Gem was required to make its election as to the installment repayment option on or before the valuation date. Its failure to do so imposed upon it a duty to render complete performance on June 5, 1970. See Williston on Contracts § 1407, at 592 (3d ed. 1968). We hold, therefore, that the court was correct in denying Ply-Gem the benefit of the installment repayment option and in awarding interest at the statutory rate on the $457,840 to which Albert and Gold were entitled on the valuation date.

With respect to Ply-Gem’s third claim, counsel for Albert and Gold conceded at oral argument that the court erred in awarding interest from June 5, 1970 on the entire value of the stock dividends which were or should have been declared for the years 1971, 1972 and 1973. We assume that the parties can agree on this small sum and that .a stipulation correcting the judgment accordingly will be filed with the Clerk of this Court within 30 days of the date of this opinion. If not, we remand to the district court for the minor recomputation of damages indicated.

Affirmed in part; remanded in part.

      . Albert and Gold were the sole shareholders of Harcord Industries, Inc., from which Ply-Gem formally purchased the 90% interest in Harcord. On January 21, 1969, Harcord Industries was liquidated. Albert and Gold succeeded to its rights and assets and assumed its liabilities.
      Albert died after the commencement of this action. His estate has been substituted as a defendant.

      . In December 1968, Ply-Gem purchased the remaining 10% of Harcord common stock from Edward Kime, President of Harcord. Ply-Gem’s agreement with Kime contained no repurchase guarantees. He is not a party to the instant action.

      . Pursuant to the agreement these shares were restricted and could not be freely sold.

      . Judge Palmieri computed damages in accordance with the alternate dividend provi-, sions of the agreement. He properly declined to award damages based on an annual $1.00 increase in the guaranteed repurchase price, but awarded the lesser total based on the annual 5% stock dividends.

      . Prior to September 1, 1971, the legal rate of interest in New York was 7%% per an-num. Effective that date, the rate was reduced to 6% per annum. See N.Y.C.P.L.R. § 5004 (McKinney 1974 Supp.).


source: Caselaw Access Project

author: PER CURIAM.

license: Public Domain

text:
    J. T. ROACH, Appellant, v. BOARD OF PARDONS AND PAROLES, STATE OF ARKANSAS, et al., Appellees.
    No. 74-1329.
    United States Court of Appeals, Eighth Circuit.
    Submitted Sept. 13, 1974.
    Decided Oct. 16, 1974.
    J. T. Roach, pro se.
    Jim Guy Tucker, Atty. Gen., and James W. Atkins, Asst. Atty. Gen., Little Rock, Ark., for appellees.
    Before VOGEL, Senior Circuit Judge, and ROSS and WEBSTER, Circuit Judges.
   PER CURIAM.

On April 15, 1974, appellant sought injunctive relief under 42 U.S.C. § 1983 from denial of parole by the Board of Pardons and Paroles. On the same day, the United States District Court for the Eastern District of Arkansas dismissed the petition as frivolous, pursuant to 28 U.S.C. § 1915(d). Appeal was taken by appellant from such dismissal.

The record indicates that appellant was denied parole because of the nature and seriousness of the offense for which he was incarcerated, and because of his prior criminal record. Appellant contends that consideration by the parole board of his prior criminal record in determining his eligibility for parole was a violation of his constitutional rights.

Appellant argues that he has been deprived of liberty without due process of law based upon the following rationale:

(1) Denial of parole is an increase in the length of a prison sentence;

(2) An increase in sentence may be imposed only by a court of competent jurisdiction ;

(3) Therefore, parole may be denied only by a court of competent jurisdiction.

In other words, denial of parole by an agency other than a court is a denial of due process of law. U.S.Const, amend. XIV.

Also, appellant argues that to base denial of parole on prior criminal record is to impose additional punishment for his prior offense(s) in violation of his constitutional right against double jeopardy. U.S.Const, amend. V.

Appellant’s conclusions in each instance are based upon the erroneous premise that denial of parole is an increase in the sentence. In fact, parole is a supervised release from incarceration prior to the termination of sentence. Conversely, 'the denial of parole has the effect of perpetuating the status quo, i. e., continued incarceration during the term of sentence. Therefore, such denial does not give rise to multiple punishment for the same offense. United States ex rel. Jacobs v. Barc, 141 F.2d 480 (6th Cir. 1944), cert. denied, 322 U.S. 751, 64 S.Ct. 1262, 88 L.Ed. 1581; Carlisle v. Bensinger, 355 F.Supp. 1359, 1362 (D.C.Ill.1973).

A parole board is an independent statutory agency delegated broad discretionary powers in parole eligibility determinations. In making such determinations, the parole board may properly consider the length and seriousness of an inmate’s prior criminal record.

Prior criminal convictions are one of many factors a parole board should consider in its review to determine whether a prospective parolee will remain at liberty without violating the law, and whether such release will be compatible with the welfare of society. See Scarpa v. United States Board of Parole, 477 F.2d 278, 280-281 (5th Cir. 1973), vacated and remanded for consideration of mootness, 414 U.S. 809, 94 S.Ct. 79, 38 L.Ed.2d 44; Riley v. Perini, 422 F.2d 397 (6th Cir. 1970); Jones v. Salisbury, 422 F.2d 1326 (6th Cir. 1970).

We find no error in the conclusion of the District Court. Accordingly, this case is affirmed.


author: PER CURIAM:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Michael Lynn TYSON, Defendant-Appellant.
    No. 74-1226.
    United States Court of Appeals, Fifth Circuit.
    Nov. 15, 1974.

      M. C. Mykel, Atlanta, Ga. (Court appointed), for defendant-appellant.
    John W. Stokes, U. S. Atty., Gale McKenzie, Anthony M. Arnold, Asst. U. S. Attys., Atlanta, Ga., for plaintiff-ap-pellee.
    Before GODBOLD and MORGAN, Circuit Judges, and BOOTLE, District Judge.
   PER CURIAM:

Pursuant to an induction notice, Michael L. Tyson reported for induction on June 17, 1971. Tyson was referred to a civilian psychiatrist, Dr. Charles Beall, whose report stated in part: “He is correctly oriented. No hallucinations or delusions can be elicited. Memory, insight and judgment are good.” Dr. Beall concluded that Tyson was “Qualified.” Tyson was then ordered to submit to induction on June 22, 1971, but he refused. He was indicted and arrested; but because of negotiations between his attorney and the United States Attorney, he again reported for induction on July 12, 1973. Tyson submitted a letter from Dr. Lawrence Brannon, a psychiatrist, stating that he suffered from, a schizo-affective disorder and was unfit for military service. He was at this time declared unfit by the Armed Forces Examining and Entrance Station. Tyson was then prosecuted.

Because a question arose as to Tyson’s mental capacity to understand the proceedings against him', the trial court appointed Dr. E. Marston Rascoe to conduct a psychiatric examination. Although Dr. Rascoe found schizoid traits, Tyson was found competent to stand trial. The trial court ruled that testimony of Drs. Brannon and Rascoe to the effect that Tyson was not qualified for military service was inadmissible. Tyson was convicted of refusing to submit to induction, 50 U.S.C. App. § 462, and was given a probated sentence.

Factfinding for purposes of Selective Service classification is committed to the administrative process, and judicial review is limited to determining whether there is a “basis in fact” for the administrative finding. McGee v. United States, 402 U.S. 479, 91 S.Ct. 1565, 29 L.Ed.2d 47 (1971); Estep v. United States, 327 U.S. 114, 66 S.Ct. 423, 90 L.Ed. 567 (1946). Such a strict standard is likewise applicable to the analogous situation of factfinding for purposes of qualification for induction. Absent usual circumstances the courts will not inquire into an inductee’s physical fitness. United States v. Shunk, 438 F.2d 1204 (9th Cir. 1971); United States v. Haifley, 432 F.2d 1064 (10th Cir. 1970).

In United States v. Wilson, 478 F.2d 475 (9th Cir. 1973), the court held that arbitrary action by AFEES will warrant a court’s taking corrective action. In that case the government conceded that the examining psychiatrist was unaware of medical standards controlling the acceptability of registrants. However, Tyson has shown no such unawareness on the part of Dr. Beall. Tyson shows simply that two psychiatrists who examined him two years later found him to be unqualified at that time, and one of those suggested that he might have been unqualified for military service in 1971. Such a showing falls short of Tyson’s burden to show arbitrariness on the part of Dr. Beall.. A mere difference of medical opinion is not sufficient. The government showed that there was a basis in fact for finding Tyson qualified for induction in 1971 when the offense was committed.

Affirmed.


text:
    UNITED STATES of America, Plaintiff-Appellee, v. Jaime Martinez RODRIQUEZ and Roberto C. Aguilar, Defendants-Appellants.
    No. 74-2434
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    Nov. 15, 1974.
    David C. Kellum, Pasadena, Tex. (Court-appointed), for defendants-appellants.
    Anthony J. P. Parris, U. S.. Atty., Ronald J. Waska, James R. Gough, Asst. U. S. Attys., Houston, Tex., for plaintiff-appellee.
    Before BELL, SIMPSON and MORGAN, Circuit Judges.

       Rule 18, 5 Cir.; Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5 Cir., 1970, 431 F.2d 409, Part I.

   PER CURIAM:

Appellants were convicted of unlawful possession of a firearm which was not registered, in violation of 26 U. S.C. §§ 5861(d), 5871, and of unlawfully making a firearm (destructive device commonly known as a Molotov cocktail) and failing to pay the making tax, in violation of 26 U.S.C. §§ 5861(f), 5871. Appellants seek reversal of their convictions because of alleged prejudicial re-: marks by the prosecutor in closing argument. A review of the remarks reveals they were not so prejudicial as to require reversal. We affirm.

Appellants admitted at trial that they set fire to a co-worker’s car because of union activity. They were caught fleeing the scene. They alleged, however, they did not make a molotov cocktail, or intend to bomb anything.

In closing argument the prosecutor, Mr. Waska, said:

. I submit to you that if these defendants had merely wanted to burn a little gasoline by the side of the car to scare this man, so to speak, and you will recall Mr. Aguilar said — he used the term, that was translated, and we’ll give him the benefit of the doubt on the translation, he said he went out there to throw a bomb, to burn—
MR. RAMIREZ: Objection, Your Honor.
MR. WASKA: Your Honor, that’s part of the testimony.
THE COURT: I believe that is correct (TR. 177-183).
MR. WASKA: He used that phrase, “throw a bomb,” and that’s my recollection. If yours is different, I ask you to take yours, “and to scare him.”

In actuality the appellant Aguilar had testified as follows through an interpreter :

QUESTION: What did you decide to do about the situation, then ?
ANSWER: Scare him, but to burn the car by throw [sic] a bomb, or something like that, we never thought about it.

The prosecutor and the judge obviously had faulty recollections. However, the prosecutor warned the jury to rely on their own recollections and the judge instructed them they were the sole judges of the facts. The standard for judging prosecutorial misconduct was set out in United States v. Rhoden, 5 Cir. 1972, 453 F.2d 598. The test is to weigh the degree to which the alleged improper argument may have affected the substantial rights of the defendants.

The prejudicial effect, if any, of the alleged improper argument here appears to be slight, while the evidence of guilt is overwhelming. Considering the totality of all of the circumstances, it is our conclusion beyond a reasonable doubt, that even if the argument was improper it constituted no more than harmless error. A defendant is entitled to a fair trial, not a perfect one. Lut-wak v. United States, 1953, 344 U.S. 604, 619, 73 S.Ct. 481, 97 L.Ed. 593; Samuels v. United States, 5 Cir. 1968, 398 F.2d 964.

Affirmed.


author: GODBOLD, Circuit Judge:

text:
    COTTON BELT INSURANCE COMPANY, INC., Plaintiff-Appellant, v. K. M. WALL, Administrator of the Estate of Kenneth M. Wall, Deceased, et al., Defendants-Appellees.
    No. 73-4027.
    United States Court of Appeals, Fifth Circuit.
    Nov. 18, 1974.

      Robert E. Parsons, Birmingham, Ala., for plaintiff-appellant.
    Tom Radney, Alexander City, Ala., for Wall.
    Sam H. Bradshaw, III, Alexander City, Ala., for McCoy.
    John F. Dillon, IV, Alexander City, Ala., for defendants-appellees.
    Before GODBOLD and MORGAN, Circuit Judges, and BOOTLE, District Judge.
   GODBOLD, Circuit Judge:

James Rufus McCoy was employed by K. M. Wall at Wall’s pulpwood yard, located in Alabama. While operating a loader, McCoy ran over and fatally injured Kenneth Wall, age eight and one-half, the son of the employer. McCoy was prosecuted and convicted of manslaughter. Also McCoy was sued by Wall for damages for the wrongful death of the child. Cotton Belt then brought a declaratory judgment action against Wall and McCoy to determine whether it owed a defense and coverage to McCoy.

Cotton Belt claimed noncoverage on two grounds: (1) McCoy was not covered because he was not a “person insured” under the provision of the policy covering.loading and unloading, because he was merely preparing to commence a loading operation rather than actually engaged in loading; (2) even if otherwise McCoy would have been an insured a policy exclusion applied which excluded from the term “insured” one engaged in the business of his employer with respect to bodily injury to a fellow employee injured in the course of the fellow employee’s course of employment.

In a jury trial, at the close of the insurer’s case, the court granted a directed verdict for the defendants.

Whether on conflicting evidence the relation of employer-employee exists at the time of an injury is a question of fact for the jury. Woodward Iron Co. v. Limbaugh, 276 F. 1 (CA5, 1921); Nichols v. Smith’s Bakery, 218 Ala. 607, 119 So. 638 (1929); Sloss-Sheffield Steel & Iron Co. v. Crosby, 201 Ala. 544, 78 So. 898 (1918). The facts that the injured person is a minor, and that he is employed in violation of child labor laws or workmen’s compensation laws, do not of themselves bar coverage under an employee exclusion clause. Ward v. State Farm Mutual, 241 F.2d 134 (CA5, 1957) (Alabama case); State Farm Mutual v. Brooks, 136 F.2d 807 (CA8, 1943); Allied Mutual Cas. Co. v. Dahl, 255 Iowa 208, 122 N.W.2d 270 (1963); cf. Walker v. Countryside Casualty Co., 239 Ark. 1085, 396 S.W.2d 824 (1965). The primary purpose of an employee exclusion clause in a public liability policy is to draw a sharp line between employees and members of the general public. Webb v. State Farm, 151 F.Supp. 359 (S.D.W.Va.1957); Farm Bureau Mutual Ins. Co. v. Farmers Mutual, 360 S.W.2d 325 (Mo.App. 1962); State Farm Mutual v. Brooks, supra.

Wall testified that his son was not an employee. He had, however, given a written statement a few days after the accident saying:

Ken, my son, worked with me every day this summer. He had his own jobs to do and was paid for these jobs. These jobs consisted of answering telephone, keeping scales swept off, picking up bottles all over yard, keep the office clean and operate the lease radio. Then after school started Ken came by the wood yard after school and worked on Saturdays. Ken was paid scale wages during the summer and on Saturday. The accident happened on Friday after Thanksgiving and he was on regular scale then.

Also, he acknowledged on cross examination that at the trial of the manslaughter ease against McCoy he had testified that on the day of the accident Kenneth was “doing his job” of picking up bottles and tools and cleaning the yard, that Kenneth stayed there when he was not in school, and that his job was to work on the yard. These statements were corroborated by testimony of McCoy that he had seen Kenneth sweeping, picking up bottles, and greasing wheels, and testimony of another employee, Jerry Brooks, who also had seen Kenneth performing tasks about the yard. A jury issue was created with respect to whether Kenneth was an employee for purposes of the employee exclusion clause.

Course of employment also was a jury issue. Brooks testified that at the time of the accident Kenneth had just cheeked grease seals on a trailer.

The loading issue is less clear, especially since Cotton Belt claims that while attempting to establish the sequence of events immediately surrounding the accident it was improperly denied the right to lead McCoy as an adverse witness. Since the employee issue requires remand for a jury trial, we assume that the loading issue will be more fully developed in the District Court upon retrial.

Reversed and remanded.


text:
    Johnny HOLLINS, Petitioner-Appellee, v. W. J. ESTELLE, Director, Texas Department of Corrections, Respondent-Appellant.
    No. 74-2190
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    Nov. 14, 1974.

      Ed Idar, Jr., Asst. Atty. Gen., Austin, Tex., for respondent-appellant.
    Donald B. McFall, Houston, Tex. (Court-appointed), for petitioner-appel-lee.
    Before GEWIN, GODBOLD and CLARK, Circuit Judges.

       Rule 18, 5th Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of N. Y. et al. (5th Cir. 1970), 431 F.2d 409, Part I.

   PER CURIAM:

When this case was previously before this court, we remanded for an evidentiary hearing to determine whether appellee voluntarily waived his objections to standing trial in jail garb. Hollins v. Beto, 467 F.2d 951 (5th Cir. 1972). On remand the State of Texas stipulated that no such waiver had voluntarily been made, but took issue with any retroactive application of our trial-in-jail-garb rulings in Brooks v. Texas, 381 F.2d 619 (5th Cir. 1967) and Hernandez v. Beto, 443 F.2d 634 (5th Cir. 1971). The State also contended that any error in Hollins’ trial because of his clothing was harmless. See, Smith v. Estelle, 498 F.2d 631 (5th Cir. 1974).

The district court correctly applied Brooks and Hernandez to this action. Williams v. Estelle, 500 F.2d 206 (5th Cir. 1974). The court also found that this error was not, beyond any reasonable doubt, harmless. In light of the total record .developed at this trial, we cannot say that his determination was clearly erroneous. The burning issue was identification. Although several witnesses identified Hollins as the culprit, their testimony is not so compelling as to leave this court with an abiding conviction that the district judge reached the wrong result.

On remand the State should be accorded a reasonable time within which to retry petitioner.

Affirmed.


text:
    In the Matter of Sam James Recile, Bankrupt. Sam James RECILE, Bankrupt, Appellant, v. Albert J. WARD, Jr., Trustee for Southern Land Title Corporation, etc., et al., Appellees.
    No. 73-1648.
    United States Court of Appeals, Fifth Circuit.
    Nov. 21, 1974.

      James J. Morrison, James J. Morrison, Jr., New Orleans, La., for appellant.
    Charles Schwartz, Jr., New Orleans, La., for Albert Ward, Trustee, for So. Land, Plaza Tower & Co-Trustee, for G. Brian Corp.
    Edward M. Heller, New Orleans, La., for Dorothy R. Cowen, Trustee for Re-cile.
    Gerald J. Gallinghouse, U. S. Atty., New Orleans, La., for United States.
    Before WISDOM, COLEMAN and SIMPSON, Circuit Judges.
   PER CURIAM:

The petition for rehearing is denied. In considering the petition for rehearing, however, we noted that on page 682 of 496 F.2d we stated that certain contentions based upon Rule 6(b)(2) of the Federal Rules of Civil Procedure are “without merit, of course, since bankruptcy proceedings are not governed by the Federal Rules of Civil Procedure, and Rule 6(b)(2) is therefore irrelevant”. This observation, which was not essential to the decision, is not in accord with the objectives of the Rules of Bankruptcy Procedure. The Advisory Committee’s Introductory Note to the Preliminary Draft of the Rules of Bankruptcy Procedures states:

“A premise in the drafting of all the rules is that the procedure in bankruptcy cases should be conformed to that prescribed for most other kinds of civil litigation in the federal courts. Thus the Preliminary Draft adheres to and particularizes the policy of General Order 37 to follow the Federal Rules of Civil Procedure in proceedings under the Act ‘as nearly as may be.’ The mode and extent of the adaptation of the Civil Rules in the Bankruptcy Rules are more fully described elsewhere in this Introductory Note. The Federal Rules of Appellate Procedure have been adapted in the rules of Part VIII for the purpose of governing reviews of referees’ judgments by the district judge, and the Federal Rules of Evidence are made applicable by Rule 917 to cases and proceedings in bankruptcy.”

1 Collier, Spec.Supp.J. (19 — ). See also the Advisory Committee’s Note to Bankruptcy Rule 906(b) which states that it follows Rule 6(b) of the Federal Rules of Civil Procedure and Rule 26(b) of the Federal Rules of Appellate Procedure, with some modifications.

Accordingly, the Court’s original opinion dated June 24, 1974, is modified to conform with this opinion denying the application for a rehearing.


author: TIMBERS, Circuit Judge:

text:
    1050 TENANTS CORP. et al., Plaintiffs-Appellees, v. Peter JAKOBSON et al., Defendants-Appellants.
    No. 1003, Docket 74-1023.
    United States Court of Appeals, Second Circuit.
    Argued May 22, 1974.
    Decided July 8, 1974.

      Martin I. Kaminsky, New York City, (Richard M. Asehe and Pollack & Singer, New York City, on the brief), for plaintiffs-appellees.
    Lawrence A. Kobrin, New York City, (Paul C. Kurland and Emil, Kobrin, Klein & Garbus, New York City, on the brief), for defendants-appellants.
    Before SMITH and TIMBERS, Circuit Judges, and TYLER, District Judge.

       Hon. Harold R. Tyler, Jr., of the Southern District of New York, sitting by designation.

   TIMBERS, Circuit Judge:

On this appeal, pursuant to 28 U.S.C. § 1292(b) (1970), from an order entered in the Southern District of New York, Charles E. Stewart, Jr., District Judge, 365 F.Supp. 1171, denying defendants’ motion to dismiss, for failure to state a claim upon which relief can be granted and for lack of subject matter jurisdiction, a complaint in an action brought to recover damages for alleged violations of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j (b) (1970), Rule 10b-5 promulgated under the 1934 Act, 17 C.F.R. § 240.10b-5 (1973), and Sections 12(2) and 17(a) of the Securities Act of 1933, 15 U.S.C. §§ 77J(2) and 77q(a) (1970), in connection with the promotion and sale of shares of stock of a cooperative housing corporation, the sole issue is whether such stock is a “security” within the meaning of Section 2(1) of the 1933 Act, 15 U.S.C. § 77b (1) (1970), and Section 3(a) (10) of the 1934 Act, 15 U.S.C. § 78c(a)(10) (1970).

We affirm essentially for the reasons set forth in the well reasoned opinion of Judge Stewart below and upon the authority of our recent decision in Forman v. Community Services, Inc., 500 F.2d 1246, 1250-55 (2 Cir. 1974).

I.

In view of the detailed statement of facts in the district court opinion, it is sufficient for our purpose briefly to summarize only those facts necessary to an understanding of our rulings on the legal issues presented.

Plaintiffs are the 1050 Tenants Corp. (1050 Corp.), a cooperative housing corporation located at 1050 Park Avenue, New York City, and Herbert and Joan Saltzman, purchasers and holders of cooperative shares in 1050 .Corp. The Saltzmans sue on behalf of themselves and as representatives of a class consisting of all past and present 1050 Corp. shareholders. Defendants are the sponsors and promoters of the cooperative plan pursuant to which 1050 Corp. was organized and its shares were offered and sold to the public.

The gravamen of the complaint is that defendants violated various antifraud provisions of the federal securities laws by making materially false and misleading statements and by failing to disclose material facts in connection with the offer and sale of cooperative shares of 1050 Corp. Defendants contend that the offer and sale of these shares were of interests in real estate, not of “securities”.

In 1968, defendants were the fee owners of a building at 1050 Park Avenue. They undertook a plan to convert the building to cooperative ownership. They formed 1050 Corp. Pursuant to N.Y.Gen.Bus.Law § 352-e (McKinney 1968), they made a public offering of its corporate stock by a formal prospectus (the Plan). Among other matters, the Plan set forth a detailed description of the building, appraisals of the condition of its physical plant and an outline of the corporation’s capital structure.

The corporation has an authorized capital of 45,000 shares, $1.00 par value. Of the authorized shares, 42,400 were allotted to 60 residential apartments according to the selling price of each. Pursuant to the Plan, some apartments were not offered for residential use, but are rented out as doctors’ offices. The income from these rentals is used by the corporation to offset and reduce the periodic assessments on the shareholder-tenants for maintenance of the building. Also pursuant to the Plan, the corporation was required to assume certain obligations entered into on its behalf by the promoters. These included management and service contracts and two mortgages.

Unlike a traditional business corporation, the rights and obligations of the shareholders of 1050 Corp. flow, not from their ownership of corporate shares, but from a uniform proprietary lease. Each shareholder is required to execute such a lease. In addition to the usual landlord-tenant covenants, the lease requires each shareholder-tenant to make monthly payments to the corporation of his pro rata share of the expenses of the corporation. It also imposes certain restrictions and prohibitions on the rights of the shareholders freely to sublet their apartments, to assign their leases or otherwise to transfer or encumber their interests in the corporation.

In most material respects, however, 1050 Corp. has the external indices typical of a traditional business corporation. It was formed pursuant to N.Y.Bus. Corp.Law § 402 (McKinney 1963); it has a formal corporate charter and bylaws ; ownership interests are represented by certificates of stock; its shareholders have a voice in the corporate decision making process; they elect directors on the basis of one share, one vote; and they are entitled to annual financial statements. In short, the only significant difference between 1050 Corp. and the traditional business corporation is the fact that it was formed and is operated to facilitate home ownership.

The critical question raised by defendants’ motion to dismiss the complaint is whether the shares of stock in 1050 Corp. are “seeurit[ies]” under the federal securities laws. The district court held that they are. We agree.

II.

Section 3(a) (10) of the 1934 Act, 15 U.S.C. § 78c(a)(10) (1970), provides in pertinent part:

“The term ‘security’ means any stock . . . investment contract . . . or in general, any instrument commonly known as a ‘security’ . . . .

In Forman v. Community Services, Inc., supra, 500 F.2d at 1251-55, we held that a share of stock in a nonprofit cooperative housing corporation, which was chartered, promoted and subsidized under New York’s Mitchell-Lama Act, N.Y. Private Housing Finance Law §§ 10-37 (McKinney 1974 Supp.), and was supervised by the State Housing Authority, was both “stock” and an “investment contract” under § 3(a)(10). In the instant case, we believe that an even more compelling showing has been made than in Forman for including the cooperative shares of 1050 Corp. within the ambit of § 3(a) (10) and thus making available the protection of the antifraud provisions of the federal securities laws.

First, we ground our decision on what has been characterized as the “literal approach”. Forman v. Community Services, Inc., supra, 500 F.2d at 1252, and authorities there cited. 1050 Corp., is not affected by any of the state supervisory or eleemosynary factors on the basis of which the defendants in Forman sought unsuccessfully to distinguish shares in that cooperative corporation from those in a traditional business corporation. The structure of 1050 Corp. is more closely analogous to that of corporations whose stock unquestionably is a “security”. Defendants have failed to persuade us why the 1050 Corp. stock should be treated differently. We hold that the shares of stock in 1050 Corp. are “seeurit[ies]” under the federal securities laws.

Secondly, we hold, as we did in For-man, that the sale of a cooperative share constitutes the sale of an “investment contract” under the three pronged test formulated by the Supreme Court in SEC v. W. J. Howey Co., 328 U.S. 293, 298-99 (1946). The “common enterprise” element is too plain to warrant discussion. As for the requirement that there be an expectation of “profits” or “economic inducements”, SEC v. C. M. Joiner Leasing Corp., 320 U.S. 344, 353 (1943), the three elements found to have been sufficient in Forman are present here: (1) the shareholder-tenants of 1050 Corp. benefit directly from substantial non-residential income which is used by the corporation to reduce the monthly carrying charges; (2) they are afforded an opportunity to make substantial savings on their personal income tax in the form of deductions for their payment of a proportionate share of the corporation’s deductible expenses; and (3) they stand to benefit from obtaining the optimum services at the lowest possible cost. In addition, there is a “profit” element here that was notably absent in Forman: the shareholder-tenants of 1050 Corp. have the expectation of capital appreciation on a resale of their stock. Finally, the requirement that expectations of profit derive “solely from the efforts of the promoter[s] or a third party”, 328 U.S. at 299, is clearly satisfied here.

In short, we hold that a share in 1050 Corp. is both a “stock” and an “investment contract” under the federal securities laws.

Affirmed.

      . The complaint also alleged violations of New York’s blue sky laws and related common law claims. In view of the ground of our decision, we do not reach these claims.

      . The definition of “security” in the 1933 Act, 15 U.S.C. § 77b (1) (1970), is ‘“virtually identical’ and interchangeable with that in the 1934 Act.” Forman v. Community Services, Inc., supra, 500 F.2d at 1250-51, citing Tcherepnin v. Knight, 389 U.S. 332, 335-36 (1967), and Glen-Arden Commodities, Inc. v. Costantino, 493 F.2d 1027, 1034 n. 6 (2 Cir. 1974).

      . The Howey formulation is as follows:'
      “[A]n investment contract for purposes of the Securities Act means a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party . . . .” SEC v. W. J. Howey Co., supra, 328 U.S. at 298-99.

      . Non-residential use income from the rental of doctors’ offices was projected in the Plan to total $24,500 annually or approximately 6% of the anticipated annual maintenance budget.

      . Even if the shareholder-tenants of 1050 Corp. were to assume some small role in the management of the venture, that alone would not defeat the Howey “reliance” requirement. E. g., Lino v. City Investing Co., 487 F.2d 689, 692 (3 Cir. 1973); Nash & Associates, Inc. v. Lum’s of Ohio, 484 F.2d 392, 395 (6 Cir. 1973); SEC v. Glen Turner Enterprises, Inc., 474 F.2d 476, 482 (9 Cir.), cert. denied, 414 U.S. 821 (1973). See Securities Act Release No. 5211 (Nov. 30, 1971), reported in 1971-72 Transfer Binder, CCH Fed.Sec.L.Rep. # 98446.


text:
    CONTINENTAL INSURANCE COMPANIES, Plaintiff-Appellant, v. BAYLESS AND ROBERTS, INC., an Alaska corporation, and Willy Lou Warbe-low, Administratrix of the Estate of Marvin Warbelow, Defendants-Appel-lees.
    No. 74-1400.
    United States Court of Appeals, Ninth Circuit.
    Sept. 3, 1974.
    Sanford M. Gibbs, Hagans, Smith & Brown, Anchorage, Alaska, for plaintiff-appellant.
    Matthews, Dunn & Baily, Anchorage, Alaska, for defendants-appellees.
    Before BROWNING, ELY and GOODWIN, Circuit Judges.
   ORDER

Upon an examination of the record, we conclude that in determining that appellant’s action for declaratory judgment should be dismissed in view of the pen-dency of the state court suit, the district court considered the relevant factors and reached a reasonable conclusion. See 366 F.Supp. 287 (D.Alaska 1973).

Affirmed.


text:
    Marvin L. DIETRICH and Marjorie Dietrich, Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Appellee.
    No. 74-1276.
    United States Court of Appeals, Eighth Circuit.
    Submitted Sept. 13, 1974.
    Decided Sept. 25, 1974.
    Truman Clare, Omaha, Neb., for appellants.
    Ann Belanger Durney, Tax Div., Dept, of Justice, Washington, D. C., for ap-pellee.
    Before VOGEL, Senior Circuit Judge, and ROSS and WEBSTER, Circuit Judges.
   PER CURIAM.

Upon a careful consideration of the record, the briefs and oral argument, the Court has concluded that the factual findings of the Tax Court are not clearly erroneous, that its decision is based upon a correct interpretation of the law as applied to the pleadings and the facts of the case, and that an opinion would have no precedential value. See Leathers v. United States, 471 F.2d 856 (8th Cir. 1972); Wertzberger v. United States, 441 F.2d 1166 (8th Cir. 1971). For these reasons the judgment appealed from is hereby affirmed without opinion.

See Rule 14 of the Rules of this Court.


author: LANE, Judge.

text:
    Application of Horst G. LANGER.
    Patent Appeal No. 9239.
    United States Court of Customs and Patent Appeals.
    Oct. 3, 1974.
    Bernd W. Sandt and Theodore Post, Midland, Mich., attorneys of record, for appellant.
    Joseph F. Nakamura, Washington, D. C., for the Commissioner of Patents, Jack E. Armore, Washington, D. C., of counsel.

      Before MARKEY, Chief Judge, and RICH, BALDWIN, LANE and MILLER, Judges.
   LANE, Judge.

This appeal is from the decision of the Patent Office Board of Appeals, adhered to on reconsideration, affirming the rejection of all the claims, claims 1-20, for “lack of proof of utility (operativeness) of the claimed subject matter for its intended purpose” under 35 U.S.C. § 101, of patent application Serial No. 29,281, filed April 16,1970, for “Dentrifices and Method for Reducing Enamel Solubility.” We reverse in part and affirm in part.

The Specification

Appellant’s specification describes the invention in the following way:

The present invention concerns compositions and methods using a new source of stannous tin for incorporation in dentifrices by which term is meant mouth washes, tooth pastes, tooth powders and chewing gums, i. e., compositions for introduction into the oral cavity as cleansing compositions.
The novel dentifrices contain tin in the stannous form as a substantially water-insoluble, non-ionizing chelate of a synthetic amino carboxylic acid having an Sn:N ratio of the chelate moieties of 1:1, in the amount of 0.00001 to 15 weight percent. The dentifrices of this invention thus make possible a method for supplying and contacting tooth enamel several times daily with a minor to trace source of reactive tin which reacts with exposed tooth enamel to form a highly insoluble basic stannous phosphate.
******
An effective amount of topical application of stannous tin for the purpose of enamel solubility reduction can be had by employing as a component of the novel dentifrices herein taught at least 0.00001 weight percent of a stan-nous chelate of a chelating agent corresponding to the following general formula:
(HOOCCH2)2NR
(I)
wherein R is selected from the group consisting of H and -£(CH2)n-N-(CHüCOOH)^ CH2COOH (II) wherein n represents an integer which is 2, 3, or 4, and m represents an integer which is 0, 1, 2, 3, or 4, and of the alkali metal salts of such chelating agents, wherein one or two of the -CH2COOH groups may be replaced by a -CH2CH2OH group, resulting in a stannous tin chelate represented by the formula
wherein 1 or 2 of the -CH2COOH groups may be replaced by a -CH2CH2OH group when m of moiety (II) above is 1, 2, 3, or 4. All of such stannous chelates are substantially water insoluble, i. e., have a water solubility generally less than one percent by weight at room temperature, all the chelate moieties have an Sn to N ratio of 1 to 1, and all provide a source of tin reactive with tooth enamel when introduced into the oral cavity as chewing gum or other dentifrice, to reduce the enamel solubility.
Representative of the foregoing stannous chelates are distannous chelate of ethylenediaminetetraacetic acid (Sn2EDTA) [also referred to as Sn2 (II) EDTA]; distannous chelate of hydroxyethyl ethylenediaminetriacetic acid [Sn2HEDTA]; monostannous chelate of nitrilotriacetic acid [SnNTA]; monostannous chelate of iminodiacetic acid [SnIDA]; and of N-substituted iminodiacetic acids such as monostannous chelate of N-methyl-, N-ethyl-, N-propyliminodiacetic acid, etc.; distannous chelate of propylenediaminetetraacetic acid; distannous chelate of triimethylenediaminetetraacetic acid; distannous chelate of tetramethylenediaminetetraacetic acid ; and generally the stannous chelates described in U. S. Patent 3,152,-155. [Bracketed insertions ours.]

Appellant’s specification also gives the following proposed theoretical explanation of how the invention operates:

Unlike the stannous salts of the prior art, e. g., stannous fluoride and chloride, which are water soluble and unstable in aqueous media, or other chelates which are water soluble, unstable and too tightly chelated to be effective, the stannous chelates used in the dentrifices of this invention are substantially insoluble in water and stable in aqueous media and provide an effective source of stannous tin. The distannous chelate of ethylenediamine-tetraacetic acid, for example, has a water solubility of less than 0.05 weight percent at room temperature and is stable in aqueous formulations. The low solubility in water contributes to the oxidation resistance of such chelates. In solution in saliva, the minor to trace amount of dissolved stannous chelate gives an acid reaction which, in the presence of naturally occurring chelating agents normally present in the mouth, such as sugars, proteins, amino acids and lactic acid, is believed to promote a reaction according to the following simplified equations:
In the equations, SnR represents a water-insoluble chelate as utilized in the dentrifices herein, R'H2 represents a naturally occurring chelating agent normally present in the mouth, which compound has reactive hydrogen groups and the SnOH+ cation represents a species which has been demonstrated polarographically to form by hydrolysis of tin (II) salts and complexes in aqueous solution; Acta Chemica Scandinavica, 12 (1958), 198-223. The SnOH+ cation can react with the calcium hydroxyapatite of the enamel to form the insoluble basic stannous phosphate, in the same manner as stannous fluoride is believed now ultimately to react to form the same basic stannous phosphate. Because of the complexities of the above reactions involving minute quantities of reactants, it has not yet been possible conclusively to demonstrate by present analytic techniques that such reactions do, in fact, take place. Consequently, it is not desired to be bound by this theory, even though (1) the theory is consistent with all experimentally determined results, i. e., the formation with enamel of the basic stannous phosphate when a dentifrice containing one of the claimed stannous chelates is used and (2) such experimentally determined results are entirely consistent with said theory. In any event, there is an exchange of the calcium of the enamel for stannous tin provided by the chelate. As this exchange proceeds, a further minor to trace amount of stannous chelate dissolves and the exchange of stannous tin for calcium continues at the exposed surface of the tooth enamel while the dentifrice is in the mouth. Since the exposed tooth enamel surface in the mammalian mouth is relatively small, and the dentifrices are used on a continuing basis several times a day, an amount of stannous chelate as low as 0.00001 weight percent is effective in reducing enamel solubility. The exposure of enamel surfaces to the stannous chelates of the dentifrices herein described thus provides the tooth enamel with a surface of an insoluble basic stannous phosphate; J. of Dent.Res., 39, 740, July-August 1960; [Myers,] J.Am.Dent.Assn., 77, 1308, Dec. 1968. The compositions and methods disclosed are useful inter alia in the reduction of enamel solubility of valuable domesticated animals, such as, for example, dogs. [Emphasis and bracketed insertion ours.]

The specification contains sixteen “examples” of various types. Example 1 in the specification describes the results of a test where Sn2EDTA (see note 4, supra) was added to the diet of separate groups of rats at levels of 200 parts per million (p.p.m.) for Group A, 300 p.p.m. for Group B, and none for Group C (control). At examination following sacrifice, Group A had 9.1 caries lesions (average) per animal and a tin level of 160 p.p.m. (average) in their tooth enamel, Group B had- 7.5 caries lesions (average) per animal and a tin level of 225 p.p.m. (average) in their tooth enamel, and Group C (control) had 12.2 caries lesions (average) per animal and a tin level of 4 p.p.m. in their tooth enamel.

Example 2 describes a tooth paste formulation where “preferably 3% [by weight] of tin chelate, e. g., distannous ethylenediaminetetraacetic [ Sn2EDTA], is incorporated in this paste, but it can be varied from about 1% to about 15%.” Example 3 describes another tooth paste formulation where “[t]o the paste is preferably added about 4% [by weight] of the tin chelate, distannous ethylene-diaminetetraacetic [Sn2EDTA].” Example 4 describes a tooth powder formulation containing 7.5 parts of Sn2EDTA. Example 5 describes a mouth wash formulation containing Sn2EDTA “to [the] limit of solubility.” Example 6 describes an astringent mouth wash formulation containing Sn2EDTA again “to [the] limit of solubility.” Examples 7 and 8 describe chewing gum formulations containing Sn2EDTA where the amount of the chelate “can be varied from about 0.00001% to about 15% by weight.”

Example 9 describes a chewing gum formulation to which “five parts of stan-nous chelate of iminodiacetic acid [SnIDA, see note 7, supra] is added.”

Example 10 describes a chewing gum formulation containing “twelve parts dis-tannous chelate of propylene diaminete-traacetate [see note 8, supra].”

Example 11 describes a chewing gum in which the stannous chelates incorporated in the gum mix can be “distan-nous chelate of ethylenediaminetetraacetic acid [Sn2EDTA]; distannous che-late of hydroxyethylethylenediaminetri-acetic acid [Sn2HEDTA, see note 5, supra]; monostannous chelate of nitri-lotriacetic acid [SnNTA, see note 6, supra]; distannous chelate of propylene-diaminetetraacetic acid [see note 8, supra]; distannous chelate of trimeth-ylenediaminetetraacetic acid [see note 9, supra]; and distannous chelate of tetramethylenediaminetetraacetic acid [see note 10, supra].”

Examples 12 and 13 are both entitled “Artificial Mouth Test: Enamel Solubility Reduction.” They are preceded by the following explanatory paragraph.

To measure the effect on tooth enamel of enamel solubility reducing agents in dentifrices, dental researchers frequently use as an indicator the reduction in the amount of enamel dissolved or ESR test, as disclosed in Holliday et al. [Holliday], U. S. Patent 3,105,798, issued Oct. 1,1963. Holliday et al. determined ESR following treatment of teeth with a dentifrice by measuring the decrease in amount of Ca45 and P32 dissolved from irradiated teeth by a measured volume of 0.1 N lactic acid-sodium lactate adjusted to a pH of 4.5. Another method for measuring ESR, the method used herein, is the lessened decrease in hardness of enamel, following exposure to one of the novel dentifrices herein described, when the enamel is dissolved in the artificial mouth with an acid pH buffered acetate solution or when it is dissolved in the artificial mouth by acid produced by an acid-producing streptococcus isolated from dental plaque; Pigman, W.: “In Vitro Production of Experimental Caries”, J.Am.Dental Assn., 51 (1955), 685-696 (use of the artificial mouth in experimental caries research). Decrease in hardness of enamel due to solubilization or erosion of enamel was measured in following examples in Knoop units as determined with a Knoop diamond indenter using a Tukon hardness tester; W. T. Sweeney: “The Knoop Indentation Hardness Instrument as a Tool in Dental Research”, J.Dent.Res. 21 (1942), 303; R. W. Phillips e. a., “Effect of Fluorides on Hardness of Tooth Enamel”, J.Am.Dent.Assn. 37 (1948), 1; and T. Koulourides e. a., “Rehardening of Softened Enamel Surfaces of Human Teeth by Solutions of Calcium Phosphates”, Nature, 189 (1961), 226-227. [Bracketed insertion ours.]

The test results stated in Examples 12 and 13 show that when human tooth enamel is exposed to solutions containing 1% by weight Sn2EDTA the enamel softened and eroded less than the control samples.

Examples 14 and- 15 describe tests where human subjects were fitted with bridge-like dental appliances holding small slabs of human teeth. The subjects then chewed sticks of chewing gum containing 1% and 0.01% by weight Sn2EDTA for fifteen minutes three times each day for one week. Analysis of the slabs for tin uptake showed that they contained higher concentrations of stannous tin than the control slabs.

Finally, Example 16 describes a test using three groups “each of forty rats of mixed sex Osborne-Mendel caries-susceptible strain * * * maintained on a eariogenic diet * * Group (A) had applied to their teeth, twice each day for 115 days, a mixture of 3.5% by weight Sn2EDTA in ORABASE emollient dental paste. Control group (B) had ORABASE emollient dental paste (without Sn2EDTA) applied to their teeth, and control group (C) had nothing applied to their teeth. After sacrifice, examination of the rats’ teeth showed that group (A), which had the Sn2EDTA applied to their teeth, had “a caries reduction of approximately 40% as compared with the controls.”

The Claimed Subject Matter

Claims 1-5 are drawn to dentifrices. Independent claim 1 recites generically a dentifrice as follows:

1. A dentifrice containing from about 0.00001 to 15 percent by weight of said dentifrice of a substantially water-insoluble stannous chelate of a chelating agent corresponding to the formula (HOOCCH2)2NR wherein R is selected from the group consisting of H and -KCH2)n-N-(CH2COOH}m CH2COOH in which n is an integer from 2 to 4 and m is an integer from 0 to 4, wherein one or two of the -CH2COOH groups may be replaced by a -CH2CH2OH group and wherein the Sn :N ratio of said chelate moiety is 1:1.

Dependent claims 2-5 recite dentifrices containing specific chelates as follows: (Bracketed insertions ours.)

2. A dentifrice as claimed in Claim 1 wherein the chelate is the distannous chelate of ethylenediaminetetraacetic acid [Sn2EDTA],
3. A dentifrice as claimed in Claim 1 wherein the chelate is the stan-nous chelate of nitrilotriacetic acid [SnNTA],
4. A dentifrice as claimed in Claim 1 wherein the chelate is the stannous chelate of iminodiacetic acid [SnIDA].
5. A dentifrice as claimed in Claim 1 wherein the chelate is the distannous chelate of hydroxyethyl ethylenedia-minetriacetic acid [Sn2HEDTA],

Claims 6-10 are drawn to chewing gums. Independent claim 6 recites generically “[a] chewing gum containing from about 0.00001 to 15 percent by weight of said chewing gum of * * * [a chelate defined generically as in claim 1, supra].” Claims 7-10 are dependent on claim 6, and they recite chewing gums containing the specific chelates recited in claims 2-5, supra, respectively. For example, claim 7 reads as follows: (Bracketed insertion ours.)

7. A chewing gum as claimed in Claim 6 wherein the chelate is the distannous chelate of ethylenediamine-tetraacetic acid [Sn2EDTA].

Claims 11-20 are drawn to methods (processes) “whereby the enamel solubility is reduced.” Independent claim 11 generically recites a method as follows:

11. Method which comprises contacting the enamel of teeth on a continuing basis with a substantially water-insoluble stannous chelate of a chelating agent corresponding to the formula (HOOCCH2)2NR wherein R is selected from the group consisting of H and f(CH2)n-N-(CH2COOH)}m -CH2COOH in which n is an integer from 2 to 4 and m is an integer from 0 to 4, wherein one or two of the -CH2COOH groups may be replaced by a -CH2CH2OH group and wherein the Sn:N ratio of said chelate moiety is 1:1, whereby the enamel solubility is reduced.

Claims 12-15 are dependent on claim 11, and they recite methods wherein the chelates employed are the specific che-lates recited in claims 2-5, supra, respectively. For example, claim 12 reads as follows: (Bracketed insertion ours.)

12. Method as claimed in Claim 11 wherein the chelate is the distannous chelate of ethylenediaminetetraacetic acid [Sn2EDTA],

Claim 16 is also dependent on claim 11, and it adds the further limitation that the method “comprises chewing a chewing gum containing from about 0.00001 to 15 percent by weight of * * * [a chelate defined generically as in claim 11, supra].” Claims 17-20 are dependent on claim 16, and they recite methods wherein the chewing gum contains the specific chelates recited in claims 2-5, supra, respectively. For example, claim 17 reads as follows: (Bracketed insertion ours.)

17. Method as claimed in Claim 16 wherein the chelate is the distannous chelate of ethylenediaminetetraacetic acid [Sn2EDTA].
The References And The Rejection
The references relied on by the examiner and the board are:
Holliday et al. (Holliday) 3,105,798 Oct. 1, 1963 (filed May 29, 1958)
Fiseella 3,282,792 Nov. 1, 1966 (filed Jan. 9,1964)
Griebstein 3,544,678 Dec. 1, 1970 (filed May 2, 1966)
Great Britain 922,385 Mar. 27, 1963 (filed Jan. 3,1961)
Drug and Cosmetic Industry, 67:833 (Dec. 1950)
Langer, Journal of Dental Research, 39:740 (July-Aug. 1960)
Dental Abstracts, 8:372 (June 1963)
The references cited by appellant are:
Myers, J.Am.Dent.Assn., 77:1308-14 (Dec. 1968)
Norris et al. (Norris) 2,946,725 July 26, 1960 (filed Mar. 25, 1957)
Gagolski et al. (Gagolski) 3,471,613 Oct. 7, 1969 (filed Mar. 22, 1966)
Muhler 3,546,335 Dec. 8, 1970 (filed July 16, 1969)

In the final Office Action, claims 1-20 were rejected for “lack of proof of utility under 35 U.S.C. 101.” The examiner’s position was that the compositions and methods are “alleged to be useful in reducing enamel solubility of teeth in the mouth,” but that “those skilled in the art would not accept applicant’s allegation as obviously valid and correct.” According to the examiner, the Drug and Cosmetic Industry reference teaches “that stannous ion, when not in association with fluoride ion, is not effective in reducing dental caries”; the Holliday reference teaches “that complexes of stannous tin and the chelating agent, ethylene diaminetetraacetic acid, are not suitable to supply tin ions in dentifrices since the tin is held too tightly”; the Fiscella reference teaches “that stannous chelates of ethylene dia-minetetraacetic acid have been found to be ineffective in dentifrices”; and the Langer reference “indicates that the stannous chelates of the present invention failed to demonstrate a statistically significant lowering of dental caries when fed to rats.” The examiner then stated that “ * * * in the absence of clear and convincing evidence commensurate in scope with the allegation and claims, which evidence establishes the validity of the allegation, no claim can be indicated as allowable.”

Appellant responded by submitting an affidavit executed by Mr. 0. Ray Mc-Intire, Technical Director of Research, Consumer Products Department of The Dow Chemical Company. Mclntire’s affidavit is 44 pages in length and gives in detail the results of numerous animal toxicity studies done on Sn2EDTA. In addition, the affidavit states in detail the same tests and results described in Examples 12, 13, 14, 15 and 16 of appellant’s specification, supra.

In the examiner’s answer, three new references were cited “to show the state of the art”: Griebstein, British Patent 922,385, and Dental Abstracts. The examiner cited Griebstein and the British patent for this paragraph in Griebstein (Col. 2, lines 28-35):

Stannous chelates of alkylene poly-amine carboxylic acid chelating agents such as ethylenediaminete-traacetic acid are disclosed for use in oral preparations in British Pat. 92,385 [sic; should read 922,385], published Mar. 27, 1963. Such che-lates have been found to substantially impair the reactivity of stannous tin with dental enamel and are therefore of limited value in fluoride-containing oral compositions for caries prophylaxis. [Emphasis and bracketed insertion ours.]

British Patent 922,385, issued to The Dow Chemical Company, claims priority based on two U.S. patent applications, Ser. Nos. 43 and 78 (both filed Jan. 4, 1960), the former being the great-great-grandparent of the present application, and there is no question that the claimed subject matter includes the che-lates disclosed in the British patent. In light of this teaching, the examiner thought that one skilled in the art would view appellant’s allegations with a “great deal of skepticism,” and he again stated that the § 101 rejection was proper “in the absence of clear and convincing evidence commensurate in scope with the allegations and claims * * * ”, citing In re Citron, 325 F.2d 248, 51 CCPA 852 (1963); In re Har-wood, 390 F.2d 985, 55 CCPA 922 (1968), and In re Buting, 418 F.2d 540, 57 CCPA 777 (1969).

Responding to the Mclntire affidavit, the examiner stated that the “Artificial Mouth Tests” (same as Examples 12 and 13 in the specification) fail “to establish the clinical effectiveness of the tested compound at the level tested.” Relying on the newly cited Dental Abstracts reference, the examiner stated that for clinical effectiveness to be established, the chemical agent should be subjected to clinical trials for two years if the agent is expected to arrest the progress of caries and for a longer time if the agent’s effect in preventing caries is to be assessed. With regard to the tests described in the affidavit where subjects chewed gum containing 1% and 0.01% by weight Sn2EDTA and the tin uptake in the test slabs was measured (same as Examples 14 and 15 in the specification), the examiner stated that this test was of “doubtful significance as no utility has been shown to result from the uptake of tin by dental enamel in the absence of fluoride.” The examiner also criticized the test on the ground that it could not demonstrate utility for concentrations below those tested or for complexes other than the one tested. With respect to the test in the affidavit where a mixture of 3.5% by weight of Sn2EDTA in ORABASE emollient dental paste was applied to the teeth of rats (same as Example 16 in the specification), the examiner criticized the test on the ground that it pertained to only one of the many complexes coming within the scope of the claims and that it was directed to a concentration far above the lowest level claimed. The examiner concluded by stating that no “clinical evidence relating to the reduction of caries is on the record” and “that the evidence appearing in the Mclntire affidavit cannot establish the validity of the allegations.”

In response to the newly cited Grieb-stein reference in the examiner’s answer, an affidavit executed by Langer (the inventor in the present application) was submitted. Langer’s affidavit states that he presented a paper on the enamel solubility reducing properties of Sn2EDTA at a meeting of the International Association for Dental Research in March 1960. The affidavit states that two “representatives” of a certain domestic corporation (we have omitted names) were present and expressed interest in Sn2EDTA; that one of the representatives wrote to Langer in May 1960 (a copy of the letter is attached to the affidavit) requesting a sample of Sn2EDTA, but such sample was not sent; that at the March 1961 meeting of the same association a third representative of the aforementioned domestic corporation reported that Sn2EDTA had been tested “for in vitro solubility, i. e., distannous EDTA had been slurried in water and the supernatant aqueous liquor had been tested for dental enamel solubility reduction; it was notorious that * * * [the domestic corporation] was then looking for a tin. reservoir compound which would deliver stan-nous ions to dentrifice pastes * * *;” and that Langer pointed out to the third representative that because of the che-late’s low solubility in water, the supernatant aqueous liquid would not be expected to perform well, and certainly would not deliver any stannous ions to the toothpaste.

Langer’s affidavit then makes the following statement regarding the Grieb-stein patent (which is assigned to the aforementioned domestic corporation):

Langer, in reading U.S. patent 3,544,678 issued to Dr. Griebstein of * * * [the aforementioned domestic corporation], noted that Grieb-stein, by his attorney, inserted the following paragraph at * * * [col.] 2, * * * [lines] 28-35 of the said patent:

“Stannous chelates of alkylene polyamine carboxylic acid chelating agents such as ethylenediaminete-traacetic acid are disclosed for use in oral preparations in British Pat. 92,385 (this should be 922,385), published March 27, 1963. Such chelates have been found to substantially impair the reactivity of stannous tin with dental enamel and are therefore of limited value in fluoride-containing oral compositions for caries prophylaxis.”; parenthetic insert added.
This paragraph from Griebstein’s patent is clearly mistaken, fails to indicate under what conditions any such chelate was used, and reminded Lang-er of past conversations had with * * * researchers [of the aforementioned domestic corporation], in particular * * * [the third representative of the domestic corporation], wherein it was reported that * * * [the domestic corporation] was attempting to use as a source of stan-nous ionic tin the chelate distannous EDTA in the form of a supernatant liquod obtained by slurrying some distannous EDTA with water, certainly not a source of stannous tin of any magnitude since the compound is substantially water insoluble and not a source of stannous ions, since the compound does not form stannous ions in water.

In his supplemental examiner’s answer, the examiner stated that Langer’s affidavit “contains no new evidence which would tend to convince those skilled in the art that the allegations in the specification are valid.”

In affirming, the board said “ * * * we agree with the Examiner’s rejection of the appealed claims as based upon lack of proof of utility (operativeness) of the claimed subject matter for its intended purpose (35 U.S.C. 101).” The board stated that appellant had the burden of supplying “evidence as to clinical testing which would resolve the issues in a simple manner.”

The board found that the examiner’s references (Holliday, Fiseella and Grieb-stein) provided an adequate basis for “skepticism,” citing In re Ferens, 417 F.2d 1072, 57 GCPA 733 (1969). Considering the Myers reference cited by appellant, the board commented “[w]e are puzzled by the fact that the Examiner has not discussed this article * * then proceeded to find that “Myers, in page 1312, column 2, first paragraph, clearly points out with respect to deposition of a related metal, lead, that reduction of enamel solubility (the ‘ESR’ test relied upon in appellant’s arguments) is not directly correlated in clinical studies to a reduction of caries.”

Concerning the three patents (Norris, Gagolski and Muhler) cited by appellant, the board said:

The issuance by the Patent Office of the stated patents cannot establish a standard for the art to accept in vi-tro tests as demonstrating proof of utility in the human mouth with respect to living teeth. Numerous factors become important under the latter conditions, including the usual bacteria and other microorganisms and the continuous production of various fluids as well as intermittent contact with liquid and solid foods and environmental gases. We thus cannot consider in vitro tests alone to evidence actual utility. Compare * * Hoover et al. v. Eckerd’s Cut Rate Medical [Medicine] Co., Inc., 53 F.2d 215 [D.Del.1931], affirmed 63 F.2d 813 [3rd Cir. 1933].

After considering appellant’s petition for reconsideration, the board refused to change its decision.

OPINION

The question is whether the claimed subject matter is “useful” as required by the statement of “inventions patentable” found in 35 U.S.C. § 101.

Preliminarily, it should be pointed out that the references relied on by the examiner and the board are not cited as “prior art” references. Indeed, the effective date, for prior art purposes, of many of these references is subsequent to appellant’s earliest filing date. Rather, these references are properly cited for the purpose of showing a fact under the principle of In re Wilson, 311 F.2d 266, 50 CCPA 773 (1962). See In re Marzocchi, 439 F.2d 220, 58 CCPA 1069, n.4 (1971).

Turning to the merits, the board held, apparently, that the examiner’s references establish such a strong prima facie ease for lack of utility (“usefulness”) in the entire claimed subject matter that the highest type of evidence (i. e. — clinical testing in humans) is required to rebut the prima facie case.

Do the examiner’s references establish a prima facie ease for lack of utility in the entire claimed subject matter?

The Prima Facie Case For Lack of Utility

As a matter of Patent Office practice, a specification which contains a disclosure of utility which corresponds in scope to the subject matter sought to be patented must be taken as sufficient to satisfy the utility requirement of § 101 for the entire claimed subject matter unless there is reason for one skilled in the art to question the objective truth of the statement of utility or its scope. Assuming that sufficient reason to question the statement of utility and its scope does exist, a rejection for lack of utility under § 101 will be proper on that basis; such a rejection can be overcome by suitable proofs indicating that the statement of utility and its scope as found in the specification are true.. Cf. In re Marzoechi, 439 F.2d 220, 223, 58 CCPA 1069, 1073 (1971) (involving the enablement requirement of 35 U.S.C. § 112, first paragraph).

In the instant case, the Griebstein reference provides sufficient reason for one skilled in the art to question the objective truth of the statement of utility made for the entire claimed subject matter. Therefore, the examiner has established a prima facie case for lack of utility in the entire claimed subject matter.

Appellant disputes the existence of a prima facie case. Citing the Langer publication (see note 14, supra), appellant argues that his preferred species, the distannous chelate of EDTA (Sn2EDTA), is a novel chelate which was unknown at the time of Holliday’s filing date, and that because it is insoluble in water (see also Langer’s affidavit, supra), a person skilled in the art would know that Holliday and Fiscella are not referring to Sn2EDTA, but rather they are referring to the chemically distinct mono stannous chelate of EDTA which is soluble in water. Although appellant’s argument may be valid with respect to showing that Holliday and Fis-cella do not establish a prima facie case for lack of utility for Sn2EDTA, the argument fails with respect to Grieb-stein which specifically refers to the British patent (which discloses the distannous chelate of EDTA). Thus, insofar as Sn2EDTA is concerned, Grieb-stein clearly provides sufficient reason to question appellant’s statement of utility.

With regard to the remaining claimed species and the claimed genus (other than Sn2EDTA), Griebstein also provides sufficient reason for one skilled in the art to question appellant’s statement of utility. Griebstein refers to “[sjtannous chelates of alkylene poly-amine carboxylic acid chelating agents,” disclosed in British Pat. 922,385. This class of chelates disclosed in the British patent comprises a large portion of appellant’s presently claimed genus. Griebstein then states that “[s'juch che-lates have been found to substantially impair the reactivity of stannous tin with dental enamel and are therefore of limited value in flouride-containing oral compositions for caries prophylaxis.” (Emphasis ours.) Griebstein’s pointed criticism of the class of chelates disclosed in the British patent is sufficient to establish a prima facie case for lack of utility in the remaining claimed species and in the claimed genus.

The Type of Evidence Needed to Rebut The Prima Facie Case

While we find that the Griebstein reference is sufficient to establish a prima facie case for lack of utility in the entire claimed subject matter, we do not agree with the board’s view that clinical testing in humans is necessary here to rebut the prima facie case.

It is not proper for the Patent Office to require clinical testing in humans to rebut a prima facie case for lack of utility when the pertinent references which establish the prima facie case show in vitro tests and when they do not show in vivo tests employing standard experimental animals.

Although Holliday uses the phrase “do not serve” and Fiscella and Grieb-stein both use the phrase “have been found,” these references do not indicate that their statements are supported by tests employing standard experimental animals, much less by clinical testing in humans.

Holliday does not disclose the basis for his statement regarding EDTA, but he discloses an in vitro enamel solubility reduction test to support the statement of utility for his claimed dentifrice invention.

Fiscella indicates that the experimental basis for his statement regarding EDTA is a simple in vitro test where an aqueous solution containing 0.50% by weight stannous fluoride and 2% by weight sodium salt of ethylenediamine-tetraacetic acid is analyzed for stannous fluoride content after one week. (The ethylenediaminetetraacetic acid solution formed “a heavy precipitate” in one week and analysis- showed that the amount of stannous fluoride in solution had dropped to nearly one half the original concentration in one week.)

Griebstein does not indicate the experimental basis for his statement regarding the “[sjtannous chelates of alkylene polyamine carboxylic acid che-lating agents * * * disclosed * * * in British Pat. 92,385 [922,385] * * * ” However, the disclosed experimental basis for the utility of Griebstein’s invention is an in vitro tin uptake test employing tooth chips which are immersed in a slurry containing the dentifrice to be tested and then analyzed for tin.

Thus, the three pertinent references cited by the examiner use in vitro tests to support their own statements of utility, and one (Fiscella) clearly indicates that his statement regarding EDTA is based on an in vitro test. In such circumstances, it is reasonable to conclude that in vitro tests were used as the basis for all the statements regarding EDTA. Therefore, it was improper for the examiner and the board to require clinical testing in humans when the pertinent references only show in vitro tests.

Full scale clinical trials in humans, such as described in the Dental Abstracts reference (see note 16, supra), may be necessary to establish “commercial usefulness” in this technology. However, development of a product to the extent that it is presently commercially salable in the market place is not required to establish “usefulness” within the meaning of § 101. In re Anthony, 414 F.2d 1383, 56 CCPA 1443 (1969).

Claims 2, 7, 12 and 17

These claims are dependent claims which specifically recite a “dentifrice” (claim 2), a “chewing gum” (claim 7), or a “method" (claims 12 and 17) wherein the chelate is appellant’s preferred species, the distannous che-late of ethylenediaminetetraacetic acid Sn2EDTA). Since these are dependent claims, they “ * * * shall be construed to include all the limitations of the claim incorporated by reference into the dependent claim.” 35 U.S.C. § 112, second paragraph. We hold that the in vivo dental paste experiment (employing standard experimental animals) described in Mclntire’s affidavit, which verifies Example 16 of appellant’s specification, is sufficient to rebut the prima facie ease and to prove utility to one skilled in the art for Sn2EDTA when employed in the claimed “dentifrice,” “chewing gum,” and “method.”

Gagolski uses a dental paste experiment employing rats to show “cario-static effect”, and Muhler expressly states that rats are “standard experimental animals for anticariogenic studies.” Hence, rats appear to be a standard experimental animal in this technology.

Mclntire’s affidavit, in verifying Example 16 of appellant’s specification, states that a caries reduction of approximately 40% was achieved by brushing the rats’ teeth with ORABASE emollient dental paste containing 3.5% by weight Sn2EDTA. Brushing teeth, as described in the foregoing dental paste experiment, appears to be functionally equivalent to using chewing gum, since in both situations Sn2EDTA contacts the tooth enamel. Hence, we accept the dental paste experiment employing a standard experimental animal as sufficient proof of utility for the subject matter recited in claims 2, 7, 12 and 17.

Appellant’s dental paste experiment employing a standard experimental animal is clearly distinguishable from the simple in vitro “weighing” tests and “staining” tests described in Hoover v. Eckerd’s Cut Rate Medicine Co., Inc., 53 F.2d 215 (D.Del.1931), aff’d 63 F.2d 813 (3rd Cir. 1933).

The solicitor attacks appellant’s dental paste experiment on three additional grounds. First, that the ORABASE material is not an “emollient dental paste” but rather a “denture adhesive.” Second, that the 3.5% by weight Sn2EDTA used in the verified test is insufficient proof for the claimed range of 0.00001 to 15% by weight. Third, that the rats may have received fluoride in their drinking water.

The problem regarding the identity or function of the ORABASE material stems from the fact that at one point in Mclntire’s affidavit, the affiant refers to ORABASE as a “denture adhesive” whereas in all other occurrences in the affidavit and in the specification, it is described as an “emollient dental paste.” The solicitor has not asked us to take judicial notice of any product specification for ORABASE, and therefore the weight of the evidence favors the view that ORABASE is an “emollient dental paste.” Furthermore, it is hard to see how the rats’ teeth could be “brushed” using a denture adhesive so the solicitor’s argument is unrealistic.

The solicitor’s argument regarding the range of 0.00001 to 15% by weight Sn2EDTA fails to recognize the basic fact proved by the verified dental paste experiment. The basic fact proved by the experiment is that Sn2EDTA is an active component in a dentifrice and that by using Sn2EDTA a significant reduction in caries is achieved. Granted that 0.00001% by weight seems to be a very low concentration, but the Sn2EDTA which will be present at that low concentration will nevertheless function in the intended way. A concentration of 0.00001% by weight Sn2EDTA may not be commercially acceptable, but commercial acceptability is not required. See In re Anthony, supra, and Land v. Regan, 342 F.2d 92, 52 CCPA 1048 (1965).

Melntire’s affidavit is silent on the subject of fluoride control, but it is fair to assume that the three groups of rats used in the experiment verified by Mc-Intire were receiving the same drinking water. The two control groups should nullify any effect of fluorinated water insofar as the validity of the overall test is concerned, so the solicitor’s argument on this ground must fail.

Claims 1, 3-6, 8-11, 13-16 and 18-20

These claims recite either the defined genus or species other than Sn2EDTA. We hold that appellant’s evidence of record is insufficient to rebut the prima facie case for lack of utility in the subject matter (other than Sn2EDTA) recited in these claims.

Appellant’s specification, supra, states that all members of the defined genus are substantially water insoluble, that all have an Sn to N ratio of 1 to 1, and that “all provide a source of tin reactive with tooth enamel * * However, as discussed earlier, the pertinent re-ferenees provide sufficient reason for one skilled in the art to question this broad statement of utility.

To prove utility, appellant submitted Mclntire’s affidavit, but Mclntire’s affidavit describes experiments where the only chelate tested is Sn2EDTA; thus, appellant has submitted no direct evidence proving utility for the other members of the defined genus.

In response to questions from the bench at oral hearing, appellant’s counsel argued that the affidavit evidence for Sn2EDTA was sufficient to prove indirectly the utility of the other claimed species and, therefore, the claimed genus. Counsel’s basis for this argument was “the chemical structure of the compounds involved.”

The issue is whether, in view of the prima facie case, one skilled in the art would accept the affidavit evidence for Sn2EDTA as sufficient to prove indirectly the utility of the remaining members of the claimed genus (including the other claimed species).

Appellant’s argument seems to be that one skilled in this art would view similarity in structure as a reliable guide to functional equivalency for stan-nous chelates in dentifrices. Despite the fact that appellant had the burden of rebutting the prima facie case, appellant submitted no evidence to support the foregoing argument, and counsel’s argument cannot take the place of evidence. See In re Schulze, 346 F.2d 600, 52 CCPA 1422 (1965) and In re Cole, 326 F.2d 769, 51 CCPA 919 (1964).

Moreover, Myers, cited by appellant, states that even the use of stannous fluoride in caries prevention rests on a “semiempirical basis.” This is some evidence that appellant is in a technology largely based on empirical results— not on predictable factors. See In re Cook, 439 F.2d 730, 58 CCPA 1049 (1971).

Therefore, since there is no evidence of record to support appellant’s argument, we cannot say that one skilled in the art would accept the affidavit evidence for Sn2EDTA as sufficient to prove indirectly the utility of the remaining members of the claimed genus. The prima facie case for lack of utility in the claimed subject matter (other than Sn2EDTA) stands unrebutted.

In summary, we hold that appellant has submitted sufficient evidence to| prove that claims 2, 7, 12 and 17 recite subject matter which is “usefül” within the meaning of § 101, and therefore we reverse the board’s decision on these claims. We further hold that appellant has not submitted sufficient evidence to prove that claims 1, 3-6, 8-11, 13-16 and 18-20 recite subject matter which is “useful,” and therefore we affirm the board’s decision on these latter claims.

Modified.

      . This application is a continuation-in-part of application Serial No. 790,469, filed January 10, 1969, which was a continuation-in-part of application Serial No. 714,411, filed March 20, 1968, which was a continuation-in-part of application Serial No. 359,778, filed April 14, 1964, which was allegedly a continuation of application Serial No. 165,962, filed January 12, 1962, and application Serial No. 43, filed January 4, 1960. The record indicates that The Dow Chemical Company is the real party in interest.

      . “Stannous” means “of, relating to, or containing tin [chemical symbol: Sn] — used esp. of compounds in which this element is bivalent [Sn+] * * Webster’s Third New International Dictionary of the English Language, Unabridged, 2225 (1966). “Stannic” refers to “ * * * compounds in which this element is tetravalent [Sn+] * * * . id.

      . “Chelate” means “[t]he type of coordination compound * * * in which a central atom (usually a metal) is joined by covalent bonds to two or more other atoms of one or more other molecules or ions (called ligands), so that heterocyclic rings are formed with the central (metal) atom as part of each ring. Ligands * * * offering two groups for attachment to the metal are termed bidentate (two-toothed); three groups, tridentate, etc.” The Condensed Chemical Dictionary, 190 (8th ed. 1971).

      . Formula IVA, supra, when n is 2, represents this chelate.

      . Formula IVB, supra, when n is 2, represents this chelate.

      . Nitrilotriacetic acid is *(OH2COOH) 3. The Condensed Chemical Dictionary, 619 (8th ed. 1971).

      . Formula III, supra, represents this chelate.

      . Formula IVA, supra, when -(CH2)ñ is replaced by -CH(GH3)CH2> represents this chelate.

      . Formula IVA, supra, when n is 3, represents this chelate.

      . Formula IVA, supra, when n is 4, represents this chelate.

      . Drug and Cosmetic Industry states in relevant part (col. 3, lines 1-25) :
      Of pertinent interest are the experimental studies made by J. O. Muhler and H. G. Day (J.Am.Dent.Assoe. 41:529, 1950) on the effects of stannous fluoride, stannous chloride and sodium fluoride on the incidence of dental lesions in rats fed a caries-producing diet. They found that stannous fluoride in the concentration of ten parts of fluorine per million in the drinking water was greatly superior to sodium fluoride or stannous chloride in any concentration used in this experiment for reducing the incidence and severity of carious lesions in both strains of rats. Stannous chloride did not appear to decrease significantly the incidence of dental 'caries. Sodium fluoride in the eoncentra-tions of 10 ppm of fluorine in the drinking water had some preventive effect on the incidence and severity of the carious lesions. Neither the stannous salts nor the sodium fluoride had any apparent toxic effects in the concentrations used. [Emphasis ours.]

      . Holliday states in relevant part (col. 3, lines 41-54) :
      Many other compounds which form water-soluhle complexes with metallic ions are known, but the aldonates [a complex of an aldonic acid such as gluconic acid] appear to be unique for the purposes of this invention. The complexing agent may be postulated to react with stannous ions to bind them tightly enough that their rate of becoming non-available to dental enamel by hydrolysis, oxidation, and precipitation is greatly reduced but not so tightly that they become non-available to dental enamel.
      Examples of complexers which bind the stannous ions more tightly than aldonates, and which do not serve to achieve the objects of this invention, are pryophosphate, triphosphate, ethylenediaminetetraaaetate, and phytate. Examples of complexers which apparently do not bind the stannous ions tightly enough are lactate and salicylate. [Bracketed insertion and emphasis ours.]

      . Eiscella states in relevant part (col. 2, lines 7-18) :
      The effect of the hydroxyl substituted aliphatic di- and tri-carboxylic acids [of Fiscel-la’s invention] and their water-soluble salts in preventing the precipitation and oxidation of the stannous ion was unexpected. Compounds having characteristics similar ' to these acids have been found to be ineffective for such purposes. For instance, chelating and complexing agents, such as ethylene dia-mine tetra-acetic acid (known as EDTA and Versene), have been found to be ineffective. Yet the acids of the invention and their water-soluble salts effectively chelate or form a complex with the stannous ion which releases stannous ion in effective form in the mouth of the user. [Bracketed insertion and emphasis ours.]

      . The Langer reference, authored by appellant, states (p. 740, item 249) :
      Previous reports on caries inhibition have shown the importance of the stannous metal ion in SnFa [stannous fluoride] as well as the fluoride ion and the effectiveness of some metal ion chelates, including Zn, Ni, and Mn versenate. A new chemical, the distannous chelate of EDTA, has been prepared, which combines the effect of stannous ions with the advantages of the chelate — low toxicity and rate of hydrolysis as compared with other tin (II) salts. The compound has a surprisingly low solubility in water; yet, upon heating an aqueous slurry of dental enamel and the chelate for Ca/Sn 1/1, quantitative formation of a basic stannous phosphate takes place, corresponding with stannous fluoride treatments. Rat feeding tests by L. C. Hendershot, R. Mansell, and J. Forsaith (Bioehem.Res.Lab., Dow Chemical Company) show a definite dose-response relationship for different amounts of stan-nous EDTA added to the cariogenic diet and a significant caries inhibition in female rats, starting with a level of 200 ppm Sn. A highly significant reduction in enamel solubility was obtained through treatment wth Sn(II)¿EDTA by R. S. Manly (Westwood Research Laboratory). [Bracketed insertion and emphasis ours.]

      . Griebstein had not issued at the time of the final Office Action.

      . The Dental Abstracts, reference is entitled “Clinical testing of cariostatic agents” and it states in relevant part:
      Before any cariostatic agent is subjected to clinical trial, preliminary experimental work should have determined its potential usefulness and safety. This usually involves in vitro tests, in vivo tests in animals, and small-scale pilot studies in humans. These data can be used to estimate the magnitude and variability of the car-iostatic effect to be expected and the number of subjects required in a full-scale controlled study.
      $ $ $ $ $
      Clinical trials should be conducted for a minimum of two years if the agent is expected to arrest the progress of caries, but for a longer time if the agent’s effect in preventing caries is to be assessed. There should be at least one year between re-examinations.

      . The full paragraph reads as follows :
      Of the tin compounds that have been tried, only the stannous ion has been ef-feetive. The stannic ion has been proved to be inactive. Also related is the fact that the lead ion has been found to be extremely effective in reducing the solubility rate of apatite or dental enamel, although in three clinical studies it has been slightly active (30% reduction of caries) only once. From the clinical trials, whether precautions were taken to preserve the lead in the 2+ state or whether its low solubility (0.06%) prevents concentrations high enough to be effective is not clear. In those studies in which the activity of lead has been assessed by the reduction of enamel solubility, it has generally been highly efficacious. [Footnote citations omitted.]

      . § 101. Inventions patentable
      Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title. [Emphasis ours.]

      . Appellant’s brief gives tlie following chemical formula for the monostannous chelate of EDTA:

      . We use the phrase “standard experimental animals” by way of analogy to In re Krimmel, 292 F.26 948, 953, 48 CCPA 1116, 1123 (1961), where it was defined as “whatever animal is usually used by those skilled in the art to establish the particular pharmaceutical application in question.” See also In re Hartop, 311 F.26 249, 50 CCPA 780, n. 14 (1962).