Hallco Manufacturing Co., Inc. v. Foster

• Decision Date: 06 July 2001
• Docket Number: DEFENDANT-APPELLEE,AND,DEFENDANT-APPELLE
• Citation: 256 F.3d 1290
• Parties: (Fed. Cir. 2001) HALLCO MANUFACTURING CO., INC., PLAINTIFF/COUNTERCLAIMOLOF A. HALLSTROM, COUNTERCLAIM, v. RAYMOND KEITH FOSTER, DEFENDANT/COUNTER CLAIMANT -APPELLANT 99-1458 Decided:
• Court: U.S. Court of Appeals — Federal Circuit

Page 1290

256 F.3d 1290 (Fed. Cir. 2001)

HALLCO MANUFACTURING CO., INC., PLAINTIFF/COUNTERCLAIM DEFENDANT-APPELLEE, AND OLOF A. HALLSTROM, COUNTERCLAIM DEFENDANT-APPELLEE, v. RAYMOND KEITH FOSTER, DEFENDANT/COUNTER CLAIMANT -APPELLANT

99-1458

United States Court of Appeals for the Federal Circuit

Decided: July 6, 2001

Appealed from: United States District Court for the District of Oregon, Senior Judge Owen M. Panner

John W. Stephens, Esler, Stephens, & Buckley, of Portland, Oregon, filed a petition for panel rehearing for plaintiff/counterclaim defendant-appellees. With him on the brief was Michael J. Esler.

Delbert J. Barnard, Barnard & Pauly, P.S., of Seattle, Washington, filed a response for defendant/counter claimant-appellant.

Rader, Circuit Judge, Plager, Senior Circuit Judge,^*and Schall, Circuit Judge.

Plager, Senior Circuit Judge.

ORDER

The Petition for Rehearing is GRANTED, for the limited purpose of addressing several factual issues. The original opinion is withdrawn and replaced with the attached revised opinion. The outcome is unchanged.

OPINION

In this patent case, Hallco Manufacturing Co. filed a declaratory judgment action seeking a judicial determination that its redesigned reciprocating conveyers did not infringe U.S. Reissue Patent No. Re35,022 (the "'022 patent"). The '022 patent is owned by Raymond Keith Foster ("Foster"). Foster counterclaimed against Hallco Manufacturing Co. and its owner Olof A. Hallstrom (collectively "Hallco") for breach of a settlement agreement regarding the '022 patent into which the parties had earlier entered.

The district court, Judge Owen M. Panner, first ruled that the dismissal with prejudice of a previous suit between the parties on the same patent, following a mid-trial settlement of the dispute which resulted in the settlement agreement, did not preclude Hallco from challenging the validity of the '022 patent. Hallco Mfg. Co. v. Foster, Civ. No. 98-947-PA (D. Or. Oct. 5, 1998). Second, the district court concluded, after a bench trial, that the patent was invalid. Hallco Mfg. Co. v. Foster, Civ. No. 98-947-PA (D. Or. Mar. 1, 1999). And third, the district court held that the redesigned conveyors did not infringe. Id. Foster appeals all three rulings to this court. Because we are unable to agree with the district court in its analysis of the first issue, involving the threshold question of claim preclusion, we vacate the district court's judgment and remand for further proceedings. On remand, the district court, consistent with the views expressed here, should reconsider whether Hallco is precluded from raising its invalidity and non-infringement defenses.

BACKGROUND

Hallco and Foster are competitors in the market for reciprocating conveyers. That the competition between them is fierce is evidenced by the frequency with which their disputes appear in this court.¹ Reciprocating conveyers are commonly used to move large loads into and out of trucks. They are built into the floors of the trucks themselves.

A detailed understanding of the technology is not necessary to understand this opinion; a short summary should suffice to put the case in context.² Reciprocating conveyers were known prior to the '022 patent. The key improvement of the '022 patent was the placement of the drive mechanism. In the prior art, the drive mechanism was typically located next to the floor members, with long drive beams connecting the drive mechanism to the floor members. In contrast, the '022 patent provides for mounting the drive mechanism directly below the floor members. This configuration greatly reduces the weight of the conveyor, as well as the amount of space it takes up.

Another difference between the prior art and the conveyer disclosed in the '022 patent is that, in the prior art, the drive beams are connected to the piston rods, which are therefore the moving parts (the cylinders are stationary), while in the '022 patent the drive beams are shown connected to the cylinders, and the cylinders are therefore the moving parts (the piston rods are stationary).

The original application in the '022 patent chain, filed in 1983, claimed only the embodiment of the under-mounted drive mechanism in which the cylinders moved on stationary piston rods. The application was abandoned in favor of a divisional application, in which the claims were broadened to cover in addition the embodiment in which the piston rods moved within stationary cylinders. This application matured into U.S. Patent No. 4,793,469. In 1992, in litigation between these same parties, several of the claims in this patent were held invalid (for reasons unrelated to the present case). The patentee Foster then requested a reissue proceeding in 1994, in which he amended the invalid claims and added new claims. The patent reissued in 1995 as the '022 patent.

Foster then sued Hallco on the '022 patent, accusing its Hallco 4000 and Hallco 6000 products of infringing claims 5 and 33-36. The district court granted summary judgment of non-infringement. On appeal, this court reversed the district court's claim construction and remanded the case for further proceedings. Foster v. Hallco Mfg. Co., 119 F.3d 16 (table). On remand, the district court granted summary judgment of infringement under the new construction, and Hallco was left with only its invalidity defenses. However, before conclusion of the trial, the parties settled, with Hallco taking a non-exclusive, royalty-bearing license. The district court then dismissed the action with prejudice.

After the settlement, Hallco redesigned the Hallco 4000 and 6000. The parties designate the original infringing conveyors as "Hallco I" and the redesigns as "Hallco II," which convention this opinion will follow. Hallco asserted that the new Hallco II designs did not infringe claims 5 and 33-36 of the '022 patent. Foster disagreed. Hallco paid royalties on the Hallco II under protest, then filed this declaratory judgment action, alleging non-infringement by the Hallco II conveyers. Hallco also alleged that the '022 patent was invalid, and sought return of the royalties. Foster counterclaimed, alleging breach of the settlement agreement.

In a series of carefully considered opinions, the district court decided the three issues that are relevant to this appeal. The district court ruled, first, that no claim preclusion arose as a result of the dismissal of the prior suit, and therefore Hallco was free to challenge the validity of the '022 patent.

Second, on the merits of the invalidity question, the district court concluded that the written description in the original application that ultimately led to the '022 patent did not support the claims insofar as they claimed an embodiment in which the cylinders were fixed and the piston rods moved. Thus, Foster was not entitled to its initial 1983 filing date for any claim that covered such an embodiment. The court then concluded that the earliest date to which such claims might be entitled was 1987, the date on which the divisional application with the new claims was filed. Since the Hallco I device, which had already been found to infringe the '022 patent, had been on sale since 1984, it anticipated the '022 patent, which was therefore invalid.

Third, on the merits of whether the Hallco II infringes the '022 patent, the district court noted that the claims at issue, claims 5 and 33-36, contained a means-plus-function limitation, referred to as the "connector means." The district court was not persuaded by either side's presentation on the issue of whether the structure in the Hallco II allegedly corresponding to the connector means was the same as or equivalent to the structure disclosed in the '022 patent. The district court therefore concluded that Foster had not borne his burden of proof on the issue, and thus found no infringement.

As a consequence of these conclusions, the district court rendered judgment in Hallco's favor, holding that claims 5 and 33-36 of Foster's '022 patent were invalid; that the new Hallco II units did not infringe the claims at issue; and that Hallco did not owe the royalties paid under protest. Judgment was rendered in Hallco's favor for that amount, plus interest, and Foster's counterclaim against Hallco was dismissed with prejudice.

Foster appeals the judgment of the district court. Foster asserts that the district court erred when it determined that Hallco's invalidity defense was not precluded. Foster also asserts that the written description in the '022 patent adequately supported the claims, and that the district court failed to afford his patent the requisite presumption of validity. Finally, Foster asserts that the district court erred in its determination of non-infringement.

DISCUSSION

I.

We address first the threshold question of whether Hallco was precluded by the earlier litigation from challenging in this litigation validity and infringement under the '022 patent. If it was, then the judgment against Foster on those issues cannot stand. The question of whether prior litigation results in claim preclusion in a later suit is a question of law, reviewed without deference. See Miller v. County of Santa Cruz, 39 F.3d 1030, 1032 (9th Cir. 1994); accord Epic Metals Corp. v. H.H. Robertson Co., 870 F.2d 1574, 10 USPQ2d 1296 (Fed. Cir. 1989); Young Eng'rs, Inc. v. United States Int'l Trade Comm'n, 721 F.2d 1305, 219 USPQ 1142 (Fed. Cir. 1983). Since the present claim preclusion issue is particular to patent law, we analyze it under applicable Federal Circuit law. Foster v. Hallco Mfg. Co., 947 F.2d 469, 478-80, 20 USPQ2d 1241, 1247-49 (Fed. Cir. 1991). Because the term `claim' has a special meaning in patent law, which meaning is different from `claim' in general civil procedure, it is important to keep the distinction in mind. In this discussion of claim preclusion, unless the context indicates otherwise, the unmodified word `claim' is synonymous with `cause of action.'

II.

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