269 F.2d 841 (5th Cir. 1959), 16938, Thurber Corp. v. Fairchild Motor Corp.

Docket Nº:16938.
Citation:269 F.2d 841, 122 U.S.P.Q. 305
Party Name:THURBER CORPORATION, Appellant, v. FAIRCHILD MOTOR CORPORATION and Ford Motor Company, Appellees.
Case Date:July 24, 1959
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 841

269 F.2d 841 (5th Cir. 1959)

122 U.S.P.Q. 305



FAIRCHILD MOTOR CORPORATION and Ford Motor Company, Appellees.

No. 16938.

United States Court of Appeals, Fifth Circuit.

July 24, 1959

Rehearings Denied Sept. 30, 1959.

Page 842

[Copyrighted Material Omitted]

Page 843

Edmund C. Rogers, Lawrence C. Kingsland, St. Louis, Mo., Malcolm W. Monroe, New Orleans, La., Deutsch, Kerrigan & Stiles, New Orleans, La., Kingsland, Rogers & Ezell, St. Louis, Mo., Eberhard P. Deutsch, Bernard Marcus, New Orleans, La., of counsel, for appellant.

Arthur W. Dickey, Detroit, Mich., Harry McCall, Jr., New Orleans, La., Robert G. Harris, Dearborn, Mich., Chaffe, McCall, Phillips, Burke & Hopkins, New Orleans, La., Cyrus G. Minkler, Harness, Dickey & Pierce, Detroit, Mich., of counsel, for defendants-appellees.

Before JONES, BROWN and WISDOM, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

This is a patent case involving the validity and infringement of five patents relating to automobile transmissions. Thurber complains that his 500 and 253 patents (issued 1936 and 1942) were infringed by the Ford overdrive transmission, and that his 772, 549 and 550 1 (issued ten years later) were infringed by the Fordomatic transmission. The jury thought otherwise, verdict and judgment were accordingly entered for defendant-Ford, and Thurber appeals.

Unlike the usual patent case, however, we need consider neither the mechanics of these complex devices nor involved questions of patent law.

Thurber's complaints are limited to the exclusion of evidence relating to the so-called 'Borg-Warner story, ' and the Court's charge.


The Borg-Warner Story

The so-called Borg-Warner story, which was excluded from evidence by the District Court, 2 is simply an explanation of the dealings between Thurber and Borg-Warner and the subsequent relations between Borg-Warner and Ford. Its highlights-- either undisputed or by permissible jury inferences--may be swiftly summarized.

Overdrive. Thurber has been working in the automotive industry for over fifty years, and with transmissions since the late 1920's. He filed his 500 patent in 1934 and his 253 patent in 1938. Borg-Warner had been working on a similar project. Thurber disclosed his 500 patent to them in 1934 and later his 253.

Page 844

Thurber claims that the Borg-Warner overdrive manufactured in 1948 or 1949, and used by Ford, infringed the inventions he had previously disclosed to them.

Fordomatic. Thurber's 772, 549 and 500 patents were pending in 1946 when Borg-Warner was trying to design a transmission to compete with Hydramatic. Thurber went over his applications with Borg-Warner's designers at that time. What Ford subsequently used as the 'Fordomatic' was obtained from Borg-Warner in 1949, and was, Thurber asserts, an infringement of his patents previously disclosed to Borg-Warner.

Borg-Warner paid a total of $10, 000 for two six-months' options to license Thurber's patents in 1950. This was dropped upon the insistence of Ford that it might appear to be a recognition of patents.

But during this time Borg-Warner's patent attorneys had apparently aided Thurber somewhat in perfecting the language of the claims now in suit so that they would read on the Fordomatic device.

Litigation Agreement. Borg-Warner and Ford negotiated a division of expenses agreement as to any Fordomatic litigation, an indemnity agreement as to the Fordomatic sold by Borg-Warner to Ford, and an indemnity agreement as to overdrives. Borg-Warner further aided Ford by providing Wayman and Barnes as expert witnesses.

Thurber proffered, as exhibits, correspondence between Thurber and Borg-Warner as to the patent and license negotiation, and correspondence and agreements between Ford and Borg-Warner regarding litigation agreements. The Court ruled on this proffer at the outset of the trial: (1) all the Thurber/Borg-Warner correspondence was to be admitted on the question of validity (though not on the question of infringement), and (2) none of the Borg-Warner/Ford material was to be admitted. Subsequently all was excluded.

We conclude that this ruling, and the subsequent total exclusion by the Court, were erroneous, and accordingly hold that a new trial must be granted.

The effect of this exclusion cannot be fully estimated. We cannot now determine what the jury might have done had it known what it was not permitted to know. But the matters excluded were of such great significance and pertinence to the case at hand that we cannot say that the District Court's ruling did not 'affect the substantial rights of the parties, ' 28 U.S.C.A. § 2111, or that it constituted mere 'harmless error, ' F.R.Civ. P. 61.

Witnesses Barnes and Wayman gave a substantial quantity of testimony, together comprising nearly 500 pages of printed record. Barnes was a regular consultant to Borg-Warner and received royalties from it on several devices. Wayman was in its direct employment and his presence there was in aid of the mutual defense to which Borg-Warner and Ford were bound. Of necessity, the jury was entitled to place considerable reliance upon their explanations of overdrive and automatic transmissions, the interpretation and meaning of the patent claims, and their general conclusions that there was no equivalence between the Thurber and Ford devices. Thurber was intitled, and permitted, to demonstrate to the jury that these men were effectually or actually employed by Borg-Warner, and that Borg-Warner was making the transmissions for Ford. But the Court's ruling concealed from the jury the significant additional facts underlying the Borg-Warner/Ford relationship. These relate to 3 the Ford/Borg-Warner agreement to share litigation expenses and Borg-Warner's agreement to indemnify Ford for any infringement liability incurred connected with the Borg-Warner

Page 845

transmissions. It is axiomatic that their employment by someone with such a direct interest in the outcome of the case is a fact that the jury should know in weighing their testimony.

'Under this rule the fact that a witness is employed by a party to the suit is regarded as a relevant circumstance to be considered by the jury as showing bias or interest, and a fortiori where the witness is an employee of a party who has an interest in the recovery, his employment may be shown for the same reason.' Majestic v. Louisville & N.R.Co., 6 Cir., 1945, 147 F.2d 621, 627. See generally McCormick, Evidence § 40 (1954); 3 Wigmore, Evidence §§ 948, 949 at 500-01, 966, 969 (3rd ed. 1940). To this must be added the further a fortiori that the financial interest of the witness' employer may be shown to connect the chain. That is what this evidence did in a graphic way.

The testimony of these experts was in the field of opinion on which credibility is not a mere matter of truth or falsity. How far did the fact that Wayman's employer would have to indemnify Ford fully for damages awarded Thurber for transmissions sold by Borg-Warner affect his opinion on the interpretation of this abstruse language, the equivalence of the devices and the like? Without this information the jury was weighing the intrinsic value of his testimony in ignorance of highly relevant factors.

In addition to this impeachment evidence we think the Court erred in excluding as irrelevant the proffered evidence of correspondence, etc., between Thurber and Borg-Warner. As background the record authorized the jury to infer that Ford would not have been using the Fordomatics apart from Borg-Warner, i.e., that Borg-Warner had an actual operational responsibility for Ford using this particular device. Quite apart from questions which might arise about Borg-Warner being an 'agent' of Ford, it is clear that it was no stranger to Ford in this situation. Since Ford got the device from Borg-Warner, it was certainly relevant to consider what Borg-Warner had done. Especially would this be so as between Borg-Warner and Thurber.

The evidence 4 proffered in this category warranted a jury inference that Borg-Warner had access to Thurber's secrets. That might have been deemed relevant in drawing the further inference that Borg-Warner came to design its Fordomatic, not as it and Ford claims from the prior art, but rather from the teachings of Thurber's patents and disclosures.

Of course it is true that the determination of the validity and infringement of a patent can be made irrespective of the purpose and intent of the alleged infringer, and that it is not necessary that he even have knowledge of the patent alleged to be infringed. Eastman Oil Well Survey Co. v. Sperry-Sun Well Surveying Co., 5 Cir., 1942, 131 F.2d 884, 887; Kansas City Southern Ry. v. Silica Products Co., 8 Cir., 1931, 48 F.2d 503, 508; 3 Walker, Patents §§ 450 at 1681-82, 453 (Deller's Ed. 1937).

Nevertheless, courts are not blind to these factors, and they should not insist that juries be. Many cases can be found in which the courts have taken special note of the fact that the alleged infringer had opportunity or reason to make a conscious appropriation of the patent in question. Only a few need be cited.

For example, quite recently in Bryan v. Sid W. Richardson, Inc., 5 Cir., 1958, 254 F.2d 191, we made these observations:

'At the outset, we affirm as clearly supported both the implication and the express holding that Bryan's device is traceable in fact directly to these patents. * * * He had, in the meantime, also obtained in 1952 shop drawings in connection with the settlement of a license dispute. Indeed,

Page 846

it goes even farther back for in 1948 he received, although he later made a denial which the Court discredited, * * * original drawings from McGowen. This was followed by several conferences with McGowen at Bryan's shop in Fort Worth where, at first, he encouraged these young men to work out an arrangement with him, although later, by a change...

To continue reading