Ferguson Beauregard/Logic v. Mega Systems

• Decision Date: 04 December 2003
• Docket Number: No. 02-1380.,No. 02-1427.,02-1380.,02-1427.
• Citation: 350 F.3d 1327
• Parties: FERGUSON BEAUREGARD/LOGIC CONTROLS, DIVISION OF DOVER RESOURCES, INC., Plaintiff-Appellant, and Delaware Capital Formation, Inc., Plaintiff-Appellant, v. MEGA SYSTEMS, LLC and James Bartley, Defendants-Cross Appellants.
• Court: U.S. Court of Appeals — Federal Circuit

350 F.3d 1327

FERGUSON BEAUREGARD/LOGIC CONTROLS, DIVISION OF DOVER RESOURCES, INC., Plaintiff-Appellant, and Delaware Capital Formation, Inc., Plaintiff-Appellant, v. MEGA SYSTEMS, LLC and James Bartley, Defendants-Cross Appellants.

No. 02-1380.

No. 02-1427.

United States Court of Appeals, Federal Circuit.

Decided: December 4, 2003.

COPYRIGHT MATERIAL OMITTED

Edward A. Matto, Bricker & Eckler LLP, of Columbus, Ohio, argued for both plaintiffs-appellants. On the brief for plaintiff-appellant Ferguson Beauregard/Logic Controls was T. Earl LeVere. Also on the brief for plaintiff-appellant Delaware Capital Formation, Inc., were Gerald L. Smith and Jerry K. Mueller, Jr., Mueller & Smith, L.P.A., of Columbus, Ohio.

Charles W. Alworth, Alworth Law & Engineering, of Tyler, Texas, argued for defendants-cross appellants.

Before RADER, LINN, and DYK, Circuit Judges.

LINN, Circuit Judge.

Ferguson Beauregard/Logic Controls, Division of Dover Resources, Inc. ("Ferguson") and Delaware Capital Formation, Inc. ("Delaware Capital") appeal various aspects of a judgment of the United States District Court for the Eastern District of Texas following a bench trial concerning, inter alia, allegations of infringement of four patents and multiple versions of accused infringing devices. Ferguson Beauregard/Logic Controls, Div. of Dover Res., Inc. v. Mega Sys., LLC, 6:99CV437 (E.D.Tex. Feb. 6, 2002) ("Judgment"). Mega Systems, LLC ("Mega") and James Bartley ("Bartley"), president and majority owner of Mega, cross-appeal other aspects of the same judgment.

In particular, Ferguson and Delaware Capital appeal: (1) the district court's construction of certain claim limitations of U.S. Patent No. 5,146,991 ("the '991 patent"), owned by Delaware Capital and licensed to Ferguson; (2) the district court's determination that a certain version of a product made and sold by Mega—version 3 of the APC 1000 device — did not infringe the '991 patent; (3) the district court's conclusion that Bartley was not personally liable for inducing Mega to infringe the '991 patent and U.S. Patent No. 4,352,376 ("the '376 patent"), also owned by Delaware Capital and licensed to Ferguson; (4) the district court's denial of Ferguson's motion to amend the claims to assert willful infringement; and (5) the district court's conclusion that it lacked jurisdiction to consider whether U.S. Patent No. 4,921,048 ("the '048 patent"), assigned to Mega, had been improperly revived at the U.S. Patent and Trademark Office ("PTO") after it lapsed for failure to timely pay maintenance fees.

Mega and Bartley cross-appeal: (1) the district court's construction of certain claim limitations of the '376 patent; (2) the district court's determination of damages to be awarded to Ferguson for infringement of the '376 patent; (3) the district court's conclusion that Ferguson did not infringe the '048 patent; and (4) the district court's ruling barring the submission of evidence of prior art due to lack of notice under 35 U.S.C. § 282.

Because the district court erroneously construed certain claim limitations of the '991 patent, we reverse the district court's claim construction, vacate the determination that version 3 of Mega's APC 1000 device did not infringe, and remand the issue for further findings consistent with the claim construction set forth in this opinion. We affirm the district court's conclusion that Bartley did not induce infringement based on the correct legal standard applied by the court to the facts in evidence. We reverse the district court's denial of Ferguson's motion to amend the complaint to include an assertion of willful infringement and remand for further proceedings on that issue. We affirm the district court's refusal to consider whether Mega engaged in inequitable conduct when it successfully revived the '048 patent. Further, we affirm the district court's construction of the claims of the '376 patent; however, because we believe the district court abused its discretion in determining the amount of the damage award for infringement of the '376 patent, we vacate that award and remand the issue of damages for determination consistent with this opinion. Finally, we affirm both the district court's determination that Ferguson did not infringe the '048 patent and the district court's evidentiary ruling under 35 U.S.C. § 282.

BACKGROUND

Overview of the Technology

The patents in this case concern control systems and related methods used in the production of petroleum products from a well. While some wells are capable of producing (or outpouring) liquid petroleum products under naturally induced reservoir pressures, it is more common for wells to require an artificial lift mechanism to be productive. '991 patent, col. 1, ll. 7-11. One such artificial lift system repetitively causes pressure to build by first closing in the well while it is subject to the inflow of liquids. Id. at ll. 14-18. After the proper combination of pressure and liquid develops, the well is opened to a gathering system to collect the liquid produced and expelled by the pressure built up when the well was closed. The cycle is then repeated successively. This cyclical shutting in and opening of the well is known as "intermitting." Id. at ll. 25-31. The gathering system typically includes a gas/liquid separator, one or more sales lines, and a tank or reservoir for collecting the liquids issuing from the well during the open intervals. Id. at ll. 18-24.

Many artificial lift well installations also typically employ a "plunger method" to aid production. Using the plunger method, a piston, or plunger, is installed within the tubing string of the well and travels the entire length of the tubing string during each cycle of the shutting in and opening of the well. The presence of the plunger improves the production and delivery of the liquid from the well to the gathering system. Id. at ll. 57-62.

The timing of intermitting and operation of the plunger mechanism are critical for the success of the well operation. Prior to the inventions involved in this case, control over these timing issues generally had been relegated to crude, clock-operated devices, requiring hand winding and frequent technician intervention. Id. at col. 2, ll. 30-34. All of the patents-in-suit are directed to improvements over these earlier control systems.

Figure 1 of the '991 patent, shown below, is illustrative of the technology at issue and shows "a well installation for plunger lift production according to the method of the invention." Id. at col. 6, ll. 32-34.

NOTE: OPINION CONTAINING TABLE OR OTHER DATA THAT IS NOT VIEWABLE

Well installation 10 includes a casing 12, extending from the surface into a gas-oil formation. Wellhead 14 supports a tubing string 16 having an open lower end 18 in the vicinity of the lower region of casing 12. A plunger 22 is disposed in tubing string 16. T-connection 28 provides fluid communication between tubing string 16 and conduit 42, which extends to a separator 46. A motor valve 48 provides control over conduit 42. Valve 48 is controlled to open and close conduit 42 by a microprocessor-driven controller 50. The pressure in the sales line is monitored by a sales line gauge 60. When the gas pressure in the sales gathering system is too high, and a set threshold is reached or exceeded, a "high line contact" is generated as an electrical signal and conveyed to controller 50. A conduit 70 extends from T-connection 32 and is controlled by a second motor valve 72 — a tank valve or tank control valve. Tank valve 72 is also controlled between on and off states by controller 50. Opening tank valve 72 opens tubing string 16 to the low pressure of a tank or reservoir 76. A plunger detector 86 located above plunger catcher 38 provides a magnetic shut-off on arrival signal to controller 50. Id. at col. 7, l. 58 — col. 9, l. 27.

Delaware Capital and Ferguson's '376 Patent

The '376 patent issued on October 5, 1982, and is directed to a microprocessor-based controller that improves upon a controller subject to an earlier patent, U.S. Patent No. 4,150,721 ("the '721 patent"),¹ also owned by Delaware Capital and licensed to Ferguson. The '721 patent discloses an electronic well controller system, providing long-term battery-operated control over wells and simplified control adjustment procedures. See '376 patent, col. 2, ll. 36-42. The '376 patent improves upon the system described in the '721 patent by allowing greater flexibility of operation and accommodation for a wide range of parameters, as well as other features, such as the ability to withstand a variety of severe environments and to run on conventional D-cell batteries. Id. at col. 3, l. 60 — col. 4, l. 18.

Ferguson asserts that Mega's APC 1000 controller infringes claims 1, 16, and 35 of the '376 patent. Representative claim 1 recites, in relevant part and with the disputed term underlined:

1. A controller for use in conjunction with the control of well installations of a variety wherein a control valve regulating the flow of fluid hydrocarbon is selectively actuated between an on state and an off state in response to corresponding control inputs thereto, comprising:

* * *

valve means responsive to said actuation signals to derive said control inputs.

The valve assembly, in operation, shifts between an on state, where fluid is produced from a well, and an off state, where the well is shut in. Id. at col. 7, l. 62 — col. 8, l. 45. The on state is defined by a window of time bounded by the time when the valve means is opened and extending until the time when the valve means is closed. Id.

Delaware Capital and Ferguson's '991 Patent

The '991 patent issued on September 15, 1992, and is directed toward a method for use in controllers, such as that described in the '376 patent. '991 patent, col. 8, ll. 25-36. The method includes continuous monitoring and adjustment of well performance by evaluating plunger speed. Id. at col. 3, ll....