357 F.3d 1319 (Fed. Cir. 2004), 03-1256, National Steel Car, Ltd. v. Canadian Pacific Ry., Ltd.

Docket Nº:03-1256.
Citation:357 F.3d 1319
Party Name:69 U.S.P.Q.2d 1641 NATIONAL STEEL CAR, LTD., Plaintiff-Appellee, v. CANADIAN PACIFIC RAILWAY, LTD., Canadian Pacific Railway Company, 3942503 Canada, Inc., and Delaware & Hudson Railway Company, Inc., Defendants-Appellants.
Case Date:January 29, 2004
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit

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357 F.3d 1319 (Fed. Cir. 2004)

69 U.S.P.Q.2d 1641

NATIONAL STEEL CAR, LTD., Plaintiff-Appellee,

v.

CANADIAN PACIFIC RAILWAY, LTD., Canadian Pacific Railway Company, 3942503 Canada, Inc., and Delaware & Hudson Railway Company, Inc., Defendants-Appellants.

No. 03-1256.

United States Court of Appeals, Federal Circuit

January 29, 2004

Rehearing and Rehearing En Banc Denied March 18, 2004.

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[Copyrighted Material Omitted]

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Robert G. Krupka, Kirkland & Ellis, of Los Angeles, CA, argued for plaintiff-appellee. With him on the brief were David P. Swenson and Robert J. McManus, Kirkland & Ellis, of Washington, DC; and Linda S. Resh, Craig D. Leavell, Jamie H. McDole, and Alma M. Lugtu, Kirkland & Ellis, of Chicago, IL. Of counsel was Alexandra DeNeve, Kirkland and Ellis, of Chicago, IL.

Mark T. Banner, Banner & Witcoff, Ltd., of Chicago, IL, argued for defendants-appellants. With him on the brief were Marc S. Cooperman, J. Pieter van Es, Janice V. Mitrius, and Theodore L. Field.

Before MAYER, Chief Judge, CLEVENGER and SCHALL, Circuit Judges.

CLEVENGER, Circuit Judge.

Plaintiff-Appellee National Steel Car, Ltd. ("National Steel Car" or "NSC") sued Defendants-Appellants Canadian Pacific Railway, Ltd., Canadian Pacific Railway Company, 3942503 Canada, Inc., and Delaware

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and Hudson Railway Company, Inc. (collectively "Canadian Pacific" or "CPR") in the Eastern District of Pennsylvania for infringement of U.S. Patent No. 4,951,575 ("the '575 patent"). NSC moved for a preliminary injunction, and the district court granted NSC's motion, holding inter alia that NSC had demonstrated a likelihood of success on the merits, that CPR's defense to infringement under 35 U.S.C. § 272 lacked substantial merit, and that CPR's invalidity defense did not raise a substantial question. See Nat'l Steel Car, Ltd. v. Canadian Pac. Ry., Ltd., 254 F.Supp.2d 527 (E.D.Pa.2003). After careful review of the district court's opinion, the record, and the arguments advanced by the parties, we conclude that CPR's defenses demonstrate substantial challenges to NSC's allegations, and we reverse the district court's preliminary injunction.

I

The '575 patent, assigned to National Steel Car, a manufacturer of railway cars, addresses a particular type of railway car used to haul lumber: a depressed center-beam flat car. Figure 1 of the '575 patent shows a longitudinal section through one side of the car and is reproduced below.

(Image Omitted)

The car described in the '575 patent is a "center-beam" car because the primary structure of the car is a truss-like beam element that runs the length of the center of the car between the wheel assemblies, or "end truck assemblies," in the front and back of the car. Center-beam cars are an industry standard for hauling lumber, which is piled onto a floor that extends laterally to each side of the car from the bottom of the center beam and then secured to the center beam. Canadian Pacific currently operates a fleet of center-beam flat cars.

The car described in the '575 patent is a "depressed," or "drop-deck," car because the portion of the floor between the end truck assemblies is lowered relative to the height of the floor over the end truck assemblies. The drop-deck center-beam flat car has two advantages over the non-drop-deck version. First, it can carry a volumetrically larger load. Given the relatively low density of wood, ordinary center-beam cars reach volume capacity before they reach weight capacity, leaving each car inefficiently under-loaded in terms of weight. Second, the dropping of the deck lowers the car's center of the gravity, permitting safer loading, transit, and unloading because a higher center of gravity renders the car more vulnerable to tipping.

NSC alleges infringement of claims 1-3, 5-9, and 20-23 of the '575 patent. Claims 1, 2 and 20 are independent claims, each using different structural aspects of the invention to define the claim's scope. Because the district court construed only a limited number of claim terms, and based its invalidity conclusion on only those terms, we need not reproduce an exhaustive list of the asserted claims. Claims 1

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and 5 are thus representative, and the construed claim terms are emphasized:

1. A flat car supported on end truck assemblies comprising

a body formed by a longitudinally extending center sill, a draft sill attached to each end of said center sill, and a pair of bulkheads mounted at each end,

side sill means disposed on opposite sides of said center sill on said body,

a vertical center beam assembly extending upward from said center sill,

said vertical center beam assembly including an upper center sill extending parallel above said center sill between said bulkheads, said upper center sill being supported by a plurality of columns carried by at least said center sill, and

floor means being arranged between said opposite side sill means, said floor means having end floor sections lying in a first generally horizontal plane and an intermediate depressed floor section disposed in a second generally horizontal plane lying below said first horizontal plane,

said side sill means includes a pair of side sill assemblies disposed on opposite sides of said center sill, each of said side sill assemblies includes a pair of upper end sections extending along an upper axis and an intermediate section extending along a lower axis disposed below said first axis for supporting said intermediate depressed floor section.

5. The flat car according to claim 1 wherein said side sill means includes side sill transition means for joining said end sections of each of said side sill assemblies to said intermediate section.

'575 patent, col. 5, l. 49--col. 6, l. 9 (emphases added).

II

Canadian Pacific is a Canadian railroad company1 that owns rail lines in Canada and in the United States and operates trains on these lines. On May 21, 2002, CPR issued a Request for Quote for a new fleet of depressed center-beam flat cars. Although NSC was among the three companies that submitted bids, CPR awarded a contract for 525 cars to Greenbrier, a United States company with a TrentonWorks production facility in Canada at which the cars were to be produced. The contract was based on Greenbrier's GBRX 20003 model of a depressed center-beam flat car.2 The contract was for a total of over $21 million and included a broad provision under which Greenbrier agreed to defend patent-infringement suits brought against CPR, to indemnify CPR against all damages in any such suit, and to provide a suitable remedy should use of the cars be enjoined.

CPR intends to use the GBRX 20003 depressed center-beam flat cars in the same way that it uses its current fleet of 2,900 lumber-carrying center-beam flat cars.3 Ninety percent of CPR's lumber shipments travel from Canada to the United States; the remaining ten percent are performed entirely within Canada. Because

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there is no market need for American lumber to be shipped into Canada, CPR center-beam flat cars return to Canada empty 99.2 percent of the time. Measured either on the basis of days or track mileage traveled, a center-beam flat car is in the United States approximately 56 to 57 percent of the time.

To service destinations in the United States, CPR engines pull the CPR cars as far as CPR-owned track extends into the United States. If the destination lies beyond the end of the CPR track, the CPR cars are switched at an interchange point, such as Chicago, Illinois, to trains powered by locomotives owned by United States railroads. At an interchange point, CPR cars from the same incoming train may end up on different trains heading to different United States destinations.

III

During the course of the bidding process on Canadian Pacific's fleet of depressed center-beam flat cars, National Steel Car apprised CPR of the existence of the '575 patent and indicated that it was prepared to protect its patent rights. Less than a month after CPR informed NSC that its bid had not been accepted, NSC filed the complaint initiating the instant suit, alleging infringement of claims 1-3, 5-9, and 20-23 of the '575 patent based on CPR's intended use of the drop-deck center-beam flat cars in the United States.4 NSC moved for a preliminary injunction against CPR, and after an expedited discovery period and an evidentiary hearing, the district court granted the motion. The district court's preliminary injunction enjoins CPR "from making, using, offering to sell, or importing the GBRX 20003 depressed center beam flat car in the United States."

In the preliminary injunction proceedings before the district court, CPR conceded that limitations in the claims of the '575 patent read on the GBRX 20003. The questions considered by the district court in its analysis of NSC's likelihood of success on the merits, therefore, focused on CPR's defenses to patent infringement. The district court held that neither of the two defenses raised by CPR had substantial merit. CPR first claimed that 35 U.S.C. § 272 defines CPR's use of the accused cars as noninfringing. Section 272, titled "Temporary presence in the United States," provides that the use of an invention in a vehicle "entering the United States only temporarily or accidentally, shall not constitute infringement of any patent" provided certain conditions are met. 35 U.S.C. § 272 (2000). The district court held both that the GBRX 20003 would not be "entering the United States only temporarily," as per CPR's description of its intended use of the cars, and that several of the additional conditions were not met. CPR also claimed that the '575 patent was invalid as anticipated and as obvious in light of the prior art, but the district court determined that neither contention presented a substantial question precluding the entry of a preliminary injunction.

CPR appealed in a...

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