Kaiser Industries Corporation v. McLouth Steel Corp.

• Citation: 400 F.2d 36
• Decision Date: 02 August 1968
• Docket Number: No. 17497.,17497.
• Parties: KAISER INDUSTRIES CORPORATION, Vereinigte Oesterreichische Eisen-und Stahlwerke Aktiengesellschaft, and Brassert Oxygen Technik AC., Plaintiffs-Appellants, v. McLOUTH STEEL CORPORATION, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

400 F.2d 36 (1968)

KAISER INDUSTRIES CORPORATION, Vereinigte Oesterreichische Eisen-und Stahlwerke Aktiengesellschaft, and Brassert Oxygen Technik AC., Plaintiffs-Appellants, v. McLOUTH STEEL CORPORATION, Defendant-Appellee.

No. 17497.

United States Court of Appeals Sixth Circuit.

August 2, 1968.

William H. Webb, Pittsburgh, Pa., John A. Dienner, Chicago, Ill., John M. Webb, David C. Bruening, Pittsburgh, Pa., W. Brown Morton, Jr., New York City, George E. Brand Jr., Detroit, Mich., on brief; Webb, Burden, Robinson & Webb, Pittsburgh, Pa., Brown, Jackson, Boettcher & Dienner, Chicago, Ill., of counsel, for appellants.

John Vaughan Groner, New York City, William B. Cudlip, T. Donald Wade, Dickinson, Wright, McKean & Cudlip, Detroit, Mich., on brief; John Vaughan Groner, Ronald F. Ball, Donald E. Degling, Fish, Richardson & Neave, New York City, of counsel, for appellee.

Before WEICK, Chief Judge, and EDWARDS and CELEBREZZE, Circuit Judges.

CELEBREZZE, Circuit Judge.

Appellants filed an action in the United States District Court for the Eastern District of Michigan complaining that Appellee had infringed the Appellants' patented process for refining steel with pure oxygen. Appellee first defended by contending that a know-how agreement, for which Appellee paid $100,000 to Appellants, constituted a license to use the Appellants' process. The District Court held against the Appellee on that point, Henry J. Kaiser Company v. McLouth Steel Corporation, 175 F.Supp. 743 (D.C.Mich.1959), and in an interlocutory appeal was affirmed by this Court. McLouth Steel Corporation v. Henry J. Kaiser Company, 277 F.2d 458 (6th Cir.1960). These rulings made it possible for the Appellee to contest the validity of the Appellants' patent at the trial on infringement.¹ The handling of the protracted trial on infringement by the District Judge was a monumental task, which he performed ably and well. After unusually long and complex litigation, involving several years of pretrial research, experimentation and discovery and over an entire calendar year of trial, the District Court concluded that the patentees were the inventors of a process that was not anticipated by the prior art and would not have been obvious to one skilled in the art at the time of the discovery. The Court held the patent invalid, however, for the reason that the specifications did not support the claims and the claims did not measure the invention as required by 35 U.S.C. § 112 and for the further reason that the claims covered the prior art.^1a Henry J. Kaiser Co. v. McLouth Steel Corp., 257 F.Supp. 372 (D.C.Mich.1966). From that judgment the Appellants have perfected the instant appeal contesting the Court's rulings covering the claims and specifications; and in addition the Appellee has contested the District Court's holdings on obviousness and inventorship.

In reaching its decision, the District Court wrote a long and comprehensive decision ruling on the issues of anticipation, obviousness, inventorship, compliance of the specifications with Section 112, and compliance of the claims with Section 112. In addition the District Court ruled that the doctrine of file wrapper estoppel applied to prevent the Appellants from claiming the advance that they now allege is the gist of their invention. Since we conclude that the claims overclaim the invention as represented to the Patent Office by the patentees and that the claims cover the prior art, we find it unnecessary to consider the correctness of every ruling of the District Court. On the other hand, a consideration of the factual background of this case and of the errors we find in the District Court's ruling on obviousness will aid in understanding the reasoning by which this Court has reached its decision.

Plaintiffs-Appellants in this action are the owner, the exclusive world-wide licensing firm, and the exclusive licensing agent in the United States of the patent in suit. Vereinigte Oesterreichische Eisen-und Stahlwerke Aktiengesellschaft (hereinafter VOEST), a steel company owned by the Austrian Government, is the present owner of the patent in suit by virtue of assignment from the patentees, who at the time of the experimentation that led to the application for the patent in suit were employees of VOEST. Brassert Oxygen Technik AG. (hereinafter BOT), a Swiss corporation, was formed in the early 1950's by VOEST and several other European steel companies as the exclusive world-wide licensing agent for a pool of patent rights relating to the use of oxygen in steelmaking, which included the patent in suit after its issuance in 1957. In May of 1954 BOT and the Henry J. Kaiser Company (hereinafter Kaiser), a Nevada corporation, entered into an agreement by which Kaiser became the exclusive licensing agent for BOT in the United States and thus entitled to sue for infringement of the patent in suit when it became a part of the BOT pool of patents.

Appellee McLouth Steel Corporation (hereinafter McLouth), is a Michigan corporation having a steel plant located in Trenton, Michigan, whose operations are alleged to infringe the patent in suit.

In this action McLouth is accused of infringing Patent No. 2,800,631 (hereinafter the Suess Patent), which was issued July 23, 1957, to four Austrian steelmakers, Drs. Theodor Edward Suess, Herbert Trenkler, Hubert Hauttmann and Rudolf Rinesch on the basis of a process developed at Linz, Austria, in 1949, (hereinafter the L-D Process). Only two prior art patents are relied upon by McLouth in this appeal: The Schwarz German Patent No. 735,196 dated July 3, 1943 (hereinafter the Schwarz Patent); and the Miles Belgian Patent No. 486,316 dated March 1, 1947 (hereinafter the Miles Patent). In addition, McLouth relies upon experimentation by Dr. Robert Durrer and Dr. Heinrich Hellbruegge, (hereinafter the Gerlafingen experiment) which was conducted in Gerlafingen, Switzerland, in 1948 and the spring of 1949 and the results of which were fully disclosed to the patentees, as proving non-inventorship.

Producing steel from iron ore involves at least two processes. Iron ore, which exists in nature in the form of oxides of iron, is first processed through a blast furnace where the oxygen is removed from the iron ore. This process reduces the iron oxide to relatively pure iron, but it does not remove the other impurities present in the iron ore. In fact, the blast furnace process increases the carbon content of the resultant product, which is known as pig iron. To produce steel from the pig iron, the amounts of these impurities, carbon, silicon, phosphorous, manganese, and sulphur, must be reduced to an acceptable level without adding any significant amount of oxygen or nitrogen. Accomplishing this result is the purpose of the second process involved in steelmaking: the refining process.

The patents involved in this suit are concerned exclusively with the refining process, which involves essentially oxidizing the impurities and removing them from the molten pig iron. Carbon combines with oxygen to form carbon monoxide or carbon dioxide and is exhausted as a gas. Silicon, phosphorous, sulphur, and manganese form various oxides and are absorbed into a slag layer that is formed on top of the metal bath by the addition of lime and other materials before and during the operation. Since the various impurities react with oxygen at different rates, the problem of steelmaking is to control the refining process so that sufficient amounts of all the impurities are removed.

Various methods have been devised to accomplish this refining process. The oldest method is the acid Bessemer process, which was developed in the 1850's and involves blowing air into a molten bath of pig iron from below through tuyeres in the bottom of a converter. This process was unsatisfactory for most pig iron, however, because a basic slag for phosphorous removal could not be formed in the converter, which had an acid refractory lining. As a result, only pig iron with an already sufficiently low phosphorous content could be satisfactorily refined by this method.

The Thomas process, or basic Bessemer process, was devised during 1879 to permit the use of a basic slag capable of removing phosphorous and sulphur. This process also proved unsatisfactory: because air was blown, an excessive nitrogen content developed in the steel produced, and because the blowing was from below, insufficient iron oxide was formed in the slag for phosphorous removal, thus requiring an afterblow for adequate removal of phosphorous.

Although the electric furnace has recently been used for refining, the high cost of the operation has limited its usefulness to the making of specialty steels. Therefore, since the 1880's the principal method of refining steel has been the open hearth process. As late as 1953, approximately eighty-nine per cent of the steel produced in the United States came from open hearth furnaces, which produce steel of excellent quality. The process, however, has the disadvantage of high capital and operating costs and a relatively slow rate of production. An average open hearth heat requires eight to ten hours, while a blow in a Thomas operation requires only approximately eighteen minutes.²

The basic process combines the best qualities of the Thomas and the open hearth processes: it produces a steel of excellent quality in a relatively short blowing period; and it has low capital and operating costs. Since VOEST began the first commercial operation of the basic oxygen process at Linz in November 1952, the process has had a considerable impact on the steelmaking industry. According to the Appellants, more than seventy-five per cent of all new steelmaking facilities constructed since 1954, or now in the planning stage use the basic oxygen process. Sixteen companies in the United States have begun or planned oxygen blowing facilities, and sixty-four companies in twenty-three countries have installed, or are installing,...