546 F.2d 748 (7th Cir. 1976), 76-1156, Super Products Corp. v. D P Way Corp.

Docket Nº:76-1156.
Citation:546 F.2d 748
Party Name:192 U.S.P.Q. 417 SUPER PRODUCTS CORPORATION, a Wisconsin Corporation, Plaintiff-Appellee, v. D P WAY CORPORATION, a Wisconsin Corporation, Defendant-Appellant.
Case Date:December 14, 1976
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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546 F.2d 748 (7th Cir. 1976)

192 U.S.P.Q. 417

SUPER PRODUCTS CORPORATION, a Wisconsin Corporation,



D P WAY CORPORATION, a Wisconsin Corporation, Defendant-Appellant.

No. 76-1156.

United States Court of Appeals, Seventh Circuit

December 14, 1976

Argued Sept. 13, 1976.

Rehearing and Rehearing En Banc Denied Jan. 11, 1977.

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[Copyrighted Material Omitted]

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Patrick H. Hume, Richard G. Lione, Chicago, Ill., for defendant-appellant.

Robert K. Steuer, John C. Cooper, III, Milwaukee, Wis., for plaintiff-appellee.

Before CASTLE, Senior Circuit Judge, CUMMINGS, Circuit Judge, and PELL, Circuit Judge.

CASTLE, Senior Circuit Judge.

Defendant D P Way Corporation appeals from a judgment of the District Court declaring United States Letters Patent No. 3,541,631 invalid and from an order awarding plaintiff Super Products Corporation the sum of $17,823.50, with interest, as attorneys' fees. We affirm the court's declaratory judgment, and we reverse its order awarding attorneys' fees. 1

The defendant is a Wisconsin corporation that has been engaged since 1968 in the business of manufacturing and selling a heavy-duty mobile dust-free vacuum device called the "Ultravac." This vacuum "loader and cleaner" is a large machine primarily used in industry to remove debris, processing materials and waste. Patent No. 3,541,631 relates to a machine for industrial vacuum cleaning that includes a self-cleaning filtration device. It was issued on November 24, 1970, to D P Way Corporation as the assignee of Burnett M. Kluge and Howard E. Paulson, the named coinventors. Plaintiff Super Products Corporation is a Wisconsin corporation that was organized in late 1972 for the purpose of manufacturing and selling industrial vacuum cleaning equipment. The principal organizer was Lionel G. Moore, Jr., then a vice-president and sales manager of D P Way Corporation, who had been a director and shareholder of the defendant and who later became president of Super Products Corporation. In the early months of 1973, plaintiff began to design an industrial vacuum cleaner, similar to the "Ultravac," that it planned to manufacture and sell.

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Plaintiff filed a complaint against D P Way Corporation 2 on April 12, 1973, challenging the validity of Patent No. 3,541,631. 3 After some discovery by oral deposition and interrogatories and after filing a copy of the file wrapper (the prosecution papers submitted to the Patent Office) for Patent No. 3,541,631 with the District Court, plaintiff moved on June 27, 1973, for a summary judgment declaring the patent invalid. It also asked for a finding by the court that this was an "exceptional case," entitling the plaintiff to reasonable attorneys' fees under 35 U.S.C. § 285. Plaintiff asserted that Patent No. 3,541,631 was issued for the self-cleaning filtration device described in the patent claim. Paulson, who was president of the defendant, had admitted in his June 18, 1973, deposition that this device, called the Mikro-Pulsaire Dust Collector, had been patented 4 and was available for purchase on the market prior to the date that Patent No. 3,541,631 was issued. Paulson stated that the inventors had merely inserted the Mikro-Pulsaire Dust Collector, which they had purchased from the Pulverizing Machinery Division of Slick Industrial Company, into their machine as part of the filtration system. Plaintiff, relying on these admissions, asserted that the patent was invalid because the invention for which it was issued was old in the art and that the case was "exceptional" because the applicants had failed to disclose relevant prior art of which they had knowledge to the Patent Office. D P Way Corporation resisted plaintiff's motion for summary judgment on three grounds. First, it disputed the plaintiff's assertion that the patent was issued for the self-cleaning filtration device described in the claim, arguing that the patent was issued for a combination of elements, including the Mikro-Pulsaire Dust Collector, which together comprised its industrial vacuum cleaner. Second, it argued that the case was not appropriate for summary judgment because construction of the patent claim required expert testimony. And third, it argued that the District Court lacked jurisdiction to enter a declaratory judgment because there was no actual controversy between the parties. It asserted that the plaintiff's apprehension that it might be sued for infringement was merely conjectural at the time the complaint was filed.

The District Court, Judge Reynolds presiding, 5 held a hearing on plaintiff's motion on November 16, 1973, after which the court asked plaintiff to submit proposed findings of fact and conclusions of law. The court adopted the plaintiff's proposed findings and conclusions on June 28, 1974. Judge Reynolds rejected the defendant's jurisdictional and procedural arguments, found that the invention claimed under Patent No. 3,541,631 was the self-cleaning filtration device, and found that the applicants had breached the standards of honesty and candor required of patent applicants by failing to disclose relevant prior art of which they had knowledge. The court held that Patent No. 3,541,631 was invalid because it failed to meet the tests of being new and useful, novel and not obvious under 35 U.S.C. §§ 101-03. However, the court did not rule at that time on the question of whether the case was "exceptional" within the meaning of 35 U.S.C. § 285.

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Plaintiff moved for judgment in accordance with the findings of fact and conclusions of law on September 19, 1974, seeking in addition a determination by the District Court that the case was "exceptional" and an award of $17,465.25 as reasonable attorneys' fees in accordance with that determination. In opposition to plaintiff's motion for an award of attorneys' fees, defendant asserted that the inventors were innocent of any willful lack of candor in dealing with the Patent Office. It also asserted that Moore was an active participant in the effort to obtain Patent No. 3,541,631, that he was involved in any breach of standards that occurred in prosecution of the patent claim, and that Super Products Corporation could not properly claim monetary benefits from an act in which its president had been an active participant. Judge Warren, 6 to whom the case had been reassigned, entered judgment on September 24, 1975, in accordance with the findings and conclusions and determined that the plaintiff was entitled to attorneys' fees. After conducting evidentiary hearings on the amount to which plaintiff was entitled as reasonable attorneys' fees, the court ordered an award of $17,823.50 on November 28, 1975. This appeal followed.


D P Way Corporation asserts that the District Court lacked jurisdiction to entertain the plaintiff's declaratory judgment action because no actual controversy regarding the validity of the defendant's patent existed between the parties at the time the complaint was filed. In its answer to the complaint, the defendant denied plaintiff's allegations relating to the existence of a justiciable controversy and thereby put the plaintiff to the burden of proving that such a controversy existed between the parties. 7 McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 56 S.Ct. 780, 80 L.Ed. 1135 (1936); Seagram-Distillers Corp. v. New Cut Rate Liquors, 245 F.2d 453 (7th Cir.), cert. denied, 355 U.S. 837, 78 S.Ct. 61, 2 L.Ed.2d 48 (1957); Pure Oil Co. v. Puritan Oil Co., 127 F.2d 6 (2d Cir. 1942). Super Products Corporation moved for summary judgment after certain depositions and answers to interrogatories were filed with the District Court, and the defendant raised the jurisdictional question in opposition to the motion. As the defendant argues, the requisite controversy must have existed at the time the complaint was filed. American Needle & Novelty Co. v. Schuessler Knitting Mills, Inc., 379 F.2d 376 (7th Cir. 1967). But see Technical Tape Corp. v. Minnesota Mining & Manufacturing Co., 200 F.2d 876, 879 (2d Cir. 1952) (Clark, J., concurring). The uncontroverted facts contained in the depositions and the answers to interrogatories establish that the following conditions existed at that time. Super Products Corporation had been organized in late 1972 principally for the purpose of building industrial vacuum cleaning equipment. By the time the complaint was filed, it had developed a general design for an industrial vacuum cleaner with plans for nine models. It was offering a description of the machine and its various models to prospective customers and was actively soliciting orders for them. The plaintiff was in the process of building parts for the machine. With the exception of the fact that the plaintiff's proposed machine was designed to be drawn by a truck instead of to be self-propelled, it was in all essential respects the same as the machine described in the defendant's patent claim. The defendant's officers had stated to certain prospective investors and customers of Super Products Corporation that D P Way Corporation would institute patent infringement suits if any competitors infringed its patent rights, sometimes mentioning Super Products Corporation by name. We

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believe that under these conditions the plaintiff was entitled to maintain its declaratory judgment action.


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