668 F.2d 1 (1st Cir. 1981), 80-1698, Colortronic Reinhard & Co. v. Plastic Controls,Inc.

Docket Nº:80-1698, 80-1733.
Citation:668 F.2d 1
Party Name:213 U.S.P.Q. 801 COLORTRONIC REINHARD & CO., K.G., et al., Plaintiffs, Appellees, v. PLASTIC CONTROLS, INC., Defendant, Appellant. COLORTRONIC REINHARD & CO., K.G., Plaintiff, Appellant, v. PLASTIC CONTROLS, INC., Defendant, Appellee.
Case Date:December 04, 1981
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
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668 F.2d 1 (1st Cir. 1981)

213 U.S.P.Q. 801

COLORTRONIC REINHARD & CO., K.G., et al., Plaintiffs, Appellees,

v.

PLASTIC CONTROLS, INC., Defendant, Appellant.

COLORTRONIC REINHARD & CO., K.G., Plaintiff, Appellant,

v.

PLASTIC CONTROLS, INC., Defendant, Appellee.

Nos. 80-1698, 80-1733.

United States Court of Appeals, First Circuit

December 4, 1981

Argued Sept. 14, 1981.

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Robert J. Schiller and Robert J. Schiller, Jr., Waltham, Mass., with whom Schiller & Pandiscio, Waltham, Mass., was on brief, for Plastic Controls, Inc.

G. Franklin Rothwell, Washington, D. C., with whom Donald N. Huff, and Bernard, Rothwell & Brown, Washington, D. C., were on brief, for Colortronic Reinhard & Co., K.G. and Colortronics, Inc.

Before CAMPBELL, VAN DUSEN [**] and BOWNES, Circuit Judges.

LEVIN H. CAMPBELL, Circuit Judge.

Plaintiffs Colortronic Reinhard & Company, K.G., and Colortronics, Inc. (hereinafter referred to collectively as "Colortronics") appeal from the district court's judgment, 496 F.Supp. 259, declaring Colortronics' patent, No. 3,814,296 (more particularly its Claims 1 and 5) invalid for obviousness under 35 U.S.C. § 103; its holding that defendant Plastic Controls, Inc. ("PCI") did not infringe on this patent; and the district court's award of attorneys' fees to PCI under 35 U.S.C. § 285. Defendant Plastic Controls, Inc. appeals from the district court's award of only nominal damages to PCI on PCI's counterclaim alleging unfair competition. Colortronics, Inc. is the United States representative of Colortronic Reinhard & Company of West Germany. The German parent company owns 50 percent of the American subsidiary. One Max Reinhard is the chief executive officer of the German company while Leo Meyer is president of Colortronics, Inc. Because the history of this case bears upon the issues we resolve, we begin with a review of the relationship between these parties.

PCI's principal officer and owner, Bruce A. McLean, was the exclusive U.S. sales and marketing agent for Colortronics from March 1974 until he was terminated in October 1975. In this capacity, he sold Colortronics' color blending machines-devices used in mixing coloring ingredients into kneadable plastics in precise, metered quantities. Colortronics had two U.S. patents-No. 3,985,345 ("Jakob") and No. 3,814,296 ("Tschritter")-covering these blending units. The Jakob patent covered the overall automatic mixing and feeding process of the blender. The Tschritter patent related to a very specific metering device used in the feeding apparatus.

McLean's termination in 1975 was sparked by an accusation that McLean was withholding receipts, although there may have been additional reasons for the break. Thereafter, the parties steered a collision

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course with each other. McLean immediately sent his customers a form letter assuring them that he would soon be marketing color blenders using "the same metering principles" as the Colortronics units. Colortronics, meanwhile, sued McLean to obtain some $7,000 to $8,000 of customers' payments he had allegedly withheld. McLean counterclaimed for allegedly withheld commissions.

In the winter of 1977, this lawsuit was finally tried to a jury resulting in a net award to McLean of approximately $30,000. Colortronics appealed. In August 1977, McLean met with Reinhard and other Colortronics employees and was offered, according to McLean, some $6,000 to settle the claim. 1 At this meeting he was also told that the machines he was then marketing through PCI (he had made some four machines and was marketing them for about $700 each) were in violation of Colortronics' Tschritter and Jakob patents. As part of the proposed settlement, McLean was to admit the validity of these Colortronics patents. McLean refused this package, and Reinhard threatened to sue for infringement.

In November 1977, nothing further having developed on either side, Colortronics sued McLean and PCI for infringement of the two patents. Another settlement discussion then took place with Reinhard's offer now up to $12,000-$14,000. Once again, McLean was to admit the validity of the Colortronics patents as part of the deal, and again McLean refused. By this time or soon thereafter PCI effectively stopped doing business (it never produced more than the original four units and McLean had stopped drawing a salary as early as March 1975).

In late winter or early spring of 1978, the lawsuit over McLean's salary dispute was finally resolved with McLean collecting some $34,000 including interest. The patent dispute continued, however, though Colortronics once again offered to drop the suit if McLean would admit the validity of the patents. McLean once again refused and his deposition was taken in July 1978. At his deposition, McLean informed counsel for Colortronics that Peter Jakob, a former Reinhard employee who was the author of the blending patent being sued upon and who had helped design Colortronics' commercial metering units based on the Tschritter patent, had personal knowledge regarding the invalidity of the Jakob patent. While McLean actually had some materials in his possession at this time which could have added weight to his testimony, he said only that Jakob had proof and would bring it with him when he came from Germany to testify. Colortronics did not pursue this matter until the day before Jakob was deposed on March 12, 1980. At that deposition, Jakob revealed that the blender patented as No. 3,985,345 had been written up in literature and displayed in Germany as early as 1970 and 1971, and he produced such literature, some of which was written by Reinhard. He further stated that for this reason a German patent application had been rejected, the law in Germany having been at that time that no invention was patentable if it had been displayed more than six months before the patent application. He admitted that he had signed an oath on his 1973 U.S. patent application that his invention had not been on sale, in use or described in a printed publication anywhere in the world more than one year before the 1973 filing date. 2 He agreed that this was a false statement when made and that, while he had signed the document, it was Reinhard, his employer, who had actually pursued the U.S. patent application.

The day before the deposition, on advice of counsel, Reinhard disclaimed the Jakob patent and dedicated the invention to the public. Colortronics dropped the Jakob patent

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aspect of its suit on the first day of trial by not opposing a motion for summary judgment on that patent. The trial then went on strictly on the basis of the Tschritter patent. After two days of live testimony and the introduction of the depositions of Peter Jakob and Max Reinhard, the court rendered the decision we now review.

The district court found that the Tschritter patent was invalid for obviousness under 35 U.S.C. § 103. 3 On appeal, Colortronics asserts that this finding was clearly erroneous. Before proceeding to examine this claim, we pause to give a brief description of the Tschritter device itself. A drawing of the mechanism is appended to this opinion.

The Tschritter patent was issued for an apparatus to dispense in precise, metered quantities "kneadable" materials used in blending coloring agents into plastics. In Tschritter, the metering principle is embodied in two rotating geared discs placed at the bottom of a large hopper. The larger disc acts as a pan at the bottom of the hopper to accept the material to be metered. This disc has gear "teeth" placed at regular intervals around its perimeter. When material is introduced into the hopper, the material works its way between these teeth.

A smaller geared wheel is fixed within the larger disc. As the two wheels rotate against one another, the teeth of the smaller wheel mesh with the spaces between the teeth of the larger disc proximate to an exit slot in the hopper's base. The kneadable material between the teeth on the perimeter of the larger disc is thus forced out the opening and broken up by a grating just outside the exit slot.

Since varying amounts of the metered material might tend to be pushed upwards and back into the hopper space by the action of the meshing gears, Tschritter placed a sickle-shaped plate over the interlocking gear system to effect the compression necessary to force all of the material between the two affected perimeter teeth out of the exit slot. This compression of the material by the use of a lid or "coverplate" over the chamber formed by the meshing gears enabled Tschritter to define more exactly the amount of material which would be forced out of the hopper with each rotation of the gears. In granting the patent, the patent examiner made much of this compressive feature, stating that "(a)pplicant's device forms a closed metering chamber. The contents of the chamber are, for example, horizontally ejected through a comminuting grate shortly after the chamber is formed."

In reviewing a ruling of...

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