Baumstimler v. Rankin
| Decision Date | 09 June 1982 |
| Docket Number | No. 81-1045,81-1045 |
| Citation | 677 F.2d 1061,215 USPQ 575 |
| Parties | A. B. BAUMSTIMLER, et al., Plaintiffs-Appellees, v. Bueford B. RANKIN, et al., Defendants, Kenneth J. Laughlin, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Richards, Harris & Medlock, James P. Bradley, Dallas, Tex., James Ingram, San Antonio, Tex., Will Hadden, Odessa, Tex., for defendant-appellant.
Wendell Coffee, Lubbock, Tex., Ruff Ahders, Warren Burnett, Associated, Odessa, Tex., for plaintiffs-appellees.
Roy Bell, Odessa, Tex., for other interested parties.
Appeal from the United States District Court for the Western District of Texas.
Before BROWN, GOLDBERG and GEE, Circuit Judges.
A. B. Baumstimler, the holder of two letters patent on oil well clean-out tools, sued Kenneth Laughlin, Beuford Rankin, and John Barbee for infringement and, after a jury trial on liability, received a judgment against all defendants. Defendant Laughlin appeals, alleging a multitude of errors, including incorrect instructions to the jury, insufficient evidence of infringement, improper submission of the issue of validity to the jury, and improper determination of money damages by the District Judge at the later hearing on damages. Finding that the District Court erred in instructing the jury as to the defendant's burden of proof required to overcome the presumption of validity of the patents, we reverse and remand. 1
In July 1967, Baumstimler filed an application for a patent for an oil well clean-out tool. Patent No. 3,406,757 ('757 patent), issued on October 22, 1968, is for a hydrostatic tool used to remove sand and debris from wells. Hydrostatic tools for retrieving junk or undesired objects from the bottom of a well had been available for several years prior to Baumstimler's application for a patent. The basic principle upon which these tools operate involves inserting a hollow cylinder into the well until the cylinder is immersed in the well fluid. The cylinder contains a valve which controls the flow of fluid into the cylinder. The pressure of the fluid outside the cylinder is greater than that inside the cylinder. When the cylinder reaches the bottom of the well, the valve is opened and because of pressure differential, the fluid from the well moves into and through the cylinder, carrying debris, which is retained in the cylinder. The cylinder and debris are then extracted from the well. In layman's terms, the clean-out tool operates like a drinking straw. Thus if one inserted a straw into a drink with the hole covered by a finger and then removed the finger, fluid would flow into the straw.
The flow rate in these hydrostatic tools is a function of the pressure differential between the well hole fluid and the pressure inside the cylinder, as well as the diameters of the passages within the well clean-out tool. Should the fluid rush into the tool too rapidly, the tool moves upward from the bottom and fails to pick up all debris. To avoid this problem of fluid surge, the patently obvious answer is to slow the entry of the fluid. That result can be achieved in several ways. Previously existing tools had used a system of chokes (an area of reduced cross-sectional area to restrict flow) or water cushions (a layer of water inside the cylinder over the valve which increases the pressure above the valve and thereby decreases the pressure differential). Baumstimler's '757 patent reduced the surge of fluid by varying the diameter of the passage through the use of a donut shaped ring, or orifice, whose size could be adjusted. 2
Essentially, then, Baumstimler's patent, relying on prior art, added one new element, that of the orifice to control the flow.
In May 1969, Baumstimler received a second patent, Patent No. 3,446,283 ('283 patent), covering the same device as the '757 patent but altered so as to be capable of simultaneously cleaning a well and removing a down hole tool or plug. Down hole plugs have long been used in oil field operations to isolate sections of a well in order to perform processes to facilitate oil recovery. The process may generate sand and other debris which fall on top of the plug. Thus to remove the plug, the debris must also be cleared from the path of the plug retriever. The '283 patent, by attaching a clean-out tool to a plug retriever, both removes the debris and the plug in one trip. Baumstimler's inspiration for this invention was a Mr. Carter, who had called Baumstimler to a job site and asked him if he could adapt his clean-out tool so that a retrieving head could be screwed onto the tool. Baumstimler cut off the bottom-most portion of a clean-out tool, threaded its end, and screwed a "Baker" retrieving head onto it, completing the invention on that very day.
The '283 patent was a "continuation-in-part" of the '757 patent and thus its patentability was partially dependent on the patentability of the '757 clean-out tool.
Defendant Laughlin was hired by Baumstimler in 1973. Laughlin was familiar with hydrostatic well clean-out tools from his prior employment with Cavins Corporation, the manufacturer of several oil well clean-out tools, including the "multi-surge junk-snatcher", a tool discussed in more detail below. In March 1975 Baumstimler fired Laughlin upon learning that Laughlin had plans to go into competition with him. After leaving the employment of Baumstimler, Laughlin began renting tools from Defendant Barbee until he subsequently purchased parts from Cavins and had his own tools manufactured. Defendant Rankin had also been employed previously by Cavins before working for Baumstimler. After his employment with Baumstimler terminated in 1975, Rankin worked as an independent contractor, leasing tools from Barbee and Laughlin. The tools used by all the defendants were allegedly similar to those of Baumstimler except that a drilled hole substituted for the interchangeable annular ring or orifice found in Baumstimler's patents.
Baumstimler and Basin Packer Co. (BPC) filed suit for infringement of both patents against Laughlin, Rankin, and Barbee. 3 In June 1978, three years after the filing of the complaint and approximately one year prior to the actual trial, Baumstimler filed a disclaimer under 35 U.S.C. § 253 4 with the Patent Office, disclaiming five of his seven claims in the '757 patent.
The infringement claim was tried to a jury in May 1979 on the issue of liability only. The jury returned a verdict against all defendants for infringement of both patents '757 and '283. 5 Laughlin's motion for j.n.o.v. was denied. In August 1979, the damage issue was tried to the Court, jury trial on this issue having been waived. 6 The District Court, after returning findings of fact and conclusions of law on the damage issue, assessed compensatory damages and exemplary damages for willful and wanton infringement. Laughlin's motions for j.n.o.v., new trial, modification of the damage award, and dissolution of a temporary injunction entered prior to the award of damages, were all denied.
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This appeal, prosecuted by Laughlin only, raises several issues, including challenges to the instructions and manner in which the issues were submitted to the jury, sufficiency of evidence, invalidity of the patents as obvious under 35 U.S.C. § 103, and improper determination of damages. Laughlin contends that the District Court erroneously instructed the jury that the burden of overcoming the presumption of validity of the patents was by "clear and convincing" proof rather than by a preponderance of the evidence, the standard that applies when the Patent Office in granting the patent has failed to consider prior art. The jury instructions are also questioned for improperly requiring that all defendants prove all their affirmative defenses in order to prevail. Laughlin also asserts that the District Court erred in using a general verdict form. As to the damage award, Laughlin contends that the District Court improperly used lost profits to determine the measure of damages, that Baumstimler did not prove his damages sufficiently, that the damages should have been allocated to the value created by the patentable improvements, and that the District Court should not have awarded treble damages for willful and wanton infringement. Because we agree that the District Court improperly required Laughlin to establish invalidity of the patents only by satisfaction of the heavier "clear and convincing" burden of proof, rather than the less demanding "preponderance of the evidence" standard, we reverse and remand. Damage findings, being dependent on the determination of validity, fall automatically.
Patents are presumed valid. 35 U.S.C. § 282. See Arbrook, Inc. v. American Hospital Supply Corp., 645 F.2d 273, 276 n.1 (5th Cir. 1981); Ludlow Corp. v. Textile Rubber & Chemical Co., 636 F.2d 1057, 1059 (5th Cir. 1981); Continental Oil Co. v. Cole, 634 F.2d 188, 195 (5th Cir.), cert. denied, --- U.S. ----, 102 S.Ct. 124, 70 L.Ed.2d 106 (1981); John Zink Co. v. National Airoil Burner Co., 613 F.2d 547, 551 (5th Cir. 1980); Harrington Manufacturing Co. v. White, 475 F.2d 788, 793-94 (5th Cir.), cert. denied, 414 U.S. 1040, 94 S.Ct. 542, 38 L.Ed.2d 331 (1973); Beckman Instruments, Inc. v. Chemtronics, Inc., 428 F.2d 555, 560 (5th Cir.), cert. denied, 400 U.S. 956, 91 S.Ct. 353, 27 L.Ed.2d 264 (1970). Thus the burden of establishing invalidity rests on the party asserting that invalidity, 35 U.S.C. § 282, and this burden is more than a mere preponderance of the evidence. Ludlow Corp., supra (...
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