698 F.2d 157 (3rd Cir. 1982), 82-5044, Interdynamics, Inc. v. Firma Wolf

Docket Nº:82-5044.
Citation:698 F.2d 157
Party Name:217 U.S.P.Q. 117 INTERDYNAMICS, INC., and Smiths Industries, Limited, Appellees v. FIRMA WOLF, Arend Wolf, and Trans Tech, Inc. Appeal of TRANS TECH, INC.
Case Date:December 30, 1982
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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698 F.2d 157 (3rd Cir. 1982)

217 U.S.P.Q. 117

INTERDYNAMICS, INC., and Smiths Industries, Limited, Appellees

v.

FIRMA WOLF, Arend Wolf, and Trans Tech, Inc.

Appeal of TRANS TECH, INC.

No. 82-5044.

United States Court of Appeals, Third Circuit

December 30, 1982

Argued June 25, 1982.

Rehearing and Rehearing In Banc Denied

Feb. 2, 1983.

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[Copyrighted Material Omitted]

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Albert E. Fey (argued), Kevin J. Arquit, Fish & Neave, New York City, S. Joseph Fortunato, Gregory C. Parliman, Pitney, Hardin & Kipp, Morristown, N.J., Henry R. Lerner, Levisohn, Niner & Lerner, New York City, for appellees.

Lloyd McAulay (argued), McAulay, Fields, Fisher, Goldstein & Nissen, New York City, Harold Friedman, Kirsten, Friedman & Cherin, Newark, N.J., Fred I. Sonnenfeld, Philip H. Busner, Sonnenfeld, Busner & Weinstein, New York City, for appellant.

Before GARTH and BECKER, Circuit Judges, and FULLAM, District Judge. [*]

OPINION

BECKER, Circuit Judge.

This case, involving a patent for an automobile rear-window defroster, presents two interesting questions of federal jurisdiction and one question of application of patent law. The case has a long and tortuous procedural history and is now before this Court for the second time. The suit originally was brought by appellees Interdynamics, Inc., and Smiths Industries, Limited ("Interdynamics"), alleging that appellant Trans Tech, Inc., had infringed a patent held by Interdynamics. The initial proceeding resulted in a consent decree enjoining Trans Tech from infringing any claim of Interdynamics' patent. A second proceeding began when Interdynamics sought to hold Trans Tech in contempt of the consent decree after Trans Tech commenced marketing a slightly different version of the

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product adjudged under the decree to be infringing. This Court reversed a judgment for Trans Tech, Interdynamics, Inc. v. Firma Wolf, 653 F.2d 93 (3d Cir.), cert. denied, 454 U.S. 1092, 102 S.Ct. 658, 70 L.Ed.2d 631 (1981) ("Interdynamics I" ), holding that, in the context of a contempt proceeding, the district court should have applied the "doctrine of equivalents" and determined whether the new product alleged to be a contempt was "merely colorably different" from the product previously conceded to infringe. The Court reached the merits and remanded the case so that the district court might enter a judgment of contempt against Trans Tech; Trans Tech withdrew its second product from the market and began to develop the product involved in the present appeal.

This appeal arises from the district court's decision in a proceeding commenced when Trans Tech applied for an order that would require Interdynamics to appear and "show cause why a judgment should not be made" adjudging Trans Tech's new defroster not an infringement of the original patent and not in violation of the consent decree. After a hearing, the district court entered an order providing that Trans Tech's making, using, or selling of rear-window defrosters exemplified by the experimental sample submitted to the court "would be a civil contempt" of the original consent decree, and Trans Tech appealed.

This appeal raises three questions. The first is whether Trans Tech has appealed from a final order. Trans Tech contends that the district court's order was in the nature of a declaratory judgment, which is appealable pursuant to statute; Interdynamics asserts that a declaratory judgment was neither sought nor obtained and that no other statutory provision provides a basis for appeal. The second question is whether there exists an "actual controversy" between the parties, as required by the Declaratory Judgment Act: because Trans Tech has neither manufactured nor marketed the final product, and because Interdynamics has not brought or threatened to bring a contempt proceeding against Trans Tech, Trans Tech must satisfy the "actual controversy" requirement by showing that it reasonably feared another contempt proceeding brought by Interdynamics and that it had the immediate intention and ability to produce the proposed product. The third question is whether the district court, applying the patent-law "doctrine of equivalents" prescribed by Interdynamics I, committed clear error in finding that the Trans Tech product at issue was no more than colorably different from the product that had been the subject of the consent decree.

Although each of the questions presented is not without difficulty, we conclude that the judgment of the district court is appealable, that a justiciable dispute exists, and that the decision of the district court is not clearly erroneous.

I. Procedural History and Factual Background

On September 4, 1973, the United States Patent Office awarded Patent No. 3,757,087 (the "Barnard patent") for an automobile rear-window defroster. The Barnard patent was assigned to Smiths, a British company, which subsequently designated Interdynamics its United States licensee for the patent, granting the latter the right to market the product and to sue for patent infringement. This Court has described the patented article as follows:

[the] kit consists of a grid of metal heating strips sandwiched between a backing sheet and a top sheet of plastic. Installation of the defroster simply entails peeling off the backing sheet and placing the exposed strips and adhesive surface of the top sheet against the car window. The adhesive that covers the surface of the heating strips which contacts the glass is stronger than the adhesive attaching them to the top sheet on which they lie. Thus, when pressure is applied to the top sheet over the heating strips, the strips adhere to the window and the top sheet can be peeled away. This process leaves only the grid of heating strips on the surface of the window. This grid is then connected to the automobile's

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electrical system and heat can be generated by passing electricity through the heating elements.

Interdynamics I, supra, 653 F.2d at 95.

Firma Wolf, a Dutch corporation owned by Arend Wolf, developed a similar defroster kit (the "Wolf product") in Europe and marketed its version in the United States through Trans Tech. According to the Court in Interdynamics I:

The Wolf product differed from the Interdynamics kit in that the Interdynamics kit contains a single set of sheets supporting a full pre-arrayed grid of heating strips, while the Wolf product contained four sets of sheets. Each set in the Wolf product consisted of a backing sheet and a top sheet, between which were sandwiched two parallel heating strips also containing adhesives of different strengths. The sheets were long and narrow, and were packaged in coils. Installation of each set was performed as in the Interdynamics kit, except the four sets of heating strips had to be linked together as well as to the electrical system.

653 F.2d at 95.

In March 1978, after the Wolf product appeared on the American market, Interdynamics and Smiths filed an infringement action against Trans Tech, Firma Wolf, and Arend Wolf. On September 6, 1978, the parties, at Trans Tech's instigation, entered into a consent decree, which provided (in relevant part):

2. Barnard United States patent 3,757,087 for HEATING ELEMENTS, owned by plaintiff Smiths Industries, Limited and solely licensed to plaintiff Interdynamics, Inc., is both good and valid in law and is enforceable;

3. Defendant Trans Tech, Inc. has infringed Barnard United States patent 3,757,087 by using and selling rear window defrosters identified with the trademark "JUSTLIKE" and manufactured by defendant Firma Wolf under the direction and control of defendant Arend Wolf.

4. Defendant Trans Tech, Inc. and all those in privity with it are hereby enjoined from infringing any claim of Barnard United States patent 3,757,087....

Interdynamics, Inc. v. Firma Wolf, No. 78-647 (D.N.J. Sept. 6, 1978) (order entering consent decree) (quoted in part in Interdynamics I, supra, 653 F.2d at 95). Interdynamics waived damages and, by signature of its counsel Henry R. Lerner, agreed that "the settlement agreement and consent judgment does not bar Trans Tech, Inc. from manufacturing rear window defrosters as long as they do not infringe United States Patent 3,757,087." Letter from Lloyd McAulay to Henry R. Lerner (June 14, 1978), App. 342-43.

Shortly after the entry of the September 6, 1978, consent decree, however, Trans Tech began to market a slightly different version of the Wolf product (the "first Trans Tech product").

In this product, the four coils did not contain separate top and backing sheets but were instead constructed in continuous rolls, much like rolls of conventional adhesive tape. The smooth back of each layer of plastic sheet served as the protective surface for the heating strips and adhesive surface in the layer above. Thus the need for a separate covering sheet was eliminated. The Trans Tech product was otherwise identical to the Wolf product.

Interdynamics I, supra, 653 F.2d at 95. 1 Interdynamics thereupon applied for an order to show cause why Trans Tech should not be held in contempt for violating the consent decree; a show-cause order issued from the district court on November 2, 1978, and commanded that Trans Tech appear before the court on November 9, 1978.

Upon the conclusion of the contempt hearing, however, the district court decided that it could not rule on the contempt issue until it had determined whether the first Trans Tech product actually infringed the

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Barnard patent. The court held a hearing focusing on infringement and ultimately found no infringement of the Barnard patent. It therefore concluded that Trans Tech had not violated the consent decree. Interdynamics, Inc. v. Firma Wolf, 493...

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