Handgards, Inc. v. Ethicon, Inc.

• Decision Date: 26 September 1984
• Docket Number: 83-1646,Nos. 83-1575,s. 83-1575
• Citation: 223 USPQ 214,743 F.2d 1282
• Parties: , 1984-2 Trade Cases 66,134 HANDGARDS, INC., a Corporation, Plaintiff-Appellee, v. ETHICON, INC., a Corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1282

743 F.2d 1282

223 U.S.P.Q. 214, 1984-2 Trade Cases 66,134

HANDGARDS, INC., a Corporation, Plaintiff-Appellee, v. ETHICON, INC., a Corporation, Defendant-Appellant.

Nos. 83-1575, 83-1646.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Dec. 20, 1983.

Decided Aug. 2, 1984.

As Amended Sept. 26, 1984.

Maxwell M. Blecher, Blecher & Collins, Joel R. Bennett, Nancy Miller Bennett, Kendrick, Netter & Bennett, Los Angeles, Cal., for plaintiff-appellee.

David F. Dobbins, Dunne, Phelps, Mills & Jackson, San Francisco, Cal., for defendant-appellant.

Appeal from the United States District Court for the Northern District of California.

Before SNEED, KENNEDY, and BOOCHEVER, Circuit Judges.

SNEED, Circuit Judge:

Handgards, Inc. (Handgards) filed this suit against Ethicon, Inc. (Ethicon) for initiating and pursuing a series of bad faith patent infringement suits in an attempt to monopolize the market for heat-sealed plastic gloves sold to manufacturers of home hair coloring kits. A jury returned a verdict in favor of Handgards, and Ethicon appealed. In Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986 (9th Cir.1979) (Handgards I ), cert. denied, 444 U.S. 1025, 100 S.Ct. 688, 62 L.Ed.2d 659 (1980), we established a clear and convincing standard for section 2 antitrust liability resulting from the prosecution of a patent suit in bad faith. We then reversed and remanded this case for a new trial.

After a new trial, the jury found Ethicon liable under section 2 of the Sherman Act. The district court denied Ethicon's motion for a judgment notwithstanding the verdict. See Handgards, Inc. v. Ethicon, Inc., 552 F.Supp. 820 (N.D.Cal.1982) (Handgards II ). Ethicon appeals this judgment in all respects. We affirm.

Ethicon's appeal raises the following issues:

1. Does this court have jurisdiction over this appeal?

2. Does substantial evidence support the jury's finding that Handgards had proven by clear and convincing evidence that Ethicon prosecuted its patent infringement action in bad faith in violation of section 2 of the Sherman Act?

3. Did the trial court err in refusing to instruct the jury that liability under the Sherman Act required a finding by the jury that Ethicon's patent infringement suit was a "sham" proceeding within the meaning of the Noerr-Pennington doctrine?

4. Were the injuries suffered by Handgards such as to afford it standing to seek treble damages under the Sherman 5. Was the damage award by the jury properly supported by the evidence?

Act as required by Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983)?

6. Did the trial court err in awarding post-judgment interest from the date of the entry of the first judgment in 1976?

After concluding that this court has jurisdiction to hear and determine this appeal, we resolve each of these issues in a manner favorable to Handgards.

I. FACTS AND PROCEEDINGS BELOW

A complete statement of the facts is set forth in Handgards I, 601 F.2d at 988-92; therefore, here we shall outline the history of the prior litigation only briefly.

In 1962 Ethicon filed a patent suit against Plasticsmith, Inc. and Mercury Manufacturing Company, two corporations that subsequently combined to form Handgards. Ethicon alleged that these corporations had infringed its Gerard and Orsini patents involving the production of plastic gloves. In 1968 the trial court entered judgment for Handgards because it found Ethicon's Gerard patent invalid on the basis of "prior public use" by Lyle Shabram. Ethicon had dropped its enforcement of the Orsini patent earlier in the case. This court affirmed the district court's decision, and the Supreme Court denied review. Ethicon, Inc. v. Handgards, Inc., 432 F.2d 438 (9th Cir.1970), cert. denied, 402 U.S. 929, 91 S.Ct. 1525, 28 L.Ed.2d 863 (1971).

Meanwhile, in 1968 Handgards filed this civil antitrust action alleging that Ethicon and its parent, Johnson & Johnson, "had either unilaterally or in concert, monopolized, attempted to monopolize, and conspired to monopolize trade and commerce for the purpose of eliminating plaintiff as a competitor in the sale of disposable plastic gloves to the health care and medical markets." Handgards I, 601 F.2d at 989. Handgards also sought a declaration of invalidity of the Orsini patent. Id. at 991. The jury found the Orsini patent valid under a preponderance of the evidence proof standard; yet, it found Ethicon liable for bad faith prosecution of the invalid Gerard patent. The jury also found that no conspiracy to monopolize had existed between Johnson & Johnson and Ethicon. Handgards was awarded $2,073,000 before trebling. See id. at 991-92. On appeal, we reversed the jury's antitrust verdict and imposed a clear and convincing standard of proof for bad faith prosecution of a patent infringement action. Id. at 996-98. ¹

After a new jury trial, the district court entered a verdict of $3,587,331 before trebling, attorneys' fees of $1,064,943, and about $3,000,000 in post-judgment interest. Handgards II, 552 F.Supp. at 824. Ethicon's motion for a judgment notwithstanding the verdict, or, in the alternative, a new trial was denied. Id. at 821.

II. JURISDICTION

In 1982 Congress passed the Federal Courts Improvement Act of 1982 in part to promote predictability, uniformity, and the efficient administration of patent law. Pub.L. No. 97-164, 96 Stat. 25. See S.Rep. No. 275, 97th Cong., 1st Sess. 1, reprinted in 1982 U.S.Code Cong. & Ad.News 11. To achieve these goals, Congress created the United States Court of Appeals for the Federal Circuit (Federal Circuit). See generally Note, An Appraisal of the Court of Appeals for the Federal Circuit, 57 S.Cal.L.Rev. 301 (1984). The Federal Circuit was given exclusive jurisdiction "of an appeal from a final decision of a district court of the United States ... if the jurisdiction of that court was based, in whole or in part The phrase "based, in whole or in part, on section 1338," is new and, as far as we know, has not been interpreted in the context of a mixed patent/antitrust appeal by any court. Commentators have argued that this language could support several types of jurisdiction. ³ See Newman, Tails and Dogs: Patent and Antitrust Appeals in the Court of Appeals for the Federal Circuit, 10 Am.Pat.L.A.Q.J. 237, 238-39 (1982); Note, supra, at 326-33. The House Report states that "[c]ases will be within the jurisdiction of the Court of Appeals for the Federal Circuit in the same sense that cases are said to 'arise under' federal law for purposes of federal question jurisdiction." H.R.Rep. No. 312, 97th Cong., 1st Sess. 41 (1981). See also id. at 23-24. The Senate Report explicitly adopts the same position:

                on section 1338."    28 U.S.C. Sec. 1295(a)(1) (1982) (emphasis added).  Section 1338(a) gives district courts exclusive jurisdiction over "any civil action arising under any Act of Congress relating to patents."    28 U.S.C. Sec. 1338 (1982).  Because section 1295 is in effect for all appeals filed after October 1, 1982, see Pub.L. 97-164, Sec. 402, 96 Stat. 57, it is applicable to this appeal.  Both parties suggest that we have jurisdiction, and we agree. 2
                

It has been argued that a jurisdictional grant to the new court to consider appeals from a district court when jurisdiction was based, "in whole or in part," on section 1338 of title 23 [sic] (which confers on the district courts original jurisdiction of any civil action arising under an act of Congress relating to patents, plant variety protection, copyright and trademarks) is too broad and that specious patent claims will be tied, for example, to substantial antitrust claims in order to create jurisdiction in the Court of Appeals for the Federal Circuit. However, the statutory language in question requires that the district court have jurisdiction under 28 U.S.C. Sec. 1338. This is a substantial requirement.

S.Rep. No. 275, 97th Cong., supra, at 19, reprinted in 1982 U.S.Code Cong. & Ad.News at 29.

Whether the district court's jurisdiction here arose "under any Act of Congress relating to patents" presents a difficult issue. ⁴ We do have the benefit of hindsight, however, to determine what issues were adjudicated in the district court. ⁵ This hindsight facilitates the determination of the substantiality of the district court's jurisdiction under 28 U.S.C. Sec. 1338 (1982) in both trials. In the district court proceedings from which this appeal is taken (Handgards II ) the jurisdiction of that court was neither based in whole or in part on section 1338. The entire proceeding was based on the antitrust laws. See 15 U.S.C. Sec. 4 (1982). Jurisdiction under section 1338 was irrelevant. ⁶ The situation with respect to Handgards I is more complicated. True, the major thrust of the district court proceedings in Handgards I was toward the antitrust laws, but it is also true that in those proceedings the validity of the Orsini patent was litigated. The determination that the Orsini patent was valid, however, in no way altered Ethicon's liability under the antitrust laws. ⁷ It, of course, had no effect on our jurisdiction to hear and determine the Handgards I appeal because at that time 28 U.S.C. Sec. 1295(a)(1) (1982) had not been enacted. See 28 U.S.C. Sec. 1291 (1976). Whether it would have deprived us of jurisdiction had it been in effect is an issue we need not address. The important fact is that both we and the district court had jurisdiction beyond question in Handgards I. It would be both wasteful and foolish for us now to hold that we lack jurisdiction to hear and determine the appeal in Handgards II because had section 1295(a)(1) been effective in 1979 our appellate jurisdiction in Handgards I would have been subject to question. We, therefore, hold that we have jurisdiction to hear and determine this Handgards II appeal. Under these circumstances, the district court's jurisdiction in...