Senza-Gel Corp. v. Seiffhart

Decision Date02 October 1986
Docket Number85-2781,Nos. 85-2780,SENZA-GEL,s. 85-2780
Citation803 F.2d 661,231 USPQ 363
Parties, 1986-2 Trade Cases 67,307 CORPORATION, et al., Appellants/Cross-Appellees, v. John B. SEIFFHART, Goehring Meat, Inc., and Ohi, Inc., Appellees/Cross- Appellants. Appeal
CourtU.S. Court of Appeals — Federal Circuit

Elmer S. Albritton, Flehr, Hohbach, Test, Albritton & Herbert, San Francisco, Cal., argued for appellants/cross-appellees. With him on brief were Donald N. MacIntosh, Richard F. Irecartin and Richard P. Doyle, Jr.

Ernest H. McCoy, Oakland, Cal., argued for appellees/cross-appellants. With him on brief were Robert M. Brown, Brown & Finney, San Francisco, Cal. and Charles Townsend, Jr., Townsend & Townsend, San Francisco, Cal.

Before MARKEY, Chief Judge, BENNETT, Senior Circuit Judge, and NIES, Circuit Judge.

MARKEY, Chief Judge.

Certified question from the United States District Court for the Eastern District of California, relating to the criteria employed by the court in rendering summary judgment of patent misuse. We answer the inquiry in the affirmative.

Background

Appellants (Senza-Gel) sued all appellees, asserting numerous claims under state and federal law. One such claim was for infringement of Senza-Gel's process patent No. 3,644,125. 1 The district court separated the issues of patent validity and direct infringement for trial before all other issues. The jury returned a verdict that the patent was valid and infringed and the court denied Goehring's motion for JNOV. Months later, appellees moved to amend Before us, Senza-Gel challenges the grant of the motion to amend and the grant of summary judgment of patent misuse. Goehring seeks reversal of the denial of summary judgment of antitrust violation and a determination by this court that it had established certain elements of its counterclaim not reached by the district court.

their answer to add an allegation of patent misuse and an antitrust counterclaim. When that motion was granted, appellees (Goehring) filed motions for summary judgment of patent misuse and antitrust violation under Sec. 1 of the Sherman Act, 15 U.S.C. Sec. 1 (1982). The court granted the former and denied the latter.

Opinion and Orders of the District Court

The district court extensively discussed the evidence, the law, and the parties' arguments. Citing authorities, the court delineated the difference it correctly saw between patent misuse as a defense in a suit for patent infringement and as a basis for a complaint for antitrust violation. The court noted that the parties confused the two concepts (as they have on appeal), and that courts have done so as well.

The court cited the license agreements and testimony of Senza-Gel's principals (submitted at the patent issues trial as proof of commercial success of the patented process) as establishing Senza-Gel's refusal to permit use of the process of the patent in suit unless the user leased Senza-Gel's "macerator" machine, and the undisputed fact that the process and macerator were always leased together. The absence of conflict between the jury verdict and the grant of summary judgment of misuse was noted.

Reviewing legal history, the court discussed the "staple article of commerce" concept as it relates to contributory infringement, patent misuse, and antitrust. The court noted that Senza-Gel had insulated from review the validity of what it called its patent on the macerator. Having determined that Senza-Gel's macerator was useful in non-infringing processes, the court found it a staple article, as was OHI's machine that Senza-Gel called a "knock-off" of the macerator; the court then found that the process and the macerator (which performed one step of the process) were two "things"; and that those two things were "tied".

Because the parties had not raised the issue, the court declined to discuss any question of package licensing, but noted that the mere leasing together of the process and machine would not suffice if the effect were not, as it was here, to expand the "ambit" of the process patent. Senza-Gel's sole argument (that no one asked to lease the process alone and there was thus no coercion) was rejected.

Because Senza-Gel had submitted no evidence of business justification or other adequate response, the court concluded that no genuine issue of material fact on the misuse issue was present.

Noting that Senza-Gel had conditioned access to its process by requiring a lease of the macerator at prices making it uneconomical to lease the process and practice it with a different machine, and that Senza-Gel had thereby extended the scope of the process patent to cover the macerator, the court found misuse and granted Goehring's motion for summary judgment.

The court denied Goehring's motion for summary judgment of antitrust violation because genuine issues of material fact (on whether Goehring had suffered an injury the Sherman Act sought to remedy; whether, for antitrust purposes, as distinguished from patent misuse analysis, a single product was being sold by Senza-Gel) were present.

In disposing of Senza-Gel's motion for reconsideration, the court twice noted that no final judgment had been entered and that the motion was inappropriate under Fed.R.Civ.P. 59(e) or 60(b). Nonetheless, the court employed its inherent power to reconsider its interlocutory decrees and considered the motion in light of its Local Rule 230(k). Senza-Gel's assertion that it Senza-Gel's sole new argument on reconsideration (business justification) was found unsupported by facts, set forth in affidavits or otherwise, and was not accompanied by any explanation for its untimeliness. The court recognized that a motion for reconsideration is not a chance for a second bite, and that a grant of such a motion not based on newly found, previously unknown facts, would enable the movant to "sandbag" an adversary. Finding that Senza-Gel had not borne its burden of showing why the court should again consider its original arguments or why it should be permitted to raise new defenses to Goehring's motion, the court denied the motion to reconsider. 2

had been denied oral argument was correctly rejected not only as insufficient, but as contrary to fact; its list of 14 fact issues was rejected because it reflected no material fact issues; and its notion that it was privileged to argue the motion de novo was in direct disregard of Rule 230(k).

Certification

The district court's April 11, 1985 Opinion and Order included:

D. Certification for Appeal

Having found for defendant, it cannot be denied that the concept of patent misuse, outside of an antitrust context, is neither clear nor consistent. Thus, in granting defendants' motion for summary judgment on the issue of patent misuse, it seems to the court that this is a situation where "reasonable minds could differ." Therefore Summary Judgment is hereby GRANTED in favor of defendants, and the matter is certified for interlocutory appeal pursuant to 28 U.S.C. Sec. 1292(b).

* * *

* * *

4. The granting of summary judgment on defendants' motion relative to patent misuse and the denial of plaintiffs' motion for injunctive relief are certified for immediate appeal pursuant to 28 U.S.C. Sec. 1292(b).

The district court's June 5, 1985 Order denying Senza-Gel's motion for consideration included:

CERTIFICATION OF QUESTIONS

Alternatively, plaintiffs request the court to clarify its order of certification. This is a reasonable and proper request and the court will now specify the questions certified for interlocutory appeal:

A. Plaintiffs' Motions

1. Is the proper mode for analysis of a claim of patent abuse [sic, misuse] in a tying context the three step analysis undertaken by this court, namely:

First: Determine whether there are two things tied, i.e., whether there are separable or inseparable items; if so

Second: Determine whether the "thing" which is assertedly tied to the patented item is a staple or non-staple item in commerce; if staple

Third: Determine whether in fact they are tied.

2. In determining whether items are separable or inseparable for patent abuse [sic, misuse] questions, is the correct test whether the two items assertedly tied are separately patentable?

3. Whether this court was correct in holding that the test for prohibited patent misuse turns on whether the tied product is a staple item in commerce, and if the tied product is a staple, a patent misuse defense lies even though the suit alleges direct infringement?

4. Whether the test for a prohibited tying arrangement focuses on whether the patent holder forbids use of the patent without the purchase from him of a staple item in commerce, and thus the absence of any request by a customer for use of the patent separately is not a defense.

5. Whether, despite plaintiffs' failure to tender any facts upon which a business justification for patent misuse might be premised, summary judgment on behalf of the defendant based upon patent misuse should nevertheless be denied since, despite the absence of evidence, it is possible as an abstract matter that plaintiffs can prove a business justification?

The district court, indicating that it did not think the issue met the standards for interlocutory appeal, nonetheless conditionally certified its denial of Goehring's motion for summary judgment of antitrust violation, and this question:

6. In the Ninth Circuit, in an antitrust case, is the proper standard for determining whether the seller is tying one product with another rather than offering a single package, to be determined by looking at consumer behavior? That is, is it correct that the relationship between the producer's selling decision to market demand determines the existence of legally separable products?

The Parties' Presentations on Appeal

Incredibly, though they filed briefs totalling 145 pages, neither party addresses certified question No. 1 in those briefs. Neither says the district court's three-step...

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