Christianson v. Colt Industries Operating Corp.

• Decision Date: 25 June 1987
• Docket Number: No. 85-2644,85-2644
• Parties: , 1987-1 Trade Cases 67,612, 3 U.S.P.Q.2d 1241 Charles R. CHRISTIANSON and International Trade Services, Inc., etc., Appellee, v. COLT INDUSTRIES OPERATING CORP., Appellant. Appeal
• Court: U.S. Court of Appeals — Federal Circuit

Page 1544

822 F.2d 1544

56 USLW 2027, 1987-1 Trade Cases 67,612,

3 U.S.P.Q.2d 1241

Charles R. CHRISTIANSON and International Trade Services Inc., etc., Appellee, v. COLT INDUSTRIES OPERATING CORP., Appellant.

Appeal No. 85-2644.

United States Court of Appeals, Federal Circuit.

June 25, 1987.

Anthony M. Radice, Parker, Auspitz, Neesemann & Delehanty, P.C., New York City, argued for appellant. With him on brief were Joseph C. Markowitz and Kim J. Landsman. Also on brief was Robert L. Harmon, William Brinks Olds Hofer Gilson & Lione, Ltd., Chicago, Ill., of counsel and John V. Patton and James D. Mowen, Bozeman, Neighbour, Patton & Noe, Moline, Ill., of counsel.

John C. McNett, Woodard, Weikart, Emhardt & Naughton, Indianapolis, Ind., argued for appellee. With him on brief was Spiro Bereveskos. Also on brief was Stuart R. Lefstein, Katz, McAndrews, Durkee, Balch & Lefstein, P.C., Rock Island, Ill.

Before MARKEY, Chief Judge, NICHOLS, Senior Circuit Judge, and BISSELL, Circuit Judge.

MARKEY, Chief Judge.

Appeal from a summary judgment of the United States District Court for the Central District of Illinois in favor of Charles R. Christianson and International Trade Services, Inc. (ITS) (Christianson). The court held Colt Industries Operating Corp. (Colt) liable under: (1) sections 4 and 16 of the Clayton Act (15 U.S.C. Secs. 15, 26) and sections 1 and 2 of the Sherman Act (15 U.S.C. Secs. 1, 2), because Colt asserted trade secrets the court deemed "invalid" for failure of Colt to disclose them in nine U.S. patents the district court declared invalid for noncompliance with best mode and enablement provisions of 35 U.S.C. Sec. 112; ¹ and (2) the

                theory of tortious interference with contract.   Christianson v. Colt Industries Operating Corp., 609 F.Supp. 1174, 227 USPQ 361, final judgment on liability, 613 F.Supp. 330 (C.D.Ill.1985).  We reverse in part, vacate in part, and remand
                

Introduction

The present appeal reflects a monumental misunderstanding of the patent jurisdiction granted this court. An appeal in a pure and simple antitrust case is here solely because an issue of patent law appears in an argument against a defense. Christianson asserted rights that arise under, and only under, antitrust law. Colt's defense is its trade-secret rights under state law. Christianson's argument against that defense is that Colt lost its secrets because it did not disclose them in its patent applications. The district court's opinion said Colt's patents were invalid. Colt requested inclusion of that view in the final judgment and brought its appeal here.

Background

(a) The Earlier Patent Suit

On September 2, 1983, Colt sued Springfield Armory, Inc. and Rock Island Armory, Inc. (Springfield) for patent infringement ² and other activities. Colt sought to preliminarily enjoin performance of Springfield's contract to sell M-16-type rifles to El Salvador, alleging unauthorized use of Colt's production trade secrets. Springfield said it copied the weapon by reverse engineering. Finding that Springfield had copied Colt's production secrets, the district court granted a preliminary injunction on October 7, 1983.

Convinced that former Colt employee Christianson disclosed its secrets to Springfield, Colt added him and his company, ITS, as parties on November 23, 1983. When the court denied a preliminary injunction against Christianson and ITS, Colt dismissed its complaint against them.

On October 17, 1983, Springfield appealed to this court, but abandoned its reverse engineering theory, saying the weapon could not be reverse engineered. Springfield then presented the novel theory that its inability to mass produce a particular type (M-16) of rifle established a failure of Colt's patents on rifle parts to comply with 35 U.S.C. Sec. 112 p 1.

On March 20, 1984, this court affirmed, Colt Industries Operating Corp. v. Springfield Armory, Inc., 732 F.2d 168 (Fed.Cir.1984) (unpublished opinion), but noted in dicta that, "Although Springfield's 35 U.S.C. Sec. 112 arguments, particularly relating to best mode, have an appearance of validity, ... the evidence of record is totally lacking in specifics." This court noted a distinction between a rifle and rifle parts and listed the "specifics" of evidence required (none of which appears of record here).

(b) This Antitrust Suit ³

On May 14, 1984, Christianson filed an inartful complaint against Colt "pursuant to Section 4 ... (15 U.S.C. Sec. 15) and Section 16 of the Clayton Act (15 U.S.C. Sec. 26) for damages, injunctive and equitable relief by reason of its violation of Sections 1 and 2 of the Sherman Act (15 U.S.C. Secs. 1 & 2) After alleging that Colt controlled "nearly 100%" of the market for M-16 rifles and parts, acquired patents in "the late 1950's" and "early 1960's," and granted licenses extending beyond the life of its patents, Christianson inserted this disjointed statement in Count I of the complaint:

                as hereinafter alleged."    [Complaint p 1, JA at 39]
                

18. The validity of the Colt patents had been assumed throughout the life of the Colt patents through 1980. Unless such patents were invalid through the wrongful retention of proprietary information in contravention of United States Patent Law (35 U.S.C. Sec. 112), in 1980, when such patents expired, anyone "who has ordinary skill in the rifle-making art" is able to use the technology of such expired patents for which Colt earlier had a monopoly position for 17 years.

Count I continued with allegations that Colt gave and withdrew permission for ITS to make and sell M-16 parts, and drove ITS out of business by threats to suppliers and customers and by joinder and dismissal of ITS in Springfield.

On October 19, 1984, Christianson added a count II, alleging tortious interference with Christianson's business relationships.

In its answer to paragraph 18, Colt said it "admits that Colt's patents are valid until the end of their respective lifetimes" and admitted that "anyone with ordinary skill in the art is entitled to and is able to use any and all of Colt's expired patents for any legitimate purpose." ⁴

Colt counterclaimed, alleging jurisdiction under 28 U.S.C. Secs. 1331, 1332(a), 1338 (trademark infringement), 15 U.S.C. Sec. 1121, Fed.R.Civ.P. 13, pendent and ancillary jurisdiction, and that Christianson: (a) improperly obtained and used Colt's confidential information, proprietary drawings, and other trade secrets pertaining to its production of M-16 rifles; (b) breached contractual duties; (c) tortiously interfered with Colt's contracts; and (d) willfully violated section 43(a) of the Lanham Act (15 U.S.C. Sec. 1125(a)) and Illinois state law by falsely designating its products.

Christianson answered Colt's counterclaims, substantially repeating paragraph 18, supra, of Count I, and alleging that Colt fraudulently procured its patents by concealing "patent technology" and is now asserting that "technology" as trade secrets and thereby extending the patent grant.

Christianson's motion for summary judgment sought only a declaration that Colt's trade secrets were invalid. It stated, "[b]asic and fundamental to the subject lawsuit is whether or not at any of the times described in the complaint and counterclaims [Colt] possessed and was entitled to maintain as exclusive proprietary rights its claimed trade secrets with respect to the M-16 rifle and rifle parts," and that "none of these trade secrets were [sic] valid [sic] as a matter of law."

(c) District Court Opinion

Focusing on 35 U.S.C. Sec. 112, the district court granted Christianson's motion on Counts I and II and denied Colt's cross-motion. 609 F.Supp. 1174, 227 USPQ 361. The district court said "[t]he thrust of [Christianson's] motion is the position that Colt cannot assert its claim of trade secrecy against [Christianson] because it had, in its now-expired patents, failed to make the full disclosures of its claims of invention as required by 35 U.S.C. Sec. 112," id. at 1176, 227 USPQ at 362; "[t]he disclosures made by Colt satisfied neither the enablement nor best mode requirements of 35 U.S.C. Sec. 112," id. at 1178, 227 USPQ at 363, and that each of Colt's "patents was invalid from its inception and that any claim of trade secrecy as to the nondisclosed information is likewise invalid," id. at 1184, 227 USPQ at 367. The district court said this court's dicta in Springfield:

can and should be accepted as the statement of a recognition by [the Federal Circuit] Id. at 1177, 227 USPQ at 363.

that possibly serious issues of Colt's compliance with Section 112 could exist, subject to substantiation by adequate evidence. To that extent, and to that extent only, that statement does have a bearing on the issues now before this court.

Instructed to prepare a final judgment and order, the parties proposed, and the court's final judgment and order included, numerous matters never presented to the court. It was during this process that Colt requested a holding that its own patents, as stated in the court's opinion, were invalid.

On July 19, 1985, the district court entered its "Final Judgment on Liability" which stated:

Patent infringement is not an issue in this case. This court has jurisdiction over the subject matter of this action and the parties before it under 28 U.S.C. Sec. 1332 and 15 U.S.C. Secs. 4, 15 and 26. Venue in this district is proper under 28 U.S.C. Sec. 1391(b) and (c) and 15 U.S.C. Sec. 15.

613 F.Supp. 330, 331.

The district court ordered: (a) a trial on damages and a hearing on attorney fees; (b) Colt's nine patents are invalid from inception; (c) Colt's rights in its secrets on production of the M-16 rifle are void and unenforceable; (d) Colt is enjoined from asserting any form of trade secret in any technical information relating to production of the M-16 rifle, including any that "came into existence prior to entry of this order"; (e) Colt shall preserve until June 1, 1989 such technical information and provide it upon request to...