Kearney & Trecker Corp. v. Cincinnati Milacron, Inc.

• Decision Date: 17 October 1975
• Docket Number: Civ. A. No. 6019,6146.
• Court: U.S. District Court — Southern District of Ohio
• Parties: KEARNEY & TRECKER CORPORATION, Plaintiff, v. CINCINNATI MILACRON, INC., and Cincinnati Milacron Company, Defendants.

403 F. Supp. 1040

KEARNEY & TRECKER CORPORATION, Plaintiff, v. CINCINNATI MILACRON, INC., and Cincinnati Milacron Company, Defendants.

Civ. A. Nos. 6019, 6146.

United States District Court, S. D. Ohio, W. D.

October 17, 1975.

Edward A. Haight, Chicago, Ill., Thomas W. Ehrmann, Milwaukee, Wis., and Thomas S. Calder, Cincinnati, Ohio, for Kearney & Trecker Corp.

William Marshal Lee, Chicago, Ill., and C. Jackson Cromer, Cincinnati, Ohio, for Cincinnati Milacron, Inc.

AMENDED OPINION

DAVID S. PORTER, District Judge:

These are consolidated actions in which plaintiff charges the defendant with infringement of patents on automatic tool changers important to automation in the machine tool industry. In such actions the defendant in its amended answer asserts the defense of collateral estoppel and in a counterclaim charges plaintiff with antitrust violations and seeks declaratory judgment that plaintiff's patents in suit are invalid, not infringed, and unenforceable. The jurisdiction of the Court is not contested.

Plaintiff, Kearney & Trecker Corporation (a Wisconsin corporation), is engaged primarily in the manufacture and sale of machine tools. The defendant, Cincinnati Milacron, Inc., and its wholly owned subsidiary Cincinnati Milacron Company (herein referred to collectively as defendant or as "Cincinnati"), are Ohio corporations, also engaged primarily in the manufacture and sale of machine tools.

The patents charged to be infringed are Morgan Re. 25,812,¹ and Brainard, et al., Re.-Re. 25,737.² In its original complaint the plaintiff claimed that still another patent³ was infringed. In the course of discovery in this litigation and similar litigation involving the Brainard patent in the Eastern District of Wisconsin, it came to light that after issuance of the Brainard patent plaintiff had employed as a consultant Thomas Emmert Beall, formerly the Primary Examiner of the Division of the Patent Office to which the Brainard patent had been assigned. As such consultant for Kearney & Trecker, Beall worked on the reissue and re-reissue of the Brainard patent, the prosecution of the shuttle patent (No. 3,099,873) and the acquisition and reissue of the Morgan patent. This raised a question of fraud on the Patent Office (conflict of interest) and, on the advice of its trial counsel, plaintiff disclaimed the shuttle patent and reduced its charge of infringement to certain claims in the reissued Morgan patent and the re-reissued Brainard patent which had been carried forward from the original patent. These curative efforts were temporarily successful. The District Court for the Eastern District of Wisconsin found the Brainard patent valid, infringed, and, most importantly, enforceable. Kearney & Trecker Corporation v. Giddings & Lewis, Inc., 306 F. Supp. 189 (E.D.Wis.1969). The case before this Court (except the issue of damages) came on for trial in 1970 after five years of exhaustive discovery. After it was submitted this Court held up, pending the outcome of the appeal of the Giddings & Lewis case, supra. The Court of Appeals for the Seventh Circuit reversed, finding that the Brainard patent was unenforceable, that there was an antitrust violation on the plaintiff's part, and that this was a proper case for attorney's fees. Kearney & Trecker Corp. v. Giddings & Lewis, Inc., 452 F. 2d 579 (7 Cir., 1971), cert. den. 405 U.S. 1066, 92 S.Ct. 1500, 31 L.Ed.2d 796 (1972).

Thereafter defendant was permitted to amend its answer herein and assert the additional defense of estoppel by judgment. The record was made up on this, and the case was finally submitted late in 1972. The issues of estoppel and conflict of interest overshadow the others in the case and will therefore be considered first. In that connection there will be a description of the industry and the plaintiff's machines. But before passing to that, a statement about the procedural background of this case, the patents, their success, and the events leading up to this litigation is in order.

This litigation began with the filing in this Court of Case No. 6019 by defendant on September 14, 1965, seeking a declaratory judgment that the patents in suit were invalid and not infringed by Cincinnati's accused machine. Six days later the plaintiff, Kearney & Trecker, filed Case No. 65-C-1575 in the United States District Court for the Northern District of Illinois, Eastern Division, charging infringement of the patents in suit and one other. The latter proceeding was stayed and, after extensive proceedings, eventually transferred to this Court. Kearney & Trecker Corporation v. Cincinnati Milling Machine Company, 254 F.Supp. 130 (N.D. Ill., E.D., 1966).

As to the patents still in suit, the Morgan patent was originally issued September 1, 1959, as U. S. Patent No. 2,901,927, on an application filed December 27, 1957. It was assigned by the inventor to his employer, IBM. Plaintiff purchased it from IBM under an agreement affective April 1, 1963, and since that time has been the record owner by assignment of the patent. On January 17, 1964, plaintiff filed an application for a reissue of the patent, and Reissue Patent Re. 25,812 was granted to it by the Patent Office on June 25, 1965.

The Morgan patent discloses a jig boring machine with an automatic tool changer under numerical control, the details and development of which will be gone into later. Suffice it to say here that the machine was the first with a fully automatic programmed selection of a tool from storage, means for positioning and securing the selected tool in the spindle, and removal of the tool from the spindle and return to storage.

The application for the original Brainard patent was filed June 27, 1958, by Wallace E. Brainard and four others of the plaintiff's employees as joint inventors. Patent No. 3,052,011, (containing claims 1 through 35), issued on this application on September 4, 1962. Application for reissue was filed September 23, 1963, and Patent Re. 25,583 issued thereon on May 26, 1964, (adding claims 36 through 47). Application to again reissue the patent was filed August 28, 1964, and patent Re.-Re. 25,737 was issued thereon on March 2, 1965, (adding claims 48 through 60).

Plaintiff is and at all times has been the sole owner of Brainard Re.-Re. 25,737, and was at all times total owner of patents Re. 25,583 and 3,052,011, prior to their surrender to the patent office at the time of re-reissue.

Brainard disclosed a more sophisticated machine than Morgan and included several "firsts." If not the first, it was the best machine to fill the need for a multi-purpose machine tool under numerical control with an automatic tool changer. It was the first to provide for bodily removal of a tool from storage, and the first to provide for simultaneous exchange of such selected tool with the tool in the spindle and placing the tool removed from the spindle in the place in the storage drum from which the new tool was just removed. It was also the first to enjoy commercial success.

The defendant first became aware of such success in 1958-59 when it received a request from Westinghouse Electric Corporation in Pittsburgh—or an inquiry —as to what defendant had which compared to the Milwaukee-Matic line of Kearney & Trecker⁴ (r. 637, et seq.; px. 185, 186, 187, 188). Cincinnati, the largest manufacturer of machine tools in the United States, though not a giant corporation by modern standards, was caught short, as it was preoccupied with the development of other machines. As will be seen later in this opinion, as a result of this inquiry from Westinghouse, Cincinnati came under extreme pressure to come up with a machine or machines to compete with the Milwaukee-Matic machine. Their own reports showed the enthusiasm for Kearney & Trecker's tool changing machine was almost "indescribable" (px. 76). A workpiece which had previously taken eleven hours to machine was being done in less than three on the Milwaukee-Matic, and the set-up time previously measured in hours was cut to minutes (r. 117).

Cincinnati developed its "ATC" line to compete with Kearney & Trecker's Milwaukee-Matics and first offered this line for sale in 1962 (r. 469-479; px. 152-161); its CIM-Xchanger line was offered in 1968 (r. 486-494; px. 167-175); and its Cintimatic tool changer line was first offered for sale in 1969 (r. 508-10, 517-522; px. 178-184). Cincinnati never took a license under the Brainard patent and was appropriately put on notice by Kearney & Trecker. When Cincinnati did not respond this lawsuit followed.

I. COLLATERAL ESTOPPEL

In support of its position that the plaintiff was estopped from asserting patent infringement by the Seventh Circuit decision in Giddings & Lewis, supra, defendant relies on Blonder-Tongue v. University Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971). In that case the Court overruled Triplett v. Lowell, 297 U.S. 638, 56 S.Ct. 645, 80 L.Ed. 949 (1936), and held that a defendant in a patent case could assert estoppel by judgment if the validity of the same patent had been previously litigated by the same plaintiff or one with whom he was in privity, and found invalid. The Supreme Court moved into this specific area of patent invalidity after a review of the entire doctrine of mutuality of estoppel, recognizing that:

"Undeniably, the court-produced doctrine of mutuality of estoppel is undergoing fundamental change in the common-law tradition." 402 U.S. at 327, 91 S.Ct. at 1442.

The Court said:

"Obviously, these mutations in estoppel doctrine are not before us for wholesale approval or rejection. But at the very least they counsel us to re-examine whether mutuality of estoppel is a viable rule where a patentee seeks to relitigate the validity of a patent once a federal court has declared it to be invalid." Id.

At the outset of our consideration of defendant's claim of collateral estoppel, we concluded a factual distinction exists between the present case and that in Blo...