Micro Chemical, Inc. v. Great Plains Chemical Co.

• Citation: 900 F. Supp. 1386
• Decision Date: 21 July 1995
• Docket Number: Civ. A. No. 88-Z-499.
• Court: U.S. District Court — District of Colorado
• Parties: MICRO CHEMICAL, INC., Plaintiff, v. GREAT PLAINS CHEMICAL CO., INC., Lextron, Inc., and Robert C. Hummel, Defendants and Counterclaimants, v. MICRO CHEMICAL, INC., and William Pratt, Counterclaim Defendants.

900 F. Supp. 1386

MICRO CHEMICAL, INC., Plaintiff, v. GREAT PLAINS CHEMICAL CO., INC., Lextron, Inc., and Robert C. Hummel, Defendants and Counterclaimants, v. MICRO CHEMICAL, INC., and William Pratt, Counterclaim Defendants.

Civ. A. No. 88-Z-499.

United States District Court, D. Colorado.

July 21, 1995.

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Richard P. Holme, Donald E. Phillipson, Davis, Graham & Stubbs, Denver, CO, Howard Adler, Jr., Davis, Graham & Stubbs, Washington, DC, James S. Leigh, Mark S. Becker, John D. Vandenberg, Ramon S. Klitzke, Carole Schlaes, Klarquist, Sparkman, Campbell, Leigh & Whinston, Portland, OR, for Micro Chemical, Inc. and William Pratt.

Cassandra Gay Sasso, Kutak Rock, Denver, CO, Dennis J. Mondolino, Edward M. Reisner, Paul H. Blaustein, Michael F. Hurley, James M. Rhodes, Jr., Hopgood, Calimafde, Kalil & Judlowe, New York City, for Lextron, Inc., Robert C. Hummell and Great Plains Chemical Co. Inc.

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER

WEINSHIENK, District Judge.

This matter came before the Court on a suit for patent infringement brought pursuant to 35 U.S.C. §§ 1-307. The Court has subject matter jurisdiction under 28 U.S.C. § 1331 and § 1338(a), as well as in personam jurisdiction over the parties. Venue in this judicial district is provided by 28 U.S.C. §§ 1391(c) and 1400(b). Plaintiff, Micro Chemical, Inc. (MCI), charged defendants Lextron, Inc., Great Plains Chemical Co., Inc., and Robert C. Hummel with infringing the patent-in-suit, U.S. Patent No. 4,733,971 ('971 Patent), entitled "Programmable Weight Sensitive Microingredient Feed Additive Delivery System and Method," which issued on March 29, 1988. MCI amended its complaint to add unfair competition claims under Colorado law.

Defendants denied plaintiff's allegations, and asserted counterclaims charging MCI and William Pratt with unfair competition, misappropriation of trade secrets, and violations of the antitrust laws. Defendants also requested a declaratory judgment that all claims of the '971 Patent are invalid, noninfringed, and unenforceable due to plaintiff's inequitable conduct before the United States Patent and Trademark Office (Patent Office). Finally, defendants assert that this action should be deemed an exceptional case pursuant to 35 U.S.C. § 285, warranting the award of attorneys' fees.

Prior to the trial, the parties agreed to dismiss the unfair competition claims against each other. (Second Stipulated Pretrial Order at 2-3.) During the trial, the issues of damages and defendants' antitrust counterclaims were bifurcated, and the case proceeded to trial to the Court solely on the issues of patent validity, infringement, inequitable conduct and exceptional case status.

Having considered all the evidence and arguments presented at trial, the Court now makes the following Findings of Fact, Conclusions of Law, and Order.

FACTUAL BACKGROUND

1. MCI, a Texas corporation based in Amarillo, Texas, sells microingredient feed additives, such as vitamins and antibiotics, to large cattle feedlots. MCI provides to its customers, at no charge, machines which both measure the amounts of the microingredient feed additives and mix those ingredients with a liquid carrier to create a slurry. The slurry is then sprayed onto and mixed into a cattle feed ration before the feed is given to the cattle. William Pratt is the founder and president of MCI, and is the named inventor on the '971 Patent. (Ex. 1).

2. Defendants Lextron, Inc. and Great Plains Chemical Co, Inc., are from Greeley, Colorado. Though two names are used in the caption, they are a single Colorado corporation; the name was changed from Great Plains to Lextron in 1986. The name Lextron is used in this Order to refer to both entities collectively. Lextron competes with MCI in microingredients sales. Lextron also provides its customers with machines for measuring the microingredients, at no charge. Lextron's microingredients are also made into a slurry which is applied to a cattle feed ration prior to delivering the feed to the cattle. Defendant Robert C. Hummel is the founder and president of Lextron.

FINDINGS OF FACT

I. THE CATTLE FEEDLOT BUSINESS

3. Cattle typically are kept for about four or five months at a feedlot before being sent to slaughter. In a feedlot, a steer normally consumes approximately 25 lbs. of feed each day, resulting in a weight gain of about 3 lbs. per day. Microingredients are added to feed to promote growth and prevent sickness in the cattle.

4. Typically, feed is prepared in large 8,000 pound batches, which are composed of 7,500 pounds grain and roughage, 420 pounds protein and mineral supplements, and approximately 80 pounds of microingredients and their liquid carrier, most of which is water.

5. To prepare a batch of feed, the grain and roughage are often loaded by a front-end loader into a truck equipped with an auger to mix the feed. Also, the truck normally is equipped with a scale so that individual ingredients can be weighed as they are added to the truck.

6. After the major feed components are in the truck, the supplements are added and mixed into the feed ration by an auger in the truck.

7. After addition of all ingredients, including microingredients, the feed is further mixed in the truck for between one and four minutes as the truck is driven to the cattle pens. A trough, called a bunk, runs along the length of each pen. The feed is delivered into the bunk by a chute from the truck as it drives along next to the bunk.

8. Microingredients typically are added to feed in one of three ways, which have not changed since the 1970's. The most commonly used method is for the feedlot to purchase premixed protein supplements containing the desired microingredients. Measured amounts of the supplements are mixed into the feed ration along with the other ingredients.

9. The second method of adding microingredients is known as the "top dress" method. A bag containing microingredients is opened and the contents are spread directly onto the feed in the bunks. The microingredients applied this way are in a more concentrated form than they are in the protein supplements.

10. The third method of adding microingredients to feed is to use a microingredient feed additive machine. These machines measure predetermined amounts of concentrated microingredients, either by volume or by weight. Some machines deliver the microingredients in dry form to the feed in the truck. Most machines are equipped to create a slurry of microingredients in a liquid carrier, usually water, which is then pumped out of a receiving tank and sprayed onto the feed and mixed into the batch of feed by the mixer in the truck.

11. One of the advantages of a microingredient additive machine is that it allows the nutritionist to custom formulate the rations given to each group of animals and to make adjustments in the formula, as needed, to maximize growth.

II. THE '971 PATENT

12. William Pratt invented the subject matter of the '971 Patent, and MCI is the owner by assignment of that patent. (Ex. 1.)

13. The '971 Patent claims a programmable weight sensitive feed additive system and method. The Patent Office granted 94 claims on various aspects and combinations of MCI's weigh machine and weighing method inventions in the '971 Patent.

14. Weigh machines built according to the invention are installed at a livestock feeding site, such as a cattle feedlot, where on demand, selected microingredients are dispensed by weight, combined in a slurry, and mixed into batches of feed being delivered to livestock.

15. As testified to both by Mr. Pratt and Mr. Hummel, weigh machines enhance accuracy and reliability. As a result, such machines have been commercially successful, and have been in demand from livestock feedlots.

III. ON-SALE BAR

16. In a handwritten note bearing the date 10/31/85 and the title, "Need Patent Filing Date," Mr. Pratt made several notes after reviewing sales files on MCI's dealings with the Sunbelt Feedlot in Hugoton, Kansas. (Ex. 117.) Mr. Pratt testified that he reviewed these files and created these notes after his attorney had explained the need to inform the Patent Office when the first public use or offer for sale of his patented invention occurred. The files Mr. Pratt reviewed in creating these notes no longer exist.

17. The entries germane to the offer of the weigh machine are set forth below:

12/05/84 — Thought about offering MWS Micro Weigh System — made notes to self.

12/25/84 — Phone said had been working on a weigh system — would have it "available by" crossed out in production by Feb. 1, 1985 — installation possible by March 1?

12/26/84 — MWS machine offered in person for 6D e 6L — no date promised. MWS not final version. (Ex. 117.)

18. Mr. Lee Isaac, co-owner of the Sunbelt Feedlot, confirmed that he had several meetings with Mr. Pratt, as well as several telephone conversations between October, 1984, and the beginning of January, 1985, during which Mr. Pratt offered to place a weigh machine at the Sunbelt Feedlot. Isaac testified that Mr. Pratt had told him "that it MCI weigh machine was more accurate than the volume machine." Mr. Isaac also testified that it was his understanding that the machine was not in an experimental stage but ready to be placed at the feedlot as soon as he would place an order. Under cross-examination by plaintiff's attorney, Mr. Isaac reaffirmed his understanding that Mr. Pratt had offered him a weigh machine that was ready to be placed in his feedlot. Mr. Isaac's diary contains several entries reflecting meetings and conversations with Mr. Pratt in November and December, 1984. (Ex. TV.)

19. Mr. Pratt testified that his notations did not mean what they appeared to say. Where his notes indicated that the machine would be "in production by February 1, 1985," Mr. Pratt testified that this really meant only that a "production size machine"...