Spindelfabrik Suessen-Schurr v. Schubert & Salzer Maschinenfabrik Aktiengesellschaft

• Decision Date: 17 May 1990
• Docket Number: SUESSEN-SCHUR,Nos. 89-1624,89-1625,S,s. 89-1624
• Citation: 903 F.2d 1568,14 USPQ2d 1913
• Parties: , 14 U.S.P.Q.2d 1913 SPINDELFABRIKtahlecker & Grill GmbH, Hans Stahlecker, and Fritz Stahlecker, Plaintiffs-Appellees, v. SCHUBERT & SALZER MASCHINENFABRIK AKTIENGESELLSCHAFT, and Schubert & Salzer Machine Works, Inc., Defendants-Appellants. and Appeal of RIETER HOLDING AG, Maschinenfabrik Rieter AG and Rieter Corporation, and any other entity owned or directly or indirectly controlled by Rieter Holding AG or any company effectively controlled by Rieter Holding AG.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1568

903 F.2d 1568

58 USLW 2707, 14 U.S.P.Q.2d 1913

SPINDELFABRIK SUESSEN-SCHURR, Stahlecker & Grill GmbH, Hans Stahlecker, and Fritz Stahlecker, Plaintiffs-Appellees, v. SCHUBERT & SALZER MASCHINENFABRIK AKTIENGESELLSCHAFT, and Schubert & Salzer Machine Works, Inc., Defendants-Appellants and Appeal of RIETER HOLDING AG, Maschinenfabrik Rieter AG and Rieter Corporation, and any other entity owned or directly or indirectly controlled by Rieter Holding AG or any company effectively controlled by Rieter Holding AG.

Nos. 89-1624, 89-1625.

United States Court of Appeals Federal Circuit.

May 17, 1990.

Charles B. Park, III, Bell, Seltzer, Park & Gibson, Charlotte, N.C., argued, for plaintiffs-appellees. With him on the brief were Joell T. Turner and Barbara K. Caldwell. Also on the brief was, Fletcher C. Mann, Leatherwood, Walker, Todd & Mann, Greenville, S.C.

William M. Grant, Jr., Grant & Leatherwood, Greenville, S.C., argued, for defendants-appellants. With him on the brief were, O.G. Calhoun, Judith A. Leatherwood, and Moffatt G. McDonald. Hugh A. Chapin, Kenyon & Kenyon, of New York City, argued, for appellants. With him on the brief was, John A. Fogarty, Jr. Also on the brief were, Lowell Gordon Harriss, Joan I. Greco, Guy T. Petrillo, Davis Polk & Wardwell, of New York City and Edward R. Cole, Drennan, Shelor, Cole & Evins, P.C., Spartanburg, Conn.

Before RICH and ARCHER, Circuit Judges, and FRIEDMAN, Senior Circuit Judge.

FRIEDMAN, Senior Circuit Judge.

These appeals make various challenges to a judgment of the United States District Court for the District of South Carolina that, for the second time in this patent infringement case, held the defendants in contempt of the court's injunction and directed certain relief. Spindelfabrik Suessen-Schurr Stahlecker & Grill v. Schubert & Salzer, No. 83-2421-3 (D.S.C. June 15, 1989). We affirm in part and reverse in part.

I

A. The Infringement Suit and the Earlier District Court Decisions. In 1983, Hans and Fritz Stahlecker and Spindelfabrik Suessen-Schurr, Stahlecker & Grill GmbH, (collectively Suessen), German nationals and companies, filed suit for infringement of two U.S. patents (U.S. Patent No. 4,059,946 ('946) and U.S. Patent No. 4,175,370 ('370)) against the defendants Schubert & Salzer Maschinenfabrik AG (Schubert-Germany) and Schubert & Salzer Machine Works, Inc. (Schubert-U.S.) (collectively Schubert). As the district court stated in the present case, the patents "are directed to automated open-end rotor spinning machines for making textile yarns, and particularly to rotor spinning machines which have the capability of automatically 'piecing up' broken yarn ends during the spinning process." Order of June 15, 1989, at 2.

After trial, the court held that the patents were valid (i.e., not proven invalid) and enforceable and that the defendants had willfully infringed them by selling their "Spincomat" spinning machines. The court enjoined the defendants from "manufacturing, using or selling in the United States their accused infringing 'Spincomat' automatic piecing device, or any other apparatus embodying any invention claimed in the '946 or '370 patent, and from otherwise infringing, or inducing others to infringe, the '946 or '370 patent in suit." Order & Opinion of Sept. 4, 1985, at 80.

A few days later, the defendants requested the court to authorize them to exhibit their model RU 14 "Spincomat" at an upcoming trade show in Greenville, South Carolina. They did not contend that their new model had been changed to avoid infringement; they argued only that since the trade show was an international event, they should be able to exhibit their product The defendants then made two minor changes in the RU 14 "Spincomat" machine and exhibited it at the trade show. In response, the plaintiffs filed an emergency motion to enforce the injunction. After an evidentiary hearing, the court held that the changed RU 14 Spincomat continued to infringe the '946 patent. On October 23, 1985, the court ordered the defendants immediately to remove the infringing machines from the trade show, and "to further refrain from assembling, erecting, displaying, operating, using or otherwise exhibiting this automatic piecing device in any manner to customers, potential customers, or the public generally." Order of Oct. 23, 1985, at 2. In an order dated December 23, 1985, the court denied a stay pending appeal of the October 23, 1985 order.

                to the non-U.S. attendees.  The court denied permission, stating "[t]hat such a demonstration of the Spincomat would constitute infringement of the Plaintiff's patents, and thus violate the existing injunction."    Order of Sept. 27, 1985
                

In an appeal from those orders, the defendants challenged only the district court's finding of infringement. This court affirmed, holding that the district court's findings that the defendants had infringed both patents were not clearly erroneous. Spindelfabrik Suessen-Schurr v. Schubert & Salzer, 829 F.2d 1075, 4 USPQ2d 1044 (Fed.Cir.1987).

B. The First Contempt Proceeding. Shortly after this court's affirmance, the plaintiffs informed the district court that the defendants had continued to bring infringing RU 14 "Spincomat" machines into the United States. After another evidentiary hearing in October 1987, the district court found on November 16, 1987 that the additional modifications the defendants had made to the machines were insufficient to avoid infringement, and held the defendants in contempt. Order & Opinion of Nov. 16, 1987, at 7-8, 15. The court entered a further injunction and awarded additional damages, increased for willfulness, and attorney fees. Id. at 15-20.

In that evidentiary hearing, the court was informed that as of January 1987, Rieter Holding AG of Switzerland (Rieter-Holding) had acquired a substantial majority of the stock of the defendant Schubert-Germany. Rieter-Holding has a wholly-owned subsidiary, Maschinenfabrik Rieter AG of Switzerland (Rieter-Swiss), which in turn has a wholly-owned subsidiary, Rieter Corporation of Spartanburg, South Carolina (Rieter-U.S.) (collectively Rieter). The court also was informed that the sales and service functions of Schubert-U.S. had been taken over by Rieter-U.S. as of about April 1987, and that the defendants had transferred some of Schubert-U.S.'s key personnel to Rieter-U.S. See Order of June 15, 1989, at 4-5.

Because of this information, the district court made certain findings concerning the Rieter companies and named Rieter-U.S. in certain of the injunctive provisions in the November 16, 1987 order. For example, the court ordered the defendants to:

Take out of operation, disassemble and export from the United States all "Spincomat" automatic piecing devices located in the United States which are under the direct or indirect control of either of the defendants, or those in active participation or concert with defendants, including specifically, but without limitation, Rieter Corporation of Spartanburg, South Carolina;....

Order & Opinion of Nov. 16, 1987, at 19.

At the time of the November 16, 1987 order, no Rieter company was a party to the suit. On December 11, 1987, however, Rieter-Swiss and Rieter-U.S. moved to intervene in the suit, in order to appeal from that order. Simultaneously, they filed a separate declaratory judgment action in the same court against the plaintiffs seeking to enjoin them from enforcing against the Rieter companies the injunctive provisions of that court's November 16, 1987 order. Rieter Corp. v. Spindelfabrik Suessen-Schurr, No. 6:87-3298-3 (D.S.C.). The Rieter companies contended that they were authorized to engage in the enjoined conduct under a November 11, 1981 patent license agreement (the Rockford Agreement, discussed below) between Rieter-Swiss and the plaintiff Suessen.

In an April 21, 1988 order, the district court (1) denied "without prejudice to renewal when, if, and as necessary in the future," the Rieter companies' motion to intervene, (2) modified the November 16, 1987 order to eliminate all references to the Rieter companies, and (3) indicated that "[n]othing in [the November 16, 1987 order] shall be construed to enjoin [Rieter-Swiss] or [Rieter-U.S.] or their customers from any activity authorized by the Rockford Agreement." Order & Opinion of Apr. 21, 1988, at 5. The court explained:

The pertinence of the particulars and scope of the patent license granted by Suessen in the Rockford Agreement was not brought to this Court's attention by any of the parties to this action, prior to November 16, 1987. This Court would not have referred to Rieter Swiss and Rieter U.S. in the November 16th Order, thereby depriving Rieter Swiss and its customers of the benefits of the patent license granted by Suessen in the Rockford Agreement, had this Court been fully advised in the premises.

Further, neither Rieter Swiss nor Rieter U.S. were properly before this Court in the contempt proceeding giving rise to the Order of November 16, 1987. As a result, neither Rieter interests nor the pertinence of the Rockford Agreement were appropriately recognized and protected by this Court.

For the foregoing reasons Rieter U.S. and Rieter Swiss should not be included in the November 16, 1987 Order of this Court. Neither of those companies should be limited by that Order in any respect while operating under the terms of the Rockford license.

Id. at 4 (emphasis in original). In a footnote, the court stated that by those modifications it "in no way passe[d] on the validity or effect of Plaintiff's attempted unilateral termination of the Rockford license. The Court merely want[ed] to make it clear that the November 16, 1987 Order does not apply to any entity operating under the provisions of a valid licensing agreement." Id. at 4 n. 2.

This court affirmed the district court's order holding the defendants in contempt. Spindelfabrik Suessen-Schurr v. Schubert & Salzer, 865 F.2d 268, 9 USPQ2d 1743,...