Minnesota Min. and Mfg. Co. v. Norton Co.

• Citation: 18 USPQ2d 1302,929 F.2d 670
• Decision Date: 27 March 1991
• Docket Number: No. 90-1291,90-1291
• Parties: , 18 U.S.P.Q.2d 1302 MINNESOTA MINING AND MANUFACTURING CO., Plaintiff-Appellant, v. NORTON COMPANY, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

Page 670

929 F.2d 670

59 USLW 2620, 18 U.S.P.Q.2d 1302

MINNESOTA MINING AND MANUFACTURING CO., Plaintiff-Appellant, v. NORTON COMPANY, Defendant-Appellee.

No. 90-1291.

United States Court of Appeals, Federal Circuit.

March 27, 1991.

Douglas A. Strawbridge, Merchant, Gould, Smith, Edell, Welter & Schmidt, P.A., of Minneapolis, Minn., argued for plaintiff-appellant. With him on the brief were John D. Gould and R. Carl Moy. Also on the brief were Richard Francis and Gary L. Griswold, 3M Office of Patent Counsel, St. Paul, Minn. and Charles L. Gholz, Oblon, Spivak, McClelland, Maier & Newstadt, P.C., of Arlington, Va., of counsel.

Ronald J. Brown, Dorsey & Whitney, of Minneapolis, Minn., argued for defendant-appellee. With him on the brief were Craig D. Diviney and David R. Abrams. Also on the brief was Steven Borst, The Norton Co., Worcester, Mass., of counsel.

Before PLAGER, Circuit Judge, SMITH, Senior Circuit Judge, and LOURIE, Circuit Judge.

LOURIE, Circuit Judge.

This case, on appeal from the United States District Court for the District of Minnesota, raises the question whether an accused patent infringer's suit for a declaration of non-infringement should be dismissed because the patent involved is part of an interference proceeding in the United States Patent and Trademark Office (PTO). The district court dismissed the suit. Minnesota Mining & Mfg. Co. v. Norton Co., Civil No. 4-89-676 (D.Minn. February 28, 1990). We reverse and remand.

BACKGROUND

Appellant Minnesota Mining and Manufacturing Company (3M) and appellee Norton Company (Norton) manufacture and sell abrasive products or "grains" used in sandpaper and grinding wheels. These grains are made by a seeded gel process, in which tiny particles or seeds are introduced into a gel; the gel is then dried and fired to form a ceramic grain around the seed. The resulting grain has a finer crystal structure than grain manufactured from non-seeded processes.

Norton filed a patent application covering the seeded gel process for making abrasive grain using aluminum-based seeds. ¹ Fifteen months after Norton's filing, 3M filed a patent application which claimed both the seeded gel process using aluminum-based seeds and the process using iron-based seeds. U.S. Patent 4,623,364 ('364 patent) issued to Norton in late 1986, covering the aluminum-based process, while 3M's application remained pending. 3M then initiated an interference with respect to the aluminum-based process, which is now in progress at the PTO. ²

Before Norton's '364 patent issued, 3M had been using the aluminum-based process to produce abrasive grain. To avoid On April 27, 1989, 3M filed suit for a declaration that its iron-based seeded gel process does not infringe the '364 patent and that Norton's '364 patent is limited to the process of seeding with aluminum-based particles. Norton moved to dismiss the action, arguing that the results of the pending interference proceedings might moot any declaratory judgment issued by the court. ³ The district court granted Norton's motion and dismissed 3M's complaint, basing its ruling solely on discretionary grounds.

accruing infringement damages, 3M changed to the iron-based process after the '364 patent issued. Norton and 3M then began to discuss their respective rights to the seeded gel processes. During the negotiations, Norton informed 3M that its '364 patent could be interpreted under the doctrine of equivalents to cover not only the aluminum-based process, but also 3M's iron-based process. Norton later sent letters to 3M's customers asserting that they were infringing the '364 patent. The letters demanded that the customers "cease immediately all infringing sale or use of such bonded abrasives and account to Norton for all such sale or use;" several of the letters stated that "Norton intends to vigorously enforce its patent rights against any such infringement."

DISCUSSION

We note first that this is not the type of issue about which we defer to the rule of the circuit in which the district court resides. The decision to assume declaratory judgment jurisdiction here involves the interrelationship between an ongoing interference, in which priority of invention of the aluminum-based seeded gel process will be decided, and a lawsuit, in which infringement of Norton's '364 patent will be decided. Thus, it is of importance to the development of the patent law and is clearly a matter that falls within the exclusive subject matter responsibility of this court. See Goodyear Tire & Rubber Co. v. Releasomers Inc., 824 F.2d 953, 954, n. 3, 3 USPQ2d 1310, 1311, n. 3 (Fed.Cir.1987). We therefore are not bound by decisions rendered by other circuit or district courts.

Norton claims that our review of the district court's action is limited to determining whether the district court abused its discretion. It relies on the district court's ruling that "[t]he permissive language of the [Declaratory Judgment] Act has been construed to make a declaratory judgment discretionary rather than a matter of right." Slip op. at 11. (citing Public Service Comm'n of Utah v. Wycoff Co., 344 U.S. 237, 73 S.Ct. 236, 97 L.Ed. 291 (1952)).

The Declaratory Judgment Act, 28 U.S.C. Sec. 2201, provides:

In a case of actual controversy within its jurisdiction ... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.

(Emphasis added). Thus, the very terms of the Act and its subsequent interpretation by the courts have made the exercise of declaratory judgment jurisdiction discretionary. See Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 126, 88 S.Ct. 733, 746-47, 19 L.Ed.2d 936 (1968); Public Service Comm'n, 344 U.S. at 241, 73 S.Ct. at 239; Intermedics Infusaid, Inc. v. Regents of the University of Minnesota, 804 F.2d 129, 134-35, 231 USPQ 653, 657-58 (Fed.Cir.1986) (holding that "the district court did not abuse its discretion" in its ruling whether to proceed with a declaratory judgment action). The reason for giving this discretion to the district court is to enable the court to make a reasoned judgment whether the investment of judicial time and resources in a declaratory action will prove worthwhile in resolving a justiciable dispute. Situations justifying exercise of the court's discretion to issue a declaratory judgment include "(1) when the judgment will serve a useful purpose However, the statement that a decision lies within the discretion of the trial court does not rigidly fix the decision's reviewability. Indeed, we have held that an abuse of discretion may be found when (1) the court's decision was clearly unreasonable, arbitrary, or fanciful; (2) the decision was based on an erroneous conclusion of law; (3) the court's findings were clearly erroneous; or (4) the record contains no evidence upon which the court rationally could have based its decision. Western Elec. Co. v. Piezo Technology Inc., 860 F.2d 428, 430-31, 8 USPQ2d 1853, 1855 (Fed.Cir.1988); Heat & Control, Inc. v. Hester Indus., Inc., 785 F.2d 1017, 1022, 228 USPQ 926, 930 (Fed.Cir.1986). Here, we must determine whether the district court properly balanced the needs of 3M and the consequences of exercising declaratory jurisdiction in light of the pending interference. Our determination does not depend on particular observations of witnesses by the district court; thus, the trial court's decision is not accorded the narrow review reserved for such discretionary decisions. Cf. Modine Mfg. Co. v. Allen Group Inc., 917 F.2d 538, 16 USPQ2d 1622 (Fed.Cir.1990) (great deference given to discretionary determination of inequitable conduct by district court where jury had first hand observation of those accused).

                in clarifying and settling the legal relations in issue, and (2) when it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding."    E. Borchard, Declaratory Judgments, 299 (2d ed. 1941)
                

This case involves the competing policy considerations of, on the one hand, conserving limited judicial resources by declining jurisdiction and, on the other hand, utilizing the services of a court by permitting a party threatened with legal action to obtain an early adjudication of its rights and liabilities. Norton argues that "the Interference made it at best speculative and hypothetical that a resolution of the issue presented in this litigation would have any utility at all in clarifying the legal relationship between Norton and 3M." On the other hand, 3M argues that the harm that is threatened to its business entitles it to the benefits of the Declaratory Judgment Act, which was enacted precisely for circumstances such as these. 3M argues that the district court erred in giving too little consideration to the harm which a delay in deciding the case will inflict on it. We agree with 3M. In promulgating the Declaratory Judgment Act, Congress intended to prevent avoidable damages from being incurred by a person uncertain of his rights and threatened with damage by delayed adjudication. See E. Borchard, Declaratory Judgments 803-04 (2d ed. 1941); 5 C. Wright & A. Miller, Federal Practice and Procedure Sec. 1238 (1990); see also Muskegon Piston Ring Co. v. Olsen, 307 F.2d 85, 89 (6th Cir.1962), cert. denied, 371 U.S. 952, 83 S.Ct. 508, 9 L.Ed.2d 500 (1963).

Norton has threatened 3M and its customers with the prospect of infringement liability. ⁴ As 3M continues to sell products it believes do not infringe, its potential liability grows. These are among the problems the Declaratory Judgment Act sought to alleviate. See Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 176, 86 S.Ct. 347, 350, 15 L.Ed.2d 247 (1965) ("one need not await the filing of a threatened suit by the patentee; the validity of the patent may be tested under the...