Air Turbine Technology, Inc. v. Atlas Copco Ab

• Decision Date: 07 June 2005
• Docket Number: No. 04-1387.,04-1387.
• Citation: 410 F.3d 701
• Parties: AIR TURBINE TECHNOLOGY, INC., Plaintiff-Appellant, v. ATLAS COPCO AB, Atlas Copco Tools AB, Atlas Copco North America, Inc., and Atlas Copco Tools, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Federal Circuit

410 F.3d 701

AIR TURBINE TECHNOLOGY, INC., Plaintiff-Appellant, v. ATLAS COPCO AB, Atlas Copco Tools AB, Atlas Copco North America, Inc., and Atlas Copco Tools, Inc., Defendants-Appellees.

No. 04-1387.

United States Court of Appeals, Federal Circuit.

June 7, 2005.

Richard L. Horn, Akerman Senterfitt, of West Palm Beach, Florida, argued for plaintiff-appellant. With him on the brief was Philip M. Burlington, of West Palm Beach, Florida.

William P. Atkins, Pillsbury Winthrop LLP, of McLean, Virginia, argued for defendants-appellees. With him on the brief were Scott J. Pivnick, Guillermo E. Baeza, and Benjamin L. Kiersz.

Before LOURIE, SCHALL, and PROST, Circuit Judges.

SCHALL, Circuit Judge.

Air Turbine Technology, Inc. ("ATT") is the owner of United States Patent No. 5,439,346 ("the '346 patent"). ATT sued Atlas Copco AB ("ACAB"), Atlas Copco Tools AB ("ACTAB"), Atlas Copco North America, Inc., and Atlas Copco Tools, Inc. (collectively, "Atlas") in the United States District Court for the Southern District of Florida for infringement of the '346 patent, for violation of the Lanham Act, and for unfair competition under Florida law. In the same action, ATT sued ACTAB separately for breach of contract, fraud, and breach of confidential relationship. ATT now appeals from the final judgment of the district court that was adverse to it on all of its claims. Air Turbine Tech., Inc. v. Atlas Copco AB, No. 01-8288-CIV (S.D.Fla. Nov. 13, 2003) ("Final Judgment"). We affirm.

BACKGROUND

I.

ATT, located in Boca Raton, Florida, is a manufacturer of pneumatic industrial tools.¹ One of its products is a "governed turbine pencil grinder." This is a tool that has a high-speed grinding bit at one end and is typically used for high-precision work, such as engraving. Among the various means of powering pencil grinders, the turbine engine has several advantages, such as reduced noise and fewer maintenance requirements. However, at least as used in grinding tools, turbines have the disadvantage of losing power under load. This means that the rotation speed of the grinding bit tends to decrease as resistance is applied to it. So, for example, a person using a turbine grinder to engrave a piece of metal might find that the rotation speed of the grinder's bit decreased as the bit was applied against the surface of the metal.

ATT acquired U.S. Patent No. 4,776,752 ("the '752 patent") in an effort to overcome this power-loss shortcoming of turbine grinders. The '752 patent, entitled "Speed Governed Rotary Device," claims a "governor" that can be used to control (or govern) the rotary speed of a turbine grinder. ATT used this technology to develop several governed-turbine models of its pencil grinder, one of which was the Model 201A grinder. ATT believed that this new tool overcame many of the power-loss problems experienced by turbine pencil grinders.

Atlas is a large power-tool distributor based in Sweden. It is comprised of multiple corporate entities, one of which is ACTAB, its worldwide distribution subsidiary. One of the many products marketed by Atlas, and distributed by ACTAB, is a high-speed pencil grinder. On May 1, 1992, ACTAB and ATT entered into a Private Brand Agreement ("PBA") under which ACTAB obtained the rights to market and sell ATT's Model 201A grinder worldwide, with the exception of the United States and Canada. The PBA included, among others, the following provision protecting ATT's intellectual property:

AC[TAB] will not exploit ATT's technology covered by ATT's patents. ATT will inform AC[TAB] well in advance before implementing any modifications or improvements of the Product. This provision is valid for the life of the patent (including applicable application periods).

Operating under the PBA, Atlas marketed the Model 201A pencil grinder as the "TSF06." Atlas intended to eventually sell the TSF06 worldwide (with, presumably, the exception of the United States and Canada). It never did so, however, because in March 1993, ATT terminated the PBA.²

Several years later, ATT acquired ownership of the '346 patent, which relates to an "automatic braking mechanism" for turbine grinders and other rotary devices. The patent is based on an application filed on September 16, 1993, by Gregory A. Bowser and Edward C. McCollough. It describes a braking mechanism that uses pressurized fluid, such as air, to enable or inhibit the rotation of, for example, a turbine's rotor. The braking mechanism is located inside of a chamber that is adjacent to the rotor. '346 patent, col. 3, ll. 22-23. The mechanism consists, in part, of a spring and a brake pad that are oriented in such a manner that, in the absence of external forces, the spring exerts pressure on the brake pad so as to push the brake pad into the rotor, thereby inhibiting rotation. Id. col. 5, ll. 33-50. However, when compressed air flows through the chamber, an exhaust pressure is created that is greater than the ambient pressure normally present in the chamber. This in turn exerts a force on the brake pad greater than, and opposite to, the force exerted on it by the spring, thereby pushing the brake pad away from the rotor and enabling rotation. Id. col. 5, ll. 12-21. The automatic braking mechanism can therefore be summarized as follows: in the presence of a compressed fluid, the braking mechanism enables rotation of the rotor; in the absence of a compressed fluid, the braking mechanism inhibits rotation of the rotor. Id. col. 5, ll. 47-57.

At some point after ATT terminated the PBA with ACTAB, Atlas began looking for other suppliers of pencil grinders. Atlas found Schmid & Wezel GmbH & Co. ("Schmid"), a German company, to be a suitable supplier and, in 1999, entered into a PBA with Schmid for turbine pencil grinders. Atlas marketed the Schmid pencil grinder as the "TSF07" and began selling it in October 1999. Atlas continued to sell the TSF07 until the spring of 2001, when it received notice that ATT believed the TSF07 incorporated an automatic braking mechanism that infringed the '346 patent.

II.

On April 6, 2001, ATT sued Atlas in the Southern District of Florida. ATT's first amended complaint alleged a total of six causes of action: (1) infringement of the '346 patent; (2) unfair competition under section 43 of the Lanham Act, 15 U.S.C. § 1125; (3) breach of contract; (4) fraud; (5) breach of confidential relationship; and (6) unfair competition under Florida law. (First Am. Compl. ¶¶ 18-50.) Counts one, two, and six were asserted collectively against Atlas, while counts three, four, and five were asserted separately against ACTAB.³

The patent infringement and unfair competition claims asserted against Atlas were all alleged to arise from Atlas's marketing of the TSF07 grinder subsequent to ATT terminating the PBA with ACTAB. ATT's theory with respect to count one — patent infringement — was that the TSF07 marketed by Atlas incorporated an automatic braking mechanism that infringed the '346 patent. (Id. ¶ 14.) ATT based its Lanham Act claim of count two on a theory of false advertising. Specifically, ATT alleged that Atlas made the TSF07 to look like the TSF06 and that it advertised the TSF07 as having the same governed turbine characteristics as the TSF06, when in fact the TSF07 did not have such capabilities. (Id. ¶¶ 27-28.) ATT alleged that this false advertising caused consumer confusion as to product origination and, moreover, caused consumers to stop buying the TSF06 because they believed it had the same inferiorities as the TSF07. (Id. ¶¶ 29-32.) In other words, ATT alleged that consumers were not satisfied with the TSF07 because it lacked the advertised "governed turbine" feature and that, because of the falsely advertised similarities to the TSF06, they stopped buying the TSF06. With respect to the unfair competition claim under Florida law, count six, ATT similarly alleged that Atlas had falsely represented the TSF07 as having the same characteristics as the TSF06 and thereby caused consumer confusion as to product origination. (Id. ¶¶ 48-49.)

The three causes of action asserted separately against ACTAB arise from ATT's perceived breach of the PBA by ACTAB. Indeed, ATT based its breach of contract claim, count three, on its belief that ACTAB's marketing of the competing TSF07 product breached the promise ACTAB made in the PBA not to exploit any of ATT's technology during the life of ATT's patents. (Id. ¶¶ 34-37.) ATT specifically alleged that ACTAB exploited its technology by marketing a product that infringed the '346 patent. (Id. ¶ 36.) Along these same lines, ATT alleged that ACTAB also committed fraud, count four, by entering into the PBA under false pretenses and with the intent to steal ATT's technology. (Id. ¶¶ 39-40.) Finally, ATT alleged in count five that ACTAB acquired a position of trust by entering into the PBA and gaining access to ATT's proprietary and confidential technology. (Id. ¶ 43.) According to ATT, ACTAB then breached this confidential relationship when it "used and disclosed [ATT's] information to others in the sale and promotion of ACTAB['s] ... tools incorporating [ATT] technology." (Id. ¶ 44.)

III.

Trial on all claims was set to begin the week of October 6, 2003. Air Turbine Tech., Inc. v. Atlas Copco AB, et al., No. 01-8288-CIV (S.D.Fla. May 5, 2003) ("Order Setting Trial"). However, on September 23, 2003, the district court granted Atlas's motion for summary judgment on the unfair competition, breach of contract, and fraud claims. Air Turbine Tech., Inc. v. Atlas Copco AB, 295 F.Supp.2d 1334, 1349 (S.D.Fla.2003) ("Summary Judgment"). ATT's two remaining claims of patent infringement and breach of confidential relationship proceeded to trial as scheduled.

With respect to ATT's false advertising claim under the Lanham Act, the court granted summary judgment for Atlas on the ground that ATT had not produced any evidence suggesting it was Atlas's false advertisements that caused consumers to not buy ATT's...