Air-vend, Inc. v. Thorne Industries, Inc., Civ. No. 3-81-919.

• Citation: 625 F. Supp. 1123
• Decision Date: 04 November 1985
• Docket Number: Civ. No. 3-81-919.
• Parties: AIR-VEND, INC., Plaintiff, v. THORNE INDUSTRIES, INC. and Air-Ports Systems, Inc., Defendants.
• Court: U.S. District Court — District of Minnesota

625 F. Supp. 1123

AIR-VEND, INC., Plaintiff, v. THORNE INDUSTRIES, INC. and Air-Ports Systems, Inc., Defendants.

Civ. No. 3-81-919.

United States District Court, D. Minnesota, Fourth Division.

November 4, 1985.

COPYRIGHT MATERIAL OMITTED

James T. Nikolai, Haugen and Nikolai, and John F. Bonner, III, Bonner Law Offices, Minneapolis, Minn., for plaintiff AIR-vend, Inc.

Richard O. Bartz, and Robert W. Gutenkauf, Burd, Bartz & Gutenkauf, Minneapolis, Minn., for defendants Thorne Industries, Inc. and Air-Ports Systems, Inc.

MEMORANDUM AND ORDER

MAGNUSON, District Judge.

INTRODUCTION

Plaintiff AIR-vend, Inc. (AIR-vend) commenced this declaratory judgment action pursuant to 28 U.S.C. §§ 2201 and 2202 against defendants Thorne Industries, Inc. (Thorne Industries) and Air-Ports Systems, Inc. (Air-Ports Systems) on November 13, 1981. AIR-vend sought a declaration that United States Patent No. 4,289,225 (the `225 patent), which was issued to Owen R. Scholta and assigned to Thorne Industries and subsequently assigned to Air-Ports Systems, was not infringed, but rather invalid and unenforceable. On January 19, 1982, Thorne Industries and Air-Ports Systems jointly filed their Answer and Counterclaim in which they alleged the affirmative defenses of failure to state a claim and estoppel and alleged claims of infringement of the `225 patent, misappropriation of business property, such as trade secrets and confidential business information, conversion of business property, breach of contract, breach of fiduciary duty, usurpation of corporate opportunity, and unfair competition. On September 29, 1982, the court, pursuant to a Stipulation dated September 23, 1982 between counsel for the parties, dismissed with prejudice the affirmative defenses and counterclaim of Thorne Industries and Air-Ports Systems and found that AIR-vend had not infringed any of the claims of the `225 patent. The court further dismissed with prejudice all claims of AIR-vend "save and except for AIR-vend's Declaratory Judgment Claim that Thorne Industries' and Air-Ports Systems' `225 patent is invalid and is unenforceable, said issues being the only issues remaining for litigation." On September 11, 1982, Thorne Industries and Air-Ports Systems filed a terminal disclaimer with the United States Patent Office abandoning any rights granted to them under Claims 1-6 of the `225 patent (PX 12).

A four day trial commenced before Judge Paul A. Magnuson on August 12, 1985. The court had jurisdiction over the parties and subject matter of this action pursuant to 28 U.S.C. § 1338(a). The court heard and received evidence with respect to Claims 7 and 8 of the `225 patent. The patent issues at trial focused on whether Claims 7 and 8 of the `225 patent were invalid as anticipated under 35 U.S.C. § 102 or as obvious under 35 U.S.C. § 103. A subsidiary, yet threshold, issue at trial was whether an actual case or controversy existed for the court to adjudicate. This Memorandum and Order constitutes the findings of fact and conclusions of law of the court pursuant to Rule 52(a) of the Federal Rules of Civil Procedure.

CASE OR CONTROVERSY

The Declaratory Judgment Act provides that "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...." 28 U.S.C. § 2201. In order to pursue a declaratory judgment action in federal court, therefore, the court must have an independent basis of jurisdiction, which is undisputed to be 28 U.S.C. § 1338(a) in this case, and be presented with an actual case or controversy between the parties, which is disputed in this case. The actual controversy requirement of a declaratory judgment has been defined to be coextensive with the case or controversy requirement of Article III, Section 2 of the Constitution. Aetna Life Insurance Co. v. Haworth, 300 U.S. 227, 239-41, 57 S.Ct. 461, 463-64, 81 L.Ed. 617 (1937). The case or controversy requirement in the context of a patent invalidity declaratory judgment action requires the presence of two elements. First, the defendant in such an action must have engaged in conduct that created on the part of the declaratory plaintiff a reasonable apprehension that it will face an infringement suit if it commences or continues the activity in question. Second, the plaintiff seeking a declaration of invalidity must have actually produced the accused device or have actually prepared to produce such a device. Jervis B. Webb Co. v. Southern Systems, Inc., 742 F.2d 1388, 1398-99 (Fed.Cir.1984). A case or controversy must exist as of the date of the filing of the declaratory judgment action, as well as at all stages of review. Preiser v. Newkirk, 422 U.S. 395, 401, 95 S.Ct. 2330, 2334, 45 L.Ed.2d 272 (1975); See Jervis B. Webb Co. v. Southern Systems, Inc., 742 F.2d 1388, 1398 n. 6 (Fed.Cir.1984).

Without question, a case or controversy existed as of the date of the filing of this declaratory judgment action. In the Fall of 1981, Dave Bobert, the President of AIR-vend, received a letter dated October 30, 1981 (PX 18) from Richard Wilson, an attorney representing Thorne Industries and Air-Ports Systems, which raised the possibility of a patent infringement suit against AIR-vend. The letter discussed the belief of Thorne Industries that AIR-vend was producing and marketing equipment, including air compressors and dispensers or tire inflators, similar to patented equipment which Thorne Industries and Air-Ports Systems produced and marketed. The letter referred to the `225 patent and a patent application, and the remedies available to Thorne Industries and Air-Ports Systems in a patent infringement suit. Also in the Fall of 1981, AIR-vend learned that Thorne Industries and Air-Ports Systems were threatening AIR-vend tire inflator customers with `225 patent infringement suits. As of the date of the filing of this declaratory judgment action, November 13, 1981, Thorne Industries and Air-Ports Systems clearly had engaged in conduct which created in AIR-vend, which was actually selling and producing the accused coin-operated tire inflators, a reasonable apprehension that it would face a patent infringement suit if it continued its tire inflator production and marketing activities. A case or controversy existed when this declaratory judgment action was commenced.

What brings the issue of a case or controversy to the fore is the Stipulation and Order Dismissing Defendants' Affirmative Defenses and Counterclaim With Prejudice dated September 29, 1982. The Stipulation and Order dismissed with prejudice the affirmative defenses of Thorne Industries and Air-Ports Systems and stated that AIR-vend did not infringe any of the claims of the `225 patent. The Stipulation and Order also dismissed with prejudice all claims of AIR-vend "save and except for AIR-vend's Declaratory Judgment Claim that Thorne Industries' and Air-Ports Systems' `225 patent is invalid and is unenforceable, said issues being the only issues remaining for litigation." Thorne Industries and Air-Ports Systems contend that the Stipulation and Order effectively destroyed any case or controversy that may have existed between the parties. Thorne Industries and Air-Ports Systems contend that the dismissal with prejudice of all claims, except for the claim of AIR-vend for a declaration that the `225 patent is invalid, removes any apprehension that AIR-vend might have concerning the possibility of a patent infringement suit if it continued to produce and market coin-operated tire inflators. AIR-vend responds that the belated admission of Thorne Industries and Air-Ports Systems that it did not infringe the `225 patent on this occasion cannot destroy the case or controversy among the parties. AIR-vend expresses concern that if the `225 patent is not now declared invalid as requested, Thorne Industries and Air-Ports Systems will reenter the coin-operated tire inflator market and attempt to gain leverage among customers and competitors with an allegedly invalid patent. AIR-vend will once again be faced in its business decisions and dealings with the uncertain effect of an allegedly invalid patent in the hands of its competitors that have once before used the patent against AIR-vend.

Some four months before trial, the court considered this precise issue of a case or controversy upon the Motion to Dismiss of Thorne Industries and Air-Ports Systems. In an Order dated April 2, 1985, the court denied the Motion to Dismiss and found that an actual case or controversy existed for purposes of proceeding to trial on the issue of patent invalidity. The court, having completed a trial in this matter, remains satisfied that an actual case or controversy existed at all times in this declaratory judgment action. In finding that an actual case or controversy existed in this patent invalidity declaratory judgment action, the court has considered the requirements of Jervis B. Webb Co. v. Southern Systems, Inc., 742 F.2d 1388, 1398 (Fed.Cir. 1984), against the background of Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 61 S.Ct. 510, 85 L.Ed. 826 (1941), which provides that:

The difference between an abstract question and a "controversy" contemplated by the Declaratory Judgment Act is necessarily one of degree, and it would be difficult, if it would be possible, to fashion a precise test for determining in every case whether there is such a controversy. Basically, the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.

Id. at 273, 61 S.Ct. at 512 (quoted with approval in Golden v. Zwickler, 394 U.S. 103, 108, 89 S.Ct. 956, 959, 22 L.Ed.2d 113 (1969), and Preiser v. Newkirk, 422 U.S....