American Hoist & Derrick Co. v. Sowa & Sons, Inc.
| Decision Date | 12 January 1984 |
| Docket Number | 83-564,Nos. 83-555,s. 83-555 |
| Citation | 725 F.2d 1350,220 USPQ 763 |
| Parties | AMERICAN HOIST & DERRICK COMPANY, Plaintiff-Appellant, Cross-Appellee, v. SOWA & SONS, INC., Defendant-Appellee, Cross-Appellant. Appeal |
| Court | U.S. Court of Appeals — Federal Circuit |
Edward W. Goldstein, Houston, Tex., argued for appellant. With him on the brief were Pierre Kolisch and Francine H. Gray, Houston, Tex.
Daniel P. Chernoff, Portland, Ore., argued for appellee. With him on the brief was Ingrid L. Swenson, Portland, Ore.
Before RICH, Circuit Judge, COWEN, Senior Circuit Judge, and KASHIWA, Circuit Judge.
American Hoist and Derrick Co. (AmHoist) appeals from the unpublished decision of the United States District Court for the District of Oregon holding for Sowa & Sons, Inc. (Sowa) on AmHoist's suit for infringement of claims 3, 5, and 7 of its Shahan U.S. Patent No. 4,079,584, issued March 21, 1978, for a "Heavy Duty Shackle." After a two and one-half day jury trial, the jury rendered a verdict for defendant by answering written interrogatories as to two legal issues, stating that each claim in suit was invalid for obviousness and for fraud in the prosecution of those claims in the United States Patent and Trademark Office (PTO).
In three separate opinions, the district court held (1) that it would adopt the jury's determination of obviousness, (2) that there was sufficient evidence to support the jury's "findings" of fraud, and, while the degree of fraud was insufficient to support Sowa's unfair competition and antitrust counterclaims, that it was sufficient to render this an exceptional case under 35 U.S.C. Sec. 285 justifying an award to Sowa of its attorney fees, and (3) that Sowa was entitled to $50,000 in attorney fees rather than the $90,367.55 requested.
Sowa cross-appeals from the decision of the court granting AmHoist's motion for summary judgment on Sowa's unfair competition and antitrust counterclaims.
Because of erroneous jury instructions, and because there exist disputed issues of fact, we vacate and remand for a new trial. However, we reverse the trial court's determination that the jury could properly have found that no damages were proved, and
we affirm in part and reverse in part the decision dismissing Sowa's antitrust and unfair competition counterclaims.
As described in the "ABSTRACT" of the patent in suit, the invention relates to
A heavy duty shackle for use under great loads, such as in anchor lines. The shackle is formed from a cylindrical bar rod by shaping the ends to a reduced diameter, and forging the central portion into a flattened shape having the cross-section of a wide shallow U shape. The bottom surface of the central section is in the form of a portion of a circular cylinder. The ends of the bar are flattened and a central opening is forged and based for a pin. The formed bar is then bent in the form of a bow to provide an eye for the shackle, with two parallel ears spaced a selected distance apart.
Figures 5 and 6 of the patent are reproduced below:
NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE
In Fig. 5, 50 is the "eye" of the shackle, 51 labels the "rein sections," 55 the "ears," and 54 and 57 designate parts of a pin that may be threaded and held on by a nut 58 and/or cotter pin as shown. Fig. 6 shows at 28 a depressed central portion, at 30 flat surfaces, and 31 indicates the cylindrical under surface of the shackle.
Claims 3, 5, and 7, all claims in suit, read as follows:
3. A shackle bow for heavy duty use under large loads, as in anchor lines, comprising:
a. a rein section adjacent the two ends of said shackle for a selected length and of diameter X', each said rein section being between a central cylindrical portion and a flattened ear portion;
b. said central cylindrical portion being of a broadened flattened shape, having a U-shaped cross-section with a circular bottom surface, the radius of said bottom surface being at least substantially equal to X' c. said shackle being in the shape of a bow, with said U-shape of said central cylindrical portion directed outwardly, around a central eye, said ears being substantially parallel, spaced apart a distance less than the diameter of said eye, and having coaxial central openings therein to receive a pin therethrough.
5. A shackle bow having an approximately circular eye, with two rein sections leading to two substantially parallel ears;
the cross-section of said bow being in the form of a broad flat U section, with the bottom (inner) surface having as large a radius as possible;
the thickness of the cross-section of said bow substantially constant;
the cross-section of said rein section approximately circular;
the cross-section of said ears being broad and thin, with aligned central openings, and thick flanges formed by forging central depressions in said ears;
said shackle bow being heat treated.
7. The shackle bow of claim 5 including a locked pin through said central openings.
Defending against AmHoist's suit for infringement of these claims, Sowa denied infringement and counterclaimed for a declaratory judgment of invalidity. Sowa later brought to AmHoist's attention what it deemed new prior art, leading AmHoist to file an application for reissue of its patent. Sowa then amended its answer and counterclaimed for damages for unfair competition and for violation of federal antitrust law, asserting that AmHoist committed fraud in the PTO by not disclosing to the examiner the prior art that Sowa discovered.
Sowa stipulated in a pretrial order that its products infringed the claims in suit, Sowa's counterclaims were severed, and the issue of validity was tried to a jury. The jury returned its answers to two written interrogatories on ultimate legal issues, cf. Fed.R.Civ.P. 49(b), stating that each claim was invalid under 35 U.S.C. Sec. 103 and for "fraud on the Patent Office."
Shortly after the verdict, the PTO completed examination of the reissue application, allowing claims 1, 2, 5, 6, and 7 without change in the first Office Action. After AmHoist amended claim 3 to clarify the meaning of "diameter," and swore that the mistake in claim 3 occurred without deceptive intent, it too was allowed, as was claim 4 which had been objected to as depending from a rejected claim.
The district court stated:
Because the issue of obviousness under 35 U.S.C. Sec. 103 is one of law rather than of fact, it is encumbent [sic] upon the court rather than the jury to make the final determination. Guided by the jury's findings and by the evidence, I hold the Shahan patent to be invalid under Sec. 103.
In reaching its conclusion, the court first noted that because the PTO was not in possession of all "relevant prior art" the 35 USC 282 presumption of validity "disappears" because "the court is not entitled to rely upon the patent office expertise." After setting forth the scope and content of the prior art and stating that testimony of several experts indicated that a person of ordinary skill in the art of heavy-duty shackle design is "a skilled engineer capable of determining stress requirements, material, and shape designs and would have a high familiarity with the design, manufacturing, and performance characteristics of various types of rope fittings and fixtures," the court concluded a two-page opinion on validity as follows:
The jury determined that the subject matter of the Shahan patent would have been obvious to one of ordinary skill in the art at the time of the claimed invention. I agree. The only difference other than size between the Shahan design and other cited, prior art is the presence of rein portions of either rectangular (Crosby-Laughlin and Nicro/Fico) or ellipsoidal (Schaefer Marine), rather than circular cross-section. Such circular cross-section design is not new, however, and can be found on the old and well-known anchor shackle design.
In another opinion, the court determined this to be an "exceptional case" within 35 U.S.C. Sec. 285, although "the degree of fraud was insufficient to support defendant's unfair competition claim":
A jury determined that AmHoist's patent was invalid. On each claim of the patent in issue, the jury determined that AmHoist committed fraud on the Patent Office. The fact that a reissue application was allowed by a Patent Office examiner makes this a harder case, but does not remove the finding of fraud by the jury. * * *.
* * *
* * *
I find that plaintiff's actions taken to procure its Shahan patent were well within the range of activities sufficient to find the ensuing patent infringement case "exceptional" within the meaning of Sec. 285. A jury properly concluded that AmHoist committed fraud on the Patent Office. Even assuming that AmHoist's conduct was short of fraud, I would find that it was in excess of simple negligence so as to support a finding of "exceptional."
I further find that an award of attorney's fees in this case is appropriate. Defendant is a smaller company than plaintiff and enjoyed substantially less of the market share. The amount of potential damages for the alleged infringement was small--a factor which might have counseled Sowa to not undertake the expensive defense of this case. Sowa's success in invalidating an unlawfully obtained patent accrues not only to its interests but also to the public interest. Under these circumstances, I find that it would be unjust for Sowa to bear the expense of its counsel's fees in successfully pursuing this case.
In its final opinion, the district court entered an award of $50,000 in attorney fees, but "only for work on the patent claims and not on the counterclaims [Sowa] pursued." Sowa had requested $90,367.55, but the court believed that to be "too high considering all relevant factors."
AmHoist argues that the court erred in submitting the fraud issue to the jury because there was no evidence of bad faith and intent to deceive...
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