Ball Corp. v. Xidex Corp.

• Decision Date: 18 June 1992
• Docket Number: Nos. 89-1325,89-1348,s. 89-1325
• Citation: 967 F.2d 1440
• Parties: , 23 U.S.P.Q.2d 1214 BALL CORPORATION, Plaintiff-Appellant/Cross-Appellee, v. XIDEX CORPORATION and Dysan Corporation, Defendants-Appellees/Cross-Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1440

967 F.2d 1440

22 Fed.R.Serv.3d 1366, 23 U.S.P.Q.2d 1214

BALL CORPORATION, Plaintiff-Appellant/Cross-Appellee, v. XIDEX CORPORATION and Dysan Corporation Defendants-Appellees/Cross-Appellants.

Nos. 89-1325, 89-1348.

United States Court of Appeals Tenth Circuit.

June 18, 1992.

Charles F. Brega, Brega & Winters P.C., Denver, Colo. (Stuart N. Bennett and Mark J. Appleton, Brega & Winters P.C., Denver, Colo., Clyde F. Willian and Richard A. Kaplan, Willian Brinks Olds Hofer Gilson & Lione, Chicago, Ill., and J. Stephen McGuire, Purcell & McGuire, Englewood, Colo., with him, on the briefs), for plaintiff-appellant, cross-appellee.

William E. Murane, Holland & Hart, Denver, Colo. (Ralph F. Crandell, Holland & Hart, Denver, Colo., Warren P. Kujawa and Henry C. Bunsow, Townsend & Townsend, San Francisco, Cal., with him, on the briefs), for defendants-appellees, cross-appellants.

Before McKAY, Chief Judge, ALDISERT, ¹ and McWILLIAMS, Circuit Judges.

McKAY, Chief Judge.

Ball Corporation, a research and development company, brought this tort action against Xidex Corporation and Dysan Corporation (collectively Xidex), ² manufacturers of computer disks. The complaint alleges that Xidex damaged Ball by making false statements and withholding material evidence during a reexamination proceeding in the United States Patent and Trademark Office (PTO). Ball alleges that Xidex' actions caused the PTO to revoke lucrative patent claims held by Ball for fourteen years. After trial on the merits, the district court dismissed Ball's action. Ball now appeals and Xidex cross-appeals.

The dispute between the parties arose over a patented method of lubricating magnetic storage devices such as computer memory disks, drums, and tapes. United States Patent No. 3,778,308 (Roller patent) issued to inventors Kent G. Roller, George H. Alhorn, and Richard E. Brown in December of 1973 and was assigned to Ball. The Roller patent describes, inter alia, the application of a lubricant known as perfluoroalkyl polyether (PFA) over a substrate of magnetic material. Since the Roller patent was issued, PFA has become the most widely used lubricant in the computer disk industry. Xidex has used PFA as a lubricant since 1978 without a license from Ball.

The parties hold different views as to what the claimed invention is. Xidex argues that thickness of the PFA coating is a material element and that the patent only protects products that fall within the thickness range specified in the patent claim. Xidex points out that the patent application was initially rejected and that the patent issued only after the applicants specified a thickness range for the PFA coating. ³ Ball argues against a highly technical reading of the patent, urging that the claimed invention is simply PFA as applied in a thin coating to magnetic memory devices. These divergent views of the claimed invention lead the parties to dispute whether the PFA coating on Xidex disks falls within the Roller patent claims.

In 1986, Ball filed an action against Xidex claiming that Xidex disks did fall within the thickness specifications of the Roller patent and that their unlicensed manufacture by Xidex constituted patent infringement. ⁴ Xidex conducted discovery in the patent infringement case. To protect proprietary information from customers of Xidex that were not parties to the suit, the trial court declared certain materials confidential. Xidex later produced documents that revealed sales information and kept them under the court's protective order. Xidex also designated certain depositions as confidential.

After conducting substantial discovery in the infringement action, Xidex instituted a reexamination proceeding in the PTO, claiming that the Roller process was obvious in light of prior art and therefore should never have been patented. The patent examiner agreed with Xidex, citing specific prior art that rendered the Roller process obvious. Ball appealed the PTO's decision to invalidate certain claims of the Roller patent, but the PTO affirmed its earlier decision. The evidence that Xidex had designated as confidential in the infringement action was relevant to the issue of commercial success, a factor which supports a finding of patentability. This evidence of commercial success might have helped Ball in the reexamination proceeding, but it was never introduced in that setting. Ball could not introduce it because of Xidex' protective order, and Xidex refused to introduce it. The district court found that the PTO's partial invalidation of the Roller patent had mooted the patent infringement action, and so the district court dismissed that suit without prejudice.

The present tort action focuses on the conduct of Xidex' counsel during the reexamination proceeding. At issue is the legal significance of the following statement by Warren P. Kujawa to the PTO:

[Ball] would have the examiner believe that the invention enjoys demonstrated commercial success, citing the Loran Declaration in support. Again ignoring the questionable weight to be accorded the Loran opinions, there are no facts which establish that any disk sold using the perfluoroalkyl polyether as a lubricant is covered by the subject patent. In addition, there is no evidence tending to establish that the specific lubricant is responsible for the sales of the product. It should be noted that the patentee does not manufacture magnetic disks and thus has no first hand knowledge of the market. Accordingly, the patentee's commercial success contentions should be entirely disregarded in assessing the non-obviousness.

(District Ct.Mem., Sept. 21, 1989, at 19 (quoted therein with emphasis added)). Citing this language and Mr. Kujawa's knowledge of the confidential materials discovered in the infringement action, Ball claims that Mr. Kujawa knowingly made false statements to the PTO, and withheld and prevented presentation of material evidence. Ball further alleges that Mr. Kujawa's actions damaged Ball by causing the PTO to invalidate certain patent claims in the reexamination proceeding. Xidex argues that certain non-adversarial aspects of the reexamination setting excused Mr. Kujawa from any duty of full disclosure to the PTO. Xidex also claims immunity from suit for Mr. Kujawa's statements in the reexamination proceeding. Finally, Xidex claims that Ball has not established that Mr. Kujawa's statements caused damage to Ball.

Ball brings its allegations under five separate tort claims: (1) patent libel, (2) product disparagement, (3) intentional interference with protected property interests, (4) intentional interference with prospective business relationships, and (5) unfair competition. After a full trial to the court on the issue of liability regarding these claims, the district court made extensive findings of fact and conclusions of law. The court first determined that under the First Amendment and federal case law, Xidex was entitled to qualified immunity for statements made in the PTO proceeding unless they were made with actual malice. The district court found that Mr. Kujawa had acted not with actual malice but with reasonable beliefs regarding the materiality of thickness specifications to the patent claims. The court also found that Ball had failed to prove the causation element of each tort. On these two bases, the district court dismissed all of Ball's claims against Xidex.

Ball challenges the dismissal, arguing that the district court erred in applying qualified immunity to Mr. Kujawa's statements to the PTO. Ball also argues that Xidex waived the immunity defense by failing to raise it in its pleadings. Xidex cross-appeals, arguing that it is entitled to absolute immunity for Mr. Kujawa's statements in the PTO proceedings. We affirm the dismissal of the claims, though on different grounds from those set forth by the district court regarding immunity.

I.

Ball first argues that Xidex waived the immunity defense by not raising it in its answer as required by Fed.R.Civ.P. 8(c). Although Xidex did not argue immunity as an affirmative defense in the pleadings, Xidex did file a motion for partial summary judgment three months prior to trial, basing its argument in part on immunity. Xidex also argued for immunity in its supplemental pretrial statement. Ball addressed immunity in responding to both the motion for partial summary judgment and the pretrial statement.

This court has held that "[t]he purpose behind rule 8(c) [is] that of putting 'plaintiff on notice well in advance of trial that defendant intends to present a defense in the nature of an avoidance....' " Marino v. Otis Eng'g Corp., 839 F.2d 1404, 1408 (10th Cir.1988). In Marino, we held that the purpose of rule 8(c) was served when the plaintiff had notice at least three months prior to trial that the defendant intended to raise that affirmative defense, even though the defendant had failed to plead that affirmative defense. See id.; see also Parker v. Title and Trust Co., 233 F.2d 505, 515-16 (9th Cir.1956) (where privileged character of language used is obvious, party claiming privilege need not plead privilege affirmatively). In the current case, Ball had notice at least three months prior to trial that Xidex would claim immunity, and the issue was therefore properly litigated at trial.

II.

The district court held that Xidex' statements in the PTO proceeding were protected by qualified immunity. This is a question of law which we review de novo. In re Ruti-Sweetwater, Inc., 836 F.2d 1263, 1266 (10th Cir.1988).

The district court adopted the analysis of qualified immunity found in McDonald v. Smith, 472 U.S. 479, 105 S.Ct. 2787, 86 L.Ed.2d 384 (1985), which involved an action for libel arising out of letters written to the President of the United States. The Supreme Court resolved the question of immunity in light of the First Amendment's Petition Clause, holding that the author of the letters had qualified immunity for his statements....