Beckman Instruments, Inc. v. Chemtronics, Inc.

• Decision Date: 07 June 1971
• Docket Number: Civ. A. No. 3633.
• Citation: 328 F. Supp. 1132
• Parties: BECKMAN INSTRUMENTS, INC. and Leland C. Clark, Jr., Plaintiffs, v. CHEMTRONICS, INC. and J. Ryan Neville, Defendants.
• Court: U.S. District Court — Western District of Texas

328 F. Supp. 1132

BECKMAN INSTRUMENTS, INC. and Leland C. Clark, Jr., Plaintiffs, v. CHEMTRONICS, INC. and J. Ryan Neville, Defendants.

Civ. A. No. 3633.

United States District Court, W. D. Texas, San Antonio Division.

June 7, 1971.

Frank B. Pugsley, Larry B. Feldcamp, Baker & Botts, Houston, Tex., and Bernard Ladon, Lang, Cross, Ladon, Boldrick & Green, San Antonio, Tex., for Beckman Instruments, Inc., and Leland C. Clark, Jr.; Sheldon Karon, Mario A. Martella, Chicago, Ill., of counsel.

Bill Durkee and John F. Lynch, Arnold, White & Durke, Houston, Tex., and Patrick H. Swearingen, Jr., Mathews, Nowlin, McFarlane & Barrett, San Antonio, Tex., for Chemtronics, Inc., and J. Ryan Neville.

FINDINGS OF FACT, CONCLUSIONS OF LAW AND JUDGMENT

GUINN, District Judge.

Statement of the Case

This case began as an action for infringement of Clark patent 2,913,386 in which defendants denied infringement, challenged the validity and title of the Clark patent, and counterclaimed for treble damages under the Sherman Act. After trial this Court filed Findings of Fact and Conclusions of Law and entered its Judgment, holding the Clark patent valid but not infringed and dismissing defendants' counterclaims.

The Court of Appeals for the Fifth Circuit (439 F.2d 1369) reversed the holding that the Clark patent was valid, holding it invalid on two independent grounds. The first ground is that, although Dr. Clark appeared to have made a patentable invention, some of the claims of the Clark patent were drawn too broadly and distinguished over the prior work of Dr. Richard Stow only by their limitations to "polarographic analysis". The Court of Appeals held that these were merely "new use" recitations, insufficient to distinguish and properly claim the Clark invention, and thus that the claims were invalid because of anticipation by Stow. The second ground for invalidity is that plaintiffs had failed to call the work of Dr. Stow to the attention of the Patent Examiner during the prosecution of the Clark application, which the Court of Appeals held was deliberate and constituted a failure to fulfill the "uncompromising duty" of full and good faith disclosure to the Patent Office. Accordingly the Court of Appeals held the Clark patent invalid on this independent ground.

Defendants' counterclaims under the Sherman Act were remanded for further consideration by this Court in light of its opinion holding the Clark patent to be invalid. These counterclaims are based on the Supreme Court's decision in Walker Process Equipment, Inc. v. Food Machinery, 382 U.S. 172, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965) that enforcement of a patent obtained by intentional fraud could give rise to antitrust liability.

In remanding, the Court of Appeals pointed out that the Supreme Court in Walker Process had emphasized that only intentional fraud consisting of knowing and willful misrepresentations of material facts was actionable, and that mere "technical fraud", or honest mistake in judgment, was not (428 F.2d 555 at p. 566). Accordingly, the following specific remand instructions were given:

"The trial court should look first to the evidence to determine whether appellants indulged in knowing, willful misrepresentation of material facts.27 If it finds that they did, it should then look to see whether the other elements of Sherman Act violations are present —"

"27. Our holding above, that appellants did not fulfill an `uncompromising duty' of frank disclosure, is all that is required for us to dispose of the issues properly before us. It does not fully answer the question whether appellants engaged in willful and knowing misrepresentations of material facts." (428 F.2d at p. 567).

General Findings on Remand

1. At a preliminary remand hearing on January 14, 1971 this Court instructed counsel for the parties to present in writing their positions respecting additional discovery and evidence, if any, which would be needed. Plaintiffs requested the opportunity to present as witnesses on the good faith issue those persons involved in obtaining the Clark patent, together with an expert in electrochemistry and an expert on Patent Office procedure. Defendants elected to rely on the present record, opposed plaintiffs' request to present additional evidence, and filed a motion for entry of findings on the record.

2. During a second hearing on May 4, 1971 the Court ruled that plaintiffs would not be permitted to present additional evidence, and that supplemental findings of fact and conclusions of law, directed to the question whether the Clark patent had been obtained as the result of knowing and willful misrepresentations of material facts, would be entered on the present record.

Supplemental Findings of Fact

3. This Court's original findings of fact Nos. 1 through 11 set forth the basic facts respecting Dr. Clark's invention, the filing and issuance of the Clark patent, the exclusive license thereunder to plaintiff Beckman Instruments, Inc., and the recognition and acclaim which Dr. Clark's development has received for its solution of the oxygen measurement problem.

4. As held by the Court of Appeals, some of the claims in the Clark patent are improperly drawn in that they cover the Stow arrangement simply put to a "different use" (428 F.2d at pp. 561, 564). This does not mean, however, that the invention of Dr. Clark is the same as the Stow device. That they are different was readily admitted by defendants' expert Dr. Bard (R. 579, 606),¹ and also by defendant Neville (R. 667). The basic differences in function and structure, as contrasted with the apparent similarities, were described in detail by Dr. Hume (R. 505-512). The Court of Appeals held that plaintiffs nevertheless should have called the Stow device to the attention of the patent examiner, as relevant to the broad claims of Clark. However, on the remand issue, i. e., whether plaintiffs committed an "intentional fraud", the acknowledged and significant differences between the Clark and Stow devices support plaintiffs' position that they acted in good faith and simply made an "honest mistake in judgment".

5. The Court of Appeals was willing to assume (428 F.2d at p. 560) that Dr. Clark's cell was patentable, and the evidence clearly shows that he made an important and patentable invention. Some of the claims in the Clark patent recite significant structural differences between the Clark and Stow devices. In this respect, defendants' counsel admitted during the trial, when asked by the Court, that claim 8 of the Clark patent and possibly claim 1 were valid (R. 681). The Court finds that Dr. Clark was entitled to a patent for his invention, after full consideration of the prior art including Stow, with claims properly reciting the novel structural and functional features of his polarographic cell.

6. In holding the Clark patent invalid because of plaintiffs' failure to call to the attention of the Patent Examiner the prior carbon dioxide detection device of Dr. Stow, the Court of Appeals emphasized a memorandum from Beckman's patent liaison employee Strickler, dated December 6, 1956 (Defendants' Exh. N-48). In this memorandum Strickler stated that claims then pending in the Clark application read upon the Stow device, that he did not know which of the two developments was earlier, and that he was concerned over the situation. As the Court of Appeals held, the Strickler memorandum showed his knowledge of the Stow development, and his realization that there might be a problem if Dr. Clark obtained patent claims broad enough to cover Stow's glass electrode device. It was true, moreover, that not all of the claims pending in the Clark application at the time of the Strickler memorandum contained a polarographic limitation and, if read without resort to the patent specification, one or more of these claims covered the Stow device. With respect to the issue of plaintiffs' good faith a significant fact, however, is that all of these original claims were cancelled during the prosecution of the Clark patent application (Defendants' Exh. A) and, as held by the Court of Appeals, "under the rules of patent construction" the patent finally obtained "covers only devices for polarographic analysis" (428 F.2d at p. 562). The Strickler memorandum, particularly when considered in light of the patent prosecution as a whole (Defendants' Exh. A) and the patent ultimately issued to Dr. Clark, does not suggest any intent or plan to obtain a patent which would cover the Stow device.

7. The Strickler memorandum also states that the Stow device was a "glass electrode adaptation that he was developing for pCO2 measurement" and that "The Stow invention applied to pCO2 measurement may independently be of substantial interest and importance to Beckman" (Defendants' Exh. N-48, p. 1). These comments show Strickler's appreciation of the fact that the Stow and Clark developments, independently of each other, would each be of interest to an instrument manufacturer such as Beckman. They negate any inference that might otherwise be drawn from the memorandum that Strickler considered the Stow and Clark developments to be the same, or even necessarily interfering inventions.

8. There was testimony at the trial that Beckman never demanded a royalty under the Clark patent on any device for measuring carbon dioxide, and that Beckman has never paid Dr. Clark any royalty on Beckman's carbon dioxide measurement devices (R. 370, 398). This further shows that Beckman's interpretation of the scope of the Clark patent, as excluding the Stow and other carbon dioxide detection devices, was consistent with the holdings of the Court of Appeals and this Court that the Clark patent was limited to devices for polarographic analysis.

9. The evidence as a whole shows a good faith belief on the part of plaintiffs that instruments for polarographic analysis, such as the Clark oxygen cell, were basically different and patentably distinct from...