Beech Aircraft Corp. v. EDO CORP.

• Decision Date: 11 April 1996
• Docket Number: 91-4038-DES.,Civil Action No. 90-4185-DES
• Parties: BEECH AIRCRAFT CORPORATION and Paul J. Jonas, Plaintiffs, v. EDO CORPORATION and Bruce A. Lehman, Commissioner of Patents and Trademarks, Defendants.
• Court: U.S. District Court — District of Kansas

922 F. Supp. 512

BEECH AIRCRAFT CORPORATION and Paul J. Jonas, Plaintiffs, v. EDO CORPORATION and Bruce A. Lehman, Commissioner of Patents and Trademarks, Defendants.

Civil Action Nos. 90-4185-DES, 91-4038-DES.

United States District Court, D. Kansas.

April 11, 1996.

Paul B. Swartz, Jeffrey L. Kennedy, Martin, Pringle, Oliver, Wallace & Swartz, Wichita, KS, Robert E. Hillman, Kurt L. Glitzenstein, Blair L. Perry, Fish & Richardson P.C., Boston, MA, for Beech Aircraft Corporation and Paul J. Jonas.

Richard D. Greene, Morris, Laing, Evans, Brock & Kennedy, Chtd., Wichita, KS, Marvin Genzer, College Point, NY, for EDO Corporation.

D. Brad Bailey, Office of United States Attorney, Topeka, KS, Nancy J. Linck, Albin F. Drost, Linda Moncys Isacson, Scott A. Chambers, Arlington, VA, for Patents and Trademarks Commissioner.

MEMORANDUM AND ORDER

SAFFELS, District Judge.

This matter is before the court on defendant EDO Corporation's ("EDO") motion for award of attorneys fees. (Doc. 86). The sole legal basis for fees claimed by EDO falls under 28 U.S.C. § 1927. Specifically, EDO charges Beech Aircraft Corporation ("Beech") with instituting litigation having identical objectives in two separate forums, the first suit proving wholly unnecessary and expensive and containing spurious and baseless claims which required significant effort and expense in defense, only to result in their ultimate but untimely abandonment.

I. BACKGROUND

This litigation has traveled a long and circuitous path. It was preceded by a 1985 contract dispute between Beech Aircraft Corporation ("Beech") and EDO Corporation ("EDO"). EDO sued Beech for breach of contract and misappropriation of trade secrets. In October of 1988, this court entered judgment against EDO finding that the contract between the parties had not been breached and that Beech had not misappropriated trade secrets. EDO Corp. v. Beech Aircraft Corp., 715 F.Supp. 990 (1988) (included in the judgment was the ruling that the "H" joint technology, discussed below, was the property of Beech). EDO appealed that judgment, but the Tenth Circuit Court of Appeals affirmed this court's ruling. EDO Corp. v. Beech Aircraft Corp., 911 F.2d 1447 (10th Cir.1990).

While judgment was pending in district court on the breach of contract and misappropriation suit, both Beech and EDO filed patent applications on "H" joint technology, used in manufacturing a wing for a new type of aircraft called a Starship¹. Patents were awarded to both Beech and EDO which resulted in the Patents and Trademarks Office ("PTO") declaring an interference between Beech's and EDO's respective patents. The Board of Patent Appeals decided the interference in EDO's favor and granted the patent rights to the "H" joint technology to EDO.

In 1990 Beech sued EDO and the PTO in the District of Columbia seeking to void the decision of the Board of Patent Appeals ("Board") in the interference proceeding and/or to obtain an assignment of EDO's patent and EDO's patent application ("Suit-1"). Count I of the complaint challenged PTO's jurisdiction and requested that the court review PTO's interference decision pursuant to 35 U.S.C. § 146, and reverse or vacate the decision accordingly. Count II sought relief under 35 U.S.C. § 291, alleging that the Beech patent and the EDO patent were interfering patents. Count III sought relief under 35 U.S.C. § 256, requesting that the inventorship listed on the EDO patent be corrected to indicate that Paul Jonas was the inventor or co-inventor of the patent subject matter. Count IV requested that the court order EDO to assign the EDO patents to Beech.

In October of 1990 — several months after Suit-1 was filed — Beech commenced a second suit against EDO and the PTO in this court ("Suit-2"). It contained three requests for relief similar to those in the District of Columbia case: 1) an assignment of EDO's patent on the "H" joint technology (similar to Count IV in Suit-1); 2) an order showing Beech employee Paul Jonas as either the sole inventor or co-inventor of the patented technology (similar to Count III in Suit-1); and 3) a request for an interference between the two patents (Beech and EDO) and to declare EDO's patent claim to be invalid (similar to Count II in Suit-1). There was no count in the complaint challenging jurisdiction and authority of the PTO and its regulations.

In March of 1991, Suit-1 was consolidated with Suit-2, the case then pending before this court. On November 1, 1991, cross-motions for summary judgment in the consolidated cases were ruled upon in Beech Aircraft Corp. v. EDO Corp., 777 F.Supp. 884 (D.Kan.1991). In that order, this court decided that Beech's claims for assignment of the EDO patent and the EDO application (Count IV in Suit-1 and Count I in Suit-2) were not barred by res judicata, by the compulsory counterclaim doctrine, or by the statute of limitations. However, the patent assignment Beech requested was denied and the judgment of the PTO in the interference proceedings was vacated.

Beech, Jonas and EDO all appealed from the decision of this court. Beech Aircraft Corp. v. EDO Corp., 990 F.2d 1237 (Fed.Cir. 1993). The Tenth Circuit affirmed this court's refusal to order an assignment of the EDO patent and the EDO application. However, the Court of Appeals reversed this court's ruling vacating the PTO decision and remanded the case back to this court with instructions to grant EDO's motion for summary judgment on the assignment issue and to consider the remaining summary judgment motions pending in Suit-1.

Upon remand, this court ordered the parties to show cause on all remaining issues. (Doc. 72, 91-CV-4038-DES). In its response, Beech withdrew several arguments, leaving only two issues: whether the issue of Jonas as the co-inventor of the patent at issue could be raised when it was not raised in an earlier proceeding and whether Beech could seek determination by this court of an interference between the Beech patent and the EDO patent. The court concluded that Beech was precluded from raising the issue of co-inventorship and the court declined to institute a second interference proceeding. Beech Aircraft Corp. v. EDO Corp., 896 F.Supp. 1096 (D.Kan.1995).

II. DISCUSSION

A. The standard of review for attorneys' fees.

As noted, EDO's authority for its claim to have attorneys' fees awarded falls under 28 U.S.C. § 1927, which states:

Any attorney or other person admitted to conduct cases in any court of the United States or any territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses and attorneys' fees reasonably incurred because of such conduct.

The leading case from the Tenth Circuit regarding the application of § 1927 is Braley v. Campbell, 832 F.2d 1504 (10th Cir.1987) (en banc). In Braley, the court noted:

An attorney becomes subject to § 1927 sanctions `by acting recklessly or with indifference to the law, as well as by acting in the teeth of what he knows to be the law.... A lawyer's reckless indifference to the law may impose substantial costs on the adverse party. Section 1927 permits a court to insist that the attorney bear the costs of his own lack of care.'

Id. at 1511 (citing In re TCI Ltd., 769 F.2d 441, 445 (7th Cir.1985). The court recognized the importance of not applying § 1927 in a way that would dampen the "legitimate zeal" of an attorney in representing a client and that § 1927 should be "strictly construed and utilized only in instances evidencing a `serious and standard sic disregard for the orderly process of justice.'" Id. at 1512 (citing Dreiling v. Peugeot Motors of America, Inc., 768 F.2d 1159, 1165 (10th Cir. 1985)).

Also in Braley, the court explained "that excess costs, expenses, or attorney's sic fees are imposable against an attorney personally for conduct that, viewed objectively manifests either intentional or reckless disregard of the attorney's duties to the court." Id.

Other circuits have been more explicit in defining what is meant by vexatious in a § 1927 context. "Behavior is `vexatious' when it is harassing or annoying, regardless of whether it is intended to be ... it demands that the conduct sanctioned be more severe than mere negligence, inadvertence, or incompetence." Cruz v. Savage, 896 F.2d 626, 632 (1st Cir.1990); See also U.S. v. Ross, 535 F.2d 346, 349 (6th Cir.1976) (wherein the court adopts Webster's Third New World International Dictionary defining "vexatious" as "lacking justification and intended to harass.")

B. Beech's conduct is not sanctionable.

This motion is the finale of what can be characterized as a suit of intransigence, i.e., each side doggedly pursuing its patent rights to the "H" joint technology. Both sides prevailed at some point along this protracted course. Nowhere does this court find behavior on behalf of Beech demonstrating reckless indifference to the law thereby multiplying the proceedings unreasonably or vexatiously.

In the original lawsuit, this court found that Beech did not violate the terms of the contract with EDO and that "Beech ... applied for and received a patent on the `H' joint technology." EDO Corp. v. Beech Aircraft Corp., 715 F.Supp. 990, 993 (D.Kan. 1988). Meanwhile, EDO prevailed in the interference proceeding conducted by the PTO and was declared the holder of the patent by the PTO.

Beech appealed the PTO's decision by instituting two lawsuits — one filed in the District of Columbia and the other filed in the District of Kansas — which were ultimately consolidated. This court decided in favor of Beech (in part) by vacating the PTO's finding that the patent rights belonged to EDO. The Tenth Circuit then reversed that ruling.

EDO claims the litigation begun in the District of Columbia was undoubtedly a desperate attempt on the part of Beech to reverse a...