Central Soya Co., Inc. v. Geo. A. Hormel & Co.

• Decision Date: 27 December 1983
• Docket Number: No. 83-978,83-978
• Citation: 723 F.2d 1573,220 USPQ 490
• Court: U.S. Court of Appeals — Federal Circuit
• Parties: , 220 U.S.P.Q. 490 CENTRAL SOYA COMPANY, INC., Appellee, v. GEO. A. HORMEL & COMPANY, Appellant. Appeal

Page 1573

723 F.2d 1573

74 A.L.R.Fed. 863, 220 U.S.P.Q. 490

CENTRAL SOYA COMPANY, INC., Appellee, v. GEO. A. HORMEL & COMPANY, Appellant.

Appeal No. 83-978.

United States Court of Appeals, Federal Circuit.

Dec. 27, 1983.

John L. Alex, Chicago, Ill., argued for appellant. With him on brief were Fred S. Lockwood and David Lesht, Chicago, Ill., of counsel.

Jerome F. Fallon, Chicago, Ill., argued for appellee. With him on brief were Harry A. Woods, Jr., Oklahoma City, Okl., and Edward P. Armstrong, Fort Wayne, Ind.

Before RICH, Circuit Judge, NICHOLS, Senior Circuit Judge, and BALDWIN, Circuit Judge.

RICH, Circuit Judge.

This appeal is from the April 8, 1983, judgment of the United States District Court for the Western District of Oklahoma, 219 USPQ 878, sitting without a jury, holding appellee, Central Soya Company, Inc. (Central Soya) entitled to recover from appellant, Geo. A. Hormel & Company (Hormel) $100,000.00 in attorney fees, $29,000.00 in expenses, $152,980.00 in compensatory damages, which were doubled to $305,964.00, and 6% interest on the compensatory damages in the amount of $41,116.93.

This determination followed the May 19, 1981, decision of the Tenth Circuit Court of Appeals ¹ affirming the district court's August 10, 1979, decision ² that Central Soya's patent No. 3,209,856 issued on September 28, 1962, ³ entitled "Method of Making a Meat Product" was valid and infringed by Hormel. We affirm.

Background

The '856 patent has a single claim which reads:

A method of making a food product in the form of a patty comprising applying a coating of crumbs of breading material to a slice of raw meat and subsequently compressing said slice under pressure great enough to force the crumbs deeply into the meat, to substantially reduce the thickness of the slice, to expand the area of the slice approximately 100 to 150 percent, and to cause the slice to be impregnated with the crumbs substantially throughout its thickness.

In its commercial application by the parties, the meat is pork loin and the cooked patty product is known as pork loin fritters.

January 9, 1976, Central Soya brought a civil action in the United States District Court for the Western District of Oklahoma seeking injunctive and compensatory relief for patent infringement. Hormel denied infringement and counterclaimed for invalidity of the '856 patent. August 10, 1979, the district court, after bifurcating the case, found the patent valid and infringed, entered a permanent injunction restraining Hormel from further infringement, and held plaintiff entitled to an accounting. That judgment was affirmed on appeal. After a separate trial to determine damages, the district court entered a judgment finding that Hormel willfully and deliberately infringed the '856 patent, and awarded Central Soya the total sum of $476,080.93. The district court said its holding of willful infringement was based on the following facts:

(1) Thomas Gibbons, Plaintiff's highly experienced and knowledgeable employee in making breaded pork loin fritters and the system and equipment set up for doing so, left Plaintiff's employ in December (2) Shortly after being employed by Defendant, Gibbons started acquiring the necessary components to duplicate Plaintiff's system for making breaded pork loin fritters to include obtaining a squeeze roll unit from Plaintiff's supplier thereof,

of 1969 and was hired by Defendant in January, 1970,

(3) In May, 1970, Defendant's legal department became concerned about infringing Plaintiff's patent,

(4) In June, 1970, the opinion of an outside patent law firm was sought,

(5) In September, 1970, such firm furnished its opinion stating that infringement of Plaintiff's patent could be avoided if Defendant would squeeze the meat slices so that their expansion would be under 100 percent,

(6) Such firm also advised that Defendant's production of breaded pork loin fritters if possible be done within the jurisdiction of the United States Court of Appeals for the Eighth Circuit, as such Circuit has not held a patent either valid or infringed within recent history,

(7) The opinion of such firm relied on the Ray patent (Patent No. 2,845,040) which was a file wrapper reference previously considered by the Patent Office,

(8) Defendant's activities in obtaining the breaded pork loin fritter business from two large accounts of Plaintiff's,

(9) Defendant's written expression and belief that it could proceed with Plaintiff's former employee and Plaintiff's breaded pork loin fritter manufacturing method and process with some justification or safety as Defendant was "too good a customer" of Plaintiff for the latter to bring suit for patent infringement,

(10) The creation of a breaded pork loin fritter manufacturing line under Gibbons' direction which was a copy of all the elements and steps of Plaintiff's line on which the patent was based,

(11) Defendant's failure to measure the percentage expansion of its breaded pork loin fritters at and from the time of its first production in February, 1973 until June of 1975 notwithstanding the importance of this to the issue of infringement as related by its outside patent counsel,

(12) Gibbons' testimony that the spacing of the squeeze rolls in Plaintiff's and Defendant's operation were approximately the same,

(13) Defendant's failure to seek an updated legal opinion at the time of its first production in February, 1973, and,

(14) Defendant's turning to Ranch Hand for the same product when it saw fit to stop its own manufacturing line of breaded pork loin fritters.

The first opinion of the district court, note 2 supra, thoroughly addressed the substantive background and familiarity therewith will be presumed.

Issues On Appeal

1. Whether the district court's finding of willful infringement was clearly erroneous and, accordingly, whether the award of double damages, attorney fees, and prejudgment interest was correct;

2. Whether the inclusion of "expenses" as a part of an award of attorney fees was proper under 35 U.S.C. Sec. 285;

3. Whether this court should review the Tenth Circuit's decision on appeal of the liability portion of this case; and

4. Whether the award of lost profits, as the measure of damages for infringement of a method patent, was clearly erroneous.

OPINION

Willful Infringement

On appeal, Hormel does not argue that any of the foregoing district court findings of fact are clearly erroneous; rather, it argues that any inference of willful infringement, justifying the district court's assessment of double damages, is negated solely because Hormel first sought and then followed the advice of counsel. Hormel argues, first, good faith reliance on counsel's advice that "there is a reasonably good chance that the patent might be held invalid," said advice being based solely on a review of the prior art appearing in the patent's file history. Section 282 of Title 35 U.S.C. assigns a burden which is most formidable when the party asserting invalidity relies upon prior art considered by the Patent and Trademark Office (PTO). While we recognize that counsel's opinion on validity is evidence to be weighed towards a determination of good faith, it is not dispositive. General Electric Co. v. Sciaky Bros., 415 F.2d 1068, 1073, 163 USPQ 257, 261 (6th Cir.1969). It is necessary to look at "the totality of the circumstances presented in the case," Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380, 1390, 219 USPQ 569, 577 (Fed.Cir.1983), in determining whether a reasonable person would prudently conduct himself with any confidence that the courts might hold the patent invalid. The district court extensively reviewed the surrounding circumstances, as exemplified by its findings of fact, supra, and Hormel has failed to show us either that those findings of fact were clearly erroneous, or that the holding of willful infringement based thereon was clearly erroneous. In short, the attorney's advice, based solely on file history prior art, does not by itself raise an inference of good faith substantial enough to convince us that the trial court's determination of willful infringement was clearly erroneous.

Secondly, Hormel asserts that it relied upon attorney opinions "before and after engaging in any of the acts charged to be an infringement of the patent in suit," and "operated within the parameters set forth in those opinions for avoiding infringement ...." While we agree that reliance is an important factor in determining good faith, there is no support for Hormel's assertion of reliance in the record. Moreover, it is in direct contradiction with the district court's findings of fact. The opinion letter, discussed above, stated: "I believe that Hormel is reasonably safe in manufacturing the meat product if it can do so by expanding the area [of the patty] less than 100%" and "the further away from 100% it can stay, the less likely it is to infringe the Luker [Central Soya] patent." (Emphasis ours.) Hormel was on notice of Central Soya's patent rights and had an affirmative duty to exercise due care to determine whether or not it was infringing. Underwater Devices, supra, 717 F.2d at 1389, 219 USPQ at 576. Although Hormel sought its counsel's advice prior to production, Hormel waited 2 years "post-production" to measure its patties to determine the extent of expansion. Such inaction is inconsistent with the assertion of good faith reliance. Even though the measurement, once taken, showed that the expansion of the patties was within the range recommended by counsel, that fact is not probative of good faith reliance, nor is it probative of whether infringement occurred during the prior 2 years since the measurement was taken after the inclusion of a molding press in the production line which had an effect on the amount of expansion. Hormel's intentional disregard of its counsel's opinion negates any inference of good faith, placing Hormel in the same position as one who failed...