Chromalloy American Corp. v. Alloy Surfaces Co.

• Decision Date: 14 March 1972
• Docket Number: Civ. A. No. 3640.
• Citation: 173 USPQ 295,339 F. Supp. 859
• Parties: CHROMALLOY AMERICAN CORPORATION, Plaintiff, v. ALLOY SURFACES CO., Inc., a Delaware corporation, and George H. Cook, Defendants.
• Court: U.S. District Court — District of Delaware

339 F. Supp. 859

173 USPQ 295

CHROMALLOY AMERICAN CORPORATION, Plaintiff, v. ALLOY SURFACES CO., Inc., a Delaware corporation, and George H. Cook, Defendants.

Civ. A. No. 3640.

United States District Court, D. Delaware.

March 14, 1972.

COPYRIGHT MATERIAL OMITTED

William O. La Motte, III, of Morris, Nichols, Arsht & Tunnell, Wilmington, Del., Robert D. Spille and Garo A. Partoyan, of Curtis, Morris & Safford, New York City, of counsel, for plaintiff.

Nathan Bakalar, of Connolly, Bove & Lodge, Wilmington, Del., Irving Parker and Harvey M. Brownrout, of Jacobs, Persinger & Parker, New York City, of counsel, for defendants.

OPINION

LATCHUM, District Judge.

In this patent suit, the plaintiff, Chromalloy American Corporation, seeks injunctive relief and an accounting for damages against the defendants, Alloy Surfaces Co., Inc. and George H. Cook, for alleged infringement of United States Patent No. 3,257,230 ("the '230 patent") entitled "Diffusion Coating for Metals" issued June 21, 1966 to Richard P. Seelig ("Seelig") and Richard L. Wachtell ("Wachtell") and assigned to the plaintiff. The defendants have counterclaimed for a judgment declaring the '230 patent invalid and unenforceable, and further that the defendants have not infringed that patent.¹

Without dispute, jurisdiction exists by virtue of 28 U.S.C. § 1338(a) and venue is properly laid under 28 U.S.C. § 1400 (b).

Following extensive discovery proceedings, the defendants filed a motion for summary judgment in which they asserted four separate and independent grounds for declaring the '230 patent invalid or unenforceable. This motion was denied in an unreported opinion. Thereafter the Court, with the plaintiff's consent, granted the defendants' motion, pursuant to Rule 42(b), F.R.Civ.P., for a separate trial of the same four issues raised by the earlier summary judgment motion.

The four issues tried separately by the Court without a jury were:

1. Whether the plaintiff placed the subject matter of the patent in suit "on sale" or "in public use" in this country more than one year before it applied for the patent;

2. Whether, in applying for the patent, the alleged co-inventors made false oaths as to material facts and thus misled the Patent Office into issuing an invalid patent;

3. Whether the claims of the patent are unlawfully broad in that they include the subject matter of a prior art invention not made by the alleged co-inventors of the patent; and

4. Whether the plaintiff failed to file a timely patent application disclosing the "best mode contemplated" by the alleged co-inventors of carrying out their alleged invention.

The defendants contend that the trial record adequately demonstrates that each of the four issues must be answered in the affirmative and that any one of them so answered requires a declaration of invalidity or unenforceability of the '230 patent.

I. THE "ON SALE" ISSUE

A. The Nature of Plaintiff's Diffusion Coating Business

From the time that the plaintiff was organized in 1951, it has engaged in the business of applying coatings to metals by means of a powdered pack diffusion coating process, known as "chromizing."² Chromizing is a process originally developed in England by Robert Lionel Samuel under which plaintiff was apparently licensed in early 1952.³ The purpose of chromizing is to make common steels essentially stainless, by infusing chromium into their surface,⁴ and thus to provide cheaper articles of mild steel with the surface characteristics of more expensive stainless steel.⁵ To apply such diffusion coatings, a metal article is embedded in a powder mixture called a "pack," and sometimes called a "compound."⁶ The pack contains (a) one or more metallic powders, some part of which transfers to and diffuses into the surface of the article being coated and thus forms the coating, (b) a chemical called an "energizer,"⁷ the chemical effect of which is to accelerate the formation of the coating, and (c) an inert filler or diluent material to extend the volume of the pack and to prevent the active components from sintering into a brick-like consistency. The pack, with the metal article embedded, is enclosed in a container, called a retort, which is placed in a furnace and heated. A fusible powdered glass ultimately seals the contents of the retort from the atmosphere. Upon heating the energizer vaporizes, fills the retort and drives air out of the retort through the powdered glass that later fuses to form a liquid seal, and reacts with the metallic powder to form a vapor rich in chromium. The vapor contacts the surface of the article to be coated and deposits the metallic powder in the pack onto the article as a coating or "case," typically about 0.002 inch thick.⁸

As explained by Seelig in an article written by him entitled "Chromizing Improves Surface Property of Steels" and published in the May, 1953 issue of a magazine called "Materials & Methods," the diffusion coating pack may contain (1) a single metallic powder such as chromium or (2) a combination of metallic powder such as (a) a combination of chromium, silicon and aluminum or (b) a combination of chromium and aluminum.⁹

The type of diffusion equipment used and the manipulative technique of the pack diffusion processes are the same regardless of the article to be coated and whether the pack contains a single metallic ingredient such as chromium or combination of metallic ingredients as described by Seelig in the May, 1953 publication.¹⁰ However, the heating temperature and time at temperature may be varied. The purpose of such temperature and time variations is primarily to control the amount of diffusion coating to be applied. If a thicker coating is desired, a higher temperature or longer time period or both are used. If a thinner coat is sought, the temperature and time are adjusted accordingly.¹¹

Using the above described technique, the plaintiff since 1952 has chromized a variety of articles for a number of customers under the trade designation of "Chromallizing"¹² and the diffusion coatings so applied were designated "Chromalloy" case for coatings applied to low carbon steels or "Chromacarb" case for coatings on high carbon steels and cast irons.¹³

Seelig joined the plaintiff as executive vice-president on September 19, 1952 and was primarily responsible for "sales and sales promotion."¹⁴ By 1954, plaintiff had enlarged its sales organization to the point where it had allocated, under written contract and on an exclusive basis, the New England territory to William K. Duff ("Duff"), one of its field sales representatives.¹⁵ The function of plaintiff's sales representatives was to sell plaintiff's diffusion coating work and services on a commission basis.¹⁶

From the time Seelig joined the plaintiff in 1952, the plaintiff was actively and continually seeking new business from varied customers in order to apply its diffusion coating process to customers' articles.¹⁷ Wachtell testified that the plaintiff was continuously using "existing known procedures on new parts" to determine "whether an already commercial chromizing process" would work on these new parts or articles.¹⁸

By 1957, the plaintiff had retained an independent public relations consulting firm to publicize plaintiff's diffusion coating services.¹⁹ On June 3, 1957 Seelig sent a memorandum to plaintiff's public relations firm to get the best possible coverage in the non-technical press of a diffusion coating process which plaintiff had developed and which was designated as "SA Chromallizing" (the "SA process").²⁰ A news item appeared in the Wall Street Journal on August 22, 1957 entitled "Chromalloy Claims Way To Protect Jet Parts Against Extreme Heat" which touted plaintiff's SA process.²¹ This news item was characterized by Seelig as a "sales pitch."²² The pack of the SA process, which was invented in 1956,²³ used the three-metal combination of chromium, aluminum and silicon²⁴ — a combination that Seelig had described in his May, 1953 published article.²⁵

B. Development of Plaintiff's "SA" and "U Processes"

The August, 1957 Wall Street Journal news item described plaintiff's SA process "as a modification of a patented method for infusing chromium into the surface of carbon steel. This new method applies only to high alloy steels including types used in turbine engines."²⁶ The modification consisted of a change from one to three metallic ingredients in the pack.²⁷ By the time the August, 1957 news item in the Wall Street Journal appeared, the plaintiff had made a further modification which simplified the SA process pack by eliminating silicon from it so that the metallic ingredients were chromium and aluminum.²⁸ Plaintiff later called this simplification its "U process."²⁹ The metallic ingredients of the packs for both the SA and U processes had been forecasted by Seelig in his May, 1953 article.³⁰

Plaintiff's SA process was jointly invented in 1956 by Wachtell and Charles De Guisto ("De Guisto"), two of plaintiff's employees.³¹ While Wachtell could neither pinpoint or approximate the time in 1956 when he and De Guisto invented the SA process,³² it had to be invented between February, 1956 when De Guisto was employed by the plaintiff,³³ and December 18, 1956, when Seelig, who then had the decision making power for filing patent applications,³⁴ advised the plaintiff's Board of Directors that a patent application for the SA process would be filed.³⁵ However, the filing of the application directed to the SA process was delayed for three more years and was not filed until May 16, 1960.³⁶

Meanwhile, on July 3 or 4, 1957 the simpler and modified two-metal, (aluminum and chromium) pack process which later was called the U process was performed in a diffusion coating run (referred to as XP 2839) on Udimet 500 and 600 for General Electric Company.³⁷ Wachtell, who performed this run and determined the composition of the pack, apparently did not disclose it at the time to Seelig, the alleged...