Crane Boom Life Guard Co. v. Saf-T-Boom Corporation

• Decision Date: 30 June 1966
• Docket Number: No. 18209.,18209.
• Citation: 362 F.2d 317
• Parties: CRANE BOOM LIFE GUARD CO., Inc., et al., Appellants, v. SAF-T-BOOM CORPORATION et al., Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

362 F.2d 317 (1966)

CRANE BOOM LIFE GUARD CO., Inc., et al., Appellants, v. SAF-T-BOOM CORPORATION et al., Appellees.

No. 18209.

United States Court of Appeals Eighth Circuit.

June 30, 1966.

Heiskell Weatherford, Jr., Memphis, Tenn., for appellants; Osro Cobb, Little Rock, Ark., on the brief.

Wayne W. Owen, Little Rock, Ark., for appellees.

Before VOGEL, Chief Judge, and MATTHES and MEHAFFY, Circuit Judges.

MATTHES, Circuit Judge.

This contempt proceeding grows out of a consent decree entered on May 31, 1962 in the United States District Court, Eastern District of Arkansas.

Following the issuance of a show cause order by Judge J. Smith Henley, the framing of the issues, and a plenary hearing, the District Court entered a decree on July 15, 1965 from which the appellants have perfected this appeal.

The history of this action is important. Saf-T-Boom, the assignee and owner of the so-called Thomas Patents Nos. 2,950,016 and 2,989,194 commenced an action on April 6, 1962 to enjoin infringement of the patents. The defendants were Crane Boom Guard Co., Inc. and its principal stockholders, H. P. Merritt, Jr., S. A. Coffey and Arthur J. Thomas.¹

After a partial trial of the infringement action on May 31, 1962, plaintiff and defendants, through their respective lawyers, compromised their differences, and agreed that a consent decree should be entered. The decree, prepared and approved by lawyers on both sides, was entered by the court on May 31 and provides:

"On this day, the trial of this cause having been partially finished, the plaintiff and defendants by and through their respective attorneys, E. M. Arnold and Shelby R. Blackmon, announced to the Court that the parties have agreed upon a consent decree in this cause.

"It is Therefore Considered, Ordered, Adjudged and Decreed by the Court in accordance with the agreement and consent of the parties announced to the Court, that the defendants, and each of them be and they hereby are permanently enjoined from infringing United States Patents Nos. 2,950,016 and 2,989,194.

"It is Further Ordered, Adjudged and Decreed that no damages be awarded to either the plaintiff or the defendants.

"It is Further Ordered, Adjudged and Decreed that the costs of this action be and they are hereby assessed against the plaintiff."

On November 13, 1962, Crane Boom Guard Co., Inc., H. P. Merritt, Jr., and S. A. Coffey filed a motion for relief under Rule 60(b) of F.R.Civ.P. After a full hearing, Judge Henley denied the motion. No appeal was taken from that order. Judge Henley also filed a supporting memorandum opinion which contains findings of fact. That opinion is a part of the record in this appeal, and from it we glean these pertinent facts.

The movants (Thomas, who was enjoined by the original decree, did not seek to have it set aside) asserted that the decree did not express the true settlement agreement, in that movants had not agreed to the entry of an injunction restraining infringement of the Thomas Patents; that there was "undue cooperation" between counsel for plaintiffs and movants' original attorney; that they did not become aware of the contents of the decree until shortly before the motion for relief was filed on November 13, 1962. It was developed at the hearing that Crane Boom Guard Co., Inc., the corporate moving party, had been dissolved. Upon motion and pursuant to applicable Arkansas Statutes, the directors as trustees, were included as moving parties.

Based upon undisputed evidence, Judge Henley found that the terms of the settlement of the infringement action were, (a) the corporate defendant (Crane Boom Guard Co., Inc.) should be dissolved; (b) stock in plaintiff corporation was to be issued to Merritt, Coffey, Thomas and Shelby R. Blackmon;² (c) Merritt and Blackmon were to be elected to plaintiff's board of directors; (d) Merritt and Thomas were to be employed by plaintiff at salaries of $100.00 per week and $75.00 per week, respectively; (e) Coffey and Thomas were to assign to plaintiff certain interests in the Thomas Patents which they claimed individually; (f) neither side should be awarded damages and the costs were to be paid by plaintiff.

The terms of the settlement were effectuated and, as Judge Henley found, "apparently things were going smoothly until the latter part of July." On July 27, at a meeting of plaintiff's board of directors, C. H. Earl, president of plaintiff, announced that the cash position of the corporation was weak; that he was eliminating his salary and he requested Thomas and Merritt to accept salary reductions. Thomas acceded but Merritt refused. Later, Merritt ceased working for plaintiff and resigned from its board of directors. The hearing on the motions also developed that on September 5, 1962 Coffey had filed with the Patent Office, an application for a patent on an insulating device for crane booms. That application had not been acted upon at the time the motion was denied on January 11, 1963.

We turn now to the events which occurred subsequent to the denial of the motion for relief from the injunction. On August 13, 1963, the Patent Office issued Patent No. 3,100,575 to S. A. Coffey for "Crane Boom Life Guard."³ Coffey and Associates organized a corporation known as Crane Boom Life Guard Co., Inc., (Life Guard) and Coffey assigned his patent to that corporation. Thereafter, pursuant to arrangements with Life Guard, Lon and Pat Weyland manufactured the devices which were sold in competition with the boom guards sold by Saf-T-Boom.

The contempt action was instituted in April, 1964 by Saf-T-Boom. The order to show cause was directed to S. A. Coffey, Life Guard, Lon and Pat Weyland and Weyland Machine Shop. Later, C. H. Earl, president of Saf-T-Boom and Arthur J. Thomas were added as parties plaintiff. Mel Epperson, Freda Epperson, C. E. Haile, Pauline Haile, shareholders of Life Guard, Osro Cobb, the attorney who incorporated Life Guard, and C. H. Sansom, an independent contractor, who manufactured a boom guard in accordance with the specifications of the Coffey Patent, were added as parties defendant.

In the contempt trial, Life Guard and its allies, advanced the theory that the Thomas Patents were invalid, and that Saf-T-Boom is infringing the Coffey Patent. They denied that they were guilty of contempt, their position being that one cannot infringe an invalid patent.⁴ Although the court received evidence on the question of the validity of the Thomas Patents and the Coffey Patent, it is abundantly clear that the case turned on the effect and scope of the 1962 consent decree. After discussing the doctrine of res judicata, the court arrived at the conclusion that "the consent decree bound Coffey, Merritt, and Thomas personally, as well as Crane Boom Guard Company, Inc. Life Guard is in direct privity with Coffey, and in the court's view that privity includes not only the corporation itself but also the corporation's founders and stockholders."

Although the court found that the Coffey device infringes the Thomas Patents, it refrained from adjudging Coffey or any other party guilty of contempt.⁵ The court concluded, however, that Saf-T-Boom was entitled to have the original injunctive decree extended to include Life Guard. Accordingly, the court decreed "that Crane Boom Life Guard Company, Inc., which is now a party to this litigation, together with its officers, agents, employees, and servants and all other persons, firms, and corporations in privity with it, be, and they hereby are, perpetually restrained and enjoined from infringing the Thomas Patents Nos. 2,950,016 and 2,989,194." The same parties also were permanently enjoined from engaging in unfair competition with Saf-T-Boom.

Appellants pursue here the theme they unsuccessfully advocated in the trial court. Stripped of non essentials, the numerous points appellants set forth in their brief, demonstrate that they regard this proceeding as basically an infringement action involving the validity of the Thomas Patents and the Coffey Patent. They assert, in particular, that the court erred in not invalidating the Thomas Patents and in failing to find the Coffey Patent valid. We believe, as did the District Court, that appellants have missed the mark.

Contrary to the appellants' contention, the resolution of this controversy is not keyed to the question of whether the Thomas Patents are valid as to the general public. The very nature of this contempt action focuses attention upon the consent decree forming the foundation for the order to show cause. The only meritorious question for determination is whether, under the doctrine of res judicata, that valid decree operates to estop the parties who were defendants in that action, and their privies, from launching another attack upon, and from infringing, the Thomas Patents.

The general rule is that the doctrine of res judicata is applicable to a judgment rendered in a patent infringement case by a court of competent jurisdiction, and that such a judgment is binding and conclusive upon the parties to the action and those in privity with them. Minnesota Min. & Mfg. Co. v. Superior Insulating Tape Co., 284 F.2d 478, 485 (8 Cir. 1960), where Judge Van Oosterhout quotes from Kessler v. Eldred, 206 U.S. 285, 27 S.Ct. 611, 51 L.Ed. 1065: "If rights between litigants are once established by the final judgment of a court of competent jurisdiction those rights must be recognized in every way, and wherever the judgment is entitled to respect, by those who are bound by it." Siebring v. Hansen, 346 F.2d 474 (8 Cir. 1...