Curtis Mfg. Co., Inc. v. Plasti-Clip Corp.

• Decision Date: 20 April 1995
• Docket Number: Civil No. 89-430-SD.
• Citation: 933 F. Supp. 94
• Parties: CURTIS MANUFACTURING COMPANY, INC. v. PLASTI-CLIP CORPORATION, et al.
• Court: U.S. District Court — District of New Hampshire

933 F. Supp. 94

CURTIS MANUFACTURING COMPANY, INC. v. PLASTI-CLIP CORPORATION, et al.

Civil No. 89-430-SD.

United States District Court, D. New Hampshire.

April 20, 1995.

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Craig L. Staples, Cleveland, Waters & Bass, PA, Concord, NH, Jack R. Pirozzolo, Willcox, Pirozzolo & McCarthy, Boston, MA, for Curtis Manufacturing Company, Inc.

W. Wright Danenbarger, Wiggin & Nourie, William O. Hennessey, Hayes, Soloway, Hennessey, Grossman & Hage, Jamie N. Hage, Roussos, Hage & Hodes, Manchester, NH, for Plasti-Clip Corporation, Daniel Faneuf.

Craig L. Staples, Cleveland, Waters & Bass, PA, Concord, NH, Jack R. Pirozzolo, Willcox, Pirozzolo & McCarthy, Boston, MA, Robert E. McDaniel, Devine, Millimet & Branch, PA, Manchester, NH, for Thomas W. Judd.

ORDER

DEVINE, Senior District Judge.

1. Plasti-Clip's and Faneuf's Motion in Limine to Exclude Any Reference to November 29, 1993, Rulings of Administrative Patent Judge on Preliminary Motions in Interference Proceeding (document 84)

Plaintiffs¹ filed a patent application intentionally seeking an interference with the '078 patent in the Patent & Trademark Office (PTO) on February 20, 1991. Said interference was declared on February 22, 1992, and assigned Interference Number 102,911. After the filing of preliminary statements, plaintiffs submitted a 37 C.F.R. § 1.633(a) preliminary motion² which alleged unpatentability of the '078 patent by reason of Judd's failure to disclose material information to the PTO.³

The Administrative Patent Judge (APJ) evaluated plaintiffs' claim under the "failure to disclose" standard set forth in FMC Corp. v. Manitowoc Co., 835 F.2d 1411, 1415 (Fed.Cir.1987). Under said standard,

one who alleges a "failure to disclose" form of inequitable conduct must offer clear and convincing proof of: (1) prior art or information that is material; (2) knowledge chargeable to applicant of that prior art or information and of its materiality; and (3) failure of the applicant to disclose the art or information resulting from an intent to mislead the PTO.

Id. (footnote omitted). Finding that plaintiffs did not sustain their burden with respect to both materiality and intent, the APJ denied their motion.

A section 1.633(a) motion was likewise filed by Judd, which alleged that certain claims embodied in the patent application Faneuf filed to provoke the interference were unpatentable by reason of the on sale or public use activities by Faneuf and/or Judd more than one year prior to Faneuf's February 20, 1991, filing date. The APJ held that the evidence then before him sufficiently made out a prima facie case for obviousness and thus accordingly granted Judd's motion.

Pursuant to the PTO's procedural rules, plaintiffs were thereafter ordered to show cause, within twenty (20) days from the date of the rulings, why judgment should not be entered in Judd's favor on the obviousness issue. Faneuf responded to the order and sought a final hearing for review of all the APJ's rulings on the preliminary motions. Faneuf subsequently filed a motion to suspend the interference proceedings pending resolution of the matters sub judice, which have been proceeding in this court concurrently with the interference action before the PTO.⁴

"At an appropriate stage of the interference, the parties will be given an opportunity to appear before the Board of Patent Appeals and Interferences to present oral argument at a final hearing." 37 C.F.R. § 1.654(a). It is only after such "final hearing" that "the Board shall enter a decision resolving the issues raised...." 37 C.F.R. § 1.658(a). "When the Board enters a decision awarding judgment as to all counts, the decision shall be regarded as a final decision." Id.

Notwithstanding any "final decision" rendered by the Board pursuant to 37 C.F.R. § 1.658(a), "any party to an interference dissatisfied with the decision of the Board ... on the interference, may have remedy by civil action," 35 U.S.C. § 146 (Supp.1995) to any United States District Court with appropriate personal jurisdiction over the parties or by appeal to the United States Court of Appeals for the Federal Circuit, 35 U.S.C. § 141.

"A proceeding under § 146 is not a chance for a party to reconstruct its case, based on a new litigation strategy, leap-frogging the administrative process in the PTO.... Rather, an action under § 146 is essentially a proceeding to review the action of the Board." Conservolite, Inc. v. Widmayer, 21 F.3d 1098, 1102 (Fed.Cir.), cert. denied, ___ U.S. ___, 115 S.Ct. 576, 130 L.Ed.2d 492 (1994). "Section 146 authorizes the district court on review to accept new testimony, but normally only as to issues raised by the parties during the proceedings below or by the Board's decision." Id. (citation omitted). Accord Andrew Corp. v. Gabriel Elecs., Inc., 782 F.Supp. 149, 150-51 (D.Me.1992) ("In a civil action to overturn a decision of the Board ... the party seeking relief `does not start over to prosecute his application before the district court unfettered by what happened in the PTO....) It has the laboring oar to establish error by the board.'" (quoting Fregeau v. Mossinghoff, 776 F.2d 1034, 1038 (Fed.Cir.1985) (footnote omitted) (alteration in Andrew Corp.)).

In the view of the court, whatever rulings were made by the APJ on the preliminary motions of the parties in the interference proceedings were precisely that — preliminary. As such, the standards guiding this court's 35 U.S.C. § 146 review of an interference proceeding are inapplicable as premature.⁵ See Sanford v. Kepner, 344 U.S. 13, 15, 73 S.Ct. 75, 76, 97 L.Ed. 12 (1952) (civil action remedy available only to an applicant "who has been finally denied a patent because of a Patent Office decision against him and in favor of his adversary on the question of priority") (construing former section 63, predecessor of 35 U.S.C. § 146). In consequence thereof, the court finds that the rulings on the preliminary motions, being neither rulings on the merits nor final judgments, inhere qualities whose probative value is clearly outweighed by the danger of unfair prejudice. See Rule 403, Fed.R.Evid. Accordingly, the court further finds and rules that any reference to the APJ's rulings on the preliminary motions filed in Interference Proceeding No. 102,911 is inadmissible.

2. Plasti-Clip's and Faneuf's Motion in Limine to Exclude Evidence of Contract Damages (document 85)

Plasti-Clip and Faneuf move to exclude any evidence as to how much Plasti-Clip might have earned if Curtis had purchased clips from Plasti-Clip pursuant to the contracts that were at one time contemplated in negotiations between the parties. Plasti-Clip and Faneuf contend that such evidence is irrelevant because they have withdrawn their breach of contract claim.

Defendant Curtis contends that evidence of the prices at which Plasti-Clip sells its products, including the prices at which it proposed to sell products to Curtis, and the profits of Plasti-Clip thereon, are relevant to Plasti-Clip's claims for lost profits and a reasonable royalty for patent infringement. Curtis further contends that such evidence is relevant to Plasti-Clip's tort claims and to the course of dealings between the parties.

"The goal of damages in actions for breach of contract is to put `the nonbreaching party in the same position it would have been in' if the contract had been fully performed." Lahey v. Shaw, 123 N.H. 648, 651, 466 A.2d 911, 914 (1983) (citing Martin v. Phillips, 122 N.H. 34, 37, 440 A.2d 1124, 1125 (1982)). Because Plasti-Clip and Faneuf have withdrawn their breach of contract claim, this measure of damages is no longer available.

The measure of damages available to plaintiffs under their patent infringement and tort claims differ from breach of contract damages. Damages awarded in a patent infringement action must be "adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court." 35 U.S.C. § 284 (1984). In this action, plaintiffs are seeking lost profits or, in the alternative, a reasonable royalty as their measure of damages for the alleged infringement of the '863 patent by defendants.

With respect to plaintiffs' claim for lost profits, the court has ruled herein, see infra at pp. 103-104, that Curtis is entitled to argue and offer evidence showing plaintiffs are only entitled to a portion of defendants' profits from their sales of the document holder in question. The court finds that evidence of Plasti-Clip's prices for its products, including the prices at which it proposed to sell its products to Curtis, is relevant to the issue of apportionment of lost profits, and is therefore admissible.

Plaintiffs alternatively assert that they are entitled to reasonable royalties as compensation for Curtis's infringement of the '863 patent. In evaluating what constitutes a "reasonable royalty", most courts look to the list of factors relevant to that determination set forth in Georgia-Pacific Corp. v. United States Plywood Corp., 318 F.Supp. 1116, 1120 (S.D.N.Y.1970), modified and aff'd, 446 F.2d 295 (2d Cir.), cert. denied, 404 U.S. 870, 92 S.Ct. 105, 30 L.Ed.2d 114 (1971). One such factor is the prior or existing royalties received by the patentee for the licensing of the patent in question. Related to this factor is evidence of prior offers to license by the patentee. See 5 DONALD S. CHISUM, PATENTS § 20.033, at 20-172 n. 15 (1994) (listing cases in which court considered the royalty rate offered by the patentee as one factor in setting a reasonable royalty rate).

The court finds and rules that the prices at which Plasti-Clip sells its products is one of the many factors the court may consider in determining what a reasonable royalty rate is in this case. Evidence of such prices is therefore relevant and admissible.

Plaintiffs' motion...