Derrick Mfg. Corp. v. Southwestern Wire Cloth, Inc.

• Decision Date: 02 February 1996
• Docket Number: Civil Action No. H-94-0135.
• Citation: 934 F. Supp. 796
• Parties: DERRICK MANUFACTURING CORP., Plaintiff, v. SOUTHWESTERN WIRE CLOTH, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

934 F. Supp. 796

DERRICK MANUFACTURING CORP., Plaintiff, v. SOUTHWESTERN WIRE CLOTH, INC., et al., Defendants.

Civil Action No. H-94-0135.

United States District Court, S.D. Texas, Houston Division.

February 2, 1996.

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David Lee Burgert, Porter & Hedges, Houston, TX, for Derrick Manufacturing Corporation.

Daniel O. Goforth, Goforth Lewis Scott & Williams, Houston, TX, Lester L. Hewitt, Pravel Hewitt Kimball & Krieger, Houston, TX, for Southwestern Wire Cloth, Inc.

Daniel O. Goforth, Goforth Lewis Scott & Williams, Houston, TX, for Oilfield Screens, Robert E. Norman.

Richard Austin Schwartz, Schwartz Campbell & Oathout, Houston, TX, for Amoco Corporation.

MEMORANDUM AND ORDER

ATLAS, District Judge.

Plaintiff Derrick Manufacturing Corporation ("Derrick") filed this lawsuit complaining, inter alia, of infringement of U.S. Patent No. 4,575,421 ("the '421 patent") and infringement of "Derrick" and other trademarks registered to Derrick. Defendants Southwestern Wire Cloth, Inc., Southwestern Wire Cloth Oilfield Screens, Inc. and Robert E. Norman (collectively "SWC") have filed four motions for partial summary judgment.

For the reasons given below, it is now ORDERED as follows:

• Defendants' Motion for Partial Summary Judgment Based on Inequitable Conduct Doc. # 41 is DENIED;

• Defendants' Motion for Partial Summary Judgment That Damage Awards for `Trademark Related Claims' Incurred Prior to January 14, 1992 Are Barred by the Statute of Limitations Doc. # 39 is DENIED IN PART AND GRANTED IN PART;

• Defendants' Motion for Partial Summary Judgment That All Damages for `Trademark Related Claims' Incurred Prior to January 14, 1994 Are Barred By Laches Doc. # 44 is DENIED;

• Defendants' Motion for Partial Summary Judgment That All Damages for Statutory Trademark Infringement of Derrick's Federally Registered Trademark Incurred Prior to January 14, 1994 Are Barred by 15 U.S.C. § 1111 Doc. # 40 is DENIED.

I. SUMMARY JUDGMENT STANDARD

In deciding a motion for summary judgment, the Court must determine whether "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) (en banc); Bozé v. Branstetter, 912 F.2d 801, 804 (5th Cir.1990). The facts are to be reviewed with all inferences drawn in favor of the party opposing the motion. Bozé, 912 F.2d at 804 (citing Reid v. State Farm Mutual Auto Ins. Co., 784 F.2d 577, 578 (5th Cir.1986)). However, factual controversies are resolved in favor of the non-movant "only when there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts." McCallum Highlands, Ltd. v. Washington Capital Dus, Inc., 66 F.3d 89, 92 (5th Cir.), revised on other grounds upon denial of rehearing, 70 F.3d 26 (1995).

The party moving for summary judgment has the initial burden of demonstrating the absence of a material fact issue with respect to those issues on which the movant bears the burden of proof at trial. For any manner on which the non-movant carries the burden of proof at trial, however, the movant may, by merely pointing to the absence of evidence supporting the essential elements of the non-movant's case, shift to the non-movant the burden of demonstrating by competent summary judgment proof that there is an issue of material fact so as to warrant a trial. Transamerica Insurance Co. v. Avenell, 66 F.3d 715, 718-19 (5th Cir.1995); Douglass v. United Services Automobile Association, 65 F.3d 452, 459 (5th Cir.), rehearing en banc granted, 70 F.3d 335 (1995); Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir.), cert. denied, ___ U.S. ___, 115 S.Ct. 195, 130 L.Ed.2d 127 (1994).

The nonmovant's burden may not be satisfied by conclusory allegations, unsubstantiated assertions, metaphysical doubt as to the facts, or a scintilla of evidence. Douglass, 65 F.3d at 459; Little, 37 F.3d at 1075. In the absence of any proof, the court will not assume that the nonmovant could or would prove the necessary facts. McCallum Highlands, 66 F.3d at 92; Little, 37 F.3d at 1075 (citing Lujan v. National Wildlife Federation, 497 U.S. 871, 888, 110 S.Ct. 3177, 3188, 111 L.Ed.2d 695 (1990)). Rule 56 mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a sufficient showing of the existence of an element essential to the party's case, and on which that party will bear the burden at trial. Little, 37 F.3d at 1075 (citing Celotex, 477 U.S. at 322, 106 S.Ct. at 2552).

II. INEQUITABLE CONDUCT

In 1986, Derrick secured the `421 patent for its "Non-Clogging Wear-Reducing Screen Assembly for Vibrating Screening Machine," invented by James W. Derrick and Robert G. Derrick.<sup>1</sup> The screen assembly of the `421 patent was designed for use on a "linear motion shaker machine" to filter large volumes of drilling mud in the oil field industry. SWC argues that the patent is unenforceable due to Derrick's inequitable conduct. The Court has considered the Inequitable Conduct Motion, SWC's Supplement, Derrick's Opposition, SWC's Reply, Derrick's Surreply, SWC's Response to the Surreply, all exhibits, and the applicable authorities.

To be guilty of inequitable conduct, a patent applicant must have intended to deceive the Patent and Trademark Office ("PTO") by failing to disclose material information. Thus there are two elements that must be established in order to sustain the defense of inequitable conduct: materiality and intent. Allied Colloids Inc. v. American Cyanamid Company, 64 F.3d 1570, 1578 (Fed.Cir.1995); Braun, Inc. v. Dynamics Corp. of America, 975 F.2d 815, 822 (Fed.Cir. 1992); LaBounty Mfg. Inc. v. U.S. International Trade Commission, 958 F.2d 1066, 1070 (Fed.Cir.1992). When a court determines that inequitable conduct occurred during prosecution of a patent application, the entire patent is thus rendered unenforceable. Kingsdown Medical Consultants Ltd. v. Hollister, Inc., 863 F.2d 867, 877 (Fed.Cir.1988), cert. denied, 490 U.S. 1067, 109 S.Ct. 2068, 104 L.Ed.2d 633 (1989).

Intent and materiality are separate and essential components of inequitable conduct, and SWC must establish both of these elements by "clear and convincing evidence." Allied Colloids, 64 F.3d at 1578; Braun, 975 F.2d at 822.² Therefore, in order to prevail on this motion for summary judgment, SWC must establish that, with all inferences drawn in favor of Derrick, there is clear and convincing evidence of both materiality and intent. The Federal Circuit has stated that the courts should use caution in granting summary judgment on the issue of inequitable conduct. If the facts of materiality or intent are "reasonably disputed," the issue is not amenable to summary judgment. Paragon Podiatry Laboratory, Inc. v. KLM Laboratories, Inc., 984 F.2d 1182, 1190 (Fed.Cir. 1993); Baker Oil Tools, Inc. v. Geo Vann, Inc., 828 F.2d 1558, 1566 (Fed.Cir.1987). While "merely conclusory statements or completely insupportable, specious, or conflicting explanations or excuses" do not raise a genuine issue of fact, the courts are required to consider all circumstances, including those indicative of good faith. Paragon Podiatry, 984 F.2d at 1190.

The `421 patent involves a screen assembly consisting of a fine screen and a coarse screen firmly bonded to a perforated plate. The principal prior art relied upon by the Patent Examiner when evaluating the `421 patent application was: (1) U.S. Patent No. 4,033,865, assigned to Derrick ("the `865 patent"), which discloses a "sandwich screen" but does not use a perforated plate, and (2) U.S. Patent No. 2,723,032, assigned to Gisler ("the Gisler patent"), which discloses a combination of a fine screen and a coarse screen, and suggests in its text the use of a perforated plate.

SWC, in support of its inequitable conduct contentions, offers three exhibits that allegedly show material prior art that was not disclosed during the prosecution of the `421 patent in 1984-86. The first is a 1958 drawing<sup>3</sup> of a Derrick screen assembly which shows a single fine screen bonded to a perforated plate. The second is a promotional pamphlet<sup>4</sup> prepared by Derrick prior to 1969 which describes a Derrick practice of mounting fine screens on perforated plates. The third is a rough sketch<sup>5</sup> drawn by a SWC attorney during the deposition of James Derrick. The sketch shows a combination of a coarse screen and a fine screen bonded to a perforated plate. James Derrick testified during his deposition that this assembly was made and sold by Derrick prior to 1982.<sup>6</sup> SWC argues that this undisclosed prior art was more pertinent than the prior art before the PTO (i.e., the Gisler and `865 patents) because it showed perforated plates bonded to one screen or, in some cases, two screens.

In its motion, SWC argues that intent is established because Figures 7 and 8 of the `421 patent are described in the patent application as embodiments of the present invention, but actually were Derrick prior art products that should have been disclosed. SWC also argues that the intent element of inequitable conduct is satisfied because the undisclosed prior art involved Derrick's own products. In other words, SWC argues that Derrick unquestionably knew of the existence of this allegedly material prior art, and so its failure to disclose the prior art was necessarily intentional.

Derrick argues in response that Figures 7 and 8 differ from the undisclosed designs because the two figures were intended to show the use of a perforated plate "firmly bonded" to a screen with an "adhesive like epoxy."⁷ Derrick also claims that the failure to disclose was done in good...