Devex Corp. v. General Motors Corp.

• Decision Date: 22 August 1980
• Docket Number: Civ. A. No. 3058.
• Citation: 494 F. Supp. 1369
• Parties: DEVEX CORPORATION et al., Plaintiffs, v. GENERAL MOTORS CORPORATION, Defendant.
• Court: U.S. District Court — District of Delaware

494 F. Supp. 1369

DEVEX CORPORATION et al., Plaintiffs, v. GENERAL MOTORS CORPORATION, Defendant.

Civ. A. No. 3058.

United States District Court, D. Delaware.

August 22, 1980.

COPYRIGHT MATERIAL OMITTED

David F. Anderson of Potter, Anderson & Corroon, Wilmington, Del., for plaintiffs; Frederick B. Ziesenheim and Lynn J. Alstadt of Blenko, Buell, Ziesenheim & Beck, Pittsburgh, Pa., Sidney Bender and Aaron Lewittes of Leventritt, Lewittes & Bender, New York City, William C. McCoy, Jr. of Pearne, Gordon, Sessions, McCoy & Granger, Cleveland, Ohio, of counsel.

Arthur G. Connolly, Sr. and Harold Pezzner of Connolly, Bove & Lodge, Wilmington, Del., for defendant; George E. Frost, William A. Schuetz and Saul Schwartz of General Motors Corporation, Detroit, Mich., of counsel.

Bruce M. Stargatt of Young, Conaway, Stargatt & Taylor, Wilmington, Del., Special Master.

OPINION

CALEB M. WRIGHT, Senior District Judge.

Devex Corporation ("Devex") seeks more than $100 million actual damages, plus punitive damages, interest, attorneys' fees and costs for infringement by General Motors Corporation ("G.M.") of Claim 4 of Devex's patent¹ for a process to pressure-form metal objects.

This case began in 1956-57 when Devex sued G.M. and Houdaille Industries, Inc. in the Northern District of Illinois. In 1962, Judge Edwin A. Robson ruled that Claim 4 of Devex's patent was invalid.² A year later, however, the Seventh Circuit Court of Appeals reversed and held that Claim 4 was valid.³ The Supreme Court denied G.M.'s motion for review.⁴ G.M. and Devex then moved their dispute here. Following trial, this Court found that three of G.M.'s accused practices did not infringe Claim 4,⁵ a finding that the Third Circuit Court of Appeals reversed on appeal.⁶

This Court subsequently appointed a Special Master, Bruce M. Stargatt, Esquire, who worked hard, long and well to determine which of G.M.'s other accused practices infringed Claim 4 and to set a reasonable royalty that G.M. should pay for its infringement. With the Master's guidance, the parties took dozens of depositions, propounded and answered hundreds of interrogatories and produced thousands of documents. A hearing followed, consuming fifty-three days between October 30, 1978 and February 14, 1979. Following briefing and argument, the Master released his report on February 7, 1980. Presently before this Court are the parties' Exceptions to the Report of the Special Master.

THE INVOLVED PROCESS

Claim 4 covers:

The process of working ferrous metal which comprises forming on the surface of the metal a phosphate coating and superimposing thereon a fixed film of a composition comprising a solid meltable organic binding material containing distrusted there through a solid inorganic compound meltable at a temperature below the melting point of the ferrous metal phosphate of said coating and having a hardness not exceeding 5 on the Mohs' hardness scale, and thereafter deforming the metal.

As the Master noted: "The `organic binding material' contemplated by the patent is soap. The `inorganic compound' is borax, or some other inorganic substance meeting the patent's claims and performing the same function as does the borax."⁷

The happy result of this process is that phosphate, soap and borax work to lubricate the pressure-forming operation, preventing harmful contact between the metal products and the machinery with which they are formed. Although other lubricants may be used, the phosphate, soap and borax combination is especially beneficial because it may be easily cleaned from the metal product following its formation.

THE MASTER'S FINDINGS

The Master first found that, from among G.M.'s approximately sixty allegedly infringing practices, practices 4-5, 7, 9, 12-13, 16-17, 22, 25 (in part), 26-28, 30-31, 36-38, 42, 47-49, 51, 54 and 56 all clearly infringed Devex's patent. In addition, the Master found that chemicals tetrapotassium pyrophosphate (TKPP) and trisodium phosphate (TSP) were borax equivalents. Thus, the Master found that the use of phosphate, TKPP and soap in accused practices 6, 14, 50 and 52 infringed Claim 4. He found that the remaining practices did not infringe Claim 4 for a variety of reasons. First, the Master held that Claim 4 included a requirement that products be cleaned following their formation. Because accused practices 2, 3, 10, 11, 15, 19-21, 25 (in part), 33-35, 39-41 and 44-45 included little or no cleaning, he found that these processes did not infringe. Second, the Master held that Claim 4 included a requirement that borax be used as a lubricant and/or as a cleaning agent. Because Devex failed to show that borax was used for either of these purposes in accused practices 1, 2, 8, 18, 20, 23-24, 29 (in part), 32, 34-35, 39, 43, 55 and 57-58, he found them to be non-infringing. Finally, the Master rejected accused practice 1 (after 1963), 8 and 46 because Devex failed to show that these processes in any way involved the use of borax or its equivalents.

The Master next assessed damages for the infringing practices. In many of these practices, including 4-6, 12-14, 36 and 48-53, G.M. manufactured bumper parts. In setting royalties for these practices, the Master first noted Devex's industry-wide offer, made soon after the Supreme Court declined to review the Seventh Circuit's determination that Claim 4 was valid, to license in return for a royalty of 0.75% of the value of the products manufactured by the use of Claim 4. Although the parties failed to present direct evidence regarding the value of G.M.'s bumpers in the mounted-on-the-car form in which they were usually sold, Devex did present evidence of the price at which G.M. sold its bumpers as parts. Devex's experts next argued, and the Master found, that bumpers on their mounted-on-the-car form should be valued at about 48% of the price at which G.M. sold them as parts. The Master, thus, calculated that the value of the approximately 130 million bumper parts formed by using the process of Claim 4 totalled about $1.15 billion. Multiplying this figure by 0.75%, the Master found that the price of Devex's 1964 offer totalled $8,607,183.70. The Master then found that through subsequent negotiations, the parties would have reduced this figure by one-third, to about $5.7 million.

The Master further found that G.M. would have agreed to pay interest at a composite corporate bond rate for the use of the royalty monies over the many years since its initial infringement.⁸ Accordingly, the Master increased his assessment by about $6.5 million, arriving at a total figure of about $12.2 million, as damages for G.M.'s use of the Claim 4 process to manufacture bumpers.

G.M. also used the infringing process to manufacture other products besides bumpers. The Master, however, ruled that Devex failed to adduce sufficiently reliable evidence regarding a reasonable royalty for the manufacture of these products. Therefore, the Master found that Devex was not entitled to recover anything for G.M.'s use of the Claim 4 process to manufacture products other than bumpers.

The Master refused to award multiple damages, or attorneys' fees, finding that G.M.'s infringement was insufficiently aggravated.

PLAINTIFFS' OBJECTIONS TO THE MASTER'S FINDINGS⁹

Devex first seeks to widen the scope of infringing processes to include processes in which metal was treated with phosphate, soap and borax and pressure-formed, although the process did not include any cleaning operation. Devex argues that Claim 4 does not require cleaning. Rather, Devex argues the fact that metal products may be easily cleaned following their formation was an incidental benefit. Devex further argues that the "user of a patented invention does not avoid infringement by failing to utilize all the benefits of the invention."¹⁰

Plaintiffs' argument misinterprets the import of the earlier decisions in this and related cases, holding that Claim 4 requires cleaning as an integral step of its process. The Court particularly notes the Seventh Circuit's July 12, 1967 decision in Devex Corp. v. Houdaille Corp., 382 F.2d 17. That case is especially relevant, even though Devex and G.M. had previously moved their dispute from the Seventh Circuit, because it interprets the Seventh Circuit's 1963 decision rendered while the dispute between G.M. and Devex was still before that Court. The background to the 1967 case is that, in 1965, Judge Robson granted summary judgment in favor of Devex on the issue of infringement. The lynchpin of Judge Robson's decision, reported at 148 U.S.P.Q. 74, was that Claim 4 should be literally interpreted. Although Claim 4 was and is very broad, Judge Robson refused to "read into the claim a requirement" that would limit its scope. Id., p. 77.

On appeal, the Seventh Circuit held that their 1963 "decision requires that the claim in suit be given a narrow and restricted construction."¹¹ The Seventh Circuit Panel then reviewed the setting for its prior decision:

It was conceded that all of the elements of the claim were old in the art, but plaintiffs sought to uphold validity upon the basis that such elements "were put together in a new way and achieved a new and unexpected result." It was solely on this basis that this Court sustained validity and reversed the District Court.

. . . . .

Thus, having obtained a decision of validity on a narrow and restricted basis, they now contend, inconsistently we think, that the claim must be applied literally to defendant's alleged infringing process. Such a construction would monopolize the whole broad field of metal forming with any use of a dry soap and borax over phosphate at any temperature or pressure, regardless of the results.¹²

Clearly, then, the Seventh Circuit contemplated that Claim 4 should be afforded a more limited interpretation than its literal reading might otherwise suggest. The Third Circuit expressly recognized the applicability of the Seventh Circuit's findings, ruling that "Claim 4,...