FMC Corp. v. Up-Right, Inc., C 92-0321 SC.

• Decision Date: 22 February 1993
• Docket Number: No. C 92-0321 SC.,C 92-0321 SC.
• Citation: 816 F. Supp. 1455
• Court: U.S. District Court — Northern District of California
• Parties: FMC CORPORATION, Plaintiff, v. UP-RIGHT, INC., et al., Defendants.

816 F. Supp. 1455

FMC CORPORATION, Plaintiff, v. UP-RIGHT, INC., et al., Defendants.

No. C 92-0321 SC.

United States District Court, N.D. California.

February 22, 1993.

Raymond P. Niro, Robert A. Vitale, Raymond P. Niro, Jr., Niro, Scavone, Haller & Niro, Palo Alto, CA, Martin L. Fineman, Brobeck, Phleger & Harrison, San Francisco, CA, for plaintiff.

Ernest M. Anderson, Bruce H. Johnsonbaugh, Eckhoff, Hoppe, Slick, Mitchell & Anderson, San Francisco, CA, for defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

CONTI, District Judge.

This case came on for trial without jury before Judge Samuel Conti on February 8, 9, 10, and 11, 1993. Appearing for plaintiff FMC, Inc. were Raymond P. Niro, Robert A. Vitale, and Raymond P. Niro, Jr. of Niro, Scavone, Haller & Niro, and Martin L. Fineman of Brobeck, Phleger, & Harrison. Appearing for defendant Up-Right, Inc. were Ernest M. Anderson and Bruce H. Johnsonbaugh of Eckhoff, Hoppe, Slick, Mitchell & Anderson.

The issue to be decided by the court in this action is the difference between "repair" and "reconstruction" of a patented combination. Plaintiff FMC, Inc. alleges that defendant Up-Right, Inc.'s actions amount to "reconstruction" and thus they are liable for additional royalty payments, whereas defendant claims their activities are merely permissible "repair," and thus that they are not liable for additional royalties. The Court having heard and reviewed all of the evidence and considered the parties' arguments, makes the following Findings of Fact and Conclusions of Law.

I. FINDINGS OF FACT

1. Plaintiff FMC is a Delaware corporation having a principal place of business in Chicago, Illinois.

2. Defendant Up-Right, Inc. ("Up-Right") is a California corporation having its principal place of business in Selma, California.

3. Defendant American Grape Harvesters, Inc. ("American Grape") has been dismissed as a party defendant pursuant to a confidential settlement agreement with FMC.

4. FMC filed this action on January 14, 1992 seeking, among other things, damages for infringement of U.S. patent 4,286,426 (the "'426" or "Orlando" patent). The sole remaining issue before the court is FMC's claim that Up-Right has engaged in impermissible reconstruction of certain "Rotary Pulsator" grape picking heads in violation of the '426 patent, the prior judgment of this court, and a written settlement agreement executed in the prior litigation between FMC and Up-Right.

5. Prior to June 1, 1990, Up-Right manufactured and sold grape harvesting machinery. Up-Right sold both grape harvesters, which are large vehicles which drive along rows of grapes shaking the grapes from the vines, and picking heads, which are the portion of the harvester that comes in contact with the vines. Up-Right also sold replacement parts for their products.

6. On June 1, 1990, Up-Right sold its harvester division to American Grape. That sale included all inventory and facilities. American Grape continues to manufacture and sell both harvesters and heads.

7. FMC does not sell harvesters. FMC manufactures and sells its patented ('426 patent) picking head as a replacement head for use in Up-Right harvesters.

8. In prior litigation, Up-Right's Rotary Pulsator head was found to infringe the '426 patent, and Up-Right was enjoined from further manufacture of the Rotary Pulsator. Following the liability phase of that litigation, the parties entered into a settlement agreement, under which Up-Right paid FMC $2,515,000.

9. The settlement agreement provided in pertinent part as follows:

2. FMC releases Up-Right and customers of Up-Right from liability for patent infringement with respect to all rotary pulsator picking heads sold by Up-Right prior to September 20, 1988. Up-Right may not, from September 20, 1988 forward, make, have made, reconstruct, use, or sell any rotary pulsator picking head, excepting only that Up-Right may sell those eighteen (18) rotary pulsator picking heads (fifteen as installed in harvester machines in its rental fleet and three spare units) identified by Up-Right serial numbers on Exhibit A hereto, and further that Up-Right may use said eighteen picking heads in, but only in, its rental fleet until said picking heads are sold. Up-Right additionally agrees that each of said fifteen rotary pulsator picking heads as installed in the respective harvester machines in its rental fleet may only be sold as an integral part of said Up-Right grape harvester machines, and may not be sold separately.

3. No license is granted by FMC to Up-Right under the Orlando patent in suit....

10. At the time of the settlement, Up-Right had sold 192 heads. With one or two exceptions, those 192 heads are still in service.

11. During settlement negotiations, FMC offered Up-Right a license to continue to manufacture and sell Rotary Pulsator heads at a royalty of $12,000 per head. Up-Right declined the offer.

12. Since the date of the settlement agreement, Up-Right has not manufactured or sold any new Rotary Pulsator heads. Approximately fifteen of the eighteen heads in stock at the time of the settlement have been sold in accord with the terms of the settlement, and are not at issue in this case.

13. By previous order dated January 8, 1992, this court found that under both the settlement agreement and applicable law, the owners of the 192 Rotary Pulsators have the right to use, repair, and resell the heads. They do not, however, have the right to reconstruct those heads.

14. From the time of the settlement until the sale of the harvester division on June 1, 1990, Up-Right continued to manufacture and sell replacement parts for the existing 192 heads. Up-Right continued to service some of the existing heads, while service on others was performed either by independent service companies or by the owners themselves.

15. Subsequent to June 1, 1990, American Grape has continued to manufacture and sell replacement parts for the existing 192 heads, and to service some of the heads.

16. FMC contends that the sale of replacement parts has enabled owners to reconstruct their Rotary Pulsator heads impermissibly, and thus that Up-Right is guilty of contributory infringement. The claim of the '426 patent which FMC alleges has been reconstructed is Claim 1, which reads:

1. In a harvesting apparatus that includes a vehicle movable to a position adjacent to the plant to be harvested, said vehicle including a support frame, a shaker assembly mounted to said vehicle support frame for shaking the trunk of a plant to dislodge crops therefrom comprising: a shaker frame, means connected to said support frame for mounting said shaker frame for pivoting about a single axis that is overhead the plant to be shaken, said shaker frame including first and second frame sections that extend downwardly of said axis of rotation in substantially fixed relation to each other and that terminate in outer ends, striker members connected to said outer ends in opposing relation, and drive means separate and distinct from said striker members and being connected thereto only through said shaker frame for oscillating said shaker frame as a single unit about said axis to cause said striker members to alternately impact the opposite sides of the trunk of said plant, said drive means being connected to said striker frame at a height situated generally above said plant.

17. In the field, several Rotary Pulsator parts experience frequent breakage and wear. Most prominently, the rails which strike the vine trunks experience cracking, bending, and wear, as do the C-Arms to which those rails are attached. To some extent, these parts can be patched and welded, and owners often add additional steel reinforcements. Often, however, these parts are too damaged to be repaired, and are instead replaced.

18. Similarly, the elements of the drive linkage experience considerable wear. The three geared shafts (two crankshafts and one driveshaft) which transfer force to the rotating weights experience geartooth wear and cracking as a result of repeated cyclical loading, and must be replaced periodically, along with the drive chain.

19. A number of rubber bushings in the support means also experience wear, and are regularly replaced. These are referred to as the rubber mounts (eight per head) and arm bushings (four per head).

20. At trial, the central evidence on which both parties relied consisted of summaries of parts sales of various replacement parts for the Rotary Pulsators, by both Up-Right and American Grape. Those summaries were divided into two categories. The majority of the replaced parts at issue were "Rotary specific" parts, meaning that the parts could only be used in Rotary Pulsators.¹ Sales of these parts are summarized in defense exhibits 529A and B.² A second parts summary, defense exhibits 530A and B, lists "common parts" sold from January 1989 through December 1992. Common parts are parts that can be used in a number of Up-Right products including Rotary Pulsators.

21. At trial, several inaccuracies and omissions in the parts summaries were identified by both parties, as follows:

a. Part number XXXXX-XXX-XX, Lower Arm Socket, is incorrectly identified as having a list price of $355.18. In fact, the price of this item is about $12.50.

b. The rotary-specific list does not include a listing for the pivot arms. Testimony of Thomas M. Thompson, general manager of Up-Right's harvester division and president of American Grape, established that in fact approximately nine of those parts had been sold, at an approximate price of sixty dollars each.³

c. The rotary-specific list contains sales of only 32 drive chains. That part, however, is a standard type of chain, and the parties agree that in most cases users purchased replacement chains from other sources. The lifetime of that chain is conceded to be less than three years. Accordingly, the court finds that the chain has been replaced at least once in all of the existing heads, and...