GAF CORPORATION v. Amchem Products, Inc.

• Decision Date: 09 September 1975
• Docket Number: Civ. A. No. 72-1994.
• Citation: 399 F. Supp. 647
• Parties: GAF CORPORATION v. AMCHEM PRODUCTS, INC.
• Court: U.S. District Court — Eastern District of Pennsylvania

399 F. Supp. 647

GAF CORPORATION v. AMCHEM PRODUCTS, INC.

Civ. A. No. 72-1994.

United States District Court, E. D. Pennsylvania.

September 9, 1975.

COPYRIGHT MATERIAL OMITTED

K. Robert Conrad, Philadelphia, Pa., for plaintiff.

Alan H. Bernstein, Caesar, Rivise, Bernstein & Cohen, Philadelphia, Pa., for defendant.

OPINION

Luongo, District Judge.

Plaintiff, GAF Corporation (GAF), a Delaware corporation, filed suit against Amchem Products, Inc. (Amchem), a Pennsylvania corporation, seeking to obtain rights to certain foreign patents controlled by Amchem covering a plant growth regulating acid. Jurisdiction is based upon diversity of citizenship. 28 U.S.C. § 1332. Amchem has moved for summary judgment, pursuant to Rule 56(b), F.R.C.P., contending that the equitable doctrines of estoppel and laches bar GAF's claim for relief.

Affirmative defenses such as estoppel,¹ and laches,² may be resolved in a motion for summary judgment. Summary judgment, of course, may not be granted "if there be an issue presented as to existence of any material fact; and all doubts as to existence of a genuine issue as to a material fact must be resolved against the party moving for summary judgment." First Pa. B. & T. Co. v. United States Life Ins. Co., 421 F.2d 959, 962 (3d Cir. 1969).

Although there are several factual issues in dispute in this case, none are "material," for even if all disputed facts are resolved in plaintiff's favor, Amchem is still entitled to judgment, accordingly I will grant its motion. In the recitation of the facts of this case, therefore, whenever the parties are in disagreement, the facts will be resolved, and all inferences will be drawn, in plaintiff's favor.

BACKGROUND

GAF is engaged in the manufacture and sale of chemicals on a worldwide basis. As part of its research and development program, GAF employees synthesize and evaluate chemicals of potential commercial use in industry and agriculture. To test agricultural chemicals, nursery and greenhouse facilities are required. In the period relevant to this suit, GAF did not maintain agricultural test facilities of its own but instead engaged outside companies, including Amchem, to test or "screen" these chemicals.

A. The Screening Agreement and its Operation

In 1961, Amchem agreed to test for GAF the effectiveness of certain chemicals as herbicides and/or plant growth regulators. The written screening agreement between the corporations provided inter alia that, from time to time, GAF would offer Amchem groups of chemicals; Amchem would select from each group the chemicals it wished to screen; GAF would send a sample, and disclose in confidence the structure, of each chemical selected; and Amchem would test the chemicals and report to GAF, at least twice annually, those chemicals in which Amchem had a continuing interest. The agreement permitted GAF and Amchem to file patents covering their respective inventions and discoveries.

Amchem placed all chemicals received from GAF into a primary screening program. Chemicals which showed biological activity after primary screening then were placed into secondary screening for further testing. Dr. Anson R. Cooke (Dr. Cooke), Director of Biological Research for Amchem, participated in the screening program and drafted the semi-annual reports required under it by Amchem.

On March 3, 1965, forty-three chemicals were offered, of which Amchem³ requested thirty-seven for testing, including 2-chloroethyl phosphonic acid; an ester⁴ of the acid; and the acid dichloride. Dr. Cooke's semi-annual report dated August 1, 1965, noted that, as of that date, the ester was undergoing secondary screening as a defoliant and plant growth regulator, while the acid and dichloride were undergoing secondary screening as defoliants.

On January 4, 1966, at a day-long meeting to discuss agricultural chemicals, Dr. Cooke informed GAF personnel present⁵ that Amchem remained highly interested in the ester since, in tests already completed, the ester had shown remarkable growth regulating properties. In many crops, a single bud, the terminal bud, grows to maturity. In doing so, it inhibits the growth of other plant buds and accordingly limits crop yields. The ester reversed this process.⁶ It inhibited the terminal bud and caused auxiliary bud stimulation in tomato and cotton plants. The possibility that use of the ester could dramatically increase crop yields generated considerable excitement and Dr. Cooke requested an additional ester sample for further testing. Dr. Cooke also informed the GAF personnel present that Amchem had discontinued testing the acid, the dichloride, and all other chemicals undergoing secondary screening solely as defoliants. Dr. Cooke's semi-annual report dated February 1, 1966, listed the ester, but did not list either the acid or dichloride, as of continuing interest to Amchem.

B. Dr. Randall's Discovery of the Use of the Acid⁷

Dr. David T. Randall (Dr. Randall) was a Senior Scientist employed by GAF and as such he was permitted to choose the projects on which he worked. Dr. Randall was interested in agricultural chemicals and GAF assigned him to manufacture additional quantities of, and to synthesize analogs⁸ around, the ester. Dr. Randall, who also attended the January 4 meeting, was inventor or co-inventor in many domestic and foreign patents.⁹ The GAF patent department worked closely with Dr. Randall on patent applications since, under the terms of his employment agreement, he was required to assign all patentable discoveries to GAF.

Dr. Randall intensively analyzed the chemical structure of the ester compound. In the months following the January 4 meeting, Dr. Randall became convinced that the acid and the acid alone was responsible for the activity shown by the ester. He discussed this theory with Dr. Cooke, but Dr. Cooke rejected it because a sample of the acid had already been tested and found inactive as a plant growth regulator. Unable to refute the fact of the acid's tested inactivity, Dr. Randall returned to the laboratory. There he reasoned that if the original acid sample provided to Amchem was impure, the acid might still prove responsible for the ester's activity. He tested the first acid sample, found it impure, synthesized a second acid sample and delivered it personally to the Amchem test facilities on March 16, 1966.

Amchem tested the second acid sample. In a GAF-Amchem meeting on May 25, 1966,¹⁰ and in a letter from Dr. Cooke to Dr. Leonard dated May 27, 1966, Dr. Cooke confirmed Dr. Randall's theory by reporting that the acid exhibited plant growth regulating activity equal to the ester in greenhouse tests. Dr. Cooke also noted that the acid was considerably cheaper than the ester to manufacture. The semi-annual report dated August 1, 1966, listed the new acid sample as of continuing interest to Amchem. By September 1966, Amchem decided to commercialize the acid rather than the ester.

Amchem continued secondary screening of the acid throughout the fall of 1966. Amchem decided to neutralize the acid to minimize its corrosive effect on metal spraying tanks and equipment. In the process of neutralizing the acid, however, a gas evolved and the entire mixture bubbled over. Dr. Cooke asked Dr. Randall to find a solution to the neutralization problem. By November 7, 1966, Dr. Randall began to explore this problem by attempting to identify the gas. It was known that ethylene gas possessed remarkable growth regulating properties. Dr. Randall concluded that the activity of the acid could be explained if the acid caused the release of ethylene gas. He isolated the gas produced by the acid, identified it as ethylene and informed Dr. Leon Katz (Dr. Katz), Vice President for Research and Development for GAF, of this discovery. Dr. Katz, in turn, informed Amchem. The discovery that the acid was an ethylene releasing agent intensified the efforts of GAF and Amchem to obtain patent protection for the acid and its related compounds.

C. GAF and Amchem Patent Activity

In February and March 1966, attorneys in the GAF patent department as a result of the initial interest shown in the ester, researched the relevant patent law in order to formulate a policy to govern patent applications arising under the screening agreement. Their research disclosed that patents could be filed for novel chemicals, for non-novel chemicals when a new use for the chemical was discovered (use patents), and for new manufacturing processes to produce novel or non-novel chemicals (process patents). GAF's attorneys concluded, therefore, that GAF could file patents on novel chemicals and for new manufacturing processes, but that new uses would ordinarily be discovered, and use patents filed, by the company performing the screening.

This interpretation of the patent law was communicated to GAF chemists, including Dr. Randall. Since the acid and the ester were non-novel compounds, the attorneys in the patent department believed that any new use would be discovered by and be the property of Amchem. Dr. Randall, based upon that GAF policy, also believed that any use patent would be Amchem's property and, although he informed Dr. Katz of the ethylene release from the acid, he failed to inform anyone at GAF of his inventive work with the acid.

Amchem, as early as March 4, 1966, sought use patent protection for the activity of the ester which its employees had discovered. Amchem and GAF agreed, however, that no patents would be filed until the ester's active ingredient was discovered. On May 25, 1966, a GAF-Amchem meeting was held to discuss a broad growth regulating patent. By August 12, 1966, Amchem, believing that its employees had also discovered the use of the acid, filed a rough draft of a patent application designed to protect the acid as well as the ester. This draft was reviewed extensively at a GAF-Amchem meeting held September 8, 1966. A final draft of this patent application was mailed by Amchem to the GAF patent...