Glitsch v. Koch Engineering Co.

• Decision Date: 30 June 2000
• Citation: 216 F.3d 1382
• Parties: (Fed. Cir. 2000) GLITSCH, INC. (now known as Tray, Inc.), Plaintiff-Appellant, v. KOCH ENGINEERING COMPANY, INC. and SULZER BROTHERS LIMITED, Defendants-Appellees. 99-1377 DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 1382

216 F.3d 1382 (Fed. Cir. 2000)

GLITSCH, INC. (now known as Tray, Inc.), Plaintiff-Appellant, v. KOCH ENGINEERING COMPANY, INC. and SULZER BROTHERS LIMITED, Defendants-Appellees.

99-1377

United States Court of Appeals for the Federal Circuit

DECIDED: June 30, 2000

Appealed from: United States District Court for the Northern District of Texas Judge Robert B. Maloney

Donald R. Dunner, Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P., of Washington, DC, argued for plaintiff-appellant. With him on the brief were Griffith B. Price, Jr., and Don O. Burley. Of counsel on the brief were Thomas L. Cantrell, Jenkens & Gilchrist, of Dallas, Texas. Also of counsel on the brief were Joseph P. Della Maria, Jr., Kenneth P. Taube, and Alan S. Madans, Rothschild, Barry & Myers, of Chicago, Illinois. Of counsel was Kara F. Stoll, Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P.

John C. Dods, Shook, Hardy & Bacon, L.L.P., of Kansas City, Missouri. With him on the brief were James David Wharton and James R. Eiszner.

Before LOURIE, CLEVENGER, and BRYSON, Circuit Judges.

BRYSON.

The sequence of events leading to this appeal began with an action filed in 1982 by appellees Koch Engineering Company, Inc., and Sulzer Brothers Limited against appellant Glitsch, Inc. In that action, Koch and Sulzer alleged that Glitsch had infringed a patent in which Koch and Sulzer had interests and that Glitsch had misappropriated certain trade secrets. In 1992, the district court entered an order in that action finding Glitsch liable on both counts. In February 1993, after the court had entered its order on liability but before it had addressed the issue of damages, Glitsch sought leave to amend its answer to raise the defenses of patent misuse and trade secret misuse. The theory underlying Glitsch's motion was that by virtue of various patent and trade secret licenses, Koch and Sulzer had improperly agreed to allocate geographic markets, in violation of the Sherman Act, 15 U.S.C. § 1. As a result, Glitsch contended, the patent and the trade secrets at issue in the case should be deemed unenforceable. The district court denied the motion to amend the answer on the ground that it was untimely, because the defenses that Glitsch sought to raise related to the issue of liability, which the court had already determined.

Glitsch then filed a separate declaratory judgment action in which it alleged the same claims of patent and trade secret misuse that it had not been allowed to raise in the principal action. In its complaint in the declaratory judgment action, Glitsch alleged, as it had in its motion to amend its answer in the principal action, that Koch and Sulzer had committed patent and trade secret misuse by unlawfully allocating geographic markets throughout the world with respect to the sale of packing elements used in the petroleum, chemical, petrochemical, and related industries. As a remedy in the declaratory judgment action, Glitsch sought to have the patent and trade secrets covered by the alleged market allocation agreements declared unenforceable and any award of damages in the original action vacated.

The declaratory judgment action was assigned to the same judge who was handling the principal action. On cross-motions for summary judgment, the district judge ruled that Glitsch had waived its right to litigate the affirmative defense of misuse in the principal action because it had failed to raise that defense on a timely basis. The court explained that "[i]t is now apparent that Glitsch is attempting to assert the affirmative defense of misuse in this declaratory judgment action and that the defense should have been raised in Glitsch I." The court rejected Glitsch's argument that it had been unable to assert the defense of misuse before the court decided the liability issue in that case and that for that reason its request to raise the defense should not have been deemed untimely. Accordingly, the court granted Koch's motion for summary judgment.

What Glitsch is attempting to do in this case is to use a second action to raise a defense that should be litigated in the first action, which is still pending. Glitsch unsuccessfully sought to raise its defense in the first action, and it now contends that it may raise the same legal claim in the second action because the district court was wrong when it barred Glitsch from raising that claim as a defense in the first case. There is, however, a strong and sensible policy against such a tactic. When a court enters an order that a party does not like, the party's recourse is to seek relief on appeal; it is not appropriate for the party to contest the court's order by filing a new action seeking a declaratory judgment challenging the court's ruling in the first case.

For example, in Grand Trunk Western Railroad v. Consolidated Rail Corp., 746 F.2d 323 (6th Cir. 1984), the court held that it was impermissible for a party to bring a declaratory judgment action that would, in effect, ask the court in the second action to review an order issued in the first. In the first case, a tort action against Grand Trunk and Conrail in state court, Grand Trunk filed a cross-claim for indemnification against Conrail, but the state court rejected the claim on the merits. Instead of appealing that ruling, Grand Trunk filed a second action in federal court seeking a declaratory judgment that Conrail was required to indemnify it for any judgment it might suffer in the first action. The district court granted summary judgment to Conrail on the ground that Grand Trunk's indemnity claim was barred by res judicata or collateral estoppel as a result of the state court's order. The court of appeals agreed that Grand Trunk's complaint had no merit, but it concluded that the district court should not have addressed the merits of Grand Trunk's claim. Instead, the district court should have dismissed Grand Trunk's complaint on the ground that it constituted an inappropriate effort to use litigation before a second court to circumvent a decision of the first court relating to the same matter. The court of appeals explained that if Grand Trunk believed the state court's ruling on the indemnity issue was wrong, the proper course was for Grand Trunk to appeal that ruling, not to seek a contrary ruling through a declaratory judgment from a federal district court. See Grand Trunk, 746 F.2d at 326-27. See also Fireman's Fund Ins. Co. v. Ignacio, 860 F.2d 353, 355 (9th...