Hughes v. Novi American, Inc.
| Decision Date | 06 January 1984 |
| Docket Number | Nos. 83-998,83-999,s. 83-998 |
| Citation | 220 USPQ 707,724 F.2d 122 |
| Parties | , 1984 Copr.L.Dec. P 25,638 Robert F. HUGHES, Appellant, v. NOVI AMERICAN, INC., Appellee. OAKWOOD MANUFACTURING, INC., Appellant, v. NOVI AMERICAN, INC., Appellee. Appeal |
| Court | U.S. Court of Appeals — Federal Circuit |
Douglas W. Sprinkle, Birmingham, Mich., argued for appellant Hughes.
Louis J. Burnett, Birmingham, Mich., argued for appellant Oakwood, Inc.
Hiram P. Settle, Washington, D.C., argued for appellee Novi American; Royal Targan, Novi, Mich., of counsel.
Before KASHIWA, and NIES, Circuit
Judges, and KELLAM, * Senior District Judge.
Oakwood Manufacturing, Inc., a Michigan corporation, together with Robert F. Hughes, the inventor named in the patent in suit, sued Novi American, Inc., for patent and copyright infringement and other related charges. The United States District Court for the Eastern District of Michigan, following a bench trial before Judge Thornton, found the subject patents and copyrights invalid and not infringed. Further, the court held that this was an "exceptional case" warranting an award of attorney fees and costs under 35 U.S.C. Sec. 285 and 17 U.S.C. Sec. 505 against each of the plaintiffs. Oakwood and Hughes separately appeal these awards asserting that only the other should be held liable for all or part of the award. We find no merit in their arguments and affirm the trial court's decision on these issues in all respects. Hughes also appeals the denial of a motion to be dismissed as a party. That decision is also affirmed. Our jurisdiction is found in 28 U.S.C. Sec. 1295(a)(1), the jurisdiction of the district court being based in part on a patent claim under 28 U.S.C. Sec. 1338(a).
Appellant Oakwood is engaged in the manufacture and sale of wood deck kits, rail posts, rail post brackets and deck brackets ("deck products") for the construction of outdoor patio decks. Hughes, Oakwood's co-plaintiff in this action, is the inventor named in United States Letters Patent 4,081,940, issued April 4, 1978, and 3,921,356, issued November 25, 1975, covering certain deck products and methods of use, respectively. Hughes was formerly president and majority stockholder of Erecto-Pat Company, to whom he assigned his patent rights.
By virtue of a bankruptcy sale of Erecto-Pat's assets, Oakwood became the owner of the patents in suit in 1978. In 1979 Oakwood learned that Novi was offering competitive deck products for sale and was using certain printed promotional materials similar to materials of Oakwood. This suit was promptly commenced charging Novi, inter alia, with infringement of the '940 and '356 patents and infringement of Oakwood's purported copyrights. Other counts of the complaint, such as trademark infringement, conspiracy, and false representation, are not relevant here.
Irving M. Weiner of Smithfield, Michigan, was the attorney who prosecuted the patents in suit for Hughes/Erecto-Pat and originally represented both Hughes and Oakwood in this litigation.
Novi successfully defended the charges of patent infringement on the grounds that the patents were invalid under 35 U.S.C. Sec. 102(b) in that the inventions had been on sale by Hughes more than one year prior to the filing of the patent applications and also on the ground that its products did not infringe the '356 patent, that is, the devices did not fall within the claims.
The charges of copyright infringement were also dismissed. Each of the three works allegedly copied by defendant was held to be in the public domain because of publication without notice of copyright, such notice being required for works published before January 1, 1978. In any event, only one copyright registration was issued by the Copyright Office. Applications were prosecuted for two other works but these had been refused registration shortly before the complaint was filed because of the lack of the required notice.
The court awarded defendants reasonable attorney fees in the amount of $44,195 and costs of $3,000, finding the case met the requirements for such awards under the copyright and patent statutes, 17 U.S.C. Sec. 505 and 35 U.S.C. Sec. 285, respectively, in that Hughes was guilty of fraud in procuring the patents and that each plaintiff and their attorney, Irving M. Weiner, knowing long prior to trial that the asserted patents and copyrights were invalid, persisted in the suit on these counts. Also the court found that the charge that Novi's products were covered by the claims of the patent was made in bad faith.
In making its determination as to the amount of the award for attorney fees and costs, the court required detailed submission of the hours spent by defendant's counsel on non-patent and non-copyright issues and limited the award to expenditures in connection with patent and copyright issues. Only the propriety of the award, not the amount, is challenged on appeal.
Following issuance of the decision of the court in favor of Novi on all issues, Hughes obtained other counsel and brought a motion under Fed.R.Civ.P. 21 to be dismissed as a party, asserting he had been led to believe by Weiner that, as the inventor, he had to participate in the patent litigation. Hughes' appeal attacks the denial of this motion and asserts that as a matter of law, only Oakwood, the party having the real interest and control of the suit, may be held liable for costs and attorney fees in the action.
Oakwood, also represented by other counsel after trial, argues that only Hughes should have been held liable in view of Oakwood's lack of knowledge of Hughes' fraud on the Patent and Trademark Office and Oakwood's good faith reliance on advice of its former counsel Weiner. Oakwood also challenges the court's reliance on Oakwood's conduct during discovery as a basis for the award.
The trial court in this case exercised authority under the following statutory provisions in making its award of attorney fees and costs:
35 U.S.C. Sec. 285: The court, in exceptional cases, may award reasonable attorney fees to the prevailing party.
and
17 U.S.C. Sec. 505: In any civil action under this title the court, in its discretion, may allow the recovery of full costs by or against any party other than the United States or an officer thereof. Except as otherwise provided by this title, the court may also award a reasonable attorney's fee to the prevailing party as part of the costs.
While an award of attorney fees is to be reviewed under the standard of whether such award constitutes an abuse of discretion, an award must be set aside if it is unsupported by adequate findings of the basis for the award, thereby precluding meaningful review, or if the award is made for work on issues not covered by the statutory provision. Stickle v. Heublein, Inc., 716 F.2d 1550, 1564-65, 219 USPQ 377, 387-88 (Fed.Cir.1983).
In this case the consideration given by the trial judge to the issue of attorney fees under the above statutes was exemplary. Not only were the grounds for the awards spelled out in detail for each party, but also billings of counsel were scrutinized and adjusted and charges for services other than in connection with patent and copyright claims were eliminated.
In sum, the findings of the trial court pertinent to attorney fees were that the plaintiff Hughes, while an officer and employee of Erecto-Pat, was engaged in a commercial operation of substantial magnitude involving sales and advertising of the subject "patented" device as much as two years prior to the filing of the patents in suit; that Hughes' oath in the applications, therefore, contained an intentional misrepresentation to the Patent and Trademark Office or was a representation made in an atmosphere of gross negligence as to its truth; that "plaintiffs denied their own prior public use and sale of the patented brackets in their answers to interrogatories posed by the defendant prior to trial ... [and] persisted in the maintenance of the present litigation even though plaintiffs had knowledge of the invalidating prior use and sale of the plaintiff Hughes himself"; and, finally, that "plaintiffs could not in good faith believe that defendant's ground saddle infringed the '356 patent, since even a cursory reading of the claim makes obvious the fact of noninfringement."
With respect to the copyright claim, the court stated:
Such fees and...
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