In re Convertible Rowing Exerciser Patent Lit., Misc. 85-14.

• Decision Date: 31 August 1989
• Docket Number: No. Misc. 85-14.,Misc. 85-14.
• Citation: 721 F. Supp. 596
• Parties: In re CONVERTIBLE ROWING EXERCISER PATENT LITIGATION.
• Court: U.S. District Court — District of Delaware

721 F. Supp. 596

In re CONVERTIBLE ROWING EXERCISER PATENT LITIGATION.

No. Misc. 85-14.

United States District Court, D. Delaware.

August 31, 1989.

Bruce M. Stargatt, of Young, Conaway, Stargatt & Taylor, Wilmington, Del., of counsel, Harold J. Birch, and Alan I. Cantor, of Banner, Birch, McKie & Beckett, Washington, D.C., for plaintiffs.

Allen M. Terrell, Jr., of Richards, Layton & Finger, Wilmington, Del., of counsel, Melvin F. Jager, and Cynthia A. Homan, of Willian Brinks Olds Hofer Gilson & Lione Ltd., Chicago, Ill., for defendant Ajay Enterprises Corp.

Neil M. Rose, Sunbeam Corp., Downers Grove, Ill., for Allegheny International Exercise Co.

Todd B. Serota, of Poms, Smith, Lande & Rose, Los Angeles, Cal., for Rocket Industries, Inc.

Philip B. Polster, of Polster, Polster and Lucchesi, St. Louis, Mo., for Roadmaster, Inc. John J. Dempsey, of Chapin, Neal & Dempsey, Springfield, Mass., for Columbia Mfg. Co.

Myron Amer, of Bauer & Amer, Mineola, N.Y., for Beacon Enterprises, Inc., Saw Mill River Industries, Inc.

Kenneth R. Glaser, of Glaser, Griggs & Schwartz, Dallas Tex., for Walton Mfg. Co.

Thomas J. Rossa, of Trask, Britt & Rossa, Salt Lake City, Utah, for defendant Weslo, Inc.

Peter M. Sieglaff, of Potter Anderson & Corroon, Wilmington, Del., Liaison Counsel, for defendants.

Edmond Falgowski, of Dept. of Justice, Wilmington, Del., of counsel, Lyn M. Schlitt, James A. Toupin, Jack M. Simmons, U.S. International Trade Comm'n, Washington, Del., amicus curiae.

OPINION

LONGOBARDI, Chief Judge.

This opinion addresses an issue of first impression raised in a summary judgment motion by Defendants Ajay Enterprises Corporation and Weslo, Inc. in a dispute involving the alleged validity and infringement of U.S. Patent No. 4,477,071 (the "'071 patent"). The ultimate determination of the issue may affect the emerging patent litigation strategy of "testing the water" on patent validity, enforceability and infringement issues¹ before the International Trade Commission ("ITC"). The precise question before the Court is whether the determination of the ITC invalidating the '071 patent, affirmed by the Court of Appeals for the Federal Circuit ("Federal Circuit"),² made relative to a determination that no violation of section 337 of the Tariff Act of 1930 (19 U.S.C. § 1337 (1982)) occurred, should be given preclusive effect in this Court despite the grant of original jurisdiction over patent matters placed in the District Courts under 28 U.S.C. § 1338 (1982).³

BACKGROUND

In October, 1984, nine separate patent infringement actions were instituted in districts throughout the country. The Judicial Panel on Multidistrict Litigation thereafter referred to this District the original cases and four more cases involving the '071 patent. The cases are now consolidated for pretrial proceedings. Plaintiffs are Diversified Products Corporation ("DP") and Brown Fitzpatrick Lloyd Ltd. ("BFL"). The Defendants, each named in one of the actions, are Ajay Enterprises Corporation ("Ajay"), Allegheny International Exercise Company ("Allegheny"), Beacon Enterprises, Inc. and Saw Mill River Industries ("Beacon/Saw Mill"), Billard Barbell Company ("Billard"), Columbia Manufacturing Company ("Columbia"), Roadmaster, Inc. ("Roadmaster"), Rocket Industries, Inc. ("Rocket"), Walton Manufacturing Company ("Walton") and Weslo, Inc. ("Weslo").⁴

On December 5, 1984, DP filed a Complaint with the ITC pursuant to 19 U.S.C. § 1337 (1982). The Complaint was amended twice. The Second Amended Complaint alleged that Defendant Weslo committed acts of unfair trade practice in violation of section 337 by importing goods that infringe the '071 patent. Weslo responded to the Complaint by asserting, inter alia, that the '071 patent was invalid and not infringed.⁵

The Administrative Law Judge ("ALJ"), after concluding all other aspects of an unfair trade practice had been established, held that the invention of the '071 patent was anticipated and obvious in view of the prior art Beacon 3002 rowing machine. On review, the full Commission reversed the ALJ's conclusion of anticipation but sustained the ALJ on all other grounds. In the Matter of Certain Convertible Rowing Exercisers, ITC Investigation No. 337-TA-212 (1985). DP appealed to the Federal Circuit for review of the obviousness finding of the ITC. The Federal Circuit in an unpublished opinion dealt exclusively with the obviousness issue. The appellate court affirmed the determination by the ITC that the '071 patent was invalid and thus no violation of section 337 occurred. Diversified Products Corp. v. United States Intern. Trade Com'n, 824 F.2d 980 (Fed.Cir. 1987).⁶

DISCUSSION

The Defendants argue that summary judgment on the issue of patent validity should be entered for them based upon the affirmance by the Federal Circuit of the ITC determination that the '071 patent is invalid by reason of obviousness. Obviousness is a legal conclusion based on factual determinations and not a factual determination itself. Karlstads Mekaniska Werkstad v. ITC, 705 F.2d 1565 (Fed.Cir.1983). Defendants assert that the rule promulgated by the Supreme Court in Blonder-Tongue v. University Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971), bars Plaintiffs from relitigating the validity of the '071 patent. In Blonder-Tongue, the Supreme Court held that once a court determines a patent is invalid in a proceeding where the patent owner had a full and fair opportunity to adjudicate, the patent owner is precluded from relitigating the validity of the patent against all others. Id. The Supreme Court thus eliminated the mutuality requirement in the use of collateral estoppel in cases finding patent invalidity.

Defendants also urge that the doctrine of "administrative res judicata" prevents further judicial review of the '071 patent. In United States v. Utah Constr. Co., 384 U.S. 394, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966), the Supreme Court held that findings of federal agencies shall be given preclusive effect when those agencies are acting in a judicial capacity. Id. at 422, 86 S.Ct. at 1560. Defendants argue the ITC is a federal agency; it acted in a judicial capacity in the proceeding declaring the '071 patent invalid; therefore, the findings of the ITC in this matter should be given preclusive effect.⁷

Failure to grant preclusive effect to the Federal Circuit's affirmance of the '071 patent gives rise to prudential as well as practical problems. First, if the Court does not grant preclusive effect to the ITC determination that the '071 patent is invalid, this Court might find, as the Canadian court found with the benefit of additional evidence, that the '071 patent is not invalid.⁸ This Court then would be placed in the awkward position of disagreeing with a Federal Circuit decision upholding the invalidity of the '071 patent and the same Court of Appeals would be asked to hear the appeal of the decision by this Court finding the '071 patent not invalid.⁹ (The implications of such circumstances need not be discussed in detail at this point.)

Unlike the prudential problems posed above, the issue posed by conflicting decisions —one finding the '071 patent invalid affirmed by the Federal Circuit and one holding the '071 patent not invalid—is a practical problem courts and commentators have addressed although not in this specific context. If preclusive effect is not granted to the determination of patent invalidity, those individuals who have relied upon the Federal Circuit's affirmance could face potential financial harm if a contrary result were reached by this Court and affirmed by the Federal Circuit. For example, individuals might invest capital in an effort to produce a product for market following a determination by the ITC and affirmance by the Federal Circuit. Then, if preclusive effect were not granted to the prior proceeding, this Court could uphold the validity of that same patent and those individuals who relied upon the seemingly final decision of the Federal Circuit affirming the ITC determination would find themselves having invested in projects which could be barred by the valid '071 patent. Both the Federal Circuit and Supreme Court have stated that it is highly desirable to apply judicial preclusion to ensure finality of litigation and thus prevent the problems raised by the above example.¹⁰See generally Blonder-Tongue, 402 U.S. at 323-50, 91 S.Ct. at 1439-53 (recognizing importance of finality of litigation, limiting litigation costs and limiting waste of court time; Court eliminated mutuality requirement in use of collateral estoppel in cases finding patent invalidity); Montana v. United States, 440 U.S. 147, 154, 99 S.Ct. 970, 974, 59 L.Ed.2d 210 (1979) (res judicata "fosters reliance on judicial action by minimizing the possibility of inconsistent decisions"); MGA, Inc. v. General Motors Corp., 827 F.2d 729, 732 (Fed.Cir.1987), cert. denied, 484 U.S. 1009, 108 S.Ct. 705, 98 L.Ed.2d 656 (1988) (res judicata and collateral estoppel "relieve parties of the cost and vexation of multiple lawsuits, conserve judicial resources, and, by preventing inconsistent decisions, encourage reliance on adjudication." (quoting Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 414, 66 L.Ed.2d 308 (1980))); Del Mar Avionics, Inc. v. Quinton Instrument Co., 836 F.2d 1320 (Fed.Cir.1987) (recognizing importance of finality in litigation and granting preclusive effect to prior determinations); Young Engineers v. U.S. Intern. Trade Com'n, 721 F.2d 1305, 1316 (Fed.Cir.1983) (where patent infringement claim that serves as basis of section 337 investigation claim that would be barred in second infringement suit, such claim barred in section 337 proceeding).¹¹

Another problem posed if this Court does not accord preclusive effect to the Federal Circuit affirmance of the ITC determination is justifying such a result in light of Blonder-Tongue. In Blonder-Tongue, the Supreme Court held that once an...