International Nickel Company v. Ford Motor Company

• Decision Date: 26 September 1958
• Citation: 166 F. Supp. 551
• Parties: The INTERNATIONAL NICKEL COMPANY, Inc., Plaintiff, v. FORD MOTOR COMPANY and Caswell Motor Company, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

166 F. Supp. 551

The INTERNATIONAL NICKEL COMPANY, Inc., Plaintiff, v. FORD MOTOR COMPANY and Caswell Motor Company, Inc., Defendants.

United States District Court S. D. New York.

September 26, 1958.

Charles H. Walker, Sullivan & Cromwell, by George C. Sharp, John F. Dooling, Jr., and Anthony William Deller, New York City, John N. Cooper, Rynn Berry, Henry J. Zafian, Stuart A. White, Donald E. Degling and David W. Plant, New York City, of counsel, for plaintiff.

Kenyon & Kenyon, by Theodore S. Kenyon, Ralph L. Chappell, John A. Reilly, James H. Callahan, Richard A. Huettner, New York City, Hughes, Hubbard, Blair & Reed, by L. Homer Surbeck, Otis Pratt Pearsall, Howard A. Levine, New York City, Robert G. Harris, Dearborn, Mich., of counsel, for defendants.

IRVING R. KAUFMAN, District Judge.

I. Background

International Nickel Co., Inc. (hereinafter INCO), plaintiff in this action, filed a complaint on August 14, 1952 alleging infringement by the defendants of 15 claims of its product patent for cast ferrous alloy, No. 2485760 issued October 25, 1949. By request and consent of the parties the case was referred to the Honorable Simon H. Rifkind as Special Master to take evidence and report his findings of fact and conclusions of law. On February 11, 1958, the Master filed his report holding all of the contested claims valid and infringed. Pursuant to motions for confirmation and modification, this report is now before the Court for review.

The patent in issue covers a cast ferrous alloy, variously referred to as nodular iron, ductile iron, spheroidal iron and S. G. iron. For purposes of consistency I shall endeavor to employ the same terminology used by the Master and will hereafter refer to the patented product as nodular iron.

Defendant Ford Motor Company is charged with wilful and deliberate infringement by manufacture, use and sale of nodular iron crankshafts.

Defendant Caswell Motor Company, Inc., a Ford dealer in New York City, is accused of having infringed by using and selling Ford cars equipped with nodular iron crankshafts.¹

Defendants' answer denied infringement and claimed that the patent was invalid in form and substance, anticipated by the prior art and unenforceable because of alleged misuse. Defendants also interposed a counterclaim seeking a declaratory judgment of invalidity and noninfringement.

In determining the issues thus presented, the Master conducted exhaustive hearings, consuming some 27 trial days in which some 21 witnesses were heard, 750 exhibits were received and 2,400 printed pages of transcript were recorded. The Master also observed the product in manufacture in a licensed foundry.² The Report of the Master reflects a careful and thorough examination and analysis. I take this opportunity to commend the Master for his scholarly treatment of a difficult subject.

It should be emphasized at the outset that the factual findings of the Master come to me armored with a strong presumption of validity. Morris Plan Industrial Bank v. Henderson, 2 Cir., 1942, 131 F.2d 975; Helene Curtis Industries v. Sales Affiliates, Inc., D.C. S.D.N.Y.1954, 121 F.Supp. 490, 494-495, affirmed 2 Cir., 233 F.2d 148, certiorari denied 1956, 352 U.S. 879, 77 S.Ct. 101, 1 L.Ed.2d 80. Under Rule 53(e) (2), Federal Rules of Civil Procedure, 28 U.S. C., I must accept these findings unless they are clearly erroneous. As I pointed out in Sales Affiliates, the same principles apply to a master's factual findings as to those of a district court on appeal. United States v. Village of Highland Falls, 2 Cir., 154 F.2d 224, 227, certiorari denied Volkringer v. United States, 1946, 329 U.S. 720, 67 S.Ct. 54, 91 L.Ed. 624.

The requirement of Rule 53(e)(2) is especially appropriate in highly technical patent cases such as this. See Graver Tank & Mfg. Co. v. Linde Air Products Co., 1949, 336 U.S. 271, 274-275, 69 S.Ct. 535, 93 L.Ed. 672; University of Ill. Foundation v. Block Drug Co., 7 Cir., 241 F.2d 6, 10, certiorari denied 1957, 354 U.S. 922, 77 S.Ct. 1382, 1 L.Ed.2d 1437. Here the Master's appreciation of the metallurgical subtleties involved was gained through actual observation of foundry procedures and personal microscopic study of the internal structures of metals, as well as through evaluation of voluminous oral testimony and documents. This is the antithesis of the case where the precise nature of the processes involved can be gleaned from the record. See Plax Corp. v. Precision Extruders, 3 Cir., 1957, 239 F.2d 792. Here we are dealing with findings stemming from examination of real evidence, views of processes in operation and above all from the careful evaluation of testimony, based on actual observation of the witnesses, with its requisite determination of credibility.³

Numerous issues are raised by the parties' exceptions to the findings of the Master. They reach into every facet of the Master's detailed analysis. In my ensuing discussion I shall endeavor to treat the more important of these objections.

II. State of Prior Art

Ferrous casting, as distinguished from forging, machining or welding, has long been employed by the art in the production of a wide variety of articles. However, the trade encountered certain limitations concomitant with its use. These may be best exemplified by setting out the nature and character of the principal cast ferrous products, such as cast steel, cast iron and malleable iron, employed for such purposes.

Cast steel is an iron alloy with a minimum amount of carbon (less than 1.7%) and represents the optimum that can be obtained from ordinary ferrous materials in cast form from the standpoint of such properties as tensile strength, yield strength, elongation, etc. However, because of its low carbon content, cast steel has a high melting point and its production entails an elaborate and expensive process with a high capital investment in specially designed furnaces. Accordingly it is a costly product to produce.

Cast iron is an alloy or iron having a carbon content in excess of 1.7%. Gray iron which is the most popular form of cast iron has a considerably lower melting temperature than cast steel and combines the advantages of lower cost and simplicity of production. Its major shortcoming is that the continuity of its matrix is disrupted by myriad graphite flakes. These flakes reduce the strength and impair the ductility and shock resistance of the cast.

Malleable iron, which has a carbon content between that of cast iron and cast steel, is a useful compromise between the two extremes. The disruptive effects of graphite flakes are reduced through a lengthy heating and annealing process which causes the carbon to occur in the form of compacted particles known as "temper carbon." This procedure is time consuming, expensive and generally feasible only with fairly thin castings. For a good many years the industry has been desirous of achieving the advantages of malleable iron without its cost, thickness limitations, and other disadvantages.

III. The Patent

A. Its Nature

The patent in question has allegedly achieved this goal. It provides for the addition of magnesium to molten iron so as to produce a small quantity of retained magnesium in the iron in its "as cast" state. This retained magnesium causes the graphite (crystallized form of carbon) to occur in spheroidal rather than flake form thereby producing a product with vastly improved physical properties. The minimal amounts of retained magnesium necessary to induce the desired effect are referred to in the patent both as "small but effective" and "0.04%."⁴

According to the Master, the patent taught a means of vastly improving cast iron properties which the art had sought for many years. The use of magnesium as an additive to molten iron was itself a daring accomplishment. For years the literature on the subject regarded this as a hazardous procedure on the assumption that adding iron to magnesium would induce explosive reaction. However, by carefully regulating their process, INCO was able to limit the reaction and to utilize the changes induced by retained magnesium. The resultant alloys were subjected to critical analysis by INCO metallurgists. They learned that small quantities of retained magnesium produced shortening, thickening and curving of the graphite flakes with commensurate improvements in physical properties. Further analysis disclosed a strong correlation between the number of spheroids and amounts of magnesium retained. It was found, however, that a point was reached after which additional quantities of retained magnesium induced a reappearance of flaked graphite. It was on the basis of these studies that the patentees undertook to charter the outside limits of retained magnesium within which their successful results might be duplicated.

INCO filed its application for a patent on November 21st, 1947. Since then the industry has heralded INCO's contribution to the art as a broad, new pioneering discovery. Nodular iron as so produced had many advantages—low cost, good castability, strength, toughness, heat and corrosion resistance, stiffness, wear resistance, machinability, and ability to damp vibrational noise. As might be expected, the patent was strenuously exploited by the industry, and adopted for use in the performance of a wide variety of tasks. The Master found that INCO's discovery represented a significant advance in the art and was of great importance to the industry.⁵ At the time of the hearings before the Master, there were 113 active licensees in the United States and 236 in foreign countries. From 1949 to 1955 the annual world-wide production of nodular iron had increased at an accelerating rate. INCO, recognizing the valuable asset it possessed in nodular iron, has not stood still in the face of its growing trade acceptance. From 1949 to 1955, INCO expended more than ¾ of a million dollars to promote its licensing program and license production of nodular iron.⁶ It is...