McElmurry v. Arkansas Power & Light Co.

• Decision Date: 16 June 1993
• Docket Number: No. 92-1246,92-1246
• Citation: 995 F.2d 1576,27 USPQ2d 1129
• Parties: Max C. McELMURRY and White River Technologies, Inc., Plaintiffs-Appellants, v. ARKANSAS POWER & LIGHT COMPANY, Entergy Corporation and Middle South Utilities, Defendants-Appellees.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1576

995 F.2d 1576

27 U.S.P.Q.2d 1129

Max C. McELMURRY and White River Technologies, Inc. Plaintiffs-Appellants, v. ARKANSAS POWER & LIGHT COMPANY, Entergy Corporation and Middle South Utilities, Defendants-Appellees.

No. 92-1246.

United States Court of Appeals Federal Circuit.

June 16, 1993.

David A. Hodges, Little Rock, AR, argued, for plaintiffs-appellants.

Thomas F. Meeks, Friday, Eldredge & Clark, Little Rock, AR, argued, for defendants-appellees.

Before NIES, Chief Judge, RICH, and MAYER, Circuit Judges.

RICH, Circuit Judge.

Max C. McElmurry and White River Technologies, Inc. (WRT) appeal the February 10, 1992 Judgment of the U.S. District Court for the Eastern District of Arkansas, Northern Division, granting a motion for summary judgment filed by Arkansas Power & Light Company (AP & L) and Entergy Corporation. ¹ The district court held that there were no relevant or material factual disputes precluding a finding that AP & L holds "shop rights" to certain subject matter claimed in U.S. Patent No. 4,527,714, titled "Pressure Responsive Hopper Level Detector System" (Bowman patent), and thus, as a matter of law, AP & L had not infringed any claim of the Bowman patent. For the reasons set forth below, we affirm.

I. Standard of Review

Because WRT's complaint alleged patent infringement, the jurisdiction of the district court was based at least in part on 28 U.S.C. § 1338(a) (1988). Accordingly, we have jurisdiction over this appeal pursuant to 28 U.S.C. § 1295(a)(1) (1988).

Under the Federal Rules of Civil Procedure, a motion for summary judgment is properly granted only where

the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.

Fed.R.Civ.P. 56(c). In reviewing the district court's grant of summary judgment, we must make an independent determination as to whether the standards of Rule 56(c) have been met. Reversal is required if the district court improperly determined any genuine issue of material fact or erred in holding that AP & L was entitled to judgment as a matter of law. Intellicall, Inc. v. Phonometrics, Inc., 952 F.2d 1384, 1387, 21 USPQ2d 1383, 1386 (Fed.Cir.1992).

II. Genuine Issues of Material Fact

In considering AP & L's motion for summary judgment, the district court was required to view the evidence in the light most favorable to WRT and to draw all reasonable factual inferences in WRT's favor. AP & L had the burden of demonstrating the absence of any genuine issue of material fact. However, since AP & L supported its motion with three affidavits, deposition testimony, and a Rule 29 Statement of Uncontested Facts based upon these affidavits and testimony, the burden shifted to WRT to come forward with evidence directed to specific facts showing that there was a genuine issue for trial. Hodosh v. Block Drug Co., 786 F.2d 1136, 1141, 229 USPQ 182, 186 (Fed.Cir.1986), cert. denied, 485 U.S. 1007, 108 S.Ct. 1472, 99 L.Ed.2d 701 (1988); Fed.R.Civ.P. 56(e).

WRT failed to come forward with such evidence, instead choosing to rely upon conclusory statements and denials in its pleadings. ² Mere denials and conclusory statements, however, are not sufficient to establish a genuine issue of material fact. Hodosh, 786 F.2d at 1141, 229 USPQ at 186; Fed.R.Civ.P. 56(e). Therefore, we find no error in the district court's holding that there were no genuine issues of material fact necessitating trial or in the district court's acceptance of the facts presented by AP & L in its supporting evidence for purposes of analyzing the "shop rights" issue.

III. Shop Rights

A. Background

AP & L hired Harold L. Bowman, the patentee, as a consultant on October 24, 1980, to assist in the installation, maintenance and operation of electrostatic precipitators at AP & L's White Bluff Steam Electric Station (White Bluff) located near Redfield, Arkansas. An electronic precipitator is a device which removes granular ash particles (fly ash) from the gasses emitted by coal-fired boilers used to generate steam. As fly ash is removed, it is collected in hoppers referred to as precipitator hoppers. Prior to April of 1982, the precipitator hoppers at White Bluff employed a level detector system using a nuclear power source (K-ray system) to detect the level of fly ash in the hoppers.

AP & L was not satisfied with the K-ray system. As a result, in the early part of 1982, Bowman discussed with a Mr. Richard L. Roberts, an AP & L employee, replacing the K-ray system with a new level detector, an initial design of which they drew on a napkin. ³ In the proposed level detector, a vacuum gauge was connected to a pipe inserted and welded into the wall of a precipitator hopper. If the level of the fly ash collected in the hopper extended above the point where the pipe was inserted into the hopper, the vacuum gauge would no longer indicate that a vacuum existed, as it would if the level of the fly ash were below that point. Thus, by monitoring the vacuum gauge, one could determine whether the fly ash exceeded a certain level in the hopper.

AP & L considered the proposed level detector and, during a power outage in March of 1982, ordered its installation on one hopper at White Bluff for testing purposes. When it proved successful, AP & L ordered that the level detector be installed on a total of sixteen (16) precipitator hoppers at White Bluff. In each case, level detectors were installed both near the bottom and top of the hopper, thus allowing for the detection of the fly ash at two different levels in the hopper. When this system proved successful, AP & L ordered that the level detectors be installed on the remaining one hundred and twelve (112) precipitator hoppers at White Bluff. All costs associated with the installation and testing of the level detector on the one hundred and twenty eight (128) hoppers at White Bluff, including materials and working drawings, were paid by AP & L.

On October 24, 1982, Bowman moved from White Bluff to AP & L's Independence Steam Electric Station (ISES) located near Newark, Arkansas, to assist in the start-up, maintenance and operation of electronic precipitators at that facility. In November of 1982, Bowman formed White Rivers Technology, Inc. with McElmurry and a Mr. Johnny Mitchum, to market certain inventions on which Bowman held patents or was planning to seek patent protection. Bowman filed a patent application on the level detector on February 18, 1983, and the patent-in-suit issued on July 9, 1985. At some point prior to its issuance, Bowman assigned his patent rights to WRT.

While at ISES, Bowman assisted another AP & L engineer, a Mr. Will Morgan, in installing the level detector on precipitator hoppers at that facility. AP & L requested bids for the project and ultimately contracted with WRT to install the level detector on sixty four (64) of the hoppers at that location. An outside contractor other than WRT installed the level detector on the remaining sixty four (64) hoppers. AP & L did contract with WRT, however, to install certain electronic components of the level detectors installed by the outside contractor. The level detectors had been installed and were in operation on all one hundred and twenty eight (128) precipitator hoppers ⁴ by the end of 1984, prior to the issuance of the Bowman patent. Bowman's contract with ISES ended, however, in October of 1983 before completion of the project. All costs associated with the installation and testing of the level detectors at ISES, including materials and working drawings, were paid by AP & L even though some of the work was contracted out.

In 1985, based upon the success of the level detector on the precipitator hoppers at White Bluff and ISES, another AP & L engineer, a Mr. John Harvey, implemented a plan to install the level detector on fourteen (14) hydroveyer hoppers ⁵ at ISES. ⁶ Harvey informed Bowman of the plan to install the level detector on the hydroveyer hoppers, and Bowman indicated that he thought it was a good idea. Bowman also indicated that WRT would be interested in bidding on the project. AP & L ultimately awarded the contract, however, to another contractor because WRT was not the low bidder. In soliciting bids on the hydroveyer project, AP & L provided the contractors with specifications prepared by AP & L showing the work to be performed. The installation of the level detectors on the hydroveyor hoppers at ISES was completed in 1985, and all costs associated with their installation were paid by AP & L.

B. District Court Litigation

On April 25, 1990, WRT brought suit against AP & L for patent infringement based on AP & L's solicitation of and contracting with a party other than WRT to install Bowman's patented level detector on the hydroveyer hoppers at ISES. The district court granted summary judgment in favor of AP & L on the basis that AP & L had acquired a "shop right" in the level detector claimed in the Bowman patent. AP & L argued and the court agreed that, as a matter of law, Bowman's development of the patented level detector at AP & L's facilities at AP & L's expense entitled AP & L, under the "shop rights" rule, to reproduce and use the level detector in its business. ⁷ WRT then appealed to this court.

C. Analysis

A "shop right" is generally accepted as being a right that is created at common law, ⁸ when the circumstances demand it, under principles of equity and fairness, entitling an employer to use without charge an invention patented by one or more of its employees without liability for infringement. See generally D. Chisum, Patents, § 22.02 (1985 rev.); C.T. Dreschler, Annotation, Application and Effect of "Shop Right Rule" or License Giving Employer Limited Rights in Employee's Inventions and Discoveries, 61 A.L.R.2d 356 (1958); P. Rosenberg, Patent Law Fundamentals, § 11.04, 11-20 (1991)...