McGraw Edison Company v. Central Transformer Corp.

• Decision Date: 23 June 1961
• Docket Number: Civ. A. No. 2960.
• Citation: 196 F. Supp. 664
• Parties: McGRAW EDISON COMPANY, Plaintiff, v. CENTRAL TRANSFORMER CORP., Defendant.
• Court: U.S. District Court — Eastern District of Arkansas

196 F. Supp. 664

McGRAW EDISON COMPANY, Plaintiff, v. CENTRAL TRANSFORMER CORP., Defendant.

Civ. A. No. 2960.

United States District Court E. D. Arkansas, W. D.

June 23, 1961.

John T. Williams, Little Rock, Ark., James Van Santen, Charles F. Meroni, Chicago, Ill., for plaintiff.

Bridges & Young, Pine Bluff, Ark., John H. Sutherland, St. Louis, Mo., Heiskell Weatherford, Jr., Memphis, Tenn., for defendant.

HENLEY, Chief Judge.

This suit for alleged patent infringement and unfair competition was brought by plaintiff, McGraw Edison Company, a Pennsylvania concern, formerly McGraw Electric Company, against Central Transformer Corp., an Arkansas corporation, which has its principal place of business at Pine Bluff. It is now before the Court on exceptions to the report filed April 1, 1960, by Special Master Robert S. Lindsey to whom the cause was referred in 1957.

In its amended pleadings plaintiff alleges that defendant infringed United States Letters Patent No. 2,614,158, issued October 14, 1952, and reissued April 26, 1955, as RE 23,987, to Robert C. Sefton and John J. Zimsky, and also Letters Patent No. 2,700,207, issued January 25, 1955, to John J. Zimsky. Plaintiff further alleges that defendant has been guilty of unfair competition in various respects. The prayer of the plaintiff is for injunctive relief, damages, costs, and an attorney's fee.

In its answer defendant denies the operative allegations of the complaint as amended, and by way of counterclaim seeks a declaratory judgment that the patents in suit are invalid and void and that they were not infringed by defendant.

The article involved in this case is a magnetic iron core for use in electrical transformers. Such cores are manufactured and sold by both plaintiff and defendant. One of the patents owned by plaintiff covers the manufactured core and is sometimes referred to as the "apparatus patent." The other patent covers the method or process by which the core is manufactured and is at times referred to as the "method patent."¹

The order of reference directed the Master to define and simplify the issues in the case, to receive and report the evidence on behalf of the respective parties upon all of the issues, to make necessary computations, and to make findings of fact and conclusions of law upon all of the issues.

As a preliminary matter the Master advised counsel on both sides that it was discretionary whether evidence as to damages should be submitted prior to a determination of liability; that the issues as to damages were somewhat complex; that the introduction of evidence as to damages would be both time consuming and expensive; and that it was considered preferable to make findings or determinations on the questions of validity and infringement of the patents prior to requiring the parties to submit their evidence as to damages, although either side should be considered free to introduce evidence on that issue.

Extensive hearings were held. The transcribed testimony of the witnesses covers more than 7,000 typed pages and 1190 exhibits were received in evidence.

The well-written report of the Master consists of an opening statement, a statement of the issues, a statement with regard to the incidence of the burden of proof as to the respective issues, an opinion dealing with all issues in the case other than damages, and formal findings of fact and conclusions of law. The Master found ultimately that both patents had been infringed by defendant, but that neither patent was valid, and he further found that defendant had not been guilty of unfair competition in any of the respects relied upon by plaintiff. The Master's recommendations for judgment, found in his 11th, 13th, and 14th Conclusions of Law, are that the complaint should be dismissed, that judgment should be entered in favor of defendant declaring both patents invalid, and that costs should be assessed against plaintiff, except that the parties should bear equally the costs of reporting and transcribing the proceedings before the Master and the latter's fee and expenses.

Within due time plaintiff filed exceptions to the Master's holdings of invalidity and to his findings on the claim of unfair competition. Defendant has filed exceptions to the findings of infringement. Both sides have filed extensive briefs to which due consideration has been given.

In passing upon the pending exceptions this Court does not try the factual issues de novo. In this connection Rule 53(e) (II) of the Federal Rules of Civil Procedure, 28 U.S.C.A., provides that the Court shall accept the Master's findings of fact "unless clearly erroneous." And a factual finding by a Master is not "clearly erroneous" unless it stems from a mistaken view of the law, or unless, although it be supported by substantial evidence, the Court is thoroughly convinced after a consideration of the evidence that a mistake has been made. United States v. Twin City Power Co., 4 Cir., 248 F.2d 108, certiorari denied 356 U.S. 918, 78 S.Ct. 702, 2 L.Ed.2d 714; Ferroline Corporation v. General Aniline & Film Corporation, 9 Cir., 207 F.2d 912, certiorari denied 347 U.S. 953, 74 S.Ct. 678, 98 L.Ed. 1098; United States v. Waymire, 10 Cir., 202 F.2d 550; Sanitary Farm Dairies v. Gammel, 8 Cir., 195 F.2d 106; 2 Barron & Holtzoff, Federal Practice & Procedure, § 1170, p. 886. It may be noted that the Court is more reluctant to overturn the Master's findings where such findings are based upon conflicting testimony of witnesses who have been seen and heard by the Master than where the findings are simply logical inferences drawn by the Master from documentary evidence, depositions, or undisputed facts. United States v. 15.3 Acres of Land in City of Scranton, D.C. Pa., 154 F.Supp. 770; In re Riddlesburg Mining Co., D.C.Pa., 122 F.Supp. 560; Helene Curtis Industries v. Sales Affiliates, D.C.N.Y., 121 F.Supp. 490, affirmed 2 Cir., 233 F.2d 148, certiorari denied 352 U.S. 879, 77 S.Ct. 101, 1 L.Ed. 2d 80; 5 Moore's Federal Practice, 2d Edition, ¶ 53.12(4), pp. 2983-2986. Of course, the Court is not bound by the Master's conclusions of law. 2 Barron & Holtzoff, op. cit. § 1170, pp. 886-887; 5 Moore's, op. cit. ¶ 53.12(5), p. 2989.

From its consideration of all of the materials before it the Court is convinced that the Master correctly conceived the law applicable to the case, that his findings are adequately sustained by substantial evidence and are not clearly erroneous, that he correctly applied the law to the facts, and that his report should be accepted and approved and judgment entered thereon.

I. Infringement

On the patent phase of the case, the Master first considered the issue of infringement² and recognized that the burden of proving infringement of the respective patents by a preponderance of the evidence was upon plaintiff. 35 U.S.C.A. § 282. The Master correctly stated that the test of infringement is whether the accused device does the same work in substantially the same way and accomplishes substantially the same result, irrespective of whether there is a duplication of every literal detail. Graver Tank & Mfg. Co. v. Linde Air Co., 339 U.S. 605, 608, 70 S.Ct. 854, 94 L.Ed. 1097; Sanitary Refrigerator Co. v. Winters, 280 U.S. 30, 42, 50 S.Ct. 9, 74 L.Ed. 147. In Crowson v. Dennington, D.C. Ark., 141 F.Supp. 647, 651, the Court, speaking of infringement, said:

"Generally speaking, the test of infringement is whether or not the accused device performs the same work as the patented device in substantially the same way and accomplishes substantially the same result; if so, there is an infringement even though there may be variations in form, nomenclature or proportion. 40 Am.Jur. `Patents,' Section 155, p. 643; Electric Protection Co. v. American Bank, etc., Co., 8 Cir., 184 F. 916; McKays Co. v. Penn Electric Switch Co., 8 Cir., 60 F.2d 762; Irvin v. Buick Motor Co., * * * 8 Cir., 88 F.2d 947; Montgomery Ward & Co. v. Clair, 8 Cir., 123 F.2d 878. In the case last cited the Court said: `* * * It is settled that "to sustain the charge of infringement the infringing device must be substantially identical with the one alleged to be infringed in (1) the result attained; (2) the means of attaining that result; and (3) the manner in which its different parts operate and cooperate to produce result. If the devices are substantially different in either of those respects, the charge of infringement is not sustained." * * *'"

Although the Master did not decide whether defendant's product and method were identical copies of plaintiff's product and method, he did find that the doctrine of "substantial equivalents" was applicable, and that both patents had been infringed. On this point the Master said:

"Without deciding Plaintiff's contention that we are dealing with `Chinese copies,' substantial equivalents are involved and Defendant has infringed both patents which are in suit. Graver Tank & Mfg. Co. v. Linde Air Products Co., 339 U.S. 605 70 S.Ct. 854, 94 L.Ed. 1097 * *."

In Graver the doctrine of equivalents was discussed in some detail. It was there stated (at pages 608-610 of 339 U.S. at page 856 of 70 S.Ct.):

"* * * The essence of the doctrine is that one may not practice a fraud on a patent. Originating almost a century ago in the case of Winans v. Denmead, 15 How. 330 14 L.Ed. 717, it has been consistently applied by this Court and the lower federal courts, and continues today ready and available for utilization when the proper circumstances for its application arise. `To temper unsparing logic and prevent an infringer from stealing the benefit of an invention' a patentee may invoke this doctrine to proceed against the producer of a device `if it performs substantially the same function in substantially the same way to obtain the same result.' Sanitary Refrigerator Co. v. Winters, 280 U.S. 30, 42, 50 S.Ct. 9, 74 L.Ed. 147. The theory on which it is founded is that `if two devices do the same work in substantially the same

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