Mee Industries v. Dow Chemical Company, No. 08-16747 (11th Cir. 6/15/2010)
| Decision Date | 15 June 2010 |
| Docket Number | No. 08-16747.,08-16747. |
| Parties | MEE INDUSTRIES, A foreign corporation, Plaintiff-Appellant-Cross-Appellee, v. DOW CHEMICAL COMPANY, A foreign corporation, Defendant-Appellee-Cross-Appellant. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Appeals from the United States District Court for the Middle District of Florida, D. C. Docket No. 05-01520-CV-ORL-31DAB.
Before MARCUS, FAY and ANDERSON, Circuit Judges.
This case comprises the respective appeal and cross-appeal of Mee Industries ("Mee") and Dow Chemical Company ("Dow") in a malicious prosecution suit brought by Mee against Dow. Mee brought this suit in response to a patent infringement suit filed in the Middle District of Florida by Dow against Mee and Florida Power Corporation, a Mee customer. That case was ultimately resolved in Mee's favor. In the instant case, a jury verdict was entered in Mee's favor for the previously stipulated amount of its attorneys' fees in the patent infringement case. On appeal, Mee argues that the district court erred by granting Dow's Rule 50(a) motion on the issue of punitive damages and excluding evidence of Mee's damages relating to loss of goodwill under Fed. R. Civ. P. 37(c)(1). In its cross-appeal, Dow argues that the district court erred by denying Dow's Rule 50(b) motions on the issues of lack of probable cause and its advice-of-counsel defense. This case presents two close questions, but after carefully considering the parties' briefs, thoroughly investigating the record, and having heard oral arguments, we affirm.
The foundations of this case were laid in a patent infringement case filed by Dow against Mee and Florida Power Corporation. As part of its myriad operations, Dow uses gas turbines to generate power for manufacturing operations. Mee sells fogging systems for a variety of uses, including power augmentation for gas turbines. The infringement case focused on two patents, United States Patent No. 5,867,977 ("the `977 Patent") and United States Patent No. 5,930,990 ("the `990 Patent"), entitled "Method and Apparatus for Achieving Power Augmentation in Gas Turbines Via Wet Compression." Dow is the assignee of both patents. The patents were issued in 1999 and disclose methods of increasing the power output of a gas turbine by allowing nebulized water particles to flow into the compressor of a turbine while minimizing the possible negative side effects.
Gas turbines work in several steps. A working fluid, such as air, is drawn through an inlet duct into a compressor section. In the compressor section, the air is compressed by a row of blades. The compressed air is combined with fuel in the combustion chamber. Finally, the compressed air/fuel mixture is oxidized, and the energy from the hot gas is converted into work in the turbine section.
The performance of a gas turbine can be improved by cooling the inlet air temperature. Cooling the inlet air reduces the amount of work necessary to compress the air in the compressor section. One method of cooling the inlet air temperature is evaporative cooling. In evaporative cooling, fine water particles are injected into the air before it enters the gas turbine. As the water evaporates, the air temperature cools, leading to cooler air entering the turbine. In evaporative cooling, all of the water injected into the air evaporates before it enters the compressor. Thus, no water particles enter the compressor section. Wet compression, on the other hand, occurs when more water is injected into the air than can evaporate before it enters the compressor. Therefore, under wet compression conditions, fine particles of water actually enter the compressor section. Those water particles evaporate in the compressor section, lowering the air temperature in the compressor section, thereby providing greater power augmentation. The technology of wet compression has been understood for some time. The difficulty with wet compression is that putting too much water into the compressor can create thermal stresses that can cause the compressor blades to crack or lead to deformation of the machine's housing. Dow's research centered around increasing the amount of water added to the system in an incremental fashion to achieve greater power augmentation without any negative side effects.
In 1998, Dow licensed its technology to Siemens Westinghouse. Shortly after that agreement was reached, Siemens made Dow aware that Mee was selling its fogging systems for use in the power augmentation field.
In May 1999, several Dow employees traveled to California and met with Thomas Mee, the president of Mee Industries, at Mee's headquarters to discuss a possible licensing arrangement related to his products and Dow's patents. Those employees were William Miller, Dow's in-house patent counsel, Paul Hathaway, a Dow licensing manager, and Steven Jasper, a Dow technical expert. At the conclusion of that meeting, Mee provided Dow with information on Mee's Fog System, including a Users Manual and information on installations Mee had performed.
In June 1999, Thomas Mee contacted Hathaway, expressing interest in a licensing arrangement, but denying infringement of Dow's patents. After that contact, Miller provided Hathaway with a memo to assist Hathaway in his negotiations with Mee. The memo included Miller's opinion on whether Mee was infringing. His opinion was based on modeling work performed by Jasper, using the technical information provided by Mee. Jasper's model demonstrated that under certain environmental conditions, some of the installations on Mee's customer list were achieving wet compression if operated at the designed water flowrates. Miller opined that based on that model and his understanding of the patents in question, Mee's systems infringed on several claims. Miller's memo also provided information in response to Mee's claims that Dow's patents were invalid. Miller pointed out that the standard of proof to invalidate an issued patent was one of clear and convincing evidence, which he characterized as a difficult standard to meet. Hathaway forwarded Miller's opinion to Mee, along with an informal, initial licensing proposal. Ultimately, the parties failed to reach any arrangement.
In December 1999, Miller contacted Bruce Kanuch, an in-house lawyer specializing in IP litigation, about the possibility of an infringement action against Mee. Kanuch agreed with Miller's assessment that a reasonable basis existed for suing Mee. Miller then retained William Schramm to act as outside counsel and to provide an opinion on the validity of Dow's patents and an infringement analysis if he concluded the patents were defensible. Schramm was given access to Dow personnel, information on the patents and Mee's Fog System, including the documents provided by Mee, and all relevant patent files, literature searches, correspondence, and licensing agreements.
In January 2000, Schramm provided an opinion letter which concluded that Dow's patents were valid and that Mee's technology infringed on at least one claim in each patent. In his letter, Schramm stated that he had reviewed the file histories, the art cited by the Patent Office in both patents, references cited in the information disclosure statements filed with the Patent Office, and four other references that potential Dow licensees had brought to Dow's attention. In his opinion, those additional references were cumulative of other art before the patent examiner. He concluded that any challenger would have a difficult time proving by clear and convincing evidence that the patents were invalid. Schramm also listed the various articles or brochures provided by Miller relating to Mee technology that he reviewed for his infringement analysis. In his view, those materials established that Mee systems infringed on at least one claim of each patent.
In February 2000, Christopher Mudd, Dow's commercial manager for energy, Jasper, Schramm, Kanuch, and Miller held a meeting. The lawyers opined that the patents were valid and Mee was infringing. Mudd agreed that they should move forward in securing authorization to file an infringement action.
In March 2000, Kanuch made a presentation to the Litigation Review Committee ("LRC") covering the legal and business aspects of an infringement suit. The LRC approved the suit.
On April 5, 2000, Dow filed an infringement suit against Mee and Florida Power in the United States District Court for the Middle District of Florida. Dow alleged that Mee and Florida Power infringed on both patents. In response, Mee argued, inter alia, that the patents were invalid under 35 U.S.C. §§ 102(b)1 and 1032 because the claimed invention, or obvious variations thereof, were placed on sale in the United States more than one year before the earliest filing date of the patents at issue.3 Dow moved for a preliminary injunction. The district court denied that motion, finding that Dow had failed to meet its burden of showing a likelihood of success on the merits. Dow Chem. Co. v. Mee Indus., 264 F. Supp. 2d 1018, 1022 (M.D. Fla. 2002), aff'd in part, rev'd in part, 341 F.3d 1370 (Fed. Cir. 2003). Florida Power sought summary judgment on the grounds that its system did not infringe on Dow's method, but that motion was denied because the court concluded a genuine issue of material fact existed as to how Florida Power operated its system. Id. Mee did not seek summary judgment on the infringement issue.
At trial, the district court focused on two independent claims, Claim 14 of the `977 Patent and Claim 30 of the `990 Patent. In Claim 14 of the `977 Patent, Dow claimed:
A method for augmenting the net output of a gas turbine having an axial flow multistage compressor for acquiring and compressing a working fluid comprising air, the method comprising the steps of:
adding increasing amounts of liquid water comprising liquid droplets to the...
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