MGA, Inc. v. LaSalle Mach. Tool, Inc.

• Decision Date: 04 April 1986
• Docket Number: Docket No. 80604
• Citation: 384 N.W.2d 159,148 Mich.App. 350
• Parties: MGA, INC., Plaintiff-Appellant, v. LaSALLE MACHINE TOOL, INC., Defendant-Appellee, Counter-Plaintiff, and Peter J. Manetta, Third-Party Defendant.
• Court: Court of Appeal of Michigan — District of US

Page 159

384 N.W.2d 159

148 Mich.App. 350

MGA, INC., Plaintiff-Appellant, v. LaSALLE MACHINE TOOL, INC., Defendant-Appellee, Counter-Plaintiff and Peter J. Manetta, Third-Party Defendant.

Docket No. 80604.

Court of Appeals of Michigan.

Submitted Oct. 17, 1985.

Decided Jan. 21, 1986.

Released for Publication April 4, 1986.

John R. Benefiel, Birmingham, for plaintiff-appellant.

Stephenson and Boller, P.C. by James E. Stephenson, Ann Arbor, for defendant-appellee, counter-plaintiff.

Before V.J. BRENNAN, P.J., BEASLEY and NOECKER, ^* JJ.

BEASLEY, Judge.

On April 14, 1981, plaintiff, MGA, Inc., filed a complaint against defendant, LaSalle Machine Tool, Inc., alleging that defendant had violated a "patent license agreement" by not paying royalties to plaintiff for sales of machines covered by the license agreement. Plaintiff sought damages for the unpaid royalties and an injunction to enforce the license agreement in the future. On July 12, 1984, subsequent to a four-day bench trial, the trial judge issued a written opinion finding that plaintiff had failed to prove by a preponderance of the evidence that the machines sold by defendant were covered by the license agreement. On September 14, 1984, the trial judge entered a judgment of no cause of action.

The parties, both at trial and on appeal, argue that the determination of whether defendant has breached the license agreement rests on an interpretation of plaintiff's patent number 3,570,656. Since this case extensively involves federal patent law issues, we must initially determine if the state courts have jurisdiction over this matter.

Jurisdiction over claims "arising under" the patent laws is exclusively vested in the federal courts. ¹ However, not all claims involving the patent laws "arise under" the patent law. In A & C Engineering Co. v. Atherholt, ² the Michigan Supreme Court quoted with approval the rule stated in 167 A.L.R. 1114, 1118 which drew the following distinction:

"[T]he correct rule is that if the plaintiff founds his suit directly on a breach of some right created by the patent laws, he makes a case arising under those laws and only a Federal court has jurisdiction; but if he founds his suit on some right vested in him by the common law, or by general equity jurisprudence, he makes a case arising under State law and only a State court has jurisdiction."

In determining whether a plaintiff's suit is found directly on federal patent laws or on state common law, a court must look to the pleadings, specifically the relief sought. ³ In reviewing the pleadings in this case, plaintiff seeks damages and an injunction only for royalties related to the licensing agreement. Plaintiff's claim is based on the licensing agreement and rights created by state contract law. Therefore, plaintiff's claim does not "arise under" federal patent law, and the state courts have jurisdiction in this matter.

The trial judge set out his findings of fact in his opinion. Initially, he described the background facts of the case and noted that the parties had entered a "patent licensing agreement" effective January 1, 1979. Under the agreement, defendant was to report sales of "conveyor accumulator devices" covered by the patent involved in the license agreement and pay a royalty to plaintiff. After operating under the license agreement for a period, defendant desired to avoid the royalty payments and become more competitive. Defendant designed and obtained patents on its own conveyor accumulator devices and then sold these newly developed accumulator devices without paying royalties to plaintiff.

After setting out these background facts, the trial judge noted that the specific issue at trial was whether defendant's accumulators (the "accused machines") were covered by paragraphs 13 and 31 ("claims" in patent law terminology) of plaintiff's patent which formed the basis for the licensing agreement. The trial court then noted the common design of conveyor accumulator devices and that this basic design had been patented prior to both plaintiff's and defendant's patents. The trial court further noted that defendant's accumulators use a chain device to function, whereas plaintiff's accumulators, under its patent, use end-to-end abutting bars.

After making these findings, the trial judge concluded that the accumulators sold by defendant were not covered by the license agreement. To reach this conclusion, the trial judge implicitly found that defendant's accumulators were not covered by claims 13 and 31 of plaintiff's patent. Thus, the trial judge found that defendant did not breach the license agreement by selling its accumulators without paying royalties to plaintiff.

Construing patent claims is a somewhat novel experience for this Court, but the parties agreed that state courts must apply patent law decisions of the federal courts in addressing patent construction issues. ⁴ The guidance of the federal court decisions is necessary for a proper determination of the issues involved in this case. Thus, our analysis follows that of the federal decisions.

In general, there are two separate methods of analysis for determining whether the claims of a patent cover a certain device. The first method of analysis is termed "literal infringement". The second method of analysis is termed "the doctrine of equivalents" and is often used when literal infringement is absent. ⁵ We will apply the "literal infringement" analysis first, since our disposition under that analysis also disposes of "the doctrine of equivalents" analysis.

"Literal infringement" may be found if the accused device falls within the scope of the language of the asserted claims as properly interpreted. ⁶ Thus, the asserted claims must be compared with the product accused of infringement. ⁷

A court's comparison of the accused machines to the patent claims is broken down into two steps. First, the court must define the scope of the claims. This construction of the claims is a question of law if the language of the claims is not disputed (as in this case). ⁸ Second, the trier of fact must decide whether the claims, as construed in law, cover the accused machine. This involves an issue of fact. ⁹

In the within case, the function and components of defendant's machines are not in dispute. An accumulator is a device which operates within a conveyor system. A conveyor transports parts from one area to another. In many factory conveyor systems it is important not to have lags or gaps when parts are missing from their positions on the conveyor. Thus, if a part is removed or falls off, a method is needed to fill in the spot of the removed or lost part. Accumulators serve this role by pushing forward the parts behind the gap, thus filling the gap. Every type of accumulator uses a "sensor" to find gaps along the conveyor. Once a gap is found, a "mechanism" is used to raise a "moving component" that pushes forward the parts behind the gap. The difference in accumulators is based on the various "mechanisms" used to activate the appropriate moving components. The earliest accumulators (before both plaintiff's and defendant's) used a pneumatic mechanism, which was often unreliable. Plaintiff's accumulator was the first to use a simple mechanical mechanism of "end-to-end bars". The parties agree that defendant's accumulator uses a simple mechanical mechanism of "chains and pivoting levers". Thus, the second issue involving the factual determination of the nature of the accused machine is not seriously in dispute.

The crucial step in this case is defining the scope of the undisputed language of the claims in plaintiff's patent as a matter of law. This is the issue on which the trial court and the parties focused in four days of trial. Plaintiff asserted that claims 13 and 31 of its patent cover defendant's chain and pivoting lever accumulators. Defendant, and the trial court, interpreted the language of those claims not to cover defendant's accumulators.

Claim 13 includes the following devices:

"13. An accumulating feed system comprising a longitudinally arranged series of work supporting stations including a starting station at which workpieces are deposited serially, a delivery station from which workpieces are removed serially, and a plurality of intermediate stations through which workpieces are advanced intermittently and from which individual workpieces may be removed, sensing means associated with said stations to determine empty stations, feed means associated with each station except the discharge station operable to advance a workpiece from its station to the next successive station, and control means responsive to the sensing of the absence of a workpiece at the delivery or any intermediate station to activate the feed means of every station in rear of the empty station to simultaneously advance a workpiece to the next successive station, said control means comprising a series of individual separately movable elements, all of said elements being movable relative to a support in the same sense, and abutment means acting between said elements effective to ensure identical movement of all elements located in one direction from a particular element upon movement of such particular element, while the elements located in the opposite direction are not moved." (Emphasis added.)

Claim 31 includes the following devices:

"31. An accumulating feed system comprising a series of work support stations including a starting station at which workpieces are deposited serially, a delivery station from which workpieces are removed serially, and a plurality of uniformly spaced intermediate stations between which workpieces are advanced intermittently, movable rigid sensing elements associated with said stations each having two positions corresponding to the presence or absence of a workpiece at the associated station and including an actuating portion movable between idle and actuating positions upon movement of said...