Molins PLC v. Textron, Inc., s. 94-1199

• Decision Date: 16 February 1995
• Docket Number: Nos. 94-1199,s. 94-1199
• Citation: 33 USPQ2d 1823,48 F.3d 1172
• Parties: MOLINS PLC, Plaintiff-Appellant, and John Coventry Smith, Jr., Plaintiff-Appellant, v. TEXTRON, INC., Kearney & Trecker Corporation, and Avco Corporation, Defendants-Appellees. to 94-1201 and 94-1215.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1172

48 F.3d 1172

33 U.S.P.Q.2d 1823

MOLINS PLC, Plaintiff-Appellant, and John Coventry Smith, Jr., Plaintiff-Appellant, v. TEXTRON, INC., Kearney & Trecker Corporation, and Avco

Corporation, Defendants-Appellees.

Nos. 94-1199 to 94-1201 and 94-1215.

United States Court of Appeals, Federal Circuit.

Feb. 16, 1995.

Rehearing Denied March 15, 1995.

Rudolph E. Hutz, Connolly, Bove, Lodge & Hutz, Wilmington, DE, argued for plaintiff-appellant, Molins, PLC. With him on the brief were Arthur G. Connolly, Jr., and Patricia Smink Rogowki. Also on the brief was Charles E. Pfund, Greenfield & Sacks, Boston, MA. Scott L. Nelson, Miller, Cassidy, Larroca & Lewin, Washington, DC, argued for plaintiff-appellant, John Coventry Smith, Jr. With him on the brief were R. Stan Mortenson and Lisa D. Burget. Also on the brief was William K. West, Jr., Cushman, Darby & Cushman, Washington, DC, of counsel.

Willem G. Schuurman, Arnold, White & Durkee, of Austin, TX, argued for defendants-appellees. With him on the brief was Richard D. Egan. Of counsel was Eric B. Meyertons. John S. Pacocha, Law Offices of Dick & Harris, of Chicago, IL, argued for defendants-appellees. With him on the brief were Richard E. Dick and Howard E. Silverman.

Opinion for the court filed by Circuit Judge LOURIE, in which Circuit Judge NIES joined as to part A1 and filed a separate opinion dissenting as to parts A2, A3, A4, and B; and Circuit Judge PAULINE NEWMAN joined except that she filed a separate opinion concurring in the judgment as to part A4.

LOURIE, Circuit Judge.

Molins PLC and John Coventry Smith, Jr. appeal from a judgment of the United States District Court for the District of Delaware holding U.S. Patents 4,369,563 and 4,621,410 unenforceable due to inequitable conduct and awarding attorney fees, costs, and expenses against Molins and Smith, jointly and severally. Molins PLC v. Textron, Inc., Civ. Nos. 86-446-JJF, 87-275-JJF, and 87-163-JJF (D.Del. Feb. 1, 1994) (amended final judgment). ¹ We affirm-in-part, vacate-in-part, and remand.

BACKGROUND

Molins is a United Kingdom limited liability corporation, having its principal office at Milton Keynes, England. Between 1963 and 1973, Molins operated a machine tool division for the design, manufacture, and sale of machine tools used in the high speed machining of light alloys.

In 1965, Molins' Research Director, Dr. David Williamson, developed a method for improving batch machining involving a plurality of machine tools arranged to accommodate the manual transport of pallet-mounted In 1966, Williamson invented a fully automated machining system that allows several related families of parts to be machined simultaneously (the "system 24"). Molins filed patent applications for the system 24 in the United Kingdom, the United States, and in other countries during 1966-67. In 1967, the U.S. batch process application was combined with the U.S. system 24 application in a continuation-in-part. The '563 patent later matured from a continuation-in-part of the combined U.S. application. ² Before the patent issued in January of 1983, however, the batch process claims were cancelled and only claims drawn to the system 24 apparatus issued. The '410 patent issued from a divisional application and is directed to the system 24 method of machining.

workpieces to and from the machine tools (the "batch process"). Molins filed a British patent application for the batch process in the fall of 1965 and filed counterpart applications in a number of countries, including the United States.

The '563 patent discloses a system of complementary, numerically-controlled machine tools. Materials to be machined, or "workpieces," are subjected to selected machining operations on selected machine tools in a selected order by the delivery of common form pallets loaded with the workpieces. Transporters deliver pallets between the machine tools, a storage rack, and work stations where the workpieces are automatically delivered in bins from a bin store and are loaded on the pallets. Tool magazines are delivered between a rack and the machine tools by a transporter. A computer controls transport and machining operations, and receives signals from monitors indicating the location of pallets, tool magazines, and bins.

Dennis Whitson began working for Molins in 1967 as one of several British chartered patent agents working in Molins' in-house patent department. He managed Molins' patent department from 1974 through 1981 and was responsible for the prosecution of all of Molins' patent applications directed to the batch process and system 24 inventions. When Whitson retired in 1981, Ivan Hirsh, employed by Molins since 1968, assumed the responsibilities as manager of Molins' patent department. After becoming manager, Hirsh assumed responsibility for prosecuting the applications relating to the patents in suit and for conducting the litigation involving Molins' patents.

Smith served as the primary United States counsel to Molins, representing Molins at the United States Patent and Trademark Office ("PTO") from 1966 through the relevant time period in this case. ³ Beginning in 1967, Smith prosecuted the patent applications leading to the issuance of the '563 and '410 patents. In January of 1980, Molins assigned a one-half interest in the patent applications to Smith in exchange for Smith's agreement to undertake further prosecution at his own expense. In July of 1988, Smith reassigned his interest in the patents to Molins. Smith remained entitled to one-half of all royalty income received by Molins from licenses under the patents entered into prior to July 1, 1988.

Between the fall of 1967 and April 1968, while the relevant U.S. patent applications were pending, Molins' patent department, and specifically Whitson, became aware of prior art referred to here as the "Wagenseil reference." ⁴ Upon evaluating the Wagenseil Prosecution of the U.S. and foreign system 24 applications continued. Wagenseil was cited to and by several foreign patent offices, but was not cited by Molins to the PTO. In 1975, Whitson told Smith that there were oppositions to the German system 24 patent application, but he did not inform Smith of the art cited in Germany, which included the Wagenseil reference. Eventually, Molins abandoned all foreign system 24 applications. In the United States, the '563 patent issued in January of 1983, after Molins prevailed in an interference with two other parties.

reference, Whitson concluded that it fully anticipated the "batch process" claims that Molins initially filed in the United Kingdom and in many other countries including the United States. Accordingly, in 1968 and 1969, Whitson abandoned all the foreign patent applications to the batch process. However, Whitson decided not to abandon the pending U.S. application because it contained both batch process and system 24 claims.

Later in 1983, Hirsh reviewed the files of the foreign system 24 applications, all of which had been abandoned in the late 1970s. Hirsh found the references that had been cited in the foreign patent prosecution, but not the PTO, including the Wagenseil reference. Hirsh also found Whitson's correspondence relating to the references and to their citation to and by foreign patent offices. Hirsh then informed Smith of the foreign citations. Together, they consulted with outside counsel and, on September 21, 1984, although the '563 patent had already issued, filed a lengthy prior art statement under 37 C.F.R. Sec. 1.501 (Rule 501) on behalf of Molins, listing the Wagenseil reference together with all other prior art references that had been cited during the foreign prosecution.

In October of 1984, Cross & Trecker, Incorporated, the parent corporation of defendant Kearney & Trecker Corporation, filed a request for reexamination of the '563 patent in view of several IBM references. Cross & Trecker filed a Form PTO-1449 listing Wagenseil, which was initialed by the examiner as having been considered in June of 1985. During the reexamination, Molins referred the examiner to the Rule 501 prior art statement previously filed in the '563 patent file. The examiner indicated that, in order to make the prior art of record, Molins was required to submit English language translations of the foreign language references. Accordingly, Molins filed the translations and a brief statement of the relevance of the cited art. The examiner initialed each reference Molins had listed, indicating that he had considered it. The examiner's final office action in the reexamination stated that he had considered all of the cited references. No claims were rejected based on Wagenseil during the reexamination. Re-Examination Certificate B1 4,369,563 was issued on May 13, 1986.

Late in 1986, Molins and Smith filed suit against Textron, Incorporated, Kearney & Trecker, and Avco Corporation (collectively "Textron"), ⁵ alleging infringement of the '563 and '410 patents. In February of 1989, after approximately three years of discovery, Textron filed a summary judgment motion asserting that the patents were unenforceable due to inequitable conduct in connection with the prosecution of the '563 patent, in particular, concealment of Wagenseil and other information from the PTO. The motion was denied. After more discovery, in June of 1990, Textron again moved for summary judgment, adding new allegations of inequitable conduct relating to Smith's failure to disclose to the PTO allegedly material information regarding a copending patent application in the name of Jerome Lemelson, whom Smith also represented. Again, the court denied summary judgment. The court severed the issue of inequitable conduct, and held a bench trial.

On November 24, 1992, the court held that both patents were unenforceable due to inequitable conduct. See supra note 1. The court found the case to be "exceptional" within the meaning of 35 U.S.C. Sec. 285 and ordered further briefing on whether attorney fees...