Phillips Petroleum Co. v. Sid Richardson Carbon & Gas. Co.

• Decision Date: 09 September 1968
• Docket Number: Civ. A. 4-63-110.
• Citation: 293 F. Supp. 555
• Parties: PHILLIPS PETROLEUM COMPANY v. SID RICHARDSON CARBON & GASOLINE CO., et al.
• Court: U.S. District Court — Northern District of Texas

293 F. Supp. 555

PHILLIPS PETROLEUM COMPANY v. SID RICHARDSON CARBON & GASOLINE CO., et al.

Civ. A. 4-63-110.

United States District Court N. D. Texas, Fort Worth Division.

September 9, 1968.

Sidney Neuman, Pendleton, Neuman, Seibold & Williams, Chicago, Ill., Ardell Young, Brown, Herman, Scott, Young & Dean, Fort Worth, Tex., Walter H. Schneider, Houston, Tex., for plaintiff.

Bruce Tittel and Wood, Herron & Evans, Cincinnati, Ohio, Rufus Garrett, Jr., Fort Worth, Tex., and J. A. Young, Bartlesville, Okl., for defendants.

OPINION

BREWSTER, District Judge.

The Court has jurisdiction, pursuant to 28 U.S.C.A. Secs. 1338(a) and 1400 (b), of this patent infringement suit involving some of the giants in the carbon black manufacturing industry.

The original parties hereto were:

Plaintiff, Phillips Petroleum Company, a Delaware corporation.

Defendant, Sid Richardson Carbon & Gasoline Company, a Texas corporation.

Defendant, United Carbon Company, a Delaware corporation.

After the institution of this suit, United was acquired by Ashland Oil & Refining Co., a Kentucky corporation. United was dissolved under the acquisition plan, and its former operations have been continued as an unincorporated subdivision of Ashland. All of United's obligations were assumed by Ashland; and, by subsequent pleadings of the plaintiff and a plea of intervention, Ashland became a defendant and an intervenor herein during the early stages of discovery.

The patent in suit was issued to Phillips, assignee of the inventor, Joseph C. Krejci, on August 21, 1951, as U. S. Letters Patent No, 2,564,700, entitled, "Production of Carbon Black." It will be sometimes referred to herein as "Patent 700". It is not a basic or pioneer patent.

Richardson began the manufacture of HAF and ISAF carbon blacks in its new plant at Big Spring, Texas, in 1961 under processes licensed to it by United. Those processes were covered by a patent issued to United as assignee of its employee, Williams, after the date of the Krejci patent. The differences in the HAF and ISAF processes are immaterial to this case. If one is an infringement, the other one is too; so, for the purpose of this case, the two will for the most part be discussed as if they were one. The license agreement provided that United would fully indemnify Richardson for damages sustained as a result of any claim for patent infringement. Phillips contends that Richardson has been continuously infringing Claim 26 of its Patent 700 by the use of such processes since 1961, and that the infringement will continue unless enjoined. It says that United induced and contributed to the infringement by the license to Richardson, and that Ashland's assumption of United's liabilities and its own conduct since the acquisition of United has made it "the real party-defendant in this litigation". It prays for damages and for an injunction enjoining further infringement.

By way of affirmative relief, Ashland and Richardson seek a declaratory judgment that the patent in suit is invalid, and a judgment for attorneys fees on account of Phillips' alleged lack of good faith in prosecuting this suit.

For the purpose of this trial, the issues dealing with liability were severed from those relating to damages; but the damage issues are now foreclosed by the determination that there is no liability. The judgment entered will therefore finally dispose of the case.

There is no necessity for a detailed discussion of the validity of the patent in suit, as the patent will expire before this opinion can be completed.¹ The defendants' declaratory judgment action will therefore be moot. While the question of validity could under some circumstances still be an important factor in deciding an action for infringement and a cross-action for attorneys' fees such as are here involved, the Court's conclusions that there is no infringement even if the patent is valid and that there has been no bad faith in bringing or maintaining this suit will make the decision of that question unnecessary. Universal Oil Products Co. v. Globe Oil & Refining Co., 7 Cir., 137 F.2d 3 (1943), affirmed, 322 U.S. 471, 64 S.Ct. 1110, 88 L.Ed. 1399; Kemart Corp. v. Printing Arts Research Laboratories, Inc., 9 Cir., 201 F.2d 624, 634 (1953). It will therefore be assumed arguendo in the discussion of the infringement issue that the patent in suit was valid.²

The record in this case is voluminous. The transcript, with the depositions included, will run several thousand pages. The three separate depositions of the inventor, Dr. Krejci, all of which were offered in evidence, standing alone, are much longer than the transcript of proceedings in most cases on appeal. There are well over four hundred exhibits and some of them are technical and lengthy. Every effort will be made to summarize the facts as briefly as possible, consistent with the inclusion of enough information to enable a reviewing court to understand the issues, the findings and conclusions and the bases for them. Many facts are stipulated. Most of them appear in the pre-trial order. A few facts are established as a matter of law. All of those matters have been duly considered, whether they are specifically discussed herein or have gone without mention to avoid unduly lengthening this opinion.

That carbon black, sometimes called "lamp black" in its early days and now commonly referred to in the industry as "black", is a useful product has long been known; but the real boom in the manufacture of it began with the widespread use of rubber tires. It is made commercially from the partial combustion of petroleum hydrocarbons. Fossil fuels, such as oil and natural gas, have been the products most commonly used for fuel and feedstock. The furnace method, using residue crude oil as a feedstock, is the most usual type of manufacture today, with the channel method and the thermal method accounting for a total of less than one-fourth of the entire commercial output. The channel, thermal and gastex methods produced almost all the carbon black on the market before the advent of the oil furnace method in the early thirties. The changeover to the furnace process was brought about by the low yield of black and high cost of the other types of manufacture. Natural gas was the hydrocarbon used as the feedstock in those types, and the sharp increase in the price of such natural gas with the coming of the interstate gas pipelines to the big city markets made the manufacturers of carbon black look for a method where a cheaper feedstock could be used. The heavy residue left from crude oil after it had been cracked at refineries was the answer, and the furnace method was best suited for its use. The yield from this type of manufacture has been much higher and the cost much lower; but the industry has continued to look to channel black as the standard for measuring quality of the product for re-inforcing rubber. That the application for the patent in suit so recognizes is evidenced by the fact that one of the objects stated in it is the production of a carbon black of greater re-inforcing value than that of channel black.

There are many different grades and qualities of carbon black. Those differences may appear where the same apparatus and general methods are used. They are due to the variation in chemical reaction resulting from many things. The better grade of blacks have higher re-inforcing qualities for rubber by increasing its elasticity and resilience, and its resistance to abrasion, heat, cold, and damage from flexing. The top quality blacks are referred to as being fully reinforcing, and they are used in tire treads and in better class rubber heels and soles for shoes. The grade just below the top is used for walls and carcasses of tires, belts for machinery, wire insulation, etc. The lower ones are used for products not subjected to as much strain as tires, and for pigment in paints, varnishes, inks and other products.

The types of carbon black which have figured to any appreciable extent in this case, together with the symbols by which they are generally identified and the trade names by which they are known, are:

(1) FEF (fast extruding furnace), sometimes identified as F-81. Phillips gave it the trade designation, "Philblack A". It was well received on the market from the time of its introduction in the early forties, but it had its limitations. It was not a fully re-inforcing black, and therefore could not be used in rubber made for tire treads. The most common use of the rubber re-inforced by it was in the walls and carcasses of tires.

(2) HAF (high abrasion furnace black). Phillips began commercial production of it in 1947, and marketed it under the trade name, "Philblack O". This product is fully re-inforcing and rubber mixed with it can be used in tire treads.

(3) SAF (super abrasion furnace black). Phillips claims that Dr. Krejci is entitled to credit for this black. Commercial production began in 1952.

(4) ISAF (intermediate super abrasive furnace black). It is intermediate between HAF and SAF blacks. Columbian Carbon Co. introduced it. Commercial production began in 1953.

Each one of these carbon blacks has been manufactured by various companies and has been commercially successful. Phillips has received special recognition in the industry in the form of a plaque for the types of the above described blacks put out under its own trade names.

Richardson has been manufacturing carbon black for a number of years by means other than the furnace method. Its modern plant at Big Spring, Texas, constructed under specifications furnished by United, is a furnace plant exclusively. Phillips got into the carbon black industry in the 1930's. It acquired the Ayers Patent No. 2,292,344 covering a furnace method of making carbon black in the early 1940's. All of its manufacturing processes have required the use of a suitable furnace.

Dr. Joe Krejci, the inventor of Patent 700, is a chemical engineer and a...