Ransburg Corp. v. Automatic Finishing Systems, Inc., Civ. A. No. 68-1320.

• Decision Date: 31 March 1976
• Docket Number: Civ. A. No. 68-1320.
• Citation: 412 F. Supp. 1357
• Parties: RANSBURG CORPORATION, Plaintiff, v. AUTOMATIC FINISHING SYSTEMS, INC., Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

412 F. Supp. 1357

RANSBURG CORPORATION, Plaintiff, v. AUTOMATIC FINISHING SYSTEMS, INC., Defendant.

Civ. A. No. 68-1320.

United States District Court, E. D. Pennsylvania, Civil Division.

March 31, 1976.

Robert L. Harmon, Clyde F. Willian, Chicago, Ill., Robert J. Zinn, John T. Synnestvedt, Philadelphia, Pa., for plaintiff.

Edward Lovett Jackson, Joseph Gray Jackson, Eugene Chovanes, Bala Cynwyd, Pa., for defendant.

OPINION

DITTER, District Judge.

In this patent matter, the present question is whether the manufacturer of an allegedly infringing device so controlled the litigation of a prior suit involving identical patents as to be bound in this case by the decision in that one.¹ Pursuant to Rule 52(a), Federal Rules of Civil Procedure, I make the following:

FINDINGS OF FACT

1. Plaintiff, Ransburg Corporation² ("Ransburg") is an Indiana corporation with its principal office in Indianapolis.

2. Ransburg's business primarily involves methods and equipment for electrostatic spray coating, the foremost of which, Ransburg No. 2 Process, is the subject of the patents in this suit.³

3. In each of the following decisions some or all of the claims of some or all of the patents here in suit were adjudged valid and infringed: Binks Manufacturing Company v. Ransburg Electro-Coating Corp., 281 F.2d 252 (7th Cir. 1960), cert. dismissed, 366 U.S. 211, 81 S.Ct. 1091, 6 L.Ed.2d 239 (1961); Ransburg Electro-Coating Corp. v. Proctor Electric Co., 317 F.2d 302 (4th Cir. 1963);⁴ Ransburg Electro-Coating Corp. v. Standard Container Co., 167 U.S.P.Q. 426 (M.D.Ga.1970); Ransburg Electro-Coating Corp. v. Williams, 246 F.Supp. 626 (W.D. Ark.1965); and Ransburg Electro-Coating v. Ford Motor Co., 245 F.Supp. 308 (S.D.Ind. 1965).

4. In Ransburg Electro-Coating Corp. v. Ionic Electrostatic Corp., 395 F.2d 92 (4th Cir. 1968), it was held that the defendant, which had been enjoined from infringing plaintiff's patents on electrostatic spray painting systems, was not guilty of contempt in producing and marketing devices in which the dependence upon electrostatic forces to atomize paint was so insubstantial and minimal that it did not exceed employment of those forces under the prior state of the art.

5. Defendant, Automatic Finishing Systems, Inc. ("AFS"), is a New Jersey corporation with its principal place of business in Cinnaminson, New Jersey.

6. AFS manufactured and sold certain equipment and equipment components to Lansdale Finishers, Inc. ("Lansdale"), the Standard Container Company ("Standard"), and other businesses. AFS installed such equipment at Lansdale's plant in Lansdale, Pennsylvania, at Standard's plants in New Jersey and Georgia, and elsewhere.

7. In 1967, Ransburg brought suit against Standard in the United States District Court for the Middle District of Georgia for infringement of Ransburg's patents by reason of Standard's use of an AFS electrostatic spray coating system. See Ransburg v. Standard Container Co., supra.

8. The Standard case was tried in October, 1969. On March 27, 1970, the court entered its Findings of Fact and Conclusions of Law and on April 20, 1970, granted an Interlocutory Judgment holding the Ransburg No. 2 Process patents, the same patents at issue in this suit, valid and enforceable, and infringed by Standard's utilization of the AFS System.

9. Although AFS was not a formal party to the Standard suit, the court found AFS to be guilty of inducement and contributory infringement, and enjoined further such infringement.

10. Although a notice of appeal was filed, it was not pursued, Ransburg and Standard ultimately arriving at a settlement. On January 5, 1971, the Georgia court entered an order making the Interlocutory Judgment final.

11. Chief Judge Bootle, before whom Standard was tried, was aware of the instant action against AFS. Accordingly, he made certain findings concerning AFS' participation in the suit against Standard, including the following:

5. Automatic Finishing Systems, Inc. ("AFS"), a New Jersey corporation with its principal place of business in Palmyra, New Jersey, manufactured the accused electrostatic spray coating system and sold it to defendant (Tr. 3). AFS has actively and openly assisted in the defense of this action. (PX 53, p. 146-52, 170, 248, 235-55, 269; PX 54, p. 34-42; Tr. 506-12, 521).

6. AFS agreed with defendant that AFS would pay all litigation costs in the present action (Tr. 506; PX 54, p. 34, 39) including the fees of an expert witness, Dr. Kusko (Tr. 507), and any damages which may be assessed against defendant (Tr. 506). Defendant's trial counsel has also been retained by AFS to defend an action brought by Ransburg against AFS in Philadelphia (Tr. 506), and AFS has agreed to pay his fees in both cases. No officer or employee of defendant appeared as a witness or attended the trial of this case, but the president (Tr. 501) of AFS, Gallen, and one of its key employees (Tr. 501), Monroe, were daily present in court, while an AFS vice-president, Lanchak (Tr. 502) attended portions of the trial. The tests used to develop much of defendant's evidence (e. g. DX 23, 24, 37 & 38) were conducted at Lanchak's place of business in New Jersey (Tr. 520-21), and no employee or officer of defendant was present at the tests (Tr. 521).

7. Ransburg's interrogatories (PX 55) and requests for admissions (PX 56) were never submitted to defendant for consideration because defendant's counsel knew that defendant had no information relating to them (PX 54, p. 50); rather, draft responses were prepared by trial counsel and submitted to Gallen (Tr. 508-10) and Monroe (PX 51, p. 64) for their opinion, after which they were signed by trial counsel. The accused system, which was purchased from AFS in 1965 (Tr. 473), was used by defendant in New Jersey for approximately 3 months (PX 51, p. 7) and in Homerville, Georgia, for one, possibly two, seasons (PX, p. 30). Defendant's stake in this action is less than that of AFS. At one time defendant's counsel indicated that AFS might attempt to intervene, but such attempt did not materialize.

12. Chief Judge Bootle refused Ransburg's request for a finding that AFS actually controlled the defense in Standard. Reasoning that such a finding would not be binding upon any other court which might be confronted with the question, he stated:

It's better to leave such Court untrammeled. Such Court before whom res judicata or collateral estoppel is urged may be in a better position than this Court to make a correct finding on this question because it may have the benefit of additional facts. See Marshall Metal Products v. Aghnides, 126 F.Supp. 849 850 (S.D.N.Y.1954); Schnell v. Eckrich & Sons, 365 U.S. 260, 81 S.Ct. 557 5 L.Ed.2d 546 (1961); Minneapolis-Honeywell Regulator Co. v. Thermoco, Inc., 116 F.2d 845 (2d Cir. 1941); 1B MOORE'S FEDERAL PRACTICE, ¶ 0.4116 at 1571. But see Brock v. Brown, 138 F.Supp. 628 (D.Md.1956).

13. At trial of the instant action, Thomas Gallen, president of AFS, admitted he had no basis for denying the accuracy of Chief Judge Bootle's findings 5 through 7 with one exception, specifically that Dana Raymond, Esquire, defendant's trial counsel in the suit before Chief Judge Bootle, had also been retained by AFS in the instant case.

14. Testimony by both Mr. Raymond and Mr. Gallen denying that Mr. Raymond had been retained to represent AFS in the present suit⁵ sharply conflicts with previous statements made by both men.

15. In a deposition taken in the Standard suit in July, 1969, Mr. Raymond stated that his appearance had also been entered in the suit brought by Ransburg against AFS in Philadelphia. And in his opening statement in the Standard trial, he advised Chief Judge Bootle, "I am of counsel for AFS in the Philadelphia action."

16. Prior to trial of the case at bar, AFS admitted in response to Ransburg's Request No. 11 that the same counsel originally had been retained to defend both suits although this arrangement was "changed recently due to a shortage of funds." Moreover, Mr. Gallen stated flatly at the Standard trial that he had hired Mr. Raymond as his counsel. In a deposition taken for the present case, Mr. Gallen acknowledged there "was a meeting of the minds" as early as July, 1969 (well before the Standard trial), that Mr. Raymond would represent AFS in this suit, and that Mr. Raymond ceased to represent AFS only after the decision was made not to pursue the appeal in Standard.

17. Even if Rule 36(b), Fed.R.Civ.P.,⁶ would permit AFS to disavow Admission 11, independent evidence demonstrates that AFS engaged Mr. Raymond to represent it in this action until a shortage of funds on the part of AFS forced his withdrawal.⁷

18. The significant degree to which AFS participated in Standard's defense in the Georgia suit is in marked contrast with Standard's own conduct. William M. Vogel, Jr., the president of Standard, testified that his company preferred not to become involved in the matter. He stated that since AFS had agreed to pay all expenses he had no objections to Mr. Raymond's litigating the suit, but that for its part, Standard would pay nothing.⁸ No one at Standard was regularly apprised of the progress of the suit, nor did any employee of Standard assist in the preparation for trial or attend the trial. After the court rendered its decision, Mr. Vogel sent Ransburg's settlement proposal to Mr. Gallen because "since he was in charge of litigating or they had taken over the suit finally as we were involved in, I thought he should have this information."

19. AFS actively and openly assisted in the Standard defense. Draft responses to interrogatories and requests for admissions were submitted by Mr. Raymond to Mr. Gallen for his opinion. Mr. Gallen made written suggestions for tests, and tests were conducted at the plant of an AFS stockholder. Mr. Gallen hired a photographer for these tests, and paid the fees of Standard's expert witness. Prior to trial, Mr. Raymond had numerous...