RE Phelon Co., Inc. v. Wabash, Inc.

• Decision Date: 09 July 1986
• Docket Number: No. S 79-9.,S 79-9.
• Citation: 640 F. Supp. 1383
• Parties: R.E. PHELON COMPANY, INC., Plaintiff, v. WABASH, INC., Defendant.
• Court: U.S. District Court — Northern District of Indiana

640 F. Supp. 1383

R.E. PHELON COMPANY, INC., Plaintiff, v. WABASH, INC., Defendant.

No. S 79-9.

United States District Court, N.D. Indiana, South Bend Division.

May 30, 1986.

As Amended July 9, 1986.

COPYRIGHT MATERIAL OMITTED

James D. Hall, South Bend, Ind., John J. Dempsey, Springfield, Mass., Jerald A. Jacover, Chicago, Ill., for plaintiff.

Walther E. Wyss, Chicago, Ill., John J. Lorber, Wendell W. Walsh, South Bend, Ind., for defendant.

MEMORANDUM AND ORDER

ALLEN SHARP, Chief Judge.

I.

The jurisdiction of this case is not disputed; it is based on 35 U.S.C. § 1 et seq. and 28 U.S.C. §§ 1338 and 1400. The parties agreed to bifurcate the issues of liability and damages for the purposes of trial. This opinion addresses the liability issues only. There are three patents at issue in this litigation: United States Patent No. Re. 31,837 ('837), United States Patent No. 4,228,780 ('780), and United States Patent No. 4,333,442 ('442).

This case comes before the Court after several procedural steps. The case was originally filed on January 16, 1979. The complaint alleged infringement, by the defendant's products, of United States Patent No. 4,036,201 ('201). The defendant, by answer, challenged the validity of the plaintiff's patent and asserted counterclaims based on two additional patents: United States Patent No. 4,228,780 ('780) and United States Patent No. 4,333,442 ('442). After this complaint was filed an interference was filed to determine the seniority rights between the Burson '201 and Carmichael No. 4,056,088 ('088) patents. Burson and Carmichael are the inventors of the respective patents at issue in the interference. Subsequent to the filing of the interference, the parties requested and were granted a stay of proceedings in the infringement action in this court. During the interference proceedings the plaintiff applied for a reissue patent. The reissue application retained claims 1-5 of the '201 patent and added claims 6-10. The application was approved and United States Patent No. Re. 31,837 issued on Feb. 26, 1985. The plaintiff amended the complaint to allege infringement of the '837 patent. The Patent and Trademark Office Board's decision, which granted Carmichael senior rights, was appealed and the United States Court of Appeals for the Federal Circuit reversed the Board's decision and granted seniority rights to the Burson '201, now the '837, patent. Following the decision of the United States Court of Appeals for the Federal Circuit the stay of proceedings in the infringement action was set aside, and this case went forward. This case was tried by this court without a jury over eight trial days. This court also heard final arguments on March 28, 1986 after the issues raised at trial had been fully briefed. Due to the complexity of the issues in this case this court chose not to adhere strictly to the Seventh Circuit Judicial Council Resolution of October 4, 1984 requiring submission of post-trial briefs within ten (10) days of the bench trial. The following represents the Findings of Facts and Conclusions of Law pursuant to Rule 52 of the Federal Rules of Civil Procedure.

The Federal Circuit instructs that patent cases must be analyzed in the "real world." The real world of this litigation is the competitive area of ignition systems, specifically capacitive discharge ignition (CDI) systems, for small gasoline engines. The fierceness of the competitive atmosphere was so strong that "one would cut your throat for a dollar." Unfortunately this competition was transmuted into adolescent hide and seek, and quarrelsome conduct between the attorneys for both parties. This case has been fraught with discovery disputes and inappropriate activity by both sides. The depositions, filings, briefs and trial transcript are replete with accusatory and contentious language which was directed at the attorneys' conduct and did absolutely nothing to forward any legal issue of this case. Although the court encourages strong advocacy, the behavior of the attorneys in this case degenerated beyond the realm of good advocacy. That behavior was anything but helpful to this court in performing its proper functions here.

II. The '837 Patent

This case began in the real world before 1974. The ignition system industry was searching for an inexpensive substitute for the breaker point magneto ignition system. Although as early as 1969, the Piteo patent, United States Patent No. 3,447,521 ('521), disclosed a breakerless ignition system, that system was not cost competitive in the marketplace. Several breakerless ignition systems were developed, including some developed by the plaintiff, between 1969 and 1974.¹ There were several characteristics which were shared by the early systems: (1) the charging, triggering or auxiliary coils were not placed on the same leg of a multilegged ferromagnetic core as the triggering mechanism and primary and secondary coil; (2) they were not cost competitive; and (3) the bulk of the systems limited utilization in the marketplace of small gasoline engines.

CDIs work in the following manner. A magnet is fixed on a flywheel which rotates, in synchronism with the shaft of an internal combustion engine, past a ferromagnetic core which may be comprised of multiple core legs. Coils which are capable of generating energy are wrapped around the core legs. As the magnet, on the flywheel, passes the core legs a magnetic flux is induced and a voltage is generated in the coils.² The circuit is structured so that the voltage induced in the charging coil is transferred to a capacitor where that energy is stored. That energy is held in the capacitor until the "gate", of the silicon controlled rectifier (SCR), is opened to permit the energy to flow through the transformer, consisting of primary and secondary coils, to a spark plug in most cases. The SCR is triggered (opened) when energy induced in either the charging coil or the primary coil reaches a certain voltage and flows to the gate.

On January 8, 1974, Mr. Bob Burson challenged the prevailing thinking of those skilled in the art of CDI systems. He placed the charging coil on the same ferromagnetic core leg as the primary and secondary coil. Even Mr. Burson's peers at Phelon were skeptical due to the perceived possibility that such placement would interfere with the proper triggering of the gate. On or about January 8, 1974, Mr. Burson tested a CDI with a charge coil, primary coil and secondary coil mounted on the same leg of a multilegged ferromagnetic core. These tests indicated that this system was possible. At the same time Mr. Burson reduced the device to practice. Mr. Burson disclosed his discovery to Mr. Dale Phelon who ran some tests on the disclosed CDI. Mr. Dale Phelon was "excited" about this discovery. A few weeks after the initial tests, during a routine sales call to Homelite, a customer of Phelon, Inc., Mr. Dale Phelon, then sales manager, later president of Phelon, Inc., discussed, in general terms, the ignition system which Mr. Burson had recently developed. Mr. Phelon testified that he did not offer to sell Homelite the new system. Homelite was utilizing a CDI system with advance timing at the time and said they were not interested in a CDI with fixed timing.

Mr. Donald K. Huber, an attorney, was contacted by the plaintiff and he began the process of applying for a patent. Mr. Huber drafted a patent application from the disclosure which the plaintiff gave to him. In addition, he directed or performed several searches of the Patent Office files for pertinent prior art. After some discussions with the plaintiff's representatives and Mr. Burson, the draft application was approved and filed with the patent office on April 29, 1975. In the certified file history of Mr. Burson's United States Patent No. 4,036,201 ('201)³ there was no indication that Mr. Burson disclosed any of his own patents on ignition systems as prior art. On October 31, 1975, the patent examiner rejected claims 1-14, on the basis of prior art: Penn, Hohne, Piteo, Just, Bodig, Struber and Swift. The notice of rejection was mailed on November 26, 1975.

The Piteo patent No. 3,484,677 disclosed an inductive discharge system in which the primary, secondary and "control" coil were located on the same leg of a multilegged ferromagnetic core. An inductive system functions differently than a capacitive discharge system. In the inductive type, like Piteo, the energy generated in the coils is transferred directly through the transformer to the spark plug. However, the capacitive system stores the energy in a capacitor until a trigger signal opens the pathway through the transformer to the spark plug. The other prior art cited by the examiner were systems which did not teach the critical placement of the charging, primary and secondary coils on the same leg of a multilegged ferromagnetic core.

On July 9, 1975, Mr. Huber discovered the Carlsson, United States Patent No. 3,828,754 ('754), which had been issued on August 13, 1974. The '754 patent disclosed all the coils on one multilegged ferromagnetic core, but the charging, primary and secondary coils were still segregated on separate core legs. The '754 patent was assigned to a Swedish Corporation. Mr. Huber sent a copy of the '754 patent to Mr. Burson for his persual and comments; after some discussion it was decided that the '754 patent was not material, and it was not disclosed to the patent office. Mr. Huber did request a Swedish firm to do a patent search for prior art relevant to the '754 patent. No additional material information was discovered from that search.

Mr. Huber included a new claim 15 when he filed a response to the official action dated November 26, 1975. The new claim 15 disclosed:

15. A breakerless condenser discharge ignition system for an internal combusion engine, said ignition system comprising: a permanent magnet means rotated about a circular path in synchronism with the operation of

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