Safe Flight Instrument Corp. v. United Control Corp.

• Decision Date: 06 April 1978
• Docket Number: Nos. 76-2968 and 76-2969,s. 76-2968 and 76-2969
• Citation: 576 F.2d 1340,197 USPQ 849
• Parties: SAFE FLIGHT INSTRUMENT CORPORATION, a New York Corporation, Plaintiff-Appellant, v. UNITED CONTROL CORPORATION, a Delaware Corporation and UC Liquidating Corporation, a Washington Corporation, Defendants-Appellees. SAFE FLIGHT INSTRUMENT CORPORATION, a New York Corporation, Plaintiff-Appellee, v. UNITED CONTROL CORPORATION, a Delaware Corporation and UC Liquidating Corporation, a Washington Corporation, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1340

576 F.2d 1340

197 U.S.P.Q. 849

SAFE FLIGHT INSTRUMENT CORPORATION, a New York Corporation, Plaintiff-Appellant, v. UNITED CONTROL CORPORATION, a Delaware Corporation and UC

Liquidating Corporation, a Washington Corporation,

Defendants-Appellees.

SAFE FLIGHT INSTRUMENT CORPORATION, a New York Corporation, Plaintiff-Appellee, v. UNITED CONTROL CORPORATION, a Delaware Corporation and UC

Liquidating Corporation, a Washington Corporation,

Defendants-Appellants.

Nos. 76-2968 and 76-2969.

United States Court of Appeals, Ninth Circuit.

April 6, 1978.

Rehearing Denied in No. 79-2968 May 31, 1978.

Thomas M. Marshall (argued) of Riddell, Williams & Ivie, Seattle, Wash., for plaintiff-appellant.

Richard S. Phillips (argued) of Wegner, Stellman, McCord, Wiles & Wood, Chicago, Ill., Wilbur J. Lawrence of Lane, Powell, Moss & Miller, Seattle, Wash., for defendants-appellees.

Appeal from the United States District Court for the Western District of Washington.

Before KOELSCH and KENNEDY, Circuit Judges, and JAMESON, ^* District Judge.

PER CURIAM:

The question on this appeal is whether the district court erred in partially granting defendants' motion for relief from a judgment granting plaintiff a permanent injunction.

Broadly, the facts are these: In 1967, plaintiff, Safe Flight Instrument Corporation, commenced this action in the United States District Court for the Western District of Washington against defendants United Control Corporation and UC Liquidating Corporation for an injunction and damages resulting from the infringement of its three patents numbered 3,043,540 (the "540 patent"), 3,112,905 (the "905 patent"), and 3,327,972 (the "972 patent").

Following a trial, the judge held plaintiff's 540 patent valid and infringed, but ruled that the 905 and 972 patents were invalid and not infringed. But before the ensuing appeals were heard, this court remanded the matter to permit the district court judge to entertain several post-judgment motions. ¹

The parties then entered into a written agreement looking to the entry of a stipulated judgment settling the dispute. The formal agreement, following a recital that "as used herein, the term '540' shall be taken to mean an aircraft instrument covered by one or more of the claims of U.S. letters patent 3,043,540, 3,112,905 and 3,327,972," provided that plaintiff's patents numbered 540, 905 and 972 were valid and had been infringed; that defendants would pay plaintiff an agreed sum as damages in return for a complete release and settlement of all claims arising from the use, etc., of the patents, but with the proviso that

"10. Upon the expiration of patent 3,043,540, or if patent 3,043,540 is held invalid by a final decision of a court of competent jurisdiction, which decision is unappealed or unappealable, United Control shall thereafter, provided two years have passed from date of this agreement, have the right to make, use and sell '540' devices free of any charges or claims of infringement by Safe Flight."

The district judge accepted the parties' stipulation and Settlement Agreement and rendered judgment accordingly, awarding plaintiff.$2.5 million in damages and granting it a permanent injunction. ²

The Washington suit was not the only litigation in which plaintiff was involved. In 1968, plaintiff filed an action in the United States District Court for the Central District of California, charging persons other than these defendants with infringement of its 540 patent. This latter suit was entirely separate from the one in Washington against defendants and was pending but untried when the parties in this suit entered into their Settlement Agreement. When the California suit was tried, the judge there held the 540 patent invalid. Upon appeal, we affirmed and certiorari was thereafter denied. Safe Flight Instrument Corp. v. McDonnell-Douglas Corp., 482 F.2d 1086 (9th Cir. 1973), cert. denied, 414 U.S. 1113, 94 S.Ct. 843, 38 L.Ed.2d 740 (1973).

Following these dispositions of the California suit and after more than two years had passed since the date of the parties' Settlement Agreement, defendants' successor in interest (Sundstrand) moved the Washington District Court to vacate its injunction. As grounds, defendants asserted that the contingency provided for in paragraph 10 of the Settlement Agreement had occurred and thus, to paraphrase the language of Rule 60(b)(5), F.R.Civ.P., it was no longer equitable to accord the injunction, entered pursuant to that agreement, further effect. ³

The district judge, following a hearing, concluded that "the settlement agreement entered into by the parties on July 13, 1968, was the underlying basis upon which the Consent Judgment was presented to (the district judge) and signed that same date." He further concluded that, in light of paragraph 10 of the Settlement Agreement and the affirmance by the Court of Appeals of the final judgment entered in the California suit adjudicating the 540 patent invalid, the permanent injunction granted pursuant to the prior consent judgment was "no longer necessary or valid, and is of no further force and effect." He entered an order vacating the injunction, but solely as to the 540 patent. Both parties have appealed plaintiff from the partial vacation of the injunction and defendants from the refusal to vacate the injunction in its entirety.

The power of a court of equity to vacate or otherwise modify the prospective effect of its decrees is too well-established to merit extended discussion. State of Pennsylvania v. Wheeling & Belmont Bridge Co., 18 How. 421, 15 L.Ed. 435 (1855); 7 Moore's Federal Practice P 60.16(6) and cases cited at n. 1. The power to effect such a modification, "inherent in the jurisdiction of the chancery" (United States v. Swift & Co., 286 U.S. 106, 114, 52 S.Ct. 460, 462, 76 L.Ed. 999 (1932)) is, as indicated, explicitly conferred on the district courts by the terms of subsection (b)(5) of Rule 60, F.R.Civ.P. Its exercise lies within the discretion of the trial court, guided by traditional principles of equity jurisprudence (System Federation v. Wright, 364 U.S. 642, 648, 81 S.Ct. 368, 5 L.Ed.2d 349 (1961); United States v. Swift & Co., supra, 286 U.S. at 115, 52 S.Ct. 460) and a reviewing court will not disturb the trial court's disposition except upon demonstrated abuse (Bank of America Nat'l Trust & Sav. Ass'n v. Mamakos, 509 F.2d 1217 (9th Cir. 1975) and cases cited at 1219).

The Settlement Agreement and other papers before the district court manifest the parties' formal recognition that the 540 patent might conceivably be declared invalid. That contingency having occurred in the course of the California suit, the district judge in the Washington suit did not abuse his discretion in granting defendants' application for post-judgment relief in order that the unmodified decree should not obstruct full effectuation of the parties' agreement and thereby be "turned through changing circumstances into an instrument of wrong." United States v. Swift & Co., supra, 286 U.S. at 115, 52 S.Ct. at 462.

Plaintiff vigorously contends that the district judge, in granting defendants Rule 60(b)(5) relief on the basis of the judgment in the California suit declaring the 540 patent invalid, in effect nullified its own prior decree upholding the 540 patent. From this premise, plaintiff argues that it has been collaterally estopped by the judgment of invalidity entered in the California suit and should at the least have been permitted to demonstrate before the Washington district court that it did not have a "fair opportunity procedurally, substantively and evidentially to pursue (its) claims" in the California suit, citing Blonder-Tongue Laboratories v. University of Illinois Foundation, 402 U.S. 313, 333, 91 S.Ct. 1434, 1445, 28 L.Ed.2d 788 (1971). But plaintiff's argument, while ingenious, has no application to...