Scott Paper Co. v. Moore Business Forms, Inc.

• Decision Date: 05 September 1984
• Docket Number: Civ. A. No. 77-199-JLL.
• Citation: 594 F. Supp. 1051
• Parties: SCOTT PAPER COMPANY, Plaintiff, and Chester Davis, Intervenor, v. MOORE BUSINESS FORMS, INC., Defendant.
• Court: U.S. District Court — District of Delaware

594 F. Supp. 1051

SCOTT PAPER COMPANY, Plaintiff, and Chester Davis, Intervenor, v. MOORE BUSINESS FORMS, INC., Defendant.

Civ. A. No. 77-199-JLL.

United States District Court, D. Delaware.

September 5, 1984.

COPYRIGHT MATERIAL OMITTED

Rudolf E. Hutz and John D. Fairchild of Connolly, Bove, Lodge & Hutz, Wilmington, Del., and John W. Kane, Jr., Philadelphia, Pa., of counsel, for plaintiff.

William J. Wier, Jr., of William J. Wier & Associates, Inc., Wilmington, Del., and Richard H. Evans and Peter J. Manso of Wood, Herron & Evans, Cincinnati, Ohio, of counsel, for intervenor.

Edward M. McNally of Morris, James, Hitchens & Williams, Wilmington, Del., and John J. Held, Jr., Edward W. Remus and Paul H. Berghoff of Allegretti, Newitt, Witcoff & McAndrews, Ltd., Chicago, Ill., of counsel, for defendant.

OPINION

LATCHUM, Senior District Judge.

I. INTRODUCTION

This aged and hardfought patent infringement action, unlike most such cases, developed into an emotionally charged and controversial piece of civil litigation. As the case unfolded before trial, during reissue proceedings before the United States Patent and Trademark Office ("PTO"), during discovery, and at trial, the evidence exposed some of the unattractive sides of human nature. It was unique in this respect.

This action was originally brought on May 22, 1977, by the plaintiff, Scott Paper Company ("Scott"), against the defendant, Moore Business Forms, Inc. ("Moore"). (Docket Item "D.I." 1.) The original complaint alleged that: (a) Scott owned U.S. Patents 3,193,404 ("the 404 patent") and 3,278,327 ("the 327 patent") (collectively called the "Davis patents"); (b) Scott in 1972 at Moore's request granted a royalty bearing license to Moore under the two Davis patents; (c) Moore paid substantial royalties to Scott for four years until mid-1976; (d) Moore "effectively terminated" the license agreement in 1976; (e) Moore continued to practice the Davis inventions as an unlicensed infringer; and (f) Moore's infringement of the patents since mid-1976 was wilful and wanton. (Id.) Moore answered the original complaint and alleged that the Davis patents were invalid and unenforceable. (D.I. 7.)

In November 1977, Scott filed applications to reissue the Davis patents (TX 300, 301).¹ The reissue proceedings before the PTO lasted for four years. (Id.) Moore actively participated as a protester throughout the reissue proceedings, contending that the Davis inventions were not patentable and that Davis had been guilty of fraud and inequitable conduct. (Id.) After a most comprehensive examination, the PTO rejected Moore's protests and Reissue Patents 30,797 (the "404/797 patent") and 30,803 (the "327/803 patent") were granted to Scott respectively on November 16, 1981 and November 24, 1981 (TX 1090, 1091). Both reissued patents expired in mid-1982.

Scott filed an Amended and Supplemental Complaint on November 24, 1981, asserting two alternative theories for recovery. Count I sought compensatory and punitive damages and interest based on Moore's failure to pay royalties under the License Agreement between Scott and Moore relating to the Davis patents. Count II sought treble damages, attorneys' fees and costs based on Moore's wilful infringement of the Davis patents and reissue patents. (D.I. 32.)² On May 19, 1982, Davis was permitted to file a complaint in intervention in which he asserted rights against Moore and Scott on the basis of an "equitable interest" in the patents arising out of a 1965 contract between Scott³ and Davis (TX 307). Answering the Scott and Davis complaints, Moore asserted defenses that the Davis patents (1) were invalid because (a) the inventions were obvious, and (b) that the inventions were "on sale" in this country more than one year prior to their effective filing dates, (2) were unenforceable because of Davis' unequitable conduct before the PTO in procuring the patents, (3) were not infringed by Moore, and that Davis had no cause of action against Moore. (D.I. 34 at 46.)

Following the reissue proceedings and intervention of Davis, the parties engaged in extensive discovery. A twelve-day trial⁴ to the Court sitting without a jury took place between February 6-22, 1984. After carefully considering the sufficiency, weight and credibility of the testimony of the witnesses, their demeanor on the stand, the documentary evidence admitted at trial, and the post-trial briefs of the parties, the Court enters the following findings of fact and conclusions of law which are embodied in this opinion as permitted by Rule 52(a), Fed.R.Civ.P.

II. THE FACTS

A. The Inventions In Issue

The inventions in issue involve carbonless recording paper having a colorless dye precursor coated on the back side (coated back or "CB" sheet). To make a business form, the CB sheet is laid atop a second sheet having a clay coating on its front side (coated front or "CF" sheet). When the top surface of the CB sheet is impressed with a pencil or by a typewriter key, the corresponding dye precursor coated on the CB sheet is transferred to the second CF sheet where, upon contact with the clay, it becomes colored and reproduces the impressed image.

To make a multi-part or multi-leaved business form, several additional sheets may be placed between the top CB sheet and the bottom CF sheet. These are called CFB sheets, because they each have clay coated on the front, and colorless dye precursor coated on the back. The pressure of an image impressed on the top surface of the CB sheet is transmitted through the several CFB sheets to the CF sheet, producing the colored image on the front (clay coated) surface of each. (D.I. 113, § 3, ¶¶ 12-13; Tr. 59-61, 1178-79 & 1306-07; TX 2.)

Carbonless recording paper of this general type was disclosed in the patent literature by the 1930's, and was first developed commercially by National Cash Register, now NCR, in the early 1950's. NCR used a two component colorless dye precursor system in carbonless paper, namely, a combination of CVL (Crystal Violet Lactone) and BLMB (Benzoyl Leuco Methylene Blue) (Tr. 62-64, 664, 1200 & 1999).

Chester Davis, the inventor, worked for NCR from 1947 to 1952, following receipt of his Bachelor of Science Degree in chemistry from Indiana University in 1944 and a Master of Science Degree in organic chemistry from the University of Wisconsin in 1945 (Tr. 52-55). In 1954, Davis returned to Indiana University as a research associate and post-doctorate fellow (Tr. 57-58). While in this position, Davis recognized that the recently introduced NCR business forms had many deficiencies, and he decided to try to develop a recording paper which would avoid those deficiencies and be superior (Tr. 61-69). At Indiana University, Davis lectured during the day but had the use of a chemistry laboratory in the evening for his own purposes (Tr. 69-73).

Davis initially developed a theory involving Crystal Violet, a triphenylmethane dye, which was the most intense color former then known to dye chemists. The molecular structure of Crystal Violet includes a central carbon atom, and Davis proposed to "hook something" onto the central carbon atom which would convert colored Crystal Violet to a colorless form. This would be different from the NCR approach of chemically modifying one or more of the three phenyl groups of the Crystal Violet molecule, which produced CVL (Tr. 69-73).

Davis knew that Crystal Violet Base itself was too unstable to be used in a carbonless system, changing to blue-violet too easily, and staining the skin. He also knew that Crystal Violet Cyanide, another Crystal Violet derivative, could be made in a colorless form, but it was too stable and "you couldn't get the color back out again." Mr. Davis theorized that adding something to the central carbon atom might effect a workable compromise, but there were "hundreds of thousands" to "millions" of available possibilities (Tr. 74-75).

Davis first tried amines, but they also proved to be unstable. He next found a compound in the literature (Beilstein) called Crystal Violet Thiocarbinol which was said to be a white crystalline material. He made it, but "Beilstein was wrong" because it "turned out to be not white, not stable, and no good" (Tr. 75-77). Davis then experimented with a diphenylmethane dye, Michler's Hydrol, which has only two instead of three phenyl groups attached to the central carbon atom. Michler's Hydrol Thiocarbinol proved to be a little better than Michler's Hydrol itself, but it gave a slow reaction with ordinary paper and "wasn't any good either" (Tr. 78-80).

Davis became discouraged, and in February of 1955 he "sat back and tried to figure out what I could substitute on that Crystal Violet central carbon atom." He formed another theory, to put a meta directing group, such as nitro, carbonyl or sulfonyl, directly on the central carbon atom. The nitro group made "a mess" so that idea went "down the drain." He did not know how to put a carbonyl or sulfonyl group directly on the central carbon atom, however, so he again referred to Beilstein to see if any Crystal Violet derivative of that type had ever been made (Tr. 80-83; TX 1141-B).

Beilstein, a German publication consisting of about 100 volumes (Tr. 1784-85), was available to Davis at Indiana University in 1954-55. He first looked for a Crystal Violet nucleus with either a carbonyl or sulfonyl group attached to the central carbon atom, to see if he could learn how to make them. He looked under the name index and the empirical formula index but there was nothing there (Tr. 83-85).

Modifying his initial theory, Davis then checked Beilstein to determine whether a similar material had been made from Michler's Hydrol. He did not find anything in the name index because of Beilstein's improper nomenclature, but he found three compounds in the formula index and one of them was described as a "sulfone." Beilstein described how to make the sulfone, but it did not say anything meaningful...