Seismograph Service Corp. v. Offshore Raydist

• Decision Date: 29 September 1955
• Docket Number: Civ. A. No. 3686.
• Citation: 135 F. Supp. 342
• Parties: SEISMOGRAPH SERVICE CORPORATION and Etienne Augustin Henri Honore, Plaintiffs, v. OFFSHORE RAYDIST, Inc., Defendant and Third-Party Plaintiff (HASTINGS INSTRUMENT COMPANY, Inc., Third-Party Defendant).
• Court: U.S. District Court — Eastern District of Louisiana

135 F. Supp. 342

SEISMOGRAPH SERVICE CORPORATION and Etienne Augustin Henri Honore, Plaintiffs, v. OFFSHORE RAYDIST, Inc., Defendant and Third-Party Plaintiff (HASTINGS INSTRUMENT COMPANY, Inc., Third-Party Defendant).

Civ. A. No. 3686.

United States District Court E. D. Louisiana, New Orleans Division.

September 29, 1955.

COPYRIGHT MATERIAL OMITTED

Malcolm L. Monroe, New Orleans, La., Richard Mason, M. Hudson Rathburn, Joseph L. Hull, Jr. (Mason, Kohlemainen, Rathburn & Wyss, Chicago, Ill., and Monroe & Lemann, New Orleans, La.), for plaintiffs.

John E. Hurley, New Orleans, La., John W. Malley and Allen Kirkpatrick, Washington, D. C., and Cushman, Darby & Cushman, Washington, D. C., for defendants.

WRIGHT, District Judge.

This patent litigation results from the quest for oil in the tidelands of the Gulf of Mexico. It concerns three patents, the Honore patent, No. 2,148,267, owned by the plaintiff Honore, and exclusively licensed in the geophysical field to the plaintiff Seismograph Service Corporation, the Hawkins patent, No. 2,513,316, owned by the plaintiff Seismograph Service Corporation, and the Hastings patent, No. 2,528,140, owned by the third-party defendant, Hastings Instrument Company. All three patents provide means of radio location of mobile craft through application of the heterodyne phase comparison principle.¹ The Honore patent provides a radio location along a single hyperbolic line, whereas the Hastings and Hawkins patents, by using the same principle and substantially less than double the equipment used by Honore, provide a radio location, or fix, at the intersection of two hyperbolic lines.

Honore was patented in 1939 and there is no indication that the patent was ever used for any purpose prior to the incidents in suit. The patent became important in 1947 when the ascertainment of the exact locations of vessels conjointly performing geophysical work in the tidelands became necessary, and the young inventor Hastings, applying the heterodyne phase comparison principle and without being aware of the existence of the Honore patent, proposed the use of crossed hyperbolic lines, obtained through emissions from radio transmitters on shore to radio receivers in vessels afloat, to provide the exact locations of the vessels. Applications for the Hawkins and Hastings patents were filed shortly after the Hastings proposal.

Plaintiffs Honore and Seismograph filed the original complaint in this case against Offshore Raydist, Inc., for infringement of Claims 2 and 4 of the Honore and Claims 2 and 14 of the Hawkins patent. Hastings Instrument Company, the manufacturer of the alleged infringing equipment and a 50 per cent stockholder in Offshore Raydist, was made a third-party defendant. It has asserted claims against the Seismograph Service Corporation, alleging an equitable interest in the Honore and Hawkins patents by virtue of a breach of a constructive trust by Seismograph, and further alleging infringement by Seismograph of Claims 1, 2, 8 and 9 of the Hastings patent.

The issues for decision concern the validity of Claims 2 and 4 of the Honore patent and their alleged infringement by Offshore Raydist, the validity of Claims 2 and 14 of the Hawkins patent and their alleged infringement by Offshore Raydist, the alleged infringement by Seismograph of Claims 1, 2, 8 and 9 of the Hastings patent, mutual defenses of laches filed by both Seismograph and Hastings, and most important of all, whether or not a relationship existed between Seismograph and Hastings which imposed a constructive trust on Seismograph for the benefit of Hastings with respect to the Honore and Hawkins patents, or either of them.

The story of this case begins in 1947 after the oil industry became aware of the vast reserves of oil in the tidelands of the Gulf of Mexico. The geophysical work in connection with this oil exploration had to be conducted on vessels afloat in the Gulf of Mexico. The exact location of the shooting vessels which detonate the dynamite and the recording vessels which record the earth's reverberations and reaction to the explosions had to be established, and the oil industry had found no means therefor. The industry, through its geophysical contractors such as the plaintiff Seismograph Service Corporation, experimented with Shoran, Radar, and Decca, all methods of radio location, but none of sufficient accuracy to justify its use in geophysical work.

Phillips Petroleum Company, the principal client of the plaintiff Seismograph, had learned from Dr. Kenneth Norton of the United States Bureau of Standards that the young inventor Hastings had done considerable work in radio location involving the heterodyne phase comparison principle and that perhaps Hastings would have a solution to its problem of exact radio location of vessels working offshore. Hastings, an electronic engineer, had been employed by the National Advisory Committee for Aeronautics for a period of years. His work there had to do with providing means for tracking the flight of aircraft by radio, using the heterodyne phase comparison principle. A detailed 1943 N.A.C.A. report prepared by Hastings while so employed described this principle.

In April, 1946, Hastings had left the employ of N.A.C.A. and was conducting a small private business known as the Hastings Instrument Company, Inc., housed in his home in Hampton, Virginia. By this time, Hastings had conceived and described in his records various versions of his radio location system which he now called "Raydist." In June of 1946, Hastings prepared an outline entitled "The Application of Raydist in Measuring Angles of Pitch and Roll," as related to airplanes or guided missiles in flight, which he forwarded to the Navy Department. In addition to describing a two-dimensional system,² based on the heterodyne phase comparison principle, this outline explained how two or more beat frequencies³ from heterodyne phase comparison systems can be modulated upon a common carrier as is described and claimed in the Hawkins patent in suit.

By April, 1947, when technically qualified representatives of Phillips called on him at his home at Hampton, Virginia, Hastings was able to demonstrate two versions of his Raydist system, the single user, or moving transmitter type, and the multi-user, or fixed transmitter type. Phillips representatives were interested in the multi-user type since they were interested in obtaining the location of several vessels doing geophysical work at the same time. By the simple expedient of placing heterodyne receivers in the vessels and the transmitters on shore, a saturable system became nonsaturable. The Phillips representatives were elated with what they saw. They definitely felt that Hastings had a solution to their offshore survey problem. After obtaining approval from the management of their company, the Phillips representatives called on Dr. Hawkins, officer and director of Seismograph. They advised Hawkins of their visit to Hampton, Virginia, and explained in detail what they saw and heard there. Hawkins was advised of the Raydist system and its potential use in offshore surveying. He was told not only that the use of a basic Raydist system would produce a hyperbolic line of position but that by using what amounted to two basic Raydist systems conjointly, a definite radio location, or fix, could be obtained by crossed hyperbolic lines.

Hawkins, an electronic engineer who had been making fruitless efforts using other systems such as Shoran, Radar, and Decca to obtain exact radio location of vessels working offshore, immediately grasped the significance of the Hastings disclosures as related by Phillips representatives. It was the first time that Hawkins or anyone connected with Seismograph had learned that the heterodyne phase comparison principle could be used to solve the problem of exact radio location, for which solution its principal client, Phillips, was pressing. Working feverishly, by May 11, 1947, Hawkins was able to produce a duplicate of the equipment, and the demonstration, which Hastings had shown the Phillips representatives some days earlier. Having been advised by the Phillips representatives of the modest circumstances under which Hastings' business was being conducted from his home, and the further fact that obviously Hastings' patent position on his Raydist system was poor, Hawkins immediately forwarded to his patent counsel in Chicago disclosures for patent applications covering the Raydist systems and variations thereof.

Shortly before May 15, 1947, and at the request of Seismograph, a meeting with Hastings was arranged for the purpose of allowing Seismograph an opportunity further to investigate Hastings' Raydist systems to determine their applicability to Phillips' offshore exploration problem. On May 15, 1947, the Executive Vice-President of Seismograph, a geophysical engineer, went to Virginia and met with Hastings. At this meeting Hastings again described his Raydist systems, as previously disclosed to Phillips. Manhart proposed a business arrangement with the Hastings Instrument Company wherein Hastings would supply complete Raydist systems and would grant license rights to Seismograph. Upon Manhart's return to Seismograph's principal office at Tulsa, Oklahoma, he reported to the other officers of Seismograph all disclosures made to him by Hastings. In addition to disclosures of a technical nature, he reported that the Hastings company was financially weak, that Hastings was inexperienced in business matters, and that the Hastings patent position was probably poor. On May 23, 1947, after securing the approval of the Executive Committee of Seismograph, Manhart wrote to Hastings formally proposing the formation of a joint venture between Hastings and Seismograph and outlining the details of the joint arrangement, including the provisions that Hastings would supply the engineering design of the system for the company and that Seismograph...