Sun Studs, Inc. v. ATA Equipment Leasing, Inc.
| Decision Date | 31 March 1989 |
| Docket Number | Nos. 87-1509,87-1515,s. 87-1509 |
| Citation | 872 F.2d 978 |
| Parties | , 11 U.S.P.Q.2d 1479 SUN STUDS, INC., Plaintiff-Appellant, v. ATA EQUIPMENT LEASING, INC., Applied Theory, Inc. and U.S. Natural Resources, Inc., Defendants/Cross-Appellants. |
| Court | U.S. Court of Appeals — Federal Circuit |
Don H. Marmaduke, of Tonkon, Torp, Galen, Marmaduke & Booth, Portland, Or., for plaintiff-appellant. With him on the brief, were Barbee B. Lyon, of Tonkon, Torp, Galen, Marmaduke & Booth and William A. Birdwell, of Spears, Lubersky, Campbell, Bledsoe, Anderson & Young, Portland, Or.
David W. Axelrod, of Schwabe, Williamson & Wyatt, Portland, Or., for defendants/cross-appellants. With him on the brief, was Robert L. Harrington, of Portland, Or.
Before FRIEDMAN and NEWMAN, Circuit Judges, and BENNETT, Senior Circuit Judge.
This appeal and cross-appeal arise from the judgment of the United States District Court for the District of Oregon, 1 on trial to a jury of the multiple and interrelated issues of patent validity, patent infringement, misappropriation of confidential information, breach of contract, and copyright infringement. We affirm in part, reverse in part, and remand.
The three patents in suit concern processes and apparatus for automated sawmills and veneer mills. Sun Studs, Inc., an Oregon corporation, is the owner of the patents, and operates a sawmill and veneer mill. Applied Theory, Inc. and its related defendant companies ATA Equipment Leasing and U.S. Natural Resources (collectively "Applied Theory") provides various services to the lumber industry and was in 1971, at the start of the events leading to this dispute, a consulting firm of university professors having general experience in computer programming. At that time Applied Theory had no significant experience in the lumber industry.
Before 1971 Sun Studs' president Fred Sohn and a consultant H.C. Mason had developed methods and apparatus for improving the processing of raw logs and increasing the yield of usable products, resulting in the two Mason patents in suit, discussed infra. In 1971 Applied Theory was hired to do computer design work on these and related systems. Applied Theory agreed that all information developed, and all inventions and any patents thereon, were the property of Sun Studs. The patent thus obtained is the Sohn '579 patent, also in suit.
These patents cover various processes and apparatus for obtaining the optimal amount of wood products from logs, rapidly and accurately, minimizing wasted wood and operational errors, and thereby maximizing revenues. Sun Studs states that it obtained a fifty percent increase in recovery of wood products. There was testimony that these systems are of industry-wide importance; a witness called them "revolutionary".
By contract in 1971 Applied Theory also agreed that on termination of the consulting project it would preserve the information developed thereunder in confidence for five years, and "shall assist in every lawful way ... in protecting or enforcing Sun Studs' rights [to any resulting patents], and in prosecuting and defending appeals, interferences, infringement suits, and controversies relating thereto". The same agreement appears in a 1973 contract assigning the Sohn '579 patent to Sun Studs. Sun Studs agreed to pay Applied Theory half of any net royalties obtained from licensing any such resulting patents to third persons.
In 1973 Applied Theory began to offer consulting services to other sawmills, and subsequently to other veneer mills, adapting and installing processes and apparatus that the jury found to be the same or substantially the same as those that had been developed for Sun Studs. In 1978 Sun Studs filed suit for patent infringement and breach of contract, leading to the multiple issues of this appeal.
The case was tried in three phases before the same jury. In Phase 1 the jury found all of the patent claims at issue valid, and infringed by some but not all of the accused installations. The jury found that the infringement was not willful.
In Phase 2 the jury found that Applied Theory had breached its contract with Sun Studs by use of the SIMPX computer program, and that Applied Theory had infringed Sun Studs' common law copyright on the SIMPX program. The jury found that Applied Theory had breached its common law confidential relationship with Sun Studs by misappropriation of this program, and that recovery on this common law claim was barred by the Oregon statute of limitations. The jury found that Sun Studs had breached its contractual obligation to pay Applied Theory half of the net royalties it received from licensing of the Sohn '579 patent. The jury also found laches against Sun Studs with respect to recovery of damages for sawmill infringement.
In Phase 3 the jury awarded Sun Studs $710,000 in damages for patent infringement, calculated at a specified royalty per type of mill, and taking account of laches; $10,000 damages for copyright infringement; and $10,000 damages for breach of contract. The jury awarded Applied Theory $309,629.36 as its share of the licensing royalties received by Sun Studs.
The district court granted Applied Theory's motion for judgment n.o.v. on patent infringement, the court adjudging non-infringement by all the accused installations. The court vacated the damage award for patent infringement and the injunction that it had entered on the jury verdicts. The jury's two $10,000 damage awards, for copyright infringement and breach of contract, were held to be for the same breach and were reduced to one $10,000 award. The court also increased to $353,500.00 the share of royalties payable by Sun Studs to Applied Theory, reversing the jury's verdict deducting attorney fee contributions by Sun Studs' licensee in calculating "net" royalties. All other post-trial motions were denied.
Each party appeals the aspects decided adversely to it, except that Applied Theory does not appeal the judgments adverse to it on the common law confidentiality, contract and computer program issues and the damages therefor.
At issue were claims 1, 2 and 5 of United States Patent No. 3,736,968 entitled "Method and Apparatus for Processing Logs" (Mason '968); claim 3 of United States Patent No. 3,746,065 entitled "Process and Apparatus for Veneer Cutting" (Mason '065); and claims 4 and 8-13 of United States Patent No. 3,852,579 entitled "Method and Apparatus for Determining the Surface Configuration of Elongate Objects, Particularly Logs" (Sohn '579). Sohn '579 is a joint invention of Sohn of Sun Studs and Hunter and Holmes of Applied Theory; Hunter and Holmes assigned their interests to Sun Studs, in accordance with the consulting contracts. Collateral information concerning these patents appears in Sun Studs, 772 F.2d at 1563-64, 227 USPQ at 85-86.
Following four weeks of trial the jury 2, in a series of special verdicts, upheld the validity of all the claims. The district court denied Applied Theory's motions for judgment n.o.v. and for a new trial.
The standard of appellate review, on denial or grant of judgment n.o.v., is whether a reasonable jury could have reached the verdict that was reached by this jury. See Neely v. Eby Constr. Co., 386 U.S. 317, 322, 326-29, 87 S.Ct. 1072, 1076-77, 1078-80, 18 L.Ed.2d 75 (1967) (); Lavender v. Kurn, 327 U.S. 645, 653, 66 S.Ct. 740, 744, 90 L.Ed. 916 (1946). See also, e.g., Railroad Dynamics, Inc. v. A. Stucki Co., 727 F.2d 1506, 1512, 220 USPQ 929, 935 (Fed.Cir.), cert. denied, 469 U.S. 871, 105 S.Ct. 220, 83 L.Ed.2d 150 (1984) (); 5A Moore's Federal Practice p 50.07 (1988). We determine whether there was substantial evidence in support of the jury's verdicts of validity, on the entirety of the evidence adduced and in light of the instructions to the jury on the applicable law. See, e.g., Orthokinetics, Inc. v. Safety Travel Chairs, Inc., 806 F.2d 1565, 1571, 1 USPQ2d 1081, 1084-85 (Fed.Cir.1986) () (" 'Substantial' evidence is such relevant evidence from the record taken as a whole as might be accepted by a reasonable mind as adequate to support the finding under review"); Shatterproof Glass Corp. v. Libbey-Owens Ford Co., 758 F.2d 613, 618-19, 225 USPQ 634, 636 (Fed.Cir.), cert. dismissed, 474 U.S. 976, 106 S.Ct. 340, 88 L.Ed.2d 326 (1985); Weinar v. Rollform, Inc., 744 F.2d 797, 805, 223 USPQ 369, 373 (Fed.Cir.1984), cert. denied, 470 U.S. 1084, 105 S.Ct. 1844, 85 L.Ed.2d 143 (1985); Perkin-Elmer Corp. v. Computervision Corp., 732 F.2d 888, 894-95, 221 USPQ 669, 674 (Fed.Cir.), cert. denied, 469 U.S. 857, 105 S.Ct. 187, 83 L.Ed.2d 120 (1984).
The jury instructions are reviewed for legal correctness, with due consideration to any objections raised at trial. Faulty instruction of law, if harmful in effect, is grounds for a new trial. Shatterproof Glass Corp., 758 F.2d at 626, 225 USPQ at 643 ().
35 U.S.C. Secs. 102(e) and 102(g)
Applied Theory argues that the jury was not instructed that it must consider Mouat Patent No. 3,945,125 ("Mouat") as a prior art reference against the patents at issue and that the jury verdict is thereby fatally flawed, wherefore the issue of validity must be retried. Applied Theory also argues that the district court erred in its analysis of Mouat when the court sustained the jury verdict upon treating...
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