TD Williamson, Inc. v. Laymon

• Citation: 723 F. Supp. 587
• Decision Date: 21 September 1989
• Docket Number: No. 83-C-84-C.,83-C-84-C.
• Parties: T.D. WILLIAMSON, INC., Plaintiff, v. Dwane Odell LAYMON, and Electronic Pigging Systems, Inc., an Oklahoma corporation, Defendants.
• Court: U.S. District Court — Northern District of Oklahoma

723 F. Supp. 587

T.D. WILLIAMSON, INC., Plaintiff, v. Dwane Odell LAYMON, and Electronic Pigging Systems, Inc., an Oklahoma corporation, Defendants.

No. 83-C-84-C.

United States District Court, N.D. Oklahoma.

September 21, 1989.

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James R. Head and Paul E. Johnson, Head, Johnson & Stevenson, and Claire V. Eagan, Hall, Estill, Hardwick, Gable, Golden & Nelson, Tulsa, Okl., and Alan T. McCollom, Sp. Master, Marger & Johnson, P.C., Portland, Or., for plaintiff.

William S. Dorman, Tulsa, Okl., and Duane Burton, Denver, Colo., for defendants.

ORDER

H. DALE COOK, Chief Judge.

Before the Court for its consideration are the parties' objections to the Special Master's Proposed Findings of Fact and Conclusions of Law. At a hearing on June 2, 1989, the parties presented arguments in support of their objections. Having heard these arguments, and reviewed the hearing transcripts, the parties' briefs and the applicable statutory and case law, the Court is now ready to rule upon those objections.

In its decision of April 30, 1986, the Court found the defendants had infringed plaintiff TDW's patent on a device known as a caliper pig, used for measuring and reporting on the internal geometry of pipelines. An injunction prohibiting the defendants from further use of defendant EPS' infringing version of a caliper pig was issued on May 8, 1986. After the appellate court affirmed the determination of liability against the defendants, the Court appointed a Special Master, pursuant to F.R. Cv.P. 53(a), to determine and report on damages due TDW as a result of defendants' infringement. In hearings, lasting ten days the Master received and considered evidence from the parties pertaining to the damages for infringement claimed by TDW. The Master issued proposed findings of fact and conclusions of law on July 28, 1988. TDW has objected to one finding of fact made by the Master. Defendants have lodged seventeen objections to the Master's findings and conclusions.

The Court's scope of review concerning the Master's proposed findings of fact is limited. F.R.Cv.P. 53(e)(2) requires the Court to accept those findings "unless clearly erroneous". A factual finding cannot be deemed "clearly erroneous" unless it stems from a mistaken view of the law or unless, despite its support by substantial evidence, the Court is thoroughly convinced after a consideration of the evidence that a mistake has been made. McGraw Edison Company v. Central Transformer Corp., 196 F.Supp. 664, 666-67 (E.D.Ark.1961), aff'd 308 F.2d 70 (8th Cir.1962). The party objecting to the Master's findings carries the burden of proving them to be clearly erroneous. Oil, Chemical and Atomic Workers Intern. Union, AFL-CIO v. N.L. R.B., 547 F.2d 575, 580 (D.C.Cir.1976).

The Court will first consider TDW's single objection, and then turn to defendants' seventeen objections.

I. PLAINTIFF'S OBJECTION TO PROPOSED FINDING OF FACT.

TDW's only objection is to the Master's Finding of Fact 30, in which the Master concluded that TDW was not entitled to damages from jobs performed in Venezuela in 1986 by EPS' infringing pig embodiment. In support of his conclusion, the Master noted that the sensory "fingers" of the pig were manufactured in Venezuela, and that the pigs EPS shipped down to Venezuela were used for other types of pipeline operations, such as cleaning and batching jobs, as well as geometric surveys of the pipeline interiors.

TDW argues that the Master erred in not finding EPS' Venezuela jobs were infringing uses of TDW's patent under 35 U.S.C. § 271(f)(1). That statute, enacted in 1984, provides

Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

The Master recognized that this section imposed liability for infringement when the components of a patented invention are not combined in the United States, and concluded that the defendants were liable for damages under § 271(f)(1). See Conclusion of Law 17. TDW argues that that conclusion of law is at odds with the Master's Finding of Fact 30 and asks this Court to correct that Finding of Fact and award TDW damages for defendants' use of the infringing pig in Venezuela after 1984.

The caselaw interpreting 35 U.S.C. § 271(f) is limited, and no decisions were found that were dispositive of TDW's objection. The evidence supports the Master's finding that only the sensory fingers were manufactured in Venezuela, in order to meet a requirement of the Venezuelan government as a condition of the defendants performing jobs there. See Record, vol. III, p. 609, In. 7-21. The evidence is unrefuted that the majority of the components of defendants' pig bodies, minus the sensory fingers, were supplied from the defendants' offices and were shipped from Tulsa to the job sites in Venezuela. Defendant Laymon testified that defendants shipped their pigs sufficiently assembled so that EPS' technicians could complete the assembly at the job site in about two hour's time.

Defendants pin their argument for precluding the application of § 291(f)(1) to EPS' Venezuelan jobs upon the term "actively induce" in that subsection. Defendants reason that EPS escapes liability under that section because it did not "actively induce" some third party to combine the sensory fingers with the infringing pig body; according to defendants, they cannot "actively induce" themselves to combine the fingers with the infringing pig body. Defendants point to the legislative history of § 271(f) that states that the term "actively induce" was drawn from § 271(b), which provides that whoever actively induces patent infringement is liable as an infringer. However, defendants ignore the preceding sentence in the legislative history, which states that

in order to be liable as an infringer under paragraph (f)(1), one must supply or cause to be supplied "all or a substantial portion" of the components in a manner that would infringe the patent if such a combination occurred within the United States.

Patent Law Amendments, Pub.L. No. 98-622, 1984 U.S.Code Cong. & Admin. News (98 Stat.) at 5828.

The legislative history noted that § 271(f) was intended to prevent copiers from avoiding U.S. patents by supplying components of a patented product in this country so that the assembly of the components may be completed abroad. Id. This section of the patent law amendment was proposed in response to the U.S. Supreme Court's decision in Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 92 S.Ct. 1700, 32 L.Ed.2d 273 (1972), which created a loophole in prior patent law, allowing copiers to avoid liability for products patented in the United States, by shipping the patented components for combination in foreign countries.

Defendants' claim of required "active inducement" for liability under § 271(f)(1) is not supported by that subsection's legislative history. It is unreasonable that Congress, in attempting to close the loophole for infringement created by the Deepsouth decision, would create another loophole allowing infringers to eschew dealing with foreign parties in order to avoid liability for "active inducement", as defendants now claim. Rather than a limiting factor for liability under § 271(f)(1), the legislative history suggests the phrase, "actively induce" was intended to broaden the basis for liability, extending it to cover both those who actually supply the components as well as those (contributory infringers) who cause others to supply components.

Defendants contend that the Court's construction of § 271(f)(1) makes subsection (f)(2) superfluous. The legislative history of § 271(f) explains the difference between subsections (f)(1) and (f)(2):

Under paragraph (f)(1) the components may be staple articles or commodities of commerce which are also suitable for substantial noninfringing use, but under paragraph (f)(2) the components must be especially made or adapted for use in the invention. The passage in paragraph (f)(2) reading "especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial non-infringing use" comes from existing section 271(c) of the patent law, which governs contributory infringement. Paragraph (f)(2), like existing subsection 271(c), requires the infringer to have knowledge that the component is specially made or adopted. Paragraph (f)(2) also contains a further requirement that infringers must have an intent that the components will be combined outside of the United States in a manner that would infringe if the combination occurred within the United States.

Although the Master did not reference Finding of Fact 30 to § 271(f), it appears that he may have misconstrued § 271(f)(1), in finding no infringement by the defendants on the Venezuelan jobs. The Master included in his finding that components of the defendants' pigs were used for other pipeline purposes, such as cleaning and batching jobs, and not solely for caliper surveys of the pipeline. Although the Master did not clarify the meaning he intended in making that finding, it is possible that he regarded defendants' components as staple articles or commodities of commerce, since they could be used for other pipeline uses, and thus excused defendants' infringing uses of those components in Venezuela. However, the legislative history quoted above makes clear that one can be liable as an infringer under § 271(f)(1), even if the components are staple articles or commodities of commerce suitable for noninfringing use. Thus, defendants' use of infringing pig...