Thompson-Hayward Chemical Co. v. Rohm and Haas Co.

• Decision Date: 03 October 1984
• Docket Number: 83-1017,THOMPSON-HAYWARD,Nos. 83-981,s. 83-981
• Citation: 223 USPQ 690,745 F.2d 27
• Parties: CHEMICAL CO., Appellant, Cross-Appellee, v. ROHM AND HAAS CO., Appellee, Cross-Appellant. Appeal
• Court: U.S. Court of Appeals — Federal Circuit

Page 27

745 F.2d 27

223 U.S.P.Q. 690

THOMPSON-HAYWARD CHEMICAL CO., Appellant, Cross-Appellee, v. ROHM AND HAAS CO., Appellee, Cross-Appellant.

Appeal Nos. 83-981, 83-1017.

United States Court of Appeals Federal Circuit.

Oct. 3, 1984.

Dana M. Raymond, New York City, argued for appellant, cross-appellee. With him on the brief were Arthur S. Tenser and John D. Murnane, New York City, of counsel.

Rudolf E. Hutz, Wilmington, Del., argued for appellee, cross-appellant. With him on the brief were Januar D. Bove, Jr. F.L. Peter Stone and Jeffrey B. Bove, Wilmington, Del.

George W.F. Simmons, Philadelphia, Pa., of counsel.

Before RICH, DAVIS, BENNETT, MILLER and SMITH, Circuit Judges.

RICH, Circuit Judge.

Thompson-Hayward Chemical Co. (T-H) appeals from a judgment of the United States District Court for the Eastern District of Louisiana, the Honorable Patrick E. Carr, judge, in a patent infringement action by which the patentee, Rohm and Haas Co. (R & H) was awarded $833,121 in damages for infringement (83-981). R & H cross-appeals the amount of the damage award (83-1017).

Appellant T-H has designated certain issues for appeal: (1) was the district court correct in holding that the Supreme Court's decision in Dawson Chemical Co. v. Rohm & Haas Co., 448 U.S. 176, 100 S.Ct. 2601, 65 L.Ed.2d 696, 206 USPQ 385 (1980), has retroactive applicability; (2) did the trial court abuse its discretion in rejecting T-H's defense of estoppel by "implied license"; (3) did the court err in holding that R & H's claim was not barred by laches; and (4) did the district court err in awarding prejudgment interest to R & H.

Cross-appellant R & H appeals two questions: (1) did the trial court err in not awarding damages based on a reasonable royalty rate, even though such damages were higher than those based on R & H's lost profits; and (2) did the court err in awarding prejudgment interest under the Louisiana Civil Code without following a 1981 amendment to the code that increased the annual interest rates.

I.

1. Background of the Case

On June 11, 1974, U.S. Patent No. 3,816,092 (the propanil patent) issued to R & H which, on that same date, filed two infringement suits, one in New Orleans against T-H and the other in Houston against the Dawson Chemical Co., et al. In August, 1976, in the Dawson case, the district court decided by summary judgment that a licensing policy by R & H constituted patent misuse. 191 USPQ 691 (S.D.Tex.1976). This decision was reversed by the Fifth Circuit Court of Appeals, 599 F.2d 685, 203 USPQ 1 (5th Cir.1979), which was affirmed by the Supreme Court in Dawson Chemical Co. v. Rohm & Haas Co., 448 U.S. 176, 100 S.Ct. 2601, 65 L.Ed.2d 696, 206 USPQ 385 (1980) (the Dawson decision).

R & H filed its first amended and supplemental complaint herein on June 24, 1974, alleging acts of infringement on specific dates in June. Also on that date T-H asked R & H for a license under the propanil patent, which was denied. In the interim between the district court decision and that of the Supreme Court in Dawson, proceedings in the instant case were continued by a series of joint motions. After the Supreme Court's ruling on October 28, 1980, R & H's second amended and supplemental complaint was filed, and active proceedings in this case resumed.

Following the Dawson decision, litigation also resumed in the Houston case as well. That district court ultimately determined the validity and infringement issues in favor of R & H, in a decision of January 5, 1983. Rohm and Haas Co. v. Dawson Chemical Co., Inc., 557 F.Supp. 739, 217 USPQ 515 (S.D.Tex.1983). The decision was reversed by this court sub nom Rohm and Haas Co. v. Crystal Chemical Co., 722 F.2d 1556, 220 USPQ 289 (Fed.Cir.1983), (the Crystal decision) on December 7, 1983, on the ground that the propanil patent was invalid because of fraud in the Patent and Trademark Office (PTO) committed during its prosecution.

In the instant New Orleans case, R & H moved for and was granted a partial summary judgment as to the non-damages issues, as will be discussed below, on March 22, 1982. Following a non-jury trial, and subsequent to the January decision of the Texas court, final judgment was entered on March 1, 1983, in favor of R & H for damages in the amount of $402,095 plus interest. An amended judgment of March 30, 1983 awarded $833,121 plus interest to R & H.

Additional details and background information on the circumstances of these interrelated cases may be found in the Dawson decision and the Crystal decision. Familiarity with the substantive background and procedural history of this case will be presumed.

Timely appeals were taken from both of the district court proceedings. Because our decision in Crystal issued subsequent to submission of briefs and the oral arguments in the instant case, we requested and received from the parties supplemental briefs discussing what effect, if any, that decision has on this case.

2. Proceedings Below

In its Answer to the Second Amended and Supplemental Complaint alleging infringement of the propanil patent, T-H denied that the patent "was duly or legally issued." However, T-H also stated that:

(13) In the further proceedings of this cause, defendant will not contest and will not offer evidence in opposition to the following allegations that have been pleaded by plaintiff:

(1) that plaintiff Rohm and Haas is the owner of U.S. Letters Patent No. 3,816,092;

(2) that U.S. Letters Patent No. 3,816,092 is valid; and

(3) that defendant's sales of propanil in the period from June 11, 1974 to April 1979, if not then licensed or permitted as a matter of law, constituted infringement of U.S. Letters Patent No. 3,816,092. [Emphasis ours.]

Thus, while T-H did not contest validity of the propanil patent, neither did it admit validity. Significantly, T-H never raised the affirmative defense that the propanil patent was invalid or unenforceable because of fraud in its procurement.

In a Pre-Trial Order dated March 4, 1983, the trial court noted that the parties had been unable to agree on certain language as to issues for trial for inclusion in that order, and therefore it attached their "suggested" paragraphs as exhibits. It was further noted that the pretrial order controlled the course of the trial and "may not be amended except by consent of the parties and the Court, or by order of the Court to prevent manifest injustice."

T-H suggested that:

16. The trial of this case will be limited to the issue of damages.

Defendant has informed plaintiff and the Court of its desire to limit the issues to be tried by the Court to (1) defendant's liability for damages; and (2) the fixing and liquidation of damages, and has previously proposed to stipulate solely for the purposes of this action that:

(1) Rohm and Haas is and has been since the date of its issuance the sole owner of all right, title and interest in U.S. Patent No. 3,816,092 (the "Wilson patent");

(2) The Wilson patent was duly issued to Rohm and Haas and is good and valid in law;

(3) Except as to Thompson-Hayward's contentions of nonliability for damages as pleaded in the answer to the second amended and supplemental complaint which are disputed by Rohm and Haas, the Wilson patent is enforceable against Thompson-Hayward;

(4) Thompson-Hayward contributorily infringed and induced infringement of the Wilson patent by its sales of propanil in the period from June 11, 1974 to April 1979; and

(5) Thompson-Hayward reserves any and all rights for dismissal of this action or for relief from judgment in this action that may arise in law or equity in the event of a final adjudication in the Texas action adverse to Rohm and Haas with respect to validity, scope or enforceability of the Wilson patent. [Emphasis ours.]

In its alternative suggested language as to the scope of issues presented for trial, R & H agreed in part, but it contended "that the trial of this case is limited to damages only because defendant has repeatedly stated it will not contest the issues of liability (validity, enforceability and infringement) and such issues must therefore be considered in plaintiff's favor." (Emphasis ours.) R & H further acknowledged that T-H "had previously proposed to stipulate" to the five items in paragraph 16, above, but did not in fact so stipulate. Additionally, in response to T-H's suggested language for the order that it "shall be permitted to supplement this Pre-Trial Order after the complete trial transcript has been made available" to it from the Crystal case, R & H contended that T-H "has no such right." On this appeal, T-H has made no showing that the pleadings or pre-trial order have been modified or in any way amended in view of proceedings in the district court in Crystal.

In the district court's Reasons for Judgment accompanying its grant of summary judgment to R & H entered on March 22, 1982 on these non-damages issues, the court noted that it was "without any evidence to rebut" the allegations by R & H that it was the owner of the propanil patent, that the propanil patent was valid and enforceable, and that T-H "contributorily infringed and actively induced infringement of the Wilson patent." The court's judgment was predicated upon Rule 56 of the Federal Rules of Civil Procedure concerning summary judgment, in that "[a]s to the first three issues upon which plaintiff seeks summary judgment, Thompson-Hayward has raised no substantial opposition, and in fact, has offered to stipulate to such, with the reservation that the stipulation would not affect any contrary determination by the District Court in Houston, which at this time, is still pending." (Emphasis ours.) Thus, the court acknowledged T-H's offer to stipulate, but based its decision on the lack of rebuttal evidence by T-H in response to R & H's allegations, not on a stipulation by the parties. In this judgment, the Supreme Court's decision in Dawson was also held to apply retroactively.

T-H's...