United Business Communications v. Racal-Milgo, Inc.

• Decision Date: 24 July 1984
• Docket Number: Civ. A. No. 80-2051.
• Citation: 591 F. Supp. 1172
• Parties: UNITED BUSINESS COMMUNICATIONS, INC., Plaintiff, v. RACAL-MILGO, INC., Defendant.
• Court: U.S. District Court — District of Kansas

591 F. Supp. 1172

UNITED BUSINESS COMMUNICATIONS, INC., Plaintiff, v. RACAL-MILGO, INC., Defendant.

Civ. A. No. 80-2051.

United States District Court, D. Kansas.

July 24, 1984.

COPYRIGHT MATERIAL OMITTED

Carter H. Kokjer, Kokjer, Kircher, Bradley, Wharton, Bowman & Johnson, William H. Curtis, Michael C. Manning, Morrison, Hecker, Curtis, Kuder & Parrish, Kansas City, Mo., John F. Dodd, Shawnee Mission, Kan., Robert D. Benham, McAnany, Van Cleave & Phillips, Kansas City, Kan., for plaintiff.

J. Donald Lysaught, Weeks, Thomas & Lysaught, Kansas City, Kan., William Prickett, James L. Holzman, Michael Hanrahan, Prickett, Jones, Elliott, Kristol & Schnee, Wilmington, Del., Allen Kirkpatrick, Larry S. Nixon, William T. Bullinger, Cushman, Darby & Cushman, Washington, D.C., for defendant.

MEMORANDUM AND ORDER

O'CONNOR, Chief Judge.

This case, an action for relief from a prior judgment entered by this court because of fraud on the court, is now before us on the motion of the plaintiff, United Business Communications, Inc. ("UBC"), for summary judgment against the defendant, Racal-Milgo, Inc. ("Milgo"). In light of the extensive memoranda and voluminous supporting documentation filed by the parties, the court deems oral argument unnecessary. See Local Rule 15(d). Before addressing the merits of UBC's motion, however, we will attempt to relate the background of this lawsuit.

Background

In July of 1971, Milgo brought suit against UBC and others for infringement of three patents for electronic devices held by Milgo. Milgo Electronic Corporation v. United Telecommunications, Inc. and United Business Communications, Inc., No. KC-3380 (hereinafter referred to as "KC-3380" or "the prior Kansas lawsuit"). In KC-3380, Milgo claimed that certain modems¹ sold by UBC infringed one or more of the following patents: Whang United States Letters Patent No. 3,524,023 ("Whang '023"); Ragsdale United States Letters Patent No. 3,590,381 ("Ragsdale '381"); and Ragsdale and Payne United States Letters Patent No. 3,643,023 ("Payne '023"). This court, Honorable George Templar, District Judge, determined that each of the three patents represented a significant and non-obvious improvement over prior art in the electronics field and, therefore, that each patent was valid and was infringed by UBC. Milgo Electronic Corp. v. United Telecommunications, Inc., 189 U.S.P.Q. 160 (D.Kan. 1976). The court subsequently determined that UBC had wilfully and deliberately infringed the patents by copying a Milgo modem, Milgo Electronic Corp. v. United Telecommunications, Inc., 200 U.S.P.Q. 481 (D.Kan.1978), and that Milgo was entitled to judgment (including treble damages) in the amount of $2,340,726.23, Milgo Electronic Corp. v. United Telecommunications, Inc., 200 U.S.P.Q. 639, 640 (D.Kan. 1978). The judgment of this court was affirmed on appeal. Milgo Electronics Corp. v. United Business Communications, Inc., 623 F.2d 645 (10th Cir.1980). Since the trial in KC-3380, however, the patents involved in that lawsuit have been the subject of other lawsuits elsewhere, and additional information has come to light that casts some doubt upon the correctness of this court's prior judgment.

The validity of the Whang '023 patent was again at issue in a lawsuit filed in 1976 in the United States District Court for the District of Massachusetts. Codex Corp. v. Milgo Electronic Corp., 534 F.Supp. 418 ("Codex"). In that lawsuit, the plaintiff sought to have the Whang '023 patent declared invalid and unenforceable against them because, inter alia, Milgo had misused the patent and was guilty of "unclean hands" as a result of its conduct in the Kansas lawsuit, KC-3380. The Codex court, after reviewing the conduct of Milgo in KC-3380, held that the Whang '023 patent was invalid and unenforceable. Codex Corp. v. Milgo Electronic Corp., 534 F.Supp. 418 (D.Mass.1982), aff'd, 717 F.2d 622 (1st Cir.1983).

Central to the district court's holding in Codex was its finding that Whang, the inventor, and Milgo, the assignee of the patent, had made misrepresentations to this court in KC-3380 concerning the technical specifications contained in the Whang '023 patent and embodied in the Milgo modems.

Whang testified and the Kansas court found that the patent covered Milgo models 4600, 4400/24, 4400/48, 24 LSI and 20 LSI. He also testified that the composite filter of all of those modems had cosine roll-off of less than fifty percent. This was untrue, as Whang now admits, except for the 4600 series and the 4400/48. The expert witness for UBC never examined or tested any of the modems, so that Whang's assertion went unchallenged.

....

The court also concluded that a composite filter characteristic of less than fifty percent cosine roll-off was included in the claims. The district judge ruled that an inventor may be his own lexicographer, and that Mr. Whang had written his own specifications without benefit of some of the existing textbooks. Finding 61 states in part:

61. ... The Whang invention teaches and claims his composite filter means which, when expressed mathematically in terms of roll-off ..., requires a roll-off of from about 50% roll-off down to the ideal or zero percent roll-off.... The features of a narrow-band composite "filter means" of the Whang '023 patent represent a significant and non-obvious improvement over the wide-bandwidth filters recommended for phase modulated systems.... 189 U.S.P.Q. at 179.

534 F.Supp. at 427-28.

The Codex court concluded that most of the Milgo modem models claimed to be covered by the Whang '023 patent did not have "narrow-skirted filters" (i.e. a combined filter rolloff of 50% or less). 534 F.Supp. at 427.

4. Milgo's prototype modem, the 4400/24 (or WU 2247), the development of which led to Whang's purported invention, had wide skirts. Subsequent Milgo modems with wide skirts were labeled with the '023 patent number on them.... I find that the concept of narrow skirts as the novel teaching of the '023 patent to have been devised by Mr. Jones Milgo's trial counsel in KC-3380 and Mr. Whang after the fact, for purposes of establishing the validity of the '023 patent in the Kansas litigation.

534 F.Supp. at 429-30 (emphasis added).

The Codex court concluded: "I cannot escape the conclusion that both of these men Jones and Whang have deliberately misrepresented the narrow-skirt issue to both the District Court of Kansas and to this court." 534 F.Supp. at 433-34. On appeal, the First Circuit Court of Appeals reached a similar conclusion.

Whang admitted at trial that the only novel feature to be found in his patent, Whang '023, was "narrow skirts." That is, a roll-off of 50% or less. The other salient features of Whang '023 such as differential phase modulation, limiting the passband to 1/T Hz and center sampling were already known both separately and in combination. We agree with the district court's conclusion that the asserted novelty, a composite filter roll-off of 50% or less, is nowhere to be found in any of claims 1, 19 or 25 either expressly or by implication. Since the asserted novelty does not, in fact, exist there is no invention.

717 F.2d at 626-627.

The validity of the Whang '023 patent was again at issue, along with Ragsdale '381 and Payne '023, in a suit filed in 1978 in the United States District Court for the District of Delaware. Rixon, Inc. v. Racal-Milgo, Inc., 551 F.Supp. 163 ("Rixon"). In Rixon, the plaintiff sought to have each of the three patents declared invalid and unenforceable.

According to Rixon, Whang '023 is invalid because it is an old combination of elements already established in the prior art, and it is unenforceable because Whang and Milgo concocted, and successfully urged upon the Kansas Court, a theory of validity they knew to be untrue. Payne '023 is invalid, in Rixon's view, because it is obvious from the prior art; it is unenforceable because Milgo took a position in the Kansas litigation with respect to the scope of the Payne patent which was logically irreconcilable with one it was taking simultaneously in a foreign patent proceeding. Rixon attacks Ragsdale '381 as invalid because it is anticipated in the prior art, or obvious from it, and unenforceable because Milgo suppressed evidence that it had made a commercial use or sale of the Ragsdale invention more than one year prior to filing the patent application.

Rixon, Inc. v. Racal-Milgo, Inc., 551 F.Supp. 163, 168 (D.Del.1982).

In considering the plaintiff's allegations of misconduct, the Rixon court noted that "to establish an unenforceability defense, however, the allegedly infringing party must prove, by clear and convincing evidence, that the patent holder has wrongfully obtained or misused its patent." 551 F.Supp. at 171.

In discussing the alleged unenforceability of the Whang '023 patent, the Rixon court made the following relevant findings.

In persuading the Kansas Court that Whang had invented something patentable rather than arrived at an obvious improvement over the prior art, Milgo relied on representations of Whang and other witnesses that the Whang '023 patent taught the use of "sharp skirted" filters. As explained hereafter, Whang, Milgo and its Kansas trial attorney knew at that time that the Whang '023 did not teach "sharp skirted" filters and that the Milgo modems touted as having revolutionized the industry did not have sharp skirts. In its successive effort to sell this "sharp skirt" theory, Milgo deliberately concealed documents and information from its Kansas opponents and the Kansas Court which were needed to fairly assess the patent against the statutory criteria of anticipation and obviousness. 551 F.Supp. at 172.

....

... the record shows that the subsequent confirmation of a monopoly in Kansas rested on misinformation provided to the court by Milgo.

551 F.Supp. at 173.

....

The Whang invention, as set forth in the application and the final patent, did not teach anything about the rolloff of the composite filter,

...