US Industries, Inc. v. Otis Engineering Corporation

• Decision Date: 08 April 1960
• Docket Number: No. 17624.,17624.
• Citation: 277 F.2d 282
• Parties: U. S. INDUSTRIES, INC., Appellant, v. OTIS ENGINEERING CORPORATION, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

277 F.2d 282 (1960)

U. S. INDUSTRIES, INC., Appellant, v. OTIS ENGINEERING CORPORATION, Appellee.

No. 17624.

United States Court of Appeals Fifth Circuit.

April 8, 1960.

Thomas E. Scofield, Kansas City, Mo., James T. Wright, Houston, Tex., Dyche, Wheat & Thornton, Houston, Tex., for appellant, Charles F. Potter, Spruiell, Lowry, Potter & Lasater, Tyler, Tex., of counsel.

Oscar A. Mellin, San Francisco, Cal., E. Hastings Ackley, Dallas, Tex., for appellee.

Before CAMERON, JONES and BROWN, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

We have again for decision questions of validity and infringement of patents in the gas-lift field, the importance of which to the oil business is attested by the frequency with which we are confronted with such devices.¹ As in so many of these former cases, this one, too, finds Bryan and Garrett, or their respective assignees, as adversaries. Otis Engineering Corp. became the assignee of Bryan on May 12, 1956. U. S. Industries, Inc. is the corporate successor of Garrett. Although a new suit and hence a new appeal, it is a continuation of the suit determined in Bryan v. Garrett Oil Tools, Inc., 5 Cir., 1957, 245 F.2d 365. It directly involves the same Bryan patent 345² (Claims 4, 5, 6 and 7) and requires discussion of expired Bryan 918³ both adjudicated in that opinion. Infringement requires treatment of the Camco side-pocket mandrel which, between Bryan and parties other than Garrett, was the subject of our decision in Bryan v. Sid W. Richardson, Inc., 5 Cir., 1958, 254 F.2d 191, concerning Howard 162 and McGowan 903.⁴ The District Court held Bryan 345 valid and infringed (direct and contributory). We affirm on validity but reverse and modify in part as to infringement.

I.

The District Court by pretrial summary judgment held as a matter of law that the prior determination of validity of claims 4, 5, 6 and 7 of Bryan 345, affirmed by our opinion, Bryan v. Garrett Oil Tools, Inc., supra, was binding as res judicata. Otis (the plaintiff) was a direct assignee of Bryan by an assignment which expressly referred to Bryan 345 and the patent controversy with Garrett and in elaborate detail allocated control direction and expense of the litigation. On the other side, the defendant, USI, in October 1955 became the direct corporate successor of Garrett. It is somewhat difficult to determine just what the position of USI is as to res judicata. In the trial court, it was the one who, on the basis of res judicata, moved to stay trial of this cause until final action in the pending appeal of Bryan v. Garrett Oil Tools, Inc., supra. But after that stay expired from our affirmance and trial was approaching, it renewed in elaborate pleading form this attack on validity. The trial judge rejected this by sustaining motions to strike answers raising such defenses. On the actual trial, the Court declined to permit further inquiry into validity but did allow USI to develop a full bill of exceptions which it brings forward into our record. It continues obliquely to argue these matters⁵ resolved against its predecessor Garrett by our former decision. But this holding of validity of Bryan 345 is final on both the immediate parties and here on their respective direct successors.⁶ Validity, as such, may not now be questioned. Of course, in assaying infringement the scope and application of the claims previously held valid become the proper subjects for proof and adjudication. Nash Motors Co. v. Swan Carburetor Co., 4 Cir., 1939, 105 F.2d 305, 310.

II.

On infringement the District Court held that USI was guilty of:

(a) contributory infringement by making retrievable gas lift valves especially for and useful only in bypass mandrels (making up the infringing combination) and selling such valves knowing that they were to be used in the infringing combination;

(b) direct infringement by making and selling bypass mandrels knowing they were to be combined with retrievable valves to form the infringing combination; and

(c) direct infringement by making and selling the completed patented combination of a bypass mandrel and retrievable gas lift valve.

USI does contend that the Camco mandrel (and valves), as well as the type "S" valves⁷ (which we later discuss briefly) do not infringe. But except as to these it makes no effort by brief to demonstrate why the other valves and mandrels specified in the Court's findings and judgment are not (a) the substantial equivalent of the Garrett WOBP valves held to infringe in Bryan v. Garrett Oil Tools, Inc., supra, or (b) the equivalent of the devices disclosed by claims 4, 5, 6 and 7 of Bryan 345. Our examination of the record on the issues adequately briefed convinces us that as to these other devices, there was ample basis for the finding of direct or contributory infringement as the case might be. They warrant and will receive no further discussion.

The case as it finally narrows down relates essentially to the Camco side-pocket mandrel. Basically the question is whether the Camco combination of a by-pass mandrel and retrievable valve comes within the scope of these claims (4, 5, 6 and 7) of Bryan 345. If it does, two subsidiary, but important, questions remain: (1) does the making and selling by USI of gas lift valves useful only in the Camco mandrel, knowing they are to be so used, constitute contributory infringement? (b) does the act of USI in purchasing Camco mandrels from Camco, Inc. and then installing a retrievable valve of its own manufacture to complete the patented combination for sale constitute a direct infringement in view of the license granted by Bryan to Camco, Inc.?

III.

Gas-lift in production of oil is simple in its major objects and outline. Gas is injected under fixed or variable pressure into the annulus between the casing and the production tubing through which the oil is to flow to the surface. Through control valves, either single or in series, located in or affixed to the tubing, the gas enters the tubing at the sub-elevation desired and in the volume or at the pressure required. The effect is one of two things or combination of both. The gas aerates oil in the tubing and thus makes it lighter allowing the natural pressures of the well to lift the oil to the surface. Or the gas, as a slug, expands and pushes the column of oil up to the surface. The principal idea of utilizing gas (or air or fluids) was an old one as the early patents frequently cited in anticipation covering water wells reflect. So, too, were many of the mechanical elements — principally the control valve, whether spring, hydraulic, pneumatic or weight loaded. But between this well recognized idea that gas, through the use of well known control devices, was theoretically available as a source of production power and its actual realization were many practical problems encountered in oil well operations which challenged the inventive genius of skilled persons. The result has been that the novelty underlying patentable invention has most frequently come through combinations of many old elements to meet these practical problems.

So far as operation of the control valve was concerned, it was just as efficient that the valve was located in a housing outside of the tubing. And in the early days this was done. Improvements were made by which the valve housing was contained in a mandrel⁸ so that, while the valve was situated within the interior of the expanded continuation of the tubing, it was still external (offset) to the main axis of the tubing. This did, of course, leave the tubing open and unobstructed either for flow of oil or for the free passage of production tools as might be required during the life of the well. But there was a serious objection to this. The valve had to be inserted into the mandrel and the mandrel had to be put into the tubing string at the surface. This meant that in the event of valve failure or the necessity of valve maintenance or pressure resetting, the tubing had to be pulled to the surface — a process costly in time and money. The quest, then, was for a method by which the valves could be inserted and removed without pulling the tubing. Here again the mechanical means for this were self-evident. For wire-line devices had long been known through which delicate operations could be conducted in a narrow hole thousands of feet below the earth's surface. The problem was not really how to insert or retrieve a valve. The problem had to do with the operability of the valve once in place. Whether the valve was sealed by a tapered valve seat as in Bryan 918 or by traditional O-rings with latching devices as in the forerunners to Bryan 345, the inside, cross sectional area of the tubing was severely constricted by the valve and valve housing. This resulted in two things. The upward flow of oil was impeded with a like lowering in efficiency, and more important, the pressures of the oil moving upward through the valve structure caused the valve to be dislodged with conseqent damage to the valve, other well equipment, and a complete cessation of the gas lift operation. This was the problem which Bryan 345 set out to solve. In brief, the novelty was in the mandrel. It provided the customary housing for the valve in the center of the axis of the tubing. And then by bulges in the sides of the mandrel, semicircular concentric spaces were provided as by-passes around the valve.⁹

As much an advance as this was, some of the old objections remained. With the Bryan 345 mandrel and valve, the opening in the valve housing was too small to pass valve units through for seating below the topmost control valve in the tubing string. This meant that in a series installation, the tubing had to be pulled to permit removal, renewal, repair or resetting of all similar valves below the topmost mandrel. More serious, the tubing was almost completely obstructed so it was impossible to use other production tools¹⁰ without the costly pulling of the tubing. This was the...