USM Corp. v. SPS Technologies, Inc.

Decision Date04 May 1981
Docket NumberNo. 74 C 1514.,74 C 1514.
Citation211 USPQ 112,514 F. Supp. 213
PartiesUSM CORPORATION, Plaintiff, v. SPS TECHNOLOGIES, INC., Defendant.
CourtU.S. District Court — Northern District of Illinois



Gerald D. Hosier, Raymond P. Niro and Thomas G. Scavone, Hosier, Niro & Daleiden, Ltd., Chicago, Ill., James P. Hume, Chicago, Ill., for plaintiff.

Leonard J. Santisi and John A. Mitchell, Curtis, Morris & Safford, P. C., New York City, Donald L. Welsh, Fitch, Even, Tabin & Luedeka, Chicago, Ill., Aaron Nerenberg, Jenkintown, Pa., for SPS Technologies.


BUA, District Judge.

In the matter at bar, the plaintiff, the USM Corporation, has challenged, on a variety of grounds, the validity of a patent owned by the defendant, SPS Technologies, Inc. After certain of the issues raised by USM were resolved in pretrial judgments, a non-jury trial was held on the claims presented in Counts I and IV of the plaintiff's complaint on October 24, 1978. With respect to those claims, after considering the testimony and evidence presented at trial, together with the various other materials submitted by the parties, the court makes the following Findings of Fact and Conclusions of Law. Rule 52(a), Fed.R. Civ.P.


1. The plaintiff, USM Corporation (hereinafter "USM"), is a New Jersey corporation, having its principal office and place of business in Farmington, Connecticut.

2. The defendant, SPS Technologies, Inc. (hereinafter "SPS"), is a Pennsylvania corporation having its principal office and place of business in Jenkintown, Pennsylvania.

3. The amount in controversy, exclusive of interest and costs, exceeds the sum of $10,000.

4. SPS has not contested the personal and subject matter jurisdiction of this court in respect to Counts I and IV-V of USM's Amended and Supplemental Complaint, and the court finds that it has both personal and subject matter jurisdiction as to said Counts. Defendant SPS also does not contest, and the court further finds, that it has personal jurisdiction over SPS with respect to the claim made in Count III of USM's complaint.

5. SPS, on motion prior to trial, challenged the subject matter jurisdiction of this court as to Count III. This court, in a Memorandum Order dated June 12, 1978, denied SPS' motion. For the reasons set forth in that Order, the court finds that subject matter jurisdiction over Count III properly lies.

6. USM and SPS were parties to an earlier filed action in this court involving the same SPS patent at issue here, i. e. United States Patent No. 3,093,177, issued in the name of Joseph P. Villo (hereinafter "the Villo patent"). That action, styled Standard Pressed Steel Co. v. USM Corporation, et al., No. 69 C 2538, filed December 8, 1969, was settled in early 1971: (a) by USM acquiring non-exclusive license rights from SPS under the Villo patent; and (b) by the entry of a consent decree.

7. Venue over the matters at bar properly lies in this judicial district, and defendant SPS has not objected to the propriety of same.

8. The antitrust claim raised by USM in Count V of its Amended Supplemental Complaint was severed for separate and later trial in this court's Order of April 12, 1976, and jurisdiction is hereby reserved as to said Count. On June 12, 1978 summary judgment was entered against USM as to Counts II and VI of its complaint. Those matters, because they are the subject of a separate appeal by USM, formed no part of the October 24, 1978 trial.


9. To better clarify the issues presented in the case at bar, it is necessary to briefly trace the procedural history of the earlier suit in this court between USM and SPS. In that suit, USM included among its responses to SPS' infringement claim the contention that it USM held an irrevocable, royalty-free license under the Villo patent which was sufficient in scope to render any issue of validity moot. This license contention was severed from the validity and infringement questions, and tried separately on January 19-20, 1971.

The USM license claim was based upon a "grant back" provision in an October, 1955 license agreement in effect between the parties. SPS, in replying to USM's position, argued that it had conceived and reduced to practice the claimed invention of the Villo patent long prior to October, 1955, and thus that such claimed invention was not a later developed improvement, as contemplated by SPS' interpretation of the license agreement's grant back clause. As reported in 168 U.S.P.Q. 741 (N.D.Ill.1971), modified 170 U.S.P.Q. 83, USM's license defense was defeated on the basis of evidence presented by SPS to show that its conception and reduction to practice of the Villo invention was commenced in August, 1953, continued "more or less steadily" through 1954 into 1955, and led directly to the filing of the "original" Villo patent application on January 30, 1956.

After this issue was resolved, the suit was privately settled, with USM acquiesing in a license. As part of that settlement, a "Judgment Order of Consent" was entered by the court on May 3, 1971. That consent decree recited that the Villo patent was valid and infringed by certain USM patch-type self-locking bolts of a stated construction, regardless of whether or not certain methods were used by USM in the manufacture of said bolts. Because the matter was settled, no judicial hearing ever was held on validity or infringement of the Villo patent.

10. The present suit was commenced by USM in June, 1974, to challenge both the validity and its USM's purported infringement of the Villo patent on the grounds that: (a) the policy of Lear v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610 (1969) and its progeny in this Circuit rendered consent decrees in patent cases unenforceable as a matter of law; and (b) the absence of an injunctive provision against infringement in the 1971 consent decree manifested a limitation on that decree to retrospective application only. Arguing primarily res judicata principles, SPS sought to preclude all discovery on the part of USM. USM, though, ultimately was able to gain all of the discovery it required.

Shortly before the trial in this cause, SPS renewed its motion for summary judgment on these issues, again contending that the 1971 consent decree must be given res judicata effect. On June 15, 1978 this court, on the basis of the legal issue then before it, concluded that "while it is indeed a difficult assessment to make," res judicata effect should be extended to the consent decree at issue. Memorandum Order, at 6-11.

11. Prior to this court's June 12, 1978 holding, however, USM had filed an Amended Complaint based upon evidence uncovered through the discovery SPS had attempted unsuccessfully to foreclose. This Amended Complaint set forth the following further and independent grounds for vacating the 1971 consent decree: (a) that SPS was guilty of fraud and inequitable conduct as to both USM and the court in the prior suit, and in its inducements to USM to accept — and the court to sign — the consent decree; (b) that SPS was guilty of fraud and inequitable conduct in its Patent Office procurement of the Villo patent, evidence of which was wrongfully suppressed by SPS in the prior suit with USM and in an even earlier suit with a third-party, Amerace Corporation; and (c) that on the record taken as a whole, it would be at the very least inequitable to enforce the consent decree from the date of filing of the present suit.

12. In addressing these charges of USM, this court recognizes that the concept of fraud in a context of the present kind does not lend itself to simple and precise definition, but rather must be measured against fundamental standards of honesty and fair play. The court, however, is not without substantial case authority to guide it in its determinations in this action. In this regard, the legal and equitable principles that govern claims of patent fraud, and of unclean hands and inequitable conduct in the Patent Office and the courts, are well-rooted in Supreme Court doctrine. See e. g., Kingsland v. Dorsey, 338 U.S. 318, 70 S.Ct. 123, 94 L.Ed. 123 (1949); Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806, 65 S.Ct. 993, 89 L.Ed. 1381 (1945); Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 64 S.Ct. 997, 88 L.Ed. 1250 (1944); Keystone Driller Co. v. General Excavator Co., 290 U.S. 240, 54 S.Ct. 146, 78 L.Ed. 293 (1933).

13. A dispute also has arisen between the parties in respect to certain patch-type self-locking nuts produced by USM, which did not come into existence until at least one year after the 1971 consent decree was entered. As concerns this dispute, SPS, in the pretrial Order dated April 12, 1976 and in responses to formal requests for admissions, initially took the position that four variants of a USM-produced patch nut were within the compass of the Villo patent. On the eve of trial, two and one-half years later, however, SPS sought through its counsel to withdraw its infringement charges, and further contended that all questions of patent validity and infringement as to the USM patch nuts would be mooted by such action because no justiciable controversy would then exist between the parties on such issues. USM, in response, urged that, at the very least, it was entitled to a judgment of noninfringement of the Villo patent by the USM patch nuts.

Based upon the judicial admissions by SPS' counsel in open court to the effect that SPS would never again assert the Villo patent against the USM patch nuts at issue, or against future USM products of like design, judgment on this issue was summarily entered against SPS on October 27, 1978, in order to permanently remove any cloud from USM's right to make and sell such patch nuts, and from its licensees' right to do likewise free from any renewed...

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