Vekamaf Holland B.V. v. Pipe Benders, Inc.

• Decision Date: 29 December 1982
• Docket Number: No. 81-1686,81-1686
• Citation: 696 F.2d 608
• Parties: VEKAMAF HOLLAND B.V., Cojafex B.V., and Inkamaf B.V., Appellants, v. PIPE BENDERS, INC., Modern Constructors of Duluth, Minnesota, Inc., Marvin W. Meierhoff and Robert M. Meierhoff, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 608

696 F.2d 608

217 U.S.P.Q. 32

VEKAMAF HOLLAND B.V., Cojafex B.V., and Inkamaf B.V., Appellants, v. PIPE BENDERS, INC., Modern Constructors of Duluth Minnesota, Inc., Marvin W. Meierhoff and Robert M Meierhoff, Appellees.

No. 81-1686.

United States Court of Appeals Eighth Circuit.

Submitted Nov. 8, 1982.

Decided Dec. 29, 1982.

Richard J. Flynn, John E. Haley, Richard E. Young, Sidley & Austin, Washington, D.C., Robert K. McCarthy, Donovan, McCarthy, Crassweller, Larson & Magie, Duluth, Minn., for appellants.

John D. Gould, Douglas A. Strawbridge, Merchant, Gould, Smith, Edell, Welter & Schmidt, P.A., Minneapolis, Minn., for appellees.

Before LAY, Chief Judge, ROSS, and FAGG, Circuit Judges.

LAY, Chief Judge.

This is an appeal from a lengthy and involved action for breach of a written secrecy agreement, patent infringement, and misappropriation of trade secrets. The underlying dispute involves machines utilizing a continuous inductive heating method of bending large diameter metal pipes. ¹

Plaintiffs (hereinafter sometimes referred to collectively as "Vekamaf") are three Dutch companies engaged in the design, production, and sale of technical and engineering equipment. Vekamaf, the parent company, handles all international sales except those in the United States, which are handled by one of its subsidiaries, Inkamaf. Cojafex, another subsidiary, handles engineering, research, and development. In 1968, Cojafex entered into a licensing agreement with a Czechoslovakian firm for the right to manufacture and sell pipe-bending machines utilizing the continuous inductive heating process. ² Vekamaf's first machine broke while bending heavy pipe on a small radius, and Marinus Hofstede, Vekamaf's engineer, ascertained that "lateral forces," or forces transverse to the axis of unbent pipe, caused the breakage. Hofstede developed a heat-sensitive link that would detect and eliminate the presence of lateral forces. The determined cause of the lateral forces was displacement of the effective heated zone--the softest part of the pipe and the part where bending occurs--from the plane of the pivot point of the bending arm of the machine. The link served to locate the optimum position of the heat inductor longitudinally along the pipe. This method of custom bending industrial pipe was patented by the plaintiffs in April 1973 (United States Patent No. 3,724,258). The patented process was incorporated into the Czech machine and was referred to as the "generation II" design; plaintiffs later effectuated an improvement in this design providing greater mobility of the machine frame and referred to this improvement as the "generation III" design. Both designs detect deviation in the radius of a bend during the bending operation and correct it by moving the heat inductor longitudinally on the axis of the unbent portion of pipe to position the effective heated zone substantially in the plane of the center of rotation.

Defendants (hereinafter sometimes referred to as "Pipe Benders") are two Minnesota corporations, Pipe Benders, Inc. and Modern Constructors of Duluth, Minnesota, Inc., and two principals of the corporate parties, Robert and Marvin Meierhoff, who have been involved in the business of industrial pipe fabrication since the 1940's. In the late 1960's, defendants became interested in processes for bending large diameter pipe. In 1971, Robert Meierhoff traveled to Japan to observe the equipment jointly developed by Dai-Ichi and Mitsubishi utilizing the continuous movement inductive heating method. Later that year, Marvin Meierhoff contacted Vekamaf by mail regarding its equipment. Vekamaf responded in a letter containing general information and offered to meet the Meierhoffs in Duluth; the Meierhoffs' reply indicated an interest in purchasing either the Dai-Ichi or Vekamaf's machine and asked to see Vekamaf's machine. The Meierhoffs were evidently also contemplating building their own machine at this point.

Representatives of Vekamaf met with the Meierhoffs in Duluth in January 1972, discussing technical information regarding performance capabilities and providing technical sales literature including some performance graphs. Defendants allege, and the magistrate found, that the Meierhoffs informed Vekamaf of their desire to build, rather than purchase, at this particular meeting in Duluth. Vekamaf invited the Meierhoffs to view its machine in operation in the Netherlands and the Meierhoffs traveled to Europe to do so in February 1972. At that time price quotations were prepared and the Meierhoffs signed a secrecy agreement at Vekamaf's request promising not to disclose or use any confidential information regarding Vekamaf's process until it became public knowledge. Vekamaf's United States patent application was then still pending. Technical information including the theory behind the patented process and alleged trade secrets was discussed. The Meierhoffs also viewed and photographed Vekamaf's machine in operation.

Pipe Benders commenced design and construction of their own machine in April 1972 and successfully completed the project in March 1973. ³ In late 1973 Hofstede of Vekamaf obtained some of Pipe Benders' sales information regarding its new pipe bending machines. The information contained performance graphs similar or identical to those that Vekamaf had given the Meierhoffs during their 1972 meetings in Duluth and the Netherlands. Suspicious of improper use of Vekamaf's trade secrets, Hofstede contacted the Meierhoffs, who denied any impropriety and refused to allow an examination of their machines. On June 10, 1975, Vekamaf commenced this action, claiming: (1) patent infringement; (2) breach of the secrecy agreement; and (3) misappropriation of trade secrets. All three claims were dismissed by the district court upon the magistrate's recommendation and plaintiffs allege on appeal that the district court's findings were in error.

Discussion.

Our standard of review of the district court's findings of fact is prescribed by rule 52(a) of the Federal Rules of Civil Procedure as the clearly erroneous standard. See Iten Leasing Co. v. Burroughs Corp., 684 F.2d 573, 575 (8th Cir.1982); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Goldman, 593 F.2d 129, 131 (8th Cir.), cert. denied, 444 U.S. 838, 100 S.Ct. 76, 62 L.Ed.2d 50 (1979). ⁴

1. Patent Infringement Count.

The foundation of Vekamaf's case rests on the premise that the bending of large diameter metal pipes can be accomplished by only one process and that process requires the use of Vekamaf's patented link or equivalent sensing device for the control of lateral forces. Thus, Vekamaf urges, for defendants to bend large pipes successfully they must have used the link, at least initially, and infringed Vekamaf's patent. To prove this premise Vekamaf relied heavily on the expert testimony of Dr. Roger Caron about the lateral forces. Vekamaf also introduced circumstantial evidence in support of this theory. ⁵

The magistrate totally discredited the testimony of Dr. Caron finding that his conclusions were "weakened by pedantic argumentation and an obvious desire to espouse the plaintiffs' cause." Magistrate's Report at 34. The magistrate then analyzed the other evidence offered and found the evidence when considered as a whole was insufficient to prove Vekamaf's theory. Vekamaf's primary objection and contention now is that the magistrate erroneously assessed the credibility of Dr. Caron.

Vekamaf argues that the magistrate's assessment of the credibility of defendants' witnesses is in stark contrast to the assessment of Dr. Caron's credibility. Vekamaf contends that by accepting the testimony of defendants' witnesses, the magistrate overlooked the inconsistencies in their testimony and ignored his own findings that defendants' conduct adversely reflected on their general credibility. By contrast, it is urged the magistrate's assertions that Dr. Caron was biased and acted as an advocate are not supported by the record. Further, Vekamaf says the magistrate allowed his personal belief that a mechanical operation could almost always be performed in more than one way to infect his assessment of Dr. Caron's credibility.

These objections were considered and rejected by the district court. That court noted inconsistencies in the testimony of Dr. Caron and deferred to the magistrate's findings of credibility. We agree with the district court that the magistrate's determinations of credibility are entitled to great weight on appeal. See Stanley v. Henderson, 597 F.2d 651, 653 (8th Cir.1979) (per curiam); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Goldman, 593 F.2d 129, 131-32 (8th Cir.), cert. denied, 444 U.S. 838, 100 S.Ct. 76, 62 L.Ed.2d 50 (1979). Our review of the record does reveal a morass of confusing, conflicting, and sometimes incredible testimony, but it does not leave us with the "definite and firm conviction that a mistake has been committed." United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948). We cannot say that the findings of the magistrate as adopted by the district court are clearly erroneous and we accept those findings of credibility.

Vekamaf's remaining arguments address the erroneous findings made by the magistrate...