Vulcan, Inc. v. Fordees Corp.

• Decision Date: 14 October 1981
• Docket Number: No. 78-3325,78-3325
• Citation: 658 F.2d 1106
• Parties: VULCAN, INC., Plaintiff-Appellee, v. FORDEES CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1106

658 F.2d 1106

211 U.S.P.Q. 853

VULCAN, INC., Plaintiff-Appellee, v. FORDEES CORPORATION, Defendant-Appellant.

No. 78-3325.

United States Court of Appeals,

Sixth Circuit.

Argued Aug. 19, 1980.

Decided Aug. 14, 1981.

Rehearing Denied Oct. 14, 1981.

Thomas H. Murray, Rose, Schmidt, Dixon, Hasley & Whyte, Pittsburgh, Pa., for defendant-appellant.

Arland T. Stein, Reed, Smith, Shaw & McClay, Pittsburgh, Pa., Paul A. Weick, Weick, Gibson, Oldham & Aronson, Cuyahoga Falls, Ohio, for plaintiff-appellee.

Before BOYCE F. MARTIN, Jr., Circuit Judge, CELEBREZZE, Senior Circuit Judge, and JOINER, District Judge. ^*

BOYCE F. MARTIN, Jr., Circuit Judge.

Fordees Corporation appeals from a judgment of patent validity and infringement. The issues before us concern the res judicata effect of a prior consent decree and the doctrine of equivalents. Specifically, Fordees argues: 1) that it was not in privity with the prior defendant and is therefore not bound by the determination of patent validity in the consent decree; and 2) that devices it built after entry of the decree do not infringe the patent.

The patent in dispute is the "Titzel" patent, granted to Titzel Engineering, Inc. on January 19, 1965. ¹ The current owner of the patent is Vulcan, Inc., the plaintiff below. The patented and accused devices in this case are portable work towers, or "reline" towers, used in rebuilding the refractory lining of basic oxygen furnaces in which steel is made. These furnaces are lined with thick brick walls which retain the molten metal and insulate the vessel from the extreme heat that is generated. The heat eventually destroys the refractory lining, which must be replaced periodically. Since the relining process takes a vessel out of service temporarily, the lining must be replaced as quickly as possible.

Before the Titzel tower was introduced to the industry, it was necessary to build a wooden or metal scaffold from the ground up inside each vessel. This procedure took several days to complete and required two work crews, one to build the scaffold, the other to replace the refractory lining. It was also dangerous because bricks, lowered by a crane from the top of the vessel to the scaffold, could easily fall on the workers.

The Titzel tower substantially changed the relining process. It is a portable free-standing structure that collapses to fit through the narrow chimney of an oxygen furnace. Its working platform can be raised or lowered easily to different levels. A guided elevator cage transports bricks and other materials to the platform. Thus, the Titzel tower eliminates both the danger of falling brick and the inefficiency of building and disassembling scaffolds. It also enables use of the overhead crane for other jobs. Finally, it increases potential steel production by substantially reducing the time required to reline a vessel.

In 1970, Vulcan's predecessor, Titzel Engineering, brought an action in the Western District of Pennsylvania against M&G Industrial Associates and its president, Robert Munroe, for infringement of the Titzel patent. (W.D.Pa. Civ. Act. # 70-1333). Titzel claimed that M&G had infringed the patent by manufacturing and selling reline towers.

Early in 1971, Munroe contacted Fordees' president and told him about the Titzel patent. Fordees, M&G and Titzel were then bidding against each other for a contract to build a reline tower for the Gary Works of United States Steel Corporation. Although Fordees had never built a reline tower, it submitted a bid based on a plan or "cartoon." U.S. Steel accepted this bid and signed a purchase order with Fordees. As a condition of the contract, Fordees specifically agreed to hold U.S. Steel harmless from potential infringement of the Titzel patent.

After its bid was accepted, Fordees purchased from M&G a set of engineering drawings containing specifications for the construction of a reline tower. These drawings were M&G's principal asset; its practice was to subcontract construction work to firms which brought the drawings. Fordees purchased these drawings with knowledge that the reline tower they described was the subject of a patent infringement suit. Fordees also obtained technical assistance and engineering advice from M&G, after purchasing the drawings. Because of the pending litigation, Fordees insisted that M&G indemnify it against liability for infringing the Titzel patent.

Fordees then began to construct a reline tower for the Gary Works. Except for minor dimensional changes, it adhered to the specifications set out in the M&G drawings.

On October 14, 1971, Titzel's suit against M&G and Munroe ended with the entry of a consent decree and accompanying stipulation. The decree declared the Titzel patent both valid and infringed. Both M&G and Munroe agreed to stipulate that the reline tower described in the engineering drawings sold to Fordees infringed the patent. They also agreed to return the drawings to Vulcan, Inc. According to the decree, M&G had built four infringing reline towers and In the settlement, Vulcan agreed to release M&G and Munroe from liability for any acts of infringement completed before the date of the decree, intending by this clause to release Fordees from liability for the reline tower it was then building for the Gary Works. After the decree was entered, M&G and Munroe dissolved their reline tower business.

had further infringed by supplying Fordees with the drawings and technical assistance. ²

In 1973, Fordees began to construct additional reline towers. It bid for and obtained a contract to build a second tower for the Gary Works. As part of that contract, Fordees again agreed to hold U.S. Steel harmless against infringement of the Titzel patent.

On the basis of the foregoing facts, the District Court concluded that Fordees was in privity with M&G and was therefore bound by the 1971 consent judgment:

Where, as here, during the pendency of a patent infringement suit, Fordees acquired from the defendant in the suit property rights to designs and engineering and technical assistance permitting Fordees to manufacture the device which is the subject of that suit; where such acquisition is made with full knowledge of the pendency of the suit; where the defendant in the suit agreed to indemnify Fordees for any damages resulting from Fordees' infringement of the patent in suit; where a consent judgment was negotiated in the action which benefitted Fordees; and where the consent judgment holds the patent valid and infringed; the Court finds Fordees is in privity with the defendant in the suit. See A. W. Schnitger v. Canoga Electronics Corp., 462 F.2d 628 (9th Cir. 1972); J. R. Clark Co. v. Jones & Laughlin Steel Corp., 288 F.2d 279 (7th Cir. 1961), cert. denied 368 U.S. 828, 82 S.Ct. 49, 7 L.Ed.2d 32 (1961); Alb, Inc. v. Noma Lites Inc., 231 F.2d 662 (2d Cir. 1956).

The court also found that the reline towers built by Fordees after the consent decree infringed the Titzel patent. We shall deal with those issues separately.

I. Privity

We must first decide whether the District Court erred in finding that Fordees and M&G were privies with respect to the subject matter of the prior consent decree. If Fordees was in privity with M&G, then the 1971 judgment is res judicata and Fordees may not reexamine the validity of the Titzel patent.

Whether privity exists in a given case is a question of fact. Harrison v. Bloomfield Bldg. Ind., Inc., 435 F.2d 1192 (6th Cir. 1970); Astron Ind. Assoc. v. Chrysler Motors Co., 405 F.2d 958 (5th Cir. 1968); Crane Boom Life Guard Co. v. Saf-T Boom Co., 362 F.2d 317 (8th Cir. 1966), cert. denied, 386 U.S. 908, 87 S.Ct. 853, 17 L.Ed.2d 782 (1966). The scope of our review is therefore limited, and we must uphold the District Court's findings unless they are clearly erroneous. Fed.R.Civ.Proc. 52(a).

Fordees contends that it was not a successor in interest to M&G, that it never acquired a property interest in the Titzel patent, and that it received no benefit from the consent decree. According to this argument, Fordees was merely "under license" to use the M&G drawings, having bought nothing "tangible" from M&G "except, perhaps, the paper on which the designs appeared."

This argument is unpersuasive. "Privity" is an ambiguous term, a shorthand designation for those persons who "have a sufficiently close relationship with the record parties to be bound by the judgment." Note, Developments in the Law Res Judicata, 65 Harv.L.Rev. 818, 856 (1952) (emphasis added). Our review of the record discloses ample evidence that Fordees' relationship with M&G was in fact "sufficiently close" to establish privity.

First, Fordees was more than a "mere purchaser" of a manufactured product. See Gen. Chem Co. v. Standard Wholesale Phosphate & Acid Co., 101 F.2d 178 (4th Cir. 1939). See also Brunswick v. Chrysler Co., 408 F.2d 335 (7th Cir. 1969); J. R. Clark Co. v. Jones & Laughlin Steel Co., 288 F.2d 279 (7th Cir. 1961), cert. denied, 368 U.S. 828, 82 S.Ct. 49, 7 L.Ed.2d 32 (1961). For our purposes, U.S. Steel, rather than Fordees, must be considered the ultimate purchaser of the reline towers.

Second, the record reveals that Fordees acquired the substance of the Titzel patent from M&G during the course of the litigation which ended in the consent decree. The fact that Fordees did not obtain "title" to the drawings is immaterial. The important point is that the drawings enabled Fordees to construct a reline tower to fulfill its contract with U.S. Steel. Indeed, without the plans, Fordees would not have been able to build any type of reline tower, much less a Titzel reline tower. By obtaining the technical knowledge embodied in M&G's engineering drawings, Fordees acquired a significant interest which facilitated its business. In G&C Merriam Co. v. Saalfield, 190 F. 927 (6th Cir. 1911), this court upheld a finding of privity on similar facts. Although the nature of the "substantial right" was never precisely...