Whitehall Corp. v. Western Geophysical Co.

• Decision Date: 10 July 1986
• Docket Number: Civ. A. No. H-79-786.
• Citation: 664 F. Supp. 1056
• Parties: WHITEHALL CORPORATION, Plaintiff, v. WESTERN GEOPHYSICAL COMPANY OF AMERICA and Litton Resources Systems, Inc., Defendants.
• Court: U.S. District Court — Southern District of Texas

664 F. Supp. 1056

WHITEHALL CORPORATION, Plaintiff, v. WESTERN GEOPHYSICAL COMPANY OF AMERICA and Litton Resources Systems, Inc., Defendants.

Civ. A. No. H-79-786.

United States District Court, S.D. Texas, Houston Division.

July 10, 1986.

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Robert W. Turner, Hubbard, Thurman, Turner & Tucker, Dallas, Tex., for plaintiff.

Gary V. McGowan, P.C., Robert A. Rowland, III, Susman & McGowan, Houston, Tex., Elwood S. Kendrick, Kendrick, Netter & Bennett, Los Angeles, Cal., for defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

DeANDA, District Judge.

Pending before the Court is a suit for patent infringement. Plaintiff Whitehall Corporation (hereinafter "Whitehall") alleges that Defendants Western Geophysical Company of America (hereinafter "Western") and Litton Resources Systems, Incorporated (hereinafter "Litton") have copied, manufactured, used, and sold to third parties Whitehall's patented seismic streamer system with an elastic section to attenuate noise and vibrations during exploration for underwater oil deposits. Whitehall's claim for damages under 35 U.S.C. § 284 has been bifurcated from the present action to determine liability. Whitehall's claims infringement, literally and under the doctrine of equivalents, of U.S. Patent No. 3,319,734 and seeks damages for the six years prior to and for an undetermined period after the filing of this suit on April 13, 1979. Additionally, Whitehall requests a permanent injunction enjoining Western and Litton from continuing infringement and from inducing others to do the same.

Western and Litton counterclaim for a declaratory judgment that the patent is invalid, not infringed, and unenforceable by reasons of prior art, obviousness, and inequitable conduct in nondisclosure before and during the prosecution of the Pavey patent. They accordingly request attorney's fees for an exceptional case under 35 U.S.C. § 285. Alternatively, if the Court finds the patent valid, they interpose defenses of laches and estoppel. They further counterclaim that Whitehall damaged them by tortious interference with their contractual business relations and by unfair competition under Texas common law.

Following trial of this suit upon the facts to the Court and after considering the evidence and the record, the Court hereby enters the following findings of fact and conclusions of law pursuant to Rule 52(a), Fed.R.Civ.P. The Court concludes that the disputed patent is invalid and unenforceable for obviousness, for prior use, and for inequitable conduct during prosecution of the patent. However, in its equitable discretion, the Court denies an award of attorney's fees under § 285. The Court also finds that the actions of Whitehall did not constitute tortious interference with Western's property rights in its business contracts.

FINDINGS OF FACT

1. Whitehall is a Delaware corporation having its principal place of business in Dallas, Texas. Whitehall, as the alleged inventor's assignee, owns U.S. Patent No. 3,319,734, entitled "Elastic Detection Streamer Dead Section for a Borne Seismic Surveying System" (hereinafter "the Pavey patent"), issued on May 16, 1967 to George M. Pavey, Jr., as the inventor.

2. Whitehall, as Pavey's assignee and owner of the Pavey patent, has standing to maintain this action under 35 U.S.C. § 282.

3. Western and Litton, both subsidiaries of Litton Industries, Inc., are Delaware corporations having regular and established places of business at Houston, Texas and Alvin, Texas, respectively. Western is a large marine seismic operator in oil exploration, while Litton manufactured the disputed seismic streamers for use by Western and for sale to third parties.

4. Whitehall, with the aid of its manufacturing subsidiary Seismic Engineering Company, competes with Western and Litton in supplying services and equipment for offshore seismic surveying in oil and gas explorations.

5. Whitehall filed this action on April 23, 1979, charging Western and Litton with infringing the Pavey patent for the previous six years and for continuing infringement. See conclusion of law (hereinafter "CL") 16.

6. The purpose of a seismic streamer with hydrophones is to receive, after a large charge is set off, any refracted acoustic signals, such as seismic echoes, to determine geologic formations on the ocean floor.

7. The major progenitor of the Pavey conception was the Paslay streamer, patented in 1949. LeRoy C. Paslay invented it for use by a partnership consisting of himself, George M. Pavey, Jr. (inventor of the Pavey patent), and Frank Wipff. Pavey ultimately became the sole head of the business, known as Seismic Engineering Company (hereinafter "Seismic") at the time that it was acquired by Whitehall in early 1965. Pavey became president of Whitehall for five years and then stepped down to become a director and vice president of Whitehall and the chairman of the board of Seismic.

8. The Paslay streamer was a long, multichannel, waterborne streamer with three steel cables and electrical conductors running throughout, separated into modules: live, submerged detection sections (equipped with hydrophones), dead sections to isolate the live sections from the tow cable's vibration noise, and a tow cable. Although the Paslay patent did not expire until March, 1966, by 1964 it was inadequate for industry needs, despite substitutions of updated hydrophones. By then the demands of environmentalists forced the seismic exploration industry to employ sources of less intense but more frequent sound waves, e.g., air or gas guns, instead of the high explosives used previously. As a result, it became necessary to maximize the reflected signal to background-operating-noise ratio and to provide a means for continuous reception of refracted sound waves. The Paslay dead sections were unable to resolve sufficiently the problem of reducing operating noise during continuous, high speed towing. To compensate, the boats had to let out cable while moving, then stop, reel the cable in, and start up again, a procedure known as the "yo-yo" technique.

9. From 1962-64, Pavey's company, Seismic, supplied to Geophysical Service Inc. (hereinafter "GSI"), a subsidiary of Texas Instruments (hereinafter "TI"), one-inch, clear plastic, oil-filled seismic surveying cables with dead sections containing internal nylon-cord strain members, as well as spacers and electrical conductors, to dampen noise and shock from the towing vessel during continuous towing. They were single-channel, short streamers of several hundred feet, equipped with a multiplicity of geophones and used with gas guns as sound sources, for commercial oil exploration in United States waters. The data retrieved was sold to oil companies and aided in the discovery of significant oil deposits, one still productive today. Raymond Hicks, Pavey's patent attorney, was unaware of this business activity, as was the Patent and Trademark Office (hereinafter "PTO") examiner during the subsequent prosecution of the patent. Pavey produced the invoices for these streamers only after several requests from Western and Litton's attorneys.

10. After continuing to experiment with elastic dead sections during the summer of 1964, Pavey applied for his patent on June 17, 1965, less than a year before the Paslay patent, on which it was based, was to expire and shortly after Whitehall purchased Seismic. For the purposes of the statutory bars of public use and prior sale, the critical date is June 17, 1964.

11. The alleged inventiveness of the Pavey improvement patent lies in its use of nylon strain cable ropes, as Pavey acknowledged. More effectively than Paslay's comparatively stiff and stable dead sections, Pavey's elastic section (or vibration isolation module), encased in flexible plastic tubing, isolates and attenuates noisy tow-cable vibrations from affecting the first live section, without adding new noise, by the use of nylon rope. Both Paslay and Pavey dead sections simultaneously transmitted the towing force and the electrical hydrophone signals. The Pavey elastic section permits the use of much larger streamers at significantly reduced noise levels and at a uniform, high towing speed, while reducing wear on the equipment.

12. In his application to the PTO, Pavey did not disclose any prior art references to streamers with elastic sections intended to be used with low energy sound sources during continuous, relatively high speed towing.

13. Although Pavey's application did not specify a rope made of nylon, the examiner of the PTO initially and expressly rejected the Pavey application as a use of nylon cable in an obvious combination of the Pasley patent and the Mundy patents; thus, as part of the file wrapper, nylon becomes a factor in construing the patent. The examiner incorrectly stated that the Paslay patent's steel dead section had an elastic coupling; actually, it used steel wire, which transmits tow-cable vibrations and noise. The Mundy patent taught the use of an "anti-hummer" elastic hose to connect the trailing end of the tow cable with the leading end of a hydrophone-detector section. Pavey amended the claims to limit and define the scope of his elastic section in light of the prior art cited against it by introducing the concept of a plurality of plastic strain cable that were "longitudinally estensible", compared to Paslay's dimensionally stable steel cable for maintaining precision spacing. The examiner approved his application and issued a patent on May 16, 1967, which Pavey assigned to Whitehall. The Pavey patent expired on May 16, 1984.

14. As president of Whitehall, Pavey saw a newsletter describing TI's manufacture of cables with stretch sections. In a letter dated July 10, 1967, Whitehall inquired if TI wished to take out a license under the Pavey patent. After investigating, TI questioned the validity of the patent in a letter dated January 3, 1968 and...