Respondents Brief — Sowa & Sons, Inc. v. American Hoist & Derrick Co.

Office - Supreme Court. US |

FILED

JUN 11 1984

NO. 83-1827

IN THE

Supreme Court of the Huited States

OCTOBER TERM, 1983

SOWA & SONS, INC.,

Petitioner,

V.

AMERICAN HOIST & DERRICK CO.,

Respondent.

On Writ of Certiorari to the United States

Court of Appeals for the Federal Circuit

BRIEF FOR THE RESPONDENT IN OPPOSITION

EDWARD W. GOLDSTEIN

Counsel of Record

PATRICIA N. BRANTLEY

P. O. Box 4433

Houston, Texas 77210

Telephone: (713) 789-7600

Counsel for Respondent

ARNOLD, WHITE & DURKEE

P. O. Box 4433

Houston, Texas 77210

Of Counsel

a TEENS

Alpha Law Brief Co., Inc—5606 Parkersburg—Houston, Texas 77036—223-3003

~ BEST AVAILABLE COPY #

I

QUESTION PRESENTED FOR REVIEW

Whether the court of appeals’ determination was correct

that fatally defective instructions on the issues of fraud

and obviousness mandated reversal of the trial court and

remand for a new trial.

Il

TABLE OF CONTENTS

QUESTIONS PRESENTED FOR REVIEW ..........-.

TABLE OF AUTHORITIES ............:eseeeeeeeees

STATEMENT OF THE CASE ...........-eeeeeeeeees

REASONS WHY THE WRIT SHOULD BE DENIED ..

I.

II.

Il.

THE FEDERAL CIRCUIT HAS NOT CREATED

A CONTROVERSY WITH THE NINTH CIR-

CUIT WITH RESPECT TO ANTITRUST

CLAIMS BASED ON A CLAIM OF FRAUD ON

THE PATENT OFFICE ...........ccccescceess

THE DECISION BELOW IS IN ACCORD WITH

35 U.S.C. § 282 WHICH PLACES THE BURDEN

OF PROVING INVALIDITY ON THE PARTY

ASSERTING INVALIDITY ..........-..--005-

THE DECISION BELOW DOES NOT AFFECT

PETITIONER’S RIGHT TO A TRIAL BY JURY

COE ke ccc enecdecievenscecsvudesewveuheses

CERTIFICATE OF SERVICE .........ceccesceseees

10

10

sat each

ill

TABLE OF AUTHORITIES

CASES

Baumstimler v. Rankin, 677 F.2d 1061 (Sth Cir. 1982) ...

Bolt Associates, Inc. v. Rix Industries, 178 U.S.P.Q. 171

TE, ccc a ks bhhcasnceeteshsaeanaceees

Cataphote Corp. v. DeSoto Chemical Coatings, Inc., 450

F.2d 769 (9th Cir. 1971), cert. denied, 408 U.S. 929

ESE I eee eee

Chicago Rawhide Manufacturing Co. v. Crane Packing Co.,

$23 F.2d 452 (7th Cir. 1975), cert. denied, 423 USS.

eT y Tere Te Tee TTT Tee

Clipper Express v. Rocky Mountain Motor Tarriff Bureau,

Inc., 690 F.2d 1240 (9th Cir. 1982), cert. denied, __

US. COD once enhucnevas sane

Digital Equipment Corp. v. Diamond, 655 F.2d 701 (lst

ES SE OT Teer TTT eee ee Tee Tee

E. I. duPont de Nemours & Co. v. Berkley & Co., 620 F.2d

i) kk chunk eab aed ech s cea Kba

General Communicatiou:s Engineering, Inc. v. Motorola Com-

munications & Electronics, Inc., 421 F. Supp. 274 (N.D.

Ee as Oo a es oe GK4 ROE RASS ED OADK AGS 608.0

General Motors Corp. v. I.T.C., 687 F.2d 476 (C.C.P.A.

1982), cert. denied, US. , 103 S.Ct. 729

nec ctycecseues sass.

Graham v. John Deere Co., 383 U.S. 1 (1966) .........

Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986 (9th Cir.

1979), cert. denied, 444 U.S. 1025 (1980) ............

Manufacturing Research Corp. v. Graybar Electric Co., 679

ee eck awk aneccecnesesncens

Mayview Corp. v. Rodstein, 620 F.2d 1347 (9th Cir. 1980)

Spound v. Mohasco Industries, Inc., 534 F.2d 404 (lst

Cir.), cert. denied, 429 U.S. 886 (1976) ..............

Tights, Inc. v. Acme-McCrary Corp., 541 F.2d 1047 (4th

Cir.), cert. denied, 429 U.S. 980 (1976) ..............

Walker Process Equipment, Inc. v. Food Machinery &

Chemical Corp., 382 U.S. 172 (1965) ................

STATUTES

ee Cee ie Rh eke cunecnecaseses

Page

8

4

NO. 83-1827

IN THE

Supreme Court of the Hnited States

OCTOBER TERM, 1983

SOWA & SONS, INC.,

Petitioner,

V.

AMERICAN HOIST & DERRICK CO.,

Respondent.

On Writ of Certiorari to the United States

Court of Appeals for the Federal Circuit

BRIEF FOR THE RESPONDENT IN OPPOSITION

STATEMENT OF THE CASE

Respondent herein corrects the erroneous and incom-

plete sections of the petition labelled PROCEEDINGS

BELOW and STATEMENT OF THE CASE.

Petitioner totally fails to inform this Court that, after

Respondent was accused of fraud and antitrust violations,

it submitted the Shahan patent to the Patent Office for

reissue over all art presented by Petitioner. The reissue

2

proceeding took place during discovery and trial below.

Two of the three claims in suit were allowed over Peti-

tioner’s art in the first Office Action. The third claim was

allowed after Respondent amended the claim to clarify

the meaning of the word “diameter”. At the present time,

the reissue proceeding on the merits is complete.

Petitioner also fails to inform this Court that the court

of appeals affirmed the trial court’s dismissal of Petition-

er’s counterclaims under 15 U.S.C. § 1 and its counter-

claims of monopolization and conspiracy to monopolize

based on 15 U.S.C. § 2.

Petitioner conveniently neglects to inform this Court

that the court of appeals reversed the jury’s determination

that the Shahan patent was procured by fraud.

Petitioner self-servingly characterizes the Shahan patent

as “a simple mechanical patent”, (Petition at 2 n.1),

undoubtedly in the hope that it could persuade this Court

that the invention does not merit a patent. There is little

wonder that Petitioner failed to inform this Court that

the Patent Office has decided twice that the invention

of the Shahan patent merits the protection of the Patent

Statute.

Petitioner’s attempt to interest the Court in this case

is based on a misstatement of the court of appeals’ hold-

ing and a misstatement of the state of the law in the

Ninth Circuit (Petition at 10-11).

The court of appeals did not hold that it was error

to submit the question of obviousness to the jury in the

form of a general verdict. Rather, the court of appeals

held that, “Because of erroneous jury instructions and

because there exist disputed issues of fact, we vacate and

3

remand for a new trial.” American Hoist & Derrick Co.

v. Sowa & Sons, Inc., 725 F.2d 1350, 1352 (Fed. Cir.

1984) (hereinafter “Amhoist’’) (emphasis added).

The state of the law in the Ninth Circuit with respect

to relevant market as an element of a claim of attempted

monopolization is uncertain. The antitrust issues in this

case, predicated solely on alleged fraudulent procurement

of a patent and attempted enforcement of a patent, can

in no way be characterized, as Petitioner does, as “non-

patent issues”.

Respondent respectfully submits that the petition pre-

sents no substantial basis for this Court to review the

Federal Circuit’s decision.

REASONS WHY THE WRIT SHOULD BE DENIED

I. THE FEDERAL CIRCUIT HAS NOT CREATED

A CONTROVERSY WITH THE NINTH CIRCUIT

WITH RESPECT TO ANTITRUST CLAIMS

BASED ON A CLAIM OF FRAUD ON THE

PATENT OFFICE.

An antitrust cause of action predicated solely on at-

tempted enforcement of an invalid patent which was

procured by the deliberate and knowing commission of

fraud on the Patent Office can hardly be characterized

as a cause of action “unrelated to the patent” or a “non-

patent iesue”.

Petitioner admits that the district court “applied long-

recognized principles of law in the Ninth Circuit Court

of Appeals on both patent and non-patent issues”, (Peti-

tion at 16), yet fails to account for the fact that the

4

district court dismissed its antitrust and unfair competi-

tion counterclaims on summary judgment. The district

court dismissed those claims based on the fact that, as

a matter of law, no fraud existed that was material to

the issuance of the claims in suit. The Federal Circuit

affirmed the district court’s dismissal of Petitioner’s

counterclaim under 15 U.S.C. § 1 and its counterclaim

of monopolization and conspiracy to monopolize under

15 U.S.C. § 2 based on the petitioner’s refusal to allege

and offer evidence on relevant market. It reversed the

summary judgment dismissal of the Petitioner’s attempt-

to-monopolize counterclaim because the Petitioner may

have been misled by Ninth Circuit precedent. Amhoist,

725 F.2d at 1367.

The Federal Circuit has not created’ a controversy. The

controversy existed, and still exists within the Ninth Cir-

cuit as to whether proof of relevant market is necessary

in an attempt-to-monopolize cause of action. The Ninth

Circuit itself has acknowledged that proof of relevant

market is essential. Mayview Corp. v. Rodstein, 620 F.2d

1347, 1356 (9th Cir. 1980); Handgards, Inc. v. Ethicon,

Inc., 601 F.2d 986, 993 n.13 (9th Cir. 1979), cert.

denied, 444 U.S. 1025 (1980); Cataphote Corp. v. DeSoto

Chemical Coatings, Inc., 450 F.2d 769, 772 (9th Cir.

1971), cert. denied, 408 U.S. 929 (1972); Bolt Associ-

ates, Inc. v. Rix Industries, 178 U.S.P.Q. 171, 172 (N.D.

Cal. 1973). See also General Communications Engineer-

ing, Inc. v. Motorola Communications & Electronics, Inc.,

421 F. Supp. 274, 286 (N.D. Cal. 1976), for a history

of the erosion of Lessig v. Tidewater Oil Co., 327 F.2d

495 (9th Cir.), cert. denied, 377 U.S. 933 (1964).

Review of these cases makes Petitioner’s bald state-

ment, that the “Ninth Circuit Court of Appeals has un-

\

5

ambiguously and repeatedly held that ‘relevant market’

is not a necessary element” of § 2 Sherman Act monopoli-

zation claims, (Petition at 19), disengenuous, at best.

The Ninth Circuit has specifically relied on Walker Pro-

cess Equipment, Inc. v. Food Machinery & Chemical

Corp., 382 U.S. 172 (1965) for the holding that “ ‘the

enforcement of a patent procured by fraud on the Patent

office may be violative of §2 . . . provided the other

elements necessary to a § 2 case are present.’” Clipper

Express v. Rocky Mountain Motor Tarriff Bureau, Inc.,

690 F.2d 1240, 1260 (9th Cir. 1982), cert. denied,

U.S , 103 S.Ct. 1234 (1983).

Petitioner tells this Court that Northrop Corp. v.

McDonnell Douglas Corp., 705 F.2d 1030 (9th Cir.

1983), M.A.P. Oil Co. v. Texaco, Inc., 691 F.2d 1303

(9th Cir. 1982), and William Inglis & Sons Baking Co.

v. ITT Continental Baking Co., 668 F.2d 1014 (9th

Cir. 1981), unequivocally state that relevant market is

not a necessary element in an attempt-to-monopolize case.

Northrup Corp. actually states:

Although this court has periodically stated that dan-

gerous probability of successful monopolization is

also an indispensable element, . . . there is also

Ninth Circuit authority for the view that probability

of success is merely circumstantial evidence of in-

tent. . . . We need not add further fuel to the con-

troversy by adding our opinion regarding the in-

quiry’s proper significance, because . . . there was

sufficient evidence of . . . probability of success to

avoid summary judgment.

705 F.2d at 1057-58. This passage hardly represents an

unequivocal statement.

6

M.A.P. Oil Co. actually holds, “While Lessig and its

progeny do not require proof of market power to estab-

lish a claim of intent to monopolize, under the facts of

this case we agree with the trial court that failure to

define the relevant market was fatal to plaintifis’ attempt

claim.” 691 F.2d at 1309. This passage hardly represents

an unequivocal statement that relevant market is not a

necessary element of an attempt claim.

William Inglis also recognizes the state of flux in the

Ninth Circuit with regard to the necessary elements of

an attempted monopolization. 668 F.2d at 1027. In its

“current state” the Ninth Circuit recognizes dangerous

probability of success as an element of the offense. /d.

“However, the proper significance of this . . . element

‘has been controversial, even within this circuit.’” Id. at

1029.

This is not a case where there has been a “mere joinder

of a patent claim in a case whose gravamen is antitrust.”

(Petition at 15 n.2). Nor is it a case wherein the court of

appeals has created controversy (Petition at 20-21).

The petition should therefore be denied.

II. THE DECISION BELOW IS IN ACCORD WITH

35 U.S.C. § 282 WHICH PLACES THE BURDEN

OF PROVING INVALIDITY ON THE PARTY

ASSERTING INVALIDITY.

Petitioner has totally mischaracterized the Federal Cir-

cuit’s opinion with respect to the presumption of validity

and the burden of proof.’ Additionally, it cites cases to

1. Petitioner attempts to influence this Court to grant its re-

quested petition by characterizing the Federal Circuit as having

“disrespect” for the opinions of this Court. (Petition at 22 n.3.)

7

this Court which do not stand for the proposition it sets

forth.

In this case, the Federal Circuit held that the burden

of proving invalidity always rests on the party asserting

invalidity. Amhoist, 725 F.2d at 1360. The Federal Cir-

cuit has not put an “intolerable burden” on the party

asserting invalidity, but has only restated a burden placed

upon that party by Congress. 35 U.S.C. § 282. The Fed-

eral Circuit acknowledged that, “new prior art not before

the PTO may so clearly invalidate a patent that the

burden is fully sustained merely by proving its existence

and applying the proper law. . . .” Amhoist, 725 F.2d

at 1359-60. This is in direct contradiction to what Peti-

tioner has stated that the Federal Circuit has done

(Petition at 27-28).

Petitioner also cites six cases standing for the proposi-

tion that if the most pertinent prior art was not before

the patent examiner, the burden of proof shifts to the

patentee to establish validity (Petition at 23-24). The

only case standing for such a proposition is the only

Ninth Circuit case cited, Penn International Industries,

Inc. v. New World Manufacturing Inc., 691 F.2d 1297

(9th Cir. 1982). In none of the other five cases cited

by Petitioner did the court of appeals allow the burden

of proof to shift to the patentee to prove validity. To

state, as Petitioner does, that, “Most of the other circuits”

Such tactics show the total lack of merit of Petitioner’s position.

Far worse, however, are Petitioner’s “quote cropping” tactics. The

Petitioner fails to point out that, in the same paragraph quoted by

Petitioner, the Federal Circuit criticizes itself (the CCPA) for erring

in the use of the term “technical fraud” and adopts the meaning used

by the Supreme Court in Walker Process.

i.

8

recognize that the burden of proof shifts to the patentee,

is flatly untrue (Petition at 23).’

No conflict with the Constitution exists in this case.

The Federal Circuit properly found that the district court

erred in placing the burden of proving validity on the

patentee and that the error was reversible. The Federal

Circuit’s opinion does absolutely nothing to emasculate

the constitutional standard of invention unless 35 U.S.C.

§ 282 is unconstitutional—a proposition not advanced by

Petitioner in its brief. The Petition should therefore be

denied.

———

III. THE DECISION BELOW DOES NOT AFFECT

PETITIONER’S RIGHT TO A TRIAL BY JURY.

The district court’s decision was not reversed based on

the use of a general verdict rather than special interroga-

tories. Respondent, as Appellant below, did not seek

reversal on that ground. Because Respondent sought a

remand for a new trial, it requested that, on remand,

special interrogatories be submitted to the jury.

2. The CCPA, First, Fourth, Fifth, Seventh, Eighth and Eleventh

Circuits have specifically stated that the burden of proof remains on

the party asserting invalidity. General Motors Corp. v. I.T.C., 687

F.2d 476, 482 (C.C.P.A. 1982), cert. denied, US. , 10

S.Ct. 729 (1983); Spound v. Mohasco Industries, Inc., 534 F.2d 404,

409 (lst Cir.), cert. denied, 429 U.S. 886 (1976); Tights, Inc. v.

Acme-McCrary Corp., 541 F.2d 1047, 1053-54 (4th Cir.), cert. de-

nied, 429 U.S. 980 (1976); Baumstimler v. Rankin, 677 F.2d 1061,

1066 (Sth Cir. 1982); Chicago Rawhide Manufacturing Co. v. Crane

Packing Co., 523 F.2d 452, 457-58 (7th Cir. 1975), cert. denied,

423 U.S. 1091 (1976); E. I. duPont de Nemours & Co. v. Berkley

& Co., 620 F.2d 1247, 1266 n.30 (8th Cir. 1980); Manufacturing

Research Corp. v. Graybar Electric Co., 679 F.2d 1355, 1360-61

(11th Cir. 1982).

9

The Federal Circuit did not, as Petitioner claims, “hold

that it was error to use a general verdict in the instant

case.” (Petition at p. 32). The Federal Circuit merely

held that the instructions given to the jury on the obvious-

ness and fraud issues were fatally defective.

With respect to the instructions to the district court

on remand concerning fraud, the jury is to determine the

degree of materiality, if any, of certain prior art, and

the degree of intent to commit fraud, if any. The Federal

Circuit in this case, is commenting on a difficult area

of patent law. The Federal Circuit has recognized that

fraud on the Patent Office is distinct from common law

fraud and requires a careful balancing of materiality and

intent. Petitioner does not refute this fact. Amhoist, 725

F.2d at 1363-64; Digital Equipment Corp. v. Diamond,

655 F.2d 701, 708, 716 (ist Cir. 1981). The Federal

Circuit fully considered and correctly decided the fraud

issue.

Nevertheless, Petitioner’s argument is without merit

whether or not the Federal Circuit’s pronouncements are

correct. Petitioner’s right to a jury trial has not been

diminished. Nor is the court’s weighing of elements found

by a jury unprecedented. For example, when juries, by

special interrogatories, answer the factual inquiries on

obviousness set forth in Graham v. John Deere Co., 383

U.S. 1, 17 (1966), the court, of necessity, weighs those

answers in deciding the issue of obviousness. The petition

should therefore be denied.

10

CONCLUSION

For the foregoing reasons, the petition for writ of

certiorari should be denied.

GOLDSTEIN

ecord

PATRICIA N. BRANTLEY

P. O. Box 4433

Houston, Texas 77210

(713) 789-7600

Counsel for Respondent

ARNOLD, WHITE & DURKEE

P. O. Box 4433

Houston, Texas 77210

Of Counsel

CERTIFICATE OF SERVICE

This is to certify that three (3) true and correct copies

of the foregoing BRIEF FOR RESPONDENT IN OP-

POSITION were served on Petitioner’s counsel, Daniel

P. Chernoff, Chernoff, Vilhauer, McClung, Birdwell &

Stenzel, 200 Wilcox Building, Sixth & S.W. Washington,

Portland, Oregon 97204, by first class mail, postage pre-

paid, on this 8th day of June