Petition for Writ of Certiorari — Dresser Industries, Inc. v. Hughes Tool Co.

IN THE

Siprenw Cort of the United States

OCTOBER TERM, 1987

DRESSER INDUSTRIES, INC.,

Petitioner,

HUGHES TOOL COMPANY,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

Of Counsel

M. Scott NICKSON, JR.

EDWARD G. FIORITO

DRESSER INDUSTRIES, INC.

1600 Pacific Avenue

Dallas, Texas 75201

JOHN F. LYNCH

ARNOLD, WHITE & DURKEE

400 One Bering Park

750 Bering Drive

Houston, Texas 77057

ERWIN N. GRISWOLD

Counsel of Record

KATHRYN M. FENTON

SARAH W. PAYNE

JONES, DAY, REAVIS

& POGUE

1450 G Street, N.W.

Washington, D.C. 20005-5701

(202) 879-3898

Counsel for Petitioner

- 782-0096 - WASHINGTON, D.C. 20001

- Epes PRINTING Co., INC.

QUESTION PRESENTED

Whether a federal appellate court may, consistently

with the Federal Rules of Civil Procedure and the Due

Process Clause of the Fifth Amendment, deny a Motion

to Remand that is based on evidence improperly with-

held during discovery, while at the same time refusing

to review the Motion because of factual issues raised in

it?

(i)

ii

STATEMENT UNDER RULE 28.1

In accordance with Rule 28.1 of this Court, the follow-

ing is a listing of the subsidiary and affiliated companies

of Dresser Industries, Inc. (DII) which are owned less

than 100% by DII and which have as remaining share-

holders, companies which may be traded on an American

stock exchange. Remaining shareholders are italicized.

1. Airetool and Yost Superior Realty, Inc. (50% )

Yost Superior Co.

©. Bartil, Ine. (50% )

Tillco, Ine.

3. IRI International Corporation (39% )

Ingersoll-Rand Company

4. Road Machinery Company (46% )

Remaining shareholders are individuals and Road

Machinery Employees Steck Ownership Plan (ESOP)

5. BJ Titan Services Company (27.3%) (Partnership)

Baker Hughes Corporation

6. Dresser-Rand Company (50% )

Ingersoll-Rand Company

7. M-I Drilling Fluids Company (60% )

Halliburton Company

8. Dresser-Cullen Venture (50%) (Partnership)

Cullen Center, Ine.

9. Western Atlas International, Ine. (50% common

stock ) :

Litton Industries, Ince.

10. Worthing Pump Asia Pte. Ltd. (80% )

Worthington Pump, Inc.

Cooper Industries, Inc.

No other non-wholly owned affiliate or subsidiary of DII is

traded on an American stock exchange. There are scores

of companies in which DII has ownership interests but

which DII does not wholly own.

TABLE OF CONTENTS

Ob og GR gt ey |

STATEMENT UNDER RULE 28.1

op PS ey 84 gy 6 +. ae

OPINIONS BELOVW ........ Ne enn A Sieh castes

JURISDICTION .......

CONSTITUTIONAL PROVISION INVOLVED ..

STATUTORY PROVISION INVOLVED

FEDERAL RULES OF CIVIL PROCEDURE IN-

VOLVED

STATEMENT

1. The Litigation Framework .................

2. “Exhibit 8565” and the Motion to Remand in

the Federal Circuit

REASONS FOR GRANTING THE WRIT ................

I. THE EVIDENCE WRONGLY WITHHELD BY

HUGHES GOES TO THE HEART OF THE

se LS. of cnidnnsn os ansus

A. The Effect of Exhibit 8565 as Evidence __.

B. The Importance of Exhibit 8565 as a Basis

for Cross-Examination

Il. THE FEDERAL CIRCUIT’S DENIAL OF

DRESSER’S MOTION IS INCOMPATIBLE

WITH THE FEDERAL RULES OF CIVIL

2

il. THE FEDERAL CIRCUIT’S DISPOSITION

OF DRESSER’S MOTION TO REMAND VIO-

LATED DUE PROCESS

CONCLUSION

bo

Yo

11

13

bat

-]

iv

TABLE OF CONTENTS—Continued

APPENDICES—Separately bound

APPENDIX A.

APPENDIX B.

APPENDIX C.

APPENDIX D.

APPENDIX E.

APPENDIX F.

Opinion of the United States Court

of Appeals for the Federal Circuit...

Memorandum Opinion and Order of

the United States District Court for

the Northern District of Texas ........

Judgment of the United States Court

of Appeals for the Federal Circuit...

Order of the United States Court of

Appeals for the Federal Circuit De-

nying Petition for Rehearing

Dresser’s Motion to Remand, to Va-

cate, or to Reopen the Record, or

Obtain Relief from Judgment ...........

ET TEED

Federal Rules of Civil Procedure In-

volved

Page

la

87a

V

TABLE OF AUTHORITIES

Cases: Page

Aldridge v. Union Bankers Insurance Co., 457 F.2d

_ i Ue & .. : ee ne aoe 13

Bluitt v. Arco Chemical Co., 777 F.2d 188 (5th

i SN "as neds vaio orcad igen dies cantar acandsbinaiaeenean 15

Boddie v. Connecticut, 401 U.S. 371 (1971) ewe oy

Fine Paper Antitrust Litigation, In Re, 685 F.2d

810 (3d Cir. 1982), cert. denied, 459 U.S. 1156

‘yp _. EARMRRLABN OS ROUER Sa e RR eNO re Ceme ea 15

Gulf Coast Building and Supply Co. Interna-

tional Brotherhood of Electrical Pichaus 460

F.2d 105 (5th Cir. 1972) _. si fame cane ag 12

Hammond Packing Co. v. Arkansas, 212 U.S. 399

(1909) re PISA es ¥ 16

Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322

U.S. 238 (1944) 14

Hickman v. Taylor, 329 U.S. 495 (1947) 16

Hughes Tool Co. v. Dresser Industries, Tne., 816

F.2d 1549 (Fed. Cir. 1987) ....................... RRS ee fe

Klapprott v. United States, 335 U.S. 601 (1949) 13

Lindsey v. Normet, 495 U.S. 56 (1972) cee 17

Logan v. Zimmerman Brush Co., 455 U.S. 422

(1982) saahbsno hint Glas eneleneae 17

Marshall v. Holmes, 141 US. 589 (1891) . eee 13

Mitsui & Co. v. Puerto Rico Water Resources Au-

thority, 26 Fed. Rules Serv. 2d 377 (D.P.R.

1978) Aw. ; 7 an 15

National Hockey League v. Metropolitan Hockey

Club, Inc., 427 U.S. 639 (1976) . 16

Pierce v. Cook & Co., Inc., 518 F.2d 720 (10th Cir.

1975), cert. denied, 423 U.S. 1079 (1976) 12

Precision. Instrument Manufacturing Co. v, Auto-

motive Maintenance Machinery Co., 324 U.S. 806

(1945) r peckintes 14

Roadway Express v. Piper, 447 U.S. 752 (1980) 16

Rozier v. Ford Motor Co., 573 F.2d 1332 (5th Cir.

1978) Weadsatieees 15

Sellers v. General Meters Corp., 73 5 F.2d 68 (3d

Cir. 1984) 12-13

Sibbach v. Wilson & Co., 312 US. 1 (1941)

vi

TABLE OF AUTHORITIES—Continued

Page

Smith International, Inc. v. Hughes Tool Co., 664

F.2d 1373, cert. denied, 456 U.S. 976 (1982) ....3-4, 5-6, 9

Standard Cil Co. v. United States, 429 U.S. 17

| LAE ee eR aa es AN ath Oe Cries) AH TO 13

United Business Communications, Inc. v. Racal-

Milgo, Inc., 591 F.Supp. 1172 (D. Kan. 1984) ___.. 14

United States v. Cato Brothers, Inc., 273 F.2d 153

(4th Cir. 1959), cert. denied, 362 U.S. 927

| ___. SERRORORD EPPO PIP: TOE NAR OPI: A Tals PEN Ad cst me i 12

United States v. Procter & Gamble, 356 U.S. 677

| GARE pepony oven siaRarnceaianirinte: se PR I NES, NY. Lotnorr 16

United States v. Throckmorton, 98 U.S. 61 (1878)... 13

Constitutional Provisions:

U.S. Const. Amend. V, Due Process Clause

Federal Rules of Civil Procedure:

. 5 ae & |) AL | Speeeeremnmreenmnneannwer savant 15

Fed. R. Civ. P. 33 (a)

Fed. R. Civ. P. 34(b)

SIs Ey OUD cassettes cn ciessidinasicenchiemnembaberonmmpantl 16

Fed. R. Civ. P. 52(a)

Fed. R. Civ. P. 60(b)

IN THE

Supreme Court of the United States

OCTOBER TERM, 1987

No. 87-

DRESSER INDUSTRIES, INC.,

Petitioner,

,>

HUGHES TOOL COMPANY,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

The Petitioner, Dresser Industries, Inc., prays that a

writ of certiorari issue to review the judgment entered in

this case by the United States Court of Appeals for the

Federal Circuit, on April 13, 1987.

OPINIONS BELOW

The opinion of the United States Court of Appeals for

the Federal Circuit (App. A, pp. la-27a) is reported at

816 F.2d 1549. The Memorandum Opinion and Order of

the United States District Court for the Northern Dis-

trict of Texas on issues of patent infringement and dam-

ages is unreported. It is set forth in App. B, pp. 29a-

84a.

2

JURISDICTION

On April 13, 1987, a panel of the Court of Appeals for

the Federal Circuit affirmed in part, and vacated and

remanded in part, the judgment of the District Court.

The judgment of the Court of Appeals is set forth in App.

C, p. 85a. A petition for rehearing was denied on May

22, 1987. (App. D, p. 87a). By an order signed August

5, 1987, the Chief Justice extended the time for filing

this petition to and including September 16, 1987.

This Court’s jurisdiction is invoked under 28 U.S.C.

$ 125411).

CONSTITUTIONAL PROVISION INVOLVED

United States Constitution, Amendment V:

No person shall be . . . deprived of life, liberty, or

property, without due process of law.

STATUTORY PROVISION INVOLVED

35 U.S.C. § 103. Conditions for patentability; mon-

obvious subject matter:

A patent may not be obtained though the invention

is not identically disclosed or described as set forth

in section 102 of this title, if the differences between

the subject matter sought to be patented and the

prior art are such that the subject matter as a whole

would have been obvious at the time the invention

was made to a person having ordinary skill in the

art to which said subject matter pertains. .. .

FEDERAL RULES OF CIVIL PROCEDURE INVOLVED

The Federal Rules of Civil Procedure involved are set

forth in the Appendix, at pp. 115a-119a.

STATEMENT

Although this is a patent case, the question raised by

this petition is not one of patent law. It is an important

precedural question under the Federal Rules of Civil

3

Procedure, and the Due Process Clause-—whether the

Court below erred in denying any judicial consideration

of belatedly discovered evidence of obvious importance

which was not disclosed by the other party pursuant to a

valid discovery request.

1. The Litigation Framework

This case began in the United States District Court for

the Northern District of Texas when the respondent here,

Hughes Tool Co., started suit against the petitioner,

Dresser Industries, Ine., for patent infringement. The

patent in question, U.S. Patent No. 3,397,928 (the ‘“’928

patent’) describes a packing ring seal to be used in ro-

tary bits in boring oil and gas wells. As found by the

courts below, the sole characteristic distinguishing the

"928 patent from prior patents is its requirement that the

rubber packing ring be “squeezed”’ (i.e., compressed) ‘‘not

less than substantially ten percent of its thickness prior

to assembly” of the ring in the bit. Slip op. at 9 (App.

B, p. 36a); 816 F.2d at 1552 (App. A, p. 6a).

Dresser and Smith International, Inc. (“Smith”), two

of Hughes’ principal competitors, soon became convinced

that the patent was invalid. This was because, at the

time the "928 patent was submitted to the Patent Office

in 1968, engineering literature uniformly recommended a

ten percent or more squeeze upon packing ring seals used

in slow speed rotary applications. After consulting patent

counsel, the two companies began manufacturing bits

within the putative coverage of the patent.!

1 Smith initiated a declaratory judgment suit in the Central Dis-

trict of California to invalidate the patent. The district judge in

California held the patent invalid, on the ground that it was obvi-

ous, since “the evidence clearly shows that most, if not substantially

all, sealed rock bits... are run at [slow! speeds.” Two years later,

a panel of the Ninth Circuit reversed this decision. Smith Interna-

tional, Inc. v. Hughes Tool Co., 664 F.2d 1373, cert. denied, 456

U.S. 976 (1982). The appellate court concluded that the 928 design

was a “synergistic” “combination patent” which produced the “first

4

After the case in the Ninth Circuit, referred to in foot-

note 1, was decided, the present case was brought to trial

in early 1983. In a February 6, 1984, decision the Dis-

trict Court upheld the validity of the ’928 patent. The

district judge in Texas was perhaps unduly influenced by

the decision in the Ninth Circuit. He ruled that rock bit

bearings were run at high speeds and high temperatures,

and that the prior patents and engineering literature re-

lied on by Dresser to show the lack of novelty of the ten

percent squeeze accordingly failed to indicate the ’928

patent was obvious. Slip op. at 9, 44, 50 (App. B, pp.

37a, 67a, 72a). Although the District Court did “find

some concern in the limited number of tests and the

squeezes and controls used in the tests before the patent

examiner,” it concluded that the ten percent squeeze

recommended by the ’928 patent “produced a rock bit

that was 200%” longer lived than “the previous bits.”

Slip op. at 20, 21 (App. B, pp. 47a-48a).

With respect to damages, the District Court accepted

at face value testimony presented by Hughes that Hughes

had been opposed to licensing its patents to direct com-

petitors. Jd. at 33-34 (App. B, p. 59a). It entered judg-

ment fixing the damages at twenty-five percent of the

gross sales price of infringing rock bits sold by Dresser

between 1973 and 1984. The Court declined to award

exemplary damages, holding that Dresser had acted in a

“good faith belief that the patent was invalid.” Indeed,

the District Court concluded that “[t]he entire issue in-

volving the patentability of a minimum ten _ percent

squeeze on an O-ring seal in rock bits is, at least, de-

batable.” Jd. at 57 (App. B, p. 78a).

Dresser then appealed to the Court of Appeals for the

Federal Circuit.

consistent 100-hour plus rock bit” as a result of the seal’s alleged

unexpected capacity to withstand “high sneed and high tempera-

ture rotary conditions.” 664 F.2d at 1376.

5

2. “Exhibit 8565” and the Motion to Remand in the Fed-

eral Circuit

In view of the decision of the Ninth Circuit in the

Smith case, and its apparent impact on the district judge

below, the question whether the 928 patent made an un-

anticipated but important contribution to the use of bits

at high speed and high temperature is obviously of cen-

tral importance in this case. It is because of this that the

procedural question is crucial both in this case, and to

the sound development of procedural law.

When the suit was reactivated in the court below fol-

lowing the Ninth Circuit decision, Dresser immediately

resumed discovery efforts. Among others, it made the fol-

lowing discovery request:

Request 53 (b)

Identify and produce for Defendant’s inspection

and copying all Hughes documents which contain,

refer or relate to an objective of providing a sealed

drill bit capable of operation at speeds in excess of

120 rpm.

Other discovery requests by Dresser covered “reports

. and other documents relating to bearing failures

and/or seal failures of plaintiff’s ... bits... . Bit rec-

ords and other documents .. . relating to or indicating

operation of . .. bits at rotary speeds in excess of 100

rpm. . . . Documents containing or referring or relating

to recommended speeds of rotation for . .. bits whether

prepared by [Hughes] or others.” Dresser also deposed

the Hughes engineers and officers who had been respon-

sible for the testing, design and marketing of Hughes’

rock bits at the relevant times.

After the case had been briefed and argued in the

Federal Circuit, vitally important additional evidence

came to light, which had not been produced in response

to the discovery requests. This was a document produced

in the Smith litigation (but subject to a protective order

6

there), and identified in that case as “Exhibit 8565.”

This did not become known to Dresser until it was in-

cluded in the Appendix in the Federal Circuit in the

Smith litigation, at which point it became free of the

protective order.

Exhibit 8565 is an outline of product requirements

formulated during a conference of Hughes’ field repre-

sentatives in 1973.2 The document, which had wide in-

ternal circulation, including distribution to several of the

Hughes employees who testified in this case (and was

not disclosed by them), makes it clear that high speed

operation was not achievable in bits using the ’928 seal

even eight years after Hughes filed the patent applica-

tion. The Exhibit includes the following passage:

The current existing journal bearing designs are lim-

ited to the lower range of rotary speeds (up to 70)

for economic applications. A drastically reduced bear-

ing capacity is encountered as rotary speeds exceed

100 rpm. The development of a journal bearing

which will sustain higher rotary speeds in the range

of 90-100 rpm would promote the application of the

J-22 design. In addition, a 100-150 rpm _ bearing

capability is a prerequisite for introduction of [cer-

tain new bit designs].

See App. E, p. 108a.

Elsewhere, Exhibit 8565 addressed the inability of O-

ring sealed bits to function in high temperature bore-

holes:

Material now used in journal bearing seal systems is

limited in regard to its ability to withstand tempera-

tures in excess of 300° F+50° F. Bit life is limited

by bearing failure. The problem of seals being af-

fected by temperatures exists in some deep holes

2 The fuil text of Dresser’s Motion to Remand in the Court below,

which includes the text of the relevant portions of Exhibit 8565,

is set forth in Appendix E, pp. 89a-113a.

7

drilled with mud, in most holes drilled with air and

all holes drilled in geothermal exploration.

See App. E, p. 112a.

Exhibit 8565 clearly was crucial evidence, since it re-

futed Hughes’ primary thesis—and the District Court’s

central finding—that the 928 patent was not obvious be-

cause the allegedly critical ten percent squeeze unexpect-

edly permitted the Hughes bits to endure high rotary

speeds and high temperatures. See slip op. at 9, 44, 50-

51 (App. B, pp. 37a, 67a, 72a-73a); 816 F.2d at 1553,

1555 (App. A, pp. 9a, 13a). Since the Exhibit became

available to Dresser only in November, 1986, when

Dresser received a copy of the Appendix filed in the

latest appeal of the Smith case, Dresser immediately sub-

mitted the Exhibit to the Court of Appeals, as part of a

Motion to Remand, to Vacate, or to Reopen the Record,

or Obtain Relief from Judgment (the “Motion to Re-

mand”’).’

3 There was much further evidence which Hughes failed to pro-

duce in response to valid discovery requests. Just before the Dis-

trict Court entered its judgment, Dresser first learned, through the

ongoing damages phase of the Smith litigation, and from other

sources not within Dresser’s control, of a detailed appraisal, pre-

pared at the same time that the alleged infringement had occurred,

estimating that a reasonable royalty under the ’928 patent would be

-5 percent. Dresser also obtained a 1980 letter in which the Hughes

witness who had testified at trial that Hughes had been unwilling

to license the ’928 patent actually offered to license that patent to

a direct competitor of Hughes f-r a royalty of four percent.

Dresser learned in addition that an affidavit submitted by the

inventor, Edward Galle, to the patent examiner in support of the

"928 patent had been grossly misleading, in that (1) two packing

rings reported by Galle as having been squeezed in a test at 9.5

percent actually had been squeezed approximately 9.0 percent and

9.7 percent, respectively, with the former performing best; and

(2) the affidavit failed to mention a third packing ring Galle had

tested, or that this third ring, squeezed as required by the patent

in excess of ten percent, and concededly falling within the scope

8

Despite the clear evidence of Hughes’ deliberate or

reckless disregard of its responsibilities in discovery, and

despite the compelling nature of the evidence discovered

by Dresser following the trial in this case, a panel of the

Federal Circuit affirmed the District Court’s decision

upholding the ’928 patent. Like the District Court, the

Court of Appeals gave great weight to the contentions

that the ten percent squeeze was vital to improved bit

performance and that the patented seal had been designed

for “high speed and high temperature rotary conditions.”

816 F.2d at 1553, 1555 (App. A, pp. 9a, 13a).

Although the court remanded the case for errors in the

District Court’s decision on damages, it unqualifiedly de-

nied Dresser’s Motion to Remand on the issue of validity.

The court’s only explanation for this denial of an oppor-

tunity to consider the relevance and effect of Exhibit 8560

was that the motion was “bound up” with “factual dis-

putes” with respect to the alleged withholding of docu-

ments, which the court, as an appellate tribunal, could

not address. 816 F.2d at 1559 (App. A, pp. 20a-21a).

Consequently, Dresser can receive judicial consideration

of this important issue in this case, only if this Court

grants this petition and directs the court below to remand

the issues arising from the newly obtained evidence to

the District Court.

REASONS FOR GRANTING THE WRIT

I. THE EVIDENCE WRONGLY WITHHELD BY

HUGHES GOES TO THE HEART OF THE CASE

To the courts below, speed, and, to a lesser extent, tem-

verature, were the pivotal issues with respect to the va-

lidity or invalidity of the ’928 patent. Dresser had pro-

duced considerable evidence—much of it never submitted

- +h

e patent, had performed less successfully than one of the two~

ngs gpurp rtedly squeezed at 9.5 percent.

jiscovering this previously withheld evidence, Dresser

moved prior to entry of judgment to reopen the record, and filed a

similar motion following entry of judgment. The District Court

denied both motions without explanation.

3

to the Ninth Circuit in the Smith litigation—that the

patent merely reiterated teachings contained in earlier

engineering literature. In contrast, the only colorable ar-

gument advanced by Hughes to distinguish its patent

from this prior art was an allegation that the ’928 bits

operated successfully at unusually high speeds and tem-

peratures. Furthermore, the Ninth Circuit in Smith,

though focusing entirely on the status of the patent as

an innovative “combination” design, had, in an offhand

way, and without adverting to any evidence, reversed

the California district court’s finding that “most, if not

substantially all, sealed rock bits are run at [slow]

speeds.” See 664 F.2d at 1376. The District Court’s de-

cision below explicitly acknowledged that the judge felt

bound by considerations of comity to “follow” the Ninth

Circuit’s decision in Smith unless new defenses or new

evidence convinced him otherwise. Slip op. at 21-22

(App. B, pp. 48a-49a).

Accordingly, the District Court termed speed a “thresh-

old issue,” and addressed it almost immediately in the

course of deciding the case. Id. at 9 (App. B, p. 37a).

Specifically, the court, adopting almost verbatim the lan-

guage of proposed findings filed by Hughes, found that

928 seals endured unexpectedly at “surface rubbing

speeds of up to 300-400 feet per minute,” and in “high

ambient operations up to 400° F.” Id. at 50-51 (App. B,

p. 72a). The Court of Appeals affirmed those findings as

not clearly erroneous. See 816 F.2d at 1555 (App. A,

p. 1ga). On the basis of the speed and temperature

findings, the District Court and the Court of Appeals

upheld the validity of the ’928 patent, and rejected

Dresser’s protests that the patented seal was an “ob-

vious” application of prior teachings.

A. The Effect of Exhibit 8565 as Evidence

Exhibit 8565, wrongfully withheld by Hughes in dis-

covery,’ directly refutes the critical speed and tempera-

* Hughes contended in response to Dresser’s Motion to Remand

that Exhibit 8565 had been in one of two unorganized boxes of

10

ture findings made below. The Exhibit establishes—by

admissions of Hughes’ own marketing team—that 928

bits do not operate economically when their seals experi-

ence speeds above 126 feet per minute; that the bits’

capacity is “drastically reduced” at speeds exceeding 180

feet per minute; and that the bits have only “limited”

ability to withstand temperatures in excess of 350 de-

grees Fahrenheit. App. E, at 108a.° The Exhibit, more-

over, was prepared in 1973—eight years after Hughes

applied for the patent, and during the very period for

which damages have been assessed against Dresser for

patent infringement. The Exhibit, thus, was highly cred-

ible evidence that was virtually conclusive with respect

to the issues upon which the decisions of the courts below

turned. Yet it was wrongfully withheld in discovery, and

has never been considered by any court on the merits.°

documents produced to Dresser by Hughes initialiy. Dresser denies

that it received the document prior to November, 1986, and has

produced affidavits to that effect from the two attorneys who at-

tended the document production in question on Dresser’s behalf.

Dresser notes that Exhibit 8565 is not mentioned on the handwrit-

ten list of all documents produced which the two attorneys prepared

at the time. Furthermore, none of the other documents produced

related to 1973—a crucial year, in Dresser’s opinion, with respect

to Hughes’ claims of patent infringement.

No court has ever addressed the merits of this factual dispute

about withholding of evidence.

5 The speeds cited in the Exhibit are expressed in terms of revolu-

tions per minute (“rpm”), while the findings below speak in terms

of “feet per minute” (“fpm’”). The “feet per minute” measure,

which refers to the rate at which the surface of the sea! is rubbed

as the bit rotates, increases vith bit size when compared to the

rpm measure. For the largest bits involved here (1214 inches in

diameter), fpm = rpm x 1.8, according to testimony Hughes pre-

sented at trial.

The present analysis assumes, for purposes of argument only,

that Hughes’ testimony regarding the mathematica! relationship

between revolutions per minute and feet per minute is true, and

converts the Exhibit’s rpm figures to fpm on that basis.

6 The Exhibit was not made available by Hughes in the Smith

litigation until well after all issues of patentability had been fully

litigated and finally decided.

11

B. The Importance of Exhibit 8565 as a Basis for Cross-

Examination

The full measure of the significance of the Exhibit is

only apparent after consideration of the “evidence” of

high speeds and temperatures upon which the findings

below were based. Nowhere in the patent is speed or

temperature mentioned. Except for evidence regarding

the speeds at which bits of unspecified type are turned,

the only support for the crucial findings of high speed

and temperatures consisted of testimony by Edward Galle

and other Hughes witnesses to the following effect:

Q.

A.

A.

Q.

A.

In your work, Mr. Galle, what account did you

take of this wide range of rotary speeds?

Well, I felt that if I was going [to] be success-

ful in developing a bearing and seal combina-

tion that that bearing and seal would have to be

capable of being used at this full range of op-

erating practices.

Well, couldn’t you have just designed the slow

speed bit and told every user and purchaser of

the bit to just turn it slowly?

I don’t think that would be practical. We have

no control over the way that a driller uses a

bit. There are all types of drilling conditions

and practices all over the world, and that just

wouldn’t have been a practical way to have ap-

proached it.

Well, back at that time, did you believe that

your journal bearing O-ring bits would come to

be used in all sizes and types and operated over

full ranges including all of these high speeds?

I certainly hoped it would.

Well, has that come to be true?

Yes. [A. 2958-59]

Exhibit 8565 is important not only as evidence refut-

ing Hughes’ claims but also because of the basis it would

12 |

have provided for cross-examining Galle and a number of

other Hughes witnesses, and because of the leads it would

have provided for other evidence. Dresser argued strenu-

ously to the District Court that not all of the evidence

adduced of operation of bits at high speeds and high

temperatures related to bits having the ’928 seal, and

that the ’928 seal would not endure such conditions. The

District Court found otherwise, relying on testimony

such as that quoted above. Had Hughes not withheld

Exhibit 8565, Dresser would have had the evidence it

needed to expose the falsity of Galle’s testimony (and the

testimony of other witnesses) through cross-examina-

tion and testimony of expert witnesses. Lacking such evi-

dence, Dresser has been saddled with the second largest

judgment for patent infringement ever awarded, while

Hughes has enjoyed a legal monopoly on routine applica-

tions of established engineering teachings.

Unless Dresser is now permitted to present the Exhibit

to the trier of fact for consideration on the merits,

Dresser will never have received the full and fair oppor-

tunity to defend itself which the judicial system and the

Rules of Civil Procedure are designed to afford. Yet the

Federal Circuit’s decision to affirm the validity of the

patent and to deny the Motion to Remand without con-

sidering it on the merits effectively denied Dresser ac-

cess to review by the District Court.’

7On procedural matters, the Federal Circuit follows the law of

the Circuit where the case was tried, here the Fifth Circuit. Com-

pare Gulf Coast Building and Supply Co. v. International Brother-

hood of Electrical Workers, 460 F.2d 105 (5th Cir. 1972) (where

an appellate court implicitly disposes of all issues presented by the

record, a district court impermissibly flouts the appellate mandate

if it thereafter considers an issue presented by that record) ;

United States v. Cato Brothers, Inc., 273 F.2d 153, 157 (4th Cir.

1959) (district court cannot reopen questions which the mandate

lays to rest), cert. denied, 362 U.S. 927 (1960); Pierce v. Cook &

Co., Inc., 518 F.2d 720 (10th Cir. 1975) (district court could well

think it was precluded by the mandate from considering Rule 60(b)

motion), cert. denied, 423 U.S. 1079 (1976); with Sellers v. General

Motors Corp., 735 F.2d 68 (3d Cir. 1984) (district court erred in

13

This Court should take jurisdiction of the case to clar-

ify the ambiguities and conflicts in appellate decisions

concerning the effect of the mandate in situations of this

type, and to ensure that Dresser receives the hearing to

which it is entitled.

Il. THE FEDERAL CIRCUIT’S DENIAL OF DRESSER’S

MOTION IS INCOMPATIBLE WITH THE FEDERAL

RULES OF CIVIL PROCEDURE

The Federal Rules of Civil Procedure—having the effect

of statute, Sibbach v. Wilson & Co., 312 U.S. 1 (1941)—

provide the appropriate framework for litigation. They

should not be displaced by too summary judicial action.

Yet that is the impact of the denial of Dresser’s Motion

by the Court of Appeals.

Specifically, were it not for the Court of Appeals’ rul-

ing, Rule 60(b) would provide an express remedy for

Dresser’s plight. The Rule permits a district court “fo]n

motion and upon such terms as are just” to “relieve a

party ... from a final judgment, order, or proceeding.”

In addition, the Rule recognizes the power of a court to

“entertain an independent action to relieve a party from

a judgment, order, or proceeding for fraud upon the

court.” Numerous decisions establish that Rule 60(b)

may properly be invoked where, as here, a party has been

prevented from fully presenting his case, and where mal-

feasance of an opponent is involved. Klapprott v. United

States, 335 U.S. 601 (1949). Cf. Marshall v. Holmes,

141 U.S. 589 (1891); United States v. Throckmorton, 98

U.S. 61, 65-66 (1878). While district courts have wide

discretion in deciding whether to grant relief under Rule

assuming that denial of motion to remand precluded it from decid-

ing Rule 60(b) motion). Cf. also Standard Oil Co. v. United States,

429 U.S. 17 (1976) (denying motion to recall mandate, without

prejudice to movant’s right to pursue Rule 60(b) motion below) ;

Aldridge v. Union Bankers Insurance Co., 457 F.2d 501 (5th Cir.

1972) (affirming with leave for appellant to move for Rule 60(b)

relief in district court).

14

60, Dresser has been effectively denied the opportunity to

present the matter to a factfinder vested with such dis-

cretion, in the absence of clarifying action by this Court.

The Federal Circuit’s denial of Dresser’s access to post-

trial relief is particularly inappropriate in patent litiga-

tion, which affects important public interests by creating,

enforcing, or abrogating legally protected private monop-

olies. For this reason, inequitable conduct by a patentee

(or would-be patentee) in the course of enforcing or

obtaining a patent is closely reviewed, even when belatedly

raised post-trial by a private party who has been less than

diligent in presenting such claims. Hazel-Atlas Glass Co.

v. Hartford-Empire Co., 322 U.S. 238 (1944). Cf. Preci-

sion Instrument Manufacturing Co. v. Automotive Main-

tenance Machinery Co., 324 U.S. 806 (1945). Exhibit

8565 demonstrates—-particularly in conjunction with

other evidence that has been obtained post-trial—that

Hughes has deliberately sought to enforce a patent it

knew was invalid for obviousness. The Court of Appeals

acted contrary to the public interest in failing to insure

that Dresser’s right to present these matters to the trier

of fact in a post-trial motion or independent action was

preserved. Compare United Business Communications,

Inc. v. Racal-Milgo, Inc., 591 F. Supp. 1172, 1187 (D.

Kan. 1984) (in a patent case, a “pattern of false testi-

mony, fabrication, and nondisclosure of relevant infor-

mation in a systematic effort to mislead the court” con-

stitutes fraud on the court, justifying a grant of relief

from the judgment in an independent action).

The Court of Appeals’ decision also contravened the

Federal Rules by failing to require the District Court to

afford Dresser an opportunity to be heard with respect

to Dresser’s allegations that Hughes ignored its responsi-

bilities in discovery. The rules require litigants either to

8 Indeed, Smith International, Inc., has been forced to file for

bankruptcy as a result of the damages awarded against Smith in

the ’928 patent litigation.

15

answer interrogatories fully and truthfully, or to lodge

valid objections in certified responses. Fed. R. Civ. P.

26(g), 33(a), 34(b); Rozier v. Ford Motor Co., 573 F.2d

1332, 1346 (5th Cir. 1978) (“It is axiomatic that [d]is-

covery by interrogatories requires candor in responding” )

(citation omitted). Moreover, the responses are to be

made in a form usable by the requesting party.® Supple-

mental responses are required whenever a party discovers

that his answers were untrue when made, or that they

have become incorrect in circumstances in which failure

to amend would constitute knowing concealment. Fed. R.

Civ. P. 26(e).'°

In this case, the pattern of nondisclosures, suspicious

lapses of memory experienced by key Hughes witnesses,

suggestions by Hughes’ counsel to witnesses during depo-

sition that they might not remember the facts in ques-

tion, the fact that material withheld was uniformly

damaging to Hughes’ case, and the familiarity Hughes

ought to have had with discoverable materials in

view of the lengthy Smith proceedings, all suggest

Hughes’ errors may have been less than accidental."

Dresser profiers evidence which the District Court did

not see and which enhances the abuse of discovery argu-

ments Dresser made in its post-trial motions.

* Bluitt v. Arco Chemical Co., 777 F.2d 188 (5th Cir. 1985) ; In re

Fine Paper Antitrust Litigation, 685 F.2d 810, 823 (3d Cir. 1982),

cert. denied, 459 U.S. 1156 (1983); Mitsui & Co. v. Puerto Rico

Water Resources Authority, 26 Fed. Rules Serv. 2d 377 (D.P.R.

1978).

10 Hughes made no effort to advise Dresser of the existence of

Exhibit 8565 although Hughes had made the Exhibit available,

under seal, in the Smith litigation.

11Compare Rozier v. Ford Motor Co., supra, 573 F.2d at 1346

(the “policy protecting finality of judgments is not so broad as to

require protection of judgments” where a party, by “selective dis-

closure of information,” has “completely sabotaged the federal trial

machinery” and “preclude[d] the fair contest which the Federal

Rules are intended to assure”).

16

The rules vest the District Court—the tribunal famil-

iar with the entire course of discovery in this case—

with broad discretion to inquire into discovery matters,

correct any injustices that might have occurred, and take

steps to deter future disregard of discovery obligations.

See National Hockey League v. Metropolitan Hockey

Club, Inc., 427 U.S. 639, 642, 643 (1976). See also Road-

way Express v. Piper, 447 U.S. 752 (1980); Hammond

Packing Co. v. Arkansas, 212 U.S. 322 (1909); Fed. R

Civ. P. 37(d). The Federal Circuit’s role, in contrast,

was only to review, under a strictly confined “abuse of

discretion” standard, any findings the District Court

might have made with regard to Dresser’s allegations.

National Hockey League v. Metropolitan Hockey Club,

Inc., 427 U.S. 639, 643 (1976). Yet the Federal Circuit’s

ruling on the Motion to Remand, in light of the mandate

rule, operatively prevents the District Court from exer-

cising the broad discretion that court has to insure that

Dresser receives a fair trial on all the evidence, and that

the policies underlying the discovery rules are vindicated.

The discovery provisions of the Federal Rules con-

stitute ‘one of the most significant innovations of the

Federal Ruies of Civil Procedure.” Hickman v. Taylor,

329 U.S. 495, 500 (1947). They were designed to replace

cumbersome pleading rules, and overreliance on litiga-

tion tactics, with full pretrial disclosure of nonprivileged

facts and issues. United States v. Procter & Gamble, 356

U.S. 677, 682-83 (1958). Although the provisions are

largely self-executing in the ordinary case, the district

courts must retain broad discretion to insure that dis-

covery responsibilities are taken seriously. The Court of

Appeals’ treatment of Dresser’s Motion to Remand, if

disregarded in this Court, imperils important policies

served by the discovery rules.

Finally, the Court of Appeals implicitly violated Rule

52(a) by its disposition of the Motion. By denying the

Motion to Remand the issues ard evidence presented by

17

Dresser, and affirming the judgment holding the patent

valid, the appellate court’s decision effectively and im-

properly determined the factual issues adversely to

Dresser. This the Court of Appeals had no authority to

do. Although original factfinding is not appropriate at

the appellate levei, it is particularly unwarranted where,

as here, the facts which the appellate court’s decision sug-

gests to be insignificant go to central findings, and where

the trial court clearly felt the case to be an exceedingly

close one.

lil. THE FEDERAL CIRCUIT’S DISPOSITION OF

DRESSER’S MOTION TO REMAND VIOLATED

DUE PROCESS

What has been said shows that Dresser had available

to it certain procedural remedies—expressed in the Rules

of Civil Procedure, and in earlier common law precedents

as well—which the Federal Circuit’s summary denial of

the Motion ignored. The availability of such remedies is

particularly significant where their denial in these pro-

ceedings may result in Dresser’s suffering a massive

deprival of its property. Thus, the procedural protec-

tions afforded to Dresser assume constitutional dimen-

sions. See Boddie v. Connecticut, 401 U.S. 371 (1971).

Dresser does not contend that the Constitution by it-

self requires federal courts to consider evidence and is-

sues submitted post-trial. The fact remains, however, that

those courts have long demonstrated their authority to

provide such relief, and the Federal Rules explicitly pro-

vide that applications for it should be considered by the

trier of fact. These post-trial remedies having been made

available through the Federal Rules, appellate courts can-

not, consistently with due process, withdraw them. See

Logan v. Zimmerman Brush Co., 455 U.S. 422 (1982);

Lindsey v. Normet, 405 U.S. 56 (1972). Nor may the

Federal Circuit unreasonably deny Dresser access to the

only forum effectively empowered to grant Dresser re-

18

lief—the District Court. Boddie v. Connecticut, supra,

401 U.S. at 376.

CONCLUSION

For the reasons set forth above, Dresser prays that

the writ of certiorari issue.

Respectfully submitted,

Of Counsel ERWIN N. GRISWOLD

M. Scott NICKSON, JR. Counsel of Record

EDWARD G, FIORITO KATHRYN M. FENTON

DRESSER INDUSTRIES, INC. SARAH W. PAYNE

1600 Pacific Avenue JONES, DAY, REAVIS

Dallas, Texas 75201 & POGUE

1450 G Street, N.W.

Washington, L.C. 20005-5701

(202) 879-3898

Counsel for Petitioner

JOHN F. LYNCH

ARNOLD, WHITE & DURKEE

400 One Bering Park

750 Bering Drive

Houston, Texas 77957

August, 1987