Petition for Writ of Certiorari — Manildra Milling Corp. v. OMI Holdings, Inc.
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PFC 20 3993
No. 93- ‘a v
In The
SUPREME COURT OF THE UNITED STATES
October Term, 1993
MANILDRA MILLING CORPORATION, Petitioner,
v.
OMI HOLDINGS, INC., Respondent.
ON PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT
PETITION FOR WRIT OF CERTIORARI
Murray J. Belman
700 14th Street, N.W.
Washington, D.C. 20005
(202) 508-1000
Counsel of Record
Of Counsel:
W. Stanley Walch
Mark S. Sableman
Roman P. Wuller
Halpin J. Burke
700 14th Street, N.W.
Washington, D.C. 20005
(202) 508-1000
December 20, 1993
i
QUESTION PRESENTED
Whether the Court of Appeals for the Federal Circuit is
unconstitutionally depriving parties of the right to trial by jury by
reversing, in whole or in part, forty-two percent (42%) of the jury
verdicts in patent cases that it has reviewed since 1987 under the
substantial evidence test, and, in particular, by sua sponte reversing
a $4.75 million jury verdict for damages, reached after five months
of trial and six weeks of jury deliberation, on a purely factual issue
unrelated to any matters of patent law, that the respondent did not
even contest at trial or on appeal.
ii
LIST OF PARTIES
The parties to the proceedings in the trial court, the U.S.
District Court for the District of Kansas, were the petitioner,
Manildra Milling Corporation ("Manildra"); the owner of
Manildra’s parent company, John Thomas Honan ("Honan"); the
predecessor of the respondent OMI Holdings, Inc. ("OMI"), Ogilvie
Mills, Inc.("Ogilvie"); and Henkel Corporation and Henkel of
America, Inc. (together, "Henkel"). Before trial, Manildra entered
into an agreement with Henkel settling all claims. After trial, OMI
succeeded to Ogilvie’s interest in the proceedings.
The parties in the Court of Appeals for the Federal Circuit
were the petitioner, Manildra; the respondent, OMI; and Honan.
Honan has been dropped from the parties in this petition
because he is not an adverse party, he prevailed in the proceedings
at the trial and appellate level, and is not subject to the portion of
the Court of Appeals decision that is the subject of this petition for
certiorari.
RULE 29.1 LIST OF PARENT COMPANIES
Manildra Milling Corporation is a wholly owned subsidiary
of Honan Holdings, USA, Inc. It has no subsidiaries to list
pursuant to Rule 29.1.
QUESTION PRESENTED
ee ee ee a ee
RULE 29.1 LIST OF PARENT COMPANIES .
TABLE OF CONTENTS ...-----essscccttte
TABLE OF AUTHORITIES ....------sssccctc?
tk 0 a
STATEMENT OF JURISDICTION . | Seer e ee ee
CONSTITUTIONAL PROVISION INVOLVED ......--
STATEMENT OF THECASE ....------ sss?
ARGUMENT
I.
II.
il.
A.
B.
©.
IV.
The Court of pemere tor the Sete Circuit Hes
Become Notorious for Improper Fact- Finding
This Case Represents a Most Egregious Case of
Imprcper Fact Finding at the Appellate Level
The Federal Circuit Improperly Made Factual
Determinations Contrary to the Findings of the
Jury and the Position of the Parties .....----
The Legal Standard for Establishing Facts on
SESS ee
There Was Substantial Evidence to Support a
Finding By a Reasonable Jury that Ogilvie
Told Customers that Manildra Was
Snirinmins ow errr
1. Statements to Purchaser Moore Paper
2. The Hancock Evidence ......-----
Given Ogilvie’s Admission, the Federal
Circuit Should Not Have Examined the
Sufficiency of Evidence on this Issue... - .
i i a il
iV
B RITI
Amstar Corporation v. Envirotech Corporation et al.,
730 F.2d 1476 (Fed. Cir.), cert. denied, 469 U.S.
Se I a ola asa ea a a ee a 6k do 9, 10
Ashland Oil, Inc. v. Delta Resins & Refractories,
776 F.2d 281 (Fed. Cir.), cert. denied, 475 U.S.
ee EG oe se a ee ca ae tse kek ees 9
Baginsky v. United States, 697 F.2d 1070 (Fed. Cir.),
cert—denied, 464 U.S. 981 (1983) ...........2 cc eee 10
Biodex Corp. v. Loredan Biomedical, Inc., 946
oF i | ee | ae ee rear rae 22
Cone v. West Va. Pulp & P. Co., 330 U.S. 212 (1947) .... 22
Dennison Manufacturing Co. v. Panduit Corp.,
Coe as 6 6 bo eho OS eb wes 10, 11, 12, 13, 14
EWP Corp. et al. v. Reliance Universal Inc. et al.,
755 F.2d 898 (Fed. Cir.), cert. denied, 474 U.S.
ee ae a ae a es & oi oe ob ee 9, 10
Gallick v. B&O, 372 U.S. 108 (1963) ............... 15
J.P. Stevens & Co., Inc. v. Lex Tex Litd., Inc.,
747 F.2d 1553 (Fed. Cir. 1984), cert. denied,
el ae I os oe ae aa be ee 08 4% 8 9
Jones et al. v. Hardy, 727 F.2d 1524 (Fed. Cir. 1984) ... 9, 10
King Instrument Corp. v. Otari Corp., 767 F.2d 853
(Fed. Cir. 1985), cert. denied, 475 U.S. 1016 (1986) ...... 9
Lavender v. Kurn, 327 U.S. 645 (1946) .............. 15
Malta v. Schulmerich Carillons, Inc., 952 F.2d 1320
ee ae Es es ee ea Pe ee tae ee ae ee 12, 14
Vv Page
Panduit Corp. v. Dennison Mfg. Co., 774 F.2d 1082
(Fed. Cir.), cert. granted and judgment vacated by,
475 U.S. 809 (1985), on remand, 810 F.2d 1561,
cert. denied, 481 U.S. 1052 (1987) ............ 9, 11, 12
Raytheon Company v. Roper Corporation,
7124 F.2d 951 (Fed. Cir. 1983), cert. denied,
ip eo), | rere se ee ee 9, 10
RCA Corp. v. Applied Digital Data Systems, Inc.,
730 F.2d 1440 (Fed. Cir.) (Kashiwa, J., dissenting),
cert. dismissed, 468 U.S. 1228 (1984) ...........-.. 9, 10
Rogers v. MoPac, 352 U.S. 500 (1956) ....-.--.-+---- 15
Rohm & Haas Company v. Crystal Chemical
Company, et al., 722 F.2d 1556 (Fed. Cir. 1983),
cert. denied, 469 U.S. 851 (1984)... ......555555. 9, 10
Rol Mfg. Co. v. Nickson Industries, Inc., 765 F.2d
160 (Fed. Cir.), cert. denied 474 U.S.843 (1985) ........ 9
Schulz v. Penn. R., 350 U.S. 523 (1956) ............-. 15
Senmed Inc. v. Richard-Allen Medical Indus.,
Ph BLE)! Se | ar re 12
Simmons Fastener Corp. v. Illinois Tool Works,
739 F.2d 1573 (Fed. Cir. 1984), cert. denied,
671 US. WRB CIID) ccc ccc cee te sees 9, 10
Stratoflex, Inc. v. Aeroquip Corp., 713 F.2d 1530
ek, Gis, TU kgs ck 6 0 6 oo 8s eae eer ep es 9, 10
Taylor v. Mississippi, 319 U.S. 583 (1943) ......--.-.. 16
Tennant v. Peoria, 321 U.S. 29 (1944)...........5..-. 15
TP Laboratories, Inc. v. Professional Positioners,
Inc. et al., 724 F.2d 965 (Fed. Cir.), cert. denied,
fis YF) wo ere er a ee ee 9, 10
Uniroyal, Inc. v. Rudkin-Wiley Corp., 837 F.2d
1044 (Fed. Cir. 1988), cert. denied, 488 U.S.825 ....... 12
vi Page
W.L. Gore & Associates, Inc. v. Garlock, Inc.,
Tal F.2e 1568 Gad. Ci. BOGE) cc cc ccc cee ce ccs 9, 10
Walters v. City of Atlanta, 803 F.2d 1135
Se, aks 6 Sai iG Gna ate wis oF ete kn mene 22
Woods v. Tsuchiya, 754 F.2d 1571 (Fed. Cir.),
cert. denied, 474 U.S. 825 (1984) ................ 9, 10
Statutes
Es FM & |) eR EN ire eet gpa our se Gar 2
Rs PED goo c 0 4h 6 4 Oo eee 2
PC a a EE sg sa 06g OR RS ae We ee ee 2
Federal! Rule of Civil Procedure 52(a) ......... 8,9, 10, 11
her A riti
Fourth Annual Judicial Conference of the United
States Court of Appeals for the Federal Circuit,
See ee See CD Ss obo 8 eee eee eke kee 8,9
Ninth Annual Judicial Conference of the Federal
Cram, 160 F.R.D. 37 (lay DS, ISBT) ww cece 11
Note, Nothing Seems "Obvious" to the Court of
Appeals for the Federal Circuit: The Federal
Circuit, Unchecked by the Supreme Court, Transforms
the Standard of Obviousness Under the Patent Law,
26 Loyola of L.A. Law Rev. 455, 481 (1993) .......... 13
The Federal Circuit: A Case Study in Specialized
Courts, 64 N.Y.U. L. Rev. 1, 61-61 (1989) ........... 11
U.S. Constitution Amendment VII ................. y SE
In The
SUPREME COURT OF THE UNITED STATES
October Term, 1993
MANILDRA MILLING CORPORATION, Petitioner,
v.
OMI HOLDINGS, INC., Respondent.
ON PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT
PETITION FOR WRIT OF CERTIORARI
The petitioner Manildra Milling Corp. respectfully prays that a
writ of certiorari issue to review the judgment and opinion of the
United States Court of Appeals for the Federal Circuit, entered in
the proceeding entitled Manildra Milling Corporation v. Ogilvie
Mills, Inc. v. Henkel Corporation and Henkel of America, Inc., v.
John Thomas Honan on June 22, 1993.
OPINIONS BELOW
The opinion of the United States Court of Appeais for the
Federal Circuit is not reported. It is reprinted in the appendix
hereto, p. la.
The memorandum and order of the United States District Court
2 fF
for the District of Kansas (Saffels, J.) is reported at 797 F.Supp.
874. It is reprinted in the appendix hereto, p. 27a.
STATEMENT OF JURISDICTION
The judgment of the United States Court of Appeals for the
Federal Circuit was entered on June 22, 1993 (p. la), reversing the
judgment of the trial court dated June 16, 1992 (p. 27a) in
petitioner's favor on the Lanham Act and Kansas unfair competition
laws. The Court of Appeals denied a timely petition for rehearing
on September 20, 1993 (p. 25a). The jurisdiction of this Court is
invoked under 28 U.S.C. § 1254(1).
CONSTITUTIONAL PROVISION INVOLVED
U.S. Constitution Amendment VII
In Suits at common law, where the value in controversy shall
exceed twenty dollars, the right of trial by jury shall be preserved,
and no fact tried by a jury, shall be otherwise reexamined in any
Court of the United States, than according to the rules of the
common law.
STATEMENT OF THE CASE
This proceeding was commenced pursuant to 28 U.S.C. §§ 1331
and 1338 in the United States District Court for the District of
Kansas, on a complaint for declaratory relief and damages by
Manildra Milling Corporation ("Manildra"). The complaint named
Ogilvie Mills, Inc. ("Ogilvie") as defendant and alleged that
Ogilvie’s patents (Nos. 3,901,725 and 4,280,718) were invalid and
were not infringed by Manildra. The complaint also alleged
violations of the Sherman Act, the Lanham Act and Kansas unfair
ee ©
3
competition laws covering intentional interference with prospective
economic advantage and injurious falsehood ("Kansas unfair
competition law"). Ogilvie denied Manildra’s claims and
counterclaimed for patent infringement.
On August 26, 1991, trial began before a jury of nine. More
than fifty witnesses testified and the parties introduced almost 1,000
exhibits. After almost five months of trial, the case was submitted
to the jury on January 16, 1992. The jury deliberated for six
weeks, finding that Ogilvie’s patents were invalid and not infringed
by Manildra and that Ogilvie had violated the Lanham Act and
Kansas _ unfair competition law. The jury awarded Manildra
$2,250,000 in compensatory and $2,500,000 in Punitive damages.
The Basis of the Jury's Verdicts
The linchpin of the Lanham Act and unfair competition verdicts
was the jury’s finding, on a "clear and convincing evidence"
instruction,' that Ogilvie asserted its patent rights to convince the
five potential customers for the accused Product not to buy from
Manildra wher it knew, or should have known, that its patents were
either invalid or not infringed.’
' The district court gave the jurors written instructions, which they were
allowed to have with them during their deliberations
Instruction 24 called for the jury to determine. on a clear and convincing
evidence standard, whether —
Ogilvie asserted its patent mghts when it knew. or should have
known, that its patents were either invalid or unen forceable, or
had not been infringed by Manildra
Instruction 4] required the jury to decide whethe:
4
The Basis of the Federal Circuit’s Decision
This petition relates solely to the Federal Circuit's reversal of
the jury’s verdicts that Ogilvie had violated the Lanham Act and the
Kansas unfair competition law. The Federal Circuit reversed on the
sole ground that, in its view, there was no more than a scintilla of
evidence that Ogilvie ever told the potential customers that Manildra
was an infringer.
That decision ignored a substantial body of evidence, including
(1) an admission by Ogilvie’s senior American officer that he “may
have" told the customers that Manildra was infringing, (2) Ogilvie’s
own sales reports that told a story of its not very subtle message to
customers that an infringement suit could become "cost effective"
if they did not limit their purchases from Manildra, and (3) a
customer’s document flat out stating that Ogilvie accused Manildra
of infringement. Indeed, Ogilvie had admitted in its post-trial
motions that it had told buyers Manildra was infringing its patents,
and it did not argue otherwise in its briefs or oral argument on
appeal.
Notwithstanding the evidence and a complete absence of dispute
on the issue, the Federal Circuit panel seized on it, sua sponte. At
oral argument, Judge Clevenger remarked:
Now, I would presume with all deference, Mr West
[counsel for Manildra}, that if you had a ton of customers
Ogilvie published a statement, and such statement was
reasonably understood by those who heard it to cast doubt on
the legal status of Manildra’s [product].
The jury found that these conditions (as well as others requiring false and
misleading representations and malice) existed.
5
that had been subjected to a litany’ and if the litany indeed
involved threatening -- Saying, "Listen here, Manildra’s
product infringes our patent," you wouldn’t have had any
trouble putting those people on the stand. There is only
one reference to infringement uh, just a second, I mean
you've got your staff over there maybe they can start
looking but until somebody can demonstrate to me to the
contrary, I think that you don’t even have a scintilla of
evidence supporting a falsehood.
Thus began the journey of the Federal Circuit, first to set its
own standard of what proof should have been available (without any
background whatsoever about the industry, traditional relationships
between suppliers and customers or other factors that could lead a
jury to reach a different conclusion about what evidence ought to be
available) and then to make its own appraisal of the evidence that
was presented at trial.
This process resulted in the court’s conclusion that:
[A]fter examining the entire record on appeal, we have
discovered only one document, referred to as [Ex.] 715, out
of several thousand trial exhibits, that provides some
evidence that Ogilvie without qualification stated that
Manildra was infringing its patents. Moreover, this single
document is not a direct communication between Ogilvie
* The evidence showed that Prior to the time Ogilvie purchased the patents and
the business that produced the product from Henkel of America, Inc., Henkel’s
general manager and chief salesman had developed what they called a "litany"
about Henkel’s patent rights including the claim that Manildra was an infringer.
When Ogilvie purchased the business and patents, it hired the same general
manager, chief salesman and other senior employees. Thereafter, Ogilvie’s written
sales call reports indicate that they repeated the “litany” to potential buyers of
Manildra's accused product. Since there are only five users of the product in the
U. S., this was an exceptionally easy market to communicate with.
6
and one of its customers, but rather is an internal customer
memorandum between two of the customer’s employees
regarding future * * * purchases and a future expansion of
business. [Federal Circuit Opinion at p. 17a-18a]
The court found that Exhibit 715 (p. 94a) constituted a "mere
scintilla” of evidence and overturned the jury’s verdict.‘
In
reaching its conclusion, the court perforce concluded:
No reasonable juror could credit a customer’s internal
memorandum reporting that Ogilvie had charged Manildra
with infringement. See p. 16 below.
No reasonable juror could construe as an admission the
statement by Ogilvie’s chief operating that he "may have"
told customers that Manildra was infringing. See p. 16
below.
No reasonable juror could conclude that, when Ogilvie told
a customer that a suit for patent infringement would not be
“cost effective" so long as Manildra’s sales were limited, it
was threatening infringement litigation if those sales
increased. See p. 17 below.
No reasonable juror could equate Ogilvie’s claim that,
because of the patents, Manildra was not a "legitimate
* The Federal Circuit never explained why this document was, in its opinion,
a “mere scintilla” other than noting it was an internal customer memorandum. Its
opinion seems to confuse quantity with quality. Even if the Federal Circuit was
right that there was only one document out of several thousand exhibits on point,
it does not logically follow that a single document is a “mere scintilla." Indeed,
Ex. 715 is particularly credible, since it was sent by a purchaser to his superior and
documented the customer’s decision to limit purchases from Manildra because of
Ogilvie’s threat to embroil the customer in patent infringement litigation. A fact
finder might reasonably have seen the document as a “smoking gun” rather than
a “scintilla” of evidence.
Jevtid aaah :
7
competitive situation” to a charge of patent infringement.
See p. 17 below.
-- No reasonable juror could conclude that Ogilvie’s "litany"
to its customers, which admittedly related to its purchase of
the patents and their violation by Manildra, was tantamount
to a charge of infringement. See p. 18 below.
To recite these conclusions of fact that were essential to the
Federal Circuit’s decision is to demonstrate how improper that
decision was. It was plain and even arrogant error to hold that no
reasonable juror, exposed to this array of evidence during five
months of trial and six weeks of deliberation, could have found as
they did.
This is not an isolated instance of over! y aggressive fact-finding
by the Federal Circuit, a practice that has once before earned it
summary reversal by this Court and has not abated since then. But
this may be the most egregious example of a practice that, at
bottom, denies litigants their Seventh Amendment rights to a jury
trial,
This Court should act again, by summary procedure, to correct
the Federal Circuit’s mistaken practice.
ARGUMENT
I. The Court of Appeals for the Federal Circuit Has Become
Notorious for Improper Fact-Finding
{t is a cardinal rule of appellate review that courts of appeals
must give a high degree of deference to determinations of fact at the
trial level, particularly those by a jury. Unwarranted fact-finding
at the appellate level is particularly corrosive to the judicial process.
The spectacle of appellate panels -- who have not heard the evidence
and cannot, on a sterile written record, make a careful and balanced
8
evaluation of what and whom to believe -- second-guessing fact-
finders at trial can only undermine public confidence in the litigation
process and the protections of the Seventh Amendment.
It is physically impossible for this Court routinely to oversee
whether inferior courts give proper deference to this crucial
limitation on appellate review. Consequently, our system requires
self-policing by the courts of appeal. Most have carried out this
duty responsibly; unfortunately, the Federal Circuit has not.
Indeed, it has become notorious for engaging in improper fact-
finding.
Thus, the principal speaker at the Court’s Fourth Judicial
Conference could bluntly state:
The charge that the court makes de novo fact finding is
demonstrably true. I don’t believe that there is a judge on
the court that would deny it.
That fact induces lawyers to disregard Rule 52(a) and to
reargue facts that they shouldn’t really be rearguing before
the appellate court.
Fourth Annual Judicial Conference of the United States Court of
Appeals for the Federal Circuit, 112 F.R.D. 439, 542 (1987)
(Statement of Thomas Arnold). The court’s chief and two other
judges were members of the same panel of speakers; none
challenged the assertion. The issue was of such moment that a
“mini-debate” on the subject, "Resolved: The Federal Circuit Has
Improperly Assumed the Role of Fact Finder * * *" was held as
part of the proceedings.* Id. at 609-619. The speaker supporting
5 The debate was focused on the requirements of FRCP 52(a), which concerns
the review of fact-finding by a trial judge under the “clearly erroneous” standard,
rather than the stricter substantial evidence test employed in the review of jury
verdicts. Nonetheless, the speaker supporting the affirmative of the debate stated:
ae ey
9
the affirmative position was able to cite nine Federal Circuit cases
raising the issue,° seven more where an abuse of Rule 52(a) was
alleged,’ three additional cases where the contention was made by
All I know is that there are a significant number of cases, there are a
significant number of patent trial bar, who are of the firm conviction that the
court has engaged in excessive fact finding.
112 F.R.D. at 611.
* Simmons Fastener Corp. v. Illinois Tool Works, 739 F.2d 1573 (Fed. Cir.
1984), cert. denied, 471 U.S. 1065 (1985); Amstar Corporation v. Envirotech
Corporation et al., 730 F.2d 1476 (Fed. Cir.), cert. denied, 469 U.S. 924 (1984);
RCA Corp. v. Applied Digital Data Systems, Inc., 730 F.2d 1440 (Fed. Cir.)
(Kashiwa, J., dissenting), cert. dismissed, 468 U.S. 1228 (1984); Jones et al. v.
Hardy, 727 F.2d 1524 (Fed. Cir. 1984) (Kashiwa, J., dissenting in part); TP
Laboratories, Inc. v. Professional Positioners, Inc. et al., 724 F.2d 965 (Fed.
Cir.), cert. denied, 469 U.S. 826 (1984); Raytheon Company v. Roper
Corporation, 724 F.2d 951 (Fed. Cir. 1983), cert. denied, 469 U.S. 835 (1984);
Rohm & Haas Company v. Crystal Chemical Company, et al., 722 F.2d 1556
(Fed. Cir. 1983), cert. denied, 469 U.S. 851 (1984); W.L. Gore & Associates, Inc.
v. Garlock, Inc., 721 F.2d 1540 (Fed. Cir. 1983) (Davis, J., concurring in the
result in part and dissenting in part), cert. denied, 469 U.S. 851 (1984); Stratoflex,
Inc. v. Aeroquip Corp., 713 F.2d 1530 (Fed. Cir. 1983).
” J.P. Stevens & Co., Inc. v. Lex Tex Lid., Inc., 747 F.2d 1553 (Fed. Cir.
1984), cert. denied, 474 U.S. 822 (1985); Woods v. Tsuchiya, 754 F.2d 1571
(Fed. Cir.), cert. denied, 474 U.S. 825 (1984); EWP Corp. et al. v. Reliance
Universal Inc. et al., 755 F.2d 898 (Fed. Cir.), cert. denied, 474 U.S. 843 (1985);
Rol Mfg. Co. v. Nickson Industries, Inc., 765 F.2d 160 (Fed. Cir.), cert. denied
474 U.S.843 (1985); King Instrument Corp. v. Otari Corp., 767 F.2d 853 (Fed.
Cir. 1985), cert. denied, 475 U.S. 1016 (1986); Ashland Oil, Inc. v. Delta Resins
& Refractories, 776 F.2d 281 (Fed. Cir.), cert. denied, 475 U.S. 1017 (1985);
Panduit Corp. v. Dennison Mfg. Co., 774 F.2d 1082 (Fed. Cir.), cert. granted and
judgment vacated by, 475 U.S. 809 (1985), on remand, 810 F.2d 1561, cert.
denied, 481 U.S. 1052 (1987).
10
the dissent,* and eleven in which he concluded that the court had
gone too far.’
That the Federal Circuit’s own Conference would have devoted
so much time to this issue demonstrates its immediacy and
importance. That members of the patent bar participating in the
Conference would have spoken so candidly in criticism of the court
(before the very judges who hear their appeals) demonstrates their
high frustration with the court’s practice.
The Fourth Conference took place only a day after this Court
announced its per curiam decision in Dennison Manufacturing Co.
v. Panduit Corp., 475 U.S. 809 (1986). Panduit vacated a
judgment of the Federal Circuit in which it had disregarded factual
determinations of the trial judge relating to the issue of obviousness.
The Court observed that, whether the ultimate question of
obviousness is one of fact or law, the subsidiary determinations of
the district court should be subject to the cle*ly erroneous standard
of Federal Rule of Civil Procedure 52(a, “cause the Federal
Circuit had engaged in fact finding without se much as a mention
* Woods v. Tsuchiya, 754 F.2d 1571, 1582 (Fed. Cir. 1985); RCA Corp. v.
Applied Digital Data Systems, Inc., 730 F.2d 1440, 1448 (Fed. Cir. 1984); Jones
et al. v. Hardy, 727 F.2d at 1534; see also Baginsky v. United States, 697 F.2d
1070, 1077 (Fed. Cir.), cert. denied, 464 U.S. 981 (1983).
% Stratoflex, Inc. v. Aeroquip Corp., supra, 713 F.2d 1530; W.L. Gore &
Associates, Inc. v. Garlock Inc., supra, 721 F.2d 1540; Rohm & Haas Co. v.
Crystal Chemical Co., supra, 722 F.2d 1556; Raytheon Company v. Roper
Corporation, supra, 724 F.2d 951; TP Laboratories, Inc. v. Professional
Positioners, Inc. et al., supra, 724 F.2d 965; RCA Corp. v. Applied Digital Data
Systems, Inc., supra, 730 F.2d 1440; Jones et al. v. Hardy, supra, 727 F.2d 1524;
Amstar Corp. v. Envirotech Corp. et al., supra, 730 F.2d 1476; Simmons Fastener
Corp. v. Illinois Tool Works, supra, 739 F.2d 1573; EWP Corp. etal. v. Reliance
Universal Inc. et al., supra, 755 F.2d 898; Woods v. Tsuchiya, supra, 754 F.2d
1571.
11
of Rule 52 or its standard of review, the Court remanded for further
consideration in light of that rule.'°
Panduit should have sensitized the Federal Circuit to cis
Court’s concern about appellate fact finding, but it did not. Since
January 1, 1988, the Federal Circuit has reviewed jury verdicts in
approximately 38 cases involving patents. Of those, the court
reversed the juries’ findings, in whole or in part, at least 16 times,
an astonishing 42% rate."'
At the Ninth Annual Judicial Conference of the Federal Circuit,
Judge Cohn of the Eastern District of Michigan observed:
My reading, though, of some of the decisions of the
Circuit, suggests to me, when they would prefer a different
result than that reached by the trial judge, they shift from
his findings of fact and say, "Oh, no. This is a conclusion
of law." And, to some extent, I am constrained to say that
some of the decisions that I have read from this Circuit are
result driven. (Applause. )
140 F.R.D. 57, 69 (May 9, 1991).
° On remand, the Federal Circuit did apply Rule 52(a) in a 21 page opinion
dissecting each of the trial court's findings and explaining why it was clearly
erroneous. Panduit Corp. v. Dennison Mfg. Co., 810 F.2d 1561 (Fed. Cir.), cert.
denied, 481 US 1052 (1987). That that decision was not reviewed by this Court
cannot be taken as acquiescence in improper fact-finding at the appellate level.
Even those commentators who, because of the Federal Circuit's presumed expertise
in the patent field, are prepared to countenance wider leeway to its fact-finding
forays would do so only within the scope of that expertise. See, ¢.g., The Federal
Circuit: A Case Study in Specialized Courts, 64.N.Y.U. L. Rev. 1, 61-61 (1989)
'' These statistics are based on a Lexis search of patent appeals to the Federal
Circuit in which the court reviewed a jury's verdict under the substantial evidence
test. The cases are cited in Table I at p. 109a, which is a chart reflecting treatment
of the juries’ verdicts.
12
Later the same year, Judge Newman of the Federal Circuit
castigated her colleagues for fact-finding on appeal in Malta v.
Schulmerich Carillons, Inc., 952 F.2d 1320, 1331-1346 (Fed. Cir.
1991):
With all respect to my colleagues on this panel, their
rejection of the jury verdict and de novo determination of
the factual issue of infringement is contrary to the law
governing appellate review of jury verdicts.
Id. at 1331." She then cited 38 elements of evidence, plus
extensive trial testimony, that the majority disregarded in
overturning the jury's verdict of infringement. /d. at 1336-40."
'? This was not the first instance after Panduit in which Judge Newman
enticized her colleagues for improperly overturning a jury's verdict. In Senmed,
Inc. v. Richard-Allen Medical Indus., 888 F.2d 815, 821 (Fed. Cir. 1989), she
stated:
This appeal is from a jury verdict of infringement, yet it is difficult to
find in the majority opinion any deference to the jury, or application of
the standard by which jury verdicts are reviewed on appeal.
'S Uniroyal, Inc. v. Rudkin-Wiley Corp., 837 F.2d 1044 (Fed. Cir. 1988),
cert. denied, 488 U.S. 825 is another example of de novo fact-finding since
Panduit. There, the court re-examined the factual determinations of the trial court
in evaluating both the ultimate "fact" and the secondary considerations relating to
obviousness. The trial might just as well have been before the appellate court, and
the decision makes immediate the comment of one district judge:
It gives me great comfort to know that I am just the first stop on this
trip. Everything I have said here can be analyzed just as well by the
Court of Appeals for the Federal Circuit.
Quoted in Panduit Corp. v. Dennison Mfg. Co., supra, 810 F.2d at 1565. That
this statement could be made by a federal district judge shows just how far the fact-
finding practices of the Federal Circuit have conditioned trial courts to expect to
be second-guessed on the facts.
adh Pe aN
13
One recent commentator described the current situation thusly:
[T]he CAFC has not only changed the Supreme Court’s
standard of obviousness, but has made itself a de novo
reviewer of obviousness by giving itself the authority to
review all facts related to the issue of obviousness in a case.
In sum, the CAFC no longer uses the clearly erroneous
standard, but instead appears to review the facts regarding
obviousness whenever it disagrees with the trial court. The
CAFC often rolls up its sleeves and reexamines all the facts
of a case related to obviousness.
Note, Nothing Seems “Obvious” to the Court of Appeals for the
Federal Circuit: The Federal Circuit, Unchecked by the Supreme
Court, Transforms the Standard of Obviousness Under the Patent
Law, 26 Loyola of L.A. Law Rev. 455, 481 (1993).
The instant case shows that, far from being discouraged by this
Court’s decision in Panduit, the Federal Circuit has taken fact
finding at the appellate level to a new extreme.
Il. This Case Represents a Most Egregious Case of
Improper Fact Finding at the Appellate Level
This case was presented to a jury for more than five months.
Some 15,000 pages of testimony from more than fifty witnesses and
almost 1,000 documents were introduced into evidence. The jury
deliberated for six weeks before rendering its verdict on numerous
and complex issues of patent validity, infringement and violations
of the Lanham and Sherman Acts and Kansas unfair competition
laws. The jury was quite discriminating in its verdicts, finding for
Manildra on validity, infringement and the Lanham Act and state
unfair competition claims and for Ogilvie on the Sherman Act and
inequitable conduct before the Patent Office claims.
4
On appeal, the Federal Circuit overturned the verdicts under the
Lanham Act and unfair competition law on the sclitary ground that
there was no more than a scintilla of evidence that Ogilvie told the
trade that the Manildra was guilty of infringement.
Before considering the substance of that conclusion, it is
important to note that the court was not considering a combined
issue of fact and law related to the question of obviousness as in
Panduit or the standards of evidence and argument required to show
infringement by equivalence as in Malta. Here, we have a naked
issue of fact not relevant to any issue of patent law. Unlike Malta,
the district judge in this case endorsed the jury’s verdict in its
entirety. Finally, the court’s fact-finding flies in the face of specific
admissions made by the patentee in its motion for judgment as a
matter of law and in other filings that it had told the customers that
Manildra was infringing.
Ill. The Federal Circuit Improperly Made Factual
Determinations Contrary to the Findings of the Jury and
The Position of the Parties.
In the present case, the Federal Circuit sua sponte made a
crucial finding of a specific fact that was contrary to the findings of
the jury and district court who saw and heard the evidence through
more than five months of trial. Ogilvie had admitted the truth of
that specific fact on several occasions before the Federal Circuit
made its own finding on the issue. By making this factual
determination, the Federal Circuit in the fullest sense deprived
Manildra of its constitutional right to a jury trial.
15
A. The Legal Standard for Establishing Facts on Appeal.
The Federal Circuit’s fact-finding departed significantly from the
precedent established by this Court. The “substantial evidence”
standard for review of a jury’s fact-finding is very strict:
Courts are not free to reweigh the evidence and set aside
the jury verdict merely because the jury could have drawn
different inferences or conclusions or because judges feel
that other results are more reasonable.
xx *
It is not the function of a court to search the record for
conflicting circumstantial evidence in order to take the case
away from the jury that the proof gives equal support to
inconsistent and uncertain inferences. The focal point of
judicial review is the reasonableness of the particular
inference or conclusion drawn by the jury. It is the jury,
not the court, which is the fact-finding body. It weighs the
contradictory evidence and inferences, judges the credibility
of the witnesses, receives expert instructions, and draws the
ultimate conclusion as to the facts. The very essence of its
function is to select from among conflicting inferences and
conclusions that which it considers most reasonable....That
conclusion, whether it relates to negligence, causation or
any other factual matter, cannot be ignored.
Gallick v. B&O, 372 U.S. 108, 114, 115 (1963). See also, Rogers
v. MoPac, 352 U.S. 500 (1956); Schulz v. Penn. R., 350 U.S. 523
(1956); Lavender v. Kurn, 327 U.S. 645 (1946); Tennant v. Peoria,
321 U.S. 29 (1944).
16
There Was Substantial Evidence to Support a Finding
By a Reasonable Jury that Ogilvie Told Customers that
Manildra Was Infringing
Direct evidence that Ogilvie told customers that Manildra was
infringing was contained in Ex. 715, as the Federal Circuit
acknowledged:
{A]fter examining the entire record on appeal, we have
discovered only one document, referred to as [Ex.] 715, out
of several thousand trial exhibits, that provides some
evidence that Ogilvie without qualification stated that
Manildra was infringing its patents. [Opinion, p. 17a].
In that trial exhibit, a purchasing agent for one of the three
major users of the product, large particle wheat starch, stated,
"Ogilvie has stated that their company holds all patent rights on use
of starch in carbonless paper and Manildra infringes on this patent."
That statement was perfectly consistent with the admission made
at trial by Ogilvie’s vice president and general manager:
Q.
Q.
A.
You or your sales staff also have from time to time either
in response to a question or On your own initiative told
them that -- told certain customers that you thought
Manildra was infringing those patents?
If they asked the question and would bring up the subject of
Manildra, we would try and answer those questions as
honestly as we knew how.
All right. And on those occasions, you did tell them that
Manildra -- you thought Manildra was infringing the patent?
I-- I may have. [Tr. 8040-1, p. 86a.]
It must be assumed that the jury found that testimony credible.
Taylor v. Mississippi, 319 U.S. 583, 585-86 (1943). In addition to
this direct evidence that Ogilvie told the trade that Manildra was
infringing, the was extensive evidence from which a reasonable
17
juror could properly infer that fact. The following sections describe
some of that evidence:
1. Statements to Purchaser Moore Paper Co.
In March 1985, less than two months after Ogilvie purchased the
patents from the previous owner, its director of sales, Calott, met
with its customer, Moore Business Forms. He told them he knew
Moore was using limited quantities of Manildra’s product.
Calott said that Manildra had no license, but it would not be
"cost effective” to bring an infringement suit. Tr. 3714-18, pp.
61a-64a. Seven days later, Calott wrote Moore that Ogilvie had
acquired “all the patents in this area,” and a third company,
Midwest, was its only licensee. Ex. 684, p. 88a. The jury reason-
ably interpreted that evidence to mean that Ogilvie told Moore that
Manildra was an infringer but that suit would not be brought unless
Moore increased Manildra’s small share and thereby made suit "cost
effective.”
In late January 1986, Calott reminded Moore that Midwest was
the only licensee under the patents. Ex. 697, p. 89a. Two weeks
later, Moore notified him that Manildra had lowered its price, and
Calott responded that Manildra was not "a legitimate competitive
situation.” Id. Calott testified he meant that Ogilvie’s having "a
patent license makes us more legitimate." Tr. 2168, p. 59a. On
hearing that news, Moore’s purchasing agent immediately faxed
Calott’s earlier (March, 1985) letter regarding the patents to Moo-
re’s legal department. Ex. 684, p. 88a. Moore decided at that time
to restrict purchases from Manildra. Tr. 3722, p. 64a. The jury
could reasonably take that evidence as showing that Ogilvie had
successfully curbed Moore’s purchases from Manildra by raising the
possibility of litigation if suit became "cost effective."
ee
18
In August 1986, Calott met with Moore’s buyer, Keller, who
again reminded him of Manildra’s much lower price. Calott made
no defense of Ogilvie’s price on commercial terms, but launched
immediately into Ogilvie’s “litany.” Ex. 713, p. 9la. Keller’s
response (as recorded by Calott himself) leaves no doubt that the
“litany” referred to Ogilvie’s patent infringement claim: "Manildra
has given them a hold harmless letter regarding any possible
violations of patents." Id. Calott testified:
Q. Can you tell us what your litany on your position in the
LGS field consisted of?
A. Well, we, of course, purchased the business and the patents
and so forth from Staley [sic]. * * * That cost us money.
We have to get our money back. Therefore, we maintain
our price because we feel that we have an investment in the
business. Consequently, its as simple as that, that’s why
were [sic] a leader.
Q. Related to the patents?
A. Related to purchasing the patents. And we try to maintain
our leadership by salesmanship and service. [Tr. 2173-4,
p. 59a-60a. |
Then, only three weeks later, Keller wrote his memo, Ex.715 (p.
94a), advising his superior that Ogilvie was claiming infringement
and, to avoid the risk of litigation, Moore was going to limit its
purchases from Manildra severely. It required no leap of faith,
indeed it was entirely reasonable, for the jury and the district court
to conclude that the “litany” was exactly as Keller described:
Ogilvie’s renewed charges of infringement.
The jury also heard evidence from the field: Only a month after
the “litany” meeting, the purchasing agents at Moore’s Fremont
plant told Manildra that they had to take on Ogilvie “because of the
so-called patent position involved." Ex. 714, p. 93a. Despite the
efforts of the Fremont plant to take advantage of Manildra’s lower
SD ALE anabe Cb bet wil
Yates.
19
price (Ex. 747, p. 96a), they were restricted due to the “legal
ramifications." Ex. 752, p. 97a. Manildra continued to be shut out
of the new business, even though Ogilvie’s price was higher and
Moore found serious quality problems with its product. Ex. 775,
p. 98a.
This evidence showed that Ogilvie habitually raised the patent
issues with Moore (March 1985, January, February and August
1986), that those discussions included the possibility of infringement
litigation, and that Moore responded by restricting Manildra’s sales
despite its lower price and higher quality. Against that background,
Ex. 715 represented far more than a scintilla of evidence.'*
Seldom in any trial will an accused wrongdoer directly and
unqualifiedly admit the alleged wrong.'* That is what the jurors
'* Appleton and Mead were the other principal buyers of the product.
Appleton never made any commercial purchases from Manildra because the general
manager of Henkel (the company from whom Ogilvie purchased the patents and the
business of selling the accused product in 1985) had threatened Appleton with an
infringement suit and had accused Manildra of infringement in the early 1980s.
When Ogilvie bought the business, it hired the same individual as its own general
manager. Thereafter, Appleton told Manildra that “nothing had changed” and the
reasons for Appleton’s original decision still applied.
Unlike Appleton, Mead did buy some product from Manildra. Mead was
subjected to the same “litany” before Ogilvie bought the business in 1985. The
Henkel sales call reports make clear that the litany, when first delivered to Mead
by senior officials of Henkel in 1983, included a threat that “an infringing
manufacturer’s customer” could be drawn into suit. After Ogilvie purchased the
business, it retained those very officials, who continued to call upon Mead,
reminding them that “the patents had not run out.”
" Ogilvie’s general manager virtually did in this case by admitting that he
“may” have told customers Manildra was an infringer. Certainly, a reasonable
juror can take “may” to mean “did” when he hears it from the mouth of the general
manager of a defendant from whom the plaintiff is seeking several million dollars.
20
are for -- to draw reasonable inferences from the available evidence.
In this case, however, the Federal Circuit improperly assigned itself
that task and drew the opposite inference from the evidence.
2. The Hancock Evidence
The jury was also entitled to consider and rely on the opinions
ot Manildra’s expert economist, John Hancock. Hancock testified
unequivocally that, from an economic point of view, the sole
explanation for the fact that Manildra could capture only a small
share of the market was Ogilvie’s charges of infringement and the
implicit threat to customers of involvement in expensive litigation.
Tr. 4436-38, 4476-85, 4490-93, 4501-2, 4513-14, 4516-22, pp.
65a-84a.
C. Given Ogilvie’s Admission, the Federal Circuit Should
Not Have Examined the Sufficiency of Evidence on this
Issue.
Throughout the proceedings, Ogilvie never denied that it had
told customers that Manildra was an infringer; it rested its entire
defense on its contention that it had acted in good faith. For
example, in its oral motion for a directed verdict, Ogilvie’s counsel
Stated:
[I]n the absence of bad faith, the patent holder has the
unconditional right to assert or threaten litigation.
Therefore, in this case the question is not whether Ogilvie
asserted or even threatened to enforce its patent rights, the
Furthermore, only the jury, not the Federal Circuit, could begin to evaluate his
demeanor and responses when he testified.
21
question is whether it acted in good faith.... [Tr. 7267, p.
84a, emphasis added. ]
He then pointed to testimony that Ogilvie told customers that it
"stood ready to enforce its rights;" it had “valid patents and would
protect them as we see fit," those patents covered "use and process"
on large granule wheat starch and Manildra was not licensed.
Those and other comments vividly catalogued Ogilvie’s policy of
aggressively asserting its patent rights. Tr. 7267-69, pp. 84a-85a.
Nowhere in that motion did Ogilvie suggest that there was
insufficient evidence that it had told the trade that Manildra was an
infringer.
After the jury’s verdict, Ogilvie moved for Judgment as a Matter
of Law, asserting its good faith but admitting that it told customers
that Manildra was infringing its patents:
As discussed elsewhere in this memorandum, the only
possible conclusion that could be drawn from the evidence
was that the Ogilvie salesmen had a good faith belief that
the patents were valid and infringed by Manildra and so
Stated to customers. (Memorandum, p. 47, p. 102a,
emphasis added.]
The trial judge denied Ogilvie’s motion and its motion for a new
trial, noting that substantial evidence supported the jury’s verdicts
under the Lanham Act and Kansas unfair competition law, including
the jury’s findings that Ogilvie acted in bad faith and with malice.
Even on appeal, Ogilvie continued to argue that it had acted in
good faith, and it never denied that it had told customers that
Manildra was infringing:
Here, Manildra claims that Ogilvie misrepresented that the
Patents were valid and infringed. Yet, Ogilvie had a right
to say just that. There was no adjudication to the contrary.
The law presumes such statements are made in good faith.
[Brief, p. 53, p. 104a-105a.]
22
The state tort claims should not have gone to the jury
because Manildra did not show by clear and convincing
evidence that Ogilvie acted in bad faith in stating its belief
in the Patents’ validity and in Manildra’s infringement.
[Reply Brief, p. 29, p. 107a.]
The Federal Circuit itself has held that:
the printed record on appeal more often than not will not
reflect all the persuasive issues that may have determined
the course of events at trial, even when that record is
reviewed in its entirety by the appellate court.
Biodex Corp. v. Loredan Biomedical, Inc., 946 F.2d 850, 860,
(Fed. Cir. 1991). For that reason, the Federal Circuit has adopted
a rule precluding review of the sufficiency of evidence "absent some
post-verdict disposition” by the trial judge. Id. at 946 F.2d 862.
The rule should have applied here, where Ogilvie failed to raise
the evidentiary issue in its post-verdict motions. See Walters v.
City of Atlanta, 803 F.2d 1135, 1146 (11th Cir. 1986) ("To
preserve such a [lack of sufficient evidence] claim for appeal, a
party must squarely present it to the trial court...."). The court’s
examination of the sufficiency of evidence in this case, where the
appellant in its post-verdict motion admitted the existence of the
requisite evidence, was directly contrary to the Federal Circuit's
own Biodex rule and the teaching of Cone v. West Va. Pulp & P.
Co., 330 U.S. 212, 216 (1947):
Determination of whether a new trial should be granted or
a judgment entered under Rule 50(b) calls for the judgment
in the first instance of the judge who saw and heard the
witnesses and has the feel of the case which no appellate
printed transcript can impart.
Ogilvie’s admissions about what it told the customers concerning
infringement is the best possible evidence that the jury’s finding of
fact was reasonable. Certainly if, as the Federal Circuit concluded,
ae RR IO ii
PAI Dra BO ha aS
23
there was only a "mere scintilla” of evidence to support the jury’s
finding, Ogilvie’s lawyers would not have conceded the point both
during the trial and in their post-trial papers. In short, there can be
no doubt that there was substantial evidence to support a finding by
a reasonable juror that Ogilvie warned the trade that Manildra was
infringing its patents.
IV. Conclusion
The Federal Circuit has demonstrated that, absent corrective
action by this Court, it will consider itself free to conduct expansive
fact-finding on appeal. It is willing to extend this practice far
beyond any arguable scope of its patent expertise, even to naked
questions of fact totally unrelated to patent issues. To preserve the
Seventh Amendment rights of litigants whose cases come before the
Federal Circuit, this Court should act again to give supervision and
direction to that court. As in Panduit, summary procedure would
permit this Court to preserve the established rights to trial by jury
without requiring briefs and oral argument.
Respectfully submitted,
Murray J. Belman
700 14th Street, N.W.
Washington, D.C. 20005
(202) 508-1000
Of Counsel: Counsel of Record
W. Stanley Walch
Mark §. Sableman
Roman P. Wuller
Halpin J. Burke
APPENDIX
a eee
Before RICH, MICHEL and CLEVENGER, Circuit Judges.
la
NOTE: Pursuant to Fed. Cir. R. 47.8, this disposition is
not citable as precedent. It is a public record. The
disposition will appear in tables published periodically.
UNITED STATES COURT OF APPEALS FOR THE
FEDERAL CIRCUIT
92-1462,-1480
MANILDRA MILLING CORPORATION,
Plaintiff/Cross-Appellant,
v.
OGILVIE MILLS, INC.,
Defendant-Appellant,
v.
HENKEL CORPORATION and
HENKEL OF AMERICA, INC.,
Third-Party Defendants,
and
JOHN THOMAS HONAN,
Counterclaim Defendant.
DECIDED: June 22, 1993
2a
CLEVENGER, Circuit Judge.
Ogilvie Mills, Inc. (Ogilvie) appeals from the June 15, 1992
judgment of the United States District Court for the District of
Kansas,' entered on the basis of a jury verdict, holding, inter alia,
claims 1-3, 8-10, 16-19 and 24-27 of U.S. Patent No. 3,901,725
and claims 1, 6-10 and 12-14 of U.S. Patent No. 4,280,718 invalid
and not infringed by Manildra Milling Corporation (Manildra), and
Ogilvie liable under section 43(a) of the Lanham Act and the Kansas
state law causes of action for tortious interference with prospective
economic advantage and injurious falsehood. We affirm-in-part,
reverse-in- Vv -in-
U.S. Patent No. 4,280,718 (°718 patent), entitled "Pressure
Sensitive Recording Sheet Containing Size Classified Cereal Starch
Granules," issued on July 28, 1981 to Johnson et al., who assigned
their rights to Henkel Corporation (Henkel). It is directed to the
use of fractionated large granule wheat starch (LGWS) as a stilting
material in carbonless copy paper (CCP)’ to prevent premature
' Manildra Milling Corp. v, Ogilvie Mills, Inc., No. 86-2457-S
(D. Kan. Feb. 27, 1992) (Judgment); (June 15, 1992) (amended
Judgment); 797 F. Supp. 874 (D. Kan. 1992) (memorandum and
order disposing of various post-trial motions); (June 16, 1992)
(order).
oy
~
CCP functions by forming an image on the lower sheet of
CCP when pressure on the upper sheet breaks easily rupturable dye
microcapsules on the backside of the upper sheet, causing the dye
to contact and darken a chemical on the upper surface of the lower
8 ee ee UE
3a
rupture of fragile dye microcapsules through casual contact with the
layered paper.
U.S. Patent No. 3,901,725 (’725 patent), entitled "Size
Classified Cereal Starch Granules," issued on August 26, 1975 to
Bond et al., who assigned their rights to A. E. Staley Manufacturing
Company (Staley). Henkel purchased Staley’s rights in the °725
patent in November 1978. It is directed both to the process for
producing LGWS from a _ clean starch feed through
hydroclassification,’ and to the LGWS itself.
Both patents at issue in this case originate from, and trace
their prosecution histories to, the same parent patent application,
No. 180,588, filed by Staley in September 1971, and are each the
result of a restriction requirement made in the original application
by the Patent Office. Ogilvie, a subsidiary of Ogilvie Mills, Ltd.
and a legal entity unaffiliated with Henkel, was incorporated in
January 1985 and immediately acquired all rights in both the 718
and ’725 patents through an arms-length transaction with Henkel.
In October 1986, Manildra filed a declaratory judgment
action seeking a declaration that Ogilvie’s patents were invalid and
not infringed. Manildra also asserted a claim for damages against
both Ogilvie and Henkel,‘ respectively the present and prior owners
sheet.
> Simply stated, the patented process comprises, inter alia, the
steps of feeding a clean starch slurry to a first hydrocyclone; feeding
the resulting bottoms stream of partially classified LGWS to a
second hydrocyclone; and producing LGWS meeting certain
specifications as a bottoms stream from the second hydrocyclone.
* Manildra settled with Henkel in January 1991, before the trial
phase of the suit commenced.
4a
of the patents, for violation of the federal antitrust laws, unfair
competition under section 43(a) of the Lanham Act, and both
tortious interference with prospective economic advantage and
injurious falsehood under Kansas law. Ogilvie counterclaimed for
willful infringement against both Manildra and its owner, Honan.
After a lengthy trial,° the jury found by special verdict,
inter alia, that (i) the patent claims in suit were invalid; (ii) the
patent claims were not infringed, either literally or under the
doctrine of equivalents; (iii) Ogilvie had not violated the federal
antitrust laws; and (iv) Ogilvie had not misused its patents; but
(v) Ogilvie was liable to Manildra (1) under section 43(a) of the
Lanham Act; and (2) for both tortious interference with prospective
economic advantage and injurious falsehood. In accordance with its
verdict, the jury awarded Manildra $2,250,000 in actual damages
and $2,500,000 in punitive damages.
The court subsequently denied Ogilvie’s post-trial motions
for judgment as a matter of law (JMOL) on all adversely-decided
issues, for a new trial on those same issues, and for remittitur of the
damages. The court also denied Ogilvie’s request for a ruling on its
motion to correct inventorship under 35 U.S.C. § 256 (1988) and
Manildra’s motions, inter alia, for a new trial on the antitrust claim
and enhanced damages. The court, however, granted Manildra’s
motion for reasonable attorney fees, having found that the case was
“exceptional” under either 35 U.S.C. § 285 (1988) or 15 U.S.C.
§ 1117(a) (1988). Ogilvie appeals from the district court’s denials
* The first trial to a jury resulted in a mistrial. The second jury
trial resulted in the present appeal.
Sa
of its post-trial motions and Manildra cross-appeals from the denial
of its motion for a new trial on its antitrust claim.°
II
In order to overturn a judgment entered on the basis of a
jury verdict, the party against whom the judgment was rendered
must demonstrate either that "the jury’s findings [on disputed
material factual issues], presumed or express, are not supported by
substantial evidence, . . . [or] if they [are so supported], that the
legal conclusion(s) implied from the jury’s verdict cannot in law be
supported by those findings." Read Corp. v. Portec, Inc., 970 F.2d
816, 821, 23 USPQ2d 1426, 1431 (Fed. Cir. 1992); Verdegaal
Bros., Inc. v, Union Oil Co,, 814 F.2d 628, 631, 2 USPQ2d 1051,
1052 (Fed. Cir.), cert. denied, 484 U.S. 827 (1987). Rather than
directly reviewing the jury’s verdict, we instead review the trial
court’s denial of a renewed motion for JMOL under Rule 50(b) of
the Federal Rules of Civil Procedure, and must decide
for ourselves whether reasonable jurors viewing the
evidence as a whole could have found the facts
needed to support the verdict in light of the
applicable law. If we conclude that no reasonable
findings of fact, supported by substantial evidence,
could support the verdict that was incorporated into
the trial court’s judgment, then we must conclude
that the trial court erred in not granting the motion
for [JMOL].
* Manildra’s motion to strike certain portions of Ogilvie’s reply
brief on appeal is denied.
6a
Lemelson v, General Mills Inc,, 968 F.2d 1202, 1207, 23 USPQ2d
1284, 1288 (Fed. Cir. 1992), cert. denied, 113 S. Ct. 976 (1993).
Substantial evidence is such relevant evidence, considering the
record as a whole, on which a reasonable jury might base the
verdict under review. Perkin-Elmer Corp. v. Computervision
Corp., 732 F.2d 888, 893, 221 USPQ 669, 673 (Fed. Cir.), cert.
denied, 469 U.S. 857 (1984). Substantial evidence, however,
constitutes more than a “mere scintilla." Biodex Corp., v. Loredan
Biomedical, Inc., 946 F.2d 850, 859, 20 USPQ2d 1252, 1259 (Fed.
Cir. 1991)(quoting Consolidated Edison Co, v. National Labor
Relations Bd., 305 U.S. 197, 229 (1938)), cert. denied, 112 S. Ct.
2957 (1992).
After full review of the record, we conclude that the district
court erred in failing to grant Ogilvie’s renewed notion for JMOL
on the Lanham Act and state law tort claims, but that we cannot
disturb the judgment on invalidity and noninfringement.
Il
Ogilvie makes several arguments on appeal regarding the
jury’s findings of invalidity of both patents. Ogilvie argues that
claims 24-27 of the °725 patent were not anticipated under 35
U.S.C. § 102 (1988) because the pertinent prior art reference, a
paper published by Yamazaki, (i) lacked utility and did not
demonstrate a reduction to practice of the disclosed subject matter;
(ii) related to subject matter other than that defined in claims 24-27;
and (iii) was not enabling to one of ordinary skill in the art.
Ogilvie also argues that Manildra failed to demonstrate that
all claims at issue would have been obvious under 35 U.S.C. § 103
(1988) in light of the prior art proffered at trial. Ogilvie’s various
arguments include (i) the classified wheat sample produced at trial
and testimony on prior efforts to classify wheat starch do not
7a
constitute prior art for use in the obviousness analysis;
(ii) Yamazaki’s paper did not provide sufficient information for a
person of ordinary skill in the art to discern a solution to the
problem of classifying LGWS; (iii) in light of the testimony on the
degree of skill corresponding to “ordinary skill in the art," (a) U.S.
Patent No. 2,642,185 (Fontein)’ would not have rendered the ’718
and 725 patents’ claims obvious because it does not disclose every
limitation present in the claims and does not disclose an apparatus
capable of producing LGWS satisfying the claims’ range criteria;
and (b) British Patent No. 1,252,858 (NCR)* would not have
rendered the °718 claims obvious because, inter alia, the
specification allegedly discourages any modification of natural starch
for use in CCP.
Ogilvie also argues that 35 U.S.C. § 112 (1988) cannot
provide a basis for sustaining the jury’s verdict. Finally, Ogilvie
argues that it is entitled to a new trial on validity of both patents
because the trial court erroneously permitted Yamazaki’s testimony
on subject matter not explicitly contained within his written
document.
In reviewing a jury’s verdict concerning patent validity, we
presume the jury made the proper findings to support its verdict.
Shatterproof Glass Corp. v. Libbey-Owens Ford Co., 758 F.2d 613,
619, 225 USPQ 634, 637 (Fed. Cir.), cert. dismissed, 474 U.S. 976
” Fontein discloses a method for refining and isolating starch
granules below 7 microns in diameter. Two hydrocyclones are
operated in series, with the overhead fine particle stream from the
first hydrocyclone used as a feed stream for the second.
* NCR discloses use of large granule starch as a stilting material
in CCP, and discusses various sources of starch for such use,
including arrowroot and wheat.
8a
(1985). The record before us and Ogilvie’s arguments provide us
with an insufficient basis on which to upset the jury’s verdict on
invalidity of all the claims in issue. Accordingly, the district court
did not err in refusing to grant Ogilvie’s renewed motion for JMOL
on validity of the claims in issue. We also conclude that the district
court did not abuse its discretion in refusing to grant a new trial on
the issue of validity of the patent claims in issue. See Railroad
Dynamics, Inc. v. A. Stucki Co,, 727 F.2d 1506, 1512, 220 USPQ
929, 936 (Fed. Cir.)(reviewed district court’s denial of motion for
new trial for abuse of discretion), cert. denied, 469 U.S. 871
(1984).
IV
Determining whether a patent is infringed in a particular
case requires a two-part analysis. First, the claims must be
interpreted without regard to the accused manufacture or process in
light of the specification, the prosecution history, the patent’s other
claims and, if necessary, extrinsic evidence such as expert
testimony. Hormone Research Found., Inc, v. Genentech Inc., 904
F.2d 1558, 1562, 15 USPQ2d 1039, 1043 (Fed. Cir. 1990), cert.
dismissed, 111 S. Ct. 1434 (1991). Claim interpretation is a
question of law that this court reviews de novo. Key Mfg. Group,
Inc, v. Microdot, Inc., 925 F.2d 1444, 1448, 17 USPQ2d 1806,
1809 (Fed. Cir. 1991). Second, the fact-finder must determine
whether each properly interpreted claim “reads on" the accused
Structure or process to determine whether the accused matter
incorporates each claim limitation, either literally or by its
equivalent. Minnesota Mining & Mfg. Co. v. Johnson & Johnson
Orthopaedics, Inc., 976 F.2d 1559, 1570, 24 USPQ2d 1321, 1330
(Fed. Cir. 1992). Such infringement determinations are questions
of fact. SRI Int’l v. Matsushita Elec, Corp. of Am., 775 F.2d 1107,
9a
1125, 227 USPQ 577, 589 (Fed. Cir. 1985)(in banc). Finally, it is
not our function as an appellate court to substitute our judgment for
that of the jury and determine for ourselves whether we would have
concluded that the product infringes the claims, but rather whether
there is sufficient evidence to support a jury verdict on the issue.
Dana Corp, v. IPC Ltd. Partnership, 860 P.2d 415, 417, 8 USPQ2d
1692, 1694 (Fed. Cir. 1988), cert. denied, 490 U.S. 1067 (1989);
Perkin-Elmer, 732 F.2d at 893, 221 USPQ at 673.
A
Regarding interpretation of the claims in issue, Ogilvie
argues that the claim language "about 22% of the total number of
granules . . . being at least 22 microns” should be read to
encompass a product with 22% by number of granules having a
diameter of at least 17 microns. Likewise, Ogilvie argues that the
language “about 99% by weight of the granules are at least 12
microns in size" should be read to embrace LGWS with at least
95% by weight of granules having a diameter of at least 12 microns.
Ogilvie supports its arguments by reasoning that because the
standard size of the dye microcapsules to be protected by the stilting
material has decreased in the CCP industry, as has the
corresponding requisite size of the stilting material particles, the
claim limitations setting forth the requisite size limitations should be
adjusted accordingly. We find these arguments unpersuasive.
The claims of a patent delineate the metes and bounds of the
patentee’s right to exclude others from making, using or selling.
Palumbo v. Don-Joy-Co., 762 F.2d 969, 974, 226 USPQ 5, 8 (Fed.
Cir. 1985); 35 U.S.C. § 154 (1988). A familiar canon of claim
construction is that while a patentee may be his own lexicographer,
a word will be given its ordinary and accustomed meaning unless it
appears that the inventor used it differently. ZMT Corp. v, Cardiac
TW
10a
Resuscitator Corp., 844 F.2d 1576, 1580, 6 USPQ2d 1557, 1560
(Fed. Cir. 1988). In this case, Ogilvie’s patents do not claim a
particle size that would require interpretation, such as "a granule of
a size substantially larger than the size of the dye microcapsule to
be protected.” Instead, they specifically and unambiguously
delineate numerical ranges of granule size and quanta. We thus
interpret the claims exactly as they are written.
B
In order to infringe a patent claim literally, each and every
limitation in the claim must actually be present in the accused
structure or process. Hi-Life Prods,, Inc, v, American Nat'l Water-
Mattress Corp., 842 F.2d 323, 325, 6 USPQ2d 1132, 1133 (Fed.
Cir. 1988). Failure to ..eet a single limitation is sufficient to negate
an allegation of infringement of the claim. Laitram Corp. v.
Rexnord, Inc,, 939 F.2d 1533, 1535, 19 USPQ2d 1367, 1369 (Fed.
Cir. 1991).
Ogilvie argues repeatedly that the evidence presented at trial
demonstrates that Manildra’s M-80 product has 97% by weight of
particles greater than 12 microns in size and 22% by number greater
than 20 microns in size, and therefore M-80 infringes the "718 and
725 patents. Ogilvie’s literal infringement argument depends on its
construction and interpretation of the claims in issue. Our rejection
of Ogilvie’s interpretations necessarily requires us to conclude that
the claims as properly interpreted are not literally infringed.
Moreover, although M-80 data were presented at trial that would
have supported a finding of infringement of the claims’ granule size
and quanta limitations, there was also more than substantial evidence
for the jury to have concluded otherwise, as it did.
lla
Ogilvie also argues that Manildra’s process’ literally
infringes claims 16-19 of the ’725 patent because essentially all of
the classification of the wheat starch occurring in Manildra’s process
occurs in the two hydrocyclones before the air classifier, and
therefore the air classifier is simply superfluous and a bald
subterfuge for avoiding infringement. Although there is evidence
to the contrary, the evidence supporting the jury’s verdict on this
issue is substantial and therefore legally sufficient to prevent our
disturbing the jury’s findings of fact on this issue.
C
Ogilvie argues that even if the evidence does not
demonstrate literal infringement, it "is absolutely evident" that
Manildra’s product infringes under the doctrine of equivalents
because “the Manildra stilt is so nearly identical to the Patents’
[numerical] limitations.” Thus, according to Ogilvie, the district
court erred in failing to grant its renewed motion for JMOL. While
this argument is facially appealing since the evidence before the jury
demonstrated that Manildra’s product came close to satisfying the
claims’ numerical limitations, Ogilvie is precluded as a matter of
law from prevailing on its contention.
Prosecution history estoppel is a policy-oriented limitation
on the range of equivalents available to the patentee. Loctite Corp.
vy. Ultraseal, Ltd., 781 F.2d 861, 870, 228 USPQ 90, 96 (Fed. Cir.
1985). Prosecution history estoppel will not allow the patentee to
extend the range of equivalents accorded the subject matter to that
® Manildra’s process for producing LGWS incorporates use of
two hydrocyclones to “wash” the wheat starch feed and an air
classifier which receives the washed starch stream, after drying, as
feed and produces the LGWS product.
12a
relinquished during patent prosecution, Id,, 228 USPQ at 96. The
range of equivalents available to the patentee is a question of law
which we review de novo. Id,, 228 USPQ at 96.
During prosecution of both the °718 and '725 patents, the
applicants, inter alia, specifically represented to the Patent Office
that size limitations were "critical to [the] utility" and therefore the
patentability of the claimed subject matter. For example, during
prosecution of the application that ultimately spawned the '718
patent, the applicants stated:
Applicants urge [the] critical limit[{ation] of [greater
than] 22% of [greater than or equal to] 22 microns
in size.
*~* *
[T]he particle size range of the starch fraction used
on the surface coated with rupturable micro-
capsules is of critical importance to prevent
premature rupturing of the micro-capsules during
handling.
Ogilvie argues that because these limitations were not added to the
claims as part of an amendment in response to a rejection, it cannot
be prevented from expanding its right to exclude to encompass
Manildra’s product. It has long been held, however, that an
estoppel is created merely by arguments submitted to obtain the
patent, as well as traditionally by an applicant’s conduct reactive to
an examiner’s rejection. E.g,, Hughes Aircraft Co. v. United States,
717 F.2d 1351, 1362, 219 USPQ 473, 481 (Fed. Cir. 1983).
Having stressed the criticality of the substantive size and
quanta limitations of the LGWS, Ogilvie cannot now escape the
accompanying strictures on its right to exclude under 35 U.S.C.
§§ 154, 271 (1988). Our review of the record and arguments
presented on appeal convinces us that the jury verdict of non-
infringement under the doctrine of equivalents cannot be disturbed.
13a
Ogilvie likewise argues that Manildra’s process infringes its
patent under the doctrine of equivalents. After reviewing the
record, however, we are convinced that there was substantial
evidence before the jury to support a conclusion that the air
classifier in fact plays an integral and important role in Manildra’s
production of LGWS, and therefore the jury's implicit finding that
the accused process does not infringe under the doctrine of
equivalents because the process achieves production of LGWS in a
substantially different way.
D
In conclusion, and on the record before us, we are unable
to find any basis on which to disturb the jury’s verdict on
infringement of the claims in issue of the '718 and ’725 patents. As
the district court stated in correctly denying Ogilvie’s renewed
motion for JMOL on infringement:
[T)he court finds that much evidence was presented
on this issue both supporting a finding of
infringement and supporting a conclusion of non-
infringement. The jury chose to believe the
evidence supporting non-infringement. This court
cannot say as a matter of law, considering all
inferences in the favor of the nonmoving party, that
Ogilvie was entitled to a judgment on the issue of
infringement.
Manildra Milling Corp, v, Ogilvie Mills, Inc,, 797 F. Supp. 874,
886 (D. Kan. 1992).
Since we conclude that we cannot upset the jury’s verdict of
noninfringement, we need not reach the issues of Manildra’s alleged
inducement to infringe or its alleged willful infringement, since both
allegations rely on a predicate finding of actual infringement,
l4a
whether literal or by equivalents. See Water Technologies Corp. v.
Calco, Ltd., 850 F.2d 660, 668 n.7, 7 USPQ2d 1097, 1103 n.7
(Fed. Cir.), cert. denied, 488 U.S. 968 (1988).
Finally, Ogilvie also appeals the trial court’s denial of its
motion for a new trial on infringement. Ogilvie makes a variety of
evidentiary arguments in an attempt to demonstrate that the court
abused its discretion in denying the motion. Those arguments only
demonstrate that, with regard to infringement, there is some
evidence to support Ogilvie’s contention. Ogilvie, however, has
failed to demonstrate that the district court abused its discretion in
refusing to grant a new trial on infringement of the patent claims in
issue.
Vv
There are three separate causes of action at issue under
which Ogilvie was found liable: section 43(a) of the Lanham Act"®
' Section 43(a) of the Lanham Act reads:
Any person who, on or in connection with any goods . . ., uses in
commerce any . . . false or misleading description of fact, or false
or misleading representation of fact, which-
xx *
(2) in commercial advertising
Or promotion, misrepresents the
nature, characteristics, qualities, or
geographic origin of . . . another
person’s goods, services, or
commercial activities,
shall be liable in a civil action by any person who
believes that he or she is or is likely to be damaged
by such act.
15a
and the Kansas law causes of action for tortious interference with
prospective economic advantage"’ and injurious falsehood.’? This
15 U.S.C. § 1125(a)(1988)(emphasis added).
'' Tortious interference with prospective economic advantage
under Kansas law consists of the following elements: (i) existence
of a business relationship or an expectancy with a probability of
future economic benefit to the plaintiff; (ii) defendant’s knowledge
of the relationship or expectancy; (iii) that, except for the
defendant’s conduct, the plaintiff was reasonably certain to have
continued the relationship or to have realized the expectancy;
(iv) intentional misconduct by the defendant; and (v) damages
suffered by the plaintiff as a direct or proximate cause of the
defendant’s misconduct. Reazin v. Blue Cross & Blue Shield, Inc.,
899 F.2d 951, 977 (10th Cir.)(emphasis added), cert, denied, 497
U.S. 1005 (1990).
'? Under Kansas law,
[o]ne who publishes a false statement harmful to the
interests of another is subject to liability for
pecuniary loss resulting to the other if
(a) he intends for publication of the
statement to result in harm to interests of the other
having a pecuniary value, or either recognizes or
should recognize that it is likely to do so, and
(b) he knows that the statement is false
or acts in reckless disregard of its truth or falsity.
Bacchus Indus., Inc, v. Arvin Indus., Inc,, 939 F.2d 887, 892-93
(10th Cir. 1991)(citing Restatement (Second) of Torts § 623A
(1979)(emphasis added)).
16a
court has jurisdiction to review both the Lanham Ac and state law
issues. See 28 U.S.C. §§ 1295(a)(1), 1338 (1988). Not having
exclusive jurisdiction over these types of claims, however, we apply
Tenth Circuit law to the Lanham Act claim, see, e.g., Jurgens v.
McKasy, 927 F.2d 1552, 1564, 18 USPQ2d 1031, 1039 (Fed.
Cir.), cert. denied, 112 S. Ct. 281 (1991), and Kansas law to the
State tort actions. Again, the issue before us is whether the record
includes evidence legally sufficient in quantum to support the jury’s
verdicts on each cause of action. For the purpose of reviewing the
jury’s verdicts in this case, we focus on the common thread of each
of the causes of action--namely, that all three require either falsity,
whether literal or simply deceptive or misleading,” or
misconduct’* ("“wrongful” elements).
A basic premise of any cause of action is that the party on
whom the burden of proof initially rests, typically the complainant,
must establish a prima facie case by introducing evidence on each
and every element of the cause of action. 29 Am. Jur. 2d Evidence
§§ 123, 128-129 (1967). Failure to present evidence on even one
necessary element is fatal to the complainant’s case as a matter of
law.
Manildra argues in this overly adversarial portion of the
appeal that Ogilvie’s patent “litany” constituted a series of
misrepresentations to their mutual customers that Manildra was
'® See Charles E. McKenney & George F. Long, III, Federal
Unfair Competition; Lanham Act § 43(a) § 6.03[2], at 6-14 to -15
(1991).
‘Whether certain conduct is “misconduct” is determined by
considering the factors listed in Restatement (Second) of Torts § 767
(1979). Reazin, 899 F.2d at 977 n.37; see also Turner v.
Halliburton Co,, 722 P.2d 1106, 1116-17 (Kan. 1986);
17a
infringing the patents in suit and therefore the customers acted at
their own risk in purchasing the infringing product. According to
Manildra, this “litany” satisfies the “wrongful” elements and
therefore provides a sufficient basis on which to find Ogilvie liable.
Manildra’s argument is premised on the alleged statements being
false as a matter of fact because the jury found Manildra not to be
infringing either patent:
There was abundant evidence in the record that
Ogilvie intentionally, knowingly and in bad faith
made false claims that Manildra infringed the
patents, and that those statements induced [the
LGWS purchasers] to limit their purchases from
Manildra.
At oral argument, Manildra also emphasized Ogilvie’s
alleged representations to its customers that its patents dominated the
field of LGWS and thus any use of LGWS from an entity other than
Ogilvie or its licensees would infringe and would embroil the
infringer in litigation. Manildra argues that the reaction of their
customers in refusing to buy from Manildra “simply because of the
legal situation” confirms Manildra’s view of the case.
Contrary to Manildra’s position, however, is our conviction
that the record in this case does not contain evidence sufficient to
establish the critical “wrongful” elements. Moreover, the record
fails to establish both the composition of the “litany” and how the
“litany” renders Ogilvie liable under the state laws and the Lanham
Act. In support of its argument, Manildra lists exhibit after exhibit
which purportedly corroborate its position. Yet after examining the
entire record on appeal, we have discovered only one document,
referred to as P715, out of several thousand trial exhibits, that
provides some evidence that Ogilvie without qualification stated that
Manildra was infringing its patents. Moreover, this single
document is not a direct communication between Ogilvie and one of
18a
its customers, but rather is an internal customer memorandum
between two of the customer’s employees regarding future LGWS
purchases and a future expansion of business, in which context the
memorandum summarizes Ogilvie’s statements. The other exhibits
simply do not support the proposition for which they are cited.
Furthermore, out of over fifteen thousand pages of transcript, no
testimony directly bears on Ogilvie’s falsity/misconduct.'*
This court has also discovered no evidence, and was not
directed to any by the parties, that supports Manildra’s
“domination” argument. As conceded by Manildra, we cannot
consider Henkel’s conduct and statements in this regard. In fact,
'S Manildra concedes that Henkel’s past conduct and statements
regarding Manildra’s infringement should not be taken into account
as direct evidence of the “wrongful” elements in determining the
substantial evidence issue regarding Ogilvie’s liability. Manildra
argues, however, that the evidence of Henkel’s conduct can be used
to infer Ogilvie’s conduct because Ogilvie continued to employ
some of Henkel’s salespersons who had, while in Henkel’s employ,
represented Manildra’s conduct as infringing. The actual evidence,
however, demonstrates that these particular persons, when in
Ogilvie’s employ, were careful not to mislead their customers with
false statements. Since Henkel and Ogilvie are unaffiliated legal
entities, there is no justification for attributing Henkel’s actions to
Ogilvie absent some evidence of an adoption of Henkel’s policies.
Since the record lacks any such evidence, Manildra’s position is
untenable. Moreover, the jury was instructed that Henkel’s
conduct, occurring before Ogilvie’s creation, could not be
considered in determining whether Manildra had carried its burden
of proof in demonstrating all the elements of its state law and
Lanham Act claims. This instruction is not challenged by the
parties on appeal.
19a
once the evidence of Henkel’s conduct is excised from this appeal,
Manildra’s whole case on the Lanham Act and state law tort claims
disintegrates.
At oral argument, Manildra was exhorted to underscore the
evidence on which it based its allegations and on which a reasonable
jury could have based its verdict. Manildra could only respond with
the documents already examined by this court and rely on
“inferences” that “have to [be drawn]" by this court.
Since substantial evidence requires more than a "mere
scintilla” of evidence, Biodex Corp., 946 F.2d at 859, 20 USPQ2d
at 1259, we conclude on this record that a reasonable jury could not
have found Ogilvie liable to Manildra under the Lanham Act and the
state law causes of action because the evidence on the "wrongful"
elements of those claims constitutes at most a "mere scintilla."
Since we conclude that the record fails to establish conduct
On Ogilvie’s part that would qualify for liability under the Lanham
Act, we need not decide whether the Lanham Act should even come
into play in the situation where a patentee is publicizing the
presumed validity of its patents and belief in a competitor’s
infringement thereof. See, e.g., Tubeco, Inc. v. Crippen Pipe
Fabrication Corp., 402 F. Supp. 838, 847, 187 USPQ 746, 752
(E.D.N.Y. 1975)(communications to customers and prospective
licensees regarding patent are "in no sense the false advertising at
which the Lanham Act was aimed."), aff'd, 538 F.2d 314 (2d Cir.
1976)(table); cf. Lang v. Pacific Marine & Supply Co., 703 F.
Supp. 1404, 1411, 10 USPQ2d 1058, 1063 (D. Haw. 1989)(section
43(a) is intended to reach false advertising violations, not false
patent claims), aff'd, 895 F.2d 761, 13 USPQ2d 1820 (Fed. Cir.
1990); compare with Brandt Consol., Inc. v. Agrimar Corp., 801
F. Supp. 164, 174, 24 USPQ2d 1341, 1348-49 (C.D. Ill. 1992)
(citing Chromium Indus., Inc, v. Mirror Polishing & Plating Co.,
448 F. Supp. 544, 555, 199 USPQ 146, 159 (N.D. Ill. 1978)(false
20a
statements that competitor infringes a patent states a section 43(a)
violation)).
Likewise, we also have no reason to address Ogilvie’s
argument that it is shielded from liability as a matter of law because
it is entitled under the federal patent laws to assert both the validity
of its patents and Manildra’s infringement. We thus leave for
another day resolution of any existing tension between, and the
accompanying limitations on, the right of a patentee under the
federal patent laws to announce a competitor’s suspected
infringement of its patents to the marketplace and the states’ laws of
“unfair competition.” See, e.g., Bonito Boats, Inc. v. Thunder Craft
Boats, Inc., 489 U.S. 141, 152 (1989)(an entity cannot be liable
under state law for conduct that is permitted by federal law); Loctite
Corp., 781 F.2d at 877, 228 USPQ at 100-01 (following
Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986, 202 USPQ 342
(9th Cir. 1979), cert. denied, 444 U.S. 1025 (1980))(patentee must
be able to engage in legitimate enforcement efforts to protect its
rights in the face of potential infringement).
At this time, we also need not address the influence of the
First Amendment’s protection of freedom of speech in the
commercial context and the role of a competitor’s qualified privilege
on any existing tension between federal and state laws. See Virginia
f Ph v. Virginia Citi nsumer ncil, Inc.,
425 U.S. 748, 765 (1976)(dissemination and free flow of
commercial information in free enterprise economy is
indispensable).
VI
Because we conclude that the record does not support
Ogilvie’s alleged violation of section 43(a) of the Lanham Act and
therefore reverse the judgment on this ground, we also reverse the
21a
district court’s award of attorney fees based on 15 U.S.C.
§ 1117(a). To the extent that the case was found “exceptional”
under 35 U.S.C. § 285, however, we vacate the determination and
remand for reconsideration of the issue in light of this opinion.
Vil
The district court denied Ogilvie’s motion to correct
inventorship on the °718 and °725 patents, and U.S. Patent No.
3,951,948 (948 patent) not otherwise at issue in this case. Ogilvie
argues that the district court abused its discretion in denying its
motion after finding that the error in failing to name all of the
inventors in each patent resulted from inadvertent oversight without
any deceptive intention, as required by 35 U.S.C. § 256. Manildra
Milling Corp, v. Ogilvie Mills, Inc., 745 F. Supp. 653, 655, 19
USPQ2d 1186, 1187-89 (D. Kan. 1990)(ruling on motion deferred
until after trial); Manildra Milling, 797 F. Supp. at 889-90. As to
the claims-in-issue of the °718 and °725 patents, the district court
denied Ogilvie’s motion as moot since the claims had been held
invalid. Ogilvie has not demonstrated that this action constituted an
abuse of the court’s discretion in this matter. The district court,
however, did not otherwise explicitly address Ogilvie’s motion.
Thus, on remand, Ogilvie will have the opportunity to renew its
motion to correct inventorship under section 256 as to the
remaining, unadjudicated claims of the "718 and ’725 patents as well
as to the 948 patent.
Vill
Manildra cross-appeals the trial court’s denial of its motion
for a new trial on its antitrust claims. Manildra argues that the
court incorrectly instructed the jury on the "double hurdle” nature
22a
of an antitrust claim and on how the evidence of Henkel’s past
conduct could be used. Having reviewed the arguments, we find
that the court did not abuse its discretion in denying a new trial on
this issue.
IX
For the foregoing reasons, the judgment of the United States
District Court for the District of Kansas based on the jury verdict
of invaiidity and noninfringement is affirmed; the judgment on the
Lanham Act and state law claims for tortious interference and
injurious falsehood, and the accompanying award of compensatory
and punitive damages, are reversed; and the award of attorney fees
is vacated for reconsideration.
Each party is to bear its own costs.
23a
UNITED STATES COURT OF APPEALS FOR THE
FEDERAL CIRCUIT
92-1462,-1480
MANILDRA MILLING CORPORATION,
Plaintiff/Cross-Appellant,
v.
OGILVIE MILLS, INC.,
Defendant-Appellant,
Vv.
HENKEL CORPORATION and
HENKEL OF AMERICA, INC.,
Third-Party Defendants,
and
JOHN THOMAS HONAN,
Counterclaim Defendant.
ON PETITION FOR REHEARING
Before RICH, MICHEL and CLEVENGER, Circuit Judges.
CLEVENGER, Circuit Judge.
ORDER
24a
ORDER
A suggestion for rehearing in banc having been filed by the
APPELLANT,
UPON CONSIDERATION THEREOF, it is
ORDERED that the suggestion for rehearing in banc be, and
the same hereby is, DECLINED.
FOR THE COURT,
FRANCIS X. GINDHART, CLERK
Dated: October 5, 1993 By /s/
Diane M. Frye
Chief Deputy Clerk
cc: BYRON L. GREGORY
MURRAY J. BELMAN
MANILDRA MILLING V. OGILVIE, 92-1462
(DCT - 86-2457-S)
Note: Pursuant to Fed. Cir. R. 47.6, this order is not citable as
precedent. It is a public order.
25a
UNITED STATES COURT OF APPEALS FOR THE
FEDERAL CIRCUIT
92-1462,-1480
MANILDRA MILLING CORPORATION,
Plaintiff/Cross-Appellant,
v.
OGILVIE MILLS, INC.,
Defendant-Appellant,
v.
HENKEL CORPORATION and
HENKEL OF AMERICA, INC.,
Third-Party Defendants,
and
JOHN THOMAS HONAN,
Counterclaim Defendant.
ON PETITION FOR REHEARING
Before RICH, MICHEL and CLEVENGER, Circuit Judges.
CLEVENGER, Circuit Judge.
ORDER
Both Manildra Milling Corporation (Manildra) and Ogilvie
Mills, Inc. (Ogilvie) petition for rehearing of the appeal, decided on
a
i
26a
June 22, 1993 by the Court’s opinion and judgment. The Court
having considered the petitions,
IT IS ORDERED THAT:
Ogiivie’s petition is denied. Manildra’s petition is granted
solely for the purpose of revising the Court’s opinion as hereinafter
provided:
p. 4, In. 6: Delete "patents", and insert -- °718 patent--;
p. 19, In. 19: Delete the sentence "The actual evidence
. . . their customers with false statements.".
FOR THE COURT
eptember 20, 19 /s/
Date Raymond C. Clevenger, III
Circuit Judge
27a
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
MANILDRA MILLING CORPORATION,
Plaintiff and
Counterclaim Defendant,
CIVIL ACTION
OGILVIE MILLS, INC., Case No. 86-2457-S
Defendant,
Third-Party Plaintiff,
and Counterclaimant,
HENKEL CORPORATION,
HENKEL OF AMERICA, INC.,
Defendants, and
Third-Party Defendants,
and
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
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JOHN THOMAS HONAN, )
)
)
Counterclaim Defendant.
28a
MEMORANDUM AND ORDER
This matter is before the court pursuant to numerous post
trial motions in the above-captioned case.'
This action involves a longstanding dispute between the
plaintiff and counterclaim defendant Manildra Milling Corporation
("Manildra") and the defendant, counterclaimant and third-party
plaintiff Ogilvie Mills, Inc. ("Ogilvie") regarding the validity of
various claims of two patents issued by the Patent and Trademark
Office. The patent claims-in-issue cover the manufacture and sale
of large-granule wheat starch, a product used in the manufacture of
carbonless copy paper. _Large-granule wheat starch is uniquely
suited for use as a coating or stilt material which protects ink-
containing microcapsules from prematurely rupturing and smudging
the surface of carbonless copy paper. Since the filing of the
patents-in-suit, large-granule wheat starch has become the primary
stilt material for carbonless copy paper. There are only three
producers of large-granule wheat starch in the entire United States.
Two of the producers are parties involved in this lawsuit. The third
producer, Midwest Grains, Inc. ("Midwest Grains") sells large-
granule wheat starch pursuant to a license agreement entered into
between itself and Ogilvie’s predecessor patent owner, the Henkel
Corporation ("Henkel").
In this action, Manildra sought a declaration that Ogilvie’s
patents were not valid or enforceable and that Manildra had not
infringed two patents which are owned by Ogilvie. Manildra
further sought recovery for injuries which it claimed were caused by
' The court finds that oral argument will not materially aid the
court in the disposition of the motions currently pending before the
court. Accordingly, the court denies Ogilvie Mills, Inc.’s request
for oral argument (Doc. 1154). D. Kan. 206(d).
29a
activities related to the ownership of the patents. These claims
included both federal and pendent state tort claims. Specifically,
Manildra contended that Ogilvie had violated federal antitrust laws,
the Lanham Act, 15 U.S.C. § 1125, which forbids false descriptions
in the sale of goods in interstate commerce, and state law which
forbids unfair competition and tortious interference with prospective
economic advantage. Ogilvie filed a counterclaim seeking to
recover damages from Manildra and its principal shareholder, John
Thomas Honan ("Honan"), for infringement of the two patents.
Beginning on August 26, 1991, and continuing until
February 26, 1992, the claims between Manildra and Ogilvie were
tried to a jury. On January 15, 1992, the case was submitted to the
jury and on February 26, 1992, after approximately six weeks of
deliberations, the jury returned a verdict in favor of Manildra on its
claims that the patent claims-in-issue were invalid and that Manildra
had not infringed these claims. The jury also returned a verdict in
favor of Manildra on its claims under the Lanham Act, and its state
claims for tortious interference with prospective economic advantage
and for injurious falsehood.
Ogilvie now moves for judgment as a matter of law, for a
new trial, and for remittitur. Manildra moves the court for a new
trial on its antitrust claims, and for increased damages and
attorneys’ fees under both the Lanham Act and patent laws. Both
parties move to amend the judgment, and for Rule 54(b)
certification so that this matter may be appealed. Also before the
court is Ogilvie’s request for a ruling on its motion to correct
inventorship, and two outstanding motions by Manildra and Ogilvie
for sanctions.
In reviewing a motion for judgment as a matter of law, the
district court may grant the motion only if the facts and inferences
in the case point so strongly and overwhelmingly in favor of one
party that the court should find that reasonable persons could not
30a
arrive at a contrary verdict. Downie v, Abex Corp., 741 F.2d
1235, 1238 (10th Cir. 1984).? That is, the question is not whether
there exists no evidence supporting the party against whom the
motion is directed, but whether there is any evidence upon which
the jury could properly find a verdict for that party. K-B Trucking
Co. v. Riss Int’l, Corp., 763 F.2d 1148, 1163 (10th Cir. 1985).
Furthermore, in considering the motion, the trial judge must
consider all the evidence and the reasonable inferences derived
therefrom in tne light most favorable to the party against whom the
motion is directed. Downie, 741 F.2d at 1238. In considering a
motion for judgment as a matter of law, the court presumes that the
jury resolved the underlying factual disputes in favor of the verdict
winner; these presumed findings remain undisturbed if they are
supported by substantial evidence. Jurgens v. McKasy, 927 F.2d
1552, 1557 (Fed. Cir.), cert. denied, 112 S. Ct. 281 (1991)(citing
Perkin-Elmer Corp. v. Computervision Corp., 732 F.2d 888, 893
(Fed. Cir.), cert. denied, 469 U.S. 857 (1984)).
With regard to motions for a new trial, "[generally, motions
for a new trial are committed to the discretion of the district court."
McDonough Power Equip., Inc. v. Greenwood, 464 U.S. 548, 556
(1984). In reviewing a motion for new trial, the court should
? Although this action will be appealed to the Federal Circuit
Court of Appeals, procedural issues not unique to the patent laws,
i.e., such as the standard for granting or denying a motion for
judgment as a matter of law, require the application of the regional
Circuit’s law. See Wahpeton Canvas Co., Inc, Frontier, Inc,, 870
F.2d 1546, 1552 n. 8 (Fed. Cir. 1989); Sjolund v, Musland, 847
F.2d 1573, 1576 (Fed. Cir. 1988) (citation omitted). Accordingly,
the court will apply Tenth Circuit law in determining whether
Ogilvie’s motion for judgment as a matter of law should be granted
or denied.
3la
“exercise judgment in preference to the automatic reversal for error,
and ignore errors that do not affect the essential fairness of the
trial.” McDonough Power Equip., Inc., 464 U.S. at 553. "[T}he
party seeking to set aside a jury verdict must demonstrate trial
errors which constitute prejudicial error or that the verdict is not
based on substantial evidence.” White v, Conoco, Inc., 710 F.2d
1442, 1443 (10th Cir. 1983). The alleged trial court errors must be
prejudicial and clearly erroneous, rather than harmless. Also, no
error in the admission or exclusion of evidence, and no error in any
ruling or order of the trial court or anything done or omitted by the
court, can be grounds for granting a new trial unless the error or
defect affects the substantial rights of the parties. Fed. R. Civ. P.
61; Rasmussen Drilling, Inc, v. Kerr-McGee Nuclear Corp., 571
F.2d 1144, 1148-49 (10th Cir.), cert. denied, 439 U.S. 862 (1978).
Trials must be fair, not perfect. McDonough Power Equip., Inc.,
464 U.S. at 553; Devices for Medicine, Inc, v. Boehl, 822 F.2d
1062, 1066 (Fed. Cir. 1987).
I. Ogilvie’s Post Trial Motions
A. Motion for a New Trial
The court will first address Ogilvie’s post trial motions. As
an initial matter, the court finds no merit in the arguments asserted
by Ogilvie in its motion for a new trial. During the six months of
trial an adequate record was established for the court’s evidentiary
rulings and rulings with regard to the jury instructions. Indeed, the
parties were given many opportunities to challenge the court’s
proposed jury instructions. The court stands by its previous rulings
and will not address each of Ogilvie’s assertions of error, except to
find that if any errors were made, they were harmless to the
outcome of this case.
32a
With regard to Ogilvie’s allegation that the jury reached an
inconsistent verdict, the court finds that when confronted with an
apparently inconsistent verdict, courts are to “search for a
reasonable way to read the verdicts as expressing a coherent view
of the case, and must exhaust this effort before it is free to disregard
the jury’s verdict” and grant a new trial. Richardson v, Suzuki
Motor Co,, Lid., 868 F.2d 1226, 1238 (Fed. Cir.), cert, denied,
493 U.S. 853 (1989)(citations omitted). Moreover, where a party
has failed to object to apparent inconsistencies in the verdict form
before the jury is discharged, that party has waived any objections
to inconsistencies under Fed. R. Civ. P. 49(b). See White v.
Celotex Corp,, 878 F.2d 144, 146 (4th Cir. 1989), cert. denied,
493 U.S. 964 (1989); Diamond Shamrock Corp, v, Zinke &
Trumbo, Lid., 791 F.2d 1416, 1422 (10th Cir. 1986), cert. denied,
479 U.S. 1007.
The court finds that the jury verdict does not contain any
inconsistencies. The mere fact that the jury did not find that the
patents were invalid for misuse or inequitable conduct
(interrogatories 2 and 10), is not irreconcilable with the jury’s
conclusion that Ogilvie wrongfully asserted its patents which Ogilvie
knew, or should have known, were invalid (interrogatories 18, 22-
24). While these jury interrogatories and responses do involve
misuse of patents, the jury’s response to interrogatory 10 found that
the "718 patent was not rendered invalid for misuse. In contrast,
the latter interrogatories of the jury verdict, 18, 22-24, dealt with
whether Ogilvie had wrongfully asserted its patent rights despite
knowing of the patent claims’ invalidity. The court finds the jury’s
33a
responses to these interrogatories are consistent. Accordingly, the
court finds the jury’s verdict to be reconcilable.’
B. Ogilvie’s Motion for Judgment as a Matter of
Law
Ogilvie moves the court to vacate the portion of the
judgment against Ogilvie and to grant judgment as a matter of law
on all counts of the complaint and counterclaim under Fed. R. Civ.
P. 50, on grounds that Ogilvie proved by a preponderance of the
evidence that Manildra and Honan infringed the patent claims in
issue both literally and under the doctrine of equivalents. Ogilvie
further contends that Manildra failed to establish by evidence which
is clear and convincing that the patent claims in issue are invalid.
Finally, Ogilvie contends that Manildra failed to establish the
requisite elements proving a violation of the Lanham Act and its
State tort claims.
Before addressing the merits of Ogilvie’s motion for
judgment as a matter of law, the court will review the factual
background giving rise to the claimed inventions of the patent
claims-in-issue. The carbonless copy paper industry has been in
existence since at least the early 1960s. During the early periods of
the industry, carbonless copy paper was manufactured using Solka-
Floc as the primary stilt material. By 1970, the primary stilt
* Furthermore, the court finds that Ogilvie has waived any
objections regarding the alleged inconsistency. Following the
reading of the verdict, the court granted Ogilvie’s request for
additional time during which to study the verdict in order that
Ogilvie could object to any inconsistencies. After carefully
reviewing the verdict of the jury, Ogilvie did not make any such
objections prior to the discharge of the jury.
a
material employed in the manufacture of carbonless copy paper was
arrowroot starch which was grown and produced only on the island
of St. Vincent located in the West Indies. Arrowroot starch was
used in the carbonless copy paper industry because of its uniform
particle size which is large enough to serve as a stilt material.
In early 1971, a shortage of arrowroot starch arose. The
evidence produced at trial revealed that arrowroot growers had
stopped producing arrowroot starch during the years immediately
preceding the shortage due to a history of large surpluses which
resulted in extremely low prices and narrow profit margins.
However, in early 1971, the arrowroot surplus was exhausted and
it became apparent to the St. Vincent Arrowroot Association that
they would not be able to meet the immediate demands of the
manufacturers who supplied the carbonless copy paper industry with
arrowroot starch. See Trial Exhibit 106. Upon receiving this formal
notice on February 26, 1971, or immediately prior thereto, A. E.
Staley ("Staley"), the original patent holder, set about finding a
suitable substitute. Within a few weeks, Staley had produced
fractionated large-granule wheat starch which it offered to its
carbonless copy paper customer, National Cash Register ("NCR"),
as a suggested substitute stilt material.
1. Patent Validity
With respect to its claims that the jury’s verdict of invalidity
must be set aside, Ogilvie contends that Manildra’s entire defense
of patent invalidity was based upon Manildra’s allegations that the
inventions described by the patent claims were either obvious or
were anticipated by “prior art” thereby rendering the patents invalid
under 35 U.S.C. §§ 102 and 103. Ogilvie contends that it is
entitled to judgment of validity as a matter of law on these claims.
Sa
Among the basic elements required for an alleged invention
to be patentable are that the invention disclose something "new" or
“novel” and that the claimed invention is "non-obvious” to a person
having ordinary skill in the pertinent art at the time the invention
was made. See 35 U.S.C. §§ 102 and 103. On these issues, as well
as all other attacks on the validity of a patent, the challenger must
establish invalidity by evidence which is clear and convincing.
Hybritech, Inc. v. Monoclonal Antibodies, Inc,, 802 F.2d 1367,
1375 (Fed. Cir. 1986), cert. denied, 480 U.S. 947 (1987). Also
factored into this equation is the statutory presumption of validity 35
U.S.C. § 282. Hybritech, Inc, ,802 F.2d at 1375.
In determining whether a claimed invention is obvious,
various inquiries must be made. These include: the scope and
content of the prior art; differences between the prior art and the
claimed invention; and the level of ordinary skill in the pertinent
art. Graham v. John Deere Co,, 383 U.S. 1, 17 (1966). Other
factors which are to be considered, known as “secondary factors"
or objective evidence of obviousness or non-obviousness, include:
commercial success, long-felt but unsolved need, failure of others
in attempting to invent a similar product or process, etc. Id.
Stratoflex, Inc. v. Aeroquip Corp., 713 F.2d 1530, 1538-39 (Fed.
Cir. 1983). Evidence of secondary considerations is frequently the
“most probative and cogent evidence in the record. It may often
establish that an invention appearing to have been obvious in light
of the prior art was not.” Id., at 1538.
Based upon a careful review of the evidence admitted at
trial, and in view of the statutory presumption of validity and the
prohibition of using hindsight to read the invention into the prior
art, the court finds that substantial evidence supports the jury’s
finding of invalidity of the patent claims-in-issue on the basis of
obviousness and for lack of novelty of claims 24-27 of the °725
patent.
36a
a. The Invention
The patent claims-in-issue of United States Patent 3,901,725
("’725 patent"), claims 1, 2, 3, 8, 9, 10, 16, 17, 18, 19, 24, 25, 26
and 27, teach the fractionation of bimodal cereal starch (including
wheat starch) into two monomodal fractions containing primarily
large-granule or small-granule starch particles. The process and
product taught by the claims-in-issue involve a wet process
employing hydrocyclone separating devices in two distinct steps.
The first step begins with the input of prime grade wheat starch
which has been washed and is substantially free of gluten and
fiber.‘ This prime grade wheat starch is injected into the first set
of hydrocyclones producing an overflow containing primarily small
starch particles and an underflow consisting mostly of large starch
particles. See Trial Exhibit 902. The underflow is then recycled
through another set of hydrocyclones and once again the underflow
is collected. The underflow consists of classified large-granule
wheat starch particles of relatively uniform size which are well
Suited for use aS a protective coating in the manufacture of
carbonless copy paper.
The patent claims-in-issue of United States Patent 4,280,718
(""718 patent"), claims 1, 6, 7, 8, 9 and 10, involve the application
of the large-granule starch product produced by the wet separation
process claimed in the °725 patent as a protective coating on
* In this regard, highly conflicting testimony, which now must
be viewed in favor of Manildra, was offered from various witnesses
regarding whether it was common knowledge in the cereal starch
industry to start with a prime starch feed which was critical to the
invention claimed in the '725 patent.
37a
carbonless copy paper. Thus, this patent claims the invention of a
"new use” for large-granule cereal starch.
b. Prior Art
The patents-in-suit had a long and tortuous path betore their
issuance. Indeed, various claims of the ‘725 patent had been
rejected on at least one occasion by the Patent Examiner on grounds
of obviousness in view of a patent, namely the Fontein Patent,
United States Patent 2,642,185,° issued on June 16, 1953, which
claimed the use of hydrocyclones in a wet separation process to
obtain various subfractions of starch particles based upon particle
size.° Trial Exhibit 861. Thus, from the outset, the issuance of the
claims-in-issue involved close questions which were ultimately
resolved in favor of the applicants.
> The goal of the Fontein Patent was to separate or refine cereal
starch on the basis of particle size. The primary objective of the
Fontein Patent was to "provide a method requiring a minimum of
control and space which may be operated in a continuous manner to
prepare high grade starch from wheat starch.” Trial Exhibit 861.
® In order to overcome the Patent Examiner’s rejection of the
’725 patent claims of hydrocyclonic fractionation of wheat startch,
the patent applicants represented to the Patent Examiner the critical
nature of the size limitations added to the claims-in-issue of the "725
patent. They also asserted the alleged “inventive concept” of
beginning the classification process with a clean starch stream which
is “substantially free of gluten and fiber." Based upon these two
representations, the Patent Examiner ultimately allowed the patent
claims-in-issue.
38a
While much of the prior att which was introduced during
the trial had been considered by the patent office, other relevant
prior art had not. Therefore, the court finds no merit in Ogilvie’s
contention that the only pertinent prior art relied upon by Manildra
in seeking the invalidation of Ogilvie’s patents had already been
considered and rejected by the patent examiners as invalidating prior
art.’ Specifically, the court finds that an article published by
Dr. W. T. Yamazaki, was not considered by the patent examiner as
prior art. Trial Exhibit 1344. This publication revealed that wheat
starch could be classified or fractionated into monodisperse large
and small-granule fractions. Although Dr. Yamazaki’s article
discussed an air centrifugation process, the article, nevertheless,
reveals or teaches that wheat starch can be separated into
subfractions of fairly uniform particle size which is important for its
utilization in the carbonless copy paper industry.’ This publication
” Furthermore, the court notes that the validity of a patent
obtained in ex parte proceedings before the PTO, can be challenged
in court. Constant v, Advanced Micro-Devices, Inc., 848 F.2d
1560, 1564 (Fed. Cir.), cert. denied, 488 U.S. 892 (1988). While
patents are presumptively valid, they are not conclusively valid and
unchallengable. Id.
* Furthermore, Ogilvie’s contention that Dr. Yamazaki’s work
did not constitute prior art because it was inoperable does not have
any merit with respect to this court’s consideration of his article as
prior art for a determination of obviousness. In re Shepherd, 172
F.2d 560, 564 (CCPA 1949). Indeed, an inoperative or unworkable
device or patent is part of the prior art for all that it teaches. See
generally 2 Chisum, Patents § 5.03[3] at 5-113, n. 22 (citing
numerous such holdings). In any event, the jury presumptively
found that the classification process described by Dr. Yamazaki’s
: | ” . |
39a
disclosed a subfraction of large-granule wheat starch of relatively
uniform particle size identical or similar to that of the large-granule
starch particles claimed by the °725 patent.” Compare Trial Exhibit
1344, at 79, Fig. D with Trial Exhibit 902, Figure 4. Substantial
evidence was admitted into trial that Dr. Yamazaki’s large-granule
wheat fraction met the critical size limitations defined in the patent
claims-in-issue.
Moreover, Dr. Yamazaki’s work with regard to large-
granule wheat starch is not secret prior art because he did not
abandon, suppress or conceal, his work and its accomplishments.
See 35 U.S.C. § 102(g); E.L. DuPont de Nemours and Co. v.
Phillips Petroleum Co,, 849 F.2d 1430, 1437 (Fed. Cir.), cert.
denied, 488 U.S. 986 (1988). The evidence supports a contrary
conclusion. The record reflects that Dr. Yamazaki had publicly
disclosed his large-granule wheat fraction in Trial Exhibit 1344 by
presenting his paper at an annual conference.
paper was operable.
® This prior art reference anticipates Ogilvie’s product claims in
the ’725 patent, i.e., claims 24 through 27, and serves as a statutory
bar to patentability pursuant to 35 U.S.C. § 102(b) because this
work was performed more than twelve months prior to the filing of
the patent application. In this regard, it is irrelevant whether
Dr. Yamazaki realized the utility of large-granule wheat starch. See
In re Shoenwald, _—S&s F.2d __, 1992 U.S.App. Lexis 10181
(May 12, 1992)("it is beyond argument that no utility need be
disclosed for a reference to be anticipatory of a claim to an old
compound."); In re Donohue, 632 F.2d 123, 126 n. 6 (CCPA
1980)("proof of utility is not a prerequisite to availability of a prior
art reference under 35 U.S.C. § 102(b)").
40a
c. Differences from Prior Art
1. °725 Patent
None of the pertinent prior art discloses the wet separation
of a monomodal large-granule wheat fraction through the use of
hydrocyclones beginning with a prime starch feed disclosed in the
‘725 patent." However, the Fontein Patent does teach the wet
separation of various subfractions of wheat starch through the use
of hydrocyclones in repeated cycles. One of the main distinctions
between the Fontein Patent and the patent claims-in-issue of the '725
patent, is that the objective of the Fontein Patent was to obtain a
fine or small-particle size fraction whereas the ‘725 patent seeks to
obtain a large-granule fraction. In order to obtain these different
objectives, the Fontein Patent teaches the recycling of the overflow,
while the °725 patent teaches the recycling of the underflow.
In contrast, the Yamazaki prior art, Trial Exhibit 1344, does
not teach a wet separation process through the use of hydrocyclones.
Rather, once prime starch is obtained by wet separation and sieving,
the prime starch fraction is then air-dried and later subjected to a
Series of separations or fractionation via air classification. The
large-granule subfraction, $-6208, which was ultimately obtained
’° As previously discussed, supra, at note 4, whether it was
common knowledge to those skilled in the art to start with a "clean
Starch stream" was highly disputed. Now, viewing the evidence and
reasonable inferences therefrom in the light most favorable to
Manildra, the court concludes it would have been obvious to one of
ordinary skill in the art to begin with a clean starch stream when
attempting to further refine starch into various fractions.
> ee
4la
after numerous passes, met the particle size limitations contained in
claims 24 through 27 of the 725 patent."
Another Yamazaki publication, Trial Exhibit 2901, teaches
the wet classification of various bimodal cereal starches, including
wheat starch, by the use of a series of sieving devices or by air
eleutriation in order to obtain a monodisperse particle size fraction.
The process described in this article begins with a deproteinized
starch sample. The prime starch is then passed through a series of
sieves until various subfractions are obtained.
2. ’718 Patent
With regard to the application of large-granule wheat starch
in the carbonless copy paper industry, Manildra asserted the NCR
Patent as invalidating prior art. The NCR patent discloses the use
of cereal starches in combination with a binding material as a
suitable coating in the manufacture of carbonless copy paper. The
NCR Patent teaches that cereal starch is a superior stilt material
over artificial stilt materials such as microscopic glass beads. The
NCR Patent discloses a list of unfractionated cereal starches,
including wheat starch, and describes their particle size
distributions. The NCR Patent also rates their effectiveness as a
suitable stilt material. Trial Exhibit 948, at 3, line 85. Unclassified
wheat starch was rated below arrowroot, potato and sago starch.
The NCR Patent further teaches that uniformity in particle size is
'' In this regard, Dr. Yamazaki’s work described in Trial
Exhibit 1344 was reduced to practice as demonstrated by his sample
of $-6208, which was introduced at trial as Trial Exhibit 1359.
Further, this reference, Trial Exhibit 1344, was enabling because it
describes in relative detail how to obtain the large-granule starch
fraction.
42a
the requisite requirement for suitable stilt material, arrowroot
possessing this quality in an unfractionated state.
In contrast, the "718 claims-in-issue, claims |, 6, 7, 8, 9
and 10, teach the use of fractionated large-granule cereal starch
(selected from wheat, barley and rye which naturally have a bimodal
particle size distribution) obtained by wet separation in the
manufacture of the carbonless copy paper. These claims also cover
the use of a large-granule cereal starch possessing specific
characteristics in particle size and other parameters as applied to the
surface of carbonless copy paper. Trial Exhibit 948.
d. Level of Ordinary Skill
A person of ordinary skill in the art is “one who thinks
along the line of conventional wisdom in the art and is not one who
undertakes to innovate, whether by patient, and often expensive,
systematic research or by extraordinary insights. . . .” Standard Oil
Co, v, American Cyanamid Co,, 774 F.2d 448, 458 (Fed. Cir.
1985). “Reference to the educational background and experience of
those actively involved in the art is proper in determining the level
of skill.” Vandenberg v. Dairy Ecruip, Co., 740 F.2d 1560, 1566
(Fed. Cir. 1984). Other factors which may be considered include:
(1) the educational level of the inventors; (2) the types of problems
encountered in the art; (3) prior art solutions to those problems; (4)
rapidity with which innovations are made; (5) sophistication of the
technology; and (6) educational level of active workers in the field.
Environmental Designs, Ltd. v, Union Oil Co, of Calif., 713 F.2d
693, 696 (Fed. Cir. 1983), cert. denied, 464 U.S. 1043
(1983)(citation omitted).
Based upon the testimony received during trial, one of
ordinary skill in the art at the time of the claimed invention would
have been an individual with at least a bachelors degree in a
43a
technologically relevant area such as chemistry, grain science, or
chemical engineering and with several years experience in the starch
refining industry or a closely related industry. Many of the
numerous witnesses presented at trial by both sides, including some
of the named inventors, expert and fact witnesses, had this type of
background. As such, the ordinary level of skill may be properly
characterized as high and extremely technical.
e. Secondary Considerations of
Obviousness
Among the secondary considerations which must be
considered when determining whether an invention is obvious are
commercial success, longfelt but unsolved need, and the failure of
others, etc. Graham, 383 U.S. at 17. Applying these factors to the
evidence presented at trial leads to the conclusion that substantial
evidence supports the jury’s conclusion of invalidity on grounds of
obviousness.
As previously recited above, the need for a substitute stilt
material was not a longfelt but unsolved need. Prior to early 1971,
an adequate supply of arrowroot starch was available to the
producers of carbonless copy paper, and before that, Solka-Floc was
used as a stilt material. Within only a month of learning that its
only source of arrowroot starch had disappeared, A. E. Staley found
a suitable substitute. Thus, although the technology existed for
many years in the starch industry to refine or classify cereal starch
into various subfractions, including large granule fractions, there
was no incentive to classify large granule particles because there
was no use for such monomodal large granule cereal starch.
Accordingly, viewing the inferences in favor of the nonmoving
party, substantial evidence supports the conclusion that the claimed
inventions were obvious solutions to a new problem. See Chisum,
aa
2 Patents § 5.05]1), at 5-399 n. 7, (for a Jist of citations addressing
situations where the inventor’s solution is an obvious response to a
new problem created by changes in the market). Furthermore, the
NCR Patent teaches that cereal starch of uniform particle size is the
best type of stilt material. The NCR patent also teaches the use of
wheat starch as a potential source of stilt material. In view of this
prior art, the invention of the "718 patent, L.e., use of a monomodal
large-granule cereal starch as a stilt material, would have been
obvious to one skilled in the art at the time of the alleged invention.
With respect to commercial success, there is no question
that Ogilvie’s fractionated large-granule wheat starch has met with
significant commercial success in the carbonless copy paper
industry. However, the record also supports the conclusion that the
unique situation confronted by the carbonless copy paper market is
largely responsible for the commercial success of the classified
large-granule wheat starch product. As stated previously, the
carbonless copy paper industry was a preexisting market which
suddenly lost its only supply of cereal stilt material. Thus, the
commercial success of this product was largely the result of a
preexisting built-in market with no other alternatives.
With respect to the failure of others, the record is highly
conflicting. Substantial evidence exists in the record that Mid-west
Grains (f/k/a Midwest Solvents) produced a sample of fractionated
wheat starch within a short time after being asked to come up with
a sample of classified wheat starch. Other than this, there is no
record that others tried and failed to find a solution to the shortage
of arrowroot starch as a stilt material. The jury presumptively
resolved this disputed area in favor of Manildra."”
Other factors which are relevant include licensing of the
invention or acquiescence in the industry, copying, acclamation of
the invention and simultaneous invention by others. Evidence
45a
Careful examination of all of the above factors leads the
court to conclude that substantial evidence, indeed evidence arising
to the level of being clear and convincing, exists to support the
jury’s conclusion that the claimed inventions are invalid on the basis
of obviousness, as well as lack of novelty of claims 24-27 of the
"725 patent. The technology to fractionate bimodal cereal starch
existed since the 1950s; however, there simply was no demand for
a monodisperse large-granule cereal starch product. Rather, the
valuable subfractions of starch were those consisting of smaller
particle sizes. The process for obtaining a large-granule cereal
starch was an obvious modification of the Fontein Patent. Further,
evidence which the jury found credible supports the conclusion that
it would have been obvious to those skilled in the art to begin with
a clean starch stream, j,¢,, deproteinized starch stream, substantially
free of gluten and fiber, at the time of the alleged inventions. These
factors combined with the high level of skill in the pertinent art and
the nature of the problem presented to the starch industry and
carbonless copy paper industry, lead the court to conclude that it
would have been obvious to one skilled in the art of starch refining
to combine the various references to obtain a cereal starch product
which is similar to arrowroot in particle size and distribution which
presented during the trial relevant to these factors was highly
conflicting. For example, testimony was presented that Midwest
had produced a large-granule wheat starch product prior to its
obtaining a license from Ogilvie’s predecessor for a relatively
modest price of approximately $300,000. Prior to receiving this
license, inquiries of infringement had been directed at Midwest.
Whether Midwest accepted the validity of the patents, or whether it
purchased a license to avoid any litigation regarding the patents-in-
suit, was unclear. In view of the undoubtedly high cost of this
litigation, it appears that Midwest made a wise choice.
46a
would serve as a Suitable substitute stilt material for arrow root
starch."
2. Infringement of the Patent Claims-in-Issue
Ogilvie also moves for judgment as a matter of law on the
issue of infringement. Infringement is an issue of fact to be decided
by the jury. Sun Studs, Inc, v, ATA Ecruip, Leasing, Inc,, 872 F.
2d 978, 986 (Fed. Cir. 1989); Moleculon Research Corp. v. CBS,
Inc,, 793 F.2d 1261, 1269-70 (Fed. Cir. 1986), cert, denied, 479
U.S. 1030 (1987). On this issue, Ogilvie bears the burden to prove
by a preponderance of the evidence that Manildra and Honan have
infringed the patent claims-in-issue. Symbol Technologies, Inc, v.
Opticon, Inc,, 935 F.2d 1569, 1574 (Fed. Cir. 1991).
In the interest of economy, the court finds that much
evidence was presented on this issue both supporting a finding of
infringement and supporting a conclusion of non-infringement. The
jury chose to believe the evidence supporting non-infringement.
This court cannot say as a matter of law, considering all inferences
in the favor of the nonmoving party, that Ogilvie was entitled to a
judgment on the issue of infringement. Specifically, the court finds
With regard to Manildra’s contentions of invalidity of the
specific claims-in-issue on the basis of vagueness in violation of 35
U.S.C. § 112, the court finds that this was a heated point of
controversy on which wide ranging testimony was introduced.
Indeed, the testimony was simply irreconcilable. Expert testimony
was introduced by both sides regarding whether one of ordinary
skill in the art would have known precisely what was intended with
the use of the term “about” as it was employed in the patent claims
in view of the applicants’ use of this term in their patent
specifications.
47a
that evidence was presented that Manildra’s product did not literally
infringe, or read on the claims of the patent claims-in-issue because
Manildra’s product does not fall within the size limitations contained
in the relevant patent claims. Further, with respect to Ogilvie's
contentions that it is entitled to judgment as a matter of law on the
issue of infringement under the doctrine of equivalents, the court
finds that the jury was properly instructed on the elements of the
infringement under the doctrine of equivalents, i.e,, that the
infringing device performs substantially the same function, in
substantially the same way to achieve substantially the same result.
Malta v. Schulmerich Carillons, Inc,, 952 F.2d 1320, 1325 (Fed.
Cir. 1991), cert, denied, U.S. — (U.S. June 8, 1992)(1992
WL 95084); Lear Siegler, Inc. v, Sealy Mattress Co, of Michigan,
873 F.2d 1422, 1425-26 (Fed. Cir. 1989). Substantial evidence was
presented during trial that Manildra’s product was produced through
air classification, thus, failing the second prong of the equivalency
test as it relates to the process and product-by-process claims-in-
issue. Further, the court finds that substantial evidence supports the
jury's conclusion that Manildra’s large-granule wheat product does
not infringe the product claims-in-issue under the doctrine of
equivalents in view of the prosecution history of the patent claims.
The court further finds that evidence was presented
supporting the giving of an instruction on the reverse doctrine of
equivalents. As previously stated, evidence supporting literal
infringement was introduced during the trial, as was evidence that
Manildra’s alleged infringing product was produced in a
Significantly different manner. Thus, the underlying factual
prerequisites for an instruction of the reverse doctrine of equivalents
were introduced during the case. Accordingly, the court finds that
it was proper to instruct upon this doctrine.
eS
48a
3. Lanham Act and Pendent State Tort
Claims
The court has carefully reviewed and considered Ogilvie’s
contentions, the evidence admitted at trial and the applicable law,
and finds that in viewing all of the evidence and inferences in the
light most favorable to Manildra, substantial evidence exists in the
record to support the jury’s conclusion that Ogilvie violated the
Lanham Act. The court further finds that substantial evidence exists
to support the jury’s conclusion that the defendant interfered with
Manildra’s prospective economic advantage and that it committed
unfair competition in the form of injurious falsehood.
Specifically, the court finds that the record contains
evidence that Ogilvie continued to make representations which were
originally made by its predecessor patent owner, Henkel, such
representations which led potential purchasers of large-granule
wheat starch to avoid doing business, or to limit their purchases
from Manildra due to the threat of being brought into patent
infringement litigation. Furthermore, the court finds that plaintiff
was not allowed to create the erroneous impression that Ogilvie
should be held responsible for the conduct of the Henkel
corporation. The court gave a very specific limiting instruction on
this issue. See Instruction 24a.'* Furthermore, while presiding
over four and one-half months of testimony, the court did not
observe any abuse by Manildra with respect to the limited
admissibility of evidence regarding conduct of the Henkel
Corporation.
Additionally, the court finds that the record contains
evidence upon which the jury could have concluded that Ogilvie did
not investigate whether Manildra’s large-granule wheat starch
'* Manildra complains this instruction is too limiting.
49a
actually infringed Ogilvie’s patents and that Ogilvie possessed test
data revealing that Manildra’s product did not infringe the patent
claims-in-issue. Thus, the court finds that substantial evidence was
presented upon which the jury could have based a finding of malice
on the part of the defendant. On the issue of causation of
Manildra’s small market share, evidence was presented that
Manildra had the lowest price and a good quality product, and yet,
was unable to increase its market share among carbonless copy
paper manufacturers. In addition, evidence was presented that
carbonless copy paper manufacturers had represented to Manildra
their reluctance to enter into contracts or to purchase large quantities
of large-granule wheat starch from Manildra due to the threat of
patent litigation. Thus, evidence was presented from which the jury
could infer that Manildra’s damages (lost sales) resulted from
Ogilvie’s representations regarding its patents and Manildra’s
alleged infringement. Finally, the court finds that Ogilvie’s
remaining contentions regarding insufficient evidence are without
merit.
Cc. Remittitur
Ogilvie next contends that the jury’s verdict of $2,250,000
compensatory damages and $2,500,000 in punitive damages is
excessive, against the weight of the evidence, and the product of
improper passion and prejudice on the part of the jury.
In evaluating a motion for remittitur, the court must
examine the verdict to determine whether the jury award is "so
excessive that it shocks the judicial conscience or leads to an
inescapable inference that it resulted from improper passion or
prejudice on the part of the jury." Malandris v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 703 F.2d 1152, 1177 (10th Cir.
50a
1981), cert, denied, 464 U.S. 824 (1983). Whether to grant
remittitur is within this court’s sound discretion.
The court has fully considered Ogilvie’s contentions
regarding the size of the verdict, the evidence presented at trial, and
the applicable law. The court finds Ogilvie’s motion for remittitur
should be denied. Although the damages awarded by the jury are
significant, the damages awarded are well within estimates presented
during trial through expert testimony based upon underlying data
involving Manildra’s product, profit margin, the large-granule wheat
starch market, and other economic and financial indices. Finally,
the court finds the jury’s award of $2,500,000 in punitive damages
is reasonable in view of the actual damages found to have been
sustained, the relative positions of the parties, and the financial
resources of Ogilvie. Accordingly, the court will deny Ogilvie’s
motion for remittitur.
Il. Manildra’s Post-Trial Motions
Manildra moves the court to amend the judgment to award
Manildra Ogilvie’s profits from its sales of large-granule wheat
starch or to treble the damages awarded by the jury pursuant to 15
U.S.C. § 1117(a). Manildra also seeks an award of attorneys’ fees
pursuant to 15 1.S.C. § 1117(a), 35 U.S.C. § 285, and 28 U.S.C.
§ 1927. Finally, Manildra moves the court for a partial new trial
On its antitrust claims.
Title 15, United States Code, Section 1117(a) allows a
prevailing party to recover, subject to the principles of equity,
(1) defendant’s profits, (2) any damages sustained by the plaintiff,
and (3) the costs of the action. Section 1117(a) also allows the
court, in exceptional cases, to award the prevailing party reasonable
attorney fees. However, any award must constitute compensation
and not serve to penalize the losing party.
5la
As the prevailing party under 15 U.S.C. § 1117(a), the
court finds that Manildra is entitled to recover its actual damages
sustained, i,e,, $2,250,000, and its costs of the action. The court
finds such an award to be just in view of the evidence presented
during trial regarding Manildra’s lost profits and injury to its
reputation. With respect to Ogilvie’s request that Manildra’s costs
be apportioned so that Manildra may recover only those costs
related to its Lanham Act claim, the court finds that no
apportionment is warranted. The court bases this finding upon the
fact that all of Manildra’s claims centered upon the same issues
which had to be proven in order to establish violations of the
Lanham Act. In order to recover under the Lanham Act, Manildra
had to prove that Ogilvie had made false representations of fact
about its large-granule wheat starch and Manildra’s large-granule
wheat starch; Manildra had to establish by clear and convincing
evidence that the patent claims-in-issue were invalid, or that the
patents were unenforceable.'* Thus, the court finds Manildra’s
claims were so "tightly bound” together, that the same work was
necessary for all of Manildra’s affirmative claims. Thus, the court
concludes no apportionment of costs is warranted.
With respect to Manildra’s request that it be awarded
enhanced damages in the form of Ogilvie’s profits or by the court’s
trebling of the jury’s award of actual damages, the court finds that
the award of actual damages made by the jury is an adequate and
just amount. Thus, the court will not increase Manildra’s damages,
nor will it order an accounting of Ogilvie’s profits. The court
further finds that any increased or enhanced damages would serve
'* In the alternative, Manildra had to establish by a
preponderance of the evidence that the patent claims-in-issue were
not infringed. ¥
52a
to penalize Ogilvie which is an impermissible reason to enhance the
damages award under the Lanham Act. See 15 U.S.C. § 1117(a).
In determining whether this is an exceptional case
warranting the award of attorneys’ fees, under the Lanham Act,
“exceptional” cases involve those situations where the wrongful
conduct may be characterized as “willful,” “malicious,”
“fraudulent,” or “deliberate.” Brunswick Corp, v. Spinit Reel Co.,
832 F.2d 513, 528 (10th Cir. 1987); VIP Foods, Inc, v, Vulcan
Pet, Inc., 675 F.2d 1106, 1107 (10th Cir. 1982). Similarly, under
the patent laws, 35 U.S.C. § 285, the court may award reasonable
attorneys’ fees to the prevailing party in “exceptional” cases.
Section 285 is meant to “provide discretion where it would be
grossly unjust that the winner be left to bear the burden of his own
counsel which prevailing litigants normally bear." Badalamenti v.
Durham's, Inc,, 896 F.2d 1359, 1364-65 (Fed. Cir.), cert. denied,
111 S. Ct. 142 (1990)(quoting 1,P, Stevens Co, v. Lex Tex Lid.,
Inc,, 822 F.2d 1047, 1052 (Fed. Cir. 1987)(emphasis in original)).
There must be some finding of unfairness, bad faith or inequitable
conduct on the part of the unsuccessful patentees. Id.(citation
omitted).
Applying the above tests to Manildra’s motion for attorneys’
fees, the court finds that Manildra should be awarded attorneys’ fees
under either provision. There is no question in this court’s mind
that this case is exceptional or extraordinary in terms of the costs to
the parties, the government and all other persons who were even
remotely involved." However, the inquiry which this court must
focus on in determining whether to award attorneys’ fees involves
an inquiry into whether this case is “exceptional” in view of the
patent laws or the Lanham Act.
‘© The court notes that a jury of nine people dedicated six
months of their lives to this case.
53a
Upon reviewing the verdict entered by the jury and
considering the evidence presented at trial, the court finds that this
case is an exceptional case warranting the award of attorneys’ fees
to Manildra as the prevailing party. In reaching its verdict that
Ogilvie had committed unfair competition in the form of injurious
falsehood, and that Ogilvie had intentionally interfered with
Manildra’s prospective economic advantage, the jury presumptively
found that Ogilvie’s conduct was intentional and malicious. See
Instruction Nos. 34 and 41. Because the Lanham Act is essentially
a federally codified version of unfair competition, the court finds the
jury’s verdict to be sufficient to warrant a finding that Ogilvie’s
violation of the Lanham Act was willful or intentional, thereby
rendering this case exceptional within the meaning of 15 U.S.C.
§ 1117(a). Accordingly, the court finds that Manildra is entitled to
recover attorneys’ fees under Section 1117(a) of the Lanham Act.
Similarly, the court finds that such a finding of intentional or
malicious conduct is the equivalent of a finding of bad faith, thereby
warranting an award of attorneys’ fees under the 35 U.S.C. § 285.
Accordingly, the court finds that Manildra is entitled to recover
reasonable attorneys’ fees in litigating this action.’ The court
further finds that Manildra is entitled to recover reasonable expert
witness fees because the use of expert witnesses in this case was
necessary. Mathis v, Spears, 857 F.2d 749, 759 (Fed. Cir. 1988).
'’ The court finds Manildra’s request for attorneys’ fees under
28 U.S.C. § 1927, to be without merit. While it is true that this
was an extremely hard fought battle in which both sides interests
were zealously pursued, the court does not find Ogilvie’s counsel to
have vexatiously or unreasonably multiplied the proceedings in this
case. Accordingly, the court will deny Manildra’s request for an
assessment of attorneys’ fees under 28 U.S.C. § 1927.
54a
Finally, the court finds no merit in Manildra’s motion for
a partial new trial on its antitrust claims. The court correctly
instructed upon the elements of Manildra’s antitrust claims in the
context of the patent laws of the United States. See Instructions 24,
26, 30 and 31. Moreover, the court finds that Manildra has waived
any Objections to the "double-hurdle” nature of the instructions
relating to its antitrust claims. The first time this objection was
brought to the court’s attention was during jury deliberations. Nor
does-the court find merit in Manildra’s allegations that Instruction
24a impermissibly limited the jury’s consideration of the conduct of
Ogilvie’s predecessor patent owner.
Iil. | Ogilvie’s Motion to Correct Inventorship
Ogilvie has requested that the court rule on its motion to
correct inventorship. This motion was first presented to the
Honorable Earl E. O’Connor, then Chief United States District
Judge. Upon consideration, Judge O’Connor deferred ruling on this
motion and took it under advisement pending trial. While the court
finds that the omission of Dennis M. Adkesson as an inventor to
U.S. Patents 3,901,725, 3,951,948 and 4,280,713 and the omission
of Donald L. Johnson as a named inventor in U.S. Patents
3,901,725 and 3,951,948 were errors of oversight which occurred
without deceptive intent, the court finds that this motion is now
moot as it relates to the patent claims-in-issue. See Garret Corp. v.
United States, 422 F.2d 874, 881 n. 5 (Ct. Cl. 1970), cert. denied,
400 U.S. 951 (1970)), Long Mfg. N.C., Inc. v, Condec Corp.,
(unpublished slip op. Case No. Civ. A 79-93-Civ.-7)(filed June 21,
1984) 1984 WL 1351, 223 U.S.P.Q. 1213. Accordingly, the court
will deny Ogilvie’s motion to correct inventorship as moot.
55a
IV. Other Matters
The court has carefully considered Ogilvie’s and Manildra’s
motions for sanctions and finds that both motions should be denied.
Further, the court finds that both parties’ motion to amend and
clarify the judgment to more clearly reflect the jury verdict, nunc
pro tunc, should be denied, except that the court will direct the
clerk to amend the judgment nunc pro tune to reflect the jury’s
verdict with respect to validity and infringement of the patent
claims-in-issue, and to the extent that defendant and counterclaimant
John Thomas Honan should not have been awarded any recovery.
IT IS BY THE COURT THEREFORE ORDERED that
Manildra’s motion to amend judgment pursuant to 15 U.S.C.
§ 1117(a)(Doc. 1088) is denied.
IT IS FURTHER ORDERED that Manildra’s motion to
award reasonable attorneys’ fees, expenses and costs (Doc. 1089) is
granted. Manildra is directed to submit to the court an affidavit
detailing its attorneys’ fees and expert witness fees, within sixty (60)
days of the date of this order, in lieu of a hearing on this issue.
Ogilvie is given twenty (20) days after receipt of the service of the
affidavit to file with the court and serve on Manildra any objections
to the expenses and fees detailed in the affidavit.
IT IS FURTHER ORDERED that Manildra’s motion for
a new trial on Manildra’s antitrust claims (Doc. 1090) is denied.
IT IS FURTHER ORDERED that Manildra’s motion to
amend and clarify the judgment nunc pro tunc (Doc. 1092) is
granted in part, and denied in part.
56a
IT IS FURTHER ORDERED that Ogilvie’s renewed
motion for judgment as a matter of law (Doc. 1094) is denied.
IT IS FURTHER ORDERED that Ogilvie’s motion for a
new trial (Doc. 1096) is denied.
IT IS FURTHER ORDERED that Ogilvie’s motion to
amend the judgment (Doc. 1100) is granted in part, and denied in
part.
IT IS FURTHER ORDERED that Ogilvie’s request for a
ruling On its motion to correct inventorship (Doc. 1102) is denied,
as is the underlying motion (Doc. 282).
IT IS FURTHER ORDERED that Ogilvie’s motion for
remittitur (Doc. 1104) is denied.
IT IS FURTHER ORDERED that Ogilvie’s motion for
sanctions (Doc. 807) is denied.
IT IS FURTHER ORDERED that Manildra’s motion for
sanctions (Doc. 984) is denied.
IT IS FURTHER ORDERED that the clerk enter judgment
nunc pro tune on the jury’s verdict on which judgment was
originally entered on February 27, 1992, as follows:
The patent claims-in-issue are declared and
adjudged to be invalid and non-infringed. Judgment
is entered in favor of plaintiff and counterclaim
defendant Maniidra Milling Corporation in the sum
of Two Million Two Hundred Fifty Thousand
Dollars ($2,250,000.00) in actual damages; and
57a
Two Million Five Hundred Thousand Dollars
($2,500,000.00) in punitive damages, with interest
at the rate of 4.21% as provided by law.
IT IS FURTHER ORDERED that the clerk is directed to
certify this judgment as final between Manildra Milling Corporation,
John Thomas Honan, and Ogilvie Mills, Inc.
Dated this __15 _ day of June 1992, at Topeka, Kansas.
ls/
DALE E. SAFFELS
United States District Judge
58a
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
MANILDRA MILLING CORPORATION,
Plaintiff & Counterclaim Defendant,
v. CASE NO. 86-2457-S
OGILVIE MILLS, INC.,
Defendant, Third-Party Plaintiff & Counterclaimant.
HENKEL CORPORATION, HENKEL OF AMERICA, INC.,
Defendants & Third-Party Defendants,
JOHN THOMAS HONAN,
Counterclaim Defendant.
RULE 54(b) CERTIFICATE
There being no just reason for delay and pursuant to Rule
54(b) of the Federal Rules of Civil Procedure, it is hereby
ORDERED that final judgment be entered as to the claims between
Manildra Milling Corporation, John Thomas Honan and Ogilvie
Mills, Inc. |
ls/
DALE E. SAFFELS, U.S. DISTRICT JUDGE
Filed: June 16, 1992
> ©
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59a
[Calott Tr. 2168]
Can you tell me what you meant by the term legitimate
competitive situation?
We just don't think when someone is selling price low that
it's a genuine price competitive situation because we felt
they were the number one supplier in the area and we were
a price leader. So we just don’t meet those situations.
It had something to do with your patent license situation.
MR. WEITZMAN: It had nothing to do.
MR. BELMAN: I'm sorry. Thank you.
It had nothing to do with your patent license situation?
I think the fact that we do have a patent license makes us
more legitimate.
MR. BELMAN: Okay. Moving to Page
197, Line 6.
Your next sentence in this memo says he, and that's again
referring to Mr. Craw. He, again, reminded me this was
just a matter of information--
Mr. Keller.
Beg your pardon, Mr. Keller. Again he reminded me this
was just a matter of
{Calott Tr. 2173]
MR. GREGORY: No, Your Honor.
I take it Mr. Keller, in this case, was complaining about the
selling price and the pressure it put on the plant or the
penalty it put on the plant?
Yes.
You make the statement in that Call Report, I again went
through our litany on our position in the LGS field and why
we have to be a leader, et cetera, et cetera.
Can you tell us what your litany on your position in
the LGS field consisted of?
> ©
60a
Well we, of course, purchased the business and the patents
and so forth from Staley.
MR. BELMAN: I’m going to pause here
while we get this in focus there.
You make the statement--
MR. BELMAN: Oh, I'm sorry..
MR. WALCH: It’s Line 19.
MR. BELMAN: Thank you.
Yes.
That cost us money. We have to get our money back.
Therefore, we maintain our price because we feel that we
have an investment in the business. Consequently, it’s as
simple as
[Calott Tr. 2174]
that, that’s why were a leader.
Related to the patents?
Related to purchasing the patents. And we try to maintain
our leadership by salesmanship and service.
All right. So you feel you’re a leader because you have the
patent and because you do a good job of selling?
And servicing.
And servicing the customer.
And we bought it. So, therefore, it doesn’t cost a
competitor as much to sell his product as us since we put an
investment in the license, purchasing it.
MR. BELMAN: Okay. Page 210, the
bottom line.
This document is an Intra-Company memo from yourself to
production man down in Keokuk.
I take it you are the author of that.
MR. BELMAN: 211, Line 4.
6la
Yes, I am.
It’s dated July 2 of ’87?
Correct.
MR. BELMAN: Your Honor, that’s
Exhibit 775, @@ and I'll move its admission at
[Keller Tr. 3714]
possibility of Prostar in Canada.
Q.
A.
©
Did he say whether or not Midwest Solvents was licensed?
He mentioned that Midwest Solvents was licensed.
MR. WALCH: Page-- or Line 9 on Page
61.
Was anything said about whether or not Manildra was
licensed under Henkel’s patent or patents?
I think he mentioned that Manildra was not licensed.
Was anything said in that conversation about whether or not
Moore was buying from Manildra?
He was aware that Moore was buying from Manildra.
MR. WALCH: Skipping to Line 22 on
Page 61.
Was anything said in that conversation about possibility of
patent lawsuit or patent infringement lawsuit?
Pete said that he was aware that Moore used Manildra, but
it would not pay to take the case to court because the cost
that would be incurred through litigation would be-- it
{Keller Tr. 3715]
would be far more expensive than the results.
MR. WALCH: Then to Page 66, Line 19.
Let’s go back to the first luncheon meeting with Mr. Calott,
then with Henkel, advised you of Henkel having patent
rights. Did Mr. Calott encourage Moore to use Midwest
rather than Manildra as a second source?
He asked me why we were not using Midwest, I recall, yes.
Be ee Se ee
62a
What did you say?
Midwest, from the files, showed that the material was not
approved for use. That’s number one. Number two,
Midwest showed no actual interest in Moore Business
Forms. Number three is why should we purchase from a
licensee instead of the actual manufacturer? We felt that the
costs for Midwest would be higher.
Q. Did you explain all these things to Mr. Calott at the
and
meeting?
A. Yes.
MR. WALCH: Now we're on Page 68,
Line 18.
Q. Mr. Keller, the court reporter has showed you Deposition
Exhibits 1, 2, and 3 have you had a
{Keller Tr. 3716}
chance to review those documents?
A. Yes.
Q. Do any of those documents refresh your recollection as to
the time period of your-- of your luncheon meeting when
Mr. Calott was with Henkel that we have just been
discussing?
A. From the date on top, yes.
MR. WALCH: Do we have that exhibit?
MR. SABLEMAN: No, I don’t think so.
Q. The date on top of the document, Exhibit 2, is that the date
of the meeting we have been discussing?
A. Yes, 10/18/84.
Q. Is Exhibit 1 a document you prepared following the
meeting?
A. Yes.
MR. WALCH: Then to Page 70, Line 1.
©
©
o>
O>O>O>O>
63a
Let’s go to this next meeting where a patent was discussed.
You don’t have to look at the documents anymore. You say
there was one meeting-- you said there was one meeting
when Mr. Calott was with Ogilvie where the patents were
discussed, is that right?
Yes.
Can you place that in time?
{Keller Tr. 3717]
It was a meeting after that date.
Do you recall anything that Mr. Calott said in that meeting
other than what you told me before, that Ogilvie had the
patent rights from Henkel?
That’s all I recall.
Did Mr. Calott mention Manildra in that meeting?
Yes, he did.
What did he say about Manildra in that meeting?
Manildra does not have patent rights.
Did he say anything else about Manildra?
No.
Did he mention the possibility of a lawsuit involving
Manildra?
No.
Did he refer to his prior discussion about it wouldn’t be
cost effective to sue Manildra for patent infringement?
I think he had mentioned it at that meeting.
MR. WALCH: Then moving to Page 77,
Line 13.
I’m sorry. Mr. Keller, will you tell me if Exhibit 4 is the
correspondence relating to
[Keller Tr. 3718]
your inquiry about the Midwest license agreement?
Yes.
©
> oO? 2?
64a
Does that help you place the time period of the conversation
you had with Mr. Calott about the patents when he was
with Ogilvie?
Right, it does.
When was that conversation with Mr. Calott?
That was at the 3/12/85 meeting.
MR. BELMAN: Can we consult for a
second, Your Honor?
THE COURT: Certainly. Go right
ahead.
MR. BELMAN: Thank you, Your Honor.
MR. WALCH: Now, we’re going to Page
80, Line 6.
Mr. Keller, have you had a chance to review Exhibits 5A
and 5B?
Yes.
Have you had a chance to review these?
Yes.
Can you identify those for us?
Yes. I composed these.
MR. WALCH: @@ All right. At this
time, Your Honor, I would like to offer trial
[Keller Tr. 3722]
Now that you have Exhibit 715 in front of you, can you
better place in time the time that you made the decision--
look at 715, please-- when you made the decision to restrict
Manildra to 50 percent of Fremont?
I don’t recall an accurate date. I can only guess it was
about six months prior.
Six months prior to September 12, ’86?
Correct.
©
>
OF OPO?
65a
Did Paul Marshal! ever discuss the patent situation with
you?
Yes.
On how many occasions?
I don’t know the total number of times that he discussed it.
Approximately how many?
Approximately two or three.
Can you differentiate between those, or do they all run
together in your mind?
When | initially came into Glenview in June, Paul Marshall
requested that I review all of the files on the MCP
chemicals, which I did. If I had any questions, I should ask
him.
It was during a meeting that Paul mentioned that
there’s a situation with
{Hancock Tr. 4436]
MR. WALCH: @@ Ail right. I'll
introduce Exhibit 1460 at this time.
MR. McANANY: No objection, Your
Honor.
THE COURT: @@@ Be admitted.
All right. Could you explain your findings then to us with
the aid of this chart. If you need to, come-- please come
down with the pointer.
Yes, now, here domestic sales, we’re looking at sales in the
United States, the lower 48 states, of large granule wheat
starch by manufacturer. Here on the vertical axis we have
pounds measured in millions going up by increments of $2
million pounds per horizontal segment, and then we have
each of the three producers of large granule wheat starch,
again, represented, Midwest Grain, Ogilvie Mills and
Manildra Milling. And from 1985 through the second
“4
66a
quarter of 1991, we obtained information on total pounds
sold by producer, and we see that on a-- on a consistent
basis, Manildra Milling, shown here as the blue columns,
Manildra Milling is the lowest quantity seller of all three
{Hancock Tr. 4437]
producers. os
Midwest Grain is just below Ogilvie Mills for the
years of 1986-- excuse me 1985 and 1986, and then they
surpass Ogilvie Mills in the year of 1987, and continue
from that point on to be the largest quantity seller.
Ogilvie Mills then comes in second, and then in a
distant third is Manildra Milling.
This--
What does this tell you from an economic theory
standpoint?
Well, it-- it-- it’s a very interesting piece of information
because it is inconsistent with what we expect it, and
sometimes the inconsistencies are, in fact, the most
interesting results that you come up with. So we expected
to see Manildra Milling leading all three producers in terms
of quantities sold. We see exactly the opposite. So in our
mind-- being economists, in our mind, lower price is always
associated with higher quantities, so we say at this point
there has to be a reason. There has to be a reason to justify
why it is that Manildra with the lowest price is also the
lowest quantity
{Hancock Tr. 4438]
seller.
So what we did at this point is we started
investigating some of the characteristics of the market to try
and come up with a reason for Manildra Milling being the
lowest quantity seller. it’s kind of like--
67a
Excuse me, Doctor Hancock. At this point, can you
automatically assume that some producer is exercising
market power or do you have to do some more analysis
before you come up--
Well, I- I would not feel comfortable at this point, just
looking at price and quantities information, to draw that
conclusion, no.
All right. What other potential explanations can you offer,
or what do you have to investigate to find out what could
explain this dichotomy between the quantity and the price?
Well, the first explanation that occurred to us was that it’s
possible that Manildra Milling is simply-- (reporter
interruption) simply at its capacity. That is to say, that they
only sell this much large granule wheat starch because they
simply do not have the
{Hancock Tr. 4476]
about that being the basis for a submarket, we’ve gone
through the two submarket analysis, my question to you is:
If you said, "Well, no, we shouldn’t regard this as two
submarkets for purposes of analysis-- for market share
analysis, do you have any explanation, aside from that
submarket explanation that we’ve been through, for the
division of the market in this manner other than a decision
by the producers to allocate it in that manner?
I have no such explanation, no.
MR. WALCH: All right. I think we’re
ready to go to a new subject at this point, Your Honor.
THE COURT: Let’s have lunch,
then. We'll take our luncheon recess and reconvene at
1:30. Remember the admonition of the Court. Please
recess the Court.
(THEREUPON, a lunch recess was had).
68a
THE COURT: Mr. Walch, please
continue your direct.
MR. WALCH: Thank you, Your Honor.
Doctor Hancock, I just want to review the bidding here
before asking you another
{Hancock Tr. 4477]
question. I think before lunch, we had covered the fact we
had this dichotomy in the market where we have the low--
the strange price structure with the low price
producer and selling by far the lowest quantities, and you
had gone into what-- potential economic indicators by
explaining that phenomenon and you ruled out a number of
them. Could you review that briefly with us and see if
there’s anything else left we need to rule out?
Yes. We ruled out by analysis of the production facilities
that Manildra has the possibility that they simply could not
supply that quantity to the markets. We ruled out the
possibility that there was poor information regarding
Manildra in the markets. We ruled out the possibility that
Manildra was selling a product that was, in fact,
substantially different from the products being sold by
Midwest and-- and Ogilvie. And we ruled out the fact that
the buyers simply were not aware of-- of Manildra. So
those-- those are the economic issues that we considered and
subsequently ruled out as-- as a way in which we could
{Hancock Tr. 4478]
explain low price, low quantity.
We had talked about it specifically, but in your earlier
exhibit when you were talking about the market, one of the
things you’d mentioned was geographic concentration. Can
we rule out the geographic dispersity as an explanation?
Yes, we did.
> ©
69a
And-- and can you explain why?
Well, again, because of the fact that there’s not going to be
a significant difference in the transportation cost between
one firm and another firm, no-- no single firm would have
a tremendous cost advantage on transportation.
All right. From an economist standpoint, is there any other
theory to explain this phenomenon that we haven’t yet ruled
out?
We came up with an alternative explanation as to why it is
that the low cost seller is also the low quantity seller, and
that has to do with the ability of the buyer to distinguish
between various types of costs of purchasing the product
from Manildra.
And what do you mean by various types of-- types of cost.
I thought we were talking
{Hancock Tr. 4479]
about a cost of something like that 26 cents a pound plus
transportation charges. Is that what you mean?
Well, that is the explicit stated cost. The explanation that
we began to focus on next is the possibility that in addition
to the price that a buyer would have to pay from Manildra,
they would also encounter an additional cost to them in
terms of the potential that down the road they may be
involved in a legal suit and all the attended cost that go
along with being involved in a legal suit.
Did you prepare a chart which is in your red book to
illustrate that?
I did, yes.
And is that Plaintiff's Exhibit 1464?
It is.
MR. McANANY: No objection,. Your
Honor.
=
> ©
70a
THE COURT: @@@ Be admitted.
All right. Probably you can do it from where you are, it’s
not that difficult of a chart. What does 1464 demonstrate
or illustrate, | guess?
Basically what we’re looking at here is, on
[Hancock Tr. 4480]
the vertical axis we're looking at the price, on the
horizontal axis we're looking at the two different sellers,
Manildra versus Ogilvie. And as we've seen for Appleton,
Meade and Moore, the price that Ogilvie
charges is in fact higher than the price that Manildra
charges. So why--
That's the explicit price? ; pmae « yieas “eames
That’s the explicit price, that’s right. So why is it that
Manildra is the low quantity seller. Well, perhaps there is
information out there that would lead us to conclude that
there is an additional cost buying from Manildra, over and
above the stated price, 28 and a half cents a pound that
would in fact, when taken into account, place the price that
Manildra sells large granule wheat starch for above the
price that Ogilvie charges its customers for large granule
wheat starch.
Would another way be-- of saying that-- would that be a
hard cost or would that be a perceived cost, or what would
that be?
It’s obviously a perceived cost, because when you-- if you
bought 100 pounds of large granule wheat starch from
Manildra, you
{Hancock Tr. 4481]
wouldn't be paying the additional cost at that point. But
there may be a perception out there that down the road after
Tla
you've purchased the product for a period of time, down the
road you will be brought into a legal suit.
All right. You can take your seat again. Now, with
respect to this perceived cost, Doctor Hancock, would that
necessarily have to be just the cost if, let’s say, one of these
producers, Moore, obviously if it got brought into a patent
infringement suit, it would have cost defending that suit.
But would it necessarily-- would that perceived cost just
have to be limited to a situation where, say, Moore or
Meade or Appleton was brought into a suit?
I’m not sure I understand the question. I’m sorry.
Well, could there be perceived costs, say, if there had been-
could there be perceived costs to the buyer in that situation
as well as in a suit where the buyer himself is involved in
it?
{Hancock Tr. 4482]
[I see. Yes. There could be. There are, of course,
associated with trials or legal suits, there are all kinds of
depositions that require that marketing people are taken
away from their job. People in-- well, from the people in
the Board of Directors all the way down to the president
and vice-president and so forth, they may be required to
come in and give testimony and so forth. And that type of
cost, while it would not be an explicit cost, that would show
up on the financial report, it would, of course, be a cost to
the firm. They’re trying to run their- their operation in a
smooth fashion and-- and to the extent that these people are
called out of the firm for various reasons not related to that
operation, that’s-- that is indeed a cost.
And what about document production that is required in
these lawsuits?
>
72a
Well, of course. There are substantial quantities of
documents that have to be produced for litigation. There
may be information that the-- that the firm does not want
to be made available to its competitors or be made available
in any form, and yet,
{Hancock Tr. 4483]
they are compelled to provide this information. So that
again would represent an additional cost.
Now, while we’re talking about possible perceived costs
here, I'll ask you another illustration, take the situation
again where a particular customer himself isn’t directly
involved in a lawsuit, Appleton, Meade or Moore, but if
one of them had been, say, purchasing all of its supplies
hypothetically from Manildra, which we know didn’t occur,
but say they had been, hypothetically, and then there was a
lawsuit, the result of which was Manildra was eliminated
completely from the market, would that be a perceived cost?
Certainly. It wouid.
And can you explain that, please?
Yes. In the large granule whe
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