Petition for Writ of Certiorari — Schinzing v. Mid-State Stainless, Inc.
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2003) a claim for a declaration of non-infringement makes a
counterclaim for patent infringement compulsory, anc since
Schinzing failed to assert a counterclaim for infringement he
waived his right to bring the counterclaim and is forever
barred from asserting the claim in future litigation. (A-8)
The court of appeals’ reversal of the damage award
was based in part on the termination provision of the license
agreement that provides, in relevant part, that:
Upon termination of this agreement for any
reason, [Mid-State] may after the effective
date of such termination sell all Licensed
Products in stock and complete construction
of all Licensed Products in the process of
manufacture at any time of termination and
sell the same, provided that [Mid-State] shall
pay to [S/S Products] royalties o such
Licensed Products as specified in this
Agreement.
(A-8)
The court of appeals’ vacation of the district court’s
ruling that the patent was not invalid with respect to
inventorship, prior publication and public use and vacation of
the ruling that Mid-State breached the license agreement
were based on the court’s understanding that the district court
should have conducted a patent validity analysis by
comparing the claims of the patent to the students’ proposals,
the student report and the student demonstration. (A-4, A-5)
REASONS FOR GRANTING THE PETITION
This petition should be granted because the decision
of United States Court of Appeals for the Eighth Circuit is in
conflict with decisions of the Supreme Court and those other
United States Courts of appeals on the same important
matters.
l. Compulsory count..claim.
In reversing the district court’s denial of Mid-state’s
motion for an amendment to the judgment which would add a
declaration of non-infringement, the court of appeals
apparently lost sight of the fact that Rule 13 is particularly
directed against one who failed to assert a counterclaim in
one action and then instituted a second action in which that
counterclaim became the basis of the complaint. Southern
Constr. Co. v. Pickard, 371 U.S. 57, 60, 83 S.Ct. 108, 110, 9
L.Ed.2d 31, 34 (1962). This guidance from the Supreme
Court has resulted in a series of decisions by courts of
appeals focused on the rule’s prohibition against instituting a
new action based on claims that were compulsory in a prior
action. For example, see Dillard v. Security Pac. Brokers,
Inc., 835 F.2d 607, 609 (5" Cir. 1988); Hydranamics vy.
Filmtech Corp., 70 F.3™ 533, 536 (9" Cir. 1995); Avemco
Ins. Co. v. Cessna Aircraft Co., 11 F.3™ 998, 1001 (10" Cir.
1993).
This guidance from the Supreme Court has also
resulted in recognition that the rule is intendea to encourage
litigation of a compulsory claim in the court in which it is
required to be brought. United States v. Eastport Steamship
Corp., 255 F.2d 795, 802 (2d Cir. 1958). (“The compulsory
counterclaim rule requires that once the action was
commenced in the Court of Claims that court was the only
proper forum for the adjudication of any claims by the
Government arising out of the transaction or occurrence that
was the subject matter of Eastport’s petition.”’)
This understanding of rule 13 is consistent with rule
15 which provides for amendments to pleadings at any time,
even after judgment. In this case, however, the court of
appeals adopted an interpretation of the rule that prevents
Schinzing from moving-for leave to amend his pleadings to
add the required counterclaim of infringement, thus
eliminating the possibility of litigating the claim in the court
where it is compulsory. This petition should be granted so
that Schinzing and others who fail to initially fail to plead a
compulsory counterclaim can be assured of having the
benefit of an opportunity amend their pleadings under rule 15
when that is the only way in which their counterclaims can be
considered on the merits.
Note 7 of the Advisory Committee Notes to the 1937 —
adoption of rule “T3, regarding compulsory counterclaims,
states: “If the action proceeds to judgment without the
interposition of a counterclaim as required by subdivision (a)
of this rule, the counterclaim is barred. See American Mills
Co. v. American Surety Co., 260 U.S. 360, 43 S.Ct. 149, 67
L.Ed. 306 (1922); Marconi Wireless Telegraph Co. v.
National Electric Signalling Co., 206 Fed. 295 (E.D.N.Y.,
1913); Hopkins, Federal Equity Rules (8" ed. 1933), p. 213;
Simkins, Federal Practice (1934), p. 663.” Subsequent to
the adoption of the rule, trial courts within the 8" circuit, and
in other circuits as well, have interpreted it to mean that
failure to assert a compulsory counterclaim is barred only if
the action in which it could have been asserted proceeds to
judgment. For example, in Schott v. Colonial Baking Co.,
111 F.Supp. 13, 18-19, (W.D.Ark 1953), the district court
assumed that Rule 13(a) would not bar a compulsory
counterclaim unless the action proceeded to judgment, and
cited Douglas v. Wisconsin Alumni Research Foundation, 81
F.Supp. 167, 170, in which the court said “At the time of the
dismissal, it would have been still possible for Dougias to
have asserted a counterclaim by way of amendment; but, in
view of the dismissal order, such action became
unnecessary.”
Schott and Note 7 of the 1937 Advisory Committees
Notes to rule 13 were subsequently cited in the case of
Bellmore Sales Corp. v. Winfield Drug Stores, Inc. 187
F.Supp. 161, 162 (S.D.N.Y. 1960), where the court denied a
motion for dismissal of the plaintiffs complaint on the
grounds that it should have been raised as a compulsory
counterclaim in a prior pending action saying: “The prior
action is still pending. It is only after that action proceeds to
judgment that any compulsory counterclaim arising out of the
transaction or occurrence that is the subject matter of the
prior suit will be barred.”
In 1964 the United Stated District Court for the
Southern District if lowa cited Bellmore saying “A plaintiff's
claim should not be dismissed on ground that it should have
been raised as a compulsory counterclaim in a prior action,
where such prior action is still pending and has not proceeded
to judgment.” Local Union 499 of the International
Brotherhood of Electrical Workers, AFL-CIO v. lowa Power
& Light Co., 224 F.Supp. 731, 738 (S.D. Iowa 1964).
In this case, the court of appeals remanded the case to
the district court for further proceedings. (A-11) As a result,
this action is still pending and has not proceeded to final
judgment. Therefore, Schinzing should not be barred from
bringing a claim for infringement.
In International Video Corporation v. Ampex
Corporation, 484 F.2d. 634, 636 (9" Cir. 1973), the Court of
Appeals for the ninth circuit affirmed the tnal court’s
dismissal of the defendant’s compulsory counterclaim for
patent infringement when the plaintiff decided to abandon its
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claim for a declaratory judgment of non-infringement. The
present case is similar to International Video in that in this
case Mid-State abandoned its claim for a declaratory
judgment of non-infringement by failing to include it in its
proposed findings of fact and conclusions of law. As a result,
Magistrate Judge Nelson did not consider the claim and it
was not addressed in the judgment. Once Mid-State
abandoned its claim for a declaratory judgment of
noninfringement Schinzing’s counterclaim for infringement
was no longer compulsory. On the other hand, if Mid-State’s
claim for non-infringement is reinstated, then Schinzing
should be given an opportunity to assert a counterclaim for
infringement.
This petition should be granted because the decision
of the court of appeals in this case is inconsistent with
generally accepted law that a compulsory counterclaim is not
barred until the action in which it is compulsory proceeds to a
final judgment, and if an opposing party’s claim that makes
the counterclaim compulsory is abandoned, the counterclaim
is no longer compulsory.
In Ayers v. United States, 58 F.2d. 607, 608 (8" Cir.
1932) the court acknowledged its limited authority saying:
“This court has no authority to retry an action at law and
render such judgment as we may think should have been
rendered. We can review only rulings made by the trial court
on questions brought to its attention and passed upon by it.”
In this case, the trial court did not decide whether
Mid-State’s products infringed Schinzing’s patent. Instead,
the trial court merely denied Mid-State’s motion for
amendment of the judgment to include a declaratory
judgment of non-infnngement because Mid-State “failed to
present evidence of non-infringement, failed to seek a
declaration of non-infringement at tnal, failed to include a
declaration of non-infringement in its proposed findings of
oj].
fact and conclusions of law and has not persuasively argued
that it has new evidence, previously unavailable.” (A-18)).
Since the trial court did not address or decide the issue of
non-infringement it should not have been reviewed or
decided by the court of appeals.
2. Damages.
In a footnote the court of appeals acknowledged
Studiengesellschaft Kohle, M.B.H. v. Shell Oil Co., 112 F.3™
1561, 1568 (Fed. Cir. 1997) (“this court detects no significant
frustration of federal patent policy by enforcing the [license
agreement] to the extent of allowing [the patent holder] to
recover royalties until the date [the licensee] first challenged
the validity of the claims” (emphasis added)). (A-10) In fact the
United States Supreme Court has held that federal patent law
does not pre-empt state coniract law so as to preclude
~ enforcement of a contract. Aronson v. Quick Point Pencil Co.,
440 US. 257, 99 S. Ct. 1096, 59 L. Ed. 2d. 296 (1979).
In this case there are two written agreements, the patent
license agreement and a second agreement entitled “Disclosure
Document.” In the Disclosure Document Mid-State agreed that
it would not build or have build (sp) or disclose information
with anyone or any other manufacturers (sp) company on said
products (wheelchair washers) without the written permission
from Wally Schinzing or Susan Spaulding. (A-42 - A-44) This
second agreement is not mentioned anywhere in the court of
appeals’ decision. It should have been addressed because it is
an additional basis upon which Schinzing is entitled to recover
from Mid-State under Wisconsin contract law. See Lipscomb’s
Walker On Patents, 3” Edition, Volume 6, Section 20:41, on
Pocket Part Page 19 (Copyright 1987); Universal Gym
Equipment, Inc. v. Erwa Exercise Equipment Limited, 827
F.2d. 1542, 1550 (Fed. Cir. 1987). (“The question is whether
the patent law precludes the application of state law to validate
and award damages for a licensee’s breach of a contractual
«1 2.
provision by which the licensee agreed that, after its license to
manufacture the licensor’s product had terminated, the licensee
would not include the licensor’s features and designs in the
licensee’s products. In our view the patent law does not
preclude the application of state contract law to provide
damages for breach of this agreement.”) The court of appeals
decisicn in this case is in conflict with Kohle, Aronson and
Universal Gym and should be reversed.
a Student report and student demonstration.
In its May 18, 2004, Second Amended Findings of
Fact, Conclusions of Law and Order for Judgment the trial
court concluded that Mid-State had not proved by clear and
convincing evidence that the Northern Iowa _ student
demonstration of the wheelchair washer constituted a public
use and that as a matter of law the student’s written proposal
is not a printed publication under 35 U.S.C. §102(b). (A-49,
A-50) The court of appeals did not reverse these rulings;
nevertheless it remanded the case to the trial court for an
element-by-element comparison of the ‘375 patent to the
device shown in the student demonstration and the device
described in the student report. Given the trial court’s
conclusion that the demonstration was not a public use and
the report was not a printed publication, these two mandated
element-by element comparisons would serve no purpose and
are inconsistent with the statute and decisions of the court of
appeals for the federal circuit relied upon by the tnal court.
Lough v. Brunswick Corp., 86 F.3d 1113, 1119 (Fed. Cir.
1996); Tone Bros. V. Sysco Corp., 28 F.3™ 1192, 1198 (Fed.
Cir. 1994); and Jn Re: Cronyn, 890 F.2d 1158 (Fed. Cir.
1989).
CONCLUSION
This petition should be granted.
Respectfully submitted,
William L. Lucas, P.A.
7456 Cahill
Edina, MN 55439-2728
(952) 944-8267
sta.
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
No. 04-2535
Walter W. Schinzing,
Appellee,
Appeal from the United States
District Court for the
District of Minnesota
V.
Mid-States Stainless, Inc., a
Wisconsin Corporation,
* *&£ &* & & & & & H F
Appellant.
Submitted: March 18, 2005
Filed: July 15, 2005
Before WOLLMAN, GIBSON, and COLLOTON, Circuit - «dges.
WOLLMAN, Circuit Judge.
Mid-State Stainless, Inc. (Mid-State), appeals from the
rejection of its patent invalidity counterclaim and from the denial of
its motion to amend the judgment to include a declaratory judgment
of non-infringement and a judgment that it had not breached a patent
license agreement. We affirm in part, reverse in part, vacate in part,
and remand.
I.
This is a patent case involving a machine designed to wash
wheelchairs, the idea for which was originally conceived by Walter
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Schinzing (Schinzing) in 1987. Schinzing filed a patent application
with the United States Patent and Trademark Office (PTO) in August
1988 (the '091 application). The PTO rejected Schinzing's
application as obvious in December 1988 and rejected amended
applications as obvious in January 1989 and July 1989.
Contemporaneous with the filing of the '091 application,
Schinzing made arrangements with Elm Springs Enterprises to
manufacture his washer. Shortly thereafter, he permitted four
students from Dr. Lou Honary's Methodology and Conceptualization
class at the University of Northern Iowa to analyze the washer
design over the course of a two-semev "sr class project.’ The students
recommended improvements to the washer in a written report
entitled "Wheel-Chair Modifications Proposal" (the student report).
The students also demonstrated a version of the washer that
incorporated their recommended improvements to an audience that
included Schinzing, Dr. Honary, other students and professors,
partners of Elm Springs, and a member of Congress (the student
demonstration).
In October 1989, Schinzing filed a second patent application
(the '119 application), which was a continuation-in-part of the '091
application. The '119 application incorporated the improvements
recommended by the students and included several of the students'
drawings. Schinzing maintained that he was the sole inventor of the
modified washer. After the PTO rejected the '119 application,’
Schinzing continued to work on further modifications to the washer.
He and several other members of Elm Springs filed a third patent
application in November 1990 (the '757 application). The
subsequently amended '757 application presented an independent
claim consisting of seven elements and a second claim dependent on
' The undergraduate course was part of an engineering technology
program. Honary Dep. at 5. Dr. Honary indicated that the students in
the program were trained to be "somewhere between a technician
and an engineer with a management component to learn to manage
projects.” Id. at 6.
? Schinzing later abandoned the '119 application when he failed to
respond to an August 1, 1990, letter from the PTO.
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the first. The PTO issued patent number 5,133,375 (the '375 patent)
for the amended ‘757 application in July 1992.
In April 1993, Schinzing, in partnership with a woman
named Sue Spaulding (collectively, S/S Products), entered into a
license agreement with Mid-State under which Mid-State would
develop, manufacture, use, and market the washer. Mid-State agreed
to pay S/S Products a royalty of $ 400 for each washer that it
installed. MidState manufactured and sold 99 washers under the
agreement and paid royalties on those washers. After S/S Products
terminated the agreement in February 1998, MidState sold an
additional 232 washers but did not pay royalties on them.
Schinzing sued Mid-State in Minnesota state court, alleging
that Mid-State had breached the license agreement by failing to pay
royalties on the washers that it sold after the termination of the
agreement. Mid-State removed the case to federal court, raised ten
affirmative defenses, and counterclaimed for a declaratory judgment
of patent invalidity and non-infringement. The parties consented to a
trial before a magistrate judge. After a two-day bench trial, the
district court concluded that MidState had breached the license
agreement and that the '375 patent was not invalid. Mid-State filed a
motion to amend the judgment to include a declaratory judgment of
non-infringement and a judgrnent that Mid-State had not breached
the license agreement. See Fed. R. Civ. P. 59(e). Mid-State appeals
from the district court's denial of its motion and from the district
court's conclusion that the '375 patent was not invalid.
Il.
We briefly address the question of jurisdiction. This case
involves substantive issues of patent law that are usually adjudicated
in the Court of Appeals for the Federal Circuit. We are required to
exercise jurisdiction, however, under the holding of Holmes Group
v. Vornado Air Circulation, 535 U.S. 826, 829-31, 153 L. Ed. 2d 13,
122 S. Ct. 1889 (2002), which makes clear that the Federal Circuit's
jurisdiction attaches when a plaintiff's well pleaded complaint asserts
a claim arising under federal patent law, but not when the patent
issue is raised for the first tinte in a defendant's counterclaim.
Because Schinzing’s complaint alleged no claims arising under
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federal patent law and the patent issues arise solely from Mid-State's
counterclaim, appellate jurisdiction properly lies with us. Cf.
Telecom Tech. Servs. Inc. v. Rolm Co., 388 F.3d 820, 826 (11th Cir.
2004) ("Because the face of the complaint, here, addresses antitrust
issues and patent infringement issues are only raised as
counterclaims, the Federal Circuit determined that it did not have
jurisdiction over the present case and transferred it to this court.");
E.I. Du Pont de Nemours & Co. v. Okuley, 344 F.3d 578, 583 n.3
(6th Cir. 2003) (noting that counterclaims cannot serve as the basis
for Federal Circuit jurisdiction). :
In examining this case, we adopt the Federal Circuit's
precedent on substantive issues of patent law.
IT],
We tur first to Mid-State's counterclaims of patent
invalidity, because if we conclude that the patent is invalid then we
need not consider whether Mid-State was guilty of infringement. See
Lough v. Brunswick Corp., 86 F.3d 1113, 1123 (Fed. Cir. 1996)
("Invalidity is a complete defense to infringement and . . . .no further
public interest is served by our resolving an infringement question
after a determination that the patent is invalid."). Mid-State asserts
four theories under which the district court should have invalidated
the '375 patent: (1) inventorship (because Schinzin.g failed to name
the students as co-inventors); (2) prior publication (based on the
student report); (3) public use (based on the student demonstration);
and (4) inequitable conduct.
A.
The first step in any invalidity analysis is claim construction.
Akamai Techs., Inc. v. Cable & Wireless Internet Servs., Inc., 344
F.3d 1186, 1192 (Fed. Cir. 2003). Construction of the claims by the
trial court is often conducted upon a preliminary evidentiary hearing,
called a Markman hearing (which derives its name from Markman v.
Westview Instruments, Inc., 517 U.S. 370, 134 L. Ed. 2d 577, 116S.
Ct. 1384 (1996)). EMI Group North America, Inc. v. Intel Corp., 157
F.3d 887, 891-92 (Fed. Cir. 1998). A court is required to construe the
limitations of the claims and apply them to the allegedly invalidating
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acts. See Dana Corp. v. American Axle & Mfg., Inc., 279 F.3d 1372,
1374 (Fed. Cir. 2002). See also Trovan, Ltd. v. Sokymat SA, Iron,
299 F.3d 1292, 1302 (Fed. Cir. 2002) (claim construction is the first
step in invalidity analysis based on inventorship); Helifix Ltd. v.
Blok-Lok, Ltd., 208 F.3d 1339, 1346 (Fed. Cir. 2000) (same with
respect to prior publication); Bernhardt, L.L.C. v. Collezione Europa
USA, Inc., 386 F.3d 137i, 1377 (Fed. Cir. 2004) (same with respect
to public use).
The district court failed to construe the claims of the '375
patent. It is true that a trial court need not parse claims when there is
no “issue in material dispute as to the meaning or scope of the
claims." U.S. Surgical Corp. v. Ethicon, Inc., 103 F.3d 1554, 1570
(Fed. Cir. 1997); see also id. at 1562-63 ("there was no argument at
trial as to the meaning of technical terms or words of art insofar as
they concerned the determination of obviousness"). Because neither
Schinzing ner Mid-State contests the meaning of any terms or words
used in the description of the '375 patent, the threshold claim
construction is not essential for purposes of definiiug the claim. What
is indispensable, however, is an element-by-element comparison of
the '375 patent to: (1) the aspects of the modified washer that the
evidence showed were proposed by the students; (2) the device
shown in the student demonstration; and (3) the device described in
the student report. These are questions of fact, cf. id. at 1570, and
they were not reached by the district court. Accordingly, we must
remand the case so that the district court may conduct these
comparisons for the purpose of addressing Mid-State's invalidity
counterclaims related to inventorship, prior publication, and public
use. Cf Graco, Inc. v. Binks Mfg. Co., 60 F.3d 785, 791 (Fed. Cir.
1995) (conclusory factual findings on infringement provide an
independent basis for remand).
We note that on remand the district court's comparison of the
'375 patent to the device described in the student report and the
device shown in the student demonstration should reflect the Federal
Circuit's observation that 35 U.S.C. § 102(b) may bar patentability
by anticipation if the earlier device includes every limitation of the
later claimed invention, or by obviousness if the differences between
the claimed invention and the earlier device would have been
obvious to one of ordinary skill in the art. Netscape Communications
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Corp. v. Konrad, 295 F.3d 1315, 1321 (Fed. Cir. 2002). Although
obviousness is a legal conclusion, it requires underlying factual
inquiries that include: (1) the scope and content cf the prior art, (2)
the differences between the prior art and the claims at issue, (3) the
level of ordinary skill in the art at the time the invention was made,
and (4) any objective evidence of nonobviousness. See Graham v.
John Deere Co., 383 U.S. 1, 17-18, 15 L. Ed. 2d 545, 86 S. Ct. 684
(1966).
B.
Mid-State contends that the patent 1s invalid because
Schinzing engaged in inequitable conduct before the PTO.’
Specifically, Mid-State asserts inequitable conduct based on
Schinzing's failure to identify in the '757 application: (1) Schinzing's
previously rejected patent applications (the '091 application and the
'119 application); (2) a prior patent (the Haverberg patent); (3) the
student co-inventors; (4) the student report; and (5) the student
demonstration.
A district court's determination regarding inequitable conduct
before the PTO is reviewed for abuse of discretion. PerSeptive
Biosystems v. Pharmacia Biotech, Inc., 225 F.3d 1315, 1319 (Fed.
Cir. 2000). To sustain a claim of inequitable conduct, the alleged
infringer must show by clear and convincing evidence that (1) the
nondisclosed information would have been material to the patent
examiner, and (2) the nondisclosure was intentional. Under Sea
Indus., Inc. v. Dacor Corp., 833 F.2d 1551, 1559 (Fed. Cir. 1987).
These two elements must be balanced against each other, and if one
is particularly strong, a lesser degree of the other may suffice to
show inequitable conduct. Id. Nonetheless, "materiality does not
presume intent, which is a separate and essential component of
inequitable conduct." Allen Eng'g Corp. v. Bartell Indus., Inc., 299
F.3d 1336, 1352 (Fed. Cir. 2002) (citation omitted).
> Although the practical effect is generally the same, inequitable
conduct renders a patent unenforceable rather than invalid. Ulead
Systems, Inc. v. Lex Computer & Mgmt. Corp., 351 F.3d 1139, 1150
n.8 (Fed. Cir. 7 3). ;
A-6
The district court's findings on materiality and intent are
reviewed for clear error, and thus will not be overturned in the
absence of a definite and firm conviction on the part of the reviewing
court that a mistake has been made. Hoffmann-La Roche, Inc. v.
Promega Corp., 323 F.3d 1354, 1359 (Fed. Cir. 2003) (citation and
quotation marks omitted). The district court's credibility
determinations on intent to deceive the PTO can virtually never be
clear error. Brasseler, U.S.A. I, L.P. v. Stryker Sales Corp., 267 F.3d
1370, 1381 (Fed. Cir. 2001) (citation and quotation marks omitted).
Gross negligence alone does not mandate a finding of intent to
deceive. Kingsdown Med. Consultants v. Hollister, Inc., 863 F.2d
867 (Fed. Cir. 1988) (en banc in relevant part) (resolving conflicting
precedent pertaining to gross negligence and intent).
The district court found that "there was no evidence at trial
that Mr. Schinzing intentionally withheld anything from the Patent
and Trademark Office" and that "Mr. Schinzing consistently testified
that the student proposal was an educational opportunity provided to
the students as part of their undergraduate course requirements and
that the students' proposal was not a significant part of the invention
as finally patented." D. Ct. Order of May 18, 2004, at 23. Although
the district court did not specifically address Mid-State's allegations
of inequitable conduct based on Schinzing's failure to disclose the
prior patent applications, the Haverberg patent, and the student
report, the factual findings that these nondisclosures were not
intentional is implicit in the district court's finding that Schinzing did -
not intentionally withhold "anything" from the PTO. We conclude
that the district court's factual findings as to intentionality are not
clearly erroneous. Because none of Schinzing's nondisclosures was
intentional, the district court did not err in finding that Schinzing did
not engage in inequitable conduct before the PTO.
IV.
Although we are unable to determine whether the '375 patent
is invalid, we address Mid-State's other issues on appeal in the
interest of judicial economy. We review the denial of a Rule 59(e)
motion to amend the judgment for abuse of discretion. Mathenia v.
Delo, 99 F.3d 1476, 1480 (8th Cir. 1996).
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A.
A claim for a declaration of non-infringement makes a
counterclaim for patent infringement compulsory. Polymer Indus.
Prods. Co. v. Bridgestone/Firestone, Inc., 347 F.3d 935, 938 (Fed.
Cir. 2003) (noting that this is a uniform national rule established by
the Federal Circuit). A party that does not assert a compulsory
counterclaim waives its night to bring the counterclaim and is forever
barred from asserting that claim in future litigation. Id. The burden is
always on the patent holder to show infringement. Under Sea Indus.,
833 F.2d at 1557.
Mid-State counterclaimed for a declaratory judgment of non-
infringement in its answer to Schinzing's complaint. Accordingly,
Schinzing was obligated to counterclaim for infringement and had
the burden to show infringement. Schinzing argues that because
Mid-State failed to reassert its request for a declaratory judgment in
its proposed findings of fact and conclusions of law, Mid-State has
waived or abandoned its counterclaim and Schinzing is therefore
relieved of its obligation to assert a compulsory counterclaim. We
disagree. Schinzing's obligation to assert a compulsory counterclaim
arose when Mid-State filed its counterclaim for declaratory
judgment. Irrespective of Mid-State's subsequent action or inaction,
Schinzing, having failed to counterclaim or present any evidence of
infringement at trial, has not proved infringement and is now barred
from bringing a future infringement action. Accordingly, Mid-State
is entitled to a declaratory judgment of non-infringement, and thus
the district court abused its discretion in denying Mid-State’s motion
to amend the judgment. Moreover, because it is entitled to a
declaratory judgment of noninfringement, Mid-State, as a matter of
law, could not have infringed the '375 patent.
B.
Schinzing’s allegation that Mid-State breached the license
agreement is premised on article VI(D) of the agreement, which
provides, in re. vant part, that:
Upon termination of this Agreement for any reason,
{[Mid-State] may after the effective date of such
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termination sell all Licensed Products in stock and
complete construction of all Licensed Products in the
process of manufacture at any time of termination and
sell the same, provided that [Mid-State] shall pay to
[S/S Products] royalties on such Licensed Products as
specified in this Agreement.
License Agreement at 5.* The district court concluded that "to the
extent that MidState breached [the] agreement after the date of
termination, the appropriate measure of damages is the calculation of
a reasonable royalty on all machines sold which embodied the
licensed patent and/or technology." D. Ct. Order of May 18, 2004, at
25.
The district court's conclusion fails to distinguish between
breach and infringement. The license agreement obligated Mid-State
to pay Schinzing royalties on any washers that were either in stock or
in the process of manufacture when the agreement was terminated.
Schinzing may assert a claim for breach of contract against Mid-
State for its failure to pay post-termination royalties on those
washers. In contrast, any washers that Mid-State manufactured
completely post-termination fell outside the scope of the license
agreement, and Schinzing has no contractual remedy against Mid-
State for its manufacture and sale of those washers. To conclude
otherwise would mean that the agreement was irrevocable, an
interpretation precluded both by Article VI of the agreement ("unless
terminated earlier, the term of this Agreement shall be indefinite")
and by Schinzing's termination of the agreement.
* The license agreement defines "licensed products" as “any wheel
chair cleaning assembly, subassemblies, components, replacement
parts [or] other products which embody the Licensed Patent and
Technology." License Agreement at 1. The "licensed patent" is
defined as "U.S. Patent No. 5,133,375 and corresponding foreign
patents or applications and including divisions, reissues,
continuations, renewals, and extensions thereof." Id. "Technology" is
defined as "any knowledge, information, know-how and devices,
whether patentable or not, in the possession of [S/S Products] and
relating to the Washer." Id.
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When Schinzing terminated the agreement, Mid-State "no
longer [had]. any right to the use of the licensed patent or
technology." License Agreement at 5. Accordingly, the appropriate
recourse for Schinzing would have been an infringement action. That
possibility, however, is now barred by our holding in part IV(A),
supra.
We are left, then, to consider Schinzing's breach of contract
claim with respect to those washers sold by Mid-State that were
either in stock or in the process of manufacture when the agreement
was terminated. Although we have held that MidState did not
infringe the '375 patent in its manufacture and sale of the washers, it
may still have breached the license agreement by failing to pay
royalties in accordance with that agreement. On the other hand, if the
district court concludes on remand that the '375 patent is invalid,
then it will have to address Mid-State's affirmative defense that the
license agreement is invalid for lack of consideration.° Accordingly,
we remand the breach issue. We also note that the record does not
reflect how many of the 232 washers that Mid-State sold after the
agreement had been terminated were either in stock or in the process
of manufacture at the time of termination. If the district court
concludes that Mid-State breached the license agreement by selling,
after the agreement had been terminated, washers that were either in
stock or in the process of manufacture at the time of termination, the
district court will have to make a factual finding regarding the
number of washers sold posttermination that fell within that
category.
V.
We affirm the district court’s ruling that the ‘375 patent is not
unenforceable due to inequitable conduct. We vacate the district
> But cf. Studiengesellschaft Kohle, M.B.H. v. Shell Oil Co., 112
F.3d 1561, 1568 (Fed. Cir. 1997) ("this court detects no significant
frustration of federal patent policy by enforcing the [license
agreement] to the extent of allowing [the patent holder] to recover
royalties until the date [the licensee] first challenged the validity of
the claims" (emphasis added)).
court’s ruling that the patent was not invalid with respect to
inventorship, prior publication, and public use. We reverse the
district court’s denial of Mid-State’s motion to amend the judgment
to reflect a declaratory judgment of noninfringement and remand
with direction to grant the motion. We vacate the district court’s
ruling that Mid-State breached the license agreement, we vacate the
damage award, and we remand for further proceedings consistent
with this opinion.
A-ll
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Walter Schinzing, Civil No. OO-CV-2686 (MJD/SRN)
Plaintiff,
v. ORDER
Mid-State Stainless, Inc.,
Defendant.
William L. Lucas, Esq., on behalf of Plaintiff.
Richard A. Arrett, Esq. and Edwin E. Voigt, Esq., on behalf of
Defendant.
SUSAN RICHARD NELSON, United States Magistrate Judge
The above entitled matter came before the undersigned United States
Magistrate Judge on Defendant's Motion to Alter or Amend
Judgment Pursuant to Fed. R. Civ. P. 59(e) [Doc. No. 71] and
Plaintiff's Motion for Attorney's Fees and Expenses and Prejudgment
Interest [Doc. No. 73]. On April 28, 2003, the parties consented to
the exercise of jurisdiction by a United States Magistrate Judge and
the Honorable Michael J. Davis, United States District Judge for the
District of Minnesota, ordered the case referred to the undersigned.
I. PROCEDURAL HISTORY
Plaintiff filed his Complaint on October 30, 2000, in
Hennepin County District Court alleging breach of a license
agreement for United States Patent No. 5,133,375 ( '375 Patent).
Defendant removed the case to this Court in December 2000, denied
the allegations of breach, and raised the following affirmative
defenses: (1) joint ownership of the licensed patent; (2) the patent
license was no longer in force; (3) invalidity of both the patent
license and disclosure document for lack of consideration; (4) patent
misuse; (5) no breach of the patent license; (6) invalidity of the
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license agreement for lack of consideration because the '375 patent is
invalid; (7) no breach because the '375 Patent does not cover any
Mid-State product; (8) invalidity and unenforceability of the license
agreement because the '375 Patent is invalid because it does not
name the correct inventors; (9) invalidity of the '375 Patent due to
Schinzing's and/or his counsel's inequitable conduct before the
United States Patent Office; and (10) Mid-State was fraudulently
induced to enter the license agreement. (Am. Findings of Fact at 1-
2.) Mid-State counter-claimed for declaratory judgment of patent
invalidity and non-infringement of the '375 Patent and for fraudulent
inducement and common law deceit. (Am. Answer & Counterclaims
at 9] 21-57.)
In July 2002, Judge Davis addressed the parties’ cross
motions for summary judgment. Judge Davis granted Plaintiff's
motion for summary judgment as to Defendant's counterclaim that
the '375 is invalid as obvious. (Mem. & Order of 7/16/02.) Judge
Davis denied the rest of Plaintiff's summary judgment motion and
denied Defendant's summary judgment motion. id.
A bench trial was held in May 2003 before this Court. The
sole issue on which the parties presented live testimony at trial was
the validity of the '375 Patent. The Court issued its Amended
Findings of Fact, Conclusions of Law and Order for Judgment on
December 4,2003, granting judgment to Plaintiff in the amount of
$92,8000 plus interest. (Am. Findings of Fact at 26.)
Il. BACKGROUND
This case arises out of a dispute involving a license
agreement in which Plaintiff licensed the use of its '375 Patent for a
wheelchair washer to Defendant. Defendant obtained the license in
order to further develop, manufacture and market the washer. In
exchange, Defendant agreed to pay a royalty of $400 per machine.
The parties entered into this agreement in April 1993. (Def. Ex. 40.)
As to termination of the agreement, the license agreement provided
for an indefinite term. It also provided:
D. Upon termination of this Agreement for any reason,
nothing herein shall be construed to release any party
A-13
from its obligation which matured prior to the
effective date of termination. MSI, its affiliates or its
sublicensees may after the effective date of such
termination sell all Licensed Products in stock and
complete construction of all Licensed Products in the
process of manufacture at any time of termination and
sell the same, provided that MSI shall pay to S/S
royalties on such Licensed Products as specified in
this Agreement.
E. Upon termination for any cause, other than the
expiration of the letters patent granted under the
Licensed Patent, MSI shall no longer have any night
to the use of the Licensed Product or Technology.
(Complaint, Ex. A, Art. VI.)
Within six days of entering into the license agreement, at
Plaintiffs request, Plaintiff had Defendant's General Manager,
Marshall Ryan, sign a disclosure document. (Am. Findings of Fact at
4] 82.) This document states:
I will in no way build or have build [ sic] or disclose any
information with anyone or any other manufacturers [sic]
company on said products, without the written permission
from Wally Schinzing or Susan Spaulding.
(Complaint, Ex. B.) Plaintiff also signed this document, though it
involved no separate consideration. (Am. Findings of Fact at § 85.)
Plaintiff betieved that under this disclosure agreement, Defendant
was allowed to build the licensed machine, but could only build
other machines with Plaintiff s written permission. id. at § 87.
Ill. ©PARTIES' POSITIONS
Pursuant to Fed. R. Civ. P. 59(e), Defendant moves to alter or
amend judgment. While Defendant requests that the Court amend
judgment on several grounds, the primary substantive reasons and
amendments sought include the following:
l. To indicate that Defendant also counterclaimed for
declaratory judgment of non-infringement of the '375
Patent;
2. That the Court award Defendant declaratory judgment
of non-infringement;
3. That the Court provide analysis as to how Plaintiff
met its burden of proving breach of a clause that
survived termination, specifically, identifying how
Defendant sold "licensed product" post-termination.
Accordingly, Defendant requests that the altered or
amended judgment reflect that Defendant did not
breach the license agreement. Defendant also seeks to
alter or amend the judgment in conformity with its
position that Plaintiff has failed to state a cause of
action post-termination upon which relief can be
granted. Defendant contends that Plaintiff has not
initiated a cause of action against Defendant for
patent infringement following termination of the
license agreement.
4. Defendant requests that the Court change the
judgment to indicate that Defendant did not breach
the agreement, as Defendant contends it did not sell
licensed product post termination.
(Def's Mem. to Alter or Amend Judgment at 4-5.)
Defendant points to paragraph 25 of its counterclaim, and its
prayer for relief, in which it pled that its wheelchair washing
machines did not infringe on any valid claim of the '375 Patent and
requested a declaration to that effect. Id. at 1. Defendant also argues
that the trial evidence showed that Defendant's products sold since
termination have motor-powered, oscillating back-and-forth spray
arms, rather than circular rotating arms powered by water pressure.
Id. at 3. The Court found that since termination, Defendant sold
some models without motonzed rollers (Am. Findings of Fact at §
93), and that the '375 Patent claimed to include rollers and the means
for rotating said roller means. Id. at 64. Thus, Defendant argues that
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this further supports its position that any models it sold since
termination without motorized rollers do not infringe claims 1-2 of
the '375 Patent. (Def.'s Mem. To Alter or Amend Judgment at 3.)
Defendant argues that the judgment does not sufficiently
analyze the issue of breach following termination. Id. at 4. Also,
Defendant contends that the damages’ standard is in error because it
contained no analysis of Defendant selling "licensed product” post-
termination. Id. Furthermore, Defendant contends that just because it
mistakenly paid Plaintiff royalties prior to the termination of the
license agreement, that does not alter Plaintiff's burden of proving
breach of the agreement post-termination. Id.
Plaintiff argues that Defendant does not meet the standard to
amend or alter the judgment under Fed. R. Civ. P. 59(e). (Pl.’s Mem.
in Opp. to Def.'s Mot. to Alter or Amend at 1.) In particular, Plaintiff
contends that Defendant based its non-infringement claim upon its
claim of invalidity. As the Court found that the patent was not
invalid, Plaintiff argues that Defendant's non-infringement claim
fails accordingly. Id. at 2. Moreover, Plaintiff notes that because
Defendant failed to request judgment of non-infringement in its
proposed findings of fact and at trial, it may not now raise the issue.
Id.
Even if the Court considers Defendant's non-infringement
argument, Plaintiff contends that it is directed at only claim 1 of the
patent. Because the patent has two claims, Plaintiff argues that
infringement of one claim constitutes infringement of the entire
patent. Id. at 3. Furthermore, Plaintiff states that the undisputed
evidence at trial proved that Defendant's products do infringe claim 1
of the patent. Specifically, the spray arms of Defendant's products
perform the same work as the spray arms of Plaintiff s patent and
they also clean wheelchairs in substantially the same way and
achieve the same result. Id. at 4. Finally, Plaintiff notes that contrary
to Defendant's assertions, some of Defendant's products do have
motorized rollers. Id. at 5. Thus, Plaintiff contends that even if the
Court considers Defendant's arguments in support of non-
infringement, they do not lend adequate support to give Defendant a
judgment of non-infringement.
IV. DISCUSSION
A. Standard of Review
A motion to amend or alter judgment in a non-jury case may
be granted when “evidence has been admitted or excluded
improperly, evidence has been newly discovered, or improper
actions of counsel have affected the outcome of the case." Fed. R.
Civ. P. 59. However, "a motion to amend should [not] be employed
to introduce evidence that was available at trial but was not
proffered, to relitigate old issues, to advance new theories, or to
secure a rehearing on the merits." Fontenot v. Mesa Petroleum Co.,
791 F.2d 1207,1219 (Sth Cir. 1986). Parties should not use a motion
to alter and amend judgment to raise arguments which could, and
should, have been made before judgment issued. Bogosian v.
Woloohojian Realty Corp., 323 F.3d 55 (pt Cir. 2003); see also, NL
Industries. Inc. v. Commercial Union Ins. Cos., 938 F.Supp. 248 (D.
N.J. 1996) (party may not use motion to reconsider to reargue
motion or present evidence which should have been raised before.)
Thus, a motion made pursuant to Rules 52 and 59 is not intended to
routinely give litigants a second bite at the apple, but to afford an
opportunity for relief in extraordinary circumstances. Dale and Selby
Superette & Deli v. U.S. Dept of Agriculture, 838 F.Supp. 1346,
1347-1348 (D. Minn. 1993). .
B. Defendant's Claim of Non-Infringement
As noted above, in a Rule 59 motion, a party may not
introduce evidence that could have been discovered earlier, but was
not proffered at trial. See, supra. While Defendant included a claim
for a declaration of non-infringement in its counterclaim (Def.'s
, Answer and Counterclaims, 4 23, 25), it offered no evidence or
argument to this effect at trial, nor did it include any such proposed
finding of fact (See, Def.'s Revised Proposed Findings of Fact at 4
3.) In fact, the Court's Amended Findings of Fact, in which it
enumerated Defendant's counterclaims, mirrors the very language
proposed by Defendant -language which makes no mention of a
counterclaim regarding a declaration of non-infringement.° The
entirety of Defendant's case at trial consisted of its arguments with
respect to invalidity.
Because Defendant failed to present evidence of non-
infringement at trial, failed to seek a declaration of non-infringement
at trial, failed to include a declaration of non-infringement in its
proposed findings of fact and conclusions of law and has not
persuasively argued that it has new evidence, previously unavailable,
the Court denies Defendant's motion to amend or alter judgment to
include a finding of non-infringement.
es Breach
Defendant argues that the Court did not sufficiently analyze
the issue of breach and, in short, even if the patent was valid,
Defendant's products are not contained in the patent, and therefore,
Defendant could not breach the agreement. (See, Def.'s Mem. to
Alter or Amend Judgment at 4-5.) Again, the thrust of Defendant's
case at trial focused on invalidity of the patent. No live testimony
was presented on the issue of breach by the defense.
The relevant clauses in the licensing agreement provide:
Article VI - Term and Termination
D. Upon Termination of this Agreement for any reason,
nothing herein shall be construed to release any party
from any obligation which matured prior to the
effective date of termination. MSI, its affiliates or its
sublicensees may after the effective date of such
termination sell all Licensed Products in stock and
* Compare, "Mid-State also counterclaimed for a declaratory
judgment of patent invalidity of the '375 Patent and for fraudulent
inducement and common law deceit" (Am. Findings of Fact at 2.),
with "Mid-State also counterclaimed for a declaratory judgment of
patent invalidity of the '375 patent (First Counterclaim) and for
Fraudulent Inducement and Common Law Deceit (Second
Counterclaim.)" (Def.'s Revised Proposed Findings of Fact at { 3.)
A-18
complete construction of all Licensed Products in the
process of manufacture at the time of termination and
sell the same, provided that MSI shall pay to S/S
[plaintiff] royalties on such Licensed Products as
specified in this Agreement.
E. Upon termination for any cause, other than the
expiration of the letters patent granted under the
Licensed Patent, MSI shall no longer have any night
to the use of the Licensed Patent or Technology.
(Complaint, Ex. A., Art. VI) The agreement defines "Licensed
Products" as "any wheel chair cleaning assembly, subassemblies,
components, replacement parts of other products which embody the
Licensed Patent and Technology. Id. at Art. 1. "Technology," per the
agreement, is “any knowiedge, information, know-how and devices,
whether patentable or not, in the possession of S/S [plaintiff] and
relating to the Washer." Id.
Interpretation of a contract is a question of law. Edwards v.
Petrone, 465 N.W.2d 847, 848 (Wis. Ct. App. 1990). Evidence of
parties’ intent, such as the course of performance, is admissible only
if the contract is ambiguous. Heder v. City of Two Rivers, 149
F.Supp.2d 677, 687 (E.D. Wis. 2001), vacated on other grounds, 295
F.3d 777 (7th Cir. 2002), citing, Mielke v. Nordeng, 337 N.W.2d
462 (Wis. Ct. App. 1983). A contract is ambiguous if its terms are
reasonably susceptible to more than one construction. Gorton v.
Hostak. Henzl & Bichler. $.C., 577 N.W.2d 617 (Wis. 1998). Under
Wisconsin law, parties’ course of dealings is an acceptable method of
proof of contractual] obligations. Northwestern National Ins. Co. v.
Marsh & McLennan. Inc., 817 F.Supp. 1424, 1431 (E.D. Wis. 1993);
see also, Central States. Southeast. Southwest Areas Pension Fund v.
Kroger Co., 226 F.3d 903 (7th Cir. 2000), cert. denied, 532 US. 990
(2001) (noting that, in general, the practical interpretation the parties
to a contract have given that contract is strong evidence of their
intended meaning for an ambiguous term); Sethness-Greenleaf. Inc.
v. Green River Corp., 65 F.3d 64 (7th Cir. 1995) (course of dealing
or course of performance can be used to flesh out ambiguous or
incomplete agreement).
A-19
At issue here is what is meant by the language in the
termination provision stating that "MSI shall no longer have any
right to the use of the Licensed Patent or Technology." ((Complaint,
Ex. A, Art. VI. (E)) The license agreement defines the "Licensed
Patent" as US. Patent No. 5,133,375, and had the termination
provision merely referred to the "Licensed Patent," there would be
no ambiguity. Instead, the termination provision encompasses "the
Licensed Patent or Technology." Id. at Art. 1 (B) (emphasis added).
"Technology" is defined as "any knowledge, information, know-how
and devices, whether patentable or not, in the possession of S/S and
relating to the Washer." rd. at Art. I(A). The very terms
"knowledge," "information," "know-how," and “devices” are vague,
as well as the phrase "relating to the washer." Because the language
is so broad, it could be construed to refer to only the '375 patent
washer, or it could include similar products "relating to" the '375
patented device. Had Plaintiff merely sought to protect products
which embody only the licensed patent, he could have expressly
stated that. Thus, given this sufficient evidence of ambiguity, the
Court finds that extrinsic evidence of the parties’ intent is relevant to
the interpretation of the license agreement.
By using the words "or Technology," one must presume that
the parties understood the license agreement would be broadly
construed. Such an interpretation is further buttressed by the
Disclosure Document (Complaint, Ex. B.), which more explicitly
provides that Defendant agrees to refrain from building or disclosing
information about the washer without Plaintiff's written permission.
In this Order, the Court is not, however, defining "Technology."
Rather, the Court is noting that the license agreement language is
ambiguous and however it might be construed, the Court must
examine the parties’ course of performance to shed light upon the
parties’ understanding and intent.
The parties’ course of performance under this agreement ts
instructive. The license agreement provides for the payment of
royalties on the wheelchair washing machines until the date of
termination of the license agreement. As the Court noted in its
Amended Findings of Fact, Defendant contemplated that the first 99
wheelchair washing machines sold, which did not include rotary
spray arms, were products covered by the license agreement, and, in
fact, Defendant paid royalties on these products. (Am. Findings of
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Fact at 25.) Defendant argues that it affirmatively proved at trial that
none of its products sold post-termination utilized rotary spray arms
which are caused to rotate by liquid. (Def.'s Mem. to Alter or Amend
Judgment at 6.) Nevertheless, Defendant previously paid royalties on
the first 99 machines, none of which utilized rotary spray arms,
indicating that it understood such machines to be encompassed by
the license agreement.
As to its conduct post-termination, Defendant argues that it
did not sell "Licensed Product,” therefore, it is not liable for such
damages. Again, the license agreement provides for "Licensed
Product or Technology." ((Complaint, Ex. A, Art. V(E.))
"Technology" is defined as "any knowledge, information, know-how
and devices, whether patentable or not, in the possession of S/S and
relating to the Washer." id. at Art. I(A). Applying the broad
definition, “Technology,” could be interpreted to included
Defendant's products. Given Defendant's exclusive focus at trial on
the issue of invalidity, it cannot now raise arguments that could have
been raised at trial regarding breach. For these reasons, Defendant's
motion to amend or alter judgment as to breach is denied.
F. Damages
The Court held that, to the extent that Defendant breached the
agreement after the date of termination, "the appropriate measure of
damages is the calculation of a reasonable royalty on all machines
sold which embodied the licensed patent and/or technology." (Am.
Findings of Fact at 25.) The Court determined that Defendant was
liable for royalties for the 232 machines for which it had not paid
any royalties, in the amount of $92,800. Id. Defendant argues first
that the Court's standard was in error because the license agreement
defines "licensed products" to include products "which embody the
Licensed Patent and Technology.” (Def.'s Mem. to Alter or Amend
Judgment at 4.) Defendant argues that there is no analysis showing
that Defendant sold "licensed product," post-termination. Id.
As discussed, supra, the Court finds the agreement's
definition of "technology" ambiguous, and therefore turns to the
parties’ course of performance as to what the agreement
encompassed. While Defendant argues that none of its products fall
A-21
~ within Claim 1 of the '375 Patent, because they do not include
rotating spray arms rotated by water pressure, Defendant paid
royalties on the first 99 products. Id. at 5. None of these products
utilized rotary spray arms. Defendant then refused payment on 232
other machines. Defendant characterizes the royalty payments on the
first 99 machines as a mistake, resulting in a windfall for Plaintiff.
Id. Although Defendant argues that it is black letter law that,
following termination, parties are relegated to their status prior to the
grant of the license (Def.'s Mem. to Alter or Amend Judgment)
(citations omitted), in Universal Gym Equipment. Inc. v. Erwa
Exercise Equipment. Ltd., 827 F.2d 1542, 1550 (Fed. Cir. 1987), the
court addressed a similar situation. The Universal Gym court posed
the question of whether patent law precludes the application of state
law to validate and award damages for a licensee's breach of a
contractual provision by which the licensee agreed that, after its
license to manufacture the licensor's product had terminated, the
licensee would not include the licensor's features and designs in the
licensee's products. Id. The court concluded, "patent law does not
preclude the application of state contract law to provide damages for
breach of this agreement.” Id. While Defendant argues that the
agreement in this case, unlike that in Universal Gym, contained no
prohibition against selling licensed product, post-termination, the
agreement provides that upon termination, Defendant may sell all
licensed products in stock and complete construction of all licensed
products in the process of manufacture and sell them, provided that
Defendant pay to Plaintiff all the royalties on such products as
specified in the license agreement. (Complaint, Ex. A., Art. VI.) The
agreement contemplates that Plaintiff receive royalties for its
licensed products following termination.
The Court concludes that the 232 machines fall within
"licensed product," as they are essentially the same as the 99
machines for which Defendant paid royalties and contemplated to be
"licensed product." The Court finds the course of performance
persuasive evidence of the parties’ intent and understanding and
concludes that the damages total, which includes the 232 wheelchair
washers, is a reasonable calculation of damages. Thus, the Court
denies Defendant's motion to alter or amend the Findings of Fact as
it pertains to damages.
A-22
G. Miscellaneous Proposed Changes
A Summarization of Judge Davis' Summary Judgment
Decision
Defendant seeks clarification of the Amended Findings of
Fact and Conclusions of law as it pertains to Judge Davis' Summary
Judgment Order. (Def.'s Mem. to Alter or Amend Judgment at 2.) At
summary judgment, the Court granted Plaintiff's motion for partial
summary iudgment as to Defendant's counterclaim that the '375
patent was invalid as obvious, in view of the teachings of Clark, _
Zademach, Haverberg or Clark, and denied summary judgment of
the other claims and counterclaims. (Order and Mem. of July 16,
2002.) Discussing Judge Davis' decision, in the Amended Findings
of Fact and Conclusions of Law, this Court stated:
Judge Davis ruled, in his Memorandum Opinion and Order
dated July 16, 2002, that claim 1 of the '375 Patent was not
obvious to one skilled in the art in view of the prior art
identified by Mid-States’ expert Richard Bartz in his expert
report. Mid-State failed to prove, by clear and convincing
evidence, that the student proposal and/or student
presentation in combination with the other art of record
renders claim 1 of the '375 Patent obvious.
(Am. Findings of Fact at 23-24.) Defendant argues that at summary
judgment, Judge Davis did not have before him and did not rule on
the obviousness of the '375 Patent in view of the public use or the
printed publication which occurred at the University of Northern
Iowa combined with the '375 prior art of record. (Def.'s Mem. to
Alter or Amend Judgment at 2.)
While the Court is willing to make the requested clarification
regarding its description of the summary judgment ruling, it is
unwilling to alter the conclusion that Defendant failed to prove, by
clear and convincing evidence, that the student proposal and/or
student presentation in combination with the other art of record
rendered claim | of the '375 Patent obvious.
B. Typographical Errors
A-23
Defendant also seeks to amend the judgment via Fed. R. Civ.
P. 59 to correct two typographical errors. First, Defendant points out
that on page 24 of the Amended Findings of Fact that the Court
quoted the license agreement as reading "license to patent and
technology,” when the actual language in the license is "licensed
patent and technology.” Second, Defendant notes that in one of its
proposed findings of fact, it inadvertently referred to "licensed
product" instead of "licensed patent." When the Court included
Defendant's proposed paragraph into its Amended Findings of Fact
and Conclusions of Law, it included Defendant's typographical error,
found in paragraph 76 and page 24, paragraph E.
As these requested corrections are merely to correct and
clarify the Court's judgment, the Court grants Defendant's motion as
to these clarifications.
H. Plaintiff's Motion for Attorney's Fees and Expenses
and Prejudgment Interest
A. Attorney's Fees and Expenses
Plaintiff contends that he is entitled to fees and expenses,
citing Wisconsin legal authority and the plain language of the license
agreement. Plaintiff points to the following language in the licensing
agreement to support its position:
Article VIII - Indemnifications and Insurance
A. MSI agrees to indemnity S/S and hold S/S
harmless against all liabilities, demands,
damage., expenses, or losses arising from (i)
the manufacture, use, or sale of Licensed
Products by MSI, an affiliate or sublicensees,
(ii) from a third party's use of a Licensed
Product purchased or leased from MSI, an
affiliate or sublicensee of MSI, or (iii) from a
third party's manufacture of a Licensed
Product at the request of MSI.
(Complaint, Ex. A, Art. VIII)
A-24 ©
Wisconsin follows the "American Rule," under which parties
assume responsibility for their own attorney fees. Hunzinger Constr.
Co. v. Granite Resources Corp., 538 N.W.2d 804,809 (Wis. Ct. App.
1995). "As a general proposition, attorney fees are not allowable
unless a statute or an agreement of the parties provides otherwise."
Meas v. Young, 417 N.W.2d 55, 57 (Wis. Ct. App. 1987) (citations
omitted). Wisconsin also recognizes an exception to the general rule
when:
[T]jhe wrongful acts of the defendant have involved the
plaintiff in litigation with others, or placed him in such
relation with others as to make it necessary to incur expense
to protect his interest, such costs and expense should be
treated as the legal consequences of the original wrongful act.
Id., citing Weinhagen v. Hayes, 190 N.W. 1002, 1003 (Wis. 1922).
Plaintiff argues that both the indemnification language in the
license agreement and the Weinhagen decision require Defendant to
bear Plaintiff's attorney's fees and costs. Defendant argues that
Plaintiff's motion should not be considered because the request for
attorney's fees was not included in either Plaintiff's pretrial or post-
trial findings of fact and conclusions of law, nor was it submitted at
trial. (Def.'s Mem. Opp. to PI.'s Mot. Atty's Fees at 1.) The Court is
not persuaded by Defendant's argument, as a motion for attorney's
fees and costs is typically made by separate motion and is not
included in a party's proposed findings of fact and conclusions of
law.’ See Osterneck v. Emst & Whinney, 489 U.S. 169, 175 (1989)
(noting difference between motions for attorney's fees as compared
to motions for prejudgment interest; the former are not regarded as
part of the merits judgment).
Plaintiff is not trying to recover litigation expenses it incurred
’ Defendant certainly is correct, however, to note that Rule 59
motions to alter or amend judgment require a party to have submitted
some evidence, either at trial or in 1ts proposed findings of fact and
conclusions of law, on the issue at hand to the court. See, supra.
A-25
in a dispute with a third party. The contractual language does not
mention attorney's fees between parties. The language at issue
provides that Defendant agrees to "indemnify and hold Plaintiff
harmless against damages resulting from the manufacture, use or sale
of products by Defendant. ((Complaint, Ex. A., Art. VIII (A)).
Although not explicit, the language refers to indemnification relating
to third-party claims, and is found, appropriately enough, in tlie
section of the license agreement captioned "Indemnification and
Insurance."(Complaint, Ex. A, Art. VIII.) Had the parties intended to
include a provision requiring the breaching party to bear the
attorney's fees of the other party, a logical section to include such a
provision would have been either there or in the "Construction!
Arbitration" section. In that section, the license agreement provides
that Wisconsin law governs any disputes and it describes a procedure
for arbitrating disputes. (Complaint, Ex. A, Art. XII). As to
arbitration, the agreement states that expenses "will be shared
equally between the parties." Id. In Hunzinger, 538 N.W.2d at 809,
the court, "as is the general rule, we will not construe an obligation
to pay attorneys’ fees contrary to the American Rule unless the
contract provision clearly and unambiguously so provides."
(citations omitted). Similarly here, the license agreement is silent as
to an award of attorney's fees between the parties. Absent a clear
expression of intent to the contrary, the court is unwilling to permit
an award of attorney's fees.
The Weinhagen rule appears to be similarly applied to situations
involving third-parties: "Under Weinhagen attorney's fees are
recoverable from a wrongdoer only if they were incurred by a party
who was forced to litigate with a third party.” Marquardt v.
Milwaukee Cty., 639 N.W.2d 762, 768-69 (Wis. Ct. App. 2001).
Again, because Plaintiff's motion does not involve a third-party,
Weinhagen is not applicable. The Court denies Plaintiff's motion for
attorney's fees and costs.
2. Prejudgment Interest
Plaintiff also moves for an award of prejudgment interest.
Plaintiff argues that the Court's judgment against Defendant, which
includes interest, refers also to prejudgment interest. (P1.'s Mem.
Supp. Mot. Atty’s Fees at 3.) Further, Plaintiff contends that an
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award of prejudgment interest is consistent with the license
agreement language in which Defendant agreed to indemnify
Plaintiff and hold him harmless against all liabilities, demands,
damages, etc., resulting from the manufacture, sale or use of the
licensed products. rd. In providing a method for calculating
prejudgment interest, Plaintiff refers to Wisconsin's statutes for
calculating interest on jury verdicts and post-judgment interest. Id. at
4, citing WI. Stat. §§ 814.04(4), 815.05.
Defendant argues that Plaintiff's motion, which should be
characterized as a motion to alter or amend judgment under Fed. R.
Civ. P. 59(e), is untimely, and therefore should be denied. Defendant
also disputes the applicability of the Wisconsin statutes upon which
Plaintiff bases his calculation of prejudgment interest. (Def.'s Mem.
Opp. to Pi.'s Mot. Atty's Fees at 1, 4.)
A post-judgment motion for discretionary prejudgment
interest constitutes a motion to alter or amend the judgment pursuant
to Fed. R. Civ. P. S9(e). Osterneck v. Ernst & Whinney, 489 US.
169, 175 (1989). The Supreme Court notes that postjudgment
interest is really an element of plaintiff's complete compensation. Id.
"Thus, unlike attorney's fees, which at common law were regarded as
an element of costs and therefore not part of the merits judgment,
prejudgment interest traditionally has been considered part of the
compensation due plaintiff." Id. (citations omitted.) Furthermore,
unlike a motion for attorney's fees and costs, a motion for
discretionary prejudgment interest does not raise wholly collateral
issues to the judgment in the main cause of action. Id.
Here, Plaintiff's motion for prejudgment interest was filed on
December 22, 2003. This Court's Amended Findings of Fact and
Conclusions of Law were filed on December 2,2003. Under Fed. R.
Civ. P. 59(e), a motion to amend or alter judgment must be filed no
later than 10 days after entry of judgment. Having filed to meet the
filing date, the Court denies Plaintiff's motion for prejudgment
interest.
THEREFORE, IT IS HEREBY ORDERED THAT:
1. Defendant's Motion to Alter or Amend Judgment
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Pursuant to Fed. R. Civ. P. 59(e) [Doc. No. 71] is
DENIED, in part, and GRANTED, in part, consistent
with this Order; and
2. Plaintiff's Motion for Attorney's Fees and Expenses
and Prejyudgment Interest [Doc. No. 73] is DENIED
as to attorney's fees and expenses and is DENIED as
to prejudgment interest.
Dated: May 18, 2004
s/Susan Richard Nelson
SUSAN RICHARD NELSON
United States Magistrate
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UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Walter Schinzing, Civil No. 00-2686 SRN
Plaintiff,
v. SECOND AMENDED
FINDINGS OF FACT,
Mid-State Stainless, Inc., CONCLUSIONS OF LAW
AND ORDER FOR
Defendant. JUDGMENT
William L. Lucas, Esq., on behalf of Plaintiff.
Richard A. Arrett, Esq. and Edwin E. Voigt, Esq., on behalf of
Defendant.
SUSAN RICHARD NELSON, United States Magistrate Judge
On April 28, 2003, the parties in the above-entitled matter
consented to the exercise of jurisdiction by a United States
Magistrate Judge and the Honorable Michael J. Davis, United States
District Judge for the District of Minnesota, ordered the case referred
to the undersigned. This matter was tried to the Court on May 19 and
20, 2003.
I. PROCEDURAL HISTORY
On October 30, 2000, Plaintiff Schinzing ("Schinzing”") filed
a Complaint in Hennepin County District Court alleging breach of a
license agreement for United States Patent No. 5, 133,375 (the '375
Patent). On December 11, 2000, Defendant Mid-State Stainless
removed the case, denied the allegations of breach, and raised the
following ten affirmative defenses: (1) joint ownership of the
licensed patent; (2) the patent license was no longer in force; (3)
invalidity of both the patent license and disclosure document for lack
of consideration; (4) patent misuse; (5) no breach of the patent
license; (6) invalidity of the license agreement for lack of
consideration because the '375 patent is invalid; (7) no breach
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because the '375 Patent does not cover any Mid-State product; (8)
invalidity and unenforceability of the license agreement because the
'375 Patent is invalid because it does not name the correct inventors;
(9) invalidity of the '375 Patent due to Schinzing's and/or his
counsel's inequitable conduct before the United States Patent Office;
and (10) Mid-State was fraudulently induced to enter the license
agreement. Mid-State also counterclaimed for a declaratory
judgment of patent invalidity of the '375 Patent and for fraudulent
inducement and common law deceit.
On July 16, 2002, Judge Davis issued a Memorandum
Opinion and Order addressing the parties’ cross motions for
summary judgment. Judge Davis granted Schinzing's motion for
summary judgment as to Mid-State's Counterclaim that the '375
Patent is invalid as obvious. Judge Davis denied the rest of
Schinzing's summary judgment motion and denied Mid-State's
summary judgment motion.
Exhibits And Testimony
At trial, Schinzing introduced exhibits 1-8 and Mid-State
introduced exhibits 1-31 and 35-62, by stipulation. Also, at trial, the
deposition testimony of Walter Schinzing, Casey, Cooling, Todd
Petry, Professor Lou Honary, Michael Sewick, Thomas Tate and
Marvin Jacobson was admitted by stipulation. Walter Schinzing was
the only witness in his case-in-chief. Marshall Ryan of Mid-State
Stainless, Todd Petry, and Richard Bartz testified in Mid-State's
case-in-chief. All of the deposition testimony and exhibits relied on
by Judge Davis in his Memorandum Opinion and Order were also
admitted into evidence at trial, including the Bartz Affidavit, which
is the expert report of Defendant's patent expert.
II FINDINGS OF FACT
Initial Conception And Development
l. Schinzing conceived the idea of a machine for
washing wheelchairs in 1987, while employed as Director of Plant
Operations for a nursing home named the White Bear Care Center.
(Transcript of Proceedings (Tr.) p. 14, line 20-p. 16, line 1.)
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ra Schinzing received permission from White Bear Care
Center to take home a wheel chair which he used while constructing
a prototype wheelchair washing machine out of a thick cardboard
box measuring approximately 40 inches in height, width, and
breadth, and half-inch wide piping. (Tr. p. 16, lines 4-17.)
3. Schinzing constructed the prototype over a period of
six to seven months. He hooked the pipes up to his garden hose and
placed the device on two by fours to elevate it four inches off the
ground. (Tr. p. 17, lines 2-14.)
4. Schinzing had a company named Stenberg Welding
build the second prototype in the Spring of 1988. It was a stainless
steel prototype which had fixed spray nozzles, no rotating spray
arms, no motorized roller assembly, and no water recirculation back
to the spray arms. (Tr. p. 18, line 6-p. 20, line 23 & p. 96 line 14-p.
97 line 8.)
S. Later in 1988, Schinzing met with a group in Greene,
Iowa that had advertised for new products and showed them the
second prototype. (Tr. p. 21, lines 8-15.)
6. Schinzing and the group formed a company named
Elm Springs Enterprises (Elm Springs). The five shareholders of Elm
Springs were Schinzing, Richard Vickers, Patrick Vickers, Gale
Brinkman, and Michael Meissen. (Tr. p. 21, lines 19-21, p. 22, lines
3-4, p. 22, line 22-p.23, line 2, & p. 24, lines 13-22.)
7. In the fall of 1988, with Schinzing's permission, Elms
Springs took his prototype to the PLUS Methodology and
Conceptualization class, an undergraduate class, at the University of
Northern Iowa, taught by Professor Honary. (Tr. p. 26, line 1-p. 29, -
line 21, p. 180, line 7; Honary Depo. at 3.)
8. Patrick Vickers explained to Schinzing that the
prototype would provide a learnirg experience for the class. In
addition, if the class went well and the university received
recognition, Vickers believed Elm Springs could apply for and likely
receive a grant. (Tr. p. 26, lines 10-24.)
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9. The students in the class, Casey Cooling. Michael
Sewick, Richard Nottger and Todd Petry, were asked to improve the
wheelchair washer as part of a class project during the 1988-1989
school year. (Memorandum Opinion and Order page 2).
10. When the stainless steel prototype was dropped off at
the University of Northern Iowa, it had fixed nozzles, rather than
rotary spray arms, and did not have a motorized roller assembly or
recirculation of water back to rotary spray arms. (Tr. p. 183, line 23-
p. 184, line 8.)
11. The students in the class were not told what
improvements the prototype required; Elm Springs told them only
that they wanted recommendations. The students initially tested the
prototype, found it did not work satisfactorily, and made a list of
things that needed improvement. (Tr. p. 193, lines 10-19, p. 183,
lines 2-9, p. 182, lines 2-10.)
12. Throughout the class, three Elm Springs
representatives would periodically visit, and the students would give
progress reports which included the problems with the machine, and
the areas on which they were going to work. (Tr. p. 183, lines 10-
14.)
13. | Schinzing attended the initial meeting and three other
meetings, and the only student he met with individually was Petry.
(Tr. p. 30, lines 8-24.)
14. One of the students proposed using a similar design
that was used in a dishwasher for the spray arms. Petry proposed
using two rollers, one that drove and one that simply spun to rotate
the wheels. Petry also stated he had the idea to install a brush to
-clean the wheels, and was never told to
do so by Schinzing. (Tr. p. 193, line 22- p. 194, line 10.)
53. Schinzing initially told Petry that the wheelchair
wheels needed to be rotated when the chair was cleaned, but did not
tell Petry how to do it. Schinzing testified that the idea to use a
motorized roller assembly with two rollers spaced apart, driven by a
quarter horsepower motor with a chain was his idea, but he did not
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tell that to Petry so as not to interfere with the learning process. (Tr.
p. 117, line 6-p. 118, line 8.)
16. | Schinzing informed Petry that the roller system Petry
had designed would not work, because the rollers were made of
rubber, and when covered with water and soap, would slide rather
than rotate the wheels. Schinzing also told Petry that extending the
motor out of the side of the machine would not work because the
machine would then not fit through doors and the motor would be
knocked off the side quickly. Schinzing stated that the brushes were
already in place when Elm Springs first met with the class. (Tr. p.
31, lines 21-22, p. 32, line 14- p. 33, line 5.)
17. Sewick claims that element (b) of claim 1 of the '375
Patent, "a sump in said floor, said chamber floor being slanted to
drain liquid to said sump" was his idea, and that Petry, or the class
collaboratively, thought of the means by which the wheelchair was
elevated above the floor. Sewick also believed Petry had the idea for
element (g)'s "means for rotating said roller, means for rotating said
large diameter wheelchair wheels while liquid is applied to said
wheels." Sewick's claimed contribution to the invention was to heat
and recirculate the water. He further testified that the addition of a
sump was his idea, and that the concept of using elongated tubular
liquid spray arms was Richard Nottger’s idea. (Sewick Depo. at 4-5,
14, & 23-25.)
18. The bottom of page four of the students’ final report
discusses the distribution of the wash and rinse water which, on the
prototype, was performed by fixed jets positioned along the top,
bottom, and each side of the cabinet. The report states, "By
dispensing water through rotating arms of similar design to that
currently used in a modern dishwasher, coverage could be
dramatically increased.”
It then proceeds to state that by using four rotating arm assemblies |
by mounting two arm assemblies over the wheelchair and one on
each side, total coverage could be attained. (Dep. Ex. 10.)
19. Cooling recalled that Petry designed the motorized
_roller assembly. (Cooling Depo. at 3 & 14-15.)
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20. Schinzing did not invent rotary spray arms for the
machine, and does not know who did. (Tr. p. 116, lines 5-20.)
21. The students submitted a final report titled "Wheel-
Chair Modifications Proposal" (students' final report), which
included drawings, or figures, they had made of the machine they
modified. (Tr. p. 185, lines 19-25, p. 189, line 25-p. 191, line 24;
Dep. Ex. 8.)
22. The students conducted a final presentation of the
modified prototype, which incorporated their work as part of the
class requirements. In this presentation, the students ran the modified
prototype with a wheelchair inside. (Tr. p. 124, line 25- p. 125, line
14.)
23. | Schinzing and other members of Elm Springs
attended the final presentation, as well as Congressman David Nagle,
various professors, and students. (Tr. p. 125, line 2, p. 196, lines 13-
24; p. 198, lines 2-4; Petry Depo. at 8; Sewick Depo. at 7-8 & 21-22;
Cooling Depo. at 9; Honary Depo. at 28-29.)
24. Elm Springs received a copy of the final report and
Schinzing received a copy from Elm Springs. (Tr. p. 107, line 8.)
25. Schinzing recalled that Elm Springs had
confidentiality agreements with Professor Honary and the students,
but he did not prepare them himself and could not produce copies.
(Tr. p. 73, line 8-p. 77, line 9; Schinzing Depo. at 17.)
26. Honary, Sewick, Cooling, and Petry, did not recall
ever entering confidentiality agreements. (Cooling Depo. at 9-10;
Sewick Depo. at 10; Petry Depo. at 9; Honary Depo. at 15-16.)
27. After the class was completed, Elm Springs took the
machine back. (Tr. p. 39, line 13, p. 88, lines 1-7.)
28. After Elm Springs took the machine back, they hired
Dallas Foster to develop it from the prototype stage into a working
and then a production modei. Foster made significant changes to the
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machine. He first developed a clear plastic third prototype, which
made it possible to see inside it while it worked, and then a stainless
steel fourth prototype (Tr. p. 39, line 13-p. 40, line 10, p. 88, lines
10-17.)
29. While Foster was developing the machine, he would
periodically show Schinzing what he had done, and they would
discuss further changes. (Tr. p. 40, lines 4-8.)
Patent History
30. On August 29, 1988, before the prototype was
brought to the University of Northern Iowa, Schinzing filed a patent
application with the United States Patent and Trademark Office
(USPTO), Serial No. 02/237/,091 for an automatic wheelchair
washer, listing himself as sole inventor. On December 20, 1988, and
again on January 29, 1989, the USPTO rejected Schinzing's claims
as obvious under 35 U.S.C. §103. The application received final
rejection in July, 1989. (Memorandum Opinion and Order at 1-2.)
31. On October 10, 1989, attorney Thomas Tate filed a
Continuation-In-Part Application (CIP) of the 07/237,091 for
Schinzing. (Memorandum Opinion and Order at 2; Dep.. Ex. 17.)
32. | Schinzing affirmed that he was the original, first, and
sole inventor. (Schinzing Depo. at 111-12; Dep.. Ex. 17.)
33. | Tate communicated with Schinzing and the attorneys,
the Vickers brothers, from Elms Springs. It was Tate's understanding
that, as part of getting a marketable product, they were having the
university students do some testing of various features. (Tate. Depo.
at 6-7.)
34. In a January 20, 1989 telephone conversation between
Tate and Richard Vickers of Elm Springs, Vickers told Tate that
some of the changes in design by the students were the rotating arms
instead of stationary jets, and that Vickers would send final designs
when they were ready, and then determined if additional patent
applications would be needed. (Tate Depo. at 9-10.)
A-35
35. | Schinzing gave Tate a copy of the students’ final
report. (Tr. p. 107, lines 5-12; Tate Depo. at 18.)
36. Tate did not recall having a discussion with Schinzing
about inventorship related to the new subject matter in the CIP
application. (Tate Depo. at 11.)
37. It was Tate's understanding that the students were
doing this project based on instructions that Schinzing gave to the
students. No one from the university ever called Tate stating that
they thought the students should be listed as co-inventors. Tate did
not have any subsequent conversations with Schinzing about
inventorship related to the students at the university. (Tate Depo. at
21.)
38. Claims 2 through 6 of the CIP application related to
new subject matter added on and not included in the original claim.
(Tate Depo. at 13.)
39. The rotary spray arms of claim 2, and the means for
washing being a roller assembly with a brush of claim 4 in the CIP
application were new subject matter. (Tate Depo. at 14.)
40. Tate produced a handwritten draft CIP application
which included the same claims that were filed in the second CIP
application. The first three paragraphs of the draft CIP application
state: (1) "Include description of roller assembly," referring to the
motorized assembly that was part of the new subject matter; (2) "As
an alternative, rotary arm,” referring to the rotary arms that were also
part of the new subject matter; and (3) "add description of timing
circuit,” referring to drawings 5 through 8 of the student proposal
which were also part of the new subject matter. (Tate Depo. at 15-
16.)
4}. Tate used Figures 10 through 13, which are on pages
34-37 of the students’ final report as Figures 5 through 8 of the CIP
application. (Tate Depo. at 10 & 19-21.)
42. On January 17, 1990, the CIP application was rejected
as obvious under 35 U.S.C. § 103. (Memorandum Opinion and Order
A-36
at 2; Def. Ex. 17.)
43. OnApril 17, 1990, Schinzing revoked Tate's power of
attorney and substituted attorney Marvin Jacobson to continue the
CIP. (Nef. Ex. 17; Schinzing Depo. at 120; Memorandum Opinion
and Order at 2.)
44. Jacobson never communicated with Tate nor received
any information from him concerning where the subject matter for
the CIP application had originated. Jacobson communicated with
Schinzing, and received the CIP application from him. (Jacobson
Depo. at 5-7.)
45. On June 14, 1990, Jacobson amended the CIP
application, cancelling claims 1-6, and adding claims 7-11. (Def. Ex.
17.)
46. —Inhis request for reexamination and reconsideration,
Jacobson stated that the new claims were directed toward an aspect
of the invention, the subject matter of which had not been dealt with
in any prior art references. It specified that this novel aspect was the
manner in which the wheels were rotated and cleaned. Claim 7 stated
that the machine comprised means for rotating and cleaning the
wheels of a stationary chair. Dependant claims 8-11 described a pair
of spaced-apart rotatable rollers to rotate the wheel which rested on
them, and a brush located between the rollers "in cleaning contact
with the wheelchair wheel." (Def. Ex. 17.)
47. —_Inhis deposition, Schinzing stated that the idea of
rotating the wheels with brushes was his idea. (Schinzing Depo. at
122.)
48. On August 1, 1990, claims 8-11 were rejected as
obvious in light of prior art included in the Haverberg '650 Patent.
The patent examiner, Frankie L. Stinson, noted that the ‘650 Patent,
although not intended for wheelchair washing, nevertheless disclosed
rotatable spaced-apart rollers and a brush, adding that "to have a
roller located between the spaced rollers is obvious matter of
mechanical design." (Def. Ex. 17.)
49. The CIP application ultimately went abandoned for
failure to respond to the August 1, 1990 Office letter. (Def. Ex. 17.)
50. In October 1990, Jacobson and a draftsperson went to
Greene, lowa and viewed a mockup and drawings of Elm Springs’
wheelchair washer. (Jacobson Depo. at 16-17; Def. Ex. 20.)
51. Jacobson and the draftsperson subsequently used the
drawings for another patent application. (Jacobson Depo. at 17-18.)
Sa. Jacobson decided to file a new application, rather than
a CIP. He believed the machine was then a new entity, because it had
three additional inventors who had significantly changed the manner
and function in which the machine operated. (Jacobson Depo. at 19-
20.)
53. | Jacobson discussed inventorship with the Elm Springs
people, and advised them to make certain that all the people they
believed were inventors had actually contributed some part of the
patentable aspect of the machine. (Jacobson Depo. at 24-25.)
54. The three additional inventors, Dallas Foster, Gale
Brinkman, and Michael Meissen, along with Schinzing, mentioned
something to Jacobson about working with the University of
Northern Iowa. Whatever they told Jacobson did not seem
exceptional to him, and he relied on their representation that they
were the inventors. Consequently, he did not investigate the students'
role. (Jacobson Depo. at 21-24.)
55. Jacobson never saw the students’ final report, though
he may have seen drawings, or copies of drawings from it. (Jacobson
Depo. at 26-67.)
56. | On October 23, 1990, Jacobson wrote to Schinzing,
informing him that he would begin work on the patent application,
naming Schinzing, Foster, Meissen, and Brinkman as inventors.
(Def. Ex. 21.)
57. Schinzing recalled that Foster, Meissen, and
Brinkman made contributions to the shallow drain floor, requiring
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more water for washing and to keep the pump from cavitating, and
made contributions to the loading device. (Schinzing Depo. at 131.)
58. Schinzing stated that Jacobson made the decision to
add the other three individuals as inventors. (Schinzing Depo. at 35-
36 & 131-132.)
59. On November 14, 1990, Jacobson, on behalf of
Schinzing, filed the third patent application for the wheelchair
washer, Application Number 07/612,757. The application listed
Schinzing, Foster, Brinkman, and Meissen as inventors. (Def. Ex.
22.)
60. The third application did not cite the Haverberg
Patent, and Jacobson could not recall why it was not included. (Def.
Ex. 22; Jacobson Depo. at 38.)
61. OnJuly 9, 1991, the third application was rejected by
examiner Philip R. Coe. (Def. Ex. 22.)
62. On October 29, 1991, amended claims were rejected
and objected to by examiner Coe. (Def. Ex. 22.)
63. On February 5, 1992, further amended claims were
allowed and Schinzing was granted the '375 Patent. (Def. Ex. 22.)
64. The '375 Patent claims the following:
1. A washer for cleaning a conventional
wheelchair said wheelchair having a large diameter
support and propulsion wheel on each side of a seat
and a pair of small diameter guide wheels forward of
the seat and below the level of the seat, said washer
comprising:
a) and [an] enclosed washing chamber suitable
for holding a conventional wheelchair, said chamber
defined by end walls, side walls, a floor and a ceiling
and having a doorway in on wall through which a
wheelchair can be placed in and removed from the
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chamber;
b) a sump in said floor, said chamber floor being
slanted to drain liquid to said sump;
c) means for supporting a conventional
wheelchair elevated above said floor in said washing
chamber for exposing the underside of said
wheelchair and the entire area of the wheelchair
wheels to cleaning and rinsing liquid;
d) elongated tubular liquid spray arms rotatably
mounted on walls and the ceiling of said chamber,
said spray arms having a series of nozzles spaced
apart lengthwise on said spray arms, said nozzles
angled to apply liquid onto all parts of a conventional
wheelchair supported by said wheelchair supporting
means including the underside of the wheelchair, the
entire seating surface area of the wheelchair seat and
the wheelchair wheels;
e) means for feeding cleaning and rinsing liquid
to said spray anns for rotating said spray arms and for
providing said liquid to said nozzles; f) said
means for supporting a conventional wheelchair
including a rack having frame means for holding the
front small diameter guide wheels of a conventional
wheelchair to prevent the wheelchair from moving
while being washed and roller means, the large
diameter support and propulsion wheels of a
conventional wheelchair resting on said roller means;
and
g) means for rotating said roller means for
rotating said large diameter wheelchair wheels while
liquid is applied to said wheels.
3 The wheelchair washer as described in claim 1
further including means for moving said frame
meaning into and out of said washing chamber.
(Def. Ex. 22.)
65. Figures I and 2 of the '375 Patent show the loading
mechanism to which Michael Meissen and Gale Brinkman and
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Dallas Foster contributed. (Schinzing Depo at. 144.) (Def. Ex. 22.)
66. Figure 3 of the '375 Patent shows the rotating spray
nozzles mounted on the ceiling. (Schinzing Depo. at 144.)
67. Figure 4 of the '375 Patent shows a view of the
wheelchair through the sidewall where the front wheels are a bit
higher than where the back wheels rest so that there is a slant to the
wheelchair causing water to run off the wheelchair. (Schinzing
Depo. at 144-45.) :
68. Figure 7 of the '375 Patent shows the chain with the
two rollers shown and the brush in between the two rollers.
(Schinzing Depo. at 145.)
69. Jacobson was not aware of any disclosure, any prior
sale, any statutory bar or anything that would put the invention
disclosed in the CIP application in the public domain or into public
knowledge, and, therefore, Jacobson did not consider the CIP
application to be prior art. (Jacobson Dep. at 44, line 21 - 45, line
24.)
License Agreement Under The '375 Patent
70. On/July 9, 1991, Elm Springs met with members of
the Grantsburg, Wisconsin City Council in Greene, Iowa, to discuss
finding investors for the wheelchair washing machine. (Schinzing
Depo. at 36-37 & 158-59.)
71. On August 17, 1991, Schinzing and Elm Springs
terminated their agreement. After the termination, Schinzing and
Elm Springs were each free to market and sell the wheelchair
washing device in any way they wanted. (Schinzing Depo. at 160;
Def. Ex. 26.)
72. ‘In the fall of 1991, Schinzing began working with a
Grantsburg company called DR Tech. Schinzing originally brought
DR Tech an old prototype with stationery jets on the side, and a
videotape and drawings of the new prototype which had rotating
arms and rollers to move the wheels (Tr. p. 46, line 17-p. 47, line 6;
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Schinzing Depo. at 37-38.)
73. In April 1992, DR Tech became Mid-State Stainless,
Inc. (Mid-State). (Schinzing Depo. at 40.)
74. On Apnil 29, 1993, Schinzing, in partnership with a
woman named Sue Spalding, S/S New Products, and Mid-State
entered into a license agreement under the '375 Patent (the license
agreement). (Def. Ex. 40.)
75. Under the license agreement, Mid-State received the
non-transferable exclusive right to develop, manufacture, use, and
market any wheelchair cleaning assembly, subassembly,
components, replacement parts, or other products embodying the
"licensed patent and technology." Under the license agreement,
Schinzing received a royalty of $400.00 per machine. (Schinzing
Depo. at 40-41; Def. Ex. 40.)
76. The license agreement states, with respect to
termination:
A. Unless terminated earlier, the term of this
Agreement shall be indefinite.
OK
D. Upon termination of this agreement for any
reason, nothing herein shall be construed to release
any party from its obligation which matured prior to
the effective date of termination. MSI, its affiliates or
its sublicensees may after the effective date of such
termination sell all licensed products in stock and
complete construction of all licensed products in the
process of manufacture at any time of termination and
sell the same, provided that MSI shall pay to S/S
royalties on such licensed products as specified in this
agreement.
E. Upon termination for any cause, other than the
expiration of the letters patent granted under the
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licensed patent, MSI shall no longer have any right to
the use of the licensed patent or technology.
77. Schinzing received royalties under the license
agreement for the first 99 units Mid-State sold. (Tr. p. 56, lines 3-5.)
78. At the time of trial, Mid-State had sold 331 units. (Tr.
p. 172, lines 13-16; PI Ex. 8.)
79. During negotiations with Mid-State, Schinzing
informed Marshall Ryan, one of the Mid-State principals, that the
'375 Patent was good. Ryan would not have entered the license
agreement otherwise. (Tr. p. 165, lines 12-17.)
80. Schinzing never told Ryan anything about the
University of Northern Iowa students. (Tr. p. 165, line 18-p. 166,
line 25.)
81. | Schinzing never told Ryan about the first two patent
applications, which had been rejected and abandoned. (Tr. p. 167,
lines 1-13.)
82. On May 5, 1993, six days after the license agreement
was entered into, Schinzing had Ryan sign a document titled
"Disclosure Document Between S/S New Products and Mid-States
Stainless." Ryan was in Grantsburg, Wisconsin at the time he signed
the document. (Tr. p. 47, line 21-p. 48, line 2, p. 60, line 24-p. 61,
line 7; Schinzing Depo. at 41-42; Def. Ex. 41.)
83. In typed print, this document states:
I WILL IN NO WAY BUILD OR HAVE BUILD OR
DISCLOSE ANY INFORMATION WITH ANYONE
OR ANY OTHER MANUFACTURERS COMPANY
ON SAID PRODUCTS WITHOUT THE WRITTEN
PERMISSION FROM WALLY SCHINZING OR
SUSAN SPAULDING.
(A) AUTOMATIC WHEELCHAIR WASHER AND
OR ANY MODIFICATIONS THAT MAY BE
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APPLIED TO PRESENT WHEELCHAIR WASHER
WHICH IS A PATENTED PRODUCT.
(B) DESIGNS FOR A SMALLER WHEELCHAIR
WASHER THAT MAY BE BUILT.
(C) DESIGNS OF CART TO CARRY
WHEELCHAIRS TO AND FROM WASH AREAS.
(D) WASHER THAT CAN BE ATTACHED TO
AND PUT ON THE BACK END OF A TRAILER
OR TRUCK FOR THE SOLE PURPOSE OF
GOING FROM PLACE TO PLACE TO CLEAN
WHEELCHAIRS .
(Def. Ex. 41.)
84. Schinzing asked Ryan to sign this document because
Schinzing became concerned when he went on sales trips to market
his product, and he would repeatedly see a competing product called
the Wheel-Ease. Schinzing believed that Ryan was connected to the
Wheel-Ease because he encountered it everywhere he went to market
his own machines. Further, in the fall of 1992, Ryan had asked
Schinzing if Ryan could invent his own wheelchair washing
machine, and Schinzing told him he could not. (Tr. p. 50, line 3-p.
51, line 8, p. 68, lines 20-22, p. 71, line 13-p. 72, line 18; Schinzing
Depo. at 42.)
85. Schinzing believed that under the disclosure
document, Mid-State was allowed to build the licensed machine, but
could only build other machines with his written permission.
(Schinzing Depo. at 179.)
86. Schinzing wanted Mid-State to build the machine he
had patented, rather than any other machines. (Schinzing Depo. at
187.)
87. Mid-State did not receive any specific consideration
for Ryan signing the disclosure document. (Tr. p. 67, line 12-p.69,
line 19; Schinzing Depo. at 189-91.)
88. On February 3, 1998, Schinzing terminated the
license agreement. (pl. Ex. 6.)
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89. As aresult of the termination, Schinzing believed
Mid-State no longer had any contract rights. If Mid-State continued
to build wheelchair washing machines, Schinzing believed it would
be possible to sue Mid-State either for breach of contract for
competing with him, or for patent infringement. (Tr. p. 78, line 18-
p.79, line 17.)
Schinzing's Claims In The Complaint
90. Paragraphs | & 2 of the Complaint refer to the license
agreement and disclosure document. Paragraph 3 states, "Defendant
has breached and continues to breach said agreements by failing to
account and pay plaintiff royalties for all of its sales of wheelchairs
[sic] washing machines and by building wheelchair washing
machines and having wheelchair washing machines built without
plaintiffs’ written permission."
Schinzing's And-Mid-State's Current Models
91. | The wheelchair washers sold by Mid-State in 1993-
95, which were reported to Schinzing on Mid-State's royalty
statements, had spray arms which oscillated back and forth, but did
not rotate in complete circles. (Tr. p. 100, line 23-p.101, line 22.)
92. The wheelchair washers Mid-State has sold since
Schinzing terminated the license agreement also have spray arms
which oscillate back and forth, rather than rotating in complete
cireles, and are oscillated by a motor rather than water pressure. (Tr.
p. 1%%, line 23-p. 170, line 16.)
93. Since termination, Mid-State has also sold some
models without motorized rollers. These sales were also included in
the 331 total sales figure. (Tr. p. 170, line 17-p. 171, line 3.)
94. In December 2000, Petry assigned any rights he had
in the '375 Patent to Mid-State. Petry also granted Mid-State a non-
exclusive license under the '375 Patent, retroactive to the issue date
of the '375 Patent. In exchange, Petry received $1,500. (Tr. p. 198,
line 13- p. 199, line 9.)
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95. Schinzing's current model of the machine does not
have rubber, or a motor extending out of the side. It uses knurled
bars to make the wheels turn, and has the motor in a compartment in
the back. (Tr. p. 37, lines 2-12.)
96. The proposed system for heating the water was
ultimately abandoned, because the water available at most nursing
homes is sufficiently hot by itself (Tr. p. 36, lines 4-20.)
Expert Testimony
97. Richard O. Bartz, a patent attorney and Mid-State's
patent expert, testified and submitted an expert report. (Tr. p. 209,
line 15; Def. Ex. 60.)
98. Bartz concluded the following: (1) the '375 patent was
invalid, because the students invented features claimed in claim | of
the '375 patent, but were not named as inventors; (2) it was
inequitable conduct not to disclose to the patent office the
information directed to the students’ inventive activity related to the
wheelchair washer; (3) the students’ final report was a printed
publication which renders claim 1 anticipated under 35 U.S.C.
§102(b), and when combined with the other prior art of record,
renders the remaining claims of the '375 patent obvious under 35
U.S.C. §103; (4) it was inequitable conduct not to disclose the
students’ presentation to the patent office, because it was material
information; (5) the students’ presentation was a public showing
which renders claim 1 of the '375 patent invalid under 35 U.S.C.
§102(b), and, when combined with the other prior art of record,
renders the remaining claims of the '375 patent obvious under 35
U.S.C. §103; (6) it was inequitable conduct not to disclose the
students’ presentation to the patent office, because it was material
information; (7) both the students’ presentation and final report were
closer prior art than anything the Examiner had of record. (Tr. p.
209-232; Def. Ex. 60.)
99. There was no cross-examination of Bartz, and
Schinzing did not call an expert witness on the claim of invalidity of
the '375 Patent. (Tr. p. 232, lines 5-14.)
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Il CONCLUSIONS OF LAW
Patent Invalidity
A. Proper Inventors
Mid-State asserts that the '375 Patent is invalid because the
patent application did not disclose all the inventors and by failing to
disclose the proper inventors, Schinzing committed fraud on the
Patent and Trademark Office. Specifically, Mid-States argues that
the '375 Patent was invalid under 35 U.S.C. § 102(f) because the
University of Northern Iowa students were not named as joint
inventors. Section 102( f) provides that "[ a] person shall be entitled
to a patent unless he did not himself invent the subject matter sought
to be patented." Where a non-joinder of an actual inventor is proved
by clear and convincing evidence, then a patent is rendered invalid.
Pannu v. Iolab Corp., 155 F.3d 1344, 1349 (Fed.Cir. 1998).
Mid-State has not proved, by clear and convincing evidence,
that any of the University of Northern Iowa students contributed, in a
significant manner, to the conception or reduction to practice of the
invention as it was finally patented. Although the evidence does
demonstrate that the students made proposals to an early prototype of
the wheelchair washing machine as part of a learning experience
during an undergraduate course at the University of Northern Iowa,
there is not clear and convincing evidence that the students’ early
contribution to the claimed invention is significant measured against
the dimension of the full invention. Nor is there clear and convincing
evidence that the students did more than merely explain to Schinzing
well-known concepts and/or the current state of the art.
B. Public Use
Mid-State claims that the '375 Patent is invalid pursuant to 35
U.S.C. §102(b) because the apparatus was in use more than one year
before the date of the patent application. Specifically, Mid-State
argues that the exhibition of the modified prototype, at the
University of Northern Iowa, at the conclusion of the undergraduate
course in the Spring of 1989 in the presence of fellow classmates,
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their professor, representatives of Elm Spring and a congressman
constituted public use. The Federal Circuit has defined "public use"
as "any use of [the claimed] invention by a person other than the
inventor who is under no limitation, restriction or obligation of
secrecy to the inventor." Lough v. Brunswick Corp., 86 F.3d 113,
1119 (Fed.Cir. 1996). Whether an invention has been in public use
requires consideration of the totality of the circumstances in light of
the policies underlying this doctrine.
Id. The policies include:
1) Discouraging the removal, from the public
domain, of inventions that the public
reasonably has come to believe are freely
available;
2) Favoring the prompt and widespread
disclosure of invention;
3) Allowing the inventor a reasonable amount of
time following sales activities to determine the
potential economic value of a patent; and
4) Prohibiting the inventor from commercially
exploiting the invention for a period greater
than the statutorily prescribed time.
Id. (Citing Tone Bros. v. Sysco Corp., 28 F.3d 1192, 1198 (Fed.Cir.
1994), cert denied 514 US. 1015 (1995)). Factors to be included in
determining whether the wheelchair washer was in public use
include:
1) The number of prototypes and duration of
testing;
2) Whether records or progress reports were
made concerning the testing;
3) The existence of confidentiality agreements
between the patentee and the party performing
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the testing;
4) Whether the patentee received compensation;
and
5) The extent of control the inventor maintained
over the testing. Id.
Although the evidence shows that in the spring of 1989, the
students gave a demonstration of the wheelchair washer prototype
they had endeavored to improve, which included some proposed
modifications to the early prototype, Mid-State has not proved by
clear and convincing evidence that the University of Northern lowa
student demonstration of the wheelchair washer constituted a public
use.
C. Printed Publication
Mid-State argues that the '375 patent is invalid because the
University of Northern Iowa student report was a printed publication
within the meaning of 35 U.S.C. § 102(b). To determine whether a
paper is a "printed publication” as contemplated within § 102(b), the
Court must look to the publication's dissemination and public
accessibility. The Federal Circuit, in In re: Cronyn, 890 F.2d 1158
(Fed.Cir. 1989), held that a student thesis filed in the university
library was not a printed publication because the thesis had not been
meaningfully catalogued or indexed. As a result, the publication was
not reasonably accessible to the public. Id. at 1161. Mid-State has
not demonstrated, by clear and convincing evidence, that the entire
content of the student proposal originated from the students nor that
the publication was reasonably accessible to the public. To the
contrary, there is conflicting evidence concerning the origination of
the ideas in the student proposal and the extent to which those ideas
were incorporated into the invention as finally patented. The Court
finds, as a matter of law, that the student proposal is not a printed
publication under 35 U.S.C. § 102(b).
D. Fraud. Inequitable Conduct. Breach Of A Duty Of
Candor
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Mid-State asserts that the failure of Schinzing and his counsel
to disclose to the Patent and Trademark Office that the students were
co-inventors and their failure to turn over the student report
constituted fraud on the PTO, inequitable conduct and a breach of
their duty of candor as provided in 37 C.F.R. § 1.56. "Inequitable
conduct includes affirmative misrepresentations of a material fact,
failure to disclose material information, or submission of false
material information, coupled with an intent to deceive.” PerSeptive
Biosystems, 225 F.3d at 318 (citing Molins PLC v. Textron Inc., 48
F.3d 1172, 1178-79 (Fed.Cir. 1995). Mid-State has not presented
undisputed, clear and convincing evidence of inequitable conduct.
indeed, there was no evidence at trial that Mr. Schinzing
intentionally withheld anything from the Patent and Trademark
Office. Mr. Schinzing consistently testified that the student proposal
was an educational opportunity provided to the students as part of
their undergraduate course requirements and that the students’
proposal was not a significant part of the invention as finally
patented.
E. Obviousness
Mid-State argues that claim I of the '375 patent is obvious
under 35 U.S.C. §103 in view of the student proposal and/or the
student presentation in combination with the other art of record and
the other art identified by Richard Bartz in his expert report. Judge
Davis ruled, in his Memorandum Opinion and Order dated July
16,2002, that claim | of the '375 Patent was not obvious to one
skilled in the art in view of the prior art identified by Mid-States’
expert Richard Bartz in his expert report. Judge Davis did not have
before him and did not rule on the obviousness of the '375 Patent in
view of the public use or the printed publication which occurred at
the University of Northern Iowa combined with the '375 prior art of
record. Mid-State has failed to prove, by clear and convincing
evidence, that the student proposal and/or student presentation in
combination with the other art of record renders claim I of the '375
Patent obvious.
License Agreement
A. Terms Of The License Agreement
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Pursuant to the April, 1993 License Agreement, Mid-State
received the non-transferrable exclusive right to develop,
manufacture, use and market any wheelchair cleaning assembly,
subassembly, components, replacement parts, or other products
embodying the "licensed patent and technology." The License
Agreement further states, with respect to termination:
A. Unless terminated earlier, the tern of this
Agreement shall be indefinite.
KK
D. Upon termination of this agreement for any
reason, nothing herein shall be construed to release
any party from its obligation which matured prior to
the effective date of termination. MSI, its affiliates or
its sublicensees may after the effective date of such
termination sell all licensed products in stock and
complete construction of all licensed products in the
process of manufacture at any time of termination and
sell the same, provided that MSI shall pay to S/S
royalties on such licensed products as specified in this
agreement
E. Upon termination for any cause, other than the
expiration of the letters patent granted under the
licensed patent, MSI shall no longer have any right to
the use of the licensed patent or technology.
Schinzing received royalties under the license agreement for
the first 99 units Mid-State sold at a royalty rate of $400 per
machine. As of the date of trial, Mid-State had sold 331 units.
B. Mid-State Breached The License Agreement
Interpretation of a contract is a question of law. Edwards. v.
Petrone, 160 Wis.2d 255, 258, 465 N.W.2d 847, 848 (Wis. App.
1990). The express terms of the license agreement provide for the
ongoing payment of royalties on these wheelchair washing machines
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until the date of termination of the license agreement. Upon
termination of the agreement, Mid-State was obligated to sell all
licensed products in stock and complete construction of and sell all
licensed products in the process of manufacture. Mid-State
contemplated that the first 99 wheelchair washing machines sold,
which did not include rotary spray arms, were products covered by
the license agreement and paid royalties.on these products. To the
extent that Mid-State breached this agreement after the date of
termination, the appropriate measure of damages is the calculation of
a reasonable royalty on all machines sold which embodied the
licensed patent and/or technology.
c. Disclosure Agreement
This Court need not reach the issue of the enforceability of
the May 5, 1993, agreement entered into by S/S New Products and
Mid-State Stainless, Inc.
D. Damages
Mid-State is liable to Schinzing for damages equal to
reasonable royalties for the 232 wheelchair washing machines for
which it has not paid any royalties. Mid-State is liable to Schinzing
for damages in the amount of $92,800.
E. Allegations Of Fraud Not Proven
Mid-State argues that Schinzing used the presumption of
validity in the associated patent monopoly for the '375 patent to
compel Mid-State to enter into the April, 1993 license agreement.
Mid-State argues that, had Schinzing disclosed to Mid-State his
failure to provide the PTO material information, Mid-State would
have conducted an investigation into the validity of the '375 Patent
prior to entering into the license agreement. Under Wisconsin law, a
party alleging fraud must demonstrate, by clear and convincing
evidence (1) a false representation; (2) that the false representation
was made with the intent to defraud and for the purpose of inducing
another to act upon it; and (3) that the party relied on the false
representation. W.H. Hobbs Supply Company v. Arnst, 270 Wis.
166, 169, 70 N.W.2d 615, 617 (1955). Mid-State has failed to
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demonstrate, by clear and convincing evidence, that the patent was
invalid and therefore, failed to demonstrate by clear and convincing
evidence these necessary elements of common
law fraud in the State of Wisconsin.
Based upon the above Findings of Fact and Conclusions of
Law, this Court makes the following:
ORDER FOR JUDGMENT
1. Plaintiff Walter Schinzing is entitled to judgment
against Defendant Mid-State Stainless, Inc. in the amount of
$92,800, plus interest.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: May 18, 2004
s/Susan Richard Nelson
SUSAN RICHARD NELSON
United States Magistrate Judge
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UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
No. 04-2535
Walter W. Schinzing,
Appellee,
Appeal from the United States
v. District Court for the
District of Minnesota.
Mid-States Stainless, Inc., etc.,
ee os ie - -<
Appellant.
The petition for rehearing by the panel filed by Appellee
Schinzing is denied.
(5193-010199)
September 2, 2005
Order Entered at the Direction of the Court:
Clerk, U.S. Court of Appeals, Eighth Circuit
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