Court Opinion

ID: 9489297
Source: CourtListenerOpinion
Date Created: 2023-08-05 13:11:17.438229+00
Date Added: 2024-06-11T17:53:26.676459
License: Public Domain

BRYSON, Circuit Judge,
concurring in part and dissenting in part.
This is a troubling case. The jury found in favor of Litton and against Honeywell on almost every point and returned a huge verdict of $1.2 billion. The district court, in a careful and comprehensive 113-page opinion, overturned the jury’s verdict on a number of separate legal grounds, entered judgment for Honeywell, and in the alternative granted Honeywell’s motion for a new trial on the issue of damages. There is much force to the district court’s analysis, even on those issues on which this court now reverses. The question of obviousness, for example, is close and difficult; the issue of inequitable conduct is also close and reveals a pattern of disturbing conduct by Litton both in the prosecution of the initial patent and in the reissue proceedings; and the jury’s verdicts finding infringement with respect to both technologies before it are difficult to accept. Nonetheless, given the restrictive standard of review applicable to a jury’s verdict on the issues of obviousness and infringement, I acquiesce, albeit with reservations, in this court’s ruling on obviousness and its ruling on infringement with regard to the “hollow cathode” ion-beam source. In light of recent authority holding that inequitable conduct cannot be based on an applicant’s non-disclosure of a prior art reference if the examiner independently discovers that reference, see Molins PLC v. Textron, Inc., 48 F.3d 1172, 1184-85, 33 USPQ2d 1823, 1832 (Fed.Cir.1995), I also acquiesce in the court’s reversal of the district court’s ruling on inequitable conduct. In addition, I agree with the court, this time without reservation, in its affirmance of the district court’s order granting Honeywell a new trial on the issue of damages, in its affirmance of the district court’s ruling on intervening rights, and in its rejection, without discussion, of Litton’s arguments on assignor estoppel and res judicata.
I part company with the court, however, on two points. First, I disagree that Honeywell’s RF ion-beam system infringes Litton’s reissue patent under the doctrine of equivalents; I would affirm the district court’s ruling in Honeywell’s favor on that issue. Second, I would affirm the district court’s ruling overturning the jury’s verdict on the two state law claims, although I would remand for further consideration of the second of the two claims in light of the disposition of the patent issues.

Infringement

The court invokes the doctrine of equivalents to uphold the jury’s finding of infringement with respect to the two separate technologies that were used to make mirrors for Honeywell’s ring laser gyroscope system: the so-called “hollow cathode” system, and the “RF (Radio Frequency) ion-beam” system. I agree with this court’s disposition of the infringement issue as to the “hollow cathode” system, but I disagree with the court’s action in upholding the jury’s determination that the use of an RF ion-beam system infringes the ’849 reissue patent under the doctrine of equivalents.
The RF system generates an ion beam in a very different manner from systems based on a Kaufman-type ion-beam source. Both the specification in the ’849 reissue patent *1579and Kaufman himself in testimony at trial described the Kaufman-type ion-beam source in a way that excludes the RF ion-beam source. The expert testimony at trial likewise supported the district court’s ruling that, at least as of the time of the original patent, the term “Kaufman-type ion-beam source” referred to a broad-beam ion source having an anode, a hot wire cathode, permanent bar magnets, and grids.
In such a device, the cathode emits electrons, which are accelerated towards the anode. The magnets force the electrons to spiral in their paths towards the anode. The spiraling electrons strike atoms of argon gas in the chamber and dislodge electrons, creating a stream of positively charged argon ions that are accelerated towards and past the grids.
The RF ion-beam system, by contrast, has no cathode or anode because the system is not a direct current device. The RF system instead consists of a cylindrical discharge chamber containing an RF oscillating discharge coil. Oscillating RF energy that is radiated from the coil energizes and ionizes the argon gas within the discharge chamber, and the resulting argon ions are then accelerated towards and past the grids.
In addition to being different structurally, the RF system offers significant functional advantages over the Kaufman-type ion-beam source. The record shows that the beam produced by an RF source is “cleaner” than the beam produced by a Kaufman-type source, because the Kaufman cathode can result in contamination of the beam with filament impurities such as tungsten. Moreover, because a silica liner can be placed around the inner walls of an RF system, the argon ions are prevented from colliding with the metal walls of the chamber, thereby avoiding further contamination of the beam.
While the question whether a particular improvement falls within the doctrine of equivalents is ordinarily a factual question for the jury, the jury’s finding in this case was infected by its broad construction of the scope of the claims. Because the claims are expressly limited to Kaufman-type ion-beam sources, and because the district court correctly held that the term “Kaufman-type ion beam source,” as used in the patent, includes only a source having the four elements set forth in the specification, the district court properly asked the question whether, in light of that claim construction, the RF ion-beam source could reasonably be found to be equivalent to the claimed Kaufman-type ion-beam source. And the court properly answered that question in the negative.
The majority acknowledges that Honeywell’s RF ion-beam system does not produce ions in the same way as the Kaufman-type ion-beam source. Nonetheless, the majority overturns the district court’s ruling on this issue based on its conclusion that the RF ion-beam source produces a broad ion beam similar to the broad ion beam produced by the Kaufman-type ion-beam source, and that experts testified that the RF source and the “Kaufman-type ion beam source” are interchangeable. That analysis, in my view, pushes the doctrine of equivalents too far.
The claim language at issue recites the use of a “Kaufman-type ion beam source.” The doctrine of equivalents therefore requires a comparison not of the beam characteristics but of the ion sources that produce those beams. For that reason, the district court properly focused on whether an RF ion-beam source is equivalent to a Kaufman-type ion-beam source, not simply on whether the resulting beam is similar.
To be sure, the RF source performs the same function as the Kaufman-type source, at least at a sufficiently high level of generality. In that sense, the two may be said to be “interchangeable.” But the fact that two features serve the same function is only the beginning of the test for legal equivalence. See Atlanta Motoring Accessories, Inc. v. Saratoga Technologies, Inc., 33 F.3d 1362, 1366-67, 31 USPQ2d 1929, 1932-33 (Fed.Cir.1994); Slimfold Mfg. Co. v. Kinkead Indus., Inc., 932 F.2d 1453, 1457-58, 18 USPQ2d 1842, 1845-46 (Fed.Cir.1991); see generally Hilton Davis Chem. Co. v. Warner-Jenkinson Co., 62 F.3d 1512, 1518, 35 USPQ2d 1641, 1645 (Fed.Cir.1995), cert. granted, — U.S. -, 116 S.Ct. 1014, 134 L.Ed.2d 95 (1996). The RF source generates the ion beam in a way that is quite different from the Kauf*1580man-type source, and the RF source produces significantly improved results as compared to the Kaufman-type source. The two are thus not equivalent under the currently prevailing standard.
What is most troubling about Litton’s doctrine of equivalents argument with respect to the RF process is that the limitation of the claims in the reissue patent to Kaufman-type ion-beam sources makes it quite evident that the property rights that the PTO believed should be accorded to Litton were limited to a particular kind of ion-generating system. In reissuance, Litton gave up its original claims, in which it broadly claimed a method based on any “ion beam source.” But it has now managed, in effect, to regain the ceded ground through the doctrine of equivalents. Under these circumstances, for the court to hold that Litton is entitled to recover for Honeywell’s use of technology that falls well outside the limits of the property rights granted to Litton seems to me improper.
The doctrine of equivalents may well have a proper role to play in patent law, although the debate over that issue will for now have to be carried on at a higher level. See Warner-Jenkinson Co. v. Hilton Davis Chem. Co., cert. granted, — U.S. -, 116 S.Ct. 1014, 134 L.Ed.2d 95 (1996). But while the doctrine provides protection against appropriation of the value of some patents, that protection comes at a high cost. Because the doctrine of equivalents adds considerable uncertainty to the question of patent infringement, it introduces a large component of unpredictability into an area of commercial law in which predictability is critical. The Supreme Court has recently commented on the importance of certainty in patent law:
“[T]he limits of a patent must be known for the protection of the patentee, the encouragement of the inventive genius of others and the assurance that the subject of the patent will be dedicated ultimately to the public.” Otherwise, a “zone of uncertainty which enterprise and experimentation may enter only at the risk of infringement claims would discourage invention only a little less than unequivocal foreclosure of the field,” and “[t]he public [would] be deprived of rights supposed to belong to it, without being clearly told what it is that limits these rights.”
Markman v. Westview Instruments, Inc., — U.S. -, -, 116 S.Ct. 1384, 1396, 134 L.Ed.2d 577 (1996) (citations omitted).
Patent counselors should be able to advise their clients, with some confidence, whether to proceed with a product or process of a particular kind. The consequences of advice that turns out to be incorrect can be devastating, and the costs of uncertainty — unjustified caution or the devotion of vast resources to the sterile enterprise of litigation — can be similarly destructive. An expansive doctrine of equivalents can make counseling clients on infringement an exercise in hedging.
Recent developments have underscored the problem. Infringement claims now routinely come with two components — literal infringement and infringement by equivalents — and the latter is often more significant in counseling and litigation than the former. Moreover, because of the increasing popularity of jury trials in patent infringement cases, the issue of infringement by equivalents is often given to a jury that is unfamiliar with the principles of patent law, unschooled in the pertinent technology, and accorded only modest direction through general, pattern instructions. That setting is fertile ground for arbitrariness, and it has led some to conclude that the doctrine of equivalents, in its current form, has become “a virtually uncontrolled and unreviewable license to juries to find infringement if they so choose.” Hilton Davis Chem. Co. v. Warner-Jenkinson Co., 62 F.3d at 1538, 35 USPQ2d at 1662 (Plager, J., dissenting). In part because of patent law, decisions regarding the use and sale of particular technology can have enormous financial consequences — witness this case. For that reason, the law owes it to its constituency to make the lines of potential liability as clear as possible. We should therefore be very cautious about giving broad sweep to a judge-made doctrine that introduces such uncertainty into infringement analysis.
This court’s holding that the RF ion-beam system infringes Litton’s reissue patent seems to me to present a classic case of unduly broad extension of the doctrine of *1581equivalents. Can we reasonably expect a patent counselor to have confidently advised Honeywell that the RF ion-beam system would infringe Litton’s patent? Four judges have now looked at that question; two have concluded that infringement by equivalents cannot reasonably be found, and the other two have concluded that a jury could permissibly find infringement. That diversity of views suggests that the infringement question cannot be answered with the level of confidence that the law ought to provide to lawyers and businessmen facing multi-million dollar decisions. The application of the doctrine of equivalents in a ease such as this one thus seems to me to fuel the case against the doctrine, not to support its continued existence within the narrow limits where its purposes are most clearly served and its costs kept to a minimum.

State Laiv Claims

Although this case was tried principally as a patent infringement action, Litton’s brief on appeal places substantial weight on the two state law torts on which the jury found Honeywell liable and as to which the district court granted Honeywell judgment as a matter of law. Litton argues that the two state law torts are independent of the patent infringement claims, and that the jury’s verdicts on the state law claims (separate, noncumulative verdicts of $1.2 billion in damages on each claim) can stand even if the original and reissue patents are held unenforceable, invalid, or not infringed. I agree with the district court that the verdicts on those counts should be vacated, although I would remand the second state law claim to the district court for further analysis in light of the disposition of the patent issues.
The first of the two state law torts — intentional interference with contractual relations — was based on contracts between Litton and Anthony Louderback, a former Litton employee and one of the inventors on the ’958 patent. Shortly after the issuance of the ’958 patent, Louderback left Litton and formed his own company, Ojai Research, Inc. In 1981, Louderback and Litton executed a series of agreements under which Louderback agreed to serve as a consultant for Litton for two years and was authorized to use the ’958 patent process subject to certain restrictions. The “Technical Assistance and License Agreement,” which had a 15-year duration (roughly equal to the remaining life of the ’958 patent), prohibited Louderback from using the patented process to make ring laser gyroscope mirrors for anyone but Litton. The “Consulting Services Contract,” which was effective for only the two-year period between 1981 and 1983, provided that Litton was to have proprietary rights in improvements and developments made by Louderback “during any work by [Louderback] for Litton,” but not in those improvements Louderback made apart from his work for Litton.
The district court held that Litton could not lawfully restrain Louderback from using technology that was in the public domain. Therefore, the court held, the contract provision barring Louderback from using the process claimed in the ’958 patent to make mirrors for others would be enforceable only if Litton enjoyed valid patent rights or other proprietary rights in the process. I agree with the district court’s conclusion, but not because the contract is unenforceable under federal law. See Universal Gym Equip., Inc. v. ERWA Exercise Equip. Ltd., 827 F.2d 1542, 4 USPQ2d 1035 (Fed.Cir.1987) (federal law held not to bar a state from enforcing a contract prohibiting the defendant from selling a product that included the plaintiffs “features and designs”). Instead, it is California law that makes the contract unenforceable in the absence of some protected property right of Litton’s in the technology that Louderback used to make mirrors for Honeywell.
Because the original patent was surrendered in reissue, and because none of the reissue claims were identical to claims in the original patent, Litton had no valid patent rights in the claimed process either when Louderback entered into the contracts with Litton in 1981 or when he began manufacturing mirrors for Honeywell in 1985. See 35 U.S.C. § 252; Kaufman Co. v. Lantech, Inc., 807 F.2d 970, 976, 1 USPQ2d 1202, 1206-07 (Fed.Cir.1986) (absent identity between the *1582original and reissue claims, “the patentee has no rights to enforce before the date of reissue because the original patent was surrendered and is dead”). Nor did Litton prove that, in working for Honeywell, Louderback misappropriated or made unauthorized disclosures of any Litton trade secret or other proprietary information.
At trial, the question of misappropriation centered on Louderback’s use of a sliding target that produced mirrors with a graded optical index, or “graded interface” between layers. Louderback testified that he initially set up a coating system at Ojai with a sliding target mechanism, but that he quickly discarded that mechanism and did not begin using it to make mirrors for Honeywell until several years later. He further testified that he regarded the graded index process as his own property, and that he maintained it separately from the “Litton process system” that he operated under license from Litton.
To support its argument that the sliding target process was Litton’s property, Litton characterizes Louderback in its brief as “an exclusive consultant” to Litton between 1981 and 1983. That characterization, however, is not accurate. While the October 1990 settlement agreement between Louderback and Litton referred to their prior consulting relationship as “exclusive,” the actual 1981 agreements make it clear that Louderback would be spending only part of his time doing work for Litton.
In order to determine whether Litton obtained any rights in the sliding target process, it is necessary to review the provisions of the Consulting Services Contract. Paragraph 6 of that agreement states:
Litton shall have all rights ... in all inventions, developments and discoveries (whether or not patented) which Consultant may conceive or make, or first actually reduce to practice, either solely or jointly with others, during any work by Consultant for Litton whether or not under this agreement and related Purchase Order and which:
(i)relate to subject matter with which Consultant’s work for Litton performed in accordance with the Statement of Work set forth in Attachment I; or
(ii) relate to the business, products or demonstrably anticipated research or development projects for Litton, or
(iii) involve the use of time, equipment, materials or facilities of Litton____
The key inquiry under that agreement is whether the sliding target system was developed while Louderback was doing work for Litton and thus belonged to Litton. I agree with the district court that Litton failed to prove that it was.
Both parties recognized that even during the two-year consulting period Louderback would be doing independent work and would be producing optical films for third parties. Under the terms of the consulting agreement, developments made by Louderback while working independently or for third parties did not become Litton’s property. Except as summarized above, the record does not reveal the relationship between the sliding target mechanism and Louderback’s work for Litton. Because Litton did not prove entitlement to the sliding target technology that Louderback developed, the only right Litton had to that technology under the agreement was a royalty-free, non-exclusive license to its use. Thus, even if the sliding target mechanism was entitled to the status of a trade secret — and there is considerable ground for doubt on that point — it was not shown to be a trade secret that belonged to Litton, rather than to Louderback.
If Litton had no protectible interest in the process that Louderback used in making mirrors for Honeywell, the question is whether the contractual provision barring Louderback from using an ion-beam process to make ring laser gyroscope mirrors for any third party during the term of the 15-year contract was valid and enforceable under California law. That question calls into play section 16600 of the California Business and Professions Code, which states that, subject to statutory exceptions inapplicable here, “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”
Section 16600 creates a broad prohibition against “all shades of business restraint, with one narrow judicially-created exception.” *1583Liberty Mutual Ins. Co. v. Arthur J. Gallagher & Co., 1994 WL 715613 (N.D.Cal.1994). The exception allows a covenant restraining competition to be enforced “when the subsequent competition constitutes unfair competition, such as the unauthorized use of trade secrets or confidential information.” Id. See generally Muggill v. Reuben H. Donnelley Corp., 62 Cal.2d 239, 42 Cal.Rptr. 107, 109, 398 P.2d 147, 149 (1965); Metro Traffic Control, Inc. v. Shadow Traffic Network, 22 Cal.App.4th 853, 27 Cal.Rptr.2d 573, 577-78 (1994) (section 16600 bars any attempt to restrict competition by a former employee “unless the restriction is carefully limited and the agreement protects merely a proprietary or property right of the employer recognized as entitled to protection under the general principles of unfair competition”).
The prohibition in the “Technical Assistance and License Agreement” is a broad one, as it precludes Louderback for 15 years from using any ion-beam sputtering process to produce optical films for any high power laser application (other than for Litton). Under California law, a covenant not to compete that is that broad is unenforceable absent a showing that it is supported by patent rights or other proprietary interests. Because the district court was clearly correct in its ruling on the intervening rights issue, Litton had no enforceable rights under the original patent. Littoris process was therefore not entitled to patent protection until the reissue date in 1989. Moreover, as noted above, Litton failed to prove that it had any trade secret or other proprietary rights in the process that Louderback used to make mirrors for Honeywell. Accordingly, Louderback did not commit an actionable breach of his contracts with Litton when he began making mirrors for Honeywell in 1985. Honeywell is therefore not liable to Litton for intentional interference with contractual relations.
As for the state claim of intentional interference with prospective economic advantage, a plaintiff alleging that tort “must plead and prove as part of its case-in-chief that the defendant not only knowingly interfered with the plaintiffs expectancy, but engaged in conduct that was wrongful by some legal measure other than the fact of interference itself.” Della Penna v. Toyota Motor Sales, U.S.A, 11 Cal.4th 376, 45 Cal.Rptr.2d 436, 902 P.2d 740 (1995). In this case, the jury stated on its verdict form that Honeywell “did use wrongful means,” but as the district court explained, “those words cannot, in and of themselves, substitute for proof of the elements of the tort.”
Litton alleged that Honeywell intentionally interfered with Littoris potential economic relations with various aircraft manufacturers who were prospective purchasers of Litton’s ring laser gyroscope systems. Specifically, Litton argued that Honeywell induced Louderback to breach his license agreement with Litton and thus obtained Litton’s superior ion-beam technology. Through that superior technology, Litton maintained, Honeywell secured contracts with the aircraft manufacturers that Litton would have obtained absent the breach.
Litton, however, has not shown how Honeywell’s conduct was legally “wrongful.” Because of the “intervening rights” doctrine, Litton enjoyed no patent rights in the process Louderback used when he began making mirrors for Honeywell, and Litton failed to show that Honeywell caused Louderback to breach his licensing agreement with Litton, because Litton did not prove it had other proprietary rights in the process Louderback used to make those mirrors. Moreover, the court does not identify and the record does not reveal any other conduct that would serve as the “wrongful means” required by California law. Because Litton failed to prove that Honeywell used wrongful means to compete for the aircraft manufacturers’ business, the district court was correct in overturning the jury’s verdict for Litton on the second state law claim as well.
While I disagree with this court’s disposition of the two state law issues, I would not affirm the district court’s judgment on the second of the two state law claims. Because the district court found both the original patent and the reissue patent invalid, the court did not find it necessary to address the question whether or how Littoris rights under the reissue patent, which became effec*1584tive in 1989, might affect Litton’s rights under the second state law cause of action. That is an issue that has not been briefed by the parties and as to which we have no guidance from the district court. I would therefore remand that issue for the district court to address in the first instance.
For the reasons stated, I respectfully dissent with regard to the two issues discussed above.