Avco Corp. v. PPG Industries, Inc.

867 F. Supp. 84

AVCO CORPORATION, Plaintiff, v. PPG INDUSTRIES, INC., Defendant.

Civ. A. Nos. 90-10316-WGY, 90-10688-WGY.

United States District Court, D. Massachusetts.

November 9, 1994.

COPYRIGHT MATERIAL OMITTED

Peter B. Ellis, Foley, Hoag & Eliot, Boston, MA, Nicholas L. Coch, Shea & Gould, New York City, John E. Kidd, Rogers & Wells, New York City, for Avco Corp.

John M. Skenyon, Fish & Richardson, Boston, MA, Mark Levin, PPG Industries, Inc., Pittsburgh, for PPG Industries, Inc.

MEMORANDUM AND ORDER

YOUNG, District Judge.

I. The Trial

A. PROCEDURAL BACKGROUND

Avco Corporation ("Avco") brought the first of these two consolidated cases seeking a declaration that United States Patent No. 4,529,467 ("the Ward patent") issued to PPG Industries, Inc. ("PPG") was void or invalid on various grounds. PPG brought the second action alleging patent infringement by Avco and claimed a jury trial.

After consolidation, the issues triable as of right to a jury came on for such a trial. At trial, Avco admitted that its product, CHARTEK III, infringed certain claims of the Ward patent. The Court directed a verdict for Avco as to the remaining claims of the Ward patent. On the thirteenth day of trial, the remaining issues in the case were submitted to the jury which duly rendered a verdict on July 26, 1993, wholly in favor of PPG. The jury found that Avco Corporation had failed to prove by clear and convincing evidence that the Ward patent was void or invalid on the ground that it was obvious or that it was anticipated by another Avco product, CHARTEK 59. It followed ineluctably that the Ward patent was valid and infringed by Avco's CHARTEK III. Indeed, the jury went on to find that Avco had, in fact, willfully infringed the Ward patent and, applying a lost profits analysis, awarded damages of $25,571,824.00. Despite the jury's finding of willfulness, this Court did not impose any multiplier of damages, nor did this Court impose any attorneys' fees. Given the size of the jury verdict and its obvious lost profits analysis, this Court was satisfied that PPG would be fully compensated by entering judgment on the jury verdict without a multiplier or attorneys' fees.

The Court then, see Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 510, 79 S.Ct. 948, 956-57, 3 L.Ed.2d 988 (1959), turned to Avco's last ditch defense. Avco contended that the Ward patent was invalid and unenforceable due to the inequitable conduct of PPG in filing and pursuing its patent application.¹ On July 27, 1993, ruling from the bench, this Court rejected the inequitable conduct defense. In setting forth its oral findings and rulings, the Court reserved the right to enter a comprehensive written opinion. This is that opinion.

B. FACTUAL BACKGROUND

To understand Avco's inequitable conduct defense, one must first understand the marketplace in which the patent at issue finds its commercial expression. The market is comprised of specialized fire protective coatings for large steel structures, primarily offshore drilling rigs and oil refineries. These coatings are designed to retard the buckling and actual consumption by fire of steel structural members for as long as possible when exposed to the extremely high temperatures of an oil fire.

Avco first dominated this market, having successfully developed, marketed, and supplied a product known as CHARTEK 59. CHARTEK 59 is customarily applied using galvanized mesh to support the fire protective coating. The galvanized mesh contains zinc. CHARTEK 59 is not patented, and was generally available on the market. Avco, however, did take some care to keep secret the actual composition of CHARTEK 59.

PPG made a considered corporate decision to enter this market. First, PPG reverse engineered CHARTEK 59. Mr. Ward, one of the inventors named in the Ward patent, prepared an in-house PPG version of CHARTEK 59. This initial composition contained no zinc. In July, 1980, PPG conducted a computer-based prior art search. The Sawko patent, a patent mentioning zinc as a fire-retardant substance, was ordered as a result of this computer search and was placed in Mr. Ward's personal files. The PPG laboratory also made frequent comparison and reference tests to the commercially competitive product it was imitating, CHARTEK 59. Throughout the testing, PPG referred to CHARTEK 59 as the control, the product against which PPG intended to measure its own commercial product. PPG called its prototype composition PITT-CHAR.

During the developmental work of PITT-CHAR at PPG, Mr. Ward, or someone acting on his behalf, contacted Dorothy MacFarlane at U.S. Borax and requested a fifty pound sample of FIREBRAKE ZB. Ms. MacFarlane specifically recalled this fifty pound request because most other requests for samples of FIREBRAKE ZB were in the one-half to two pound range. Accordingly, Ms. MacFarlane considered PPG to be a hot prospect for FIREBRAKE ZB. In filling its request, she also forwarded U.S. Borax bulletin 1281 to PPG.²

For two years, culminating in September, 1983, Mr. Ward compared and tested PPG's PITT-CHAR precursor against CHARTEK 59 at Underwriters Laboratories ("UL Labs"). In September, 1983, one month prior to the Ward patent application filing date, Mr. Ward subjected CHARTEK 59 and PPG's PITT-CHAR to UL Lab's crucial 1709 rapid rise fire test. The results showed that PPG's PITT-CHAR product performed comparably to CHARTEK 59, with its standard galvanized, i.e. zinc-coated, mesh reinforcement. It was time to seek patent rights.

In submitting the application to the Patent Office on the PITT-CHAR product, Mr. Ward and the other inventors submitted internal PPG documents entitled Memorandum of Invention that referred to data which they considered prior art. Among the internal documents submitted were notes of telephone conversations between Mr. Ward and Linda Pignitore, a patent attorney at PPG.

Mr. Ward disclosed to Ms. Pignitore that CHARTEK 59 was an epoxy polyamide composition. He told Ms. Pignitore that CHARTEK 59 had been used as his base line and was a product he was trying to trump by the development of PITT-CHAR. In addition, Mr. Ward disclosed to Ms. Pignitore in his Memorandum of Invention certain tests from UL Labs which eventually became Example 9 of the Ward patent.

The notes reveal that Mr. Ward made mention of the commercial universe in which PITT-CHAR was intended to be marketed and the market against which PITT-CHAR was intended to be more effective. Mr. Ward mentioned the competition to be expected from cementitious products and mentioned to Ms. Pignitore the advantages and disadvantages of those products. Mr. Ward specifically mentioned CHARTEK 59 to Ms. Pignitore as a commercially viable PITT-CHAR competitor. Mr. Ward thought that PITT-CHAR was patentable because it was a sufficient advance over this competition.

In July, 1984, the Patent Office rejected the Ward patent application as obvious. Even though the patent examiner presumably knew about the Sawko patent³ which mentions the role of zinc in fire retardation, the primary references relied upon by the patent examiner as prior art epoxy intumescent fire retardant compositions were the Lloyd-Lucas and Matsumoto patents. Significantly, both these patents are devoid of any teaching that zinc is a source of the fire retardant capability of the patent issued.

To overcome the patent application rejection, Mr. Ward devised certain comparative tests to show that in fact it was the use of zinc that gave PPG's PITT-CHAR the unexpected superiority over the prior art. The comparison tests submitted by Mr. Ward in his affidavit were not the comparison tests already conducted between PITT-CHAR and CHARTEK 59 at UL Labs. Rather, the tests were comparisons created solely for the purposes of submission to the Patent Office. The control in these tests was not CHARTEK 59. Instead, the tests compared compositions of the supposed prior art referred to by the patent examiner with the PITT-CHAR of the Ward patent application. The tests demonstrated the marked advantage of the Ward patent application composition, i.e. PITT-CHAR. Thereafter, the Ward patent issued.

Based on these facts, Avco contends that the patent should be declared invalid due to inequitable conduct by PPG. Avco raises four grounds of alleged invalidity. First, Avco claims that the Sawko patent was material and intentionally withheld from the Patent Office. Second, Avco argues that U.S. Borax Bulletin 1281 was material information and was likewise intentionally withheld. Third, Avco argues that the existence of CHARTEK 59 was material and intentionally withheld. Last, Avco claims that the UL Labs comparison tests between CHARTEK 59 and PITT-CHAR, the commercial application of the Ward patent, was material and intentionally withheld.

C. DUTY TOWARDS THE PATENT OFFICE

The Supreme Court has held that attorneys, agents, and applicants "who have applications pending with the Patent and Trademark Office or who are parties to Patent and Trademark Office proceedings have an uncompromising duty to report to it all facts concerning possible fraud or inequitableness underlying the applications in issue." Precision Instruments Mfg. Co. v. Automotive Maintenance Mach. Co., 324 U.S. 806, 818, 65 S.Ct. 993, 999, 89 L.Ed. 1381 (1945). See also 3 Ernest B. Lipscomb III, Lipscomb's Walker on Patents § 9:51, at 91 (3d ed. 1985). The Supreme Court imposed the duty to reveal in order to prevent the Patent Office from being classed among the "mute and helpless victims of deception and fraud." Precision Instruments, 324 U.S. at 818, 65 S.Ct. at 999 (quoting Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 246, 64 S.Ct. 997, 1001, 88 L.Ed. 1250 1944). The highest level of honesty and candor on the part of applicants in reporting the material facts is essential in the patent system. Norton v. Curtiss, 433 F.2d 779, 794 (C.C.P.A.1970); Hycor Corp. v. Schlueter Co., 740 F.2d 1529, 1538 (Fed.Cir.1984).

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