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Barred by Amendments, Litton Loses Equivalents Charge Against Honeywell

February 05, 2001

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Last Month at the Federal Circuit - March 2001

Judges: Mayer (author), Rader, and Bryson

In Litton Systems, Inc. v. Honeywell, Inc., No. 00- 1241 (Fed. Cir. Feb. 5, 2001), the Federal Circuit affirmed-in-part, reversed-in-part, vacated-in-part, and remanded a district court’s decision granting SJ and JMOL of noninfringement and JMOL on two state law tort claims.

In 1979, Litton Systems, Inc. (“Litton”) obtained U.S. Patent No. 4,142,958 (“the ‘958 patent”) covering a sputtering process for making multiple-layer optical films using an ion beam. In 1985, Litton sought reissue because the ‘958 patent was invalid for obviousness. After Litton amended the claims to limit them to a Kaufman-type ion beam, the Examiner allowed U.S. Reissue Patent No. 32,849 (“the ‘849 reissue”).

Meantime, Anthony Louderback, one of the coinventors of the ’958 patent, left Litton in 1981 to start his own optical coating company, Ojai Research, Inc. (“Ojai”). Louderback signed two agreements with Litton, an exclusive consulting agreement (“ECA”) and a licensing agreement (“LA”). The ECA, which expired in 1983, gave Litton ownership of any inventions, developments, or discoveries made by Louderback based on the process of the ‘958 patent. The LA, with a fifteenyear duration, allowed Louderback to use the process of the ‘958 patent, but prohibited him from using that process to produce mirrors for anyone other than Litton. However, from 1984 to 1990, Louderback used the process of the ‘958 patent to produce mirrors for Honeywell, Inc. (“Honeywell”).

In 1990, Litton sued Honeywell, Ojai, and Louderback in the U.S. District Court for the Central District of California for infringement of the ‘849 reissue. Litton later added two state law tort claims against Honeywell—intentional interference with contractual relations and intentional interference with prospective economic advantage. Litton and Honeywell went to trial. After several decisions and appeals covering all levels of the federal court system, the Federal Circuit affirmed that ion-beam processes used by Honeywell did not literally infringe the ‘849 reissue and remanded for consideration of infringement under the DOE.

Upon remand, the district court found that prosecution history estoppel and the all-elements rule precluded infringement under the DOE for all of Honeywell’s ion-beam processes. As a result, the district court granted SJ and JMOL of noninfringement of the ‘849 reissue. The district court also granted JMOL for Honeywell on the state law tort claims.

On appeal, the Federal Circuit relied on Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 234 F.3d 558 (Fed. Cir. 2000) (en banc) to affirm that the district court had correctly granted JMOL of noninfringement under the DOE. Although an earlier Federal Circuit decision related to this case had applied the flexible-bar rule regarding the DOE, the law of the case doctrine did not prevent the Federal Circuit from applying Festo’s complete-bar rule here. As a result, Litton’s patentability arguments and narrowing amendments during prosecution of the ‘849 reissue completely barred any range of equivalents for the Kaufman-type, ion-beam limitation.

Based on the JMOL of noninfringement, the Court concluded, Litton could not rely on its patent infringement claims to support the wrongful-means element of the state law tort claims, and this factual issue should have been submitted to a jury. However, in granting JMOL for Honeywell on the state law tort claims, the district court had impermissibly decided disputed issues of material fact related to wrongful means. The Federal Circuit, therefore, reversed the grant of JMOL, vacated a previous jury verdict on the state law tort claims, and remanded for further proceedings.

In dissenting, Judge Bryson pointed out that the ECA had expired prior to any alleged tortious conduct and that the conduct alleged or proved by Litton did not breach the LA. Additionally, the evidence at trial did not support the intentional interference with prospective economic advantage claim. Thus, in Judge Bryson’s view, the district court had correctly entered JMOL for Honeywell on the state law tort claims