Bourns, Inc. And Marlan E. Bourns, and Cross-Appellees v. Allen-Bradley Company, and Cross-Appellants ( 1973 )

CLARK, Associate Justice.

Appellants Bourns, Inc. and Marian E. Bourns challenge the District Court’s application of the doctrine of collateral estoppel as applied in Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971), to bar this patent infringement suit which was filed in the United States District Court for the Northern District of Illinois against Allen-Bradley Company et al., appellees. Appellants alleged infringement of their “leadscrew actuated potentiometer,” Patent No. 2,777,926 (the ’926 patent). Among the defenses appellees pleaded collateral estoppel based on the final judgment entered against appellants in Bourns, Inc. v. Dale Electronics Inc., 308 F.Supp. 501 (D.Neb.1969). After the Supreme Court handed down the Blonder-Tongue decision, appellees filed amended answers further alleging that appellants had voluntarily dismissed their appeal to the United States Court of Appeals for the Eighth Circuit on May 4, 1970, and moved for summary judgment. The District Court, 348 F. Supp. 554, granted appellees’ motion, holding that Blonder-Tongue governed this case and that the Dale decision had invalidated all claims embraced in the ’926 patent. We agree that Blonder-Tongue bars appellants from relitigating the patent claims explicitly invalidated in Dale, but reverse the judgment below insofar as it bars appellant from relitigating the remaining ’926 claims.

1. The Dale Judgment.

In the Dale pleadings Bourns had alleged infringement on the basis of its patent generally, i. e., without singling out specific claims. Likewise, the defendants in Dale had counterclaimed for a declaration that the entire patent was invalid. However, the Dale judgment stated in relevant part:

“2. Claims 1, 2, 11, 14, 15, 16 and 20 of the United States Patent No. 2,777,926 are invalid * * * *

7. The Amended Complaint is dismissed with prejudice, and the Amended Counterclaim is sustained to the extent indicated.”

The District Court here found the Dale judgment ambiguous in its application to the ’926 claims not explicitly mentioned therein. On the basis of several isolated statements in the Dale opinion (e. g., “. . . the’926 patent is held to be invalid.”) it concluded that the Dale court intended to hold the entire patent invalid.

We disagree with the District Court’s interpretation and conclude that Dale is binding only as to the claims specifically mentioned in its judgment. The opinion in that ease begins: “Plaintiff relies upon claims 1, 2, 11, 14, 15, 16 and 20 of the ’926 patent.” Further down in the opening paragraph the opinion continues: “In determining the validity of the patent this Court must ascertain the essence and scope of the patent as stated in Che above-mentioned claims.” (Emphasis added.) Still further in the opinion the court says: “Commencing with the history and progress of this application through the patent office as finally embodied in claims 1, 2, 11, 14, 15, 16 and 20, it provides some insight into the scope of the patent.” And in the judgment the Dale court again sets out these claims as invalid. We think it clear from these references that where the court referred to the ’926 patent as being invalid, it was referring only to those claims specifically designated at the outset and re-stated in the final judgment. As Professor Moore teaches:

[A prior judgment] operates as a collateral estoppel as to, but only as to, those matters or points which were in issue or contraverted and upon the determination of which the initial judgment necessarily depended. [Emphasis added.]

1B Moore’s Federal Practice 3777 (2d ed. 1965); and, as Judge Learned Hand explained almost forty years before, “. . . [collateral] estoppel extends only to facts decided and necessary to the decision.” Irving Nat. Bank v. Law, 10 F.2d 721, 724 (2 Cir. 1926). Since the Dale court’s judgment by its terms did not depend on the invalidity of claims not specified in that judgment, appellants are not collaterally estopped from asserting the remaining claims of the ’926 patent.

2. Application of the Blonder-Tongue Collateral Estoppel Doctrine.

Appellants also urge that collateral estoppel should not be applied to bar their raising the same patent claims that were declared invalid in Dale. They rely on the statement in Blonder-Tongue that “the patentee-plaintiff must be permitted to demonstrate, if he can, that he did not have ‘a fair opportunity procedurally, substantively and evidentially to pursue his claim the first time.’” 402 U.S. at 333, 91 S.Ct. at 1445. Appellants argue that they lacked an incentive to fully litigate in Dale due to (1) an alleged anti-patent bias of the Eighth Circuit, (2) the relative insignificance of the Dale suit, (3) new procedural advantages made available since Dale was begun, (4) the alleged greater hospitality of the Seventh Circuit toward patents, and (5) their reliance on the pre-Blonder-Tongue case of Triplett v. Lowell, 297 U.S. 638, 56 S.Ct. 645, 80 L.Ed. 949 (1936), which required mutuality of estoppel. We need not pause to discuss these claims. They are fully answered by the District Court, which correctly noted that appellants themselves chose the Nebraska forum; that the Dale court applied Supreme Court standards of patent validity as enunciated in Graham v. John Deere Co., 383 U. S. 1, 86 S.Ct. 684, 15 L.Ed.2d 545 (1966); that the Dale litigation involved a potential recovery by appellants of approximately $1,000,000, and that “most if not all” of the evidence alleged by appellants to have been newly discovered was in existence and discoverable during the Dale litigation. The District Court concluded that appellants lost in Dale after a full and fair hearing and that the equities fully justify the application of collateral estoppel against them.

The District Court also concluded that the Supreme Court in Blonder-Tongue implicitly rejected reliance on its prior decision in Triplett v. Lowell, supra, as an adequate basis for avoiding the general rule fashioned in the later decision. See Monsanto Co. v. Dawson, Chemical Co., 443 F.2d 1035 (5 Cir. 1971), cert. denied 405 U.S. 974, 92 S.Ct. 1191, 31 L.Ed.2d 248 (1972). We agree. The Dale litigation was pending for seven years in a jurisdiction with no backlog; the trial itself lasted six days and produced a transcript of 610 pages; and the potential recovery was over $1,000,000. Thus, appellants had ample incentive to litigate the ease to the end. True, the Supreme Court held in Triplett that collateral estoppel did not preclude “relitigation of the validity of a patent claim previously held invalid in a suit against a different defendant.” Triplett v. Lowell, supra, at 644 of 297 U.S., 56 S.Ct. 645. However, in overruling Triplett, the Blonder-Tongue Court did not see fit to rule prospectively, though it has so limited recent rulings in other contexts where retrospective application would work hardship and inequity. Phoenix v. Kolodziejski, 399 U.S. 204, 213-215, 90 S.Ct. 1990, 26 L.Ed.2d 523 (1970); Cipriano v. City of Houma, 395 U.S. 701, 706, 89 S.Ct. 1897, 23 L.Ed.2d 647 (1969). Indeed, it specifically commented that in the end the use of, the collateral estoppel doctrine “will necessarily rest on the trial courts’ sense of justice and equity.” 402 U.S. at 334, 91 S.Ct. at 1445. The District Court has carefully appraised the justice and equity of applying the doctrine here and has held against appellants. We have examined the record and conclude that its findings are fully supported therein.

Appellants dispute that they had full and fair judicial resolution of their claims. They suggest that they abandoned the Dale appeal in reliance on the Triplett rule. It may be that in some situations reliance on Triplett should relieve a patentee from the consequences of the Blonder-Tongue decision’s new collateral estoppel rules. But the circumstances surrounding the Dale litigation, particularly the large potential recovery and the time and effort already expended, convince us that appellants would have pursued their appeal regardless of the Triplett rule had they held any reasonable expectation of ultimate success. Since appellants abandoned their appeal because they saw no reasonable chance of prevailing on the merits, we believe it equitable both as a general matter and specifically under the Blonder-Tongue decision to apply the estoppel rule established in that decision.

The judgment below is reversed insofar as it bars appellants from asserting the patent claims other than those explicitly declared invalid in the Dale judgment. In other respects the judgment is affirmed.