Air Turbine Technology v. Atlas Copco Ab

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United States Court of Appeals for the Federal Circuit
04-1387
AIR TURBINE TECHNOLOGY, INC.,
Plaintiff-Appellant,
v.
ATLAS COPCO AB, ATLAS COPCO TOOLS AB,
ATLAS COPCO NORTH AMERICA, INC., and
ATLAS COPCO TOOLS, INC.,
Defendants-Appellees.
Richard L. Horn, Akerman Senterfitt, of West Palm Beach, Florida, argued for
plaintiff-appellant. With him on the brief was Philip M. Burlington, of West Palm Beach,
Florida.
William P. Atkins, Pillsbury Winthrop LLP, of McLean, Virginia, argued for
defendants-appellees. With him on the brief were Scott J. Pivnick, Guillermo E. Baeza,
and Benjamin L. Kiersz.
Appealed from: United States District Court for the Southern District of Florida
Judge Kenneth A. Marra
United States Court of Appeals for the Federal Circuit
04-1387
AIR TURBINE TECHNOLOGY, INC.,
Plaintiff-Appellant,
v.
ATLAS COPCO AB, ATLAS COPCO TOOLS AB,
ATLAS COPCO NORTH AMERICA, INC., and
ATLAS COPCO TOOLS, INC.,
Defendants-Appellees.
__________________________
DECIDED: June 7, 2005
__________________________
Before LOURIE, SCHALL, and PROST, Circuit Judges.
SCHALL, Circuit Judge.
Air Turbine Technology, Inc. (“ATT”) is the owner of United States Patent No.
5,439,346 (“the ’346 patent”). ATT sued Atlas Copco AB (“ACAB”), Atlas Copco Tools
AB (“ACTAB”), Atlas Copco North America, Inc., and Atlas Copco Tools, Inc.
(collectively, “Atlas”) in the United States District Court for the Southern District of
Florida for infringement of the ’346 patent, for violation of the Lanham Act, and for unfair
competition under Florida law. In the same action, ATT sued ACTAB separately for
breach of contract, fraud, and breach of confidential relationship. ATT now appeals
from the final judgment of the district court that was adverse to it on all of its claims. Air
Turbine Tech., Inc. v. Atlas Copco AB, No. 01-8288-CIV (S.D. Fla. Nov. 13, 2003)
(“Final Judgment”). We affirm.
BACKGROUND
I.
ATT, located in Boca Raton, Florida, is a manufacturer of pneumatic industrial
tools.1 One of its products is a “governed turbine pencil grinder.” This is a tool that has
a high-speed grinding bit at one end and is typically used for high-precision work, such
as engraving. Among the various means of powering pencil grinders, the turbine engine
has several advantages, such as reduced noise and fewer maintenance requirements.
However, at least as used in grinding tools, turbines have the disadvantage of losing
power under load. This means that the rotation speed of the grinding bit tends to
decrease as resistance is applied to it. So, for example, a person using a turbine
grinder to engrave a piece of metal might find that the rotation speed of the grinder’s bit
decreased as the bit was applied against the surface of the metal.
ATT acquired U.S. Patent No. 4,776,752 (“the ’752 patent”) in an effort to
overcome this power-loss shortcoming of turbine grinders. The ’752 patent, entitled
“Speed Governed Rotary Device,” claims a “governor” that can be used to control (or
govern) the rotary speed of a turbine grinder. ATT used this technology to develop
several governed-turbine models of its pencil grinder, one of which was the Model 201A
grinder. ATT believed that this new tool overcame many of the power-loss problems
experienced by turbine pencil grinders.
1
Generally speaking, pneumatic tools are tools that operate using
compressed air or some other compressed gas.
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Atlas is a large power-tool distributor based in Sweden. It is comprised of
multiple corporate entities, one of which is ACTAB, its worldwide distribution subsidiary.
One of the many products marketed by Atlas, and distributed by ACTAB, is a high-
speed pencil grinder. On May 1, 1992, ACTAB and ATT entered into a Private Brand
Agreement (“PBA”) under which ACTAB obtained the rights to market and sell ATT’s
Model 201A grinder worldwide, with the exception of the United States and Canada.
The PBA included, among others, the following provision protecting ATT’s intellectual
property:
AC[TAB] will not exploit ATT’s technology covered by ATT’s
patents. ATT will inform AC[TAB] well in advance before
implementing any modifications or improvements of the
Product. This provision is valid for the life of the patent
(including applicable application periods).
Operating under the PBA, Atlas marketed the Model 201A pencil grinder as the
“TSF06.” Atlas intended to eventually sell the TSF06 worldwide (with, presumably, the
exception of the Untied States and Canada). It never did so, however, because in
March 1993, ATT terminated the PBA.2
Several years later, ATT acquired ownership of the ’346 patent, which relates to
an “automatic braking mechanism” for turbine grinders and other rotary devices. The
patent is based on an application filed on September 16, 1993, by Gregory A. Bowser
and Edward C. McCollough. It describes a braking mechanism that uses pressurized
fluid, such as air, to enable or inhibit the rotation of, for example, a turbine’s rotor. The
braking mechanism is located inside of a chamber that is adjacent to the rotor. ’346
patent, col. 3, ll. 22-23. The mechanism consists, in part, of a spring and a brake pad
2
ATT contends that it rescinded the contract because Atlas was in breach
for failing to make timely payments. That issue is not before us in this appeal.
04-1387 3
that are oriented in such a manner that, in the absence of external forces, the spring
exerts pressure on the brake pad so as to push the brake pad into the rotor, thereby
inhibiting rotation. Id. col. 5, ll. 33-50. However, when compressed air flows through
the chamber, an exhaust pressure is created that is greater than the ambient pressure
normally present in the chamber. This in turn exerts a force on the brake pad greater
than, and opposite to, the force exerted on it by the spring, thereby pushing the brake
pad away from the rotor and enabling rotation. Id. col. 5, ll. 12-21. The automatic
braking mechanism can therefore be summarized as follows: in the presence of a
compressed fluid, the braking mechanism enables rotation of the rotor; in the absence
of a compressed fluid, the braking mechanism inhibits rotation of the rotor. Id. col. 5, ll.
47-57.
At some point after ATT terminated the PBA with ACTAB, Atlas began looking for
other suppliers of pencil grinders. Atlas found Schmid & Wezel GmbH & Co.
(“Schmid”), a German company, to be a suitable supplier and, in 1999, entered into a
PBA with Schmid for turbine pencil grinders. Atlas marketed the Schmid pencil grinder
as the “TSF07” and began selling it in October 1999. Atlas continued to sell the TSF07
until the spring of 2001, when it received notice that ATT believed the TSF07
incorporated an automatic braking mechanism that infringed the ’346 patent.
II.
On April 6, 2001, ATT sued Atlas in the Southern District of Florida. ATT’s first
amended complaint alleged a total of six causes of action: (1) infringement of the ’346
patent; (2) unfair competition under section 43 of the Lanham Act, 15 U.S.C. § 1125; (3)
breach of contract; (4) fraud; (5) breach of confidential relationship; and (6) unfair
04-1387 4
competition under Florida law. (First Am. Compl. ¶¶ 18-50.) Counts one, two, and six
were asserted collectively against Atlas, while counts three, four, and five were asserted
separately against ACTAB.3
The patent infringement and unfair competition claims asserted against Atlas
were all alleged to arise from Atlas’s marketing of the TSF07 grinder subsequent to ATT
terminating the PBA with ACTAB. ATT’s theory with respect to count one—patent
infringement—was that the TSF07 marketed by Atlas incorporated an automatic braking
mechanism that infringed the ’346 patent. (Id. ¶ 14.) ATT based its Lanham Act claim
of count two on a theory of false advertising. Specifically, ATT alleged that Atlas made
the TSF07 to look like the TSF06 and that it advertised the TSF07 as having the same
governed turbine characteristics as the TSF06, when in fact the TSF07 did not have
such capabilities. (Id. ¶¶ 27-28.) ATT alleged that this false advertising caused
consumer confusion as to product origination and, moreover, caused consumers to stop
buying the TSF06 because they believed it had the same inferiorities as the TSF07. (Id.
¶¶ 29-32.) In other words, ATT alleged that consumers were not satisfied with the
TSF07 because it lacked the advertised “governed turbine” feature and that, because of
the falsely advertised similarities to the TSF06, they stopped buying the TSF06. With
respect to the unfair competition claim under Florida law, count six, ATT similarly
alleged that Atlas had falsely represented the TSF07 as having the same characteristics
as the TSF06 and thereby caused consumer confusion as to product origination. (Id. ¶¶
48-49.)
3
Counts three, four, and five were also asserted against ACAB, but ACAB
was subsequently dismissed from the suit for lack of personal jurisdiction. Air Turbine
Tech., Inc. v. Atlas Copco AB, 235 F. Supp. 2d 1287, 1290-91 (S.D. Fla. 2002).
04-1387 5
The three causes of action asserted separately against ACTAB arise from ATT’s
perceived breach of the PBA by ACTAB. Indeed, ATT based its breach of contract
claim, count three, on its belief that ACTAB’s marketing of the competing TSF07
product breached the promise ACTAB made in the PBA not to exploit any of ATT’s
technology during the life of ATT’s patents. (Id. ¶¶ 34-37.) ATT specifically alleged that
ACTAB exploited its technology by marketing a product that infringed the ’346 patent.
(Id. ¶ 36.) Along these same lines, ATT alleged that ACTAB also committed fraud,
count four, by entering into the PBA under false pretenses and with the intent to steal
ATT’s technology. (Id. ¶¶ 39-40.) Finally, ATT alleged in count five that ACTAB
acquired a position of trust by entering into the PBA and gaining access to ATT’s
proprietary and confidential technology. (Id. ¶ 43.) According to ATT, ACTAB then
breached this confidential relationship when it “used and disclosed [ATT’s] information
to others in the sale and promotion of ACTAB[’s] . . . tools incorporating [ATT]
technology.” (Id. ¶ 44.)
III.
Trial on all claims was set to begin the week of October 6, 2003. Air Turbine
Tech., Inc. v. Atlas Copco AB, et al., No. 01-8288-CIV (S.D. Fla. May 5, 2003) (“Order
Setting Trial”). However, on September 23, 2003, the district court granted Atlas’s
motion for summary judgment on the unfair competition, breach of contract, and fraud
claims. Air Turbine Tech., Inc. v. Atlas Copco AB, 295 F. Supp. 2d 1334, 1349 (S.D.
Fla. 2003) (“Summary Judgment”). ATT’s two remaining claims of patent infringement
and breach of confidential relationship proceeded to trial as scheduled.
04-1387 6
With respect to ATT’s false advertising claim under the Lanham Act, the court
granted summary judgment for Atlas on the ground that ATT had not produced any
evidence suggesting it was Atlas’s false advertisements that caused consumers to not
buy ATT’s product. Id. at 1344-46. The court summarized “ATT’s evidence of
causation” as “sworn testimony from its employees and distributors that customers told
them at trade shows that they will not buy ATT’s tool because they have an Atlas Copco
tool just like it and it does not operate as they would like.” Id. at 1344. The court found
that, with the exception of one affidavit, the employee and distributor testimony did not
go to the ultimate issue of causation. That was because, although the testimony
suggested that customers stopped buying the ATT tool as a result of dissatisfaction with
the Atlas tool, it did not suggest that customers stopped buying the ATT tool as a result
of Atlas’s false advertisements. Id. Additionally, the court concluded that Mr.
Verbruggen’s affidavit—which was the one affidavit that did suggest a causal link to
Atlas’s advertisements—was based on inadmissible hearsay. Id. at 1344-45.
The district court also granted Atlas summary judgment on the breach of contract
claim because it concluded that ATT had not shown that Atlas exploited any of ATT’s
patented technology. Id. at 1346-47. In particular, the court concluded that, as a matter
of law, use of technology covered by the ’346 patent (relating to the automatic braking
mechanism) could not form the basis of the breach of contract claim because the
application for the ’346 patent was not filed until after ATT terminated the PBA. Id. at
1346. The court noted that while a claim could have been made based on exploitation
of the ’752 patent (relating to the governor system), ATT did not advance such a claim.
Id. at 1346-47 (“Plaintiff has framed the alleged breach in its amended complaint as
04-1387 7
infringement of the ’346 patent.”).4 In addition, the court ruled that “exploit” means
actual or productive use of technology covered by an ATT patent. Accordingly, the
court held that “[s]imply advertising a similar product using descriptions similar to the
descriptions used by ATT is not exploiting ATT’s technology. It may be exploitation of
advertising materials, or false advertising or a trademark violation, but such acts are not
exploitation of technology.” Id. at 1347.
With respect to the fraud claim, the district court granted summary judgment for
ACTAB because it concluded that “ATT [had] not presented more than a scintilla of
evidence regarding ACTAB’s intent to fraudulently induce ATT into a contractual
relationship.” Id. at 1348. The district court also granted Atlas summary judgment on
ATT’s claim for unfair competition under Florida law because the claim did not add
anything beyond what the court had addressed already in the Lanham Act and breach
of contract claims. Id. at 1348-49.
As mentioned, the district court denied summary judgment as to the claims for
patent infringement and breach of confidential relationship, and so those two claims
proceeded to trial. Prior to trial, the district court denied ATT’s expedited motion
requesting an order to require testimony via live video conference. Air Turbine Tech.,
Inc. v. Atlas Copco AB, 217 F.R.D. 545, 546-47 (S.D. Fla. Sept. 3, 2003). As a result,
and due to the fact that many of Atlas’s employees are Swedish citizens, much of ATT’s
testimonial evidence was presented to the jury by recitation of deposition transcripts.
Atlas also succeeded in having two of ATT’s witnesses—Dr. Jerome Catz and Gregory
4
The district court also noted the inconsistency of alleging false advertising
based on a lack of a governed turbine in the TSF07 on the one hand, and in alleging
breach of contract based on the use of the governed turbine covered by the ’752 patent
on the other. Summary Judgment, 295 F. Supp. 2d at 1347 n.10.
04-1387 8
Bowser—barred from testifying at trial on the issue of infringement. The trial lasted
about three weeks and, on October 29, 2003, the jury returned a verdict against ATT on
both its infringement and breach of confidential relationship claims. The district court
entered final judgment as to all six of ATT’s claims on November 14, 2003. Final
Judgment.
ATT subsequently filed a motion for a new trial on its patent infringement claim
based on, among other things, the district court’s evidentiary rulings excluding the
testimony of Dr. Catz and Mr. Bowser. On April 20, 2004, the district court denied
ATT’s motion. Air Turbine Tech., Inc. v. Atlas Copco AB, No. 01-8288-CIV, slip op. at 9-
10 (S.D. Fla. Apr. 20, 2004) (“Order Denying Plaintiff’s Motion for New Trial”). In the
same order, the court also stayed, pending appeal, Atlas’s motion for costs and
attorney’s fees. Id.ATT has timely appealed from the final judgment of the district court. We have
jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
DISCUSSION
On appeal, ATT challenges the grant of summary judgment to Atlas on the false
advertising5 and breach of contract claims, as well as the denial of its request for a new
trial on its patent infringement claim. We turn first to the district court’s summary
judgment rulings.
5
ATT concedes that the requirements for a false advertising claim are the
same under Florida law as under the Lanham Act. Babbit Elecs., Inc. v. Dynascan
Corp., 38 F.3d 1161, 1181 (11th Cir. 1994). Accordingly, our review is limited to the
Lanham Act false advertising claim.
04-1387 9
I.
As discussed, the district court granted summary judgment for Atlas on ATT’s
Lanham Act false advertising claim because the court found that ATT had not provided
admissible evidence to suggest Atlas’s false advertising caused consumers to stop
buying ATT’s product. Rather, the court found that, at most, ATT’s admissible evidence
only suggested that consumers stopped buying ATT’s product because they were not
satisfied with Atlas’s product. Summary Judgment, 295 F. Supp. 2d at 1344-45. With
respect to the breach of contract claim, the district court granted summary judgment to
Atlas because it found that ATT did not provide evidence to suggest that Atlas had
exploited any of ATT’s patented technology covered by the PBA. Id. at 1346-47. The
court held that “exploit,” as used in the PBA, required actual or productive use of ATT’s
patented technology and therefore, as a matter of law, advertising a product as having
similar characteristics as ATT’s products could not be considered exploitation of ATT’s
technology. Id. at 1347.
Summary judgment must be granted “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving party is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(c). When we are dealing with an issue
not unique to patent law, the applicable substantive law is that of the appropriate
regional circuit, in this case, the Eleventh. Sulzer Textil A.G. v. Picanol N.V., 358 F.3d
1356, 1363 (Fed. Cir. 2004). As in the Federal Circuit, see TorPharm Inc. v. Ranbaxy
Pharms., Inc., 336 F.3d 1322, 1326 (Fed. Cir. 2003), in the Eleventh Circuit, review of a
district court’s grant of summary judgment is de novo, Vector Prods., Inc. v. Hartford
04-1387 10
Fire Ins. Co., 397 F.3d 1316, 1318 (11th Cir. 2005). Under Eleventh Circuit law, “[a]n
issue of fact is ‘material’ if, under the applicable substantive law, it might affect the
outcome of the case.” Hickson Corp. v. N. Crossarm Co., Inc., 357 F.3d 1256, 1259
(11th Cir. 2004). “An issue of fact is ‘genuine’ if the record taken as a whole could lead
a rational trier of fact to find for the nonmoving party.” Id. at 1260. The movant carries
the initial burden of proving that there are no genuine issues of material fact. Celotex
Corp. v. Catrett, 477 U.S. 317, 322-24 (1986). If the movant shows a prima facie case
for summary judgment, then the burden of production shifts to the nonmovant to present
specific evidence indicating there is a genuine issue for trial. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 250 (1986). “When ruling on a motion for summary
judgment, all of the nonmovant’s evidence is to be credited, and all justifiable inferences
are to be drawn in the nonmovant’s favor.” Caterpillar Inc. v. Deere & Co., 224 F.3d
1374, 1379 (Fed. Cir. 2000); see also Tackitt v. Prudential Ins. Co. of Am., 758 F.2d
1572, 1574 (11th Cir. 1985) (“We resolve all reasonable doubts about the facts in favor
of the non-movant.”).
A.
With respect to the false advertising claim, ATT first argues it was deprived of its
due process rights when the district court granted summary judgment for Atlas. ATT
asserts that the case law of both this and the Eleventh Circuit requires that a party have
a reasonable opportunity to present its case before a court enters judgment against it.
ATT argues that it was not given this opportunity because the causation theory upon
which the district court relied in granting summary judgment was not raised by Atlas but,
rather, sua sponte by the district court. In particular, ATT argues that it had no notice of,
04-1387 11
and, consequently, no opportunity to address, the court’s findings that Mr. Verbruggen’s
affidavit consisted of inadmissible hearsay and that ATT had not produced other
evidence to suggest it was injured as a result of false advertising by Atlas.
In the alternative, ATT contends that it presented sufficient evidence of causation
to survive summary judgment. First, ATT argues that it was not required to submit
evidence of “causation of damages” because the elements needed to show a violation
of the law are not the same as the elements needed to establish the right to a particular
remedy, such as damages or an injunction. Second, ATT argues that it “offered
substantial evidence of injury and damages caused by Atlas’s false advertising . . . so
as to create a genuine issue of fact.” Third, ATT contends that, like the plaintiff in
Cashmere & Camel Hair Manufacturers Institute v. Saks Fifth Avenue, 284 F.3d 302(1st Cir. 2002), it was entitled in the district court to a reasonable inference that “[Atlas’s]
intentional conduct caused harm to ATT.”
In response, Atlas argues that ATT received due process because it put ATT on
notice of the causation issue in its Consolidated Motion for Summary Judgment and that
causation was discussed at length at the summary judgment hearing. As for ATT’s
alternative arguments regarding the sufficiency of the evidence, Atlas argues that the
Lanham Act requires a plaintiff to provide evidence of both an injury and a causal link
between that injury and the allegedly false advertisements, something Atlas maintains
ATT failed to do in this case. Atlas also notes that, beyond its due process argument,
ATT does not actually contest the district court’s ruling excluding the Verbruggen
affidavit on the ground that it was hearsay. Atlas lastly argues that while an inference of
causation may be reasonable in some circumstances, it is not reasonable in this case,
04-1387 12
where ATT is asking the court to infer that Atlas’s false advertising caused consumers
to “shun all turbine grinders, including ATT’s.”
We see no error in the district court’s grant of summary judgment in favor of Atlas
on ATT’s false advertising claim. First, we do not think the entry of summary judgment
deprived ATT of its due process rights because ATT had a fair opportunity to present its
case to the district court and, specifically, to come forward with evidence of causation.
ATT was on notice of the causation issue generally because Atlas raised it in its motion
for summary judgment.6 The district court judge and ATT also had a substantial
discussion on the issue at the summary judgment hearing. (Summ. J. Hr’g Tr. at 35-
41.) In addition, although in the context of the materiality of the alleged deception, Atlas
raised the general hearsay issue in its motion for summary judgment. Thereafter, ATT
responded to it in opposition to Atlas’s motion for summary judgment, arguing that the
customer and distributor statements fell within the present-state-of-mind exception to
the hearsay rule. (Pl.’s Mem. in Opp’n to Def.’s Consol. Mot. for Summ. J. at 25-26.) In
sum, contrary to ATT’s contentions, this is not a situation where the nonmovant lacked
notice as to the risk of summary judgment so as to deprive the nonmovant of a fair
opportunity to present its case. Compare Burns v. Gadsden State Cmty. Coll., 908 F.2d
1512, 1517 (11th Cir. 1990) (“The defendants’ . . . motion for summary judgment was
‘bare boned.’ It failed to apprise plaintiff of the facts and legal theories on the basis of
which defendants claimed to be entitled to summary judgment.”); Thoen v. United
6
“Even assuming literal falsity and materiality, ATT has no evidence that
links an injury, or likelihood of an injury, to the alleged falsity in the accused
advertisements. Because of this, its false advertising claim cannot survive summary
judgment.” (Def.’s Consol. Mot. for Summ. J. at 31.)
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States, 765 F.2d 1110, 1115 (Fed. Cir. 1985) (holding that summary judgment was
improper where the plaintiff had no notice of the court’s decision to render judgment).
Second, we do not think that ATT presented sufficient evidence to survive
summary judgment. Atlas is correct that false advertising under the Lanham Act
requires, among other things, a showing of both an injury and a causal link between the
injury and the allegedly false advertising. Hickson, 357 F.3d at 1260; Johnson &
Johnson Vision Care, Inc. v. 1-800 CONTACTS, Inc., 299 F.3d 1242, 1247 (11th Cir.
2002). Accordingly, ATT’s argument distinguishing between the elements required for
establishing a claim and those required for establishing the right to a particular remedy
misses the point. The critical issue is whether ATT provided evidence sufficient to allow
a reasonable juror to find that Atlas’s false advertising caused the alleged injuries to
ATT. We do not think that it did.
At the summary judgment proceedings, ATT relied on affidavits from its
distributors and customers to show causation. The district court correctly determined
that these affidavits, with the exception of Mr. Verbruggen’s, did not go to the issue of
causation. At most, the affidavits suggest that customers were dissatisfied with Atlas’s
TSF07 product and consequently stopped buying similar products.7 That, however,
7
For example, Peter Hold, an ATT distributor in Switzerland, stated: “My
interest level on promoting Air Turbine Tools decreased with the appearance of a
product with the same characteristics from the major manufacturer of power tools.”
(Decl. of Peter Hold at 2.) Jurgen Uhlarz, an ATT distributor in Germany, similarly
stated that “sales of [ATT] tools were negatively affected by the [Atlas] tool and the
attitude of prospective customers created by the unjustified claims which [Atlas] made
for its TSF07 turbine tool, which claimed to have a governor, but did not have governed
performance.” (Decl. of Jurgen Uhlarz at 3.) And, Abby Petzenbaum, an ATT
distributor in Brazil, stated that “[t]he presence of a product claiming to be equivalent to
[ATT] robbed the [ATT] products of the uniqueness of their performance. Our sales
04-1387 14
does not provide a causal link between Atlas’s false advertising and resulting injury to
ATT. In its reply brief, ATT again asserts that Mr. Verbruggen’s affidavit was sufficient
to show a genuine issue of fact as to whether the false advertising caused ATT’s
injuries. However, the district court excluded Mr. Verbruggen’s affidavit as based on
inadmissible hearsay and ATT does not challenge that evidentiary ruling on appeal.
Nor do we think the cumulative evidence submitted by ATT is sufficient to permit
an inference of causation. The cases cited by ATT involve situations where a court
drew an inference of causation based on evidence of a direct diversion of sales from
one competitor to another. In Cashmere & Camel Hair, for example, a fabric wholesaler
and a trade association of cashmere manufacturers brought suit against a manufacturer
of cashmere products for falsely advertising the cashmere content of its women’s
blazers, in violation of the Lanham Act. 284 F.3d at 306-07. In opposition to summary
judgment, plaintiffs provided evidence that: (1) defendant overstated the percentage of
cashmere in its blazers; (2) defendant priced its blazers below the prices offered by
plaintiff-wholesaler; and (3) plaintiff-wholesaler had lost business to defendant. Id. at
319-20. Based on this evidence, the First Circuit reversed the district court’s grant of
summary judgment for defendant, finding that “a rational fact-finder could reasonably
infer that the substituted cost savings [defendant] enjoyed from using non-cashmere or
recycled cashmere fabric allowed [defendant] to lower the price of its blazers, thereby
preventing [plaintiff’s] customers from competing in the market.” Id. at 319; see also
Grove Fresh Distribs. v. New England Apple Prods. Co., Inc., 969 F.2d 552, 557 (7th
(Cont’d. . . .)
force was frustrated to work for [ATT] sales in this environment and our efforts to market
the product were hindered and stalled as a result.” (Decl. of Abby Petzenbaum at 2-3.)
04-1387 15
Cir. 1992) (holding that, based on evidence as to the importance consumers placed on
the “100% Florida” label, the jury could have inferred that consumers switched to the
defendant’s product because of its false “100% Florida” label).
This case, by contrast, is not based on a diversion-of-sales theory. Indeed, ATT
states that “the damage caused by the false advertising of the TSF07 was not the
amount of tools Atlas sold, but rather the destruction of the marketability and distribution
of governed turbine grinders and the underlying technology . . . .” (Br. of Appellant at
21.) Therefore, instead of asking for an inference of causation based on diversion of
sales, ATT is really asking us to draw an inference based on its contention that Atlas
poisoned the entire tool-industry well against governed turbine grinders. That is, ATT
contends that Atlas’s false advertising caused consumers to stop buying all governed
turbine grinders, irrespective of the product’s origin. We conclude that such an
inference is not warranted based on the evidence of record, and therefore affirm the
grant of summary judgment to Atlas.
B.
Regarding the district court’s grant of summary judgment to ACTAB on the
breach of contract claim, ATT contends that the court erred in interpreting “exploit” from
the PBA to mean “to make productive use of.” ATT argues that “exploit” is not so
limited, but “extends to all the activities of commercialization and to advertising and
promotion.” ATT also asserts that the district court’s construction effectively limits the
type of conduct that could constitute a breach to patent infringement. Such a
construction, ATT continues, is too narrow because “technology” is an “extremely broad
term” and if the parties had wanted to limit exploitation to patent infringement, they
04-1387 16
would have done so. This, according to ATT, is shown by the fact that in another
provision of the PBA Atlas promised not to commit patent infringement by
“manufactur[ing] or sell[ing] competing products using ATT’s air governor system.” In
short, ATT argues that the disputed contract provision prohibited ACTAB from not only
infringing its patents but also from advertising its product as having the resulting
benefits of ATT’s patented technology.
In response, Atlas argues that the district court correctly interpreted “exploit” as
requiring actual or productive use and that the court also correctly interpreted
“technology” to mean ATT’s patented technology. Atlas argues that, in any event, ATT
cannot prevail on its appeal because, while ATT does challenge the district court’s
contract construction, ATT does not challenge the district court’s finding that neither the
’346 patent nor the ’752 patent could form the basis for the breach of contract claim.
We agree with the district court’s interpretation of the scope of ACTAB’s promise
in the PBA not to “exploit ATT’s technology covered by ATT’s patents.” The district
court did not necessarily preclude “advertising” from the scope of the term “exploit.”
Rather, the district court held that the PBA used “exploit” in conjunction with “technology
covered by ATT’s patents,” so as to limit the types of conduct that could be considered
exploitation of ATT’s technology. The court provided the following explanation: “Simply
advertising a similar product using descriptions similar to the descriptions used by ATT
. . . may be exploitation of advertising materials or false advertising or a trademark
violation, but such acts are not exploitation of ATT’s technology.”
Accordingly, we agree with the district court that ATT was required to assert that
Atlas exploited—i.e., put into practical use—technology covered by a particular ATT
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patent. In its complaint, ATT alleged that Atlas breached the PBA by infringing the ’346
patent. However, the district court held that, as a matter of law, the ’346 patent could
not form the basis of a breach of contract claim because the patent’s application was
filed after ATT terminated the PBA with ACTAB. ATT does not challenge this holding of
the district court. The district court also noted that the ’752 patent could form a basis for
a breach of contract claim, but concluded that ATT had not asserted it as such. ATT
also does not challenge this ruling on appeal. We therefore affirm the district court’s
grant of summary judgment to ACTAB because ATT neither contests the court’s
rejection of the ’346 and ’752 patents as bases for the breach of contract claim nor
argues that some other patented technology was exploited.
II.
ATT also argues that the district court should have granted it a new trial on the
patent infringement claim because of three prejudicial evidentiary rulings. First, ATT
argues that the court erred in preventing its expert witness on infringement, Dr. Jerome
Catz, from fully testifying. The district court excluded Dr. Catz’s testimony insofar as it
went to infringement of a particular means-plus-function limitation, “braking means.”
The court made this decision pursuant to Fed. R. Civ. P. 37(c)(1) because ATT failed to
disclose the content of Dr. Catz’s opinion as to infringement of the means-plus-function
claim in an expert report as required by Fed. R. Civ. P. 26(a) and 26(e)(1). (Trial Tr. of
Oct. 9, 2003, at 148-50.) ATT argues that it was “substantially justified” in not
supplementing the report because the court’s claim construction—namely, its
conclusion that “braking means” was a means-plus-function limitation—was not finalized
until just before trial. ATT also argues that under the Fifth Circuit’s decision in Texas
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A&M Research Foundation v. Magna Transportation, Inc., 338 F.3d 394, 402 (5th Cir.
2003), exclusion of Dr. Catz’s testimony was not warranted because it was important to
ATT’s case; the risk of prejudice to Atlas in allowing the testimony was minimal; and
ATT’s failure to supplement the report was excused by the court’s late claim
construction ruling.
Second, ATT argues the district court erred in excluding the testimony of Gregory
Bowser, a co-inventor of the ’346 patent. ATT called Mr. Bowser to testify as to what he
observed when he examined the accused product. Atlas objected on the ground that
Mr. Bowser was not an expert and his testimony consequently violated Fed. R. Evid.
701 as testimony of a lay witness on a matter requiring special scientific knowledge.
The district court sustained the objection. (Trial Tr. of Oct. 20, 2003, at 74-75.) ATT
argues the district court erred because Mr. Bowser’s testimony was simply based on his
observations of the structure of the accused device.8 ATT contends that cases such as
Tampa Bay Shipbuilding & Repair v. Cedar Shipping Co., 320 F.3d 1213, 1221 (11th
Cir. 2003), make clear that Rule 701 does not prohibit a witness from testifying to a
matter “rationally based on their own perceptions and experience.” And, ATT continues,
as a co-inventor of the ’346 patent, Mr. Bowser had experience with grinding tools and
his testimony related simply to his observations of the structure of the accused device.
In other words, ATT argues that Mr. Bowser “was entitled to testify based upon his
particularized knowledge and experience to what he observed when he disassembled”
the accused product.
8
The structure of the accused device is relevant to whether it reads on the
“braking means” limitation. ATT sought to establish, through Dr. Catz and then Mr.
Bowser, that the accused device contained the corresponding structure of the “braking
means” limitation.
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Third, ATT argues the district court erred in denying its expedited motion to
require Atlas to produce Swedish-employee witnesses by video teleconference for
examination in ATT’s case-in-chief. The district court denied ATT’s motion because it
believed it lacked jurisdiction to compel testimony by non-U.S. citizens. In addition,
even if it had jurisdiction, the court stated it did not think ATT had shown “compelling
circumstances” under Fed. R. Civ. P. 43(a) to justify such an order because ATT waited
until a month before trial to bring the motion and, moreover, this type of situation “occurs
all the time” in complex litigation. ATT argues the district court erred because it mistook
the motion for a motion to compel, when in fact it merely asked the court to “regulate”
testimony by requiring Atlas to present testimony in the same manner as ATT.9 ATT
also contends it has shown “compelling circumstances” to warrant granting its request.
To that end, ATT argues that this type of situation—i.e., a situation where one party
must present a witness’s testimony by reading deposition transcripts even though the
other party may later call that same witness into court to give live testimony—is unfair
and does not “occur all the time” in litigation. It also urges us to excuse the untimeliness
of its motion on the ground that the Joint Pre-Trial Stipulation, which listed likely
witnesses to be called by each party, was not filed until after the court decided the
expedited motion.
Atlas responds that none of these three rulings by the district court amount to an
abuse of discretion. First, with respect to the exclusion of Dr. Catz’s testimony, Atlas
9
For example, if ATT was forced to present the testimony of the Swedish-
citizen employees in its case-in-chief by reading deposition transcripts, then the
proposed order would have required Atlas to do the same in its case-in-chief. In this
manner, the motion was intended to eliminate the perceived unfairness of having one
party present its evidence to the jury by reading deposition transcripts while the other
party used live witnesses.
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argues that ATT had ample time to supplement the report because the claim
construction ruling came twenty-nine days before trial and did not even relate to the
“braking means” limitation. Furthermore, Atlas stresses that ATT made no attempt to
supplement Dr. Catz’s expert report after the court issued its ruling. Second, Atlas
argues that the court correctly excluded Mr. Bowser’s testimony because “[l]ike Dr.
Catz’s excluded analysis, Mr. Bowser’s testimony was directed to the function and
identification of various structures in the [accused device] in an attempt to dodge the
consequences of ATT’s failure to include the means-plus-function analysis in Dr. Catz’s
expert report.” Mr. Bowser’s testimony, Atlas argues, “is more akin to an engineer’s or
mechanic’s testimony about the technical design of an accused product, which has
traditionally been treated as Rule 702 expert testimony.” Third, with respect to the video
teleconference issue, Atlas argues that the district court correctly concluded that it
lacked jurisdiction to issue such an order and that, in any event, ATT’s justification for
the motion is undermined by the fact that Atlas did not call any Swedish witnesses at
trial.
Although the underlying claim is for patent infringement, the issues presented are
not unique to patent law, so we apply the relevant law of the Eleventh Circuit. In the
Eleventh Circuit, “[a] district court’s evidentiary rulings are not subject to reversal on
appeal absent a clear abuse of discretion.” Tampa Bay Shipbuilding, 320 F.3d at 1216;
see also United States v. Myers, 972 F.2d 1566 (11th Cir. 1992). Under this standard of
review, we see no reason to disturb the judgment in favor of ATT on the patent
infringement part of the case.
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First, we do not think the district court abused its discretion in excluding Dr.
Catz’s testimony under Fed. R. Civ. P. 37(c)(1) insofar as his testimony exceeded the
material disclosed in his expert report. The district court construed “braking means” as
a means-plus-function limitation on September 12, 2003 (about one month before trial).
Air Turbine Tech., Inc. v. Atlas Copco AB, 295 F. Supp. 2d 1327, 1333 (S.D. Fla. 2003)
(“Amended Claim Construction Order”). Furthermore, it appears that the issue of
whether “braking means” was a means-plus-function claim was in play even earlier. Id.
at 1329 (stating that a Markman hearing was held on August 8, 2003). It is true that the
district court later amended its claim construction, but it did not change its prior ruling
that “braking means” is a means-plus-function limitation. Air Turbine Tech., Inc. v. Atlas
Copco AB, 2003 WL 22939357 (S.D. Fla. Oct. 3, 2003) (“Second Amended Claim
Construction Order”). Under these circumstances, ATT should have at least attempted
to supplement Dr. Catz’s expert report. See Fed. R. Civ. P. 26(e) (requiring a party to
supplement expert reports).
Second, we do not think the district court abused its discretion in excluding the
testimony of Mr. Bowser. Relevant excerpts of Mr. Bowser’s testimony are as follows:
Q: When you disassembled and inspected the Biax T365
brake, what did you find?
A: When I removed the end cap, first of all I saw the brake
pad that was supported by a spring, and also the fact that
the tool was a rear exhaust tool, which was known, because
it was exactly like the Air Turbine tool as far as the exhaust
path.
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Q: Now, were you able to see how the brake pad was
secured to the T365?
A: Yes. There was -- the guide post for that particular tool
was a multi-sided post as opposed to a round, circular post.
The brake pad was also matching multi-sided that could
slide over the post. Obviously, since it was not round,
though, that is what kept the brake pad from rotating.
(Trial Tr. of Oct. 20, 2003, at 69.)10 Mr. Bowser’s testimony refers to both the structural
components of the accused device and to their respective functions. Moreover, the fact
that Mr. Bowser may have particularized knowledge and experience as a co-inventor of
the claimed invention does not necessarily mean he also has particularized knowledge
and experience in the structure and workings of the accused device. Under these
circumstances, we cannot say that the district court abused its discretion in concluding
that Mr. Bowser’s testimony amounted to improper expert testimony.
Third, we do not think the district court abused its discretion in denying ATT’s
motion to order testimony via video teleconference. Even assuming the district court
had power to issue such an order, the motion involved a matter expressly reserved to
the sound discretion of the trial court. Fed. R. Civ. P. 43(a) (“The court may, for good
cause shown in compelling circumstances, . . . permit presentation of testimony in open
court by contemporaneous transmission from a different location.” (emphasis added)).
The district court stated that ATT should not have waited until one month before trial to
file its motion and that requiring ATT to read the deposition transcripts of the foreign
witnesses would not give Atlas an unfair tactical advantage because “[t]his
10
The Biax T365 is, presumably, an Atlas product similar to the TSF07
accused of infringing the ’346 patent.
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circumstance occurs all the time” in civil litigation. We cannot say that the district court
abused its discretion on this point.
CONCLUSION
We hold that, as to the appealed summary judgment decisions, the district court
correctly determined that there were no genuine issues of material fact so as to
preclude judgment for Atlas. We also hold that the district court did not abuse its
discretion in connection with any of the three challenged evidentiary rulings. We
therefore do not disturb the court’s denial of ATT’s motion for a new trial on its claim of
patent infringement. For these reasons, the final judgment of the district court is
affirmed.
COSTS
Each party shall bear its own costs.
AFFIRMED
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