Water Technologies Corp. v. Calco, Ltd.

850 F.2d 660, 1988 WL 59893
CourtCourt of Appeals for the Federal Circuit
DecidedJune 16, 1988
DocketNos. 87-1204, 87-1205
StatusPublished
Cited by121 cases

This text of 850 F.2d 660 (Water Technologies Corp. v. Calco, Ltd.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Federal Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Water Technologies Corp. v. Calco, Ltd., 850 F.2d 660, 1988 WL 59893 (Fed. Cir. 1988).

Opinion

NIES, Circuit Judge.

Calco, Ltd. and William J. Gartner appeal from the judgment of the United States District Court for the Northern District of Illinois, 658 F.Supp. 961 (N.D.Ill.1986),1 in favor of Water Technologies Corporation, its wholly owned subsidiary, Water Pollution Control Systems, Inc. (collectively WTC/WPCS), and Kansas State University Research Foundation (KSURF), holding them liable for willful infringement of certain claims of U.S. Patents Nos. 3,817,860; 3,923,665; 4,187,183; and 4,190,529 and for unfair competition. We reverse the district court’s judgment to the extent it held Calco and Gartner liable for unfair competition. We vacate the damage award based on lost profits and remand for redetermination of damages. In all other respects, the judgment is affirmed. Accordingly, we affirm-in-part, reverse-in-part, and remand.

I

BACKGROUND

This case involves improved bactericidal resins used as disinfectants for purifying water. The plaintiff, WTC/WPCS, developed a drinking cup and other products which use such resins and are useful to campers, backpackers, and travelers. Cal-co, a competitor in the field, manufactures [663]*663and sells water purifying drinking straws which also contain bactericidal resins. Gartner is the president of a chemical laboratory which does testing and is the inventor/licensor of a patent for the water purifying straw made by Calco. Gartner also works as a consultant.

For twenty to thirty years before the developments claimed in the earliest of the patents at issue, scientists had used materials such as halogens (iodine, bromine, or chlorine) to disinfect water. These prior techniques inserted halogen tablets directly into the water. Unfortunately, such techniques left large, residual amounts of the disinfectant in the water, which detracted from the water’s taste and, in large applications, such as in swimming pools, risked harm to the eyes and mucous membranes.

Professors Jack L. Lambert and Louis R\ Fina worked to solve that problem at Kansas State University (KSU) during the late 1960’s. The professors developed a process able to purify water, rendering it bac-terially sterile, by passing the water through a strongly basic anion exchange resin containing triiodide.2 The triiodide groups react on demand with bacteria in water suspensions to kill the bacteria. For that reason, the triiodide resins are also called “demand” bactericide resins: the disinfectant resin generally releases iodine only upon contact with bacteria or germs to be killed. Moreover, the process has the advantage of disinfecting without forming a detectable concentration of iodine in the water and the treated water is ready for immediate use.

Lambert and Fina obtained U.S. Patent No. 3,817,860 (the ’860 patent), covering a method of disinfecting water using the demand bactericide resin, on June 18, 1974. On December 2, 1975, they obtained U.S. Patent No. 3,923,665 (the ’665 patent) covering the demand bactericide resin itself and the process of preparing that resin. Both patents issued from continuation-in-part applications of an abandoned application, Serial No. 881,923, filed on December 3, 1969. Both patents were assigned to KSURF.

In 1973, KSURF granted an exclusive license to Aqua-Chem, Inc., under the ’860 and ’665 patents. Dr. Gary L. Hatch, an employee of Aqua-Chem, then developed two improvement inventions. The improvements covered a demand bactericide resin which still comprised primarily triiodide resin but added thirty to forty percent of the polyiodide pentaiodide, I~5. This mixed-form polyhalide resin, composed of both triiodide and pentaiodide ions, elutes reduced levels of iodide ions in water of high salt concentrations (250 ppm sodium chloride or greater). Hatch obtained U.S. Patent No. 4,187,183 (the ’183 patent) on February 5, 1980, covering the mixed-form polyhalide resin itself. On February 26, 1980, Hatch obtained U.S. Patent No. 4,190,529 (the ’529 patent), covering a method of disinfecting water using that resin. Hatch assigned both patents to Aqua-Chem.

In September of 1977, Aqua-Chem granted an exclusive license under the then-pending Hatch applications, and an exclusive sublicense under the Lambert-Fina patents, to WTC/WPCS for purifier products containing less than 100 cubic centimeters (cc) of the resins. Operating under the licenses, WTC/WPCS developed, inter alia, its water purifying cup.

In late 1979, Gartner contacted Aqua-Chem in his capacity as consultant for Brunswick Corporation, a company not involved in this litigation, which he indicated was interested in taking a license from Aqua-Chem to use its resin products in new water purification devices. Through the auspices of Aqua-Chem, Gartner met with the personnel of WTC/WPCS in August of 1979. He received literature at [664]*664that meeting which described WTC/WPCS’s water purifier products using the ’665 triiodide resin.

In July of 1980, Gartner applied for a patent covering a straw-type water purifying device, specifying merely that a triiod-ide resin could be used therein. On August 28, 1980, Gartner met again with Aqua-Chem. At that time Aqua-Chem gave Gartner its preferred formula and stoi-chiometric ratio of ingredients on the basis that Gartner would assist Aqua-Chem in licensing products larger than 100 cc in size. This formula was disclosed in Table I of the ’183 and ’529 patents which had issued in February 1980, but apparently Gartner did not become aware of the patents until September 1980. Gartner gave the patented Aqua-Chem resin formula to Calco in August or September of 1980 in connection with licensing Calco to make Gartner’s water purifying straw, a product containing less than 100 cc of resin.

By September 1980, Calco was also aware of the patents but, with Gartner’s assistance, on November 4, 1980, manufactured a first batch of the Hatch triiodide resin which it put into straws marketed under the trademark POCKET PURIFIER owned by Gartner. Gartner tested the straws, helped Calco obtain EPA approval, and wrote the directions for use of the product by consumers. Calco sold 400-500 units of devices made with the first batch of resin. A few units were also sold or distributed by Gartner.

During the beginning of 1981, Gartner developed a modified resin formula which ultimately he patented. That formula added a small amount of potassium bromide (the amount of bromine that actually remained in the modified resin was only about 0.5% by weight, 658 F.Supp. at 974) to the patented Hatch resin formula. Gart-ner added the potassium bromide because he thought this addition might make it “possible to skirt both the KSU and Aqua-Chem patents.” at 968. Calco started to work with the new resin on February 23, 1981, and Gartner’s laboratory continued to evaluate Calco’s products. When this work and evaluation were complete, Calco used the new, modified resin in the POCKET PURIFIER straws which it thereafter marketed.

WTC/WPCS discovered the POCKET PURIFIER straws on the market in the early Fall of 1981. That discovery prompted WTC/WPCS to ask its licensor, Aqua-Chem, to challenge the accused infringing product. When Aqua-Chem declined, WTC/WPCS withheld royalties from Aqua-Chem and, as exclusive licensee under the patents, filed an action on July 13, 1982, against Calco, Gartner, and Aqua-Chem, charging, inter alia, patent infringement and unfair competition. The action also named Aqua-Chem as involuntary plaintiff.

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