Horace B. Brose, Plaintiff-appellant, v. Sears, Roebuck and Company, Defendant-appellee, 455 F.2d 763 (5th Cir. 1972)

This appeal is taken by Brose from the Trial Court's dismissal, at the conclusion of the plaintiff's evidence, of a qui tam informer's suit alleging "mismarking" under 35 U.S.C.A. Sec. 292.¹  The Trial Court found that Appellant failed to prove (i) falsity of the marking in issue, (ii) intent to deceive the public on the part of Sears, (iii) any marking by Sears, and (iv) that the marking was done to any "unpatented article."²  Brose's failure to prove any one of the above elements would have proved fatal to his cause since the Act is penal in nature and must be strictly construed. Ansul Co. v. Uniroyal Inc., D.C.N.Y., 1969, 306 F. Supp. 541. In affirming the Trial Court's decision we limit our discussion to the critical element, stipulated by the parties to be decisive, of intent on the part of Sears to deceive the public by placing the marking on the product in issue.³ 

Probably no earthshaking discovery, the case involves what some contemporary Judges nostalgically recall as the simple tool used by young boys to insert rubber bands in a bicycle tire to close a puncture and then seal it with a tube of Never Leak. Now this great art is extended to tubeless automobile tires. Sears under its own label markets a tubeless tire repair kit which Egan (successor) manufactures and packages for it.

Brose's Theory

The theory of Brose, shifting as it has been to meet the exigencies of the moment, can in the figure of the case, be quite deflated to almost flat proportions. The mismarking comes not from the fact that the kit bears the true legend "licensed under U.S. Patent [Kraly] 3,095,342." Rather, it is because Egan (Sears) although licensed by Patentee Kraly under 3,095,342, does not in the kit make a device which "reads on" the claims of the cited patent. For the purposes of a Sec. 292 suit this means that since the marketed device is not the one covered by the cited patent it is as though there was no patent at all and the marker (Sears through Egan) had put such a description on an admittedly unpatented article. Thus does he drag in by the back door notions-which were so baffling to the Trial Judge-of infringement, range of equivalents, invalidity and many other esoteric concepts of the world of patentese. To establish the crucial element of intent to deceive the public Brose, first, in the Trial Court urged that Sears' actions and the judgment in the Illinois suit (see discussion, infra) showed purposeful misrepresentation and, second, in this Court contends that the physical disparity between the device sold in the kit and that described in the patent claims is so gross that Sears had to know of this, and knowing this, deliberately intended to palm off the device as a patented one.

Brose Not A Disinterested Private Attorney General

Although Brose is a person entitled to bring the informer's suit with the hope of astronomical awards which continue as every day Egan turns out for Sears thousands of these suspect packages⁴  were he a stranger, the fact is that he is not. As is true in nearly all of the relatively few qui tam informer actions brought in the past one and a quarter century this one is used as a weapon in the arsenal of patent litigation-a factor which the Judge was entitled to regard with unusual significance not simply as a situation in which there was direct interest in the outcome of the apparently collateral patent controversy but in the prospect of high awards in the informer's suit itself, quite independent of the outcome of the underlying skirmish on patents.

For the record shows that Brose likewise had a patent⁵  and was then pursuing Sears (Egan) vigorously, but it turns out unsuccessfully in the adjacent Southern District of Florida by claiming that the kit infringed his patent.

The Illinois Suit

Kraly, patentee in No. 3,095,342, in 1966 sued Egan (the manufacturer) and Sears in the Northern District of Illinois claiming infringement. Egan on demand of Sears defended for both. To the usual denials, special, general or out of ignorance, Sears formally denied validity (and hence infringement) of the patent for one or more or all of the reasons which the "antlike persistence of patent solicitors," Lyon v. Boh, S.D.N.Y., 1924, 1 F.2d 48, 50, could conjure up. Subsequently the parties settled the case by the payment of a fixed sum by Egan (Sears) and the execution of a non-exclusive license agreement to Egan. When the motion and agreed order of dismissal were submitted to Judge Will, with his characteristic independence he struck out the words "without prejudice" and substituted in his own hand "with prejudice."⁶  The license agreement prescribed that the marking as used appear on the product manufactured by Egan.

Estoppel by Pleading/Judgment

Although not pressed with quite the vigor below the recurring theme in Eflat minor is that Sears' actions and the judgment in the Illinois suit (see note 6, supra) commit Sears to a binding judicial determination that Kraly was invalid and hence Sears could not in good faith have passed the kit off on the public as made pursuant to the cited license.

This rests on a hypercritical reading of the order and an argument which runs along this line. Since it is a dismissal "with prejudice" it is a judicial determination that the plaintiff (Kraly) cannot prevail, and that is so because the parties (and the Judge) thereby embrace the defendants' (Sears-Egan) defense of invalidity. Whatever other difficulties inherent in Brose, a non-party-non-privy to the Illinois suit, to raise this as res judicata or collateral estoppel, this misreads the order and its obvious purpose. It was a settlement, and so described. And it was a settlement of the plaintiff's (Kraly) claim and the defendants' (Egan and Sears) cross-claim. The "with prejudice" simply had the effect of preventing either party from ever asserting against the other the same claims or counterclaims.⁷ 

At most, the pleadings and judgment in the 1967 Illinois proceeding amounted only to an admission in the sense of action by Sears and Egan inconsistent with the current assertion. But it is only evidence, not conclusive, and the trier of the facts was entitled to disregard it as insignificant for a number of reasons, not the least of which was the plain language that all issues were compromised. Indeed, the settlement was made to avoid resolution of the contentions. The Judge, presiding over a busy Court to which more and more cases come each day, week, month and year, would hardly think the law's policy of encouraging settlements would be served by holding one party to a concession that the adversary's contention was sustained even without a trial.

Was The Kit Within Kraly Patent

Before us Brose emphasizes that intent to deceive is "proved" by knowing that the kit did not embody any or all of the Kraly claims. That approach calls for two things. First, it must be established that from an operational mechanical sense the patent does not cover the kit. Presumably that could be done by a simple preponderance of the evidence (and a finding). Second, the differences are so plain that no one in good faith could think otherwise. It is at this point that the law-perhaps out of distaste for blood money suits-compels a positive showing. For here not only are objective physical facts involved. Here are questions of motive, purpose and attitudes.

We can assume that if a device claimed to be covered by license of a cited patent is so obviously not revealed by it as the patentese world would view it, the use of such a legend would be mismarking. See, American Needle and Novelty Co. v. Schulessler Knitting Mills, Inc., D.C.Ill., 1966, 258 F. Supp. 98, modified, 7 Cir., 1967, 379 F.2d 376. But where the device is within the specific field covered by the patent and uses materials and methods similar to the technical patent disclosures, the licensee's use in good faith reliance on the license is not to be transmuted into an evil purpose to deceive the public merely on proof and finding that for one or more or all of the reasons skilled patent advocates could think up, the embodiment in question does "not read on" or is not an "infringement" of the cited patent. See, London v. Everett H. Dunbar Corp., 1 Cir., 1910, 179 F. 506, 509;⁸  Zuckerman v. Pilot, D.C.N.Y.1940, 71 F. Supp. 478, 479, 1 F.R.D. 130, 131. But this presupposes that the private attorney general has established that the device is not within the patent. Only at that time does the good faith purpose or motive of the marker of a license to a cited patent come into question. Obviously, this is essentially a question of fact.

It is here that Brose fails completely. For the Court found as a fact that the "article [kit] is licensed under * * * Kraly" and reached the legal conclusion that the "accused product is in fact licensed by" Kraly. Since the contrary finding was essential as the first part of the intent to deceive element, the burden is heavy on Brose to override F.R.Civ.P. 52(a). For such "a determination can be disturbed, as clearly erroneous, only in rare instances." Filmon Process Corp. v. Spell-Right Corp., 1968, 131 U.S.App.D.C. 374, 404 F.2d 1351, 1356, 158 P.Q. 533.

All the record contained was testimony of Brose who, while mechanically skilled in the manipulation of the various competing types of tire repair kits, demonstrated only a difference in products. He did not attempt to describe how or in what manner the kit did not reflect significant elements of Kraly. Nor was his case helped any by the "expert"⁹  whose views the Judge received as a matter of good judicial husbandship but which he then immediately rejected on credibility choices by stating "* * * it doesn't prove anything. It doesn't prove anything. It doesn't prove anything helpful to the case."

The case began with emphasis on the imperative of intent to deceive. It ended both on the absence of proof which compelled such a finding and a negative finding to the contrary. And so it ends here.

Affirmed.