The opinion of the court was delivered by: KOELTL
JOHN G. KOELTL, District Judge:
The plaintiff, Construction Technology Inc., ("CTI") has brought this patent infringement suit alleging that the defendant, Cybermation, Inc. ("Cybermation") infringed on two CTI patents relating to methods and machinery used to manufacture fittings for rectangular ducts for the Heating, Ventilating and Air Conditioning ("HVAC") industry.
On March 19, 1993, Judge Martin of this Court issued a preliminary injunction against Cybermation. Judge Martin found that CTI was likely to succeed on its claims against Cybermation and required Cybermation to deposit $ 15,000 into an escrow account any time it delivered one of its allegedly infringing products to a customer. There is no question that Cybermation has continued to sell its allegedly infringing products and has failed to make the required escrow payments.
Cybermation and its officers moved to modify the preliminary injunction in an apparent attempt to avoid being found in contempt. CTI then moved for contempt against Cybermation and its officers. This Court joined the hearing on the contempt issues with the trial on the merits of CTI's patent claims, and held a non-jury trial. Pursuant to Federal Rule of Civil Procedure 52, this Court, having reviewed the voluminous record in this case and having assessed the credibility of the witnesses, now makes the following Findings of Fact and reaches the following Conclusions of Law.
1. CTI is the owner of two patents relevant to this suit:
a. United States Patent ("USP") 4,554,635, entitled "Method and Apparatus for Marking or Cutting Laminar Patterns or Forms," (the '635 patent); (Plaintiff's Exhibit "PX" 25).
b. USP 4,551,810 entitled "Method and Apparatus for Designing Duct Work and For Producing Patterns for Conduit Sections in the Designed Duct Work" (the '810 patent). (PX 26).
2. Both patents name CTI's founder and principal owner, Richard W. Levine, as the sole inventor. (Tr. at 155-56 [Levine]). The '635 patent covers CTI's Auto-Plot and Auto-Cutter automatic plotting and cutting computer aided manufacturing ("CAM") systems. The '810 patent covers CTI's Auto-Plan computer aided design ("CAD") system when operated in conjunction with CTI's Auto-Plot or Auto-Cutter CAM Systems. The '810 patent also has claims to the Auto-Plot and Auto Cutter Systems themselves. (PX 25-26).
DEVELOPMENT AND TESTING OF CTI'S PRODUCTS
4. Before the invention of the systems at issue in this case, the drafting of designs for duct work for HVAC systems required numerous labor intensive steps. Much of the work had to be performed manually, including mathematical calculations, drawing plans, and scratching the outline of each piece to be produced on a rectangular piece of sheet metal or "blank." (Trial Transcript "Tr." at 40-43, 52-61, 63-73 [Levine]).
5. Levine was a union sheet metal worker who became skilled at many of the steps required to produce duct work for HVAC systems. (Tr. at 35-39 [Levine]). He was also interested in computers and became a self-taught computer programmer. From his knowledge of sheet metal layout techniques, Levine became convinced that it would be possible to computerize some of the time-consuming steps. In his spare time, he began work on a computerized system. In addition to labor savings, the computerized system provided other advantages over the traditional manual methods, including reducing the amount of raw materials required. This work eventually led to the development of the CTI "Compuduct" blanking system in 1970. The Compuduct program would determine the number of two-dimensional blank pieces required to make the specific HVAC fitting and calculate the minimum dimensions of the rectangular blank required for each pattern piece. The layout of the actual patterns of the fitting was thereafter done manually on the rectangular blanks. (Tr. at 75-76, 82-83 [Levine]).
6. In 1970, Levine founded CTI with two partners. Those two partners, who worked as salesmen for a computer company, marketed the Compuduct System in their spare time. In 1972, Levine left his job and began to work full time marketing the Compuduct system. The system was marketed by demonstrating its capabilities at trade shows, such as the annual American Society of Heating, Ventilating and Air Conditioning Engineers ("ASHRAE") show and by placing advertisements in sheet metal trade magazines, notably SNIPS Magazine. After 1972, sales of the Compuduct system improved and CTI began to earn a profit. (Tr. at 77-78, 81-82 [Levine]).
7. After developing the Compuduct system, Levine began work on a new computer program that would use the information generated by Compuduct and then plot the required patterns for each fitting to scale on sheet metal. Such a development could potentially be extremely valuable because it would entirely eliminate the need for manual layout. Levine decided to attempt the project and to call the new system "Auto-Plot." (Tr. at 86-88, 149 [Levine]).
8. Levine contacted a plotting table manufacturer, Gerber Scientific, Inc. ("Gerber") to seek its assistance in modifying a plotting table. Gerber advised that it could not help unless CTI would purchase two tables in advance and commit to the purchase of at least 10 tables thereafter. Although the commitment demanded about $ 1.2 million, Levine concluded that he should take the risk. (Tr. at 88-93 [Levine]; PX 14-15).
9. In 1980, CTI entered into a contract with Gerber under which Gerber agreed to provide plotting equipment and aid in the development of the Auto-Plot. Gerber also agreed to maintain all CTI proprietary information in confidence. (PX 14-15).
10. To raise funds to finance development, CTI prepared a simulation to demonstrate the potential capabilities of the new plotting invention. The simulation was shown at the ASHRAE show in Chicago in January 1981. CTI offered to accept early orders, at a substantial discount, from customers willing to test the first units. (Tr. at 111-115, 117-122 [Levine]).
12. The Auto-Plot simulation at the January 1981 ASHRAE show was successful. CTI was able to sign up early test orders to gain needed funds for development. (Tr. at 111 [Levine]). Levine advised potential customers that he was developing the program, that he expected to have it operational in six or seven months, and that he might deliver it in June. (Tr. at 111-15 [Levine]).
13. Al Chilenski of the Grunau Company heard about Levine's machine from people who had attended the January, 1981, ASHRAE show. He agreed to pay a deposit and accept the first machine for a substantial discount. Chilenski stated that his company had served as a "guinea pig" for the machine, and had received a substantial discount for doing so. (Tr. at 113-14 [Levine]; PX 32 at 504-06).
14. After the January 1981 ASHRAE show, CTI began intensive work with Gerber to develop the invention. Levine wrote various portions of the program and prepared paper tapes in CTI's offices. The tapes were sent to Gerber for tests on the plotting table, and were returned with test results, to enable Levine to take corrective measures and to proceed with each successive step in software development. This process of sending tapes and plots back and forth between CTI and Gerber continued for many months. (Tr. at 97-98, 122-126 [Levine]).
15. During this time, CTI was developing a computer program to accept fitting type dimensional data, develop the patterns for the fittings, nest the patterns on the blanks, and produce an output for the Gerber table to accept. This was a time consuming and laborious process scheduled to continue for many months. At the same time, Gerber was modifying its table, and the computer controller for its table, to allow it to accept output. The fact that the Gerber system could accept output from the CTI program has no bearing on the state of development of the CTI program. The two developments were essentially independent, although CTI needed to use the Gerber table to test its ongoing work. (Tr. at 123-126 [Levine]; PX 168 at 45-46, 50-51, 55-56, 62, 67, 73; PX 169 at 11-12, 24).
16. In late July, 1981 Gerber indicated that its table modifications and the changes to its controller to enable it to communicate with CTI's program were complete. This only reflected on the state of completion of the Gerber table. It did not reflect on the state of development of the separate program that CTI was developing relative to the inputting of fitting data, generation of patterns and nesting for the patterns. Similarly, Gerber's preparation of an instruction manual for its table did not reflect on the state of development of the separate program that CTI was developing. (PX 168 at 67, 73; PX 169 at 11-12, 24; Tr. at 127, 132-133 [Levine]).
17. In July 1981, the first test units of the Auto-Plot were sent to Grunau for assembly and on-site testing (PX 32, 32A-C). The components were assembled at Grunau and prepared for testing shortly after July 28, 1981. CTI ultimately filed its first patent application on July 28, 1982. (PX 34).
18. The first test was a failure. The machine drew miniature shapes in one corner of the metal instead of the patterns intended. (Tr. at 137-140 [Levine]; PX 32 at 500-01).
19. CTI continued to work on the development of the software. The Auto-Plot, however, continued to make unpredictable and inexplicable errors in many fittings, sometimes overlapping plots, sometimes running off the metal, and sometimes unexpectedly freezing the machine to a stop. In each case, test samples were returned to CTI and program revisions and changes were prepared. (Tr. at 138-143 [Levine]).
21. After November 1981, the Auto-Plot became sufficiently dependable to be used. Corrections and revisions were still required, but they occurred less frequently and no longer prevented the machine from being used for its intended purpose. (Tr. at 143 [Levine]).
22. After the Auto-Plot was operational, CTI began work on a cutting addition that would plot patterns by cutting them automatically. This was done by replacing the plotting pen with a cutter. (Tr. at 149-150 [Levine]).
23. The Auto-Cutter was announced in the trade literature in May 1982. It was first demonstrated in September 1982. By July 28, 1982, CTI had filed its first patent application on the invention, which eventually matured into the '635 patent. (Tr. at 150-51 [Levine]; PX 34).
24. After completing the Auto-Cutter system, Levine began work on a CAD system called "Auto-Plan" to design HVAC duct networks on a computer screen, to produce drawings and to download the information required for fittings used in the design directly to the Auto-Plot or Auto-Cutter CAM systems. (Tr. at 154-55 [Levine].
25. The main features of the Auto-Plan program were complete in the Fall of 1983, and the first system was introduced to the trade and demonstrated at an October 1983 trade show in Washington D.C. The demonstration at the Washington show was successful and CTI soon received its first orders. CTI filed its patent application, which matured into the '810 patent, and which covered the Auto-Plan System, on September 28, 1983. (Tr. at 155-56 [Levine]).
26. The CTI patents have revolutionized the HVAC duct work industry, changing the way duct work fittings have been made from a manual to an automatic process.
27. The claimed inventions differ from each of the prior art activities. It appears that Cybermation only claims that two instances of alleged prior art invalidate the claimed inventions: a COMPASS article and the Union Carbide/McCarter System. (See May 17, 1996 letter of Edward T. Dangel III to this Court). In any event, each of these instances and the other alleged instances of prior art did not invalidate the claimed invention. In particular:
a. The Hargreaves Compass System did not generate patterns to be plotted or cut on sheet metal for substantially all customized HVAC fittings, as required by the claims of the patents in this case. The output of the Hargreaves Compass System consisted only of blanking data like the Compuduct System and the system was limited to standardized fittings in the Hargreaves catalog. (PX 186, PP 52-67, 107; PX 39.211; Defendants' Exhibit ("DX") 171 at 7).
b. The Union Carbide ADAPT system (even if combined with the PINS system) and the McCarter System did not generate patterns to be plotted or cut for substantially all customized HVAC fittings like the claimed inventions. It was only a parts program for developing standard shapes to be cut on Union Carbide's or McCarter's flame cutting equipment. Even for the few round fitting shapes included in the parts list, it did not calculate two-dimensional patterns for the sides of three-dimensional fittings based on basic type and dimensional data for the three dimensional fitting as required by the claims of the patents in suit. (PX 186, PP 79-90).
28. All of the alleged prior art was before the Patent Office during the two re-examinations of each CTI patent or cumulative to the art before the Patent Office. Each patent was reexamined by the Patent Office twice. After such re-examinations the CTI patents were certified valid without any changes to the original claim language of either patent. (PX 40-41).
29. Moreover, the '635 and '810 patents were previously adjudicated valid and infringed by this Court in an action entitled Construction Technology, Inc. v. The Lockformer Co., et al., 1992 U.S. Dist. LEXIS 16504, 86 Civ. 0457 and 88 Civ. 0742 (JSM), and later adjudicated valid and infringed by this Court in Construction Technology, Inc. v. Vicon, Inc., James A. Conley, and Joan D. Conley and Avalon Machinery, Inc. v. Construction Technology, Inc., 92 Civ. 2060 (JSM). (UF at 4-5).
LEVEL OF SKILL AND NON-OBVIOUSNESS
30. When the differences between the claimed inventions and the prior art are weighed in light of the level of skill in the art, it is apparent that the claimed inventions would not have been obvious to a person of ordinary skill in the art at the time the inventions were made. (PX 186, P 51).
31. Prior to the inventions claimed in the two patents in this case, the need for manual layout to produce customized duct work caused an expensive bottleneck in the HVAC Industry. Layout people were highly paid and in short supply. This problem continued to remain unsolved until the inventions of the plaintiff's patents. The failure of others to solve the problem sooner tends to support the conclusion that the claimed inventions were not obvious at the time. ( PX 186 P 109).
32. The reaction of the HVAC industry to the introduction of the CTI Auto-Plot was widespread and immediate. CTI's simulated demonstration at the ASHRAE show in January 1981 was jammed. A number of companies took the risk of placing early orders even though the invention was not complete. Trade publications immediately praised the savings of time and money that the inventions would accomplish once completed. This type of immediate industry response also tends to support the conclusion that the claimed inventions were not obvious. (PX 186, PP 108, 110-113).
33. The claimed inventions enjoyed tremendous commercial success. CTI's own products, the Auto-Plot, Auto-Cutter and Auto-Plan, were, despite high prices, all successful. It was only after Cybermation and others introduced cheaper imitation products that CTI's sales and profits began to fall. Cybermation and others sold hundreds of computerized automatic layout and cutting machines and dozens of the newer CAD systems. Almost all other competitors to CTI, other than Cybermation, have taken licenses under the patents. This widespread commercial success also tends to support the conclusion that the claimed inventions were non-obvious. (Tr. at 204-205 [Levine]; PX 186, P 108).
LITIGATION OVER CTI'S PATENTS
34. Both before and immediately after the CTI patents issued, CTI approached sellers of infringing products in hopes of obtaining license arrangements. In particular, Levine had discussions with both Cybermation and Lockformer, but CTI was unsuccessful in licensing either company. (Tr. at 164-166, 187-88 [Levine]).
35. Due to the cost of development of both the Auto-Plot and Auto-Plan systems and reduced sales due to infringing competition, CTI was without the financial means to file suit against all of the infringers simultaneously. CTI first filed a patent infringement action in January 1986 in this court, 86 Civ. 0457, against one of the largest infringers, Lockformer. (Tr. at 192 [Levine]).
36. CTI filed a second action in 1988 in this court, 88 Civ. 0742, against Lockformer and other companies which supplied components for the Lockformer HVAC CAM system, known as the Vulcan, and Lockformer's CAD System, known as the Vantage. (Tr. at 192 [Levine]). The two suits involving Lockformer were later tried together in February and March of 1991, with the jury rendering a verdict in favor of CTI. The judgment of the Court finding the CTI patents valid and infringed was issued in October 1991. (UF at 4).
37. After the judgment of the Court in the Lockformer Litigation, Lockformer settled with CTI. Lockformer took a non-exclusive license for the future to continue selling its Vulcan HVAC CAM systems. (PX 138). CTI promptly brought the present litigation in 1991 after the Lockformer Litigation judgment.
39. Avalon Machinery, Inc. (Avalon) brought a declaratory judgment action in this district against CTI asserting that the patents were not infringed. A case brought by CTI against Vicon, whose principals also started Avalon, was transferred to this district, and consolidated with the declaratory judgment action. (PX 39.140, 39.141). After a three day bench trial, the court found that the patents were infringed. A judgment declared the patents valid and infringed. (PX 39.143).
40. Cybermation's manufacture and sale of the Cybermation CAM system infringes the '635 and '810 patents, particularly claims 32, 36, 37, 41, 42, 46, 47, and 51 of the '635 patent, and claims 11 and 22 of the '810 patent. (PX 186, PP 9-40, 44).
41. Claim 32 is an independent method claim which provides:
A method for producing the customized patterns of the closed sides of a three dimensional product which can be fabricated from sheet material, such as a ventilating duct fitting, comprising the steps of:
storing in memory means, information representative of the configurations of a group of basic types of the three dimensional product and two dimensional pattern types required for the construction of the closed sides of the product, each such pattern type having a specified geometry and at least one mathematical relationship relating selected basic dimensions of the product to the specified geometry, substantially all variations of the product being developable from said basic pattern types, said basic dimensions comprising the size of the open sides of the product and at least one dimension determining the spatial relationship of the open sides;
entering input data including the type of the three dimensional product and said basic dimensions;
generating, without operator interaction and decision-making, from said basic dimensional data and three dimensional product type data, the pattern of each of the closed sides of the product, each of said patterns developed from selected ones of said basic pattern types in response to said input dimensional and product type data;
positioning each developed pattern in related positions with other developed patterns to generate a series of positionings without operator interaction and decision-making;
determining which of said positionings yields a minimum surface area so as to provide for optimum material usage without operator interaction and decision-making and generating digital data representing said optimum positioning;
supplying the digital data representing said optimum positioning to an X-Y plotting table, said data including digital data representing the starting point for each pattern in X-Y format and sequential digital data in X-Y format representing the contour of each pattern; and
plotting said patterns in accordance with said digital data on a sheet of material on said plotting table. (PX 25).
42. A comparison of the elements of Claim 32 with the operation of the Cybermation system shows that the Cybermation system literally infringes. (PX 28, PX 152A-152W, PX 186, PP 9-40, 44; Tr. at 551-587, 592-613 [Lyons]).
a. The Cybermation cutting system implements a method for producing patterns of the closed sides of ventilating duct fittings (three dimensional products which can be fabricated from sheet material) as shown by the Cybermation manuals, the Cybermation software and operation of the system.
c. Each pattern type in the Cybermation software (corresponding to fitting type sides) has a specified geometry and at least one mathematical relationship relating selected basic dimensions of the product (e.g., opening width and depth, exiting width and depth) to the specified geometry. The specified geometry is defined by the type of fitting, e.g., elbow, bevel, offset, transition. By definition, each pattern type has to have a specified geometry and such a mathematical relationship. This is shown in the Cybermation manuals and software.
d. Cybermation offers a wide variety of standard and specialty fittings to meet virtually all production requirements. Thus, substantially all variations of rectangular duct fittings can be developed from the library based on the stored pattern types.
e. The basic dimensions of any duct fitting includes the size of the open sides (depth and width) and at least one dimension determining the spatial relationship of the open sides (e.g., length, offset, radius, throat distance). The Cybermation manuals and system operating screen identify the basic dimensions for each fitting. In each case, a width and depth defining open sides and a dimension defining spatial relationship are provided.
f. In the Cybermation system, operators answer English language questions to input data needed to set up fittings which are three-dimensional products. After dimensions are entered, they appear on the screen in position for verification. The operator selects the type of fitting from the fitting types programmed into the system and answers English language questions as to basic dimensions, i.e., width, depth, offset, etc. To enter the fitting shapes for takeoff, the system operator simply types the name of each fitting. The computer responds by prompting for basic dimensions.
g. In the Cybermation system, operators enter the dimensions of the fitting based on shop standards. The pattern for the sides of fittings are automatically produced with the correct material and construction detail without operator intervention. Once the dimensional data and product or fitting type data is entered, each of the patterns of the selected fitting is automatically developed. The fitting pattern development is based on the basic pattern types associated with the various fitting types stored in the memory.
h. The Cybermation CAM systems use various nesting programs, including simple rectangular nesting to more complex "Ultranest," to position each pattern in related positions with other developed patterns to generate a series of positionings automatically. The nesting programs automatically nest parts and arrange the actual shapes of the parts.
j. Cybermation's controller enables the job to be downloaded to the plotting or cutting table for cutting and to move the cutting machine in X and Y directions. The data for each pattern necessarily has to include a starting point and sequential contour data to define each pattern. When Cybermation's system cuts the patterns, it necessarily plots the patterns, i.e., cutting is plotting.
k. The patterns in the Cybermation system are plotted by being cut out, as nested, on the cutting table.
The method recited in claim 32 wherein said step of plotting further comprises cutting said patterns from said sheet of material on said plotting table. (PX 25).
44. A comparison of the elements of Claim 36 with the operation of the Cybermation system shows that the Cybermation system literally infringes. (PX 152A-152W, PX 186, PP 21-23; Tr. at 551-587, 592-613 [Lyons]).
a. The Cybermation table uses a plasma-arc cutting head on an X-Y table to cut the fitting patterns.
Apparatus for producing the customized patterns of the closed sides of a three dimensional product which can be fabricated from sheet material, such as a ventilating duct fitting, comprising:
memory means for storing information representative of the configurations of a group of basic types of the three dimensional product and two dimensional pattern types required for the construction of the closed sides of the product,
each such pattern type having a specified geometry and at least one mathematical relationship relating selected basic dimensions of the product to the specified geometry,
substantially all variations of the product being developable from said basic pattern types,
said basic dimensions comprising the size of the open sides of the product and at least one dimension determining the spatial relationship of the open sides;
means for entering input data including the type of the three dimensional product ...