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CARLISLE PLASTICS, INC. v. SPOTLESS ENTERPRISES

November 25, 1997

CARLISLE PLASTICS, INC., Plaintiff, against SPOTLESS ENTERPRISES, INC. and SPOTLESS PLASTICS PTY. LTD., Defendants. SPOTLESS ENTERPRISES, INC. and SPOTLESS PLASTICS PTY. LTD., Plaintiffs, -against- CARLISLE PLASTICS, INC., Defendant.


The opinion of the court was delivered by: TRAGER

 TRAGER, District Judge:

 Plaintiff in the 1994 case, Carlisle Plastics, Inc. ("Carlisle" or "plaintiff") brought this action pursuant to 28 U.S.C. §§ 2201 & 2202 against Spotless Enterprises, Inc. and Spotless Plastics Pty. Ltd. ("Spotless" or "defendants") seeking a declaratory judgment that United States Patent No. 4,322,902 ("the '902 patent") is invalid. Plaintiff also sought a declaratory judgment that, in the event that the '902 patent is deemed valid, products made by plaintiff do not infringe the patent. Defendants counterclaimed, alleging patent infringement.

 The original plaintiff in this action was Different Dimensions, Inc. ("DDI"). See Pl. Tr. Brief at 2. However, on April 15, 1997, Carlisle purchased DDI and acquired all of its assets, liabilities and ongoing business and was thereafter substituted for DDI in this action. Id. All of the products at issue in this case were DDI designs which Carlisle has represented that it will continue to market through its A & E Products Group ("A & E"). *fn1" See id. at 2-3.

 In 1997, Spotless commenced an action alleging that certain DDI (now Carlisle) products, which had not been part of the 1994 lawsuit, also infringed the '902 patent. This time, Carlisle counterclaimed, again seeking a declaratory judgment of invalidity of the '902 patent as well as non-infringement. Subsequently, all claims from the 1994 and 1997 actions pertaining to the '902 patent were consolidated for trial.

 Background

 A. The Origin of the Dispute

 The '902 patent is entitled "Indicators for Garment Hangers." Trial Exhibit ("TX") 22, '902 Patent. In non-technical terms, the subject of the '902 patent is a garment hanger having an enlarged display portion extending above the top contour of the hanger hook, and a hollow device that fits over the enlarged display portion. The device is also known as an indicator, a size cap, or a top sizer because it is attached over the top of the hook of the hanger. See Def. Tr. Brief at 3-4. This indicator is usually color-coded and displays information about the garment on the hanger, such as its size. See Pl. Tr. Brief at 11-12; Def. Tr. Brief at 4. The use of a top sizer permits a consumer to scan a rack of garments and quickly find the size or variety desired, simply by looking at the top of the hanger hook. See Def. Tr. Brief at 4; Trial Transcript ("Tr.") at 191-92. Moreover, the top sizer system permits retailers both to arrange clothing according to size ("to zone") and to restock display racks efficiently. See Def. Tr. Brief at 5; Tr. 191-92.

 The inventor of the '902 patent, Frank C. Lenthall, applied for the patent on April 16, 1979, and it was issued by the Patent and Trademark Office ("PTO") on April 6, 1982. See TX-22. Spotless, which acquired the right to the '902 patent in 1982, is currently the exclusive licensee of the patent, which will expire on April 16, 1999. See Pl. Tr. Brief at 11; Def. Tr. Brief at 3. In recent years Spotless has enjoyed considerable commercial success with the '902 patent. The combination of hanger and top sizers shown in the '902 patent has been sold in the United States to, inter alia, Target, Lowes and Wal-Mart, and over 500 million hangers and over 500 million size caps have been sold in the last four years. See Def. Tr. Brief at 4 & 6 n.5; TX-260; Tr. 199-200.

 DDI (now subsumed by the A & E Group of Carlisle) has long been a market leader in the hanger and size cap industry, but DDI has historically manufactured hangers with a side sizer, which, as its name suggests, is a size indicator located on the side of the hanger hook rather than on the top. See, e.g., TX-222; Tr. 65. DDI and A & E, in a cross-licensing agreement, have sold billions of side size clips and hangers, making theirs the most popular indicator system in the world. See Tr. at 66. However, as the popularity of the top sizer system increased, DDI's side sizer system began to lose favor commensurately. For instance, due to the Spotless top sizer, DDI lost approximately one million dollars in business annually from K-Mart. See Tr. 121-22.

 In 1993, in response to customer inquiries and demands, DDI began developing a top sizer system. In September of 1993, DDI furnished Spotless with a prototype of its hanger and top sizer, accompanied by a letter articulating that the prototypes did not infringe the '902 patent. See TX-179. Defendants responded that they did consider DDI's hanger and top sizer to be an infringement, but that Spotless would consider making DDI a licensee of the patent. No licensing agreement was ever consummated. See Def. Tr. Brief at 6. In the meantime, DDI had produced and offered for sale *fn2" a number of versions of its top sizing system. See Pl. Tr. Brief at 16-17; TX-115, TX-116, TX-117, TX-118, TX-106, TX-107, TX-33. *fn3" However, no customer agreed to purchase DDI's product, apparently fearing an accusation of patent infringement. See Pl. Tr. Brief at 16. Target requested and DDI provided an indemnification letter, but, nonetheless, Target declined to buy DDI's hangers and top sizers. See TX-40; TX-188; Pl. Tr. Brief at 16. Because DDI knew that it was no longer being considered as a possible licensee of the '902 patent, see TX-181, it commenced its declaratory judgment action for invalidity and non-infringement on March 17, 1994.

 On September 23, 1994, defendants applied to the PTO for reexamination of the '902 patent. This case was then stayed pending the issuance of the reexamination certificate. See Def. Tr. Brief at 7. The PTO produced this certificate on January 2, 1996. TX-23. On April 28, 1997, it was decided that there was "relation back" and thus that both the validity and infringement issues would be adjudicated with reference to the reexamined '902 patent, rather than the original '902 patent. See Def. Tr. Brief at 7. The PTO produced this certificate on January 2, 1996. TX-23. On April 28, 1997, it was decided that there was "relation back" and thus that both the validity and infringement issues would be adjudicated with reference to the reexamined '902 patent, rather than the original '902 patent. See Def. Tr. Brief at 14.

 B. The Claims of the '902 Patent

 Spotless claims that plaintiff's products infringe claims 1, 2, 17, 18 and 19 of the reexamined '902 patent. Claim 1 was deemed patentable with certain amendments; claim 2 is dependant on claim 1; claims 17, 18 and 19 were added in their entirety during the reexamination. See TX-23. The text of the claim 1, with the amendments effected during the reexamination in italics, is as follows:

 
1. In combination, a hanger for garments and other articles comprising:
 
a hook having a top contour adapted to engage a rail or other supporting means, said hook having an enlarged display portion extending from the hook such that it projects above the top contour of the hook; and
 
an indicating device having a hollow body attached to said display portion, wherein at least a part of the display portion is received within the hollow body of said indicating device; and said indicating device being readily visible when the hanger is in use by virtue of its position on said hook.

 TX-23. Claim 2 is dependant on claim 1, and claims 17-19 are substantially similar to claim 1 except that they include the additional requirements that the hanger and indicator be made of molded plastic (both 17 and 18) and that the indicator be color coded (claim 18). *fn4"

 All of these claims require that the hanger hook contain an "enlarged display portion." Plaintiff has consistently maintained that its products do not infringe the '902 patent because they lack an "enlarged display portion." See TX-179; Pl. Tr. Brief at 17; Tr. at 67. At trial, plaintiff's counsel acknowledged that if plaintiff's products did contain an enlarged display portion, then they would infringe the '902 patent. See Tr. at 512-13. Thus, the salient issue with respect to the infringement claim is what exactly comprises an "enlarged display portion" and whether plaintiff's products contain it. However, to resolve both this infringement issue, as well as the invalidity claim, it is necessary to analyze the prosecution history (or the "file wrapper") of the '902 patent.

 C. Prosecution History of the '902 Patent

 (1)

 When Frank C. Lenthall initially submitted his application to the PTO it contained 17 figures. See TX-60 at 5-24. In the course of the first office action, the patent examiner informed the inventor that the application actually contained five distinct inventions (or species), only one of which Lenthall would be permitted to prosecute. Species A was embodied in figures 1-4, species B was embodied in figures 5-7, species C was embodied in figures 8 and 9, species D was embodied in figures 10-13, and species E was embodied in figures 14-17. See TX-60 at 26; Tr. 290-93.

 In this original submission to the PTO, the inventor promulgated a definition of the phrase "enlarged display portion" in the abstract by reference to figure 12, part of species D, of the application. Specifically, he stated: "in the modification shown in Figures 12 and 13, the indicator is basically the same construction as the previous embodiment [figure 10] except that the hanger hook H is not formed with an enlarged display area A." TX-60 at 11. Figure 10 shows a hanger with a protuberance (which the defendants refer to as a "bump") on the side of the hanger hook and a sizer that fits on top of and totally overlaps the protrusion. See TX-60 at 19. Figure 12, by contrast, shows a hanger hook that is perfectly regular in shape, meaning that it lacks any protuberance and looks, quite frankly, like an unadulterated hanger hook. See id. The size indicator fits over the entirety of the hanger hook in figure 12 but extends beyond, or hangs outside, the contour of the hook. See id. As will be discussed, plaintiff maintains that the protuberance comprises the "enlarged display portion," while defendants insist that it is not the protuberance, but a combination of other qualities that defines the "enlarged display portion."

 Confronted with the dilemma of choosing among the five species contained in his original submission, the inventor decided to prosecute species E, which consisted of figures 14-17. The inventor canceled claims 1-14 (which described species A-D) and added claims 15-30. See TX-60 at 29-32. The examiner rejected new claim 15 on the basis of 35 U.S.C. § 102 as anticipated in light of the Ostroll patent, *fn5" and rejected new claims 16-22 on the basis of 35 U.S.C. § 103 as obvious in light of Ostroll in view of either the Bross patent *fn6" or the O'Keefe patent. *fn7" See id. at 36-37. The examiner withdrew from further consideration claims 23-30 "as not readable on the elected species." Id. at 36. Converted to plain English, this appears to mean that the claims were not encompassed within species E, the one the inventor chose to prosecute.

 In response to this office action, the inventor canceled claims 15-22 and added new claims 31-40. See TX-60 at 43-45. Proposed claim 31, on which plaintiff relies for part of its non-infringement argument reads as follows:

 
a hook adapted to engage a rail or other supporting means, said hook having a supporting means extending from the hook such that it projects above the top contour of the hook; and

 Id. at 43. In the corresponding office action, the patent examiner finally rejected claims 23-30 because they were dependent upon canceled claims, and rejected the new claim 31, quoted above, as obvious "over Ostroll in view of O'Keefe or Conger (TX-217)." TX-60 at 57. According to the examiner: "Ostroll shows the hanger hook provided a support member to receive an indicating element as in the proposed invention and to merely locate it at the top contour of the hook would be obvious from O'Keefe or Conger." Id. at 57. Claim 32 was rejected for the same reasons; claims 33-39 were objected to because they are dependent on a rejected claim; claim 40 was allowed. The inventor then had an interview with the examiner; they discussed the Ostroll, O'Keefe and Conger patents and decided that claim 31 would be amended "to structurally distinguish over references." Id. at 58.

 In the next go around, the inventor added proposed claim 41, which harkened back to claim 23 (part of his first submission). This claim reads:

 
a hook adapted to engage a rail or other supporting means, said hook having an enlarged display portion extending from the hook such that it projects ...

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