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NEUMANN v. REINFORCED EARTH CO.

July 5, 1984

Albert NEUMANN, et al., Plaintiffs,
v.
The REINFORCED EARTH COMPANY, Defendant



The opinion of the court was delivered by: GASCH

 GASCH, District Judge.

 The plaintiffs brought this antitrust case to challenge the filing of a lawsuit by the defendant in the United States District Court for the District of Maryland and a patent protest lodged by the defendant in the United States Patent Office. The plaintiffs are Albert Neumann, inventor of the Tension Retaining Earth System ("TRES") and Mr. Neumann's companies. The defendant is The Reinforced Earth Company ("RECO"), a company that markets in the United States an earth retaining system developed by the French inventor, Henri Vidal.

 For some time prior to the events immediately preceding this lawsuit, Mr. Neumann worked for RECO, and in that capacity had access to confidential drawings and trade secrets of RECO. After Mr. Neumann resigned from his employment, RECO learned that he was attempting to market a wall that RECO's executives considered to be suspiciously similar to a wall that RECO had designed and with which Mr. Neumann was familiar. After an investigation of Mr. Neumann's wall, RECO brought an action against Neumann in the United States District Court for the District of Maryland, alleging that Neumann had stolen trade secrets from RECO. The parties to that lawsuit agreed that the question of whether Mr. Neumann's invention was patentable over other designs would be submitted to the Patent Office for resolution. The Maryland lawsuit and Patent Office protest are the basis of the plaintiff's complaint alleging abuse of process and antitrust violations in the form of sham litigation and an attempt to monopolize or actual monopolization.

 Trial in this matter lasted from March 7, 1984 through March 26, 1984. The jury rendered a verdict in favor of RECO on the counts of monopolization and common law abuse of process. On the Special Verdict Form submitted by the Court to the jury, the jury found that the Maryland lawsuit did not constitute sham litigation and also found that the definition of the relevant market was retaining walls, rather than the definitions proffered by the plaintiff, i.e., walls over 20 feet in height or in the alternative, federal and state highway walls on which RECO had bid. The jury did, however, find that the patent protest or request for reconsideration by RECO was a sham, that RECO had attempted to monopolize, that there was a dangerous probability that RECO would achieve monopoly power, that plaintiffs had the intention and preparedness to compete in the relevant market necessary to establish standing, and that the defendant's attempt to monopolize resulted in $ 1 million damage to the plaintiffs.

 The defendant has now moved for judgment notwithstanding the verdict or in the alternative, for a new trial. They offer four grounds for their motion. The defendant asserts that there is no evidence to support a finding that the patent protest was sham. The defendant also states that a finding of attempted monopolization was impossible by definition because the defendant's market share was too low to support such a finding. On the question of standing, the defendant asserts that the plaintiffs have made no progress in marketing the patented TRES, have offered no evidence of their preparedness to market TRES regardless of the patent protest, and have failed to put into the record any evidence tending to show that the patent protest caused the difficulties experienced in marketing TRES. Finally, the defendant asserts that there is no competent evidence in the record of plaintiffs' damages.

 The legal standard by which the Court must evaluate this motion is set forth in the case of Vander Zee v. Karabatsos, 191 U.S. App. D.C. 200, 589 F.2d 723 (D.C.Cir.1978), cert. denied, 441 U.S. 962, 99 S. Ct. 2407, 60 L. Ed. 2d 1066 (1979). The Court may grant JNOV only if "the evidence, together with all inferences that can reasonably be drawn therefrom, is so one-sided that reasonable men could not disagree on the verdict." Id. at 726. The verdict may not, however, stand if the plaintiff has not produced any evidence upon which a jury can properly proceed to reach a verdict for the plaintiff. See Gunning v. Cooley, 281 U.S. 90, 94, 50 S. Ct. 231, 233, 74 L. Ed. 720 (1930); Murray v. Towers, 99 U.S. App. D.C. 293, 239 F.2d 914, 915 (D.C.Cir.1956).

 The Patent Protest

 The First Amendment protects the right to petition government agencies without fear of retribution. The Noerr-Pennington doctrine ensures that courts extend First Amendment Protection to efforts to petition that might otherwise be subject to attack under the antitrust laws. The sham exception to the Noerr-Pennington doctrine excludes from First Amendment immunity litigation or other petitioning activity that is frivolous, baseless, or otherwise improper. See California Transport v. Trucking Unlimited, 404 U.S. 508, 510-16, 92 S. Ct. 609, 611-14, 30 L. Ed. 2d 642 (1972); United Mine Workers of America v. Pennington, 381 U.S. 657, 669-70, 85 S. Ct. 1585, 1592-93, 14 L. Ed. 2d 626 (1965); Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 139-40, 81 S. Ct. 523, 530-31, 5 L. Ed. 2d 464 (1961). The sham exception to antitrust immunity established in the Noerr-Pennington-Trucking Unlimited line of cases does not extend to genuine attempts to secure governmental action, even though the motive may be anticompetitive. Thus, the burden is on the plaintiff in this case to show that RECO's purpose in bringing the patent protest and request for reconsideration in the Patent Office was not to obtain a decision on the patentability of Neumann's invention, but that, on the contrary, it was to achieve some purpose outside the patent process, and was itself so baseless or frivolous as to pervert the protest procedure itself. Federal Prescription Service, Inc. v. American Pharmaceutical Association, 214 U.S. App. D.C. 76, 663 F.2d 253, 262-63 (D.C.Cir.1981), cert. denied, 455 U.S. 928, 102 S. Ct. 1293, 71 L. Ed. 2d 472 (1982).

 The sham exception to the Noerr-Pennington doctrine as it applies to litigation before agencies and courts, was set forth by the Supreme Court in California Transport v. Trucking Unlimited, 404 U.S. 508, 511-16, 92 S. Ct. 609, 612-14, 30 L. Ed. 2d 642 (1972). It was further explained by the Court of Appeals for the District of Columbia in Federal Prescription Service v. American Pharmaceutical Association, 214 U.S. App. D.C. 76, 663 F.2d 253, 262-65 (D.C.Cir.1981), cert. denied, 455 U.S. 928, 102 S. Ct. 1293, 71 L. Ed. 2d 472 (1982). This latter suit was brought by a mail order prescription company against American Pharmaceutical Association and alleged coconspirators arising from American's nationwide efforts to eliminate mail order prescription services as competitors. The trial court found that American had violated Section 1 of the Sherman Act, 15 U.S.C. ยง 1, by conspiring with the Iowa Board of Pharmacy Examiners to harm the plaintiff in its business. The Court of Appeals reversed, holding that the facts of the case reflected no actionable conspiracy under the antitrust laws. The Court of Appeals reviewed the trial court's application of the Noerr-Pennington doctrine and the sham exception thereto. 663 F.2d at 261-68. The Court rejected the contention that "'the difference between protected activity and sham action depends on the competitive or anticompetitive purpose of exercising the right of petition and [that] evidence of such a purpose is a pattern of actions designed to accomplish the destruction of a competitor. '" Id. at 262 (quoting appellee's brief at 31). The Court stated that in addition to anticompetitive intent and "a pattern of actions" the sham exception can only apply where there is proof that the defendant has subverted the integrity of the governmental processes, that the defendant effectively barred the plaintiff's access to these processes, see also California Transport v. Trucking Unlimited, 404 U.S. at 515, 92 S. Ct. at 614, or that the nature of these processes made invocation something other than the "political activity" that was recognized by the Noerr-Pennington-Trucking Unlimited line of cases. Id. 663 F.2d at 261-68. The Court cited as examples of cases in which the integrity of the government process was subverted, cases involving overtly corrupt conduct, such as bribes and misrepresentations in the adjudicatory process. *fn1" The Court of Appeals also indicated that where the earlier suit has an outcome favorable to the plaintiff in that suit, that successful outcome is evidence of the genuineness of the plaintiff's efforts to secure governmental action through that suit. Federal Prescription Services, 663 F.2d at 265.

 With these guidelines in mind, the Court turns to the record of the trial in this action in search of evidence of sham litigation. There is no evidence in the record that the plaintiff in the patent protest, The Reinforced Earth Company, in any way subverted the integrity of the Patent Office process by corrupt conduct, such as bribes or misrepresentation. Nor is there any suggestion in the record that RECO barred Mr. Neumann's access to the Patent Office processes. Nevertheless, if RECO's purpose in the Patent Office was in fact, not to secure governmental action, but to harm the plaintiff by abusing the relevant government process, then the sham exception may apply. Id. at 263. Whether Mr. Neumann in this case has met his burden thus turns on whether he has put in evidence that the Patent Office protest was baseless. See id.

 At the outset, it should be noted that the protest began by agreement of the parties and had originated as an issue in the Maryland suit, *fn2" which the parties agreed to remove to the Patent Office. The record shows that Mr. Rosenberg, Mr. Neumann's patent attorney, discussed the transfer of patent-related issues from the Maryland Court to the Patent Office with Mr. Neumann. Mr. Rosenberg's testimony shows that Mr. Neumann preferred the Patent Office adjudication of the patent issues because that adjudication would be less expensive than a determination by the Maryland Court. In order for RECO to file the patent protest, Mr. Neumann or his attorney had first to withdraw the patent from issue. *fn3" Mr. Rosenberg filed such a petition to withdraw the patent from issue and Judge Miller, presiding judge in the Maryland litigation, was notified of this agreed-upon change in the case by a letter from the parties.

 The plaintiff has submitted no evidence that would show that The Reinforced Earth Company knew the claim was without merit or acted regardless of the merits of the claim. On the contrary, Assistant Commissioner Tegtmeyer's opinion stated that "it is apparent from a review of the application file that questions are present as to the patentability of the claim as well as to the conduct by, or on behalf of, the applicant." Assistant Commissioner Tegtmeyer granted RECO's request for reconsideration and remanded eight separate issues to the primary examiner for further review. Moreover, the final decision of Assistant Commissioner Tegtmeyer expressly found that Mr. Rosenberg had been negligent in failing to inform the examiner and the Patent Office about relevant prior art and that he had mischaracterized such prior art once it was discovered. In Mr. Neumann's response to the request for reconsideration, Mr. Neumann's lawyer did suggest that "the addition of this Prior Arts Statement is merely an attempt by the Protestor to delay prosecution in the subject Patent Application, and to delay the issuance of the U.S. Patent directed to the inventive concept of the applicant." The opinion of the plaintiff's own patent attorney as expressed in his response to the request for reconsideration, in the face of numerous pieces of evidence strongly supporting the fact that real issues existed, could not convince a reasonable juror that there were no issues.


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