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A. STUCKI CO. v. SCHWAM

July 17, 1986

A. STUCKI COMPANY,
v.
STUART A. SCHWAM and WORTHINGTON INDUSTRIES, INC.



The opinion of the court was delivered by: BRODERICK

 MEMORANDUM AND ORDER

 By Memorandum and Order dated May 1, 1986, this Court entered summary judgment in favor of plaintiff A. Stucki Company (Stucki) and against defendant Stuart A. Schwam on Count 1 of plaintiff's complaint. The Court held Mr. Schwam, president and 50 percent owner of Railroad Dynamics, Inc. (RDI), jointly liable with RDI for patent infringement damages imposed against RDI in a related civil action, No. 76-800. See Railroad Dynamics, Inc. v. A. Stucki Company, 579 F. Supp. 353 (E.D. Pa. 1983), aff'd, 727 F.2d 1506 (Fed. Cir.), cert. denied, 469 U.S. 871, 105 S. Ct. 220, 83 L. Ed. 2d 150 (1984). Defendant Schwam has filed a petition for reconsideration of this Court's Memorandum and Order dated May 1, 1986 634 F. Supp. 259, on the grounds that the Court failed to specifically address his arguments 1) that the claim against him was barred by laches and 2) that the damages against him are limited by 35 U.S.C. § 286.

 Both Civil Action No. 76-800 and this action involve the patent for the Stucki HS-6 snubber, a device used to control the phenomenon of rock and roll in railroad cars at high speeds. Mr. Schwam, the president of RDI, was responsible for the design and manufacture of the RDI Control/Master hydraulic snubber, which was ultimately found to infringe the Stucki HS-6 unit. The patent in question was issued to Stucki in 1974. In 1975, the president of Stucki advised Mr. Schwam of the Stucki patent and offered RDI a license under that patent. After obtaining the opinions of two attorneys that the Stucki patent was invalid, Mr. Schwam declined to acquire a license from Stucki. Instead RDI commenced Civil Action No. 76-800, seeking a declaratory judgment that the Stucki patent for the HS-6 hydraulic snubber unit was invalid. Stucki counterclaimed, alleging that the manufacture and sale of RDI's Control/Master unit infringed the Stucki patent. RDI admitted that its Control/Master snubber infringed the Stucki patent if that patent was valid. The parties stipulated that any injunctive relief which was awarded to Stucki would be delayed until a final judgment in Stucki's favor. This Court held a jury trial on the liability issues in Civil Action No. 76-800 from May 19, 1980 to June 10, 1980.

 The jury's answers to interrogatories established the validity of Stucki's patent, although the jury did not find the infringement by RDI to have been willful. After the parties waived a jury trial in connection with damages, the damages issues were tried before the Court. On August 25, 1981, this Court issued a judgment of $1,960,700. in favor of Stucki. On March 28, 1983, the Court granted Stucki's motion pursuant to Fed. R. Civ. P. 60(a) to amend the judgment nunc pro tunc to correct a clerical mistake, making the judgment in favor of Stucki $2,182,986., and denied all other post-trial motions.

 RDI filed a motion for a stay of execution on this $2,182,986. judgment pending appeal to the Federal Circuit, which this Court granted on April 29, 1983. In a Memorandum filed May 11, 1983, the Court set forth the reasons for its discretionary determination, over Stucki's vehement objection, to stay the execution of Stucki's judgment without requiring a bond in the full amount of the judgment plus costs. The Stay Order was conditioned upon RDI's posting security in the amount of $1,100,000., taking all necessary steps to maintain the value of its assets, and allowing Stucki the right to inspect RDI's records.

 On February 14, 1984, the Court of Appeals for the Federal Circuit issued as a mandate its judgment affirming this Court's judgment in favor of Stucki. Stucki then filed a motion for an injunction and for additional damages for infringing sales from February 10, 1981 on. RDI filed a motion to stay execution of this Court's judgment pending disposition of its petition for certiorari by the United States Supreme Court. On March 8, 1984, this Court granted Stucki's motion for an injunction against further sale or manufacture of infringing snubbers by RDI. The Court also denied RDI's motion to stay execution. On March 16, 1984, RDI filed a petition in bankruptcy. The automatic stay provision of 11 U.S.C. § 362 was modified by the bankruptcy court to permit this Court to rule on Stucki's motion for an award of additional damages for infringing sales from February 10, 1981 through March 9, 1984, the day the injunction became effective. On August 17, 1984, this Court entered an additional judgment of $607,730. in favor of Stucki for additional infringements by RDI not included in the prior judgment.

 On November 4, 1983, while RDI's appeal to the Federal Circuit was pending, Stucki filed this action to hold Mr. Schwam and Worthington Industries, Inc., the two 50 percent shareholders of RDI, liable for, inter alia, the above-described patent infringement by RDI. This Court granted Stucki's motion for summary judgment on Count I of the complaint as to Stuart A. Schwam and entered a judgment that Mr. Schwam was jointly liable with RDI for the patent infringement which was adjudicated in 76-800. See Memorandum and Order of May 1, 1986 in Civil Action No. 83-5340.

 In holding that Mr. Schwam was collaterally estopped from relitigating the issues of the validity of Stucki's patent, the infringement by RDI's Control/Master unit, and the resultant damages suffered by Stucki, this Court found that Mr. Schwam participated in and controlled the litigation in 76-800 on behalf of RDI and was fully represented in 76-800 such that he had had a full and fair chance to litigate these issues. See Mother's Restaurant, Inc. v. Mama's Pizza, Inc., 723 F.2d 1566, 1569 & n.4 (Fed. Cir. 1983) (citation omitted). Further, the essence of the Court's holding that Mr. Schwam was jointly liable with RDI for patent infringement was the undisputed evidence that Mr. Schwam directly participated in RDI's infringing activity by controlling the design, manufacture, and sale of the infringing goods. In other words, RDI's liability for patent infringement was derived in large part from Mr. Schwam's infringing activity.

 Mr. Schwam requests reconsideration of his defense of laches in connection with Stucki's suit against him:

 
The law is well settled that in order to assert the defense of laches, the defendant must prove two essential elements:
 
(1) unreasonable and inexcusable delay in the assertion of the claim; and (2) material prejudice to the defendant resulting from this delay, but the longer the delay, the less need there is to show specific prejudice.

 Leinoff v. Louis Milona & Sons, Inc., 726 F.2d 734, 741 (Fed. Cir. 1984) (citation omitted). A six-year delay in filing raises a presumption of unreasonable delay and places the burden of proving an excuse for the delay and lack of injury caused by the delay on the plaintiff. Id. at 741-42. See also 35 U.S.C. § 286.

 In this case, the Court is hard pressed to find any delay by Stucki in the assertion of its rights, much less inexcusable or unreasonable delay. Mr. Schwam received a letter from Stucki in 1975 offering RDI a license under the Stucki patent, which had only been issued in 1974. When RDI sued Stucki in 1976 to declare the patent invalid, Stucki elected to counterclaim against RDI and not to join Mr. Schwam as an additional defendant. Although Stucki did not sue Mr. Schwam until 1983, Mr. Schwam ...


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