The opinion of the court was delivered by: Jan E. Dubois, United States District Judge
Plaintiff, U-Fuel, Inc. ("U-Fuel" or "plaintiff") alleges in this
patent infringement action that Highland Tank & Manufacturing
Company, Inc. ("Highland"), Steel Tank Institute ("STI"), and Modem
Welding Company of Ohio, Inc. ("Modem") (collectively, "defendants")
infringed U-Fuel's United States Reissued Patent No. 37,144 (the "`144
patent") by licensing, manufacturing, and selling non-insulated,
above-ground storage tanks ("ASTs") and marketing such tanks as
"fire-resistant." U-Fuel, Highland, and Modern manufacture and sell
ASTs. STI is a non-profit trade association whose members include AST
manufacturers. STI's purpose is to promote the use of high-quality steel
tanks which are manufactured by its members to meet fire codes and
Presently before the Court is plaintiffs Motion for a Preliminary
Injunction (Document No. 3, filed May 9, 2002), in which plaintiff seeks
an order barring defendants from marketing, selling, offering for sale,
distributing, licensing, manufacturing, or using any non-insulated,
"fire-resistant" ASTs which infringe the `144 patent. Defendants respond
by asserting a number of defenses — prior art inherently
anticipates the `144 patent; plaintiff's claim construction violates the
written description requirement of 35 U.S.C. § 112; the allegedly
infringing activities of defendants are protected under the intervening
rights provision of 35 U.S.C. § 252; plaintiff failed to disclose the
best mode in making "fire-resistant" ASTs; inconsistent testimony by
plaintiff evidences unclean hands; and plaintiff procured the `144 patent
through inequitable conduct — warranting the denial of plaintiff's
For the reasons set forth in this Memorandum, plaintiffs Motion for a
Preliminary Injunction is denied.
U-Fuel filed a Complaint against defendants on May 7, 2002. The Motion
for a Preliminary Injunction was filed on May 9, 2002. Defendants
responded on June 13, 2002; plaintiff filed a reply on July 17, 2002.
The Court held a hearing on the Motion for a Preliminary Injunction on
July 22 through 25, 2002, and wanted the parties leave to file
supplemental memoranda on the issue of the validity of the reissued `144
patent. Both parties thereafter filed supplemental memoranda. The motion
was fully briefed on September 9, 2002.
The Court will now set forth findings of fact and conclusions of law in
ruling on plaintiff's Motion for a Preliminary Injunction based on
evidence presented at the hearing and the written submissions of the
ASTs are used for industrial and commercial purposes to store
combustible and flammable liquids such as gasoline. Because of the
inherent safety risks that ASTs pose, private and public entities have
promulgated standards for the testing and rating of ASTs. Such private
entities include Underwriter's Laboratories, Inc. ("UL"), the National
Fire Protection Association ("NFPA"), and Southwest Research Institute
The "Standard for Steel Aboveground Tanks for Flammable And Combustible
Liquids" ("UL 142") was created in 1922 by UL and prescribes the minimum
construction standard for single and double wall ASTs.*fn1 Due to
increased demand for ASTs for storing commercial fuel,*fn2 UL developed
an additional performance-based listing, known as the "Standard for
Insulated Aboveground Tanks for Flammable and Combustible Liquids" ("UL
2085"),*fn3 which tested the internal temperature rise of insulated ASTs
when subject to an external temperature of 2000 degrees Fahrenheit for
not less than two (2) hours. Insulated ASTs are listed as "protected"
under UL 2085 if the increase in internal temperature does not exceed 400
degrees Fahrenheit. Non-insulated ASTs are not tested under the UL 2085
The NFPA is an organization which periodically publishes fire codes and
safety use requirements, such as separation distances between an AST and
a building, an AST and a public roadway or other property line, and an
AST and a fuel dispenser. Defs.' Ex. 8. Section 2-4.5 of the NFPA 30A,
Automotive and Marine Service Station Code ("NFPA 30A"), created the
standard for "fire-resistant tanks."*fn4 Under Section 2-4.5(a), an AST
is listed as "fife-resistant" if it prevents: (a) the release of liquid;
(b) failure of the supports for the tank; and (c) impairment of venting
for two (2) hours when tested using "a fire exposure that simulates a
high-intensity pool fire, such as that described in UL 2085 . . . or
equivalent test procedure." Section 2-4.5(a), NFPA 30A (1996).
In the late 1980's and early 1990's, double wall, non-insulated tanks,
constructed in accordance with UL 142, were manufactured and sold as
ASTs.*fn5 These ASTs were non-insulated in that the space between the
primary and secondary tank was not filled with insulation (usually a
concrete mixture) and they were capable of being monitored for any
leakage into this space. Noninsulated ASTs are lighter than insulated
tanks and thus more mobile and easier to transport. Testimony of R.
Michael Webb, July 23, 2002, at 92. In addition,
non-insulated tanks cost
approximately fifty percent less than insulated tanks. Testimony of
Charles A. Frey, July 24, 2002, at 41-42, 45.
In 1993, STI published the "Standard for Aboveground Tanks With
Integral Secondary Containment" ("F921"), a specification standard for
double wall, non-insulated tanks made in accordance with UL 142. Pl.'s
Ex. 35. Thousands of ASTs manufactured to this standard were sold by STI
members during the 1993-1995 period. Defs.' Ex. 8. Highland and Modern
each sold their own versions of double-wall, non-insulated tanks that
conformed to UL 142 during this time period as well. Defs.' Ex. 9; Defs.'
U-Fuel filed a patent application on January 17, 1996 covering the
construction of an "improved" AST "fabricated from steel plates of
minimum thickness, the sheets being made from a special metal alloy, and
the plates welded in a specific way, in order to withstand a 2000°F.
environment for a minimum of two hours." (U.S. Patent No. 5,723,842 (the
"`842 patent"), column 2, lines 41-44). The `842 patent was issued by the
Patent Office on March 3, 1998.
SwRI is an applied research and development non-profit organization
which provides standards and protocols for the testing, listing, and
labeling of tanks, including ASTs. In 1995, U-Fuel contracted with SwRI
to create a testing protocol for its non-insulated ASTs. In the context
of the contractual arrangement between U-Fuel and SwRI, U-Fuel's
President R. Michael Webb ("Mr. Webb") persuaded SwRI to adopt a testing
protocol with no internal temperature limits on the ground that Section
2-4.5 of NFPA 30A imposed no requirements for maximum internal
temperature rise in its definition of "fire-resistant." This led to the
development of testing protocol 97-04 ("SwRI 97-04") in 1997. SwRI
97-04, a high-intensity fire exposure, leakage, and hose stream test,
provided a new standard for the industry to test whether a non-insulated
AST met the fire-resistant requirements of NFPA 30A; i.e., listed as able
to withstand an environment of 2000°F. for two hours without
sustaining any welding failure or leakage. Prior to SwRI 97-04, only
tanks containing insulation could meet the internal temperature
requirements of UL 2085 and thus be considered "fire-resistant" pursuant
to NFPA 30A.
SwRI began testing U-Fuel's tanks pursuant to SwRI 97-04 on April
15-16, 1999. Due to industry-wide acceptance of SwRI 97-04, other tank
manufacturers and organizations contacted SwRI to have their ASTs tested
for labeling and listing under this protocol. STI contracted with SwRI to
conduct an SwRI 97-04 test on one of its F921 tanks. On May 13, 1999, STI
publicly announced that its F921 tank passed the SwRI 97-04 protocol.
Thereafter, STI adopted the trade name "Flameshield" for its F921 tanks.
On November 21, 1999, STI issued a press release reporting that its Board
of Directors had authorized the "Flameshield" program and that its
members could officially begin marketing "Flameshield" tanks in early
2000. Defs.' Ex. 22. Accordingly, members of STI, including Highland and
Modern, began manufacturing and selling "Flameshield" tanks in early 2000
and continue to do so today. "Flameshield" tanks are listed as
"fire-resistant" under NFPA 30A and are marketed as such.
U-Fuel then filed suit against SwRI on May 3, 2000, alleging, inter
alia, misappropriation of trade secrets; that SwRI wrongfully disclosed
to third parties proprietary and confidential information relating to the
technology U-Fuel used in the manufacture of its non-insulated ASTs. See
U-Fuel, Inc. v. Southwest Research Institute, CA. No. 00-480 (W.D. Tex.
Dec. 3, 2001). Specifically, U-Fuel contended that SwRI disclosed
information (obtained through U-Fuel's production manual obtained as part
of its contractual arrangement with SwRI, and during SwRI's on-site
inspections of U-Fuel's manufacturing plants) to U-Fuel's competitors,
such as STI, so that they in turn could directly manufacture
"fire-resistant" ASTs and become clients of SwRI without entering into
licensing agreements with U-Fuel. Id. at 3.
On December 3, 2001, the magistrate judge in the SwRI suit recommended
that SwRI's motion for summary judgment with regard to the trade secret
misappropriation claims be granted because U-Fuel failed to establish
that SwRI wrongfully divulged to third parties any confidential or
proprietary information received from U-Fuel; the magistrate judge
concluded that it was undisputed that U-Fuel had already provided the
same information to third parties and thus, SwRI did not make any
"unauthorized" disclosures of U-Fuel's confidential or proprietary
information. Id. The district court accepted the magistrate judge's
recommendation by order dated January 31, 2002. Defs.' Ex. 17.
Prior to the suit against SwRI, U-Fuel filed a reissue patent
application on January 24, 2000, which contained the original claims from
the `842 patent and additional method claims specifically referencing
non-insulated fire-resistant ASTs. U-Fuel sought a reissued patent on the
ground that the original `842 patent was "overly specific" and "partly
inoperative because [U-Fuel] claimed less than [it was] entitled to
claim." Defs.' Ex. 4; see also Testimony of R. Michael Webb, July 23,
2002, Hearing Tr. at 186. The Patent Examiner originally rejected
U-Fuel's additional claims in view of the two UL standards, UL 142 and UL
2085. However, after an interview with representatives of U-Fuel, the
Examiner allowed the new claims on the basis that such claims were to be
limited to "non-insulated" ASTs, mistakenly noting that the UL standards
were for "insulated tanks" only. Defs.' Ex. 6.*fn6 The Patent Office
issued the `144 patent to U-Fuel on April 24, 2001.
On April 30, 2001, Mr. Webb sent a copy of the `144 patent to Wayne
Geyer of STI and offered STI a license under the `144 patent. Pl's Ex.
15. In May 2001, Mr. Webb and Mr. Geyer discussed the possibility of a
license agreement. Mr. Geyer informed Mr. Webb in this conversation that
STI's Board of Directors would consider U-Fuel's proposal. Testimony of
Mr. Geyer, July 23, 2002, Hearing Tr. at 76-77. There was, however, no
further contact between the parties regarding U-Fuel's licensing offer.
U-Fuel delayed initiating the present patent infringement
action until May 7, 2002.
For purposes of plaintiffs Motion for a Preliminary Injunction,
plaintiff proceeds on only one of claims set forth in the `144 patent,
Claim 27. Claim 27 is a method claim — a claim which is not tied to
a particular device, but is a series of steps that are performed to
transform materials to a "different state or thing." Schumer v. Lab.