Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 77-C-2278 -- Frank J. McGarr, Judge .
Before Swygert, Wood, and Cudahy, Circuit Judges.
In June, 1977, Loctite Corporation (Loctite) filed a patent infringement suit against Fel-Pro Incorporated and Felt Products Manufacturing Company (Fel-Pro) alleging infringement of three patents used in the production of anaerobic sealants and adhesives.*fn1 Each of these patents concludes with patent claims specifying a series of ingredients and the quantities of these ingredients which must be present. Loctite's burden was to prove the presence in the specified quantities of the allegedly infringing ingredients in Fel-Pro's products. Loctite's complaint identified neither the ingredients nor the quantities. Fel-Pro's pursuit of this information and Loctite's steadfast refusal to divulge it is the crux of the three-year discovery process which ended in dismissal.
The dispute reaches this court on an appeal from its dismissal under Rule 37(b) of the Federal Rules of Civil Procedure*fn2 for Loctite's failure to comply with district court discovery orders and from the award of attorney's fees to Fel-Pro under 35 U.S.C. § 285,*fn3 based on this conduct. A review of the record shows that the dismissal and award of fees were clearly justified; we affirm the judgment of the district court on both issues, but remand for a redetermination of the amount of the fee award.
Loctite filed its initial complaint alleging patent infringement on June 24, 1977. On August 18, 1977, Fel-Pro served a deposition notice for Loctite's officer having the greatest knowledge of the infringement facts. Jean Mauro, Loctite's in-house patent counsel, was produced and deposed on September 17, 1977. During this deposition, Mauro refused to disclose the test results of defendants' products upon which Loctite based its complaint, stating that they were irrelevant and that they were protected by the attorney-client or work-product privileges, or both.
On October 25, 1977, Fel-Pro filed a motion to compel production of the data and test results upon which Loctite based its infringement charges. This motion was granted on March 20, 1978, the district court holding that the test data was not protected by the attorney-client or work-product privileges. The court also dismissed the argument of irrelevancy: "Defendants have the right to refute plaintiff's evidence of infringement and information on these tests is clearly relevant for that purpose."
The test results were contained in two reports prepared by Loctite's experts, Dr. Leonard and Dr. Kubik. As a result of the March 20, 1978 order, Fel-Pro had reason to believe that Leonard doubted the accuracy of the test results. This was based on a statement made on October 6, 1977, by counsel for Loctite to counsel for Fel-Pro that Loctite was then uncertain whether the required ingredient, TBHP, was present in Fel-Pro's products. Loctite's counsel refused to allow questioning about Leonard's doubts as to the veracity of the tests. Fel-Pro was again required to ask the court to compel discovery in order to obtain answers to these questions about the tests. The magistrate's order of October 31, 1978, was affirmed by the district court on January 2, 1979.
In the interim, Fel-Pro filed a Motion for Partial Summary Judgment as to the one patent that required the presence of TBHP, asserting that there was no question of fact regarding the absence of TBHP in Fel-Pro's products. Loctite opposed this motion, stating in its brief, "Loctite believes Dr. Leonard's tests showing the presence of TBHP are correct." The motion for summary judgment was denied as a result of the apparent factual dispute. However, when Dr. Leonard was deposed in February, 1979, he stated that by October, 1977, he had become doubtful about the accuracy of the tests he had conducted on Fel-Pro's products in 1976 and that by April 13, 1978, he had become 85 to 90% certain that TBHP was not present in the Fel-Pro products. Dr. Leonard also stated that he had conducted no further tests that were directed toward the discovery of TBHP in Fel-Pro products.
On March 27, 1979, Fel-Pro filed a renewed motion for summary judgment as to the TBHP patent. This motion was granted on May 24, 1979. Shortly thereafter, the court issued an order imposing sanctions on Loctite for its "clear breach of the duties plaintiff and plaintiff's counsel owe the court and opposing counsel to investigate and abandon an erroneous factual position...."
By July, 1979, Loctite, through answers to interrogatories posed by Fel-Pro, introduced the theory that a catalyst produced infringing ingredients in Fel-Pro products. However, Loctite again failed to specify the infringing product, the ingredient and the quantities contained in the product. Defendants had made available to plaintiff during discovery their secret formulations which allegedly revealed that their products did not contain the special catalyst which plaintiff claimed. Again, Fel-Pro requested an order from the court requiring Loctite to produce the documents which would substantiate or refute the charges of infringement. On September 4, 1979, the magistrate ordered Loctite to produce these documents; this order was affirmed by the district court on October 2, 1979. At the hearing before the district court on this motion, counsel for Loctite admitted that he instructed those conducting tests to refrain from reducing them to writing. The district court judge then ordered full disclosure of all information from any tests conducted by Loctite bearing on the alleged infringement by Fel-Pro. The court also ordered that Loctite be permitted to depose the Sartomer Corporation, a third party not involved in this appeal, only after it made reports of all test results. This deposition was never conducted. Loctite subsequently responded with some information, but claimed that other documents were unavailable.
On January 21, 1980, Fel-Pro filed a motion to require Loctite to comply with the orders compelling discovery or suffer dismissal. This motion was considered by the court along with Fel-Pro's motion of September 20, 1979, for an order to show cause why the complaint should not be dismissed for failure to specify by claim the ingredient and the quantity of the infringing ingredient. In its response to the January, 1980 motion, Loctite asserted that it was in compliance with the orders, but at the same time produced documents it had earlier claimed were unavailable because of a fire.
The district court, on March 6, 1980, entered an order dismissing the case. A motion for reconsideration was denied and a final judgment was entered, dismissing the action and granting an award of attorney's fees to Fel-Pro on the basis of Loctite's conduct and 35 U.S.C. § 285.
Assuming the March 6, 1980, order to be a final judgment, Loctite filed a timely motion to amend or alter the judgment under Rule 59(e) of the Federal Rules of Civil Procedure.*fn4 This motion tolls the time for filing a notice of appeal until the entry of an order disposing of the motion. F.R.A.P. 4(a) (4). After a May 9 hearing on the motion, the court issued a "minute order" on May 12 stating, "Motion of plaintiff to reconsider will be denied. Order to issue." Loctite assumed this to be the final order from which its time for appeal would run and filed a Notice of Appeal to this court on June 11, 1980. Shortly thereafter, on July 2, 1980, Fel-Pro challenged the Notice of Appeal as premature in a Motion to Dismiss addressed to this court. That motion was denied on August 14, 1980. The next day, on August 15, 1980, the district court entered an order awarding attorney's fees under 35 U.S.C. § 285. Loctite filed a timely notice of appeal from that judgment on September 15, 1980. The two appeals were consolidated for review by this court.
Under Rule 37(b)(2)(C) of the Federal Rules of Civil Procedure the court may order dismissal or default judgment in instances where a party "fails to obey an order or to provide or permit discovery." Invoking this rule, Judge McGarr ordered the dismissal of Loctite's suit for failure to comply with court orders compelling production of specific information as to infringing ingredients. Loctite objects to the dismissal as improper. Its main contention is that Loctite complied with the March 20, 1978, order requiring specification by a letter dated March 24, 1978, containing a list of Fel-Pro's allegedly ...