The opinion of the court was delivered by: CASTILLO
Due to the continued fast pace of American life, the production of frozen food products has continually expanded during the last decade. Yet, because railroad carriers had not replaced aging mechanical refrigeration cars since the early 1970's, the American transportation system explored the feasibility of using liquid carbon dioxide ("CO") to create cryogenic railcar systems which could economically transport frozen food products. These developments led to the dispute in this case.
Beginning on May 1, 1995 and continuing through May 10, 1995, this Court held a bench trial on this matter. During this patent trial, this Court has been called upon to decide questions of patent validity and infringement concerning competing cryogenic refrigerated railcars. During the trial, the Court received testimony and documentary evidence and conducted a site visit to personally inspect and view the railcars at issue in this case. Thereafter, the Court considered the written post-trial submissions filed by each party. The Court hereby enters the following Findings of Fact and Conclusions of Law, which in contrast to its prior order in this matter, are based upon consideration of all the admissible evidence as well as this Court's own assessment of the credibility of the trial witnesses. To the extent, if any, that the Findings of Fact as stated may be deemed Conclusions of Law, they shall be considered Conclusions of Law. Similarly, to the extent that matters expressed as Conclusions of Law may be deemed Findings of Fact, they shall also be considered Findings of Fact.
1. This case involves a patent dispute between General American Transportation Corporation and Cryo-Trans Inc.
2. Plaintiff General American Transportation Corporation ("GATC") is a corporation organized under the laws of New York, with its principal place of business in Chicago, Illinois.
3. Defendant Cryo-Trans, Inc. ("Cryo-Trans") is a corporation organized under the laws of Maryland, with its principal place of business in Mt. Airy, Maryland.
4. GATC's claim is an action for declaratory judgment, pursuant to 28 U.S.C. § 2201, with respect to the enforceability of United States Patent 4,704,876 ("the '876 Patent") against a cryogenic railcar produced and marketed by GATC. (Pl.'s Ex. A).
5. The '876 Patent is owned by Cryo-Trans which has counterclaimed for patent infringement pursuant to 35 U.S.C. § 281. Figure 1 of the '876 Patent is hereby incorporated into this opinion as Appendix A. (Pl.'s Ex. A).
6. Venue in this case is proper under 28 U.S.C. §§ 1391 and 1400(b) and jurisdiction is proper under 28 U.S.C. § 1338.
7. On March 1, 1991, GATC filed a four-count complaint against Cryo-Trans seeking a declaratory judgment that the '876 Patent, issued to Mr. Ralph P. Hill on November 10, 1987, and entitled "Cryogenic Refrigeration System", is invalid, void and unenforceable, and further that the '876 Patent is not infringed by GATC's cryogenic refrigerated boxcar design, presently commercialized in the United States under the tradename "Arcticar". The complaint also sought a preliminary injunction enjoining Cryo-Trans from threatening patent infringement and other related litigation against actual and prospective users of GATC Arcticar boxcars. The extensive procedural history of this case includes a five-day hearing held before Magistrate Judge Rosemond in July, 1991, on the parties' cross-motions for preliminary injunction. On August 12, 1994, Magistrate Judge Rosemond issued a formal Report and Recommendation which found in favor of GATC with respect to the issues raised before him in the parties' cross-motions for preliminary injunction.
8. This Court adopted the recommended findings in the Magistrate Judge's Report in a Memorandum Opinion dated December 20, 1994, which granted a preliminary injunction in favor of GATC, except that this Court rejected, as premature, Magistrate Judge Rosemond's recommendation that GATC's motion for attorney fees under 35 U.S.C. § 285 be granted. The Court's December 20, 1994 order expressly indicated that this Court had not made any final determinations on the merits of this case.
9. GATC has been in the business of leasing railcars to the railroad industry for approximately 80 years, and for many years with respect to the business of manufacturing and leasing mechanically refrigerated railcars. In late 1990, GATC introduced a prototype non-mechanical, cryogenically refrigerated railcar using a bunker-style design. This prototype cryogenic railcar was designated the GARX 68000, and was built under the supervision of Mr. Erling Mowatt-Larssen, GATC's Director of Engineering. The GARX 68000 was built and used only for demonstration and marketing purposes to solicit orders from frozen food shippers for the company's anticipated production of a cryogenically refrigerated railcar called the "Arcticar." The prototype railcar has never been, and is not, available for lease by customers.
11. Cryo-Trans is the owner by assignment of the '876 Patent. (Def.'s Ex. 139). In 1985, Mr. Marvin H. Weiner formed a sole proprietorship named "Cryo-Trans" for the purpose of developing a business involving the leasing of cryogenically refrigerated railcars. Cryo-Trans was incorporated to form Cryo-Trans, Inc. in 1987. Mr. Weiner is the chief executive officer and president of Cryo-Trans, Inc. Cryo-Trans' cryogenically refrigerated railcars are referred to as CRYX railcars. Mr. Weiner is also the president of Mt. Airy Cold Storage ("Mt. Airy"), a frozen food storage facility used by frozen food processors which is located in Mt. Airy, Maryland.
12. The declared inventor of the '876 Patent is Mr. Ralph P. Hill. Mr. Hill has not obtained other patents. (Tr. 118, 122).
13. At all relevant times prior to his retirement in 1988, Mr. Hill was vice president of distribution at Lamb-Weston, Inc. in Portland, Oregon. (Stip. No. 5). He was also a past chairman and long-time member of the American Frozen Food Institute's Physical Distribution Council. Mr. Hill is credited with having made many outstanding contributions in rail transportation of frozen foods.
14. A critical issue facing the frozen food industry in the 1980's was the availability of mechanical refrigerator cars owned by the nation's railroads. The then-current policy of the railroads was not to replace aging mechanically refrigerated railcars as they became unserviceable. The frozen food industry's dependence on mechanical refrigerator cars for long-haul movement was expected to be compounded by the continuing escalation of diesel fuel prices which would preclude long-haul truck movement and make the industry even more dependent on the railroads. Finding an alternative to the use of mechanical refrigerator cars had been a high priority matter for the American Frozen Food Institute Distribution Council and Transportation Committee since at least 1982.
15. The American Frozen Food Institute ("AFFI") and the International Association of Refrigerated Warehouses ("IARW") through the Refrigeration Research Foundation jointly formed a cryogenic railcar research and development task force (AFFI-IAWR Refrigerated Railcar Task Force) to explore the feasibility of using total loss refrigerants, such as liquid CO to ensure an adequate transportation system for the expected growth of the frozen food industry. The United States Department of Agriculture provided the scientific monitoring and evaluation for the test shipments. Additionally, there was substantial resource involvement by the Burlington Northern Railroad.
16. Recognizing that the supply of mechanically refrigerated cars was steadily declining, Mr. Hill initiated the Cryogenic Rail Car Research Project. The project involved development of prototype railcars that relied on CO, rather than mechanical systems, to provide refrigeration. Hill was a leading force behind the project.
17. Mr. Hill first initiated the Cryogenic Rail Car Research Project under the joint sponsorship of the AFFI and IARW, and later through a separately incorporated organization called the American Frozen Food Cryogenic Association for Rail Car Research - better known as AFFCAR - which was a non-profit shipper's association formed to purchase refrigerated railcars with which the AFFI cryogenic research and development task force could experiment. Hill was chairman and leader of AFFCAR throughout its existence. Throughout the Cryogenic Rail Car Research Project, Mr. Hill championed the need for research, raised funds, supervised the design, engineering and testing of prototype railcars, and kept the frozen food industry informed of the progress of the research. In 1985, he was recognized by the frozen food industry for his work in championing the need for cryogenic research, raising funds to build prototype cars, supervising design work, and engineering and testing prototype cars. (Def.'s Exs. 14, 22, 23, 30, 47, 233 P28, 234 PP 17-18, 235 PP 15, 16, 21).
18. During 1980 - 1985, AFFCAR and/or Burlington Northern built a number of prototype cryogenic cars which were identified as the BNFE 3, AFFX 2001, AFFX 2002 and AFFX 2003 during the trial.
19. The AFFI task force decided that an insulated railcar loaded with frozen food and given an initial charge of cryogen would most likely be a technically and economically feasible cooling system. A series of test shipments were conducted over a one year period to determine the feasibility of using CO as an alternative refrigeration source for railcar shipments of frozen foods. The Burlington Northern Railroad donated its modified mechanical refrigerator test car ("the BNFE 3") to be used in the AFFI cryogenic railcar project study. The BNFE 3 was a refrigerated railcar originally built as a meat car in 1966, and rebuilt with under-the-floor air delivery and a truck-type nosemount mechanical refrigeration unit in 1976. It was modified for CO snow refrigeration in June of 1980. Seven shipments of various frozen commodities in the summer and fall of 1980 and the winter and spring of 1981 were made. The mechanical unit was not used during the testing. Upon evaluation of the test data from the BNFE 3 test shipments, the cryogenic railcar research task force concluded that the cryogenic refrigeration concept warranted further testing and consideration.
20. Ralph Hill, James Fink, Eddie Barron, LeRoy Couture and Bill McCollister were principally involved in the reconstruction of the BNFE 3 railcar in 1980. (Tr. 72). The BNFE 3 was a converted mechanical refrigeration car, which utilized an overhead rectangular manifold at the ceiling of the car to spray CO directly on the load. It utilized a single loading of CO at the place of embarkation. (Tr. 71-72). The BNFE 3 car proved that CO had applications for use in transportation of frozen food, but had drawbacks which did not allow the entire load to remain consistently frozen during the entire trip. (Tr. 73).
21. With promising results from the BNFE 3 test shipments, the task force proceeded to plan and design the construction of a prototype cryogenic railcar with an on-board CO temperature control system with no mechanical or electric parts; thus, eliminating costly mechanical diesel powered refrigeration. Construction of the prototype car - the AFFX 2001 - was completed in January of 1983.
22. The AFFX 2001 car was built for AFFCAR as an attempted improvement over the BNFE 3 car. The AFFX 2001 utilized tanks of liquid CO beneath the floor of the loading area to carry a supply of CO on the railcar as well as a computer to sense temperature changes and to direct release of CO snow on the load. (Tr. 81).
23. The salient features of the "AFFX 2001 - Prototype Car Design " were as follows:
The car is equipped with a liquid carbon dioxide refrigeration tank system. The system stores liquid carbon dioxide under pressure at zero degrees Fahrenheit in a series of interconnected aluminum storage tanks placed lengthwise to the car beneath the car's aluminum floor. The tank system not only provides in transit storage for liquid carbon dioxide, but also acts as a barrier to heat entering the car and functions as a giant cold plate to keep the load frozen.
The prototype car has a capacity of 4,904 cubic feet, compared with the 4,050 cubic feet capacity of existing mechanical cars. The overall exterior length of the car is nearly 65 feet. The interior length is 58 feet.
As evident from the above-quoted description, the AFFX 2001 was equipped with an under-the-floor liquid CO cooling system, corrugated paneling on the side walls, and a piping system with which to inject liquid CO directly on top of the cargo to form CO snow. The AFFX 2001 proved impractical because of the extra weight of the car from the storage tanks of liquid CO and because the computers, which controlled the release of CO while in transit, were subject to breakdown due to the difficulties of the rail environment. (Tr. 83).
24. Mr. Hill was part of a group of people who helped to design the AFFX 2001. Other persons involved in designing the AFFX 2001 included Messrs. Fink, Habel, Couture and Jenkins.
25. One of the problems with the AFFX 2001 Cryogenic Prototype Railcar Design was that direct contact of solid CO with the frozen cargo caused over-freezing of the frozen food product near the top of the shipments. The solution to the problem was to put a bunker between the cargo and the solid CO. Accordingly, in a subsequent phase of the task force's cryogenic railcar research, the Burlington Northern Railroad modified two existing large cube mechanical refrigerator cars with the Rubin Carbonaire Plate CO Snow Bunker System. The two cars were called the AFFX 2002 and the AFFX 2003, and operated as follows:
These cars are equipped with a snow bunker which consists of a sheet metal chamber across the interior ceiling of the car. Liquid CO is charged under pressure to supply lines accessible from either side of the A end (end opposite the brake wheel end) to the overhead bunker. As the liquid CO is charged into the non-pressurized atmosphere in the bunker, it converts to snow which accumulates in the bunker under the entire ceiling of the car. The under surface of the bunker, which is the interior ceiling of the car, is insulated to control the sublimation (melting) of the snow and prevents extreme cold air from reaching the product in the car. As the CO sublimates, the cold air drops down the side walls and around the load. (CO is 52% heavier than air.)
The AFFX 2002, which evolved over a two year period, utilized an overhead bunker to store the CO snow after charging. (Tr. 856). The idea of using an overhead bunker was a result of collective discussions between Bill McCollister, James Fink, LeRoy Couture and Ralph Hill. ( Def.'s Ex. 233 P 18, Tr. 90).
The Burlington Northern took the AFFX 2002 and the AFFX 2003 back after the AFFCAR project and put both cars in their fleet, and built 75 additional such cars in the remaining part of 1985 - after March of that year.
26. The AFFX 2002 was an experimental car. (Tr. 866). It went on two test runs before ratification (Tr. 838-39; Barron Dep. at 30-31). The AFFX 2002 design showed that an overhead bunker might be a useful innovation. Nevertheless, the AFFX 2002 still needed improvement. Improvement was made to the design of the exhaust vents and floors which were incorporated into the AFFX 2002 for subsequent test runs and into the AFFX 2003, which was identical to the AFFX 2002, except for its overall length. (Tr. 435; Def.'s. Ex. 233 P 15; Habel Dep. at 145-46; Barron Dep. at 21). Mr. Fink was principally responsible for the design of the AFFX 2002. (Tr. 163).
28. The AFFX 2002 was a converted mechanical refrigerator car having corrugated side and end walls, aluminum floor racks, corner floor drains used as cargo area vents, and an overhead bunker. (Pl.'s Exs. DF; DF(A). The bunker had screened vents along one side and alternating CO nozzles penetrating into the duct. (Pl.'s Exs. DF, DF(A), EO). The bottom wall of the air duct was insulated. (Pl.'s Ex. EO). The CO nozzles were connected to a CO manifold pipe running the length of the car and connectable to an outside source of liquid CO. (Pl.'s Ex. DF, DF(A)). The aluminum floor racks were of a herringbone construction with spaced apart slats running obliquely transversely and supported by lengthwise stringers to support the load. (Pl.'s Ex. DF; DF(A)). The stringers formed a plurality of parallel lengthwise channels for allowing CO gas to flow beneath the cargo. A center rail between the floor racks would make it difficult for CO gas to flow side to side under the floor. (Pl.'s Exs. DF(A), DX; Tr. 821-822, 826, 859-860).
29. When the AFFX 2002 railcar was initially charged with CO, the doors were kept ajar to relieve pressure. ( Def.'s Ex. 233 P 16, Barron Dep. at 32-33). Although the drain vents at each of the corners of the AFFX 2002 railcar were kept open during the charging phase, most of the pressure was relieved through the open door. (Tr. 867, 1071-72; Barron Dep. at 32-34). If the door was not kept open, the roof of the car was in jeopardy of being blown off because the drain vents were not sufficient to relieve the pressure. (Tr. 446-47).
30. There is a dispute as to how the sublimated CO gas would flow in the AFFX 2002. Many of the people involved in developing the AFFX 2002, including Messrs. Hill, Couture, Habel and Barron, believed that its CO gas would drop down the sidewall nearest the bunker toward the aluminum floor racks, pass through the gaps between the slots on the aluminum floor racks beneath the load, and then go up on the opposite sidewall of the car and over the top of the load. (Tr. 87-88; Def.'s. Ex. 233 P 14; Tr. 445; Habel Dep. at 148; Barron Dep. at 18). Mr. Fink, who also was involved in the design of the AFFX 2002, however, believed that the gas would flow on top of the load and go down both sidewalls. (Tr. 849). This theory of gas flow is contrary to what is claimed as the gas flow in the Fink and Habel Patent. (Pl's. Ex DF; Tr. 858). While GATC's in-court demonstration was of interest in trying to determine through the use of a simulated model how the AFFX 2002 actually may have worked, (Pl.'s Ex. HK), it is not entitled to much weight because it does not answer the question of how the relevant persons in the art believed the AFFX 2002 worked during the relevant time period.
31. Mr. Hill was involved in providing input and design assistance for the BNFE 3, the AFFX 2001, and the AFFX 2002/2003 cars. (Tr. 22, 84, 90, 418-20, 425-26). The development of a successful cryogenic railcar was very much an evolutionary process involving trial and error. Mr. Hill was the only person who was aware of everything that was going on in connection with AFFCAR activities. He was the only person actively involved in the development phase of each and every prototype car developed by AFFCAR. (Def.'s Ex. 234).
32. Each of the prototypes developed by AFFCAR and/or Burlington Northern had problems. However, by 1985, Burlington Northern began to commercialize the AFFX 2002/2003 design and built 75 railcars incorporating the AFFX 2003 design. Burlington Northern indicated to the industry that it was going to seek a patent. As a result, AFFCAR disbanded in March 1985. (Tr. 92-93).
34. Burlington Northern patented the AFFX 2002/2003 design. The patent issued as U.S. Patent No. 4,593,536 to two Burlington Northern employees, James K. Fink and David H. Habel ("Fink and Habel Patent"). (Pl.'s Ex. CQ; Tr. 92-93). The Fink and Habel Patent specifically disclosed that "when the refrigerant flakes sublimate in the bunker, the vapor flows from the bunker out the screen mesh, down the channel of the first sidewall, across the air flow channel and up the channel of the second sidewall, all by convection." (Pl.'s Ex. CQ). Ultimately, Burlington Northern refurbished 75 cars utilizing a modified AFFX 2002/2003 design. These cars were not effective because they suffered from hot spots on the sidewall. As a result, the Burlington Northern cars were never accepted in the marketplace, and ultimately were taken out of service. (Def.'s Ex. 233 PP 14-21).
35. The design that ultimately led to the '876 Patent was conceived by Mr. Hill during the summer of 1985. (Tr. 96; Def.'s Ex. 233 P 22). During the summer of 1985, Mr. Hill spoke often to Mr. Jenkins, a fellow employee at Lamb-Weston, about how a CO car should be designed. (Tr. 733-734). Mr. Hill often pulled out pieces of paper and made sketches. During the summer of 1985, Mr. Hill described a potential design for a CO car to Mr. Jenkins which included a false ceiling created by the use of a bunker. (Tr. 737). During this same time period, Mr. Hill also described this idea to a Mr. LeRoy Couture, a marketing manager with the Burlington Northern. ( Def.'s Ex. 233 P 13). Mr. Hill's idea included use of vents along both sides of the ceiling bunker, as well as the use of corrugated walls on the end walls and the side walls and flooring of the car. (Tr. 754). (Def.'s Ex. 235). Mr. Jenkins also saw Mr. Hill with blueprints regarding this design. (Id.; Tr. 747-49). Blueprints, which reflected Mr. Hill's design, were prepared by Lamb-Weston's engineering draftsman during the summer of 1985. (Tr. 96).
36. Mr. Hill's employer, Lamb-Weston, was not interested in manufacturing railcars. It was interested in having someone else make them for Lamb-Weston's use. (Tr. 266).
37. Mr. Weiner knew Mr. Hill because of the business relationship between Mt. Airy and Lamb-Weston. Mr. Weiner was familiar with the Burlington Northern cryogenic railcars because they had been off-loaded at Mt. Airy. Because of this, he also knew that the Burlington Northern cars - AFFX 2001 and 2002 (which were the AFFCAR prototypes) - had "hot spots" resulting in a thawing of frozen food product by the time the cars reached Mt. Airy. (Tr. 252).
38. Mr. Weiner recognized the commercial potential of cryogenic railcars as a replacement to mechanical cars. Mr. Weiner and Mr. Hill agreed to work together to build a new prototype cryogenic railcar. Mr. Weiner agreed to fund the construction of a new prototype. (Tr. 253-54).
39. Mr. Weiner and Mr. Hill acquired and modified one of the AFFCAR prototypes, the AFFX 2001, into a new design. However, because the previously used construction facilities were no longer available, Messrs. Weiner and Hill had to find another party to do the modification work they desired. (Tr. 254).
40. Mr. Hill first met James S. Moe of C.V. Engineering in October of 1985. (Tr. 99; Stip. No. 3). At all relevant times, the company was commonly referred to simply as Cryo-Van, a company principally operated by James S. Moe and Tom Maxwell. Mr. Hill's initial meeting with Mr. Moe led him to believe that Cryo-Van had the capability of modifying the AFFX 2001 into his new design because Cryo-Van had the capability to manufacture fiberglass which was an important component of the new design. (Tr. 100-101).
42. In October of 1985, Mr. Hill sent blueprints of his design and of the original railcar which was to be converted into the new design (the AFFX 2001), to Cryo-Van. (Tr. 100). Mr. Moe ultimately threw away the blueprints sent to him by Mr. Hill. (Tr. 903). After receiving blueprints from Mr. Hill, C.V. Engineering submitted a bid to Mr. Hill in the amount of $ 22,150 by letter dated October 29, 1985. (Def.'s. Ex. 21). This letter specifically acknowledges receipt of the blueprints from Mr. Hill and itemizes in detail the various changes requested by Mr. Hill for modification of the AFFX 2001 into the new design which ultimately became known as the CRYX 1000. (Id.) Mr. Moe acknowledged that Mr. Hill's prior designs included a bunker-type compartment. (Pl's Ex. HP at 690).
43. Cryo-Van converted the AFFX 2001 to the CRYX 1000. Although who actually designed the CRYX 1000 is not without some controversy, the evidence indicates that it is more likely than not that Mr. Hill principally designed the CRYX 1000.
44. The October 29, 1985 letter from Cryo-Van to Ralph Hill, while he was at Lamb Weston, Inc., confirms that the blueprints were sent to Cryo-Van by Mr. Hill. The first paragraph of the letter reads in pertinent part as follows:
I [Tom Maxwell, General Manager of Cryo-Van] also thank you [Ralph Hill] very much for your prompt arrangement for expediting your blueprints on above matter....
The Court specifically finds by a preponderance of the trial evidence that it is more likely than not that this language referred to blueprints of Mr. Hill's design.
45. The second full paragraph of the October 29, 1985 letter reads in pertinent part as follows:
Pursuant to our recent discussion on refurbished rail car #2001 to Bunker type rail car, we would like to offer you our proposal after carefully reviewing your blue-prints as follows:
2. To remove existing end wall skins and install a vent from plenums to upper extremity of the end walls,
3. To make up and install a plenum at each end of the All-Air floor to connect to the vent to relieve the flash gas from the car at floor level, this insures that all the gas is used for cooling before being emitted to the outside,
5. To install Fluted fiberglass panels on the end walls,
6. To install bunker system designed and built by C.V. System ...