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NORTHLAKE MARKETING & SUPPLY, INC. v. GLAVERBEL
June 10, 1999
NORTHLAKE MARKETING & SUPPLY, INC., ET AL., PLAINTIFFS,
GLAVERBEL, S.A., ET AL., DEFENDANTS.
The opinion of the court was delivered by: Shadur, Senior District Judge.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Over the protracted length of this litigation*fn1 this Court
has found every claim advanced and every defense asserted by
Northlake Marketing & Supply, Inc. ("Northlake") and its
principals James Hamilton ("Hamilton") and Samuel May ("May") to
be devoid of merit. They have taken an unsuccessful appeal to the
Court of Appeals for the Federal Circuit from a host of this
Court's orders (the memorandum opinion and order and permanent
injunction order each dated November 13, 1997; the memorandum
opinion and order and supplement, both dated March 11, 1997; the
memorandum opinion and order dated December 16, 1996; the
memorandum opinion and order dated August 29, 1995; and the
memorandum opinion and order dated August 4, 1994), with that
Court having rejected all of those claims in a per curiam
one-sentence judgment order entered November 13, 1998
(unpublished, but available as 1998 WL 796051).
With Glaverbel S.A. ("Glaverbel") and Fosbel, Inc. ("Fosbel")
having prevailed on the merits of their patent infringement
counterclaim, the only issue remaining before the litigation at
long last terminates is the quantification of the damages
recoverable for that infringement. This Court has conducted the
trial on that subject, only to find the issuance of its ultimate
ruling delayed substantially by the lapse of many months before
the litigants tendered their respective proposed findings of fact
and conclusions of law.
Those submissions have now been made, and what follows are this
Court's Findings of Fact ("Findings") and Conclusions of Law
("Conclusions") in accordance with Fed.R.Civ.P. ("Rule") 52(a).
To the extent (if any) that the Findings as stated may be deemed
conclusions of law, they shall also be considered Conclusions. In
the same way, to the extent (if any) that matters later expressed
as Conclusions may be deemed findings of fact, they shall also be
considered Findings. In both of those respects, see Miller v.
Fenton, 474 U.S. 104, 113-14, 106 S.Ct. 445, 88 L.Ed.2d 405
1. Northlake Marketing was formed as a partnership in 1984 and
incorporated as Northlake Marketing & Supply, Inc. in 1985. In
1995 Hamilton, one of the founders and a current owner of
Northlake, formed Northlake Industries, Inc. as a separate
company, and he is the sole owner of that company. In 1988 May,
also one of the founders and a current owner of Northlake, formed
N & E Refractories as a separate company, and he is the sole
owner of that company. May left Northlake at the end of 1994 but
did not relinquish his ownership position or his position as an
officer-director. For convenience these Findings and Conclusions
will also use "Northlake" as a singular collective noun to refer
to the corporation and the two individual counterdefendants.
2. Glaverbel S.A. ("Glaverbel") is a Belgian corporation that
was the successor by merger of two firms, each of which dated
back to the 1930s. Glaverbel is the owner of the United States
patents involved in this action. Fosbel, Inc. ("Fosbel") is a
joint venture based in Cleveland, Ohio, 49% of which joint
venture is owned by Glaverbel and the other 51% of which is owned
by the other joint venturer. Fosbel is the exclusive licensee of
the Glaverbel-Fosbel patents in the United States.
3. This Court has previously determined that the two Glaverbel
United States patents involved in this action — Nos. 4,792,468
("'468 Patent") and 4,920,084 ("'084 Patent") — are "not
invalid," were not procured by inequitable conduct and were
infringed by Northlake. This Court has accordingly issued a
permanent injunction that terminates on expiration of the two
Glaverbel patents. What remains is a determination of the
monetary relief to which Glaverbel and Fosbel are entitled. They
seek (1) an award of "lost profits" for some of the Northlake
activity and (2) a "reasonable royalty" for the remainder of the
Northlake activity, together with (3) prejudgment interest, (4)
enhanced damages under 35 U.S.C. § 284*fn2 and (5) a
determination that this is an "exceptional case" such as to call
for an award of attorneys' fees under Section 285.
4. Glaverbel-Fosbel's '468 and '084 Patents are two of their
four United States Patents involved in their litigation with
Northlake and relating to the repair of industrial furnaces, a
process referred to as "ceramic welding." In non-legal terms that
process involves forming a coherent refractory mass on a "target"
(e.g., a furnace wall) by projecting a mixture of particles of an
oxidizable substance and particles of a refractory substance
against the target. When the oxidizable substance burns
exothermically (i.e., gives off heat) at the wall, it welds the
refractory particles to the wall, thus repairing the furnace
wall. Finding 5 describes the four patents in non-legal terms.
5. Glaverbel's now-expired United States Patent No. 3,684,560
("'560 Patent") refers to ceramic welding where the average size
of the oxidizable particles is less than 50 microns (a micron is
one onemillionth of a meter). Glaverbel's United States Patent
No. 4,489,022 ("'022 Patent") refers to an improvement in ceramic
welding where both silicon particles and aluminum particles are
present, as the oxidizable materials, in certain amounts and
proportions. Glaverbel's '468 and '084 Patents refer to an
improvement in the granulometry of the refractory particles.
Granulometry refers to the quantity of particles at various
different sizes, and also may be referred to as the particle size
distribution. According to the two patents in suit, the "size
range spread factor" (a coined term that can be used as a
representation of the granulometry) must be at least 1.2.
6. One use of the process of the '468 and '084 Patents is in
repairing the silica brick walls of a coke oven. In a coke oven
the process of converting coal into coke may take from 12 to 20
hours, during which time the oven operates at a range of 1200~to
2000?. During the trial this Court observed a videotape (DX
104)*fn3 and heard an explanation of the ceramic welding
1. Demand for the Patented Product
8. Northlake explained that the annual rate of growth in the
ceramic welding industry from 1986 to 1996 was probably 35% or
40%, while in some years the market was actually doubling (DX 140
at 223-24 to 224-9).*fn4 Northlake further explained that the
environmental trend has been to shut down coke plants because
they give off large quantities of environmentally damaging
emissions, so that many plants have closed down and more are
closing down. That trend has created a drastic need to repair the
remaining coke plants. Because the alternative of rebricking is
so expensive, Northlake described the resulting demand for
ceramic welding as a "gold mine" (DX 140 at 246-9 to 246-24).
Because coke plants are no longer being built in the United
States, that has contributed to the creation of the "gold mine"
(DX 140 at 527-3 to 527-22).
9. Northlake's discovery answers in this case indicated that it
had documents concerning its own sales projections, market share
and the size of the ceramic welding market, but those documents
were not produced in response to the Glaverbel-Fosbel discovery
requests (DX 149).
10. Based on Northlake's own testimony, its failure to produce
its documents referred to in Finding 9, its infringing sales and
the Fosbel sales, this Court finds that there was a substantial
demand for coke oven repair using the patented ceramic welding
2. Absence of Acceptable Noninfringing Substitutes
11. Alternative techniques for coke oven repair include
gunning, rebricking, lava flame and harsh press silica dusting.
Findings 12 to 18 describe them and compare them with ceramic
12. Gunning is the application of a water-based cement bonded
refractory material through a gunning machine, which mixes the
water and the cement based powder, spreading it onto the hot
silica refractory. As Glaverbel-Fosbel witness John Bacon
("Bacon") testified (Tr. 293) and this Court finds:
Q. What is the expected life of a gunning repair?
A. Very short. It can be as short as a week or two.
Sometimes it last [sic] as long as six months.
Q. What is the purpose of a short term repair such
A. It's a quick fix. We can get it up and back into
service quickly. Then we can get around to doing a
proper ceramic welding repair a little later.
13. Rebricking is a major repair to a coke oven wall, involving
the replacement of bricks that make up the oven wall. In an even
more major rebricking job, an entire oven wall can be replaced.
To accomplish rebricking the oven has to be taken out of service,
the burners must be turned off and the area being repaired has to
be cooled down so that the workers can lay bricks physically.
Then after the repair is made and the oven reheated, the silica
brick goes through various silica transformations that can crack
the new brick. As Northlake explained, cooling down the ovens
sometimes takes two to three weeks, and reheating the ovens can
take three months (DX 141 at 99).
14. Lava flame is a flame spraying process.
16. By contrast, ceramic welding can extend the life of the
oven lining for years. Fosbel advertises that the life of its
oven repair is in excess of two years. In fact the repairs
typically last two to four years, with some oven repairs having
been in place for 10 years. As an additional advantage, in
ceramic welding the repairs are performed from outside the oven,
so that all ovens can remain in service except the oven under
repair, and all ovens (including the oven under repair) remain at
operating temperatures. As Northlake agreed, not having to cool
down the ovens is one of the things that make ceramic welding
unique (DX 141 at 97). Importantly, among the various furnace
repair techniques only ceramic welding and rebricking have a bona
fide life expectancy of two to four years. Finally, the
Glaverbel-Fosbel ceramic welding process is certified under ISO
9000, which is an international quality certification.
17. Fosbel never lost a ceramic welding bid to any of the other
furnace repair techniques. No Fosbel customer ever indicated that
any of the other repair techniques would be an acceptable
substitute for ceramic welding. Northlake agreed that it did not
compete with companies that rebrick ovens (DX 141 at 98), and it
never lost any work to companies that do silica dusting (DX 141
18. Based on the differences in the methods of making the
repairs, the times that the furnaces must be taken out of service
and the expected longevity of the repairs, this Court concludes
that none of the non-ceramic welding repair methods has benefits
comparable to those of the patented ceramic welding technique.
Hence none of them is an acceptable noninfringing substitute.
19. Glaverbel-Fosbel's ceramic welding competitors for coke
oven repair in the United States have included Northlake (a/k/a
Exo-Ram), United Refractories, Fuse Tech and Certek. Certek
competed during the period 1989 through 1991, having
approximately 13% of the total market, and was thereafter
acquired by Fosbel. Collectively the competitors (including
Northlake but excluding Certek) accounted for less than 10% of
the ceramic welding business. While Northlake's share was about
2% of the ceramic welding market, Fosbel's share was about 80%
before the Certek acquisition and about 92% thereafter.
20. No direct evidence was presented during the trial as to the
details of the ceramic welding powder used by the competitors
(other than Northlake) listed in Finding 19. Conclusions 7 to 9
set out the reasons why on the evidence of record those
competitors also did not provide "acceptable" alternatives. As
the predicate for those Conclusions, this Court finds that the
history of ceramic welding started with the invention of the '560
Patent, progressing to the invention of the '022 Patent and then
to the inventions of the '468 and '084 Patents. Northlake sought
to invalidate the two later patents (those now in suit) on the
theory that the invention was "on sale" for more than one year
before the filing dates of their applications, in alleged
contravention of Section 102(b). In response to Northlake's
summary judgment motion, Glaverbel-Fosbel submitted substantial
evidence from the inventors explaining the history of their
research to discover the improvement that became the basis of the
'468 and '084 Patents. This Court's August 29, 1995 memorandum
opinion and order provides a summary and timetable of the
Glaverbel experimentation leading up to the invention of the '468
and '084 Patents (1995 WL 534290, at *4-*6). Because all of
Northlake's invalidity challenges failed, on the present record
the formulation of the '468 and '084 Patents is a novel and
non-obvious improvement that provided material benefits over the
prior ceramic welding powders.
22. In addition, Northlake's antitrust claim (statements in
which may be used against Northlake under Fed.R.Evid.
801(d)(2)(A) even though disputed by Glaverbel-Fosbel) includes
the allegation of Glaverbel-Fosbel's ceramic welding monopoly
power — an assertion that means the absence of acceptable ceramic
23. Based on Findings 11 to 22, this Court finds that there
were no acceptable noninfringing substitutes of any kind — either
non-ceramic methods or noninfringing ceramic welding — for the
Glaverbel-Fosbel patented ceramic welding.
3. Manufacturing and Marketing Capability To Exploit the
24. According to Northlake, there are between 30 and 33 coke
plants in the United States (DX 141 at 134). Northlake's evidence
at the time of the March 1992 trial in the Indiana case between
Glaverbel-Fosbel and Northlake showed that Glaverbel-Fosbel was
servicing at least 23 or 24 accounts, United Refractories was
servicing one or two, Lava Flame was not servicing any accounts
and Northlake was servicing one account (DX 149 at 102 and 105).
25. Glaverbel-Fosbel knew the customers for ceramic welding
repair at least as early as 1988, the issue date of the first of
the two patents now in suit (DX 117 at 6 to 7 and Tab 5). Because
you can't hide a coke oven, everybody having any relationship to
the industry knew where all of the coke ovens were, and
Glaverbel-Fosbel had understandably identified those customers.
As for Northlake, even though it had only one customer as of
1992, during the 1989-96 period it had provided ceramic welding
materials and services to 10 customers (DX 117 at 7).
26. As Finding 19 reflects, less than 10% of the ceramic
welding furnace repair business went to Glaverbel-Fosbel
competitors (other than Certek, which was acquired by Fosbel in
1991). Glaverbel-Fosbel had a procedure in place to handle an
increase in market share of 10 to 20%, including hiring and
training additional crews, transferring people among crews,
scheduling the rotation and maintenance of equipment and
providing for the necessary lead time to purchase additional
equipment. In addition, Glaverbel-Fosbel's expert took into
consideration the capital cost of additional equipment.
27. This Court finds that Glaverbel-Fosbel did have the
manufacturing and marketing capacity both to make the ceramic
welding sales that were made by Northlake and to provide the
ceramic welding services that were provided by Northlake.
4. Profits the Patent Owner Would Have Made
28. Glaverbel-Fosbel is claiming lost profits on Northlake's
sales to four customers. Fosbel had called on those customers
before Northlake entered the ceramic welding market, and in some
cases it had actually provided them with ceramic welding ...