WILLIAMS v. HUGHES TOOL CO., 186 F.2d 278

PHILLIPS, Chief Judge. This is an appeal from a judgment adjudging two patents owned by Hughes Tool Co. valid and infringed, and that Williams had interfered with the contract rights of Hughes under leases by which it licenses the use of the patented devices. Williams pleaded invalidity, non-infringement, and misuse of the patents and by counterclaim sought damages for injury to his business and reputation, and an injunction restraining Hughes from alleged unfair competition. The patents in suit are Fletcher No. 1,-856,627 and Scott and Garfield No. 1,983,-316.

They relate to rotary drilling bits used in drilling for oil and gas. The Fletcher patent was held valid in Williams Iron Works Co. v. Hughes Tool Co., 10 Cir., 109 F.2d 500, and the Scott and Garfield patent was held, valid in Robertson Rock Bit Co. v. Hughes Tool Co., 5 Cir., 176 F.2d 783. Prior to the Fletcher patent the teeth on rotary bits were arranged in rows longitudinally of the cutters and diminished in size from the base to the apex of the cutters.

Due to the fact that the teeth near the apex of the cutters were smaller and all the teeth in each longitudinal row simultaneously came in contact with the formation at the bottom of the hole, the maximum of penetration by the teeth into the formation was not obtained. Furthermore, teeth arranged in longitudinal rows had a tendency to track in the same depressions in the formation each time the cutter revolved, thereby lessening the efficiency of the cutter. The Fletcher device embraces a head with shafts mounted thereon and approximately frusto-conical shaped cutters mounted On the shafts.

The teeth are arranged in circumferential rows around the cutters, but longitudinal of the cutters they are staggered, so that the teeth in each row are out of alignment longitudinally with the teeth in the rows adjacent thereto. Each row of teeth has a lesser number of teeth than the next outer adjacent row. The teeth are chisel-shaped and approximately uniform in size and pitch, except that those in the outer row may be slightly longer than the others.

By designing a cutter with teeth of approximately equal size and pitch from the base to the apex of the cutter and teeth out of alignment longitudinally, Fletcher overcame the defects we have adverted to in the prior cutters. The teeth, being of approximately equal size, have substantially equal penetration and wearing life. This increases the effectiveness and the useful life of the cutters. The staggered arrangement of the teeth eliminates the tendency of the rows of teeth to track and to bounce from one row to the other as the cutter revolves, and effects uniform cutting of the entire bottom of the hole.

It also results in the weight of the drill being brought to bear upon a lesser number of teeth as the rotation of the cutter brings the teeth in contact with the formation, thereby increasing their penetration and effectiveness. Fletcher’s device was a smoother-operating, faster-cutting, more efficient, and longer-lived drill than the bits of the prior art.

So great were the improvements that Hughes immediately discarded a large number of costly machines used in manufacturing the older type of cutters and supplanted them with machines adapted to manufacture cutters embodying the Fletcher patent and thereafter incorporated Fletcher’s conception into the cutters which it manufactured. The Fletcher patent was not anticipated by Griffin patent, No. 1,195,208. The cutters in Fletcher are frusto-conical cutters, which, as the bit is rotated, revolve, and bring the cutter teeth into contact with the bottom of the hole to chip and crush the rock or other strata.

Griffin discloses a pair of hemispherical cutters so arranged that the teeth contact both the bottom and side of the hole. Fletcher discloses circumferential rows of teeth separated by grooves, with the teeth out of alignment longitudinally of the cutter, and the number of teeth diminished in each succeeding row from the base to the apex of the cutter, thus permitting inner teeth of ample size and eliminating tracking of longitudinal rows. Griffin discloses hundreds of different conical projections nested together as closely as possible.

It discloses no alternate rows of teeth and grooves and no suggestion of longitudinal alignment or staggering of teeth in different rows. The only staggering is that which incidentally results from the crowding of many teeth on the cutter. While it does not appear that the Griffin device has ever been used, it is obvious that with such device it would be difficult to maintain a straight hole, to keep the teeth clean and to prevent them from balling up; and it would lose gauge very rapidly, have poor penetration and a very short life. Neither was Fletcher anticipated by Hughes No. 1,119,163.

This patent was pleaded unsuccessfully in Robertson Rock Bit Co. v. Hughes Tool Co., supra. Hughes shows a pair of cutters. Each -of these cutters has but a single circumferential set or row of teeth, each tooth extending from the base of the cone to the apex. These teeth grow smaller toward the apex of the cutter, and they diverge from the apex to the base of the cutter. There is no staggering of teeth in adjacent rows on a cutter and the teeth on the two cutters are aligned longitudinally. We adhere to our former decision sustaining the validity of the Fletcher patent.

The Scott and Garfield patent discloses a well drill comprising a head, three downwardly and inwardly inclined cutter shafts on the lower end of such head, three cutters mounted on such shafts, teeth in circumferential rows on each of such cutters, offset longitudinally from the rows- of teeth of adjacent cutters, and the rows of teeth on each cutter interfitting with the rows of teeth on the two adjacent cutters. Prior to Scott and Garfield, non-interfit-ting three-cone bits were known to the art. An example is the bit disclosed by Hughes patent, No. 959,540.

However, such three-cone prior-art bits were not used. The bits in daily use were two-cone bits. Prior to Scott and Garfield, Scott had invented a two-cone bit, in which the rows of teeth on the cutter interfitted into grooves between the rows of teeth on the adjacent cutter. Examples are the bits disclosed in Scott patent, No. 1,480,014, and Scott and Wel-lensiek patent, No. 1,647,753 (see discussion of those patents- in Williams Iron Works Co. v.

Hughes Tool Co., supra.) Prior to Scott and Garfield, it was regarded as impossible to form and position the teeth on the cutters o-f a three-cone bit so they would interfit in use, in other words, so the rows of teeth on each cutter would interfit into the circumferential grooves between the rows of teeth on the other two cutters. The advantages of the Scott and Garfield three-cone bit over prior-art bits are these: It has a broader base, resulting from the use of three cones instead of two, giving a more uniform distribution of weight. It permits the use of longer teeth and will carry greater weight.

It produces less torque and runs more smoothly. It produces less stress and shock on the component parts of the bit and the other drilling equipment, reducing fatigue failures. It may be rotated more rapidly. It maintains better gauge, making less reaming of the -hole necessary. It is more easily cleaned. It increases drilling speed approximately 100 per cent. It lasts longer. Because of the improved results obtained by the Scott and Garfield device, it almost completely supplanted the prior-art two-cone bits.

Scott and Garfield conceived a new combination of old elements, whereby new results were obtained and old results were obtained in a more facile, economical and efficient way. It is our conclusion that their conception arose to the dignity of an invention. Moreover, the decision of the Fifth Circuit in Robertson Rock Bit Co. v. Hughes Tool Co., supra, was rendered upon facts substantially identical with those presented on this record, and that decision, while not binding -on this court, is strongly persuasive under the doctrine of comity. Hughes does not sell the bits manufactured by it under the patents in suit.

It leases them to users under a contract which provides that: “Hughes Roller Rock Bits and Core Bit Heads are never sold but are leased. When the original cutter teeth and/ or bearing have served their useful life, the user will surrender the bits to Hughes Tool Company upon request. In accepting delivery, the user agrees not to surrender any of the tools as mentioned above to other than a duly authorized representative” of Hughes.

Each bit is stamped with the words, “Property of Hughes Tool Co.” Hughes maintains an active research department and a large laboratory at Houston, Texas, equipped to test bits, make metallurgical investigations and chemical an-alyses, and carry on other like research. It maintains a field organization of approximately 175 men. These men deliver new hits to the drilling rigs of the users and pick up the worn-out bits. On each delivery the user signs a delivery ticket bearing the lease agreement referred to above.

Each bit produced by Hughes is given an identifying serial number, which enables Hughes’ field organization to follow the history of each bit, and to maintain records of footage drilled, hours run, weight carried, speed of rotation, quantity of fluid circulated and formations drilled. In other words, field men follow the life of the bit from the time it is received by the driller until the time it has served its useful life. They make certain that the right type of bit is delivered for the particular drilling conditions existing at each drilling rig.

The field man examines the bits picked up and if he thinks further examination is desirable, sends them to Houston. Many of the bits are sent to the laboratory at Houston for further examination, accompanied by information with respect to each bit as to the conditions of use, the formation drilled and its performance. Laboratory tests produce further information. The information gathered by Hughes’, field organization as to the performance of the bits in particular formations and areas under specific conditions is made available to users of Hughes’ bits and is of substantial value to them.

Ordinarily, when the teeth of a bit have become so worn from use that the original cutter teeth have served their useful life, the bearings are practically worn out and the useful life of the bit is at an end. Generally, a bit once placed in use in a hole is not withdrawn until its useful life has ended. However, in a limited number of the bits the bearings survive the life of the original teeth, and the restoring of the original teeth by retipping makes possible the further use of such bits in the drilling of soft formations.

One of Williams’ witnesses testified that only a small percentage of the bits used by his company could thus be retipped. Another witness for Williams, a drilling contractor, placed the percentage at 12 to 15 per cent. Williams is engaged in the business of re-tipping bits on which the original teeth are worn out, and returning the bits to the lessees thereof for further use. Williams first washes the bits. With an acetylene torch and tungsten tube metal, he then restores each worn tooth as nearly as possible to its original form, size and position.

He keeps the bit and those teeth on which he is not working during the retipping process submerged in water to prevent loss of temper. Williams retipped bits which have been worn through use to an extent that the original teeth have served their useful life.

Where a patented device of long life has among its integrated elements a part which, as a result of use of the device, quickly wears out and, therefore, is temporary in duration, and the patentee licenses the use of the device, it will be presumed that the patentee and the licensee contemplated and intended that such temporary part would be replaced by the licensee and that replacing it would constitute permissible repair and not reconstruction amounting to infringement of the patent. In Wilson v. Simpson, 9 How. 109, 13 L.Ed. 66, the patent involved was on a woodworking machine.

Included as elements of the claims were wheels carrying detachable knives. The operative life of the machine was several years, but the machine could not be continued in use without successive replacements of the detachable knives every 30 to 60 days. The court held that a temporary part wearing out in a machine may be replaced to preserve the machine, in accordance with the implied intention of the vendor, and that such a replacement does not amount to a reconstruction of the machine. In Heyer v. Duplicator Mfg.

Co., 263 U.S. 100, 44 S.Ct. 31, 68 L.Ed. 189, the court following the principle announced in Wilson v. Simpson, supra, held that the sale by the patentee of a costly and durable copying machine, which depended for its operation on bands of gelatine attached to spools, which cost little and were quickly used up, implied a right in the purchaser to replace such bands as they wore out, without further consent of the patentee. The principle was again applied in Lan-dis Machinery Co. v. Chaso Tool Co., 6 Cir., 141 F.2d 800. There, the patent covered die heads for cutting threads in mass production.

The patented machine utilized replaceable cutters, called chasers. The patented machine was long-lived; the cutters were expendable. The court held that the expendable cutters could be replaced by purchasers without infringing the patent. Here, it cannot be said that the teeth are expendable or constitute temporary parts. In the great majority of instances, the economic life of the original teeth and the economic life of the original bearings are approximately equal, so that when the teeth wear out, the usefulness of the entire bit is at an end.

In a relatively small percentage of instances, the bearings have a longer life than the teeth and the teeth may be retipped and the useful life of the bit for drilling in soft formations extended. It cannot be said, we think, that the teeth are expendable, or that they constitute temporary parts of short life in a long-lived machine, nor that Hughes contemplated and intended that the lessees might replace worn-out teeth by retipping and devoting the bits to further use.

Moreover, the provision of the lease that the lease should terminate and the right of the lessee to use the bit should cease at the end of the useful life of either the original teeth or the original bearing negatives any such intention on the part of Hughes. And it should be noted that in Wilson v. Simpson, supra, the court, while holding the detachable knives could be replaced, said: “The other constituent parts of this invention, though liable to be worn out, are not made with reference to any use of them which will require them to be replaced.

These, without having a definite duration, are contemplated by the inventor to last so long as the materials of which they are formed can hold together in use in such a combination. No replacement of them at intermediate intervals is meant or is necessary. * * * With such intentions, they are put into the structure.

So it is understood by a purchaser, and beyond the duration of them a purchaser of the machine has not a longer use." (Italics ours.) It is true that Scott and Garfield is a combination patent for a device which embraces a head, three cutter shafts, cutters mounted on the shafts, and circumferential rows of teeth specifically formed and positioned ; and that Fletcher is a combination patent for a device embracing a head, two frusto-conical cutters mounted on the head, and concentric rows of teeth specifically arranged in their relation to each other.

However, in Scott and Garfield the arrangement of the rows of teeth on each cutter in relation to the rows of teeth on the adjacent cutters, the size of the teeth, and the inter-fitting of the rows of teeth on each cutter with the rows of teeth on the adjacent cutters constitute, in the main, the novelty in the invention and produce the improved results. Likewise, in Fletcher, the uniform size, number in each row and specific arrangement of the teeth, in the main, constitute the novelty in the invention and produce the improved results.

In these respects, we think the instant case is analogous to the case of Davis Electrical Works v. Edison Electric Light Co., 1 Cir., 60 F. 276, 278, 282, where a combination patent for an electric lamp was involved.

The claim in suit read: “The combination of carbon filaments with a receiver made entirely of glass, and conductors passing through the glass, and from which receiver the air is exhausted, for the? purposes set forth.” The court held that the replacement of an attentuated carbon filament, one element in the combination, was reconstruction and not permissible repair, because all of the elements other than the filament were old, and the filament and its use in the relation described was the new element in the combination and produced the improved results. The instant case is also analogous- to Morrin v.

Robert White Engineering Works, 2 Cir., 143 F. 519, where a combination patent for a steam generator was involved. Tiers of generating tubes of specified form and shape constituted the vital element of the combination. The improvement over the prior art and the advantages resulting therefrom were found in the new tube. The court held that the replacement of sets of tubes in the patented device was not permissible repair, but was, in fact, furnishing a new boiler essentially reconstructed in a-ll of its novel features, and constituted infringement.

Williams, by his process of retipping, undertakes to restore the worn-out teeth as nearly as possible to their original form, size, and position. He thus reconstructs and replaces that element of each patent wherein lies the novel features of the combination. We hold that so doing is not permissible repair, but reconstruction, constituting infringement. This conclusion finds support in Hughes Tool Co. v. Owen, 5 Cir., 123 F.2d 950, in Southwestern Tool Co. v. Hughes Tool Co., 10 Cir., 98 F.2d 42, 45, American Cotton Tie Co. v. Simmons, 106 U.S. 89, 1 S.Ct. 52, 27 L.Ed. 79, and Hughes Tool Co. v.

United Machine Company, D.C.N.D.Tex., 35 F.Supp. 879. We may concede, without so deciding, that retipping or replacement on a cutter of a defective or inefficient tooth, or a tooth destroyed by accident, would constitute permissible repair, rather than reconstruction. But that is not this case. Here, Williams takes the bits, the life of the original teeth of which has ended through use and wear, and restores all of such teeth to their original size, shape, -and position. The patent law confers on the patentee a limited monopoly.

It operates to create and grant to the patentee an exclusive right to make, use and vend the particular device described and claimed in the patent. The extent of the right is limited by the definition of the invention and its boundaries are marked by the specifications and claims of the patent.

In licensing the use of his patented device, the patentee may impose restrictions on the -use thereof by the licensee, either as to time or space, or any other restriction upon the exercise of the granted privilege, save only, that he may not attach a condition to his license that will enlarge the monopoly granted him by his patent, and thus acquire -a monopoly which the statutes and the patent did not give him.

Had the lease agreements, instead of providing for their termination when the useful life of the original cutter teeth and/or bearing ended, provided they should terminate on specific dates, the use or repair of a bit leased under such an -agreement after the expiration date stated therein would have constituted infringement. The lease agreements provided that the right of the lessee to use the bits should terminate upon the occurrence of a future event, namely, the end of the useful life of the original teeth, an event which would occur in normal course as the result of the use of the bits.

That provision imposed nothing more than a restriction as to time. When such event occurred the right of the lessee to use the bit ceased and with it his right to repair the bit, and the repair of the bit thereafter constituted an infringement.

It is urged, however, that Hughes, by incorporating in each lease the provision that the lease shall terminate and the lessee-user shall return the bit, when either the original bearing or teeth have served their useful life, misuses its patent monopoly contrary to public policy, destroys the utility of the bits before they are completely worn out, and imposes forbidden restraints upon the right of retippers who carry on their business in competition with Hughes in its leasing of new bits.

The reasons which motivated Hughes in leasing, rather than selling its bits, and in requiring the return thereof for inspection, testing and research are obviously to enable Hughes to improve the quality of its bits, to provide the proper bit for drilling in particular formations or in a particular area, to provide valuable information to drillers who use the Hughes bits; to maintain the high standard of its products and protect their reputation. . Failures of retipped bits would tend to injure the reputation of Hughes’ bits.

The lease agreement and the practice of recovering used bits, as stated by the Fifth Circuit in Robertson Rock Bit Co. v. Hughes Tool Co., supra, is practical, reasonable and fair. The challenged lease provision does not bring the instant case within the “Tie-in” cases. In Automatic Radio Manufacturing Company v.

Hazeltine Research, 339 U.S. 827, 70 S.Ct. 894, the Supreme Court classified the “Tie-in” cases as cases involving schemes “requiring the purchase of unpat-ented goods for use with patented apparatus or processes, prohibiting production or sale of competing goods, and conditioning the granting of a license under one patent upon the acceptance of another and different license.” In that case the court also said, “That which is condemned as against public policy by the ‘Tie-in’ cases is the extension of the monopoly of the patent to create another monopoly or restraint of competition — a restraint not countenanced by the patent grant.” Here, the provision imposes a restriction on the use in point of time and a duty to surrender the bit when the right to use has ended.

Beyond that it imposes no requirement, no prohibition and no condition on the lessee. It is not, in our judgment, within the principle of the “Tie-in” cases.

A patentee, in granting a license, may not require a licensee to purchase unpatented goods for use with the patented apparatus, prohibit the use by the licensee of goods of a competitor, condition the granting of the license upon the acceptance of another and different license, control the resale prices of patented articles after he has sold them, use his patent to protect an unpatented element from competition, or otherwise enlarge the monopoly granted by the patent.

But here, as we have indicated, Hughes, by the lease agreements, merely imposes a limitation as to the time the bits may be used, a limitation clearly within the range of its patent monopoly, and it does so, not for ulterior purposes, but to carry out a practical, reasonable and fair business practice that will enable it to better serve its lessee, maintain a high standard of quality in its products and protect its business reputation.

We conclude that Hughes is not guilty of a misuse of its patents and has not violated the Clayton Act, 15 U.S.C.A. § 12 et seq., or unlawfully interfered with the business of Williams. The Fletcher patent expired May 3, 1949, after the judgment below was entered. The case is remanded, with instructions to terminate the injunction in so far as it enjoins further infringement of the Fletcher patent. In all other respects the judgment is Affirmed. . Hereinafter called Hughes. . Warren Brothers Co. v. City of New York, 2 Cir., 187 F. 831, 835; Penfield v. C. & A.

Potts & Co., 6 Cir., 126 F. 475, 478; Cincinnati Butchers’ Supply Co. v. Walker Bin Co., 6 Cir., 230 F. 453, 454; Stoody Co. v. Osage Metal Co., 10 Cir., 95 F.2d 592, 593; Cf. Mast, Foos & Co. v. Stover Mfg. Co., 177 U.S. 485, 488, 489, 20 S.Ct. 708, 44 L.Ed. 856. . In the opinion the court said: “The right of the assignee to replace the cutter-knives is not because they are of perishable materials, but because the inventor of the machine has so arranged them as a part of its combination, that the machine could not be continued in use without a succession of knives at short intervals.

Unless they were replaced, the invention would have been but of little use to the inventor or to others.

The other constituent parts of this invention, though liable to be worn out, are not made with reference to any use of them which will require them to be replaced. * * * But if another constituent part of the combination is meant to be only temporary in the use of the whole, and to be frequently replaced, because it will not last as long as the other parts of the combination, its inventor cannot complain, if he sells the use of his machine, that the purchaser uses it in the way the inventor meant it to be used, and in the only way in which the machine can be used.” . See also Morgan Envelope Co. v.

Albany Paper Co., 152 U.S. 425, 434-435, 14 S.Ct. 627, 38 L.Ed. 500. . Ethyl Gasoline Corporation v. United States, 309 U.S. 436, 456, 60 S.Ct. 618, 84 L.Ed. 852; Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488, 491, 62 S.Ct. 402, 86 L.Ed. 363; Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502, 509, 510, 37 S.Ct. 416, 61 L.Ed. 871. . Ethyl Gasoline Corporation v. United States, 309 U.S. 436, 456, 60 S.Ct. 618, 84 L.Ed. 852; American Lecithin Co. v. Warfield Co., 7 Cir., 105 F.2d 207, 212. . Morton Salt Co. v. G. S.

Suppiger Co., 314 U.S. 488, 491, 62 S.Ct. 402, 86 L.Ed. 363; International Salt Co. v. U. S., 332 U.S. 392, 394-396, 68 S.Ct. 12, 92 L.Ed. 20. . United Shoe Machinery Corp. v. United States, 258 U.S. 451, 456, 457, 458, 463, 464, 42 S.Ct. 363, 66 L.Ed. 708. . United States v. Paramount Pictures, 334 U.S. 131, 156, 157, 68 S.Ct 915, 92 L.Ed. 1260. . United States v. Univis Lens Co., 316 U.S. 241, 250, 62 S.Ct. 1088, 86 L.Ed. 1408; Ethyl Gasoline Corp. v. United States, 309 U.S. 436, 456, 457, 60 S.Ct. 618, 84 L.Ed. 852. . Mercoid Corporation v.

Minneapolis-Honeywell Regulator Co., 320 U.S. 680, 64 S.Ct. 278, 88 L.Ed. 396; Mercoid Corporation v. Midcontinent Inv. Co., 320 U.S. 661, 665, 64 S.Ct. 268, 88 L.Ed. 376. . United States v. Masonite Corp., 316 U.S. 265, 277, 62 S.Ct. 1070, 86 L.Ed. 1461.