APPEALS COURT UPHOLDS DECISION IN LITTON CASE.

Byline: Steven J. Gorman Daily News Staff Writer

A Washington federal appeals court has refused to reconsider its July decision reinstating a jury finding that Honeywell Inc. infringed on a patent held by Woodland Hills-based Litton Industries Inc., Litton announced.

The decision clears the way for the case to return to U.S. District Court in Los Angeles this week, to set a date for a new trial that will determine monetary damages, Litton officials said.

A Los Angeles federal court jury ruled in 1993 that Honeywell had infringed on Litton's patent for a process to make laser gyroscope navigation and guidance systems. The jury awarded the Woodland Hills company $1.2 billion.

But trial Judge Mariana R. Pfaelzer overturned the jury verdict in 1995. She found the patent was unenforceable because Litton obtained it by ``inequitable conduct,'' meaning it was based on mistakes, omissions or misrepresentations.

In July, a special panel of the U.S. Circuit Court of Appeals for the Federal Circuit in Washington, D.C., reversed Pfaelzer's decision but upheld her grant of a new trial on damages.

On Friday, the appeals court denied a petition by Honeywell for a rehearing by the full court.

The legal squabble is over a process that Litton developed to coat the mirrors used in ring-laser gyroscopes. Litton sued Honeywell in 1990, claiming that the company appropriated the protected process.

In a related case, a different federal court jury in Los Angeles awarded Litton $234 million in damages this year after finding that Honeywell illegally had monopolized the commercial aircraft navigation market for inertial reference systems.

Pfaelzer affirmed the jury's verdict in that case, but ordered a new trial to re-establish the amount of damages.