Krentler-Arnold Hinge Last Co. v. Leman

• Decision Date: 02 July 1926
• Docket Number: No. 1910.,1910.
• Citation: 13 F.2d 796
• Parties: KRENTLER-ARNOLD HINGE LAST CO. v. LEMAN et al.
• Court: U.S. Court of Appeals — First Circuit

13 F.2d 796 (1926)

KRENTLER-ARNOLD HINGE LAST CO. v. LEMAN et al.

No. 1910.

Circuit Court of Appeals, First Circuit.

July 2, 1926.

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Robert Cushman and James R. Hodder, both of Boston, Mass., for appellant.

Ellis Spear, Jr., of Boston, Mass. (Eiffel B. Gale, of Yonkers, N. Y., and Victoria Lowden, of Jamaica Plains, Mass., on the brief), for appellees.

Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.

BINGHAM, Circuit Judge (after stating the facts as above).

The first question presented by the appellant (the Krentler Company) is that Belcher, the original defendant, could not in his answer set up and maintain a counterclaim for the infringement of a patent owned by him; that under federal equity rule 30, as construed by the District Courts in this circuit, a subject-matter not arising out of the cause of complaint stated in the bill could not be set up by way of counterclaim. In support of this contention reliance is placed upon the cases of Terry Steam Turbine Co. v. B. F. Sturtevant Co. (D. C.) 204 F. 103, Colman v. American Warp Drawing Machine Co. (D. C.) 235 F. 531, and Klauder-Weldon Dyeing Co. v. Giles (D. C.) 212 F. 452. It is true that these cases so hold, but since they were decided rule 30 has been construed by the Supreme Court to be of much broader scope, and to entitle a defendant to avail himself, by way of counterclaim, of matter which might be the subject of an independent suit in equity. American Mills Co. v. American Surety Co., 260 U. S. 360, 43 S. Ct. 149, 67 L. Ed. 306. It was there said:

"That which grows out of the subject-matter of the bill must be set up by counter-claim in the interest of an end of litigation. That which does not may be set up, if the defendant wishes, in one proceeding in equity quickly to settle all equitable issues capable of trial between them in such a proceeding, even though they are not related. Buffalo Specialty Co. v. Vancleef D. C. 217 F. 91. The formality of cross-bills is not required, and the rule goes as far as possible to facilitate the prompt disposition of equitable controversies between the same litigants. The rule should be liberally construed to carry out its evident purpose of shortening litigation, but the limitation of counterclaims to those which are equitable is imperative."

See, also, Wire Wheel Corp. of America v. Budd Wheel Co. (C. C. A.) 288 F. 308 (4th Cir.), Cooling Tower Co., Inc., v. C. F. Braun (C. C. A.) 1 F.(2d) 178 (9th Cir.), and Le Sueur v. Manufacturers' Finance Co. (C. C. A.) 285 F. 490, 495 (6th Cir.).

The second contention is that the District Court was without jurisdiction to entertain the counterclaim, on the ground that it was not an inhabitant of the district of Massachusetts and had no regular and established place of business in the district, as required in section 48 of the Judicial Code (Comp. St. § 1030).

In the District Courts in this circuit, where it has been held that, under rule 30, a defendant in an equity proceeding can counterclaim only for matter arising out of the transaction complained of in the plaintiff's bill, it has also been held that a plaintiff, by bringing his bill in a federal district other than that of which he is an inhabitant or has a regular and established place of business, does not, by so doing, consent to being sued in such district upon an equitable counterclaim, unless the matter set up therein arises out of the transaction complained of in the plaintiffs' bill. Colman v. American Warp Drawing Machine Co. (D. C.) 235 F. 531 (D. C. Mass.); Parker Pen Co. v. Rex Mfg. Co., 11 F.(2d) 533 (D. C. R. I.). The chief reason assigned for this holding seems to be that if a plaintiff, by bringing his bill in a district other than the one in which he resides or has a place of business, should be held to have consented to being sued there on a counterclaim unrelated to the plaintiff's cause of action, it would be to enlarge by rule the jurisdiction of the court, and that such a thing cannot be done.

The defect in this argument seems to us to be that it assumes that the statutory jurisdiction of the court is thus enlarged by a rule of court. This plainly is not so. A person who is not an inhabitant of, or does not have a regular and established place of business in, a given federal district, may by his consent, express or implied, be sued in a patent cause in such district. Postage Meter Co. v. Standard Mailing Machine Co. (C. C. A.) 9 F.(2d) 19. And if, by bringing a suit in equity in such district, he may be held to have consented to be sued there on a counterclaim setting up matter arising out of the same transaction (as appears to be conceded), there seems little reason, since the promulgation of equity rule 30, for not holding that by so doing he likewise consents to being sued on a counterclaim based upon an independent and unrelated matter, and such is the holding in many Circuit Courts of Appeals and District Courts. United States Expansion Bolt Co. v. Kroncke Hardware Co., 234 F. 868, 870, 148 C. C. A. 466 (7th Cir.); Id. (in court below) 216 F. 186; Victor Talking Mach. Co. v. Brunswick-Balke-Collender Co. (D. C.) 279 F. 758; Champion Spark Plug Co. v. Champion Ignition Co. (D. C.) 247 F. 200.

Furthermore, we are of the opinion that the appellant (the Krentler Company) cannot question the power of the court in the Massachusetts district to entertain the counterclaim of Belcher, for it appeared generally by counsel, filed an answer to the counterclaim and submitted to a trial and decision of the case upon its merits. The matter involved in the counterclaim being a patent suit, the District Court, as a federal court, had general jurisdiction of the subject-matter, and the appellant, by appearing generally, filing an answer, going to trial, and submitting to a decision on the merits, waived the privilege which it now seeks to assert, if it had not otherwise done so. Postage Meter Co. v. Standard Mailing Co., supra (1st Cir.); Cooling Tower Co. v. C. F. Braun Co. (C. C. A.) 1 F. (2d) 178, 179 (9th Cir.). In fact, it failed to take any action seeking to raise this question until February 18, 1925, some seven or eight months after the trial and decision on the merits of the case. Such being the situation, we think there can be no question but that the appellant should be held to have waived its right, if any, to object to being sued in the Massachusetts district by way of counterclaim on the Peterson patent.

The third contention is that the counterclaim abated before the trial in June, 1924, and consequently there never has been a trial on the counterclaim. In support of this contention the appellant relies upon the matter set out in its suggestion of abatement filed February 12, 1925, to the effect that a corporation by the name of the George E. Belcher Company was organized under the laws of Massachusetts, with which Belcher made the contract of April 1, 1924, heretofore set out, wherein he assigned to the corporation the assets of the business theretofore conducted by him, including patents used by him in his business, in consideration of the issue to him of 4,997 shares of the 5,000 authorized shares of common stock of the corporation; that the Peterson patent, set up in the Belcher counterclaim, was a patent used by him in his business, and constituted one of the principal features of his business.

It appears that, at the time Belcher filed his answer, November 24, 1923, setting up the counterclaim, he was the owner of one-half of the Peterson patent, and held an exclusive right and license from Peterson "to make, use, and sell, or cause to be made and sold," the invention under the other half for the full term of the patent, and that it was agreed between the parties thereto that the license and all rights therein and thereunder should be binding upon their "heirs, executors, administrators, and assigns, and legal representatives."

In view of these facts, the question arises as to what was Belcher's title to the Peterson patent when he brought his counterclaim, and on April 1, 1924, when he made the agreement with the Belcher Company — that is, whether, as a matter of law, he was the owner of the entire title to the Peterson patent, or only owned a half of it, and was licensee under the other half.

In Waterman v. Mackenzie, 138 U. S. 252, 255, 11 S. Ct. 334, 34 L. Ed. 923, the court, in considering a similar question, held that an assignment or transfer of an undivided part of the exclusive right to make, use, and vend throughout the United States a patented invention vested in the assignee title to so much of the patent itself, with a right to sue infringers; that the patentee assignor was to be joined as a party, where he retained title to the other share of the patent; that, where the transfer amounted to a license only, the title remained in the owner of the patent, and suit must be brought in his name, and never in the name of the licensee alone, unless that was necessary to prevent an absolute failure of justice, as where the patentee was the infringer and could not sue himself. It was there said:

"Every patent issued under the laws of the United States for an invention or discovery contains `a grant to the patentee, his heirs and assigns, for the term of 17 years, of the exclusive right to make, use and vend the invention or discovery throughout the United States and the territories thereof.' Rev. Stat. § 4884 Comp. St. § 9428. The monopoly thus granted is one entire thing, and cannot be divided into parts, except as authorized by those laws. The patentee or his assigns may, by instrument in writing, assign, grant and convey, either, first, the whole patent, comprising the exclusive right to make, use and vend the invention throughout the United States; or, second, an undivided part or share of that exclusive right; or, third, the exclusive right under the patent within and...