Aralac, Inc. v. Hat Corporation of America
| Decision Date | 10 February 1948 |
| Docket Number | No. 9184.,9184. |
| Parties | ARALAC, Inc. v. HAT CORPORATION OF AMERICA. |
| Court | U.S. Court of Appeals — Third Circuit |
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Worthington Campbell, of New York City (Southerland, Berl & Potter and William S. Potter, all of Wilmington, Del., and Campbell, Brumbaugh & Free and Mark N. Donohue, all of New York City, on the brief), for appellant.
Drury W. Cooper, of New York City (John N. Cooper and Bertram F. Shipman, both of New York City, and C. S. Layton, of Wilmington, Del., on the brief), for appellee.
Before GOODRICH and McLAUGHLIN, Circuit Judges, and MURPHY, District Judge.
This is an appeal from the United States District Court for the District of Delaware in an action instituted by Aralac, Inc., a Delaware Corporation, for a declaratory judgment, Judicial Code, Section 274d, 28 U.S.C.A. § 400, of invalidity of United States Letters Patent No. 2,322,254 and Claims 15, 16, 17 and 18 of United States Letters Patent No. 2,322,255, owned by Hat Corporation of America, a Delaware Corporation, Defendant-Appellee.
The District Court held there was no controversy over which the court had jurisdiction and dismissed the complaint before answer on defendant's motion.1
The complaint2 avers that plaintiff for years manufactured and sold casein fiber to fur felt hat manufacturers and to others. Hat Manufacturers use casein fiber as a substitute for a portion of animal fur in the mixture subjected to the felting process to make material for fur felt hat bodies and hats.
Defendant asserted directly to some of plaintiff's hat manufacturing customers and prospective customers that defendant's patents encompass the use of casein fiber in such manufacture. Defendant circularized the hat trade among which were many present and prospective purchasers of plaintiff's fibers informing the hat trade of the claims of defendant's patents and that unauthorized use of such fibers would constitute infringement of said patents.
One of plaintiff's largest customers, John B. Stetson Co., was charged with infringement. After commencing a declaratory judgment to question defendant's patent, Stetson discontinued its suit. Later Stetson, and one other customer, obtained a license from defendant to use the process covered by its patent.
Plaintiff charges defendant proposed by its patents to control the use of casein fiber in hat manufacture and that defendant submitted to the hat trade a form of a proposed agreement of license to operate under defendant's patent rights.
Plaintiff claims that because of defendant's course of conduct of intimidation many hat manufacturers fear infringement suits, others refuse to pay royalties, others are uncertain as to their rights and obligations, and as a result there has been a substantial reduction and, in many instances, a discontinuance or refusal to purchase plaintiff's fibers, causing plaintiff serious financial loss. Plaintiff sought a declaratory judgment of invalidity and an injunction restraining defendant from "bringing or prosecuting or threatening to prosecute any suit charging infringement * * * against plaintiff or any purchaser or user of casein fiber in the manufacture of fur felt hats."
The complaint averred that defendant's patents are invalid and that "no valid claim thereof is infringed by the manufacture, use or sale of hats made by its customers or by the use by its customers of any method used in connection therewith."
The complaint contains no specific averment as to any infringement or lack thereof by plaintiff and no prayer for judgment that it is not a contributory infringer.3
Whether a person is aggrieved or not by the act of another depends upon the nature of the act complained of and the manner in which it will affect the complainant. Substantive law must recognize plaintiff's privilege before procedure affords him an opportunity of vindicating his claim in the courts. The person raising the question of invalidity must have a legal interest to justify the grant of judicial relief. More particularly the court must in each case determine whether plaintiff has demonstrated the necessary "legal interest" in the declaration. Are the legal rights shown by the facts asserted such as to require judicial determination?
In form the Declaratory Judgment Act differs in no essential respect from any other action. The conditions of the usual action, procedural and substantive, must always be present, namely, the competence or jurisdiction of the court over the parties and subject matter, the existence of the operative facts justifying the judicial declaration of legal consequences, the assertion against an interested party of rights capable of judicial protection, and a sufficient legal interest in the moving party to entitle him to invoke a judgment in his behalf.
Legal rights may only be adjudicated under the Act precisely as only legal rights may be adjudicated in any other form of civil action. Samuel Goldwyn Inc., v. United Artists Corp., 3 Cir., 1940, 113 F.2d 703, at page 707. The controversy must be one that is appropriate for judicial determination. Alfred Hofmann v. Knitting Machines Corp., 3 Cir., 1941, 123 F.2d 458, at page 460.
"The requirements of case or controversy are of course no less strict under the Declaratory Judgment Act * * * than in case of other suits." Altvater v. Freeman, 319 U.S. 359, at page 363, 63 S. Ct. 1115, 1118, 87 L.Ed. 1450.
The question is whether plaintiff's allegations are sufficient to entitle it to the declaratory relief prayed in its complaint.4 This raises the question whether there is an "actual controversy" within the meaning of the Declaratory Judgment Act, since the District Court is without power to grant declaratory relief unless such controversy exists. Nashville C. & St. L. Ry. Co. v. Wallace, 288 U.S. 249, 259, 53 S.Ct. 345, 77 L.Ed. 730, 87 A.L.R. 1191; U.S.C. A.Constitution, Art. III, Section 2; Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, at page 272, 61 S.Ct. 510, 85 L.Ed. 826; Coffman v. Breeze Corporations, Inc., 323 U.S. 316, 324, 65 S.Ct. 298, 89 L.Ed. 264.
The existence of a justiciable controversy is to be determined by the decisions of the Federal Courts. Dewey & Almy Chemical Co. v. American Anode, Inc., 3 Cir., 1943, 137 F.2d 68; Chicago Pneumatic Tool Co. v. Ziegler, 3 Cir., 1945, 151 F.2d 784, at page 788.
This court has emphasized that the Act should have a liberal interpretation bearing in mind its remedial character and the legislative purpose. Alfred Hofmann v. Knitting Machines Corp., supra; Treemond Co. v. Schering Corp., 3 Cir., 1941, 122 F.2d 702; Dewey & Almy Chemical Co. v. American Anode, Inc., supra, certiorari denied 320 U.S. 761, 64 S.Ct. 70, 88 L.Ed. 454.
* * *" Maryland Casualty Co. v. Pacific Coal & Oil Co., supra, 312 U.S. 273, 61 S.Ct. 512, 85 L.Ed. 826. See Creamery Package Mfg. Co. v. Cherry-Burrell Corp., 3 Cir., 1940, 115 F.2d 980, 983.
"The operation of the Declaratory Judgment Act is procedural only." Hughes, C. J. in Ætna Life Ins. Co. v. Haworth, 300 U.S. 227, 240, 241, 57 S.Ct. 461, 463, 81 L.Ed. 617, 108 A.L.R. 1000.
"It is an axiom that the Declaratory Judgment Act has not enlarged the jurisdiction of the courts over subject-matter and parties." Borchard Declaratory Judgments, 2d Ed. p. 233.
The Act created no new rights but introduced an additional remedy of inestimable value for the determination of an already existing right. Cover v. Schwartz, 2 Cir., 1942, 133 F.2d 541, at page 544. It modified the law only as to procedure and though the right to such relief has been in some cases inherent the statute extended greatly the situations under which such relief may be claimed. A new opportunity for relief is thus afforded, i. e., new legal interests are recognized and protected. No new substantive rights were however created. The controversy is the same as previously.5
There being no diversity of citizenship, it is apparent that if jurisdiction is to be found in this case it must be by reason of the provisions of the Judicial Code, Section 24(7), 28 U.S.C.A. § 41(7), which confers jurisdiction upon the Federal Courts "of all suits at law or in equity arising under the patent * * * laws."6
To constitute a case or controversy under the patent laws the plaintiff must set up some "right, title, or interest under the patent laws, or, at least, make it appear that some right or privilege will be defeated by one construction, or sustained by the opposite construction of these laws." Pratt v. Paris Gas Light & Coke Co., 1897, 168 U.S. 255, at page 259, 18 S.Ct. 62, 64, 42 L.Ed. 458; Odell v. F. C. Farnsworth Co., 1919, 250 U.S. 501, 39 S.Ct. 516, 63 L.Ed. 1111; Dickinson Tire & Machine Co. v. Dickinson et al., 2 Cir., 1928, 29 F. 2d 493.7
Prior to the passage of the Federal Declaratory Judgment Act the patentee was the only one in a position to initiate a suit against the alleged infringer or his dealers.8 An alleged infringer could not sue the patentee for a declaration that the plaintiff was not infringing or that the patent was invalid. Today the alleged infringer, once he is threatened by a patentee, has a remedy by a complaint for a declaratory judgment. Now the controversy between the parties as to whether infringement exists is in either instance essentially one arising under the Patent Laws.9
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