Kimberly Corporation v. Hartley Pen Company
| Decision Date | 10 September 1956 |
| Docket Number | No. 14701.,14701. |
| Parties | KIMBERLY CORPORATION, a corporation, Appellant, v. HARTLEY PEN COMPANY, a corporation, Lindy Pen Co., Inc., a corporation, and Sidney Linden, individually and doing business as Adams-Linden Co., Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Flam & Flam, John Flam, Eugene H. Marcus, Los Angeles, Cal., for appellant.
Harris, Kiech, Foster & Harris, Ford Harris, Jr., Donald C. Russell, Los Angeles, Cal., for appellees.
Before DENMAN, Chief Judge, BONE, Circuit Judge, and TOLIN, District Judge.
This suit was originally instituted in 1953 by appellee-plaintiff, Hartley Pen Company, (hereafter called Hartley). In this action defendant-appellee, Lindy Pen Company, (hereafter called Lindy) was charged with infringement of Letters Patent No. 2,498,009 owned by Hartley.1
Later, and on or about January 15, 1954, appellant Kimberly Corporation, (hereafter called Kimberly) filed a motion to intervene as a plaintiff in the pending Hartley action upon the ground that it was the full equitable owner of the patent in suit, and as such, had an interest in the Hartley patent infringement suit. Leave to intervene was granted. So far as pertinent to this appeal, the Kimberly complaint in intervention prayed for a judgment ordering that Hartley execute an effective assignment of said patent to Kimberly, for an injunction, an accounting and other appropriate relief. In this first complaint Kimberly charged generally that Hartley, Lindy, one Linden, and two individuals, Sears and Schrader had infringed the said Letters Patent; that title thereto was being held by Hartley, Sears and Schrader as beneficiaries of their fraudulent acts hence these parties were holding such title as constructive trustees for the benefit of Kimberly. The complaint in intervention is thus squarely grounded upon a charge of fraud. Sears and Schrader were joined as defendants in this first complaint in intervention.
Hartley and the two individuals (Sears and Schrader) moved to dismiss the first Kimberly complaint in intervention on various grounds. In their motion Sears and Schrader had sought dismissal upon the ground that the court lacked jurisdiction of the subject matter of the infringement claims asserted against them; Hartley advanced the same claim as to itself and further challenged Kimberly's claim of title to the patent in suit on the ground that Kimberly's complaint failed to state a claim upon which relief could be granted. Among the various grounds for dismissal, Hartley also included the defense that Kimberly's claim to title of the patent in suit was barred because not commenced within either the two-year or three-year periods of the California Code of Civil Procedure.
In response to these motions the court entered judgment dismissing the complaint on the merits, with leave to Kimberly to serve and file an amended pleading.2 Thereupon, the so-called first amended complaint (here involved) was served and filed by Kimberly in which revamped complaint the appellees named in the caption of this case on appeal were named as counterdefendants. This complaint tendered the issues now before us. (Sears and Schrader were not joined therein as defendants.)
In his first amended complaint (which is also grounded upon a charge of fraud) Kimberly asserted, inter alia, that the patent in suit was valid; that Hartley had knowledge of prior and paramount rights of Kimberly at the time of the assignment of the patent in suit to it by Sears and Schrader on November 7, 1949 (see footnote 1); that Hartley holds a bare legal title to the said patent as constructive trustee for the benefit of Kimberly; that without authority Lindy and Linden infringed the patent by constructing and using machines such as disclosed and claimed in the patent, and by using the methods taught in the patent and covered by its claims, and by selling ball-point pens so made; that Hartley had licensed others to manufacture and use machines and methods as disclosed in the patent in suit.
Other averments were that Sears and Schrader became full-time employees of Kimberly in September 1945; that "under the conditions" of their employment they were "obligated" to assign to Kimberly all patent rights in any improvement they might make in ball-point pens, and Sears was (also) obligated "under the terms if his employment" to investigate the possibility of obtaining patent protection for anything that was conceived or developed for Kimberly, and to confer with Kimberly's patent attorney for the purpose of taking steps to obtain such patent protection; and while so employed and in the course of their duties, Schrader and Sears jointly invented and developed the apparatus and method patent in suit which were first commercially used by Kimberly in the early part of 1947, and so used (apparently as a shop right) ever since that time; that before leaving the employ of Kimberly, Sears assured the vice-president of Kimberly that all necessary steps had been taken for such purpose, which "assurance" was false and fraudulent and made with intent to deceive; that Sears also fraudulently represented to said vice-president that the device or devices they had made did not include any patentable features, and Kimberly relied on such representations and made no further inquiry regarding patenting of the Sears-Schrader machine and method until advised of the pendency of the Hartley suit against Lindy for infringement.
Kimberly further averred, inter alia, that at no time did either Sears or Schrader ever inform it of their intention to obtain patent protection on the invention here involved, or of the filing of their application for a patent thereon, or the issuance of the patent; that all of these matters were concealed from Kimberly with intent to defraud it, and Kimberly did not learn of the issuance of Letters Patent here involved until the early part of December 1953 when it was notified by Linden, one of the defendants in the Hartley suit for infringement; that Sears and Schrader joined with three others as the original incorporators of Hartley, and that Sears and Schrader were actively in charge of the business affairs of Hartley at least until December 1949; that these men held title to the application, and Hartley now holds title to the said patent, all of them at all said times holding such title as constructive trustees for the benefit of Kimberly.
The formal prayer for relief conformed to the scope of these claims and was also broad enough to include the relief customarily demanded in infringement actions.
Upon the filing of this amended complaint, Hartley moved for summary judgment of dismissal upon the grounds that Kimberly's asserted claim to title of the patent in suit was barred by the statutes of limitation of the State of California, noted supra, and by laches of Kimberly. This motion was denied. Hartley thereafter filed an answer denying the material allegations of the complaint and setting up, inter alia, as affirmative defenses, the same contentions advanced in its motion for summary judgment, along with the further defense that Kimberly was estopped to assert a claim of title to the patent in suit.
In this posture a separate trial3 was ordered pursuant to Rule 42(b), R.Civ. P. 28 U.S.C.A. on the issues raised by these affirmative defenses. Following trial the court entered an order reciting that all claims to equitable relief asserted by Kimberly were barred by laches, and that findings, conclusions and judgment be entered which dismissed the Kimberly complaint on the merits on the ground that all claims to equitable relief asserted therein were so barred. Subsequently the court made and entered such formal Findings, Conclusions and Judgment. The judgment dismissed the said Kimberly complaint with prejudice and without leave to amend. This appeal followed.
The lower court found from the evidence that Kimberly had both actual and constructive notice of facts which should have caused it to assert its equitable claim of title at an earlier time. On this vital question of fact Judge Mathes made comprehensive findings all of which were adverse to the material claims of Kimberly. The length of the transcript on appeal and the many trial exhibits now before us make it impracticable to burden this opinion with a recital of the text of the many findings and the many facets of the evidence and we confine ourselves to a discussion of the later noted carefully narrowed issues tendered by appellant Kimberly.
From the record it appears that Sears and Schrader (joint inventors of the patent here involved) had, during a period found by the court, been employees of Kimberly.4 They gave testimony in the case. As we have noted above, the substance of Kimberly's claim is that it derived "rights" through employment agreements with Sears and Schrader which rights matured into full equitable ownership of the patent in suit which Hartley now claims to own by virtue of a fraudulent assignment from Sears and Schrader.
Counsel have eliminated irrelevant phases of controversy by carefully narrowing and defining in their briefs the precise questions for decision by this court.5 In summary, they boil down to whether, under the facts of this case, the assertion of Kimberly's claim to equitable ownership of the patent in suit was barred by laches.
In its opening brief Kimberly presents these questions as follows:
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