Luckett v. Delpark

• Citation: 46 S.Ct. 397,70 L.Ed. 703,270 U.S. 496
• Decision Date: 12 April 1926
• Docket Number: No. 220,220
• Parties: LUCKETT v. DELPARK, Inc., et al
• Court: United States Supreme Court

270 U.S. 496

46 S.Ct. 397

70 L.Ed. 703

LUCKETT

v DELPARK, Inc., et al.

No. 220.

Argued March 16, 1926.

Decided April 12, 1926.

Mr. Thomas J. Johnston, of New York City, for appellant.

[Argument of Counsel from page 497 intentionally omitted] Mr. Archibald Cox, of New York City, for appellees.

Mr. Chief Justice TAFT delivered the opinion of the Court.

Philip A. Luckett is a citizen of Connecticut. He brought this bill in equity in the District Court of the United States for the District of New Jersey against Del- park, a corporation of New York, and against Parker, Ford & Dick, a corporation, formerly known as the Luckett Company, organized in the state of Maryland. Appearing for the purpose of the motion only, the defendants filed a motion to dismiss, because the court was without jurisdiction to entertain the bill. The certificate by the District Court shows its dismissal on that ground September 17, 1924. This appeal was allowed November 24, 1924, so that it is maintainable under section 238 of the Judicial Code (Comp. St. § 1215), in accordance with the saving provision of section 14 of the Act of February 13, 1925, 43 Stat. 942.

Section 51 of the Judicial Code (Comp. St. § 1033) provides that, where the jurisdiction is founded on the fact that the action is between citizens of different states, suits shall be brought only in the district of the residence of either the plaintiff or the defendant. The requisite diverse citizenship between the plaintiff and the defendants exists in this suit, but the district of New Jersey is not the district of the residence of either the plaintiff or the defendants, and against defendants' objection jurisdiction on that ground cannot be sustained.

The plaintiff asserts that jurisdiction exists as of a suit under the patent laws under Judicial Code, § 24, par. 7, section 48, and section 256 (Comp. St. §§ 991, 1030, 1233). Section 48 provides that:

'In suits brought for the infringement of letters patent the District Courts of the United States shall have jurisdiction, in law or in equity, in the district of which the defendant is an inhabitant, or in any district in which the defendant, whether a person, partnership, or corporation, shall have committed acts of infringement and have a regular and established place of business.'

The question in this case, then, is whether, it being averred that the defendants regularly do business in New Jersey, and have made and sold there the patented articles referred to in the bill, its allegations make the suit one arising under the patent laws.

The bill shows that two patents were issued to Luckett, one on November 12, 1918, No. 1,284,391, and the other on October 12, 1915, No. 1,156,301, for a method of making undergarments known as union suits. The later patent, No. 1,284,391, is averred to be the generic and the broader invention, while the earlier patent, No. 1,156,301, is a specific and narrower one. After the later patent was applied for, before it was granted, Luckett gave a nonexclusive license for manufacture and sale of the garments under it to the Delpark corporation. This reserved to Luckett a royalty on all garments manufactured and sold under it, the licensee covenanting to give access to its books of account. A supplementary agreement made the license exclusive. Later Luckett gave to the other defendant, Parker, Ford & Dick, and assignment of the letters patent No. 1,156,301, under which a particular union suit, known as the 'My Pal' suit, is made, with conditions subsequent that the assignee should pay certain royalties, should keep the accounts open for inspection, and should push vigorously the sale of 'My Pal' suits, and with a provision that, if any condition subsequent failed, the title to the letters patent assigned should revert to Luckett, on his giving the assignee 30 days' notice in writing of his election to resume title. All the contracts of license and assignment made by the plaintiff with each of the defendants are attached to the bill as exhibits.

The averments of the bill are that Delpark, Incorporated, has acquired control of the stock of the Parker, Ford & Dick corporation, and the defendants are acting together; that the Delpark corporation refuses to pay to Luckett any royalties due under its exclusive license of the generic patent; that the Parker, Ford & Dick corporation refuses to pay any royalties under plaintiff's assignment to it of the specific patent, and refuses to push the sale of 'My Pal' suits; that this refusal is to prevent competition of the 'My Pal' suits with the Delpark suits and thus deprives plaintiff of royalties on the 'My Pal' suits. The plaintiff avers that on November 27, 1918, by notice in writing he cancelled his assignment to the Parker, Ford & Dick corporation, for failure of condition subsequent, and resumed his title to letters patent No. 1,156,301.

The seventeenth paragraph in the bill, and the only one which uses the word 'infringement,' is as follows:

'(VII) And your orator further shows unto your honors that Delpark, Incorporated, is a large concern with substantial capital, and ever since the issue of letters patent No. 1,284,391 on November 12, 1918, has been actively engaged in the manufacture and sale of the Delpark garment, so called, which infringes the claims of the said letters patent, and also the claims of letters patent No. 1,156,301, and that large numbers of the said garment have been made and sold upon which royalties are now due to your orator, the amount of which he is wholly unable to state with definiteness, but which is far larger than $3,000, exclusive of interest and costs, and that, though often requested as hereinbefore set out, no accounting has ever been had between your orator and Delpark, Incorporated, or Parker, Ford & Dick, Inc., either as to royalties due or as to damages for failure to observe the contract to exploit the 'My Pal' garment.'

The plaintiff sets out 13 prayers for equitable relief. He asks that the defendants file statements of the garments made and sold under both patents, containing retail prices at which the garments were sold, in order to show the royalties due; also a statement of the orders received for the 'My Pal' garments, but not filled, with prices, to show the royalties lost, and that they be compelled to permit access to their books of account. He further prays that the Parker, Ford & Dick corporation be required to execute a formal reassignment of letters patent No. 1,156,301 to the complainant, so as to remove the cloud from his title to that patent, and that an order issue canceling the licenses and agreements made with both defendants. He prays for damages for suppressing the 'My Pal' garment, and the failure properly to exploit it as agreed.

In prayer, J, the plaintiff asks that a preliminary injunction issue against both defendants to prevent their making sale or delivery of the so-called Delpark garment, or the so-called 'My Pal' garment, or any other garment infringing the claims of the two letters patent of the plaintiff, until further order of court. By prayer K, a similar permanent injunction is asked. There is a prayer for an order sending the cause to a master to take and state the account of profits and damages, both as to royalties due and accrued, and as to damages for suppression of the 'My Pal' garment, and to report the same to the court.

We do not think that this suit arises under the patent laws. Its main and declared purpose is to enforce the rights of the plaintiff under his contracts with defendants for royalties and for pushing the sales of 'My Pal' garments. In addition he seeks the reconveyance of one patent on forfeiture for failure of condition to remove a cloud on his title and a cancellation of all agreements of license of the other for their breach in order presumably that, unembarrassed by his assignment and licenses, he may enjoin future infringement.

It is a general rule that a suit by a patentee for royalties under a license or assignment granted by him, or for any remedy in respect of a contract permitting use of the patent, is not a suit under the patent laws of the United States, and cannot be maintained in a federal court as such. Wilson v. Sandford, 10 How. 99, 13 L. Ed. 344; Brown v. Shannon, 20 How, 55, 15 L. Ed. 826; Hartell v. Tilghman, 99 U. S. 547, 25 L. Ed. 357; Albright v. Teas, 1 S. Ct. 550, 106 U. S. 613, 27 L. Ed. 295; Dale Tile Manu- facturing Co. v. Hyatt, 8 S. Ct. 756, 125 U. S. 46, 31 L. Ed. 683; Marsh v. Nichols, Shepard & Co., 11 S. Ct. 798, 140 U. S. 344, 35 L. Ed. 413; Briggs v. United Shoe Machinery Co., 36 S. Ct. 6, 239 U. S. 48, 60 L. Ed. 138.

In Wilson v. Sandford, supra, a bill in equity was filed in a federal Circuit Court setting forth complainant's ownership of a patent, an assignment to defendants of a license in consideration of five promissory notes, with a condition of reversion to complainant on failure to pay any note. The bill averred that the first two notes were not paid, insisted that the license was forfeited by the failure and the licensor was fully reinvested at law and in equity with all his original rights, that the defendants were using the patented machine and were infringing the patent, prayed an account of profits since forfeiture, a temporary and permanent injunction, and a reinvestiture of title in the complainant. On demurrer, the bill was dismissed for lack of jurisdiction as not arising under the patent laws. Chief Justice Taney, speaking for the court, said:

'The rights of the parties depend altogether upon common-law and equity principles. The object of the bill is to have this contract set aside and declared to be forfeited, and the prayer is 'that the appellant's reinvestiture of title to the license granted to the appellees, by reason of the forfeiture of the contract, may be sanctioned by the court,' and for an injunction. But the injunction he asks for is in consequence of the decree of...