Walker Process Equipment, Inc. v. FMC Corporation, 14880.

• Decision Date: 10 March 1966
• Docket Number: No. 14880.,14880.
• Citation: 356 F.2d 449
• Parties: WALKER PROCESS EQUIPMENT, INC., Plaintiff-Appellant, v. FMC CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

356 F.2d 449 (1966)

WALKER PROCESS EQUIPMENT, INC., Plaintiff-Appellant, v. FMC CORPORATION, Defendant-Appellee.

No. 14880.

United States Court of Appeals Seventh Circuit.

January 20, 1966.

Rehearing Denied March 10, 1966.

Edward A. Haight, Charles J. Merriam, Chicago, Ill., William A. Marshall, Chicago, Ill., Merriam, Marshall, Shapiro & Klose, Chicago, Ill., of counsel, for appellant.

James W. Clement, Chicago, Ill., for appellee.

Before HASTINGS, Chief Judge, and KILEY and SWYGERT, Circuit Judges.

(En Banc).

HASTINGS, Chief Judge.

This is an appeal by Walker Process Equipment, Inc. from an order of the United States District Court for the Northern District of Illinois dismissing, for lack of jurisdiction because of the absence of an actual controversy, Walker's declaratory judgment action against the F.M.C. Corporation (FMC).¹ In its complaint, Walker sought to have a patent owned by FMC, U.S. Patent No. 2,777,815, entitled "Sewage Digestion Process", declared invalid, unenforceable, and not infringed by any use of Walker's digester stirrer equipment.

Walker manufactures and sells "Gaslifter" digester stirrers for use in sewage digestion processes in sewage treatment plants. FMC competes with Walker and is the owner of a patented process for the digestion of sewage sludge, which involves continuous gas recirculation to maintain homogeneous sludge. While Walker sells only equipment, it is possible for Walker's customers to use Walker's equipment in processes allegedly covered by FMC's process patent, although the Walker equipment need not be so used and has other uses.

Walker's amended complaint alleges that FMC attempts to persuade prospective customers of competing manufacturers that they should use FMC equipment in accordance with its patented process or that, if they use the equipment of a competing manufacturer, they should, in order to protect themselves against possible infringement, purchase a license to use the patented process from FMC.

It is further alleged that because of FMC's acts some of Walker's prospective customers have refused to purchase Walker's equipment, while others demand, as a condition of purchase, that Walker furnish "hold harmless" guaranties to defend them against patent infringement actions.

Walker asserts that at least one of its customers, with which Walker has a patent suit indemnity agreement, has used, and is believed by Walker to continue to use, Walker's equipment in a process which apparently infringes the patent.

In May, 1960, FMC brought suit against Walker and one of its customers, the City of Greensboro, North Carolina, charging the City of Greensboro with infringement of FMC's patent and charging Walker with active inducement of infringement of the patent. Walker was dismissed from the suit on motion since it was not subject to process in North Carolina. Because of Walker's hold harmless agreement with Greensboro, however, Walker defended that action. The district court held that FMC's patent was valid and infringed,² but on appeal, the court of appeals reversed, holding that the process used by the City of Greensboro for the digestion of sludge did not infringe the patent. See FMC Corporation v. City of Greensboro, 4 Cir., 326 F.2d 581 (1964).

On this appeal, Walker urges a number of grounds for reversal. Walker first contends that when a patent owner charges another with infringement through active inducement of infringement or contributory infringement, an actual controversy exists sufficient to support a suit under the Declaratory Judgment Act. While this proposition is true, it begs a fundamental question of this appeal: that is, whether the patent owner has, in this case, made viable charges of infringement.

A studied consideration of Walker's amended complaint has convinced us that the complaint does not allege that FMC has charged Walker or any of Walker's customers, at any time since the Greensboro litigation, with any kind of infringement. Whatever infringement charges were made in the Greensboro litigation were resolved, and the controversy between the parties terminated, by the judgment of the court of appeals.

Walker states, however, that even if the allegations it made respecting FMC's charges of active inducement of infringement and contributory infringement refer only to the Greensboro litigation, the charges created a legally cognizable controversy not terminated in that case, although the particular controversy in issue in that case was terminated. This is so, Walker asserts, because the same basis for the charges FMC made in the Greensboro litigation continues to exist. While it may be that the same basis for charges exists, it is certain, in view of our construction of Walker's complaint, that actual charges do not exist. Lacking actual charges, Walker's right to maintain a declaratory judgment action depends upon the meaning of the Declaratory Judgment Act.

The Declaratory Judgment Act created no new rights, but rather created a new remedy with which to adjudicate existing rights. Aralac, Inc. v. Hat Corporation of America, 3 Cir., 166 F.2d 286, 291 (1948). With respect to the meaning and effect of the Act in relation to patents, we quote with approval the statement of the district court in this case:

"Prior to the enactment of the Declaratory Judgment Act, a party accused of patent infringement was without a remedy to obtain a judicial determination of the merits of the accusation if the patentee refused to bring suit for the alleged infringement. An accused infringer could thus be made subject to harassment. The Declaratory Judgment Act eliminates this inequity. It enables the accused to secure a judicial determination of the charge of infringement without having to wait for the patentee to institute proceedings."

A leading case in point is Aralac, Inc. v. Hat Corporation of America, supra. Aralac precludes a declaratory judgment action against a patent owner unless the plaintiff is in fact accused of infringement by the patent owner. In view of the fact that there are no outstanding charges by FMC of infringement by Walker or Walker's customers, there is no justiciable controversy between the parties.

It is further urged, however, that a manufacturer whose interests in a controversy concerning a patent are limited to indemnity agreements with possible infringers and possible loss of business has standing to seek a declaratory judgment regarding the scope and validity of the patent.

In Aralac, supra, it was held that where the patent owner has not made a charge of infringement, direct or contributory, against a plaintiff-manufacturer, but rather has made a claim that purchasers of the plaintiff's product were infringing by using the process covered by defendant's patent, the plaintiff-manufacturer did not have a sufficient legal interest in any claim arising under the patent laws to enable it to challenge the defendant's patent by declaratory judgment. The plaintiff's interest was an economic interest not legally recognized.

It is true, as Walker argues, that in Aralac the plaintiff sold a product which was used by purchasers in the manufacture of a wholly new product, the manufacture of which involved the alleged use of a patented process. In the instant case, Walker's product itself may be used by purchasers in a manner allegedly infringing a patented process. Because of the specialized use of Walker's equipment, it is clear that Walker has a greater and somewhat different interest than existed in the Aralac case. Nonetheless, Walker's interest is no more than an economic interest, which brings it within the Aralac rationale. In the absence of a viable charge of infringement, Walker's interest is insufficient to permit Walker to challenge FMC's patent.

Finally, Walker, citing National...