Von Brimer v. Whirlpool Corporation, Civ. No. 51322-CBR.

• Decision Date: 12 December 1973
• Docket Number: Civ. No. 51322-CBR.
• Citation: 367 F. Supp. 740
• Parties: Michael J. VON BRIMER et al., Co-Executors of the Estate of Joseph W. Von Brimer, Deceased, Plaintiffs, v. WHIRLPOOL CORPORATION, Defendant.
• Court: U.S. District Court — Northern District of California

367 F. Supp. 740

Michael J. VON BRIMER et al., Co-Executors of the Estate of Joseph W. Von Brimer, Deceased, Plaintiffs, v. WHIRLPOOL CORPORATION, Defendant.

Civ. No. 51322-CBR.

United States District Court, N. D. California.

December 12, 1973.

Belli, Ashe, Ellison & Choulos, Seymour L. Ellison, San Francisco, Cal., for plaintiffs.

Carl Hoppe, Charles E. Hanger, San Francisco, Cal., Burton Y. Weitzenfeld, Chicago, Ill., for defendant.

MEMORANDUM OF OPINION, ORDER AND FINAL JUDGMENT

RENFREW, District Judge.

On May 13, 1969, Joe W. von Brimer¹ filed a three-count complaint against Whirlpool Corporation. Both the second claim for relief (alleging malicious institution of a patent interference action) and the third claim (alleging interference with von Brimer's contractual relations) have been heretofore dismissed after trial by order dated August 17, 1973.²

The Court is now presented with Whirlpool's motion for summary judgment as to the first claim for relief which charges that defendant "fraudulently appropriated" von Brimer's linear induction motor for use in washing machines and filed a patent application based upon it.

Plaintiffs claim that commencing in August, 1962, von Brimer revealed details of his invention to Whirlpool and its employee, Robert E. Lake, in confidence during negotiations concerning the commercial feasibility of von Brimer's invention. On November 5, 1962, after the negotiations had broken down, von Brimer filed an application for Letters Patent for his invention. Lake filed a patent application for the same invention on July 8, 1963 (Application Serial No. 293,420). On July 13, 1965, von Brimer was awarded United States Letters Patent 3,194,032 on his invention. Whirlpool filed an amended patent application on December 15, 1965. As a result of the Lake application as amended, on April 26, 1966, the Commissioner of Patents declared an interference and sent notice thereof to the respective parties.

The essence of plaintiffs' remaining claim is that Whirlpool, in the guise of a prospective licensee, fraudulently obtained the details of von Brimer's invention. As of August 29, 1962, von Brimer was the sole owner of the invention at issue. On October 24, 1962, he assigned an undivided one-half interest in the invention to Stephen A. Bollinger and on November 30, 1963, assigned his remaining interest to V. B. Research & Development. Thereafter von Brimer held no interest in the patent until after Whirlpool filed the amended patent application on December 15, 1965. This amended patent application gave rise to the interference action, and its filing is the last date on which it is alleged that the fraudulent misappropriation occurred. Hence the crucial time period in which the alleged fraud and resulting actionable damage to von Brimer would have to have occurred is that period between August 29, 1962, and November 30, 1963.

Accepting plaintiffs' allegation of fraud as true for the purposes of this motion, plaintiffs still are not entitled as a matter of law to the relief sought because Whirlpool has not been unjustly enriched nor has von Brimer been damaged in any other way by the alleged fraudulent appropriation. It is undisputed that during the relevant time period, i. e., when von Brimer had an interest in his invention, Whirlpool did not manufacture or license for manufacture any washing machine embodying von Brimer's invention.³ In other words, prior to November 30, 1963, and even to date, Whirlpool has not enjoyed any earnings from the manufacture, sale, development, or marketing of any washing machine embodying von Brimer's allegedly appropriated idea.

Plaintiffs contend, however, that actionable "uses" are not restricted to commercial exploitation through actual manufacture and sale. They argue that Whirlpool "used" von Brimer's idea by filing its patent application. Those cases which involve unfair competition give no clear definition of the exact scope of the "uses" which can give rise to a claim for relief. On the other hand, it is well established that this claim is grounded "upon the principle that equity will not permit one to unjustly enrich himself at the expense of another." Hoeltke v. C. M. Kemp Mfg. Co., 80 F.2d 912, 923 (4 Cir. 1935), cert. denied, 298 U.S. 673, 56 S.Ct. 938, 8 L.Ed. 1395 (1936), quoted in Engelhard Industries, Inc. v. Research Instrumental Corp., 324 F.2d 347, 352 (9 Cir. 1963), cert. denied, 377 U.S. 923, 84 S.Ct. 1220, 12 L.Ed.2d 215 (1964). See also Filtex Corporation v. Amen Atiyeh, 216 F.2d 443, 447 (9 Cir. 1954). Whatever may be the limit on actionable "uses" in this context, the element of economic detriment to the plaintiff, whether shown by unjust enrichment to the defendant or by proof of other economic damage to the plaintiff, is essential to the recovery of money damages. Atlantic Wool Combing Company v. Norfolk Mills, Inc., 357 F.2d 866, 869 (1 Cir. 1966). Therefore, assuming solely for the sake of argument that plaintiffs' position on the "use" issue is correct, the undisputed facts nevertheless demonstrate that Whirlpool has not been unjustly enriched by the alleged fraudulent "use." Thus, plaintiffs must establish another form of economic loss.

It is also undisputed that applications to the Patent Office are confidential. In fact, von Brimer himself did not know of the Lake patent application (including its amendment) until 1966 when the interference was declared. Therefore, neither the fair market value of von Brimer's interest in his invention nor the consideration which he received for the transfer of his interest could have been adversely affected by Lake's interfering claims since these claims remained unknown until well after the termination of von Brimer's interest in the invention. Similarly because the Lake application was not public information and was not known to von Brimer prior to 1966, the alleged fraudulent appropriation could not have inhibited von Brimer in any way from marketing or manufacturing his invention during the relevant time period. On the basis of these undisputed facts as to the confidentiality of the Lake application and von Brimer's unawareness of it, it is clear that as a matter of law plaintiffs have failed to establish any damage to von Brimer's interest in the invention during the relevant time period which resulted from the alleged fraudulent "use."

In their most recent memorandum plaintiffs contend that the damage allegedly suffered in 1967 as a result of the non-performance of the Cook Machinery Co., Inc., contract should relate back to the time of the alleged fraud in 1962. Under this "relation back" argument, the alleged fraud and the resulting damage would be seen as a single, unified occurrence so that the damage would be deemed to have occurred within the time during which von Brimer still had an interest in the patent. The fatal error of their contention is that it attributes damages to von Brimer that he, in his individual capacity, never actually suffered. It is now beyond question that on November 30, 1963, von Brimer transferred his remaining rights in the patent to V. B. Research & Development "in consideration of the sum of $10.00 * * * and other valuable consideration * * *" (Exhibit 3 to Plaintiffs' Memorandum filed November 6, 1973), and that by resolution of the Board of Directors dated December 23, 1964, von Brimer was to receive fifty-one per cent of the gross income of the company from any and all sources in consideration of his assignment of certain patents to the corporation (Exhibit 4 to the same memorandum).⁴ Plaintiffs do not allege that these transactions were not bona fide. Nor do they allege that the consideration received by von Brimer was insufficient at the time of the transfer or in any way affected by the alleged fraudulent "use" by Whirlpool. As indicated above, the confidentiality of the Lake application compels the conclusion that that application could not have affected von Brimer's dealings with the patent in these 1963 and 1964 transactions. Thus, the element which plaintiffs would have related back to the alleged 1962 fraud—namely, damages personal to von Brimer—is completely absent from this case.

In a final attempt to demonstrate some interest after the November 30, 1963, assignment, plaintiffs assert that von Brimer continued to have a legally protectable interest in the patent after that date as a stockholder in V. B. Research & Development and later as a recipient of income through that corporation. "Generally, a stockholder may not maintain an action in his own behalf for a wrong done by a third person to the corporation on the theory that such wrong devalued his stock and the stock of the other shareholders, for such an action would authorize multitudinous litigation and ignore the corporate entity." Sutter v. General Petroleum Corporation, 28 Cal.2d 525, 530, 170 P.2d 898, 900-901 (1946). Where there is an injury to the corporation and its whole body of shareholders, the cause of action should be prosecuted by the corporation itself or by the shareholders derivatively if the corporation fails to act. Jones v. H. F. Ahmanson & Company, 1 Cal.3d 93, 106-107, 81 Cal.Rptr. 592, 598, 460 P.2d 464, 470 (1969). "Thus, `the action is derivative, i. e., in the corporate right, if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock and property without any severance or distribution among individual holders * * *.'" Jones v. H. F. Ahmanson & Company, 1 Cal.3d at 106, 81 Cal.Rptr. at 598, 460 P.2d at 470. On the other hand, "`if the injury is one to the plaintiff as a stockholder and to him individually, and not to the corporation, as where the action is based on a contract to which he is a party, or on a right belonging severally to him, or on a fraud affecting him directly, it is an individual action * * *.'" Sutter v. General Petroleum Corporation, 28 Cal.2d at 530, 170 P.2d at 901. Such individual...