418 F.2d 1314 (9th Cir. 1969), 23169, Koratron Co. v. Deering Milliken, Inc.

Docket Nº:23169.
Citation:418 F.2d 1314, 164 U.S.P.Q. 6
Party Name:KORATRON COMPANY, Inc., a corporation, Plaintiff-Appellee, v. DEERING MILLIKEN, INC., a corporation, Defendant-Appellant.
Case Date:November 05, 1969
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

Page 1314

418 F.2d 1314 (9th Cir. 1969)

164 U.S.P.Q. 6

KORATRON COMPANY, Inc., a corporation, Plaintiff-Appellee,


DEERING MILLIKEN, INC., a corporation, Defendant-Appellant.

No. 23169.

United States Court of Appeals, Ninth Circuit.

November 5, 1969

Jay H. Topkis (argued), of Paul, Weiss, Goldberg, Rifkind, Wharton & Garrison, New York City, Morrison, Foerster, Holloway, Clinton & Clark, San Francisco, Cal., for appellant.

Page 1315

Moses Lasky (argued), of Brobeck, Phleger & Harrison, San Francisco, Cal., Lyon & Lyon, Los Angeles, Cal., for appellee.

Before HAMLIN, ELY and HUF STEDLER, Circuit Judges.

HUFSTEDLER, Circuit Judge:

Pursuant to leave granted by this court (28 U.S.C. § 1292(b)), appellant Deering Milliken, Inc. ('Milliken'), appeals from an interlocutory order of the District Court for the Northern District of California denying Milliken's motions to dismiss, to transfer, or to stay the action filed against it by Koratron Company, Inc. ('Koratron').

Milliken contends that venue was improperly laid because the gravamen of Koratron's action is patent infringement for which an action may be brought only 'in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business' 28 U.S.C. § 1400(b)) and that the Northern District of California, in which the suit was brought, is not such a district. Koratron replies that its suit is not one for patent infringement, or even an action arising under the patent laws; rather, it is an action founded on a common law tort, and federal jurisdiction rests solely upon diversity of citizenship. Alternatively, Koratron argues that even if the suit is for patent infringement, the record supports the laying of venue in the Northern District of California.

Koratron holds two process patents dealing with the manufacture of permanent press garments. It has licensed some 200 garment makers to practice the patents upon payment of royalties. Milliken manufactures fabrics ('Visa,' 'Milstar,' and 'Milliset'), which are sold to garment makers who, in turn, may use the fabrics to make permanent press garments.

In its original complaint, Koratron alleged the following controversy between it and Milliken: Milliken claims that by using its Visa, Milstar, and Milliset fabrics a garment manufacturer can in all other respects follow one of the Koratron process patents without falling within the scope of that patent, which claim Koratron denies; Milliken threatens to tell Koratron's licensees that they can avoid paying royalties to Koratron by using Milliken's fabrics, unless Koratron acknowledges in writing that the use of Milliken's fabrics is outside the scope of the patent; Milliken had already advised one or more of Koratron's licensees to that effect; and Milliken's purpose in these actions was to induce the licensees not to pay royalties to Koratron. Koratron prayed for judgment declaring, inter alia, that the scope of its patent includes the making of garments from the described Milliken fabrics, that Milliken be enjoined from asserting to the contrary, and that it be awarded compensatory damages for its loss of royalties and $5,000,000 punitive damages.

Thereafter Koratron filed an amendment to its complaint to include an after-acquired improvement patent and to add averments that Milliken also claims 'that non-licensees of Koratron will escape being guilty of infringement of the patent by using Visa, Milstar or Milliset.' (Emphasis added.)

Milliken moved (1) to dismiss the action, (2) to stay it pending adjudication of an action filed in the Southern District of New York by Milliken against Koratron to declare Koratron's patents invalid or, alternatively, not infringed, or (3) to transfer it to the Southern District of New York. Milliken's suit against Koratron was filed one day after Koratron filed this action against Milliken. After the District Court entered its order denying Milliken's motion, Milliken abandoned that part of its motion seeking a dismissal in order to preserve the discovery thus far completed. The New York action has been stayed pending disposition of this appeal.

The central issue is the proper characterization of Koratron's complaint. If it is a 'civil action for patent infringement' the narrow venue provisions of section 1400(b)...

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