Honeywell, Inc. v. Metz Apparatewerke

• Decision Date: 24 September 1973
• Docket Number: No. 72--1987,72--1987
• Citation: 509 F.2d 1137,184 USPQ 387
• Parties: HONEYWELL, INC., Plaintiff-Appellant, v. METZ APPARATEWERKE, Defendant-Appellee. . Heard
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1137

509 F.2d 1137

184 U.S.P.Q. 387

HONEYWELL, INC., Plaintiff-Appellant, v. METZ APPARATEWERKE, Defendant-Appellee.

No. 72--1987.

United States Court of Appeals, Seventh Circuit.

Heard Sept. 24, 1973.

Decided Jan. 7, 1975.

Sheldon W. Witcoff, Chicago, Ill., for plaintiff-appellant.

Clarence J. Fleming, Chicago, Ill., for defendant-appellee.

Before FAIRCHILD, Circuit Judge, and KNOCH and O'SULLIVAN, ^* Senior Circuit Judges.

O'SULLIVAN, Senior Circuit Judge.

Plaintiff-appellant Honeywell, Inc. (Honeywell) brought this action under the Patent Act of 1952, 35 U.S.C. § 1 et seq., in the United States District Court for the Northern District of Illinois, alleging that the four named defendants had infringed two United States patents owned by plaintiff. Upon motion of one of the defendants, Metz Apparatewerke (Metz), appellee here, the District Court determined that it lacked personal jurisdiction over such appellee and dismissed the complaint as to it. Honeywell, Inc. v. Metz Apparatewerke, 353 F.Supp. 492 (N.D.Ill.1972). Insofar as this appeal is concerned, the validity of plaintiff's patents is not challenged by defendant-appellee Metz; neither does appellee deny that the products manufactured by it and distributed by its codefendants in the United States infringed plaintiff's patents.

We reverse and remand.

I. STATEMENT OF FACTS

Appellant Honeywell is a Delaware corporation with its principal place of business in Illinois. It is the assignee of United States Letters Patent No. 3,519,879 and United States Reissue Letters Patent No. 26,999, both of which cover an electronic photographic flash unit. Appellee Metz is a proprietorship organized under the laws of the Federal Republic of Germany, and produces computerized, electronic photographic flash units which are manufactured in West Germany and shipped to the United States f.o.b. West Germany, with instructions in English. The three defendants below that are not parties to this appeal are: (1) Ehrenreich Photo-Optical Industries (a New York corporation), and (2) Ehrenreich Photo-Optical Industries of Illinois, Inc., both United States distributors of Metz flash equipment, and (3) Bass Camera Company, a Chicago retailer of Metz flash units. The two Ehrenreich firms are separate corporate entities, the Illinois corporation being a wholly owned subsidiary of the New York corporation. The distinction, if any, between these two is not germane to this appeal. Therefore, Ehrenreich of New York and Ehrenreich of Illinois are referred to collectively herein as 'EPOI.'

In early 1970, Honeywell granted a license under its patents to two German companies--Rollei and Bauer-Borsch--under which the licensees were permitted to sell electronic flash units in the United States. In June of 1970, Metz began negotiating with Honeywell for a similar license, but negotiations ultimately reached an impasse, and in October, 1970, Metz informed Honeywell that '(s)ince a further delay cannot be accepted . . . I have decided to effect deliveries (of Metz units) to the United States immediately.' On August 24, 1970, Metz and EPOI had entered into an exclusive distribution agreement, and in November, 1970, after notifying Honeywell, Metz began to market various models of its allegedly infringing electronic flash units in the United States through EPOI. In December, 1970, and continuing since then, defendant Bass Camera Company has been selling such Metz products at retail, having purchased them from EPOI.

The August, 1970, distribution agreement between Metz and EPOI contained the following terms:

(1) Metz appointed EPOI its exclusive distributor of flash units and components within the United States.

(2) EPOI was to deal with its own customers and with Metz as an 'independent trader,' and was to bear all expenses arising from its business affairs.

(3) EPOI agreed to exploit its territory in the marketing of Metz flashes, to adequately publicize the units, and to provide after-sale repair service.

(4) EPOI was limited in the number of products it could sell in competition with Metz products. It could not export Metz products outside the granted territory, or delegate its sales obligation, or represent Metz in legal transactions.

(5) EPOI was held to a set quota of Metz products.

(6) Metz agreed to furnish publicity material to EPOI. EPOI was required to submit quarterly reports on its sales.

(7) Goods were to be delivered f.o.b. German seaport or German border, and EPOI assumed all transportation and insurance expenses thereafter incurred.

(8) Metz warranted its products as to merchantability. After-sale service and warranty repairs were to be done at EPOI's expense, with 3% of invoice net value to be credited to EPOI as reimbursement for such work.

(9) EPOI was granted certain trademark rights.

(10) Metz agreed to indemnify and hold EPOI harmless regarding any claims of patent infringement.

(11) Metz was granted the right to inspect EPOI premises and obtain information regarding EPOI's affairs.

(12) The parties had certain termination rights and obligations.

(13) The contract was not assignable.

(14) All contract provisions were to be interpreted according to German law, and Nuernberg was designated as the court of exclusive jurisdiction, unless Metz chose to use New York law and courts.

The record also shows that EPOI serviced and performed warranty work on Metz flash units in Chicago under the name of 'Metz Flash Service'; and, there was evidence also that on May 17, 1971, the following notice was published in an American trade journal, Photo Weekly:

To: ALL PHOTO RETAILERS

Re: METZ/MECABLITZ FLASH EQUIPMENT

It has come to our attention that rumors are being circulated throughout the trade to the effect that purchasers of the Metz MECABLITZ flash guns being distributed in this country by Ehrenreich Photo-Optical Industries, Inc. will be liable for damages because of alleged infringement of certain patents owned by Honeywell, Inc.

These rumors are totally without foundation.

Honeywell has instituted a suit in Chicago against Metz and Ehrenreich. Metz has agreed to indemnify and hold harmless Ehrenreich and its customers for any and all claims of patent infringement. The issues of validity of the Honeywell patents and their alleged infringement are being vigorously contested by the defendants in the Chicago litigation.

Ehrenreich Photo-Optical Industries, Inc.

Garden City, New York 11530. stHoneywell commenced suit against Metz on February 26, 1971, and on January 14, 1972, leave to file an amended complaint was granted. Insofar as this appeal is concerned, the amended complaint asserted, in summary, that Metz had infringed Honeywell's patents in violation of 35 U.S.C. § 271. On March 22, 1971, Metz moved to dismiss the complaint under Rule 12(b) of the Federal Rules of Civil Procedure, contending primarily that the court lacked in personam jurisdiction over Metz. ¹

After an amendment to the original complaint was allowed and filed, Metz renewed its motion to dismiss, and on September 6, 1972, the District Judge granted the motion reciting inter alia that:

'Metz does not have sufficient minimum contacts with the State of Illinois as to warrant this Court exercising in personam jurisdiction over it.

'This Court is of the opinion . . . that Metz has not transacted any business within the State of Illinois Consequently, this Court holds that Metz is not amenable to service under Illinois' 'long-arm' statute.' 353 F.Supp. at 495.

II. THE ISSUE ON APPEAL

Appellant contends that exercise of personal jurisdiction over Metz was warranted under a subsection of the Illinois long-arm statute, to-wit: Ill.Rev.Stat. Ch. 110, § 17(1)(b), which reads as follows:

' § 17. (Civil Practice Act, § 17). Act submitting to jurisdiction--Process

(1) Any person, whether or not a citizen or resident of this State, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person, and, if an individual, his personal representative, to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any such acts:

(b) The commission of a tortious act within this State;'

(Emphasis supplied.)

and that Metz was guilty of a 'tortious act within this State (illinois)' by virtue of 35 U.S.C. § 271(b) which provides that

'Whoever actively induces infringement of a patent shall be liable as an infringer.'

III. DID METZ COMMIT A TORTIOUS ACT IN ILLINOIS?

Infringement of a patent is a tort, which would bring Metz within the ambit of Ill.Rev.Stat. Ch. 110, § 17(1)(b) provided that, under the applicable patent law, Metz could be deemed an infringer, and provided that the infringement, if any, was 'committed' in Illinois. In Welch Scientific Co. v. Human Engineering Institute, Inc., 416 F.2d 32, 34 (7th Cir. 1969), cert. denied, 396 U.S. 1003, 90 S.Ct. 552, 24 L.Ed.2d 494 (1970), this Court said

'The Illinois long arm statute, Ill.Rev.Stat. Ch. 110, § 17, provides for service when a person or his agent has committed a 'tortious act' within the state. Here, defendant is charged with infringing plaintiff's patent, a tortious act, in Illinois.' 416 F.2d at 34.

In Carbice Corp. v. American Patents Development Corp., 283 U.S. 27, 33, 51 S.Ct. 334, 75 L.Ed. 819 (1931), the Supreme Court said

'Infringement, whether direct or contributory, is essentially a tort, and implies invasion of some right of the patentee.' 283 U.S. at 33, 51 S.Ct. at 336.

See also, Waltham Watch Company v. Hallmark Jewelers, Inc., 336 F.Supp. 1010, 1011 (N.D.Ill.1971).

Section 271(b), Title 35 U.S.C., upon which appellant relies, may be broadly described as an aiding and abetting statute, and was intended as part of a codification of the case law doctrine of 'contributory infringement.' This doctrine was developed at the end of the nineteenth century to prevent appropriation of the benefits of patented inventions through indirect means. 1952 U.S. Code...