N.V. Maatschappij Voor Industriele Waarden v. A. O. Smith Corp.

• Decision Date: 01 April 1976
• Docket Number: D,Nos. 618 and 681,s. 618 and 681
• Parties: , 1976-1 Trade Cases 60,807 N.V. MAATSCHAPPIJ VOOR INDUSTRIELE WAARDEN, Petitioner-Appellee, v. A. O. SMITH CORPORATION, Respondent, and Armor Elevator Company, Inc., Respondent-Appellant. ockets 75-7517 and 75-7580.
• Court: U.S. Court of Appeals — Second Circuit

Page 874

532 F.2d 874

190 U.S.P.Q. 385, 1976-1 Trade Cases 60,807

N.V. MAATSCHAPPIJ VOOR INDUSTRIELE WAARDEN, Petitioner-Appellee, v. A. O. SMITH CORPORATION, Respondent and Armor Elevator Company, Inc., Respondent-Appellant.

Nos. 618 and 681, Dockets 75-7517 and 75-7580.

United States Court of Appeals Second Circuit.

Argued Dec. 18, 1975.

Decided April 1, 1976.

William J. Pastore, New York City (Sacks, Montgomery, Molineaux & Pastore, New York City, of counsel), for respondent-appellant.

Ronald J. Offenkrantz, New York City (Kenneth Gliedman and Spitzer & Feldman, P. C., New York City, of counsel), for petitioner-appellee.

Before HAYS, TIMBERS and GURFEIN, Circuit Judges.

PER CURIAM:

Respondent-appellant Armor Elevator Company, Inc. (Armor) appeals from two orders of the United States District Court for the Southern District of New York, Dudley B. Bonsal, Judge, which directed Armor to arbitrate certain disputes it had with petitioner-appellee N. V. Maatschappij Voor Industriele Waarden (MVIW) arising out of a patent license and know-how agreement, and stayed further proceedings in the District Court pending completion of the arbitration.

The action below was commenced on June 24, 1975, with the filing by MVIW, pursuant to § 4 of the Federal Arbitration Act, 9 U.S.C. § 4, of a petition to compel arbitration of certain disputes which had arisen between Armor and MVIW concerning a patent license and know-how agreement which had been entered into by the parties on October 1, 1973. MVIW alleged (1) that Armor failed to perform its undertakings, pursuant to the agreement, to manufacture and sell gearless elevators employing the licensed patents and know-how, and that it failed to pay MVIW the royalties set forth in the agreement; (2) that it improperly attempted to disclose confidential know-how to third parties in violation of the agreement; and (3) that it engaged in a conspiracy to keep MVIW's products off the United States and Canadian markets. MVIW prayed that the court order arbitration of these disputes and that it enjoin Armor from disclosing any confidential know-how during the pendency of the arbitration proceedings. In response to this petition, Armor asserted that it had not agreed to submit any of the disputed issues to arbitration. It also counterclaimed for rescission and for damages, asserting that MVIW had not supplied Armor with sufficient know-how to permit Armor to manufacture the licensed elevators and that the patents licensed by MVIW infringed other patents owned by third parties.

In a decision dated July 24, 1975, Judge Bonsal determined that issues (1) and (2) set forth in MVIW's petition were properly subject to arbitration, but that issue (3) was not. By order entered on August 6, 1975, the court directed that Armor proceed to arbitration, and enjoined Armor from disclosure of know-how pending completion of the arbitration. ¹

MVIW moved on August 15, 1975, to dismiss Armor's counterclaims, or, in the alternative, to stay prosecution of the counterclaims pending arbitration.

On September 17, 1975, Armor filed an "Amended Answer, Counterclaim and Cross-Petition," in which it alleged, for the first time, that its agreement with MVIW was invalid because it violated the antitrust laws of the United States and § 340 of the New York General Business Law. ² Armor asserted that the agreement illegally divided world markets and imposed upon purchasers illegal resale restrictions, and that it improperly forbade disclosure by Armor of certain know-how which was publicly known. Armor also repeated and amplified its claims that the patents licensed in the agreement were invalid and infringed valid patents owned by other parties, and further alleged that MVIW misused its patents and know-how in an attempt to exert monopoly control over the licensed products. Armor asserted that the issues raised in its amended answer were within the exclusive jurisdiction of the court and asked the court to stay the arbitration proceedings pending resolution by the court of these issues.

By order dated October 14, 1975, Judge Bonsal stayed all further proceedings in the District Court until the completion of the arbitration proceedings. In an endorsement to this order, Judge Bonsal stated that the antitrust issues raised by Armor would remain with the court.

Armor appeals from both orders of the District Court, entered on August 6, 1975, and October 14, 1975.

We first must consider whether we have jurisdiction to hear these appeals. It is clear that the order to arbitrate is appealable since it constituted a final judgment in an independent proceeding commenced by a petition to compel arbitration. See 9 Moore, Federal Practice P 110.20(4.-1)(1); Farr & Co. v. Cia. Intercontinental de Navegacion de Cuba, S.A., 243 F.2d 342, 344- 45 (2 Cir. 1957) (Swan, J.); Krauss Bros. Lumber Co. v. Louis Bossert & Sons, Inc., 62 F.2d 1004, 1005 (2 Cir. 1933) (L. Hand, J.). As Judge Timbers stated in Interocean Shipping Co. v. National Shipping & Trading Corp., 462 F.2d 673, 675 n. 3 (2 Cir. 1972):

"An order compelling arbitration under § 4 of the Federal Arbitration Act is a final order and is appealable under 28 U.S.C. § 1291 (1970). Hellenic Lines, Ltd. v. Louis Dreyfus Corporation, 372 F.2d 753, 754 (2 Cir. 1967); Chatham Shipping Co. v. Fertex S. S. Corp., 352 F.2d 291, 294 (2 Cir. 1965)."

Since the order to arbitrate is appealable, the ancillary relief staying the action pending the arbitration is also appealable. As Moore has stated, "once a case is lawfully before a court of appeals, it does not lack power to do what plainly ought to be done." 9 Moore, supra, P 110.25(1), at 273; see, e. g., Semmes Motors, Inc. v. Ford Motor Co., 429 F.2d 1197, 1201 (2 Cir. 1970); Shapiro, Bernstein & Co. v. Continental Record Co., 386 F.2d 426, 427 (2 Cir. 1967). We therefore turn to the merits.

We find that the District Court properly directed that the first two claims raised by MVIW in its petition be submitted to arbitration. Although the District Court did not specifically consider the question, we agree with appellant that its claims relating to the validity of MVIW's United States patents should be determined by the court and are not arbitrable. See Beckman Instruments, Inc. v. Technical Development Corp., 433 F.2d 55, 62-63 (7 Cir. 1970), cert. denied, 401 U.S. 976, 91 S.Ct. 1199, 28 L.Ed.2d 326 (1971); Diematic Manufacturing Corp. v. Packaging Industries, Inc., 381 F.Supp. 1057, 1061 (S.D.N.Y.1974), appeal dismissed, 516 F.2d 975 (2 Cir.), cert. denied, 423 U.S. 913, 96 S.Ct. 217, 46 L.Ed.2d 141 (1975).

We disagree, however, with appellant's assertion that the existence of antitrust and patent issues which must be decided by the court inevitably...