Atlas Imperial Diesel Engine Co. v. Lanova Corporation

• Citation: 79 F. Supp. 1002
• Decision Date: 24 August 1948
• Docket Number: Civil Action No. 980.
• Parties: ATLAS IMPERIAL DIESEL ENGINE CO. v. LANOVA CORPORATION.
• Court: U.S. District Court — District of Delaware

79 F. Supp. 1002

ATLAS IMPERIAL DIESEL ENGINE CO. v. LANOVA CORPORATION.

Civil Action No. 980.

United States District Court D. Delaware.

August 24, 1948.

C. S. Layton, of Richards, Layton & Finger, all of Wilmington, Del., for plaintiff.

Hugh M. Morris and S. Samuel Arsht. of Morris, Steel, Nichols & Arsht, all of Wilmington, Del., Denis B. Sullivan, of New York City, and Arthur H. Boettcher, of Chicago, Ill., for defendant.

LEAHY, District Judge.

This is an action in which the plaintiff, a Diesel engine manufacturer, seeks a judgment declaring a certain license agreement with defendant invalid; declaring that no claim of any of the 39 patents under license is infringed by plaintiff's engines of a design upon which plaintiff has paid royalties to defendant under the license agreement; and further declaring that each of the 39 license patents is invalid. In addition, plaintiff seeks a judgment requiring defendant to refund all monies paid to plaintiff as royalties plus interest from date of payment. Plaintiff also prays for an injunction enjoining defendant from charging plaintiff or its customers with infringement of the license patents or from bringing suit against them under the patents.

Plaintiff and defendant are both Delaware corporations and jurisdiction is asserted under the patent laws "concerning the validity of Letters Patent of the United States and the question of their infringement by the plaintiff." It is also alleged that jurisdiction is conferred by the Declaratory Judgment Act.

Plaintiff claims that the license agreement is invalid because it "prohibits" plaintiff from manufacturing high speed types of Diesel engines having a piston displacement of more than 1,000 cubic inches, or aeroplane and passenger car engines and that such prohibition is in violation of the anti-trust laws. The part of the license contract which Atlas claims supports this provision provides: "* * * said license being limited to stationary, marine, industrial and automotive engines with a piston displacement of not more than 1000 cubic inches, aeroplane and passenger car engines excepted." To this complaint defendant filed a consolidated motion. The components of such motion are that the complaint should be dismissed for failure to state a claim upon which relief can be granted or for lack of jurisdiction over the subject matter; or summary judgment should be entered in favor of defendant and that if the complaint be not dismissed, to strike specified parts of it; for a more definite statement or bill of particulars and for an order of inspection of documents and engines made by plaintiff.

More specifically, defendant argues that the complaint is based on the assumption that the license agreement "prohibits" and since it does not prohibit, there is no cause of action stated. The defendant also urges that this suit, being one to set aside or cancel a license, is not a suit under the patent laws and hence the court is without jurisdiction since there is no diversity of citizenship. In support of its motion to dismiss, defendant filed an affidavit of its President. The affidavit states defendant has not at any time charged plaintiff with infringement of any claim of any of the 39 patents and it has no knowledge that plaintiff has ever manufactured or sold Diesel engines of any type or design other than those covered by the license agreement. The averments of the affidavit have not been refuted or counteracted.

To the claim of plaintiff for declaratory judgment as to whether engines of high speed type larger than 1,000 cubic inches displacement or for aeroplane or passenger automotive uses would infringe any claim of the license patents, defendant asserts that there is no allegation in the complaint that plaintiff has made or sold such an engine or that it intends presently to make or sell such engines and the allegation that it "is desirous" of making and selling such engines is insufficient to raise a controversy within the meaning of the Declaratory Judgment Act, 28 U.S.C.A. § 400.

To the allegation that such license patents were procured by fraud because the patentee knowingly claimed more than that of which he was the original inventor, defendant urges that plaintiff is not free to attack patents within the scope of the license and no facts are alleged showing a controversy outside the scope of a license.

It should be pointed out that two weeks prior to this action defendant brought an action in the Superior Court of New Castle County, Delaware, against plaintiff, to recover unpaid royalties due by plaintiff to defendant under the license agreement. In the State action special pleas to the declaration were demurred to. In sustaining the demurrers, Judge Carey held that the license agreement did not "prohibit" and that the contract did not restrain trade or competition. See Lanova Corp. v. Atlas Imperial Diesel Engine Co.,...