Bendix Aviation Corporation v. Kury

• Decision Date: 17 January 1950
• Docket Number: Civ. A. No. 9652.
• Citation: 88 F. Supp. 243
• Parties: BENDIX AVIATION CORPORATION v. KURY.
• Court: U.S. District Court — Eastern District of New York

88 F. Supp. 243

BENDIX AVIATION CORPORATION v. KURY.

Civ. A. No. 9652.

United States District Court E. D. New York.

January 17, 1950.

Hughes, Hubbard & Ewing, New York City (Horace Dawson, Chicago, Ill., Charles C. Tillinghast, Jr., New York City, Dugald S. McDougall, Chicago, Ill., and Robert H. Harry, New York City, of counsel), attorneys for plaintiff.

Bartlett, Eyre, Keel & Weymouth, New York City (Richard Eyre, New York City, of counsel), attorneys for defendant.

BYERS, District Judge.

The plaintiff company, successor to the exclusive licensee under a written agreement last amended May 12, 1939, seeks a declaratory judgment to establish that certain devices which it makes and sells are not covered by the patents of the license in terms, or at least as properly construed.

The defendants are the two licensors, but one of them, Charles A. Brewer, is not a party to this action, service as to him having been quashed, and the action has since proceeded in all respects as though he had not originally been named as a defendant.

Motion for summary judgment dismissing the complaint has heretofore been denied (2 Cir., 85 F.Supp. 581) by Judge Kennedy.

The complaint seeks a declaration on the part of Bendix concerning its right to make and vend a vacuum powered cylinder, the office of which is to furnish power in an automobile to assist in operating the gear shift; and also and separately, a like device to perform a like function in the semiautomatic transmission element. For convenience, these are called the "Chevrolet device" and the "Chrysler device".

The cylinder in question is actuated in response to the partial vacuum created in the intake manifold of the engine.

It is asserted that the device falling within the coverage of the license agreement had to do with a vacuum actuated cylinder which supplied power to assist in the engagement of the clutch, and that the Brewer patents are not infringed in respect of these two other and different mechanisms.

The cause went to trial and all of the plaintiff's testimony on the merits was taken, as well as that offered in connection with the legal issues about to be stated; the defendant Kury did not take the stand, and in effect rested by tendering no evidence on the merits, confining his proof to matters of record.

The defendant's argument is that this Court will not reach a consideration of the patent coverage under the license agreement, namely, the issues of infringement and validity if some of the defendant's patents were to be accorded the scope claimed for them, by reason of the substantial questions of law which constitute a series of road blocks to a course which otherwise would lead to a decision on the merits.

It will be convenient to list them as they were stated in the motion to dismiss or for summary judgment for the defendant, at the close of the case:

1. That Charles A. Brewer, a co-owner of the patents comprehended in the license agreement, is an indispensable party, whereby no effective adjudication of this cause is possible.

2. That the original licensee, Bragg-Kliesrath Corporation, a New York corporation, to be called B-K, is an indispensable party; and that it was not joined in order to avoid the objection that diversity of citizenship between the plaintiff and that corporation is lacking.

3. No judgment herein "would necessarily determine the entire controversy inasmuch as any decision in part or in whole favorable to the defendant would require reliance upon the judgment in the state court to determine the recovery to which the defendant may be entitled". The reference is to a suit in the Supreme Court of New York in which Brewer and Kury were plaintiffs and Bendix Aviation Corporation and Bragg-Kliesrath Corporation (the original licensee) were defendants, in which the plaintiffs recovered a judgment for royalties on the theory that the defendants named had breached the contract set forth in the same license agreement, by failing to pay royalties upon the said devices concerning which the plaintiff here seeks declaratory judgment as above stated. The judgment in that case was rendered September 30, 1949, and is said now to be on appeal to the Appellate Division First Department.

The legal effect of that judgment presents one of the searching issues in this cause. Cf. MacGregor v. Westinghouse Electric & Manufacturing Co., 329 U.S. 402, particularly at page 407, 67 S.Ct. 421, 423, 91 L.Ed. 380.

4. The controversy stated in this complaint was in issue in the state cause when this complaint was filed, whereby a declaratory judgment here would constitute a vexatious and gratuitous interference with the orderly disposition of that litigation, and a misuse of the declaratory judgment procedure contemplated by the federal act. 28 U.S.C.A. §§ 2201, 2202. Reliance is had upon expressions occurring in the opinion of the Court in Brillhart v. Excess Ins. Co., 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620, rather than upon any resemblance to the issues discussed.

5. This plaintiff is estopped from presenting its cause since:

A. The license agreement is an existing contract which provides not only for protection against infringement suits by the patentees, but the right to sue other alleged infringers.

B. No ruling respecting invalidity or restricted scope of the patent claims by a court of competent jurisdiction could be effective upon a preexisting royalty obligation.

C. This agreement in terms required the licensee to obtain full patent protection on all inventions covered by the agreement.

In this connection, it should be stated that when the agreement was written it recited, by number, six applications for patents then pending in the Patent Office, and provided that all of said applications "shall be solicited by counsel" for the licensee which agreed "to use its best efforts to obtain full patent protection on all inventions covered by this agreement".

From this, it is to be seen that the licensee's present attempt to limit the scope of the patents as issued, seems to put it in an equivocal position.

6. This action was commenced after an unnecessary delay in an effort to prevent an orderly disposition of the state court litigation, to obtain a different jurisdiction from that selected by the licensors and thus to gain a possible benefit through res judicata as to the state litigation.

The plaintiff herein is a Delaware Corporation, and the defendant Kury is a citizen of New York, residing in this district. The said Brewer is a citizen of Connecticut, where he resides.

Bragg-Kliesrath Corporation (called B-K) is a New York corporation, and was the original licensee.

Bendix Aviation Corporation owns all the stock of Bendix Products Corporation and also of B-K, which it acquired in 1930, the year before the license agreement in its original form was entered into.

It is deemed to have been shown for present purposes, which is intended to be less than a finding of fact, that in 1932 all of the assets and properties of B-K, except an account receivable from Bendix Aviation Corporation, were transferred to Bendix Products Corporation; and that in 1938 the latter conveyed all of its assets to the Aviation Corporation; it is in all respects likewise deemed to have been shown, therefore, that Bendix Aviation Corporation succeeded to this license agreement, and has assumed all obligations thereunder since 1940. This means that it has paid license fees to Kury and Brewer upon devices which it concedes that it has made and sold under and by virtue of the license agreement.

On June 28, 1947, Kury and Brewer brought suit in the Supreme Court of New York against Bendix Aviation Corporation, henceforth to be called Bendix, and B-K, alleging default in the payment of royalties according to the terms and conditions of the license agreement. The pleadings in that case are imported into this record since the judgment roll is annexed to and forms part of the supplemental answer herein of Kury. The pleadings can be examined for a more extended description of the issues litigated in the state court action, which it will be recalled resulted in a judgment in favor of Kury and Brewer on September 30, 1949, following a jury trial.

The complaint herein was filed on January 10, 1949, and describes the controversy in paragraph 10 as involving the right of Bendix to make and sell the devices enumerated in paragraph 6, thus: "Defendants assert that Bendix has no right to make and sell said devices except on pain of incurring liability to them for royalties under said license agreement * * * Defendants have commenced an action in the Supreme Court, New York County, against Bendix and B-K directed to recovering judgment against Bendix and B-K for royalties alleged to be owing on account of past manufacture by Bendix of said devices enumerated in paragraph 6". Another action "to obtain an extension until 1952 of the royalty obligations under the aforesaid license agreement" is also averred. Those actions are said to "have created uncertainty with respect to the financial liabilities incidental to the manufacture and sale by Bendix of the devices enumerated in paragraph 6".

In paragraph 11, the defendants are said to have threatened a customer of Bendix to bring suit for patent infringement.

In passing, it is stated that there was no sufficient evidence offered to sustain that allegation.

The other allegations of the complaint in substance aver that the assertions of the defendants render Bendix "financially insecure" in respect to the sale of such devices (a claim which seems not to have been pressed), and present the threat that Bendix or its customers may be compelled to defend a multiplicity of suits by Kury and Brewer, wherefore a declaratory judgment at the behest of Bendix should be had, "clearly defining its right freely to make and sell the devices enumerated in paragraph 6 without obligation * * * to defendants on account thereof".

Under the...