Wallace & Tiernan Inc. v. General Electric Company

• Decision Date: 07 October 1968
• Docket Number: No. 67 Civ. 4991.,67 Civ. 4991.
• Citation: 291 F. Supp. 217
• Parties: WALLACE & TIERNAN INC., Plaintiff, v. GENERAL ELECTRIC COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

291 F. Supp. 217

WALLACE & TIERNAN INC., Plaintiff, v. GENERAL ELECTRIC COMPANY, Defendant.

No. 67 Civ. 4991.

United States District Court S. D. New York.

October 7, 1968.

McLean, Morton & Boustead, New York City, for plaintiff, J. Donald Tierney, Cooper, Dunham, Henninger & Clark, New York City, of counsel.

Davis, Hoxie, Faithfull & Hapgood, New York City, for defendant, John Hoxie, James E. Ryder, John E. Nathan, New York City, of counsel.

OPINION

FRANKEL, District Judge.

Defendant, General Electric Company, holds as assignee a patent, No. 2,888,424, granted in 1959, which is adequately described for present purposes in defendant's Memorandum (p. 2) as being "directed to a curable, cross-linkable composition of (1) polyethylene (2) a defined peroxide and (3) a specified filler. Its claims cover that three-membered composition, before and after curing, and the process of curing such a composition." (Defendant's emphasis.) All United States manufacturers of such compositions have taken licenses under the patent. The overwhelming majority of these compositions have been produced with dicumyl peroxide (or "Dicup" as it is said to be "commonly" known) as the curing agent. There is no quarrel between the parties arising directly from that undisputed state of affairs.

However, a controversy—or, more properly for our context, an alleged controversy —has arisen in connection with plaintiff's development (as licensee or owner of certain other patents) of some so-called polyperoxides, a process of curing polyethylene with such polyperoxides, and polyethylene compositions capable of being so cured. Of specific and immediate interest are plaintiff's polyperoxide products which go by the trade names Lupersol 101 and Lupersol 130. According to defendant, the use of either Lupersol as curing agent for a composition otherwise covered by defendant's patent would fall within the claims of the patent. According to plaintiff, the composition produced with Lupersol is outside the patent. Furthermore, plaintiff asserts, if the patent is construed to cover compositions made with Lupersol, it is invalid for unlawfully excessive breadth in its claims. In addition, plaintiff makes a familiar array of attacks upon the validity of defendant's patent—for lack of novelty, obviousness, etc.

Defendant has insisted in dealing with its licensees that use of Lupersol for the composition in question falls within the patent. Defendant has demanded and collected royalties from its licensees for compositions thus produced.¹ One or two of the licensees have either failed to pay such royalties or expressed disagreement with defendant's position or both. But the licensees—because, plaintiff says, they are "fearful" when they confront defendant's "position of dominance"—have refrained from a direct challenge to defendant, and plaintiff's efforts over the past eight years to induce potential customers to use Lupersol have been unsuccessful. Instead, the licensees have deferred to defendant's view that the use of Lupersol requires their payment of royalties under the '424 patent. And since the cost of royalties renders Lupersol noncompetitive with Dicup, plaintiff is deprived of "the chief or principal market" for its product.

Alleging most or all of the foregoing facts,² plaintiff brought this suit for declaratory and injunctive relief based upon its contentions that defendant's patent is, on the theories already mentioned, invalid and not infringed where Lupersol is used. In addition, there is a standard prayer for "other and further relief" plus costs "and a reasonable attorney's fee." The court's jurisdiction is invoked not only under the patent laws but on grounds of diverse citizenship—a point of some interest to be noted again later on.

Defendant has moved to dismiss for want of a justiciable controversy. While its motion papers suggest some actual or incipient differences with plaintiff over matters of fact, defendant's essential view is that on essentially undisputed facts the action does not constitute the kind of "actual controversy" (28 U.S.C. § 2201) over which this court may or should assume jurisdiction. The court finds it unnecessary to resolve definitively the few divergences in the parties' views of (or emphases concerning) the facts. On the broad and undisputed outlines of their business, economic and legal positions, defendant's motion must be denied.

I.

To summarize it in defendant's words, the thesis of the motion is as follows:

"There are two requirements for a `controversy' in a declaratory action against a patent. First, the declaratory plaintiff's conduct, present or intended, must infringe the patent. Second, the patent owner must have charged the plaintiff with infringement. * * * The Complaint in this action does not allege anything to support either of those two requirements."³

Both of these assertedly indispensable propositions are erroneous, or at least excessively broad; neither can serve to bar the adjudication plaintiff seeks.

Defendant's first proposed requirement—that the conduct of the plaintiff seeking the declaration "must infringe the patent"—appears to be overstated in a fairly obvious and perhaps unintended way. It is familiar and appropriate practice for a plaintiff to seek a declaration that he is not infringing a patent along with (or even in lieu of) a judgment holding the patent invalid. See, e. g., Ostow & Jacobs, Inc. v. Morgan-Jones, Inc., 180 F.Supp. 38 40 (S.D.N.Y.1959). Plaintiff, therefore, proceeds on a perfectly acceptable course when, far from alleging, it denies infringement of defendant's patent by the use of Lupersol. Cf. Japan Gas Lighter Ass'n v. Ronson Corp., 257 F.Supp. 219, 239-241 (D.N.J.1966). A victory on this thesis would be no less genuine and proper as an objective than a similar result rejecting a suit by the patentee, without reaching validity, on the ground of non-infringement. See, e. g., cases collected by Judge Clark concurring in Cover v. Schwartz, 133 F.2d 541, 551 (2d Cir. 1943).

The meaningful and substantial difficulty is presented by defendant's second proposition—that "the patent owner must have charged the plaintiff with infringement." (Emphasis added.) Despite the parties' differences in characterizing some of the events, it is not really disputed that defendant has never charged plaintiff with infringement or contributory infringement or inducement of infringement. Furthermore, there is not much force in plaintiff's insistence that defendant's construction of the patent in suit would lead in law to a finding of contributory infringement or unlawful inducement by plaintiff. Defendant not only demonstrates the absence of any such charge in the past; it announces flatly and unequivocally that it will never make such charges against plaintiff in the future based upon any actions of the kind plaintiff may foreseeably take with respect to the making, promotion, and purveying of its Lupersol products. Accordingly, if plaintiff's concern arose only from its own prospective liability in a suit against itself by the present defendant, the motion to dismiss would have to be granted. For defendant's repeated and unambiguous disclaimers in support of the motion would surely protect plaintiff in the unlikely event of an attempt to retract them at some future time. See Lukens Steel Co. v. American Locomotive Co., 197 F.2d 939 (2d Cir. 1952); General Electric Co. v. Sciaky Bros., Inc., 187 F.Supp. 667, 672, 674 (E.D.Mich.1960), aff'd, 304 F.2d 724 (6th Cir. 1962); Aralac, Inc. v. Hat Corporation of America, 64 F.Supp. 696, 698 (D.Del. 1946), aff'd, 166 F.2d 286 (3d Cir. 1948). Cf. Precision Instrument Manufacturing Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806, 814-816, 65 S.Ct. 993, 89 L.Ed. 1381 (1945).

The court has not tarried, therefore, over plaintiff's lengthy efforts to make out a case of contributory infringement or inducement of infringement against itself if defendant's patent position is sustained. Instead, the effort has been to focus upon the nature of the actual hurt plaintiff alleges and to appraise whether the declaratory judgment procedure is precluded in a case of this kind because plaintiff itself has not been and will not be accused or sued directly by the defendant patentee.

II.

Neither the precedents from the patent field nor (more importantly) the principles defining the "controversies" properly cognizable in the federal courts sustain defendant's view that the useful remedy of declaratory relief must always be confined to a plaintiff who has himself been charged or threatened as an infringer. Such charges or threats supply the clearest occasions, to be sure. But, as this case demonstrates, they do not exhaust the situations in which a live, genuine, concrete controversy over patent claims justifies a demand that the patentee defend in court the validity of his patent and his assertions about its scope.

To state them somewhat more particularly, plaintiff's basically uncontroverted contentions are that it has invested substantially in excess of $350,000 to develop Lupersol and uses therefor; that the chief potential use of the product (and perhaps the only one when the complaint was filed) is for the composition defendant claims to have embraced within its patent; that the potential customers for Lupersol, all licensed by defendant, are required by defendant to pay royalties upon quantities of the allegedly patented composition made with Lupersol; that the added cost of the royalties makes Lupersol noncompetitive with Dicup or other peroxides; that Lupersol is a superior curing agent, but that its superiority is insufficient to overcome that competitive disadvantage;⁴ that defendant's licensees are "dominated" by defendant because they would need the patent licenses for broad uses with materials other than Lupersol even if they found it expedient to enter upon substantial production using Lupersol, while defendant has...