Kahn v. General Motors Corp.

• Decision Date: 17 November 1989
• Docket Number: No. 89-1325,89-1325
• Citation: 12 USPQ2d 1997,889 F.2d 1078
• Parties: Leonard R. KAHN, Plaintiff-Appellant, v. GENERAL MOTORS CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1078

889 F.2d 1078

12 U.S.P.Q.2d 1997

Leonard R. KAHN, Plaintiff-Appellant, v. GENERAL MOTORS CORPORATION, Defendant-Appellee.

No. 89-1325.

United States Court of Appeals, Federal Circuit.

Nov. 17, 1989.

Leonard R. Kahn, New York City, pro se.

James S. Renard, Bickel & Brewer, Chicago, Ill., argued for defendant-appellee. With him on the brief was Robert P. Cummins.

Before NEWMAN, Circuit Judge, SKELTON, Senior Circuit Judge, and ARCHER, Circuit Judge.

PAULINE NEWMAN, Circuit Judge.

Leonard R. Kahn appeals the order of the United States District Court for the Southern District of New York, ¹ granting General Motors' motion to stay the action before it, in favor of an action subsequently filed against Kahn and Hazeltine Research Inc. by Motorola, Inc. in the United States District Court for the Northern District of Illinois. We vacate the stay and remand for further proceedings.

Background

Leonard R. Kahn is the inventor of United States Patent No. 4,018,994 ("the '994 patent"). The action here appealed (called "the New York action") was commenced by Mr. Kahn on April 29, 1988. He charged General Motors with infringement of claims 53 and 54 of the '994 patent based on General Motors' manufacture and sale of certain AM stereo receivers, and by amended complaint he also charged General Motors with certain tortious conduct in respect of Kahn's AM stereo broadcast transmission system. Kahn sought a preliminary and final injunction and damages.

On May 27, 1988 Motorola filed a declaratory judgment action in Illinois ("the Illinois action") against Kahn and Hazeltine Research, Kahn's licensee, seeking judgment that the '994 patent is invalid, unenforceable, and not infringed by Motorola or by AM stereo receiver manufacturers, such as General Motors, that incorporate certain integrated circuits into their AM stereo receivers.

On June 10, 1988, at General Motors' request, the district court in the New York action issued an Order to Show Cause why the New York action should not be stayed pending final determination of the Illinois action. ² At a hearing on August 12, 1988 Kahn was enjoined from conducting discovery in the New York action, as to either the patent infringement or the state tort claims.

The New York action was ordered stayed in all respects, the New York court holding that this was merely a "customer suit" against General Motors; that all issues would be settled in the litigation with Motorola in Illinois, as to all potential and actual infringers; and that the balance of convenience did not bar the stay.

I

General Motors raises the threshold question of whether the district court's stay of the New York action is a final decision or otherwise an appealable order.

In Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co., 342 U.S. 180, 72 S.Ct. 219, 96 L.Ed. 200 (1952), the Supreme Court discussed the principle of choice of federal forum, in a case analogous to that at bar in that a declaratory judgment action was brought in a different forum by the manufacturer, after the patentee had sued a customer for infringement. The Court, while endorsing the discretionary authority of trial courts to determine the applicability of exceptions to the general rules governing choice of forum, remarked that such authority is subject to "corrective review". Id. at 185, 72 S.Ct. at 222. The Court stated:

The manufacturer who is charged with infringing a patent cannot stretch the Federal Declaratory Judgments Act to give him a paramount right to choose the forum for trying out questions of infringement and validity. He is given an equal start in the race to the courthouse, not a headstart.

Id.

Kahn argues that the district court, by staying the New York action for a prolonged and indefinite period, not only denied his request for a preliminary injunction against General Motors, but barred prosecution of his tortious conduct claims until, at best, completion of the Illinois action. He asserts irreparable harm, based on the demise of his business, and invokes the safeguard of 28 U.S.C. Sec. 1292(a). See Gulfstream Aerospace Corp. v. Mayacamas, 485 U.S. 271, 108 S.Ct. 1133, 1142-43, 99 L.Ed.2d 296 (1988) (section 1292(a) applies to orders that grant or deny injunctions or have the practical effect of granting or denying injunctions). Alternatively, he argues that the effect of the stay order is that of a final decision on the merits, and appealable under 28 U.S.C. Secs. 1291 and 1295.

We test the circumstances at bar against the criteria set forth in Carson v. American Brands, Inc., 450 U.S. 79, 84, 101 S.Ct. 993, 996, 67 L.Ed.2d 59 (1980), requiring that an interlocutory order (in that case refusal to enter a proposed consent decree) have " 'serious, perhaps irreparable, consequence' ", and not be " 'effectually challenged' " other than by immediate appeal. Id., (quoting Baltimore Contractors v. Bodinger, 348 U.S. 176, 181, 75 S.Ct. 249, 252, 99 L.Ed. 233 (1955)); Woodard v. Sage, 818 F.2d 841, 848-49, 2 USPQ2d 1649, 1654 (Fed.Cir.1987) (in banc). In Volvo N. Am. Corp. v. Men's Int'l Prof'l Tennis Council, 839 F.2d 69, 73 (2d Cir.), cert. denied, --- U.S. ----, 108 S.Ct. 2872, 101 L.Ed.2d 908 (1988), the court, applying Carson, held that an order dismissing certain antitrust counts was immediately appealable, for it had the practical effect of denying injunctive relief as to these counts, and delaying litigation of these counts until conclusion of potentially lengthy litigation on other matters would cause irreparable harm. The facts in Volvo track those herein, in that the stay of prosecution of Kahn's commercial tort claims until resolution of the Illinois action has the effect of denial of injunctive relief as to these claims, and leaves him without remedy. Kahn states that by the time the Illinois action is over his business will be dead. This serious, perhaps irreparable consequence, together with the inapplicability of the "customer suit exception" in this case (as will be discussed), and the effective denial of the possibility of either preliminary or final injunctive relief against General Motors as to the patent claims of which infringement is charged (as will be discussed), require interlocutory review of the stay order.

Decrees staying an action based on an erroneously applied customer suit exception to the rules disfavoring stays have, without more, uniformly received interlocutory review. William Gluckin & Co. v. International Playtex Corp., 407 F.2d 177, 177-78, 160 USPQ 513, 513 (2d Cir.1969), was an interlocutory appeal of an order enjoining prosecution of a first-filed suit against Woolworth Company pending resolution of a second-filed declaratory action brought by Gluckin, the manufacturer of the allegedly infringing goods. Similarly, Mattel, Inc., v. Louis Marx & Co., 353 F.2d 421, 422, 147 USPQ 506, 507 (2d Cir.1965), cert. dismissed, 384 U.S. 948, 149 USPQ 906, 86 S.Ct. 1475, 16 L.Ed.2d 546 (1966), was an interlocutory appeal of an order restraining prosecution of a first-filed declaratory action relating to patent and trademark infringement pending resolution of a second-filed action. ³ There is no functional distinction between a stay of the first-filed suit and an injunction against prosecution of the first-filed suit.

Recognition must be given to the strong public policy favoring expeditious resolution of litigation. The case before us is not a matter of an "order by a federal court that relates only to the conduct or progress of litigation before that court", ordinarily not having the effect of an injunction and therefore not appealable under Sec. 1292(a)(1). Gulfstream, 108 S.Ct. at 1138; see Switzerland Cheese Ass'n. v. E. Horne's Mkt., 385 U.S. 23, 25, 87 S.Ct. 193, 195, 17 L.Ed.2d 23 (1966). To the contrary: litigation that has been stayed for a prolonged or uncertain period is not litigation in progress before the court.

Kahn's claims against General Motors involving allegedly tortious conduct concerning Kahn's AM stereo broadcast transmission system are not based on the '994 patent. The Illinois case, brought by Motorola, includes no jurisdiction over General Motors. The potential lengthy and indefinite stay of these claims pending resolution of an entirely different issue involving different parties will deprive these claims of practical remedy. It is the duty of courts to avoid unnecessary delay in resolving the rights of litigants. "[A]n order which is to continue by its terms for an immoderate stretch of time is not to be upheld as moderate because conceivably the court that made it may be persuaded at a later time to undo what it has done." Landis v. North Am. Co., 299 U.S. 248, 257, 57 S.Ct. 163, 167, 81 L.Ed. 153 (1936).

We conclude that the district court's final Order staying the litigation before it is an appealable order.

II

General Motors argues that even if the stay order is appealable, the New York district court acted within its discretionary authority in staying the proceeding before it, pending the outcome of Motorola's Illinois action. Kahn responds that his primary right to choose the forum, the balance of hardship, and the court's erroneous belief that the Illinois court would resolve his disputes with General Motors, show that the New York court did indeed abuse its discretion.

Kahn states that Motorola is not infringing the '994 patents; that the Illinois suit can not resolve his claims of patent infringement against General Motors; that in all events it will not resolve his state tort claims against General Motors; that even if Kahn were to prevail in Illinois, that court can not provide relief because General Motors is not a party in Illinois; and that irreparable harm will result if he is delayed indefinitely in resolving his claims against General Motors.

The General Rule

The general rule, and the rule in the Second Circuit, is that "as a principle of sound judicial administration, the first suit should have priority," absent special...