Hartford National B. & T. Co. v. Henry L. Crowley & Co.

Decision Date11 February 1955
Docket NumberNo. 11369.,11369.
Citation219 F.2d 568
PartiesHARTFORD NATIONAL BANK & TRUST COMPANY, Trustee, and Philips Laboratories, Inc., Appellants, v. HENRY L. CROWLEY & COMPANY, Inc.
CourtU.S. Court of Appeals — Third Circuit

Arthur G. Connolly, Wilmington, Del. (William A. Consodine, Crummy, Consodine & Gibbons, Newark, N. J., Thomas Cooch, Connolly, Cooch & Bove, Wilmington, Del., on the brief), for appellants.

Thomas F. Reddy, Jr., New York City (Shanley & Fisher, Newark, N. J., Pennie, Edmonds, Morton, Barrows & Taylor, Willis H. Taylor, Jr., Sullivan & Cromwell, Henry N. Ess, III, New York City, on the brief), for appellee.

Before GOODRICH, STALEY and HASTIE, Circuit Judges.

STALEY, Circuit Judge.

Philips Laboratories, Inc., is the exclusive licensee of certain patents owned by the Hartford National Bank and Trust Company as trustee for N. V. Philips' Gloeilampenfabrieken et al., a corporation of The Netherlands.

Philips charged Henry L. Crowley & Company, Inc., with infringement of some of these patents, whereupon Crowley brought actions in the District Court for the Southern District of New York against Philips and Hartford, requesting declarations of noninfringement and invalidity of the patents.1 Hartford, the trustee-owner of the patents, was not amenable to service in New York, and was not made a party to the action. Philips, without joining Hartford, filed a counterclaim, alleging infringement by Crowley. Philips also alleged that it was an exclusive licensee with the right to prosecute infringers. While the New York action was pending, Philips, along with Hartford, commenced an action in the federal district court of New Jersey against Crowley, from which this present appeal was taken. An amended complaint in the New Jersey action contained two counts. The first count charged that Crowley had infringed three of plaintiffs' patents and sought an injunction against further infringement and general damages for past infringement. The three patents were among the patents which were in issue in the pending New York action. The second count requested a declaratory judgment that a patent owned by Crowley was invalid.2 Acting upon motions by the defendant Crowley, the district court stayed all proceedings on count one, pending disposition of the New York action and dismissed count two because the allegations did not present an actual controversy. A motion by the plaintiffs asking that Crowley be enjoined from prosecuting the New York declaratory judgment action was denied.3

We will first consider the dismissal of the second count. In the second count of their complaint, plaintiffs allege that the defendant Crowley, when confronted with a charge of infringing plaintiffs' three patents, made defensive assertions in reply which contained an implicit charge that the operations of plaintiffs' licensees infringed the Crowley patent and were not within the scope of Philips' patent.

The defensive assertions made by Crowley were that Crowley's products did not infringe Philips' patents but were described and protected by Crowley's own patent, and the composition and method described in the Crowley patent did not infringe Philips' patent. These are the only assertions allegedly made by Crowley.4

Philips reasons that since its complaint alleged that the products of its licensees are similar or identical to Crowley's products, Crowley's alleged assertion that the Crowley products were protected by the Crowley patent has the effect of charging that the products of Philips' licensees infringe the Crowley patent, and that the products of Philips' licensees are not within the scope of Philips' patents. This, they say, jeopardizes Philips' royalty agreements with its licensees and entitles them to a declaratory judgment.

But there is no allegation that Crowley ever asserted that the products of Philips' licensees are identical to Crowley's products. If anything, Crowley's assertions implicitly deny any similarity. The identity of products is claimed by Philips, not Crowley. Because of its belief, Philips may fear that at some time in the future Crowley may also think the products are identical and at that time might charge infringement by Philips' licensees, but that has not happened yet, so far as we know from the complaint's allegations. Philips' fears are merely conjectural. By no twist of logic or words can Crowley's alleged assertions alone be read to mean what Philips insists they mean.

Though it be true, as Philips points out, that a charge of infringement or threat of suit by a patentee may be craftily phrased and need not be given directly, Treemond Co. v. Schering Corp., 3 Cir., 1941, 122 F.2d 702; Dewey & Almy Chemical Co. v. American Anode, Inc., 3 Cir., 1943, 137 F.2d 68, such is not the case here. We can find no charge or threat in Crowley's alleged assertions, and without such charges or threats Crowley's patent cannot be the subject matter of a controversy which can sustain a declaratory judgment action. See Treemond Co. v. Schering Corp., supra, 122 F.2d at page 705; Dewey & Almy Chemical Co. v. American Anode, Inc., supra, 137 F.2d at page 70.

Whether or not the district court abused its discretion in refusing to enjoin Crowley from prosecuting the New York action is the question raised as to count one. Philips says that the New Jersey action should not have been stayed pending disposition of the New York action because (1) the Crowley patent is not in issue in the New York action and therefore only the New Jersey district court can adjudicate all the issues between the parties; (2) the New Jersey forum is more convenient for the parties; and (3) Hartford, an indispensable party, is not a party to the New York action but is a party in the New Jersey action.

Since we decide that the Crowley patent is not properly in issue in the New Jersey district court, the first reason assigned by Philips need not detain us. Philips has also failed to show any abuse of discretion by the district court in concluding that the New York forum is as convenient as the New Jersey forum.5

Whether Hartford is an indispensable party to the New York action is the only other question, and we think that it was correctly decided by the district court.

By an agreement of January 1, 1951, which is set out in full in the margin,6 Hartford granted to Philips "an exclusive license for the life of such patents to make use and sell devices using such patents and patent applications, including the right to grant exclusive and nonexclusive licenses to third parties."

By its terms the agreement was to terminate in 1960. Because of this termination date, Philips contends that Hartford has such an interest in the patents that it is an indispensable party. But although the agreement terminates in 1960, until that time Philips is free to grant exclusive licenses for the life of the patents. This is quite clear from the terms of the agreement. Since Philips has an exclusive license as to the patents (at least until 1960) and until that time is free to grant exclusive licenses to third parties, we do not feel that Hartford's interest is sufficient to make it indispensable to the New York action. Hartford's interest is contingent and future, because if Philips should grant exclusive licenses for the life of the patents, in 1960, when Philips' authority terminates, Hartford's interest, if any, would be limited to possible royalties.

In Waterman v. Mackenzie, 1891, 138 U.S. 252, 256, 11 S.Ct. 334, 34 L.Ed. 923, the Supreme Court said that if a patentee grants an exclusive license for life, limited as to territory, the patentee is not an indispensable party to a suit involving the patent. Here, the limitation is as to time, rather than territory, but if the patentee is not indispensable although he has a present interest which may be territorially very significant, he should not be indispensable when his interest is only a contingent future interest.

There was no abuse of discretion by the district court in staying the New Jersey action and refusing to enjoin prosecution of the New York action. The judgment of the district court will be affirmed.

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