Hook v. Hook & Ackerman

• Decision Date: 05 February 1951
• Docket Number: 10221.,No. 10182,10182
• Citation: 187 F.2d 52
• Parties: HOOK et al. v. HOOK & ACKERMAN, Inc.
• Court: U.S. Court of Appeals — Third Circuit

187 F.2d 52 (1951)

HOOK et al. v. HOOK & ACKERMAN, Inc.

Nos. 10182, 10221.

United States Court of Appeals Third Circuit.

Argued October 5, 1950.

Decided February 5, 1951.

COPYRIGHT MATERIAL OMITTED

William B. Jaspert, Pittsburgh, Pa., for C. Howard Hook et al.

Harry Price, New York City (William J. Powell, Pittsburgh, Pa., on the brief), for defendant-appellee, Hook & Ackerman.

Before ALBERT LEE STEPHENS, GOODRICH and STALEY, Circuit Judges.

STEPHENS, Circuit Judge.

The parent case here upon appeal was filed July 19, 1949. In 1938, C. Howard Hook, a resident of Pittsburgh, Pennsylvania, and Harold S. Ackerman, a resident of Larchmont, New York, together organized "Hook & Ackerman, Inc.", under the incorporation laws of Pennsylvania. In August of 1939, Ackerman applied for a patent appertaining to a gas boiler, and in the same month he granted a nonexclusive license to the corporation, Hook & Ackerman, Inc., to manufacture boilers in accordance with the invention. Also, in the same month and year, Ackerman transferred one-half interest in the invention to one McCance for the benefit of Hook, in consideration of Hook's aid and cooperation with the corporation in the development of business in connection with the invention. On June 6, 1940, the individuals Hook and Ackerman agreed together that neither would make any agreements, nor make, use or sell the invention embodied in the patent application without their mutual consent thereto in writing. The application for the patent is alleged to have ripened into an issued patent in July, 1941, numbered 2,247,796.

In 1942, the individuals Hook and Ackerman granted a nonexclusive license under the patent to Sears, Roebuck & Co. On September 28, 1945, Hook sold all of his interest in the corporation to one John F. Baier who, at time of suit, was president of the corporation Hook & Ackerman, Inc. On this same date Hook and Ackerman in a written instrument designated an "exclusive license," granted the corporation the exclusive right to make, use and sell products embodying the patented invention, subject to the license outstanding to Sears, Roebuck & Co., and the latter license by the same writing was transferred to the corporation. The same writing contained provisions for payment of royalties to Hook and Ackerman together with other beneficial rights to them under defined contingencies.

In 1945, or thereabouts, Hook, as an individual, entered into a partnership with a resident of Pittsburgh, Pennsylvania, one W. W. Miller, and the firm functioned under the firm name and style of "Hook & Miller". A controversy appears to have arisen between Hook & Miller and the corporation, in which Hook and Miller claim injury to their business through the corporation's threats of litigation against customers of Hook & Miller on the ground that the "Hook & Miller" boiler infringes the patent which is used in the "Hook & Ackerman" boiler and because of unfair trade. For related litigation see footnote 1.¹

The instant case grew out of alleged facts as above related and was begun by the partners, Hook and Miller, in the United States District Court for the Western District of Pennsylvania against the corporation Hook & Ackerman, Inc. It is alleged in the complaint that the corporation has its principal place of business in that district, and that it is threatening suit against Hook & Miller customers on the ground that the Hook & Miller boiler infringes the patent in suit. By the complaint Hook and Miller seek a declaration that the "Hook & Miller" boiler embodies none of the inventions covered by the patent, and that therefore the patent is not being infringed by them. They pray in their complaint that the corporation and its agents be enjoined from asserting, contending, claiming, or alleging that appellants' boiler infringes the patent, and from suing appellants or appellants' customers in other districts pending disposition of the case. The validity of the patent is not questioned in any pleading before the court.

The corporation filed an answer, counter-claim, and cross-complaint against both the individuals Hook and Miller doing business as a partnership, and a third party complaint against Ackerman, then moved, inter alia, to dismiss the Hook and Miller complaint upon the ground that Ackerman, a resident of New York, had not been made a party to the litigation and that he was an indispensable party. The appellants moved on their behalf for the dismissal of the counter-claim, cross-complaint and third party complaint.

The motion to dismiss the Hook and Miller complaint for lack of an indispensable party was granted under the holding that a suit for a declaratory judgment² of non-infringement calls into action the same requirements as to parties as does an ordinary infringement suit except that their position in the litigation is reversed. For such reason, says the trial court, appellants must join as defendants all those who would have been "necessary parties" plaintiff had the action been in the form of an infringement suit by the defendant against the plaintiffs as infringers. The court concluded that Ackerman was an indispensable party since the owner of a patent is an indispensable party to a suit for patent infringement brought by an exclusive licensee, and also because, under Title 35 U.S.C.A. § 67, damages for patent infringement may be recovered in an action brought in the name of the "patentee, assignee, or grantee". The court held that since Ackerman resided in New York, and Section 1391(b) of Title 28, U.S.C.A.³ determines venue in a suit for declaratory judgment of non-infringement, there would be lack of venue jurisdiction.

The trial court also held that the motion of Hook and Miller for dismissal of the counter-claim, cross-complaint and third party complaint should be granted since Ackerman was also a "necessary party" to the determination of the claims of infringement in the counter-claim and cross-complaint. As to the other relief asked in the counter-claim and cross-complaint, there was held to be no jurisdiction since diversity of citizenship jurisdiction was lacking. The third party complaint sought against Ackerman was dismissed since the court would not have jurisdiction over him except through his voluntary appearance or consent, he being a resident of New York. Hook et al. v. Ackerman, Inc., D.C. 1950, 89 F.Supp. 238. This appeal and cross-appeal followed.

The alleged charges of patent infringement present an "actual controversy" calling for declaratory relief, A. L. Smith Iron Co. v. Dickson, 2 Cir., 1944, 141 F.2d 3, within the jurisdiction of the district court under Title 28, U.S.C.A. § 1338. See Littlefield v. Perry, 1874, 21 Wall. 205, 88 U.S. 205, 22 L.Ed. 577.

The agreement entered into on September 28, 1945, between Hook, Ackerman, and the corporation, is entitled "license agreement". After it is recited in the agreement that Hook had sold his interest in the corporation to Baier, the agreement contains language specifically transferring to the corporation for the full life of the patent, extensions and reissues thereof, the "exclusive right and license subject only to the outstanding license of January 28, 1942, to Sears, Roebuck & Co. to manufacture, use and sell boilers covered by the patent and to license others so to do." The agreement contains an assignment of the Sears, Roebuck & Co. licensing agreement to the corporation in its entirety. By the terms of the agreement the corporation contracted to pay a royalty to the individuals Hook and Ackerman on each boiler manufactured. If the payments to Hook in any one year should not amount to five thousand dollars, he is given the right to terminate the exclusive features of the agreement.

In the event of infringement of the patent by third parties, the corporation is given the right to bring suit in its own name joining Hook as a party plaintiff if it so desires. Such suit is to be brought at the expense of the corporation, and recovery is to be retained by the corporation so long as the royalties are paid. In the event of bankruptcy, insolvency or dissolution of the corporation while yet owning the rights conveyed to it by the agreement, title to the patent shall vest in Baier and Ackerman. In the event that the corporation is unable or refuses to pay the required royalties to Hook, he is given the right to manufacture, use, sell and license others, to products covered by the patent. And should this happen, Ackerman is to receive the same benefits as though the corporation and not Hook was operating except that payment of minimum royalties are not to be required.

The rights transferred are not limited geographically. No rights to make, use or sell the invention are reserved to the transferors, except for those rights which arise on the occurrence of the contingencies mentioned in the agreement.

In Waterman v. Mackenzie, 1891, 138 U.S. 252, 11 S.Ct. 334, 336, 34 L.Ed. 923, the plaintiff, claiming to be sole and exclusive owner of a patent, filed a bill in equity, alleging infringement by defendants and praying for varied relief. The defendants alleged that the plaintiff, at the time of filing the bill, was not possessed of the patent or of an exclusive right under it because of certain assignments. The plaintiff had assigned, and recorded, the whole patent to his wife, who later entered into a "license agreement" with plaintiff by which she granted to him "the sole and exclusive right and license to manufacture and sell" the products embodied in the patent throughout the United States, in consideration of his agreement to pay her royalties. Plaintiff's wife later assigned the patent to a firm as security for a promissory note executed by plaintiff and his wife, in return for a loan. Shortly before the bill was filed, the plaintiff's wife assigned and recorded all of her remaining interest in the patent to plaintiff. The trial court entered a decree dismissing the bill. It was...