A & C Engineering Co. v. Atherholt

• Decision Date: 13 April 1959
• Docket Number: No. 22,22
• Citation: 355 Mich. 677,95 N.W.2d 871
• Parties: , 121 U.S.P.Q. 235 A & C ENGINEERING COMPANY, a Michigan Corporation, Plaintiff and Appellee, v. George L. ATHERHOLT, Jr., Defendant and Appellant.
• Court: Michigan Supreme Court

Page 871

95 N.W.2d 871

355 Mich. 677, 121 U.S.P.Q. 235

A & C ENGINEERING COMPANY, a Michigan Corporation, Plaintiff and Appellee, v. George L. ATHERHOLT, Jr., Defendant and Appellant.

No. 22.

Supreme Court of Michigan.

April 13, 1959.

Cline & George, Flint, Earl J. Cline, Flint, of counsel, for plaintiff and appellee.

Leitson & Dean, Flint, for defendant and appellant.

Before the Entire Bench.

VOELKER, Justice.

This case concerns a bill in equity filed by plaintiff-appellee, A & C Engineering Company, on August 13, 1956 praying that it be decreed the sole owner of certain patent rights and patent applications and of the trade name 'Hydra-lock' and that the defendant be required to assign to it his interests therein. In answer defendant admitted that the trade name belonged to the plaintiff but denied its right to the remainder of the relief requested.

Prior to 1952 A & C Engineering Company was owned and operated as a joint partnership by George L. Atherholt, Sr., and John A. Coletti. The partnership's business consisted primarily of designing certain fixtures, jigs, gauges and special machinery for various automobile manufacturing companies. Defendant, George L. Atherholt, Jr., son of the above-named Atherholt, was employed by the partnership in a combination sales, design and managerial capacity. For convenience, we shall occasionally refer to the father and son as Senior and Junior.

In January of 1952 Senior saw a mechanical arbor in operation and thereupon conceived the basic idea for a hydraulically operated arbor. To protect his idea he wrote a letter to himself outlining the idea for the arbor and enclosed it, together with a sketch and a drawing illustrating the arbor, in an envelope which he sent by registered mail to himself. That letter was kept in plaintiff's file unopened and was ultimately opened in court during the trial. After writing the letter Senior discussed the idea with his son, the defendant, and they, with the help of other employees, began to develop it.

The development of the arbor took several years, and much company money, and in the process a successor partnership was formed which consisted of the original partners and the defendant. Later the 3 men formed the present plaintiff corporation, defendant's interest being limited to 15%, which succeeded to the interests of their partnership. Ultimately the arbor was completed and patented, with Senior and the defendant listed on the applications and the letters patent as joint inventors. Senior, pursuant to an alleged oral agreement between the parties, assigned his interest in the patent to the corporation, but defendant has refused to so assign. This suit was brought to establish the true ownership of the patent and to require the defendant to assign his interest therein. Prior to the instigation of this suit the defendant quit working for the corporation, sold his interest therein to his father, and brought an action against the corporation for back pay.

In the trial court prior to the introduction of evidence defendant moved that this case be dismissed, first for lack of jurisdiction, and second because plaintiff's bill of complaint did not state a cause for action. Both were denied. The case went to full hearing following which the court decreed that the plaintiff corporation was the true owner of the patent and that defendant should assign his interest therein to the corporation. From that decree and the order denying his noted preliminary motions defendant has appealed.

In his first 2 allegations of error defendant-appellant claims that the trial court was without jurisdiction to hear this case because it involves a patent. The extent of a state court's jurisdiction in that field is thoroughly reviewed and explained in Young Spring & Wire Corp. v. Falls, 293 Mich. 602, 292 N.W. 498, and even more thoroughly discussed in 167 A.L.R. 1114. A prolonged discussion here would serve only to unduly lengthen this opinion. The correct rule (and the one prevailing in Michigan) is set out in that annotation at page 1118 as follows:

'The key to the correct rule is the distinction between a 'case' arising under the patent laws and a 'question' arising under those laws. Pratt v. Paris Gas Light & Coke Co. (1897) 168 U.S. 255, 42 L.Ed. 458, 18 S.Ct. 62.

'Reduced to its lowest terms, the correct rule is that if the plaintiff founds his suit directly on a breach of some right created by the patent laws, he makes a case arising under those laws and only a Federal court has jurisdiction; but if he founds his suit on some right vested in him by the common law, or by general equity jurisprudence, he makes a case arising under state law and only a state court has jurisdiction. In this respect it is to be remembered that there is no Federal common law or equity law. These are the juridical attributes of the localities. Their principles, when administered in a Federal court, are derived from the respective peoples of the states. A case founded on a principle of tort, contract, or equity law is a case arising under state law. And whichever court has jurisdiction by reason of the nature of the cause of action advanced by the plaintiff, that court may decide such issues as arise incidentally to a decision. If a plaintiffs sues in a Federal court for infringement, and the defendant sets up rights under a contract, the court may reach its conclusion upon an issue of contract law. If the plaintiff sues in a state court for breach of a contract, the state court may decide an issue raised as to the validity or coverage of a patent, and even submit a question of priority to a jury. If the action be for breach of a contract to sell the plaintiff a valid patent, the state court may decide the validity of the patent. This is the almost universal rule.'

There is nothing in the bill of complaint to suggest that the instant case is one based upon a right derived from the federal patent laws. Rather it appears to be a common law quity action to determine ownership of a patent and involves the federal patent laws only obliquely and incidentally. Under the above quoted rule such an action is treated no differently, in regard to jurisdiction, than an action to determine the ownership of any other kind of personal property. Therefore the trial court properly took jurisdiction of the cause.

Appellant's third and fourth questions on appeal are:

'III

'Where bill of complaint in suit to establish employer's ownership of patents applied for and obtained by employees alleges patent was developed by employees on company time and at company expense but does not allege that employees were hired, either expressly or impliedly, for their inventive genius or to develop patentable items was defendant entitled to a dismissal upon his motion made prior to trial?

'IV

'Did the trial court err in holding that plaintiff's bill of complaint stated a cause for action?'

There being no specific all-purpose test under the modern liberal rules of pleading by which the sufficiency of a bill of complaint can be tested, the determination of that question is often a difficult problem. That problem has not been made less difficult in this case by appellee's total failure to brief the subject. The primary function of a bill of complaint is to apprise the court and the defendant of the grounds or basis of the plaintiff's claim. To do this the plaintiff must allege all of the necessary facts upon which he bases his cause of action. Failure to state those facts, or others from which they might reasonably be inferred, is failure to state a cause of action. So tested we examine the relevant portions of the bill of...