AB Dick Co. v. Marr

• Citation: 48 F. Supp. 775
• Parties: A. B. DICK CO. v. MARR.
• Decision Date: 08 September 1942
• Court: U.S. District Court — Southern District of New York

48 F. Supp. 775

A. B. DICK CO. v. MARR.

District Court, S. D. New York.

September 8, 1942.

Robert W. Byerly, of New York City (Ralph M. Watson, of New York City, of counsel), for plaintiff.

Edward D. Bolton, of New York City, for defendant.

HULBERT, District Judge.

Plaintiff moves for an order confirming the report of the Special Master and overruling the defendant's objections thereto. Motion granted.

This action was for patent infringement, by the defendant, of plaintiff's Letters Patent No. 1,526,982 covering an improved stencil sheet. For a more detailed statement of the facts and explanation of process, see A. B. Dick Co. v. Shallcross Co., 2 Cir., 42 F.2d 169; A. B. Dick Co. v. Simplicator Corp., 2 Cir., 34 F.2d 935.

A trial was had before Judge Robert P. Patterson who, in an opinion dated June 2, 1932, found for the plaintiff and the interlocutory decree entered thereon referred the accounting, therein directed, to Thomas I. Crawford, Esq., as Special Master. He resigned before the proceedings conducted by him were completed. Upon consent of counsel, Judge Patterson thereupon made an order dated February 9, 1939, whereby the matter was referred to Morris Kirschstein, Esq., as Special Master. He concluded the accounting proceedings and reported to this court that the defendant had profited in the sum of $18,799.40 from his infringement and should account in said amount to the plaintiff.

The interlocutory judgment provided that the defendant account for all profits derived from his infringement of plaintiff's patent subsequent to February 28, 1930.

It appears from the testimony that, during the accounting period, the defendant conducted business both in New York and San Francisco; that subsequent to the interlocutory decree the defendant incorporated the San Francisco branch of his business.

The Special Master found that the defendant should account for all sales of infringing stencils sold either in his New York business or by the California corporation. Defendant objects to the inclusion of any sales of the latter upon the ground that said corporation, being a separate entity and not a party to this action, should not be compelled to account in this proceeding for any infringing sales unless brought into this proceeding by a supplemental bill or other proper manner.

The Special Master found that the defendant was the sole stockholder of the California corporation, which, it appears, was formed at the behest of one of the defendant's large creditors for reasons not here pertinent. The Special Master concluded that the California corporation was merely the alter ego of the defendant and the record supports that conclusion. It is self-evident that any profits resulting from infringing sales of the California branch would have to be accounted for by the defendant but for the incorporation of said business. To permit the defendant in such manner to circumvent the interlocutory decree would result, to say the least, in a grave injustice to the plaintiff. Compare Smith Metal Window Hardware Co. v. Yates, 2 Cir., 244 F. 793; New York Grape Sugar Co. v. American Grape Sugar Co., C.C., 42 F. 455, 456, 457. Equity will pierce the customary protective cloak of incorporation when necessary to prevent injustice or fraud. The fact that defendant incorporated this California business at the instance of a creditor does not excuse the fact that the business was still that of the defendant and that he was the sole stock-holder of said corporation. Accordingly, defendant's objection that the Special Master improperly included the profits of the infringing sales of the California corporation in the account, is dismissed.

The defendant also objects to the holding of the Special Master that the so-called "M.O.37" and "M.O." stencil sheets infringe plaintiff's patent.

On the trial of this action before Judge Patterson a so-called "A.F." stencil sheet was held to infringe plaintiff's patent.

During the course of the accounting it developed that defendant sold other sheets designated as "M.O.37" and "M.O." on the manufacturer's invoices to the defendant. Both plaintiff and defendant introduced proof as to the chemical composition of the disputed sheets and the Special Master found that both the "M.O.37" and "M.O." sheets infringed plaintiff's patent. Defendant objects to these conclusions.

The decision of Judge Patterson adjudged in part that claims 2 and 18 of the plaintiff's patent were valid and infringed by defendant's "A.F." stencil sheet. Said claims are as follows:

"2. A stencil-sheet adapted for conversion into a stencil by the impact of type and the like thereon, the same comprising a base having a type-impressible coating including a cellulose compound and a tempering agent."

"18. A stencil-sheet adapted for conversion into a stencil by the impact of type and the like thereon, the same comprising an open texture base having a coating including a cellulose ester and a tempering agent."

In passing upon the scope of plaintiff's patent, Judge Patterson said it was "for a sheet coated with a mixture of nitrocellulose and oily materials, the nitrocellulose in small percentage, to impart strength and binding quality, the oily materials in large percentage to keep the sheet type-impressible without moistening."

In the interlocutory decree the defendant was perpetually restrained from making "any stencil sheet comprising an open porous base having a coating including a large percentage of oily material, and a small percentage of nitrocellulose distributed through the oily material as a binder therefor, whether or not such stencil-sheet was made by successive coatings of wax and tempered nitrocellulose."

The Circuit Court of Appeals for this Circuit in A. B. Dick Co. v. Shallcross Corp., supra, stated, with respect to plaintiff's patent, 42 F.2d at page 170: "The patent is limited to no formula, but only teaches that a proper coating for dry stencil sheets should have a small percentage of nitrocellulose and a large percentage of soft materials of an oily character."

The Special Master said at page 8 of his report: "The `M.O.37' stencil consists of an open porous base of Yoshino paper having a coating of the following composition; nitrocellulose — 12.3% (weight of stencil), or 14.7% (weight of coating); liquid oily material — 63.7% (weight of stencil), or 75.9% (weight of coating)."

The testimony relating to the "M.O.37" sheet was taken before Special Master Crawford. Special Master Kirschstein adopted his conclusion regarding the chemical content of the sheet in question from the findings of Special Master Crawford.

Dr. Grosvenor performed certain tests on the "M.O.37" similar to those he had made during the trial of this action before Judge Patterson with respect to the "A.F." sheet and testified that the results were substantially the same. Dr. Grosvenor's tests amply justify the Special Master's conclusion that the "M.O.37" sheet is a dry stencil sheet which consists of a Yoshino paper base overlaid with a coating comprised of a small percentage of nitrocellulose and a large percentage of soft material of an oily character, the nitrocellulose being distributed throughout the oily material as a binder therefor, and the liquid oily material serving to temper the nitrocellulose and make it type-impressible without moistening. The mere fact that different materials are used in combination with the nitrocellulose to produce such a sheet does not take the latter sheet out of the infringing classification. Here we have the nitrocellulose combined with other ingredients — "soft materials of an oily character" — producing a homogeneous matter which is type-impressible without moistening.

The contention of the defendant that the ingredients which are combined with nitrocellulose to produce the "M.O.37" sheet are not "soft materials of an oily character" is refuted by the testimony and tests of Dr. Grosvenor.

There is no doubt in my mind but that the ingredients used in combination with the nitrocellulose are ingredients "such as an oil" and serve as a temporary agent for the nitrocellulose. See A. B. Dick v. Shallcross, supra.

The complaint of the defendant that Dr. Grosvenor should have performed in the presence of the Master the tests which he had made on defendant's stencils is without substantial merit. The defendant examined plaintiff's expert as to such tests and the Special Master obviously believed the testimony of the expert. No substantial prejudice resulted to the defendant from the procedure complained of.

On the record before me I cannot say that the conclusions reached by the Special Masters are erroneous. Accordingly, defendant's objections...