Addressograph-Multigraph Corp. v. Cooper

• Decision Date: 18 July 1946
• Docket Number: Docket 20161.,No. 253,253
• Citation: 156 F.2d 483
• Parties: ADDRESSOGRAPH-MULTIGRAPH CORPORATION v. COOPER et al.
• Court: U.S. Court of Appeals — Second Circuit

156 F.2d 483 (1946)

ADDRESSOGRAPH-MULTIGRAPH CORPORATION v. COOPER et al.

No. 253, Docket 20161.

Circuit Court of Appeals, Second Circuit.

July 18, 1946.

Joshua Ward, of New York City, and George H. Wallace and Charles B. Cannon, both of Chicago, Ill. (Ward Crosby & Neal, of New York City, and Wallace & Cannon, of Chicago, Ill., of counsel), for plaintiff-appellant.

J. B. Felshin, of New York City, for defendants-appellees.

Before SWAN, CLARK and WOODBURY, Circuit Judges.

WOODBURY, Circuit Judge.

This is an appeal from a final decree dismissing a complaint in a suit brought for infringement of United States patent No. 1,967,221 issued to William R. Allen and Emmett C. Hartley on July 24, 1934, for a Printing Plate and Holding Means Therefor.

A former suit brought in the court below by the present plaintiff-appellant against only the individual defendant-appellees herein for infringement of this patent terminated in a consent decree dated January 25, 1939. In that decree it was adjudicated first that the patent was good and valid in law as to each of its claims, and second that the plaintiff-appellant was possessed of the entire right, title and interest therein. Then the decree continued: "That, whereas the defendants have represented that they have merely furnished to others printing plates employing the invention covered by said Letters Patent for use upon the holding means of said Letters Patent as claimed therein, but that they have not made or sold the aforesaid printing plates and have no intention of making, using or selling such printing plates, plaintiff has waived the issuance of an injunction against, and an accounting by, the defendants, Eva Cooper and Milton Berg, and each of them." In conclusion the decree awarded taxable costs to the defendants.

At the trial of the present suit in the court below the plaintiff-appellant contended that the consent decree in the former suit estopped all the defendants from contesting the validity of the patent. The District Court, however, held otherwise and then proceeded to hold both claims of the patent here in issue invalid for lack of invention. This appeal, therefore, presents two questions. We shall consider them in the order stated.

The District Court found that the individual defendants were incorporators and are directors and officers of the defendant corporation; that they own all but one share of its stock; that the evidence does not disclose that anyone other than themselves controlled or transacted any business of the corporation; and that they participated in the manufacture and sale of the plates which it was conceded by the corporation over which they had control infringe the plaintiff's patent if it is valid. On the basis of these findings it properly concluded that if the consent decree in the former suit estopped at all, it estopped the corporate defendant as well as the individual defendants. But the court below concluded that the consent decree in the prior suit was invalid as a matter of law for the reason that infringement was not adjudicated therein, and hence that it did not estop any of the defendants from later contesting the validity of the patent. It found that there was no trial in the former suit nor any adjudication therein on the merits as to the validity of the patent; that the consent decree, although it did not give the defendants any relief, provided for the payment of costs to them; that it did not provide for any injunction or accounting, and that it did not disclose that there had been any infringement of the plaintiff's patent. "On the contrary," it found, "the evidence discloses that the defendants rejected a proposed consent decree submitted by plaintiff to them because it contained an allegation that they infringed the patent. The consent decree, therefore, submitted by the plaintiff to the defendants and signed by them does not contain any allegation of infringement." And it found "If the defendants in the prior suit did not infringe at the time said consent decree was entered, they were not seriously interested in any adjudication of the validity of the patent." On these findings the court below concluded that the consent decree in the prior suit adjudicating, the patent to be valid could not be sustained. In other words, the court below held as a general proposition of law that an adjudication of the validity of a patent, unless accompanied by an adjudication of infringement, is invalid and will not estop a defendant from later contesting the validity of the same patent in another suit for infringement brought by the same plaintiff.

We agree with the District Court that the issue of infringement was not adjudicated one way or the other by the decree in the former suit. And, although no case directly in point has come to our attention, we also agree with the District Court that on grounds of public policy such a decree does not estop.

In Pope Mfg. Co. v. Gormully, 144 U.S. 224, 12 S.Ct. 632, 636, 36 L.Ed. 414, decided in 1892, the question before the Supreme Court was whether a court of equity can be called upon to decree the specific performance of a provision in a licensing contract whereby the defendant-licensee had agreed never to dispute or contest either the validity of, or the plaintiff-licensor's title to, the patents covered by the license. In it the court stated the "real question" to be whether by contract "the defendant can estop himself from disputing patents which may be wholly void, or to which the plaintiff may have no shadow of title." Then it proceeded to consider whether such contracts were void as contrary to public policy, in the course of which it said that "It is * * * important to the public that competition should not be repressed by worthless patents * * *", and "it is a serious question whether public policy permits a man to barter away before hand his right to defend against unjust actions or classes of actions * * *" "But," the Supreme Court continued, "whether this contract be absolutely void, as contravening public policy, or not, we are clearly of the opinion that it does not belong to that class of contracts, the specific performance of which a court of equity can be called upon to enforce," and on this ground a decree below dismissing the plaintiff's bill of complaint was affirmed.

Several recent decisions have elaborated upon and applied the public policy adverted to in the above case to various concrete situations.

In Electrical Fittings Corp. v. Thomas & Betts Co., 307 U.S. 241, 59 S.Ct. 860, 83 L.Ed. 1263, the Supreme Court held that a defendant in a suit for patent infringement who appealed from a decree adjudicating a claim of the patent sued upon valid although not infringed was entitled to reformation of the decree by eliminating therefrom the portion dealing with validity so that it would not stand as an adjudication of that issue, and this in spite of the fact that the decree as it originally stood finally terminated the litigation in the defendant's favor. Then subsequently, on the basis of the above case and the decision in this circuit of Cover v. Schwartz, 2 Cir., 133 F.2d 541, the Supreme Court announced in Altvater v. Freeman, 319 U.S. 359, 363, 63 S.Ct. 1115, 1117, 87 L.Ed. 1450, that "To hold a patent valid if it is not infringed is to decide a hypothetical case."

But, logic notwithstanding, it does not follow that to hold a patent invalid if it is not infringed, is also to decide a hypothetical case. See Hale v. General Motors Corp., 1 Cir., 147 F.2d 383, 388; Grant Paper Box Co. v. Russell Box Co., 1 Cir., 151 F.2d 886, 890; Sinclair & Carroll Co., Inc., v. Interchemical Corp., 325 U.S. 327, 330, 65 S.Ct. 1143, 89 L.Ed. 1644. The reason for this is the importance to the public generally that an invalid patent "should not remain in the art as a scarecrow." Bresnick v. United States Vitamin Corp., 2 Cir., 139 F.2d 239, 242. Then in Mercoid Corp. v. Mid-Continent Investment Co., 320 U.S. 661, 670, 64 S.Ct. 268, 88 L.Ed. 376, the Supreme Court held that in patent cases, as in other litigation, equitable relief should be either extended or limited as the public interest may require, and that as a result the doctrine of res judicata in patent cases is limited by the public policy against monopoly.

On the basis of these cases, particularly Cover v. Schwartz and Electrical Fittings Corp. v. Thomas & Betts Co., supra, we would find no difficulty whatever in reaching the conclusion that the consent decree in the former suit would not operate to estop if non-infringement had been directly adjudicated therein. But even though we can only say that the consent decree left the issue of infringement without adjudication, nevertheless we think on grounds of public policy we ought to rule that in a decree, at least in one entered by consent, either an adjudication of infringement, or a grant of some relief from which infringement may be inferred, is essential before any effect of res judicata can be given to it on the issue of validity. In other words, we think the public interest in a judicial determination of the invalidity of a worthless patent is great enough to warrant the conclusion that a defendant is not estopped by a decree of validity, at least when the decree was by consent, unless it is clear that in the litigation resulting in the decree the issue of validity was genuine.

This brings us to the question of the validity of the two claims in issue, and this need not detain us long.

The patent in suit relates to a printing apparatus employing a printing plate mounted upon by being wrapped around and fastened by its ends to a rotary drum; the particular invention covered, according to the initial sentence of the patent, "being concerned with the mutual formation of the printing plate and the means for attaching it to the drum." Admittedly printing apparatus of the type described is old, and the court below found that for many years before the date of ...