Alamo Refining Co. v. Shell Development Co.

• Decision Date: 26 May 1949
• Docket Number: Civ. A. No. 1065.
• Citation: 84 F. Supp. 325
• Parties: ALAMO REFINING CO. v. SHELL DEVELOPMENT CO. et al.
• Court: U.S. District Court — District of Delaware

84 F. Supp. 325

ALAMO REFINING CO. v. SHELL DEVELOPMENT CO. et al.

Civ. A. No. 1065.

United States District Court D. Delaware.

May 26, 1949.

Arthur G. Connolly, of Wilmington, Del., and Thorley Von Holst, Sidney Neuman and Robert W. Poore, all of Chicago, Ill., for plaintiff.

William Prickett, of Wilmington, Del., and Albert R. Connelly, of Cravath, Swaine & Moore, New York City, for defendants Shell Development Company and International Catalytic Oil Processes Corporation.

James R. Morford and Thomas Cooch, of Marvel & Morford, of Wilmington, Del., and Garrett R. Tucker, Jr., and Brady Cole, of Baker, Botts, Andrews & Parish, of Houston, Texas, for defendant Texaco Development Corporation.

Robert H. Richards, Jr., of Richards, Layton & Finger, of Wilmington, Del., and Theodore Kenyon, of Kenyon & Kenyon, New York City, for defendant Standard Oil Development Company.

John J. Morris, Jr., of Hering, Morris, James & Hitchens, of Wilmington, Del., and Harold S. Glendening and F. P. Warne, of Cahill, Gordon, Zachry & Reindel, New York City, for defendant The M. W. Kellogg Company.

William S. Potter, of Southerland, Berl & Potter, of Wilmington, Del., and A. M. Byrd and M. P. Venema, of Chicago, Ill., for defendant Universal Oil Products Company.

LEAHY, Chief Judge.

Plaintiff filed a declaratory judgment complaint against Shell Development Company (hereinafter called "Shell"), Standard Oil Development Company (hereinafter called "Standard Development"), Texaco Development Corporation (hereinafter called "Texaco"), The M. W. Kellogg Company (hereinafter called "Kellogg"), International Catalytic Oil Processes Corporation (hereinafter called "International"), and Universal Oil Products Company (hereinafter called "Universal") and the M. W. Kellogg Company, as agents of Standard Oil Company of Indiana (hereinafter called "Standard of Indiana"). The complaint¹ charged that Kellogg and Universal, as agents for all the defendants, offered plaintiff a license under all of the patents of the defendants relating to the fluid catalytic cracking process for the treatment of petroleum in order to permit plaintiff to use this process at its plant located at Sweeny, Texas.

During World War II there was need for aviation fuel. A method available for commercial use in 1942 was a process of fluid catalytic cracking. Kellogg, Universal, Shell, Standard Development, Texaco and Standard of Indiana had participated in the development of the process and owned various patents in the field. To make this process available to all refiners, the Office of Petroleum Coordinator for War issued its Recommendation No. 41, dated July 24, 1942, suggesting an agreement to be made between the companies for cross-licensing and for the licensing of others under the group patents. An agreement was entered into on August 7, 1942, approved by the Chief Counsel of the Petroleum Administration for War on October 12, 1942. The Chairman of the War Production Board certified to the Attorney General his approval of the agreement. With an amendment dated January 6, 1944, all the parties approved the agreement known as "Recommendation 41 Agreement".

This agreement provides for cross-licensing of patents of all the parties. Each of the parties grants to Kellogg and Universal a non-exclusive right to grant licenses including the fluid catalytic cracking process.

During World War II an oil refinery was erected at Sweeny, Texas. The plant was designed by Universal and operated by two other companies not parties to this suit. The latter with the Government's consent procured a license under the patents covered by the Recommendation 41 Agreement. Universal acted as agent for these negotiations. There was also a process agreement entered into on May 16, 1944 between Universal and the other two companies. At the war's end Sweeny was declared surplus. Plaintiff purchased Sweeny from the War Assets Administration on June 20, 1947, but plaintiff first requested that the Recommendation 41 Agreement be cancelled.

Universal shows that according to the process agreement involving the two wartime operators, any subsequent purchaser of the plant would have an option of demanding a similar license. With this in mind, Universal communicated with plaintiff and offered a license, as was Universal's obligation, and also offered to re-license the fluid catalytic cracking facilities which plaintiff² had purchased.

Kellogg never dealt with plaintiff, but what business dealings it had — relating to other matters — was with Phillips direct. Kellogg is in the business of engineering and constructing plants. It is, in fact, a competitor of Universal. It sought much data from Kellogg on the catalytic cracking process and as early as January, 1947, Phillips was negotiating for a standard royalty rate. Commencing in July, 1946, up until three days before suit, here, on September 12, 1947, Phillips showed itself in a hurry to construct its proposed plants at Bosger, Texas and Kansas City, Kansas. There was discussion that if a license should issue for these two plants it could be extended to plaintiff as Phillips' subsidiary.

Phillips last met in New York on September 8, 1947.³ Again there was no hint of a threat of suit by Kellogg or by any other party. At best, a list of patents available under the proposed license was given to Phillips.

The complaint specifically prayed for judgment that plaintiff's Sweeny operation did not infringe ten enumerated patents belonging to Kellogg, Standard Development, Standard of Indiana and Shell; otherwise that these patents were invalid. The complaint also contains a general prayer that all other patents of defendants asserted to cover the Sweeny operation be declared invalid.

The motions filed by defendants vary in nature, i. e., some are to dismiss the complaint for lack of jurisdiction and failure to state a claim upon which relief could be granted; others of the defendants have labeled their motions one for summary judgment; there is also a motion by Kellogg and Universal, sued as agents of Standard of Indiana, to dismiss on the ground that an indispensable party is not before the court. Since the motions of the defendants vary, it will be necessary to treat them in apposite groups.

I. Motions to Dismiss of Texaco Development Corporation and International Catalytic Oil Processes Corporation.

The motions of Texaco and International attack the complaint⁴ itself, and no outside pleadings are offered in support of the motions. These defendants request that in passing on their motions the court exclude the affidavits and depositions filed by the other defendants in support of their motions.

The liberal view which has been taken to support jurisdiction under the Declaratory Judgment Act, 28 U.S.C.A. § 400 now §§ 2201, 2202, has found "actual controversy" in a number of post-war situations which have not been previously before the courts. Frederick Hart & Co., Inc. v. Recordgraph Corp., 3 Cir., 169 F.2d 580; Federal Telephone & Radio Corp. v. Associated Telephone & Telegraph Co., 3 Cir., 169 F.2d 1012. Heretofore, courts have held that actual controversy does not exist in a situation until after the patentee has made some assertion that his patent covers the activities of the plaintiff. In short, it was thought a charge must be present by defendant against plaintiff or one of his customers that they have infringed, but this charge could be made directly or indirectly.⁵ Treemond Co. v. Schering Corp., 3 Cir., 122 F.2d 702. Nor can the patentee use his patents as an economic weapon counting on the in terrorem effect on an industry. Dewey & Almy Chemical Co. v. American Anode, 3 Cir., 137 F.2d 68, certiorari denied, 320 U.S. 761, 64 S.Ct. 70, 88 L.Ed. 454.

But the complaint, here, contains no allegation that Texaco and International own any patents which they have asserted, even remotely, directly or indirectly, plaintiff infringes by its use of the fluid catalytic cracking process at its Sweeny plant. Nor is there any allegation that these defendants have ever charged any other person or threatened any other person with suit upon any catalytic cracking patent owned by these defendants. The charge of actual controversy is bottomed on assertions said to be made by representatives of Kellogg and Universal.

There is, however, no allegation and a complete failure to allege that either Kellogg or Universal charged plaintiff with infringement upon any particular patent or patents owned by Texaco or International. This is not the usual situation where there is a controversy...