Automotive Products Corporation v. WOLVERINE B. & S. CO.

• Decision Date: 04 November 1926
• Docket Number: No. 4400.,4400.
• Citation: 15 F.2d 745
• Parties: AUTOMOTIVE PRODUCTS CORPORATION v. WOLVERINE BUMPER & SPECIALTY CO. et al.
• Court: U.S. Court of Appeals — Sixth Circuit

15 F.2d 745 (1926)

AUTOMOTIVE PRODUCTS CORPORATION v. WOLVERINE BUMPER & SPECIALTY CO. et al.

No. 4400.

Circuit Court of Appeals, Sixth Circuit.

November 4, 1926.

Ralph M. Shaw and Geo. L. Wilkinson, both of Chicago, Ill. (John C. Slade, of Chicago, Ill., and Travis, Merrick, Warner & Johnson, of Grand Rapids, Mich., on the brief), for appellant.

Frederick S. Duncan, of New York City (Cyrus W. Rice, Rice & Rice, and Earl W. Munshaw, all of Grand Rapids, Mich., on the brief), for appellees.

Before DENISON, MOORMAN, and KNAPPEN, Circuit Judges.

DENISON, Circuit Judge.

Fageol, a citizen of California, as patentee, gave an exclusive license to the Automotive Company, a California corporation. It did not contain any express power of revocation. After a period of inaction by the licensee, Fageol insisted that he was no longer bound. Later he transferred rights under the same patent to the American Chain Company, a corporation of New York. Later he and this company began a suit in a California state court of general equity jurisdiction, making the Automotive Company defendant, and seeking both a decree that the first license be rescinded by the court for reasons alleged and a decretal declaration that it was already ineffective.

Before filing its answer, the Automotive Company brought this suit in the court below against the Wolverine Company, alleging infringement of the specified patent, setting up that it was the exclusive licensee, and making Fageol a party complainant, upon the theory that, as exclusive licensee, it must and could join him as plaintiff, without or even against his consent. The defendant, the Wolverine Company, answered with the usual defenses in infringement cases, and also denied that the Automotive Company had any existing license, and alleged that the Wolverine Company was manufacturing under a license from Fageol, through the American Chain Company. Fageol also appeared by petition (later adopted as an answer by him), alleging that the license to the plaintiff had been invalid and completely revoked, that the plaintiff had no rights in the subject-matter, and that he had later executed a license to the American Chain Company, which, under authority of its contract, had licensed the Wolverine Company. The American Chain Company also filed an intervening petition setting up substantially the same things.

Upon the hearing, and before any order had been made, the plaintiff moved to discontinue and dismiss the case. This motion was overruled, and a decree was entered dismissing the original bill, and adjudging upon the merits of the controversy that Fageol's license to the plaintiff had been effectively revoked, and that Fageol and the American Chain Company were the owners of all rights in and under the patent. Plaintiff appealed from this decree. Its contentions are:

(1) That the California court had exclusive jurisdiction of the subject-matter of the license.

(2) That the substantial matter involved was the existing validity of plaintiff's license, and that this was not a controversy arising under federal laws and of which the court had jurisdiction.

(3) That plaintiff had the right to dismiss its case before decree, or, at least, that to refuse to allow it to do so was an abuse of discretion.

(4) That upon the merits of the title controversy plaintiff was right, as well as upon the merits of the more strictly patent questions.

1. We cannot regard the decision of the California state court as a proceeding in rem. Though in a broad sense rights are property, yet, in defining suits in rem, we must distinguish those involving specific property or status and those involving mere rights. The latter are in personam; the former are or may be in rem. The exclusive right or monopoly granted by patents normally attends the person of the patentee, like other intangibles, and there was nothing in the present situation to take the case out of the normal rule. Our most recent discussion of this question is found in Brown v. Duffin (C. C. A.) 13 F.(2d) 708. Applying the test there suggested, it will hardly be claimed that, in a suit brought in a federal court against a nonresident defendant by the patentee to declare revoked, or by a licensee to declare in force, a patent license, a valid decree could be based solely upon substituted service under section 57 of the Judicial Code (Comp. St. § 1039). Grable v. Killits (C. C. A. 8) 282 F. 185.

It is true, as was said in Denison Co. v. Chicago Co. (C. C. A.) 286 F. 818, there are exceptions to the rule that tangible property must be involved in order to find that a suit is in rem. A status, like marriage, was referred to as an example of exceptions; but the existence of a mere contract right under a patent, and the issue, whether revoked or not, cannot be one of them.

2. The jurisdiction of the court below as a federal court was initially completely made out by the citizenship of the Automotive Company and Fageol in California and of defendant in Michigan. However, it has now appeared that, if the parties were aligned according to the real controversy existing on the title subject, Fageol was a defendant, and hence diverse citizenship becomes at least an unsatisfactory basis upon which to rest federal jurisdiction. However, such jurisdiction was otherwise complete, as involving a federal question. The plaintiff alleged a valid patent, sufficient title thereto, and infringement. If plaintiff's claim of title was correct, defendant had the right to deny, as it did, both validity and infringement. Under such conditions, jurisdiction over a patent controversy is not ousted by the disclosure of a dispute about the title, even when such disclosure is made by the bill, much less when interjected by defendants. In Lowry v. Hert (C. C. A.) 290 F. 876, 878, we considered the leading cases up to that time, and doubts are now foreclosed by the Supreme Court opinion in Luckett v. Delpark (April 12, 1926), 270 U. S. 496, 46 S. Ct. 397, 70 L. Ed. 703. Where the federal jurisdiction conferred by the original bill is extended to an ancillary controversy not originally there cognizable, it is not controlling that the...