Brunswick Corporation v. Chrysler Corporation

• Decision Date: 07 April 1969
• Docket Number: No. 17229.,17229.
• Citation: 408 F.2d 335
• Parties: BRUNSWICK CORPORATION, Plaintiff-Appellant, v. CHRYSLER CORPORATION and Chrysler Outboard Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

408 F.2d 335 (1969)

BRUNSWICK CORPORATION, Plaintiff-Appellant, v. CHRYSLER CORPORATION and Chrysler Outboard Corporation, Defendants-Appellees.

No. 17229.

United States Court of Appeals Seventh Circuit.

March 12, 1969.

Rehearing Denied April 7, 1969.

Elwin A. Andrus, Glenn O. Starke, Merl Sceales, Milwaukee, Wis., for appellant.

Don K. Harness, Detroit, Mich., Gerrit D. Foster, Milwaukee, Wis., Michael Dinnin, Jr., Harness, Dickey & Pierce, Detroit, Mich., Michael, Best & Friedrich, Milwaukee, Wis., for appellees.

Before DUFFY and HASTINGS, Senior Circuit Judges, and SWYGERT, Circuit Judge.

DUFFY, Senior Circuit Judge.

This is an appeal from an interlocutory decision by the District Court which denied appellant's motion to strike a designated defense and for judgment based on res judicata with respect to an earlier decree in the same Court as to validity and infringement of two of the patents in suit.

A civil action (61-C-102) was brought by the Kiekhaefer Corporation in the District Court for the Eastern District of Wisconsin against The West Bend Company claiming infringement of United States Patents No. 2,916,007 and No. 2,953,335, pertaining to outboard motors. That suit was terminated by a settlement agreement and a consent decree was entered by District Judge Grubb on January 21, 1963. The decree read as follows:

"The parties by their counsel stipulating hereto, and the Court being fully advised in the matter, it is hereby ordered and decreed as follows:

"1. United States Letters Patent No. 2,916,007 in suit is valid and is infringed by defendant\'s manufacture and sale of its "Tiger Shark 800" outboard motor.

"2. United States Letters Patent No. 2,953,335 in suit is valid and is infringed by defendant\'s manufacture and sale of its "Tiger Shark 800" outboard motor and of its inboard-outboard stern drive.

"3. The defendant having taken a license under both patents, the above entitled action is hereby dismissed, without prejudice and without costs."

Under the license agreement The West Bend Company paid back royalties on all "Tiger Shark 800" outboard motors and on inboard-outboard drives sold by it from October 21, 1960 to December 31, 1962. In addition, such royalties were paid up to December 31, 1964 after which the engine division of The West Bend Company was sold and transferred to defendants-appellees (Chrysler). The sale included the manufacturing plant at Hartford, Wisconsin, and West Bend's entire business relating to the manufacture and sale of outboard motors and stern drives.

The form of the decree in No. 61-C-102 was attached to the settlement agreement and approved. Paragraph 4 read: "West Bend will instruct its attorneys to stipulate the entry of a consent decree of validity and infringement of the subject patents in the aforesaid pending infringement suit, in substantially the form attached hereto as Exhibit A."

Prior to the commencement of the instant suit, plaintiff Brunswick Corporation had purchased the assets of Kiekhaefer and is successor in title to Patent No. 2,916,007 relating to "Tiger Shark 800" outboard motors, and Patent No. 2,953,335 pertaining to "Tiger Shark 800" outboard motors and of its inboard-outboard stern drive.

In the instant case, plaintiff moved for an order striking from Defendants' answer all denials of infringement and validity of patents Nos. '007 and '335 based upon the decree entered in No. 61-C-102.

The District Court, Judge Myron L. Gordon presiding, denied the motion. The District Court acknowledged that a consent decree usually is as binding as an actual adjudication and is subject to res judicata effect, but denied the motion because of the use of the words "without prejudice" in the sentence "The defendant having taken a license under both patents, the above entitled action (No. 61-C-102) is hereby dismissed, without prejudice and without costs."

Chrysler admits in its answer in the instant case that it was informed of the consent decree in No. 61-C-102 and also that it knew of the existence of the license agreement. However, defendants argue 1) a consent decree should not be given res judicata effect where the dismissal was "without prejudice" and 2) even if that decree has res judicata effect, then defendants cannot be bound under the rules of privity, claiming that they had no connection or control over the Kiekhaefer litigation.

We, therefore, have before us for decision two questions of law: 1) Does the decree which was entered in the same court in the previous suit between Kiekhaefer and The West Bend Company give rise to res judicata in the instant suit, and 2) whether on the admitted facts in this record, Chrysler stands in the shoes of The West Bend Company so as to be in privity with that Company.

There can be no question as to the meaning of paragraphs 1 and 2 of the decree. The parties stipulated that patents '007 and '335 which are the patents here in suit, were valid, and that such patents were infringed by the manufacture and sale by The West Bend Company of its "Tiger Shark 800" outboard motor and of its inboard-outboard stern drive. Furthermore, it is admitted that The West Bend Company took a license under both patents. Apparently it was also a part of the settlement agreement that the suit be dismissed without costs.

Plaintiff urges that it was intended by the first and second paragraphs of the decree that they were to be binding on The West Bend Company and that the third paragraph of the decree had reference to the procedure for enforcing the judgment and for determining the infringement by future changed or new constructions.

In a normal patent infringement suit, a decree of validity and infringement usually would be accompanied by an injunction and an accounting for damages from the date of notice of infringement. Here, the license agreement called for the payment of back royalties since the notice of infringement. In effect, the license took the place of an injunction.

When a court has...