Clark Equipment Co. v. Keller, s. 76-1918 and 76-2009
| Decision Date | 17 February 1978 |
| Docket Number | Nos. 76-1918 and 76-2009,s. 76-1918 and 76-2009 |
| Citation | 197 U.S.P.Q. 209,570 F.2d 778 |
| Parties | CLARK EQUIPMENT COMPANY and Clark Equipment, A. G., Appellants-Appellees, v. Louis J. KELLER and Cyril N. Keller, Appellees-Appellants. |
| Court | U.S. Court of Appeals — Eighth Circuit |
John D. Kelly, Vogel, Vogel, Brantner & Kelly, Fargo, N. D., Fred E. Schulz, Thomas D. Allen, Kay Schichtel, Wildman, Harrold, Allen, & Dixon, Chicago, Ill., Jack Toliver, Buchanan, Mich., for Clark Equipment.
Malcolm L. Moore and Herman H. Bains, Williamson, Bains & Moore, Minneapolis, Minn., for Keller, et al.
Before GIBSON, Chief Judge, and HEANEY and WEBSTER, Circuit Judges.
The two consolidated cases underlying the present appeal and cross-appeal arise out of a patent license contract whereunder Louis and Cyril Keller, residents of North Dakota, granted exclusive licenses on three interrelated patents to Clark Equipment Company, a corporation incorporated under the laws of Delaware and with its principal place of business in Michigan. In a similar license agreement, the Kellers granted to Clark Equipment A.G. (CEAG), a Swiss corporation which is a wholly owned subsidiary of Clark, an exclusive license under certain foreign patents corresponding to the licensed patents in the agreement with Clark. The patents involved relate to self-propelled, three- and four-wheel skid steer loader vehicles manufactured by Clark in Gwinner, North Dakota. Patent 3,151,503 (503 patent) is a mechanical patent entitled "transmission system"; Patent 3,231,117 (117 patent) is a mechanical patent entitled "tractor vehicle and drive therefor"; Patent 195,254 (254 patent) is a design patent entitled "self-propelled loader."
In October 1972, Clark filed a civil action against the Kellers pursuant to 28 U.S.C. §§ 2201 and 2202, seeking a declaration of the rights and obligations of the parties under their license agreement and alleging that because the three patents forming the subject matter of the license were invalid, the license contract was unenforceable. This declaratory judgment action, which was filed in the Western District of Michigan, was transferred to the District of North Dakota in August 1973. In September 1973, the Kellers filed an answer and counterclaim. The counterclaim was for royalties allegedly due from Clark under its license agreement with the Kellers and under certain nonexclusive sublicense contracts between Clark and others. In their counterclaim, the Kellers also alleged that Clark or its predecessor in interest, the Melroe Company, had been negligent in failing to comply with the requirements of 35 U.S.C. § 102(b) by neglecting to file a patent application on the 117 patent within the one-year period after the invention had been in public use or on sale.
In response to this negligence claim, Clark filed a third-party complaint against the law firm of Williamson, Bains and Moore as third-party defendant. Clark alleged that if there had been negligence in the filing of the application for the 117 patent, it had been that of the third-party defendant, who had represented Louis Keller and Clifford Melroe, the joint inventors of the mechanism underlying the 117 patent, and who had had a professional obligation to investigate the facts and see that the application was timely filed. The cases presently before this court do not include issues of negligence or possible liability for late filing of the 117 patent application, for on April 29, 1974, the District Court 1 ordered that Clark's third-party complaint and that portion of the Kellers' counterclaim pertaining to these issues be tried separately from and after the present declaratory judgment action was tried.
On July 25, 1973, the Kellers filed a separate action against Clark in the District of North Dakota. This action, which embodied the allegations in the answer and counterclaim for royalties due filed in Civil Action 4875, named CEAG as an additional defendant. The complaint alleged that, pursuant to a license agreement with the Kellers, CEAG was an exclusive licensee under certain foreign patents corresponding to the licensed patents in the agreement with Clark, and that CEAG had failed to account for and pay royalties due thereunder. Jurisdiction was based upon diversity of citizenship. This action was consolidated with Civil Action 4875 on December 21, 1973.
CEAG responded to the complaint in Civil Action 4837 with motions to dismiss in which it alleged lack of in personam jurisdiction, absence of proper service of process and failure of proper jurisdictional amount. The District Court denied these motions, Keller v. Clark Equipment Co., 367 F.Supp. 1350 (D.N.D.1973); CEAG reasserted its jurisdictional defenses in its answer.
On July 18, 1974, the District Court ordered a separate trial on the issue of the validity of the three patents. The trial on this severed issue ran for some 33 days in early 1975. The 30-volume trial transcript includes the testimony of 46 witnesses; 546 exhibits were also introduced into evidence. Following the trial, the district judge filed a lengthy, unpublished memorandum opinion in which he ruled that the 503 and 254 patents were valid, and that the 117 patent was invalid. Clark appeals the judgment of the District Court on all three patents; the Kellers cross-appeal on the 117 patent. CEAG appeals from the District Court's rulings on its jurisdictional allegations and defenses.
Before addressing the merits of the patent issues raised on this appeal and cross-appeal, we will consider CEAG's jurisdictional contentions. The District Court initially rejected CEAG's jurisdictional defenses in a memorandum opinion directed solely to this issue and entered prior to trial. Keller v. Clark Equipment Co., 367 F.Supp. 1350 (D.N.D.1973). CEAG has continued to assert a lack of in personam jurisdiction. In its lengthy memorandum opinion on the patent validity issues of this case, the District Court did not re-analyze CEAG's jurisdictional assertions. It simply took note of their continuing nature and cited its previous opinion denying CEAG's jurisdictionally based motion to dismiss.
In its initial consideration of CEAG's motion to dismiss, the District Court made the following findings of fact and inferences therefrom relative to jurisdiction over CEAG. CEAG, a corporation organized under the laws of Switzerland, is a wholly owned subsidiary of Clark, a Delaware corporation doing business in North Dakota. The present case concerns separate manufacturing licenses between Clark and the Kellers, who are residents of North Dakota, and CEAG and the Kellers. Each agreement was executed on May 19, 1971. The Clark-Keller agreement was subscribed by J. Becket (sic), as vice-president of Clark Equipment Company. The CEAG-Keller agreement was also signed by J. Becket (sic), this time in the capacity of vice-president of CEAG. Both agreements give Clark's Buchanan, Michigan, address for purposes of notice to the licensee and provide for continuing royalty payments to be made to the Kellers, residents of North Dakota. In the instant case, service on CEAG was made pursuant to Fed.R.Civ.P. 4(d)(7) by serving the summons and complaint on an officer of Clark at its Melroe Division in Gwinner, North Dakota. CEAG maintains a liaison engineering employee at the Melroe Division of Clark in North Dakota.
It can be reasonably inferred that CEAG became aware of the patents through its close association with the Melroe Division of Clark. Moreover, the factual situation here supports the inference that CEAG, or someone from Clark acting on behalf of CEAG, contacted the Kellers in North Dakota about the foreign patents, in contemplation of securing a European arrangement analogous to Clark's American arrangement exploiting the domestic patents in question. Irrefragably, CEAG sought out the Kellers in North Dakota, and the Clark-Keller and CEAG-Keller licensing agreements were handled by Clark's counsel for both Clark and CEAG. In this transaction, it clearly appears that Clark was acting for and on behalf of its wholly owned subsidiary, CEAG, and that the same individual signed both agreements on behalf of Clark and CEAG.
We have reviewed the record as a whole, giving particular attention to the documents from which the bulk of the District Court's jurisdictional findings and inferences are derived, and we can find no basis for rejecting these findings as clearly erroneous. 2 Moreover, we believe that they provide adequate support for the District Court's conclusions that CEAG had "minimum contacts" with North Dakota, which rendered in personam jurisdiction proper, and that even though CEAG itself was not doing business in North Dakota, CEAG and Clark were inextricably involved with the Kellers in the negotiations and execution of the patenting licensing agreements.
CEAG attacks the District Court's jurisdictional conclusion on several bases. We have considered its contentions in light of the District Court's careful analysis of this issue and find them to be without merit. Presence by the defendant in the forum state is not a jurisdictional prerequisite. McGee v. International Life Insurance Co., 355 U.S. 220, 222-23, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957); Electro-Craft Corp. v. Maxwell Electronics Corp., 417 F.2d 365, 369 (8th Cir. 1969). It is only necessary that the defendant have sufficient minimum contacts with the forum state so that requiring it to defend itself there will not offend traditional notions of fair play and substantial justice. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945); Aaron Ferer & Sons Co. v. Atlas Scrap Iron & Metal Co., 558 F.2d 450, 454 (8th Cir. 1977). The District Court found that service had been made in compliance with the law of North Dakota 3 and that there were minimum...
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