Coffman v. Federal Laboratories

• Decision Date: 31 March 1944
• Docket Number: Civ. No. 3289.
• Citation: 55 F. Supp. 501
• Parties: COFFMAN v. FEDERAL LABORATORIES, Inc., et al. (UNITED STATES, Intervenor).
• Court: U.S. District Court — District of New Jersey

55 F. Supp. 501

COFFMAN v. FEDERAL LABORATORIES, Inc., et al. (UNITED STATES, Intervenor).

Civ. No. 3289.

District Court, D. New Jersey.

March 31, 1944.

Carpenter, Gilmour & Dwyer, of Jersey City, N. J. (James D. Carpenter, Jr., of Jersey City, N. J., of counsel), for plaintiff.

Wall, Haight, Carey & Hartpence, and Milton, McNulty & Augelli, all of Jersey City, N. J. (Edward J. O'Mara and Thomas McNulty, both of Jersey City, N. J., of counsel), for defendant Breeze Corp.

B. Thorn Lord, U. S. Atty., of Newark, N. J., and Lester P. Schoene, Sp. Asst. Atty. Gen., for intervenor.

Before McLAUGHLIN, Circuit Judge, and FAKE and SMITH, District Judges.

SMITH, District Judge.

This is a civil action brought by the plaintiff Roscoe A. Coffman against the defendants Federal Laboratories, Inc., and Breeze Corporations, Inc., to enjoin the said defendants' alleged threatened compliance with two Royalty Adjustment Orders, the one (No. W-9) issued by the War Department, and the other (No. N-7) issued by the Navy Department, pursuant to and in accordance with the provisions of the Royalty Adjustment Act, 56 Stat. 1013-1015, 35 U.S.C.A. §§ 89-96. The defendant Federal Laboratories, Inc., although joined as a party, was not served with process and did not enter an appearance.

This suit, as it now stands, has for its only object injunctive relief against the defendant Breeze Corporations, and presents an anomalous situation. The plaintiff, without invoking the judgment of the Court on any other issues, challenges the constitutionality of the Royalty Adjustment Act and the validity of the Royalty Adjustment Orders issued thereunder, and prays injunctive relief. The defendant, although entering an appearance, neither denies the allegations that the Act is unconstitutional and the Orders are invalid nor resists the application for an injunction, but assumes a neutral position. The reason for this neutrality becomes apparent upon a reading of the facts hereinafter summarized. The only opposition is that offered by the United States, the intervenor.

The United States, having been permitted to intervene,¹ moved to dismiss the complaint on the grounds: first, that the Court lacked jurisdiction because of the failure of the complaint to state a justiciable controversy, and second, that the Court lacked jurisdiction to grant injunctive relief because of the want of equity. The Court, having reserved decision on the motion, proceeded to hear argument on the merits, but our decision on the motion makes consideration of the merits unnecessary.

A brief summary of the events which led to the present action will be conducive to a clear understanding, not only of the questions raised by the motion, but also of the reasons advanced by the Court in support of its decision.

The plaintiff, the sole owner of a series of patents covering inventions therein defined, under an agreement dated December 8, 1932, granted to the Federal Laboratories an exclusive license to manufacture, use, and sell the inventions. The said agreement fixed the "license fee or royalty" in an amount "equal to six percent (6%) of the * * * net selling price on all devices and parts thereof sold." The Federal Laboratories, under agreements dated April 28, 1937 and April 28, 1939, employed and engaged the defendant Breeze Corporations, as the "exclusive sales agent and distributor," to manufacture and sell the inventions.

On February 18, 1941 the plaintiff instituted an action in this court (Civil Action No. 1395) against Federal Laboratories and Breeze Corporations² in which he demanded, in addition to other relief, an accounting for royalties allegedly due and owing under the said license agreement and wrongfully withheld. The other issues raised in that action are not pertinent here and need not be discussed. The defendant Breeze Corporations, answering the complaint, denied any liability for royalties allegedly due and owing under the license agreement; Federal Laboratories, not having been served with process, did not answer. That action, hereinafter referred to as the law action, is still pending and awaiting trial.

While the law action was pending, the representatives of the War Department, pursuant to the provisions of the Royalty Adjustment Act, and particularly Section 1 thereof, 35 U.S.C.A. § 89, having determined that the fees and royalties payable to the plaintiff under the said license agreement on patented devices manufactured for and charged or chargeable to the said Department, either directly or indirectly, were unreasonable and excessive, adjusted the basis of compensation and fixed both the "rates and the amount" of royalties in amounts determined by them to be "fair and just." The terms and conditions of the adjustment were embodied in Royalty Adjustment Order No. W-9, the pertinent provisions of which are recited in the footnote.³ The representatives of the Navy Department, following a like procedure, issued Royalty Adjustment Order No. N-7, in which identical terms and conditions were incorporated.

The Orders, in addition to modifying the basis of compensation, fixed the maximum sum payable to the plaintiff in each calendar year at $50,000 and directed that "the balance, in excess of the payments authorized * * *, of all royalties specified in the licenses * * * which were due to Licensor (plaintiff) and were unpaid on the effective date * * *, or since said date have or may hereafter become due to Licensor, on account of any manufacture, use, sale or other disposition of said inventions for the War Department or the Navy Department * * *", be paid to the Treasurer of the United States.

In December 1943, certified copies of these orders were served on all of the interested parties, to wit, Roscoe A. Coffman, Federal Laboratories, and Breeze Corporations. The present action followed. The defendant Breeze Corporations filed an answer in which it denied liability to either the plaintiff or the Treasurer of the United States, a position consistent with its stand in the earlier law action. The said defendant, however, asserted no right or defense predicated upon either the Orders or the Act, and did not controvert the plaintiff's allegations that the former were invalid and the latter was unconstitutional.

It is reasonably apparent, upon consideration of the facts and circumstances embraced within the pleadings and herein summarized, that as between the immediate parties to this action there is no "case" or "controversy", within the meaning of Article 3, Section 2, of the Constitution. The complaint does not invoke the judgment of the Court on the respective rights and liabilities of the parties, but invites only an adjudication on the constitutionality of the Statute and the validity of the Orders; such an adjudication is not essential to the determination of any right or interest asserted by the plaintiff and controverted by the defendant in this action. This defendant, as hereinabove stated, asserts no right or defense predicated upon either the Act or the Orders, and offers no resistance to the application for injunctive relief. The "adverse legal interests" in the subject of inquiry requisite to a "case" or "controversy" are obviously absent. This defect is fatal to the jurisdiction of the Court. South Spring Hill Gold Co. v. Amador Medean Gold Co., 145 U.S. 300, 12 S.Ct. 921, 36 L.Ed. 712; Fairchild v. Hughes, 258 U.S. 126, 42 S.Ct. 274, 66 L.Ed. 499; Com. of Massachusetts v. Mellon, 262 U.S. 447, 43 S.Ct. 597, 67 L.Ed. 1078, and other cases hereinafter cited.

The pleadings present nothing more than abstract questions, the answers to which, at least in this suit, are not determinative of the respective rights and liabilities of the immediate parties. The exercise of the judicial power does not extend to the determination of such questions. Liverpool, N. Y. & P. Steamship Co. v. Commissioner of Emigration, 113 U.S. 33, 5 S.Ct. 352, 28 L.Ed. 899; Chicago & Grand Trunk Railway Co. v. Wellman, 143 U.S. 339, 12 S.Ct. 400, 36 L.Ed. 176; People of State of California v. San Pablo, etc., Railroad Co., 149 U.S. 308, 13 S.Ct. 876, 37 L.Ed. 747; Muskrat v. United States, 219 U.S. 346, 31 S.Ct. 250, 55 L.Ed. 246; Keller v. Potomac Electric Power Co., 261 U.S. 428, 43 S.Ct. 445, 67 L.Ed. 731; Liberty Warehouse Co. v. Grannis, 273 U. S. 70, 47 S.Ct. 282, 71 L.Ed. 541. The interest of the plaintiff in the only subject of the purported controversy, the constitutionality of the Statute and the validity of the Orders, will not sustain this suit or support the jurisdiction of the Court in the absence of a real adverse interest therein maintained by the defendant. Ibid.

It is well settled that the judicial power, the power to adjudicate legal rights and pronounce judgment, vested in the courts by the Constitution, is limited to the determination of actual controversies between adverse litigants. The requirements of a justiciable controversy are clearly defined by the Supreme Court in Ætna Life Ins. Co. v. Haworth, 300 U.S. 227, 240, 241, 57 S.Ct. 461, 464, 81 L.Ed. 617, 108 A.L.R. 1000, in which it was stated: "The controversy must be definite and concrete, touching the legal relations of parties having adverse legal interests. South Spring Gold Co. v. Amador Gold Co., 145 U.S. 300, 301, 12 S.Ct. 921, 36 L.Ed. 712; Fairchild v. Hughes, 258 U.S. 126, 129, 42 S.Ct. 274, 275, 66 L.Ed. 499; Com. of Massachusetts v. Mellon, 262 U.S. 447, 487, 488, 43 S.Ct. 597, 601, 67 L.Ed. 1078. It must be a real and substantial controversy admitting of specific relief through a decree of a conclusive character as distinguished from an opinion advising what the law would be upon a hypothetical state of facts. See Muskrat v. United States, supra; State of Texas v. Interstate Commerce Comm., 258 U.S. 158, 162, 42 S.Ct. 261, 262, 66 L.Ed. 531; New Jersey v. Sargent, 269 U.S. 328, 339, 340, 46 S.Ct. 122, 125, 70 L.Ed. 289; Liberty Warehouse Co. v. Grannis, 273 U. S. 70, 47...