Coleco Industries, Inc. v. Kransco Manufacturing, Inc.

• Decision Date: 10 June 1965
• Citation: 247 F. Supp. 571
• Parties: COLECO INDUSTRIES, INC., Plaintiff, v. KRANSCO MANUFACTURING, INC. and Saul Mondschein (d. b. a. Mondschein & Co.), Defendants.
• Court: U.S. District Court — Southern District of New York

247 F. Supp. 571

COLECO INDUSTRIES, INC., Plaintiff, v. KRANSCO MANUFACTURING, INC. and Saul Mondschein (d. b. a. Mondschein & Co.), Defendants.

United States District Court S. D. New York.

June 10, 1965.

Kenneth Pearson, New York City, for plaintiff.

Keith, Johnston, Isner & Des Marais, New York City, Guy W. Shoup, New York City, of counsel, for defendants.

TENNEY, District Judge.

Defendant moves herein, pursuant to Rule 12(b) of the Federal Rules of Civil Procedure, to dismiss the complaint for improper venue under Section 1400(b) of Title 28 of the United States Code or, in the alternative, to transfer the action to the district where venue is more properly laid.

It is not disputed that defendant is a California corporation and is not a resident of this district; accordingly, venue can be laid in this district only if it be shown that an act of infringement was committed here, and that defendant has a regular and established place of business in this district.

Both parties are engaged in the manufacture of various toy items for the beach and pool, including boats and small kiddie pools, and the causes of action are for infringement of a design patent of a pool and for unfair competition related thereto.

Assuming for the purposes of this motion that acts of infringement have occurred in this district (see Watsco, Inc. v. Henry Valve Co., 232 F.Supp. 38, 44-46 (S.D.N.Y.1964),¹ has it been shown that defendant has a regular and established place of business in this district? I think not, and the motion to transfer will accordingly be granted.

It is, of course, plaintiff's burden to show this essential element in order to maintain the action in this district. Gwynne v. Michael Flynn Mfg. Co., 227 F.Supp. 357 (S.D.N.Y.1964).

Venue in patent infringement actions is governed exclusively by Section 1400(b) of Title 28 (Fourco Glass Co. v. Transmirra Prod. Corp., 353 U.S. 222, 77 S.Ct. 787, 1 L.Ed.2d 786 (1957)), and while certain activities may constitute "doing business" under the general venue statutes (28 U.S.C. § 1391(c)), the "doing business" test is not to be substituted for the "regular and established place of business" test in Section 1400(b), and the terms are not to be treated synonymously. Knapp-Monarch Co. v. Casco Prod. Corp., supra, 342 F.2d at 624.

Depositions were taken of Saul Mondschein, defendant's sales representative (this deposition will hereinafter be referred to as "M" with the appropriate page citation), John N. Rosenkrans, Jr., President of defendant corporation (this deposition will hereinafter be referred to as "R" with the appropriate page citation), and Robert J. Wilson, salesmanager of defendant corporation (this deposition will be referred to as "W" with the appropriate page citation).

From these depositions, the following appears:

Defendant is a California corporation (R-3) with its principal place of business in that state, and is not authorized to do business in New York State (R-5). Its manufacturing plants are located in San Francisco and Los Angeles, California (R-4). In addition, the defendant stocks no products in New York (R-6), and does not maintain a bank account in this state (Rosenkrans affidavit at 2).

Saul Mondschein, the person served, is a commission salesman for defendant. He is not a salaried employee of defendant, his remuneration depending solely on commissions from sales solicited by him and accepted by defendant in California for shipment (M-5; R-10).

Mr. Mondschein maintains his own office in New York, located at 200 Fifth Avenue (M-5), and has had that office for ten years (M-5), though he has only represented defendant for three (M-5). He pays all the expenses for that office and receives no reimbursement for rent or telephone expenses (W-24). He exhibits defendant's products in his showroom but is not reimbursed for that space (M-5) and, in fact, is not required by defendant to maintain said display (M-6; W-23), nor is any particular portion of the showroom reserved for that purpose (M-20). The display of these products, however, is not unique since Mondschein displays the products of other companies he represents as well, according to the needs of the particular merchandise of the particular company (M-17). In addition to defendant, Mondschein represents some eight other manufacturers (M-18). Mondschein lists Kransco in the telephone directory at his own expense (M-6) without any prearrangement with the defendant (M-19) and without the knowledge of Kransco's sales manager (W-23), and in a manner similar to that used with respect to all the companies he represents (M-19). Similarly, Mondschein lists Kransco's name on the lobby directory at 200 Fifth Avenue at his own expense, though not on his own door (M-6), all without the knowledge of Kransco's sales manager (W-23) or president (R-11).

No officers or employees of defendant make use of Mondschein's showroom facilities and if use is made of Mondschein's telephone facilities it is after permission is given, and, in addition, payment is made for all calls made (M-17; W-25). Similarly, no desk or table facilities are reserved for any of defendant's representatives (M-17; W-25).

The defendant presented an exhibit at the New York Toy Fair in 1962, but has not done so since (W-4, 10, 11, 12).²

Insofar as orders are concerned, Mondschein, as already noted, works purely on a commission basis. He has some catalogues and price lists on hand in the showroom. However, his name does not appear thereon and on the price list there appears the notation "Home Office and Factory: 464 Victory Ave. South, San Francisco, California" and "Sales Office and Factory: 14241 Ventura Blvd., Sherman Oaks, California." (Plaintiff's Exhibit 2 for identification.)

All orders were taken on Mondschein's own order forms which contain a space for insertion of the name of the customer and the name of the manufacturer (M-19), and these same order forms are used in connection with sales by the other eight companies that Mondschein represents (M-22).

While Mondschein gave certain discounts in the event he thought it necessary on the advice and authorization of defendant (M-14), all orders filled in by him were sent to California for checking, confirmation and approval to ship merchandise (M-19). The procedure as described by Rosenkrans is that orders obtained by sales representatives such as Mondschein are forwarded to the San Francisco office and factory for acceptance and credit check, and then are shipped by the most economical means of transportation (R-7). Kransco invoices all customers directly and all products are shipped by Kransco directly to the buyer.^* Check is made of the credit standing of the company and whether the prices contained in the order are correct (R-12), and on occasion orders sent by Mondschein have been rejected (R-12) (compare W-24). At the time shipment is made bills are sent to the accounts involved and the matter of delinquent accounts is handled by defendant's credit manager (R-11). However, Mondschein's aid has never been enlisted to collect any such accounts (R-12).

There is no written agreement between Mondschein and defendant (R-12; W-21), the only agreement being an oral one wherein Wilson simply asked Mondschein to represent products manufactured by Kransco and requested him to solicit and procure sales in an assigned area, to wit, Pennsylvania, New Jersey, Vermont, Washington, D. C., and New York (W-22), in return for a commission on sales accepted. He is not, however, required to make any quota of sales per year (W-23).

In essence, then, Mondschein has an agreement similar to that of all of defendant's other representatives, some fourteen, located throughout the country (W-25, 26) and is supplied with the same free samples and catalogues as all of defendant's representatives (W-22).

Defendant's sales manager Wilson visits New York on two to three occasions per year (W-4) as he does the respective territories of all of defendant's sales representatives (W-7).

While in New York, Wilson on occasion calls on buyers of various chain stores.

It appears that in situations wherein a chain store has a regional buyer, which is the case with respect to most chain stores (W-29), sales are usually initiated from their California offices and followed up in New York (W-27). In the normal course, the sale is initiated in California with a specific account which may then request one of defendant's representatives to call on the New York buying office (W-5). In these cases, while at times the authorization for sale may be given in the New York buying office, the actual purchase orders are issued in California. A few chain stores do not have regional buyers (four or five, see W-20), and as to them inquiry must be made in the New York office. However, in these cases, as well, it is rare that orders are issued out of New York (W-29).

When Wilson has on occasion (W-5) called on the New York offices of some of the chain stores, it was to present the new line of products or the products that defendant was offering for sale. On these occasions Wilson would bring with him a catalogue and price list (W-5) and some of his own samples, or, if he had none, he would borrow one of Mondschein's (W-9).

On these occasions, if an order was written up, subject to transmission to California, there appears to have been no set procedure with respect to who would write the order up (W-7, 8, 9, 27, 29, and see discussion above), where it was written (ibid.), and who was credited with the sale (ibid.). But in any event Wilson testified that the sales out of the Southern District of New York since 1962 were not only "not substantial" (W-13) but were "practically nil" (W-13). He also testified that, to his knowledge, none of the infringing items were shipped into this District (W-21).

The essence of plaintiff's position, supported by an affidavit of one of its officers and of a manufacturer's representative, is...