Coleman v. Whisnant

Citation35 S.E.2d 647,225 N.C. 494,67 U.S.P.Q. 245
Decision Date31 October 1945
Docket Number307
PartiesCOLEMAN v. WHISNANT et al.
CourtUnited States State Supreme Court of North Carolina

[Copyrighted Material Omitted]

This action was instituted by the plaintiff to recover damages on account of defendants' interference with his right to the use of certain patents, covering improved appliances in the manufacture of hosiery, invented by him, and for compensation for the use of his invention by defendants in their hosiery mill.

The pleadings consisted of complaint, answer and reply. At the hearing defendants interposed demurrer ore tenus on the ground that the plaintiff's complaint and reply failed to state a cause of action, and that on the face of these pleadings the court was without jurisdiction. The demurrer was sustained. Plaintiff's appeal from this disposition of the case requires examination of plaintiff's complaint, and of his reply in response to defendants' answer, as these pleadings relate to the questions raised by the demurrer.

The pertinent allegations of the complaint may be stated as follows: During the year 1939, while plaintiff was an employee in the hosiery mill in Hickory, North Carolina owned and operated by the defendants, Ernest E. and Clarence L. Whisnant, he invented an appliance or machine for putting stripes in men's hosiery while in process of manufacture on circular knitting machines. Application for patent was filed in U. S. Patent Office December 7, 1939, and patent #2,237,270 was issued in 1940. Subsequently plaintiff devised certain improvements on the invention, for which patent #2,330,269 was issued and granted to plaintiff and Osben D. Hunt (superintendent in defendants' mill), as patentees, with an assignment of an interest therein to the two defendants. It was alleged, however, that the defendants were merely licensees, and that the use of the patented appliances was restricted to defendants' plant in Hickory. Plaintiff alleged that he was the sole inventor, and that the naming of Hunt as co-patentee was procured by defendants as result of an unlawful conspiracy on their part with Hunt in order that defendants might control the patent, and that immediately after the last patent was issued Hunt assigned his interest in the patent to the defendants, and that defendants have continuously used the appliance invented by plaintiff in their mill. Plaintiff alleged that he had demanded compensation for use of the machines invented by him but only received nominal and grossly inadequate sums therefor; that the patented device reduced the cost of manufacturing hose to the extent of 15¢ and 20¢ per dozen, and that defendants have used plaintiff's invention in the manufacture and sale of 1,500,000 dozen pairs of hose.

Plaintiff further alleged that he had made numerous efforts to make and distribute said attachments for use in various and sundry hosiery mills in North Carolina, but that on each occasion the defendants 'have gone to the party approached by plaintiff and threatened, either directly or indirectly, to institute proceedings to 'protect their interest,' or to institute proceedings to prevent the use of this plaintiff's invention by himself or any other person,' and, further, that when plaintiff was considering a proposition with parties in Hickory for the use of these attachments on a partnership basis defendants approached said parties with result they cancelled the proposition; that defendants by threats to sue the proprietor of machine shops if they attempted to manufacture any of these appliances, have prevented plaintiff from having any of the patented devices made; that such interference has continued over a period of two years and defendants have consistently prevented this plaintiff from making, using or selling the appliances invented by him; that defendants have appropriated plaintiff's invention to their exclusive use, installed the appliances so patented in their mill, and forbidden the use or sale by plaintiff of any of said appliances. For this interference with the use of his patent plaintiff alleges he has suffered damage to the extent of $150,000. He further alleges that defendants have greatly prospered by the use of his invention, and that he is entitled to recover for royalties on the use of his invention in the amount of $75,000.

The defendants in their answer admit the issuance of the patents set out in the complaint, but allege that a contract and assignment, dated October 3, 1939, was entered into by and between the plaintiff and Hunt, parties of the one part, and the defendants, of the other part, which contained stipulations and agreements that plaintiff and Hunt thereby assigned and sold to the defendants one-half interest in the invention for which the parties of first part were about to apply for letters patent, and that each of the parties thereby became entitled to one-fourth interest in said invention, including letters patent to be issued, together with all improvements and subsequent patents on said invention; that it was further stipulated in the contract that defendants be granted license to use the invention in their mill as a factory right without charge for the use of the invention; that the invention and patents should not be sold, assigned, leased or licensed, or any interest disposed of without unanimous consent of the four parties, and that in event of sale or license the money derived should be equally divided. The agreement contained the further provision that the invention and any and all patents granted thereon 'shall not be used by anyone except Ernest E. Whisnant and Clarence L. Whisnant at their mill in Hickory, North Carolina, except by the written consent of all parties to this agreement. ' This was signed by plaintiff, Hunt and the two defendants.

Defendants' answer further set out that on December 5, 1939, and again on December 31, 1940, plaintiff and Hunt executed written assignments to each of the defendants of a one-fourth interest in the invention. These assignments were recorded in U.S. Patent Office. It was further alleged that on June 7, 1943, Hunt executed written assignment of his one-fourth interest to the defendants, and appended to this assignment was the written consent signed by plaintiff.

To the defendants' answer plaintiff filed reply again alleging that he was the sole inventor of the device patented, and that the naming of Hunt as co-patentee was caused by the defendants in furtherance of the conspiracy alleged in the complaint. He admits signing the contract alleged in the answer, but alleges this was done under coercion, without consideration and in furtherance of a conspiracy between defendants and Hunt to defraud him of his rights and of the rewards due him from his invention. He further alleges the contract was illegal and void 'for the reason that same is in restraint of trade and contrary to the Federal statutes, and particularly the Sherman anti-trust statute. ' Plaintiff admits signing the assignments to the defendants set out in the answer, but alleges they were executed in furtherance of the unlawful conspiracy as alleged, were without consideration, and that at the time said assignments were executed there was a contemporary oral agreement with the defendants that they would pay him ample royalties upon the use of his inventions in the event they proved practical.

Plaintiff admits the patent was issued in the name of Hunt and himself, but not to defendants as co-patentees, 'the same having been assigned to them as assignees of a one-fourth undivided interest each and by agreement said interest was to be used in their mill at Hickory,' and that their interest is only that of licensees for the use of the invention in their plant. Plaintiff again alleges the contract and the assignments to defendants were executed under coercion, without consideration, and that the contract relied on by defendants was void as being in restraint of trade. He alleges that the defendants have installed 104 machines equipped with plaintiff's invention without compensation to him, and have interfered with plaintiff's use of his invention, and prevented him from making, using or vending the patented devices. His prayer for relief is that he recover $150,000 damages for wrongful interference, and $75,000 royalties.

From judgment sustaining the demurrer and dismissing the action, plaintiff appealed.

John C. Stroupe, of Hickory, W. H. Strickland, of Lenoir, and Paul B. Eaton, of Charlotte, for plaintiff.

J. L. Murphy and Bailey Patrick, both of Hickory, and S. J. Ervin, Jr., of Morganton, for defendants.

DEVIN Justice.

The sufficiency of the plaintiff's pleadings to constitute a cause of action was challenged by the demurrer interposed by defendants upon two grounds: (1) That the cause of action attempted to be set up was one arising under the Patent Laws of the United States, and therefore cognizable only in the Federal courts, and (2) that in any event plaintiff had failed to allege sufficient facts to constitute a cause of action. The ruling of the court below in entering judgment that the demurrer be sustained requires consideration of both grounds upon which the demurrer was based.

1. By Art. 1, sec. 8, of the Constitution of the United States the Federal Government was granted power 'to promote the Progress of Science and useful Arts, by securing for limited Times to * * * Inventors the exclusive Right to their * * * Discoveries. ' In the exercise of this power the Congress has given to the Federal Courts exclusive jurisdiction of 'all cases arising under the patentright * * * laws of the United States. ' 28 U.S.C.A. ss 371, 41(7). Only a Federal Court has jurisdiction to consider an action involving the...

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