Components, Inc. v. Western Electric Company

• Decision Date: 23 October 1970
• Docket Number: Civ. No. 11-79.
• Citation: 318 F. Supp. 959
• Parties: COMPONENTS, INC., Plaintiff, v. WESTERN ELECTRIC COMPANY, Incorporated, Defendant.
• Court: U.S. District Court — District of Maine

318 F. Supp. 959

COMPONENTS, INC., Plaintiff, v.WESTERN ELECTRIC COMPANY, Incorporated, Defendant.

Civ. No. 11-79.

United States District Court, D. Maine, S. D.

October 23, 1970.

Roger A. Putnam, Portland, Me., Mary Helen Sears, Gene W. Stockman, Washington, D. C., Frank A. Steinhilper, Chestnut Hill, Mass., for plaintiff.

Sumner T. Bernstein, Gregory A. Tselikis, Portland, Me., John T. Kelton, Thomas V. Heyman, New York City, for defendant.

OPINION AND ORDER OF THE COURT

GIGNOUX, District Judge.

The amended complaint in this action is in two counts.The first count seeks treble damages under Section 4 of the Clayton Act,15 U.S.C. § 15(1964), for alleged violations of the antitrust laws arising from defendant's patent licensing practices.The second count requests a declaratory judgment under the Federal Declaratory Judgments Act, 28 U.S.C. § 2201(1964), that U. S. PatentsNos. 3,093,883 and 3,166,693, relating to electrolytic capacitors, are invalid and have not been infringd by plaintiff, and that these two patents, and other unidentified patents owned by defendant, are unenforceable because of misuse in violation of the antitrust laws.Presently before the Court are: (1)defendant's motion to dismiss Count Two for lack of subject matter jurisdiction in this Court and for failure to state a claim upon which relief can be granted.F.R.Civ.P. 12(b)(1) and (6); and (2)defendant's alternate motion for a separate trial and stay of discovery of the antitrust issues presented by Count One and the patent misuse issues in Count Two, pending a first separate trial of the patent validity and infringement issues in Count Two.F.R.Civ.P. 42(b).

I. DEFENDANT'S MOTION TO DISMISS COUNT TWO

Defendant bases its motion to dismiss Count Two on the grounds: (1) that there is no actual controversy as to infringement and validity of Patents 3,093,883 and 3,166,693, or as to the enforceability of these two patents, and the other unidentified patents, and that, therefore, the Court lacks jurisdiction to declare the rights of the parties under 28 U.S.C. § 2201(1964); and (2) that to the extent Count Two seeks a declaration of unenforceability of defendant's patents because of misuse in violation of the antitrust laws, it fails to state a claim upon which relief can be granted.For the reasons to follow, the Court holds: (1) that the record before it discloses an actual controversy between the parties within the meaning of 28 U.S.C. § 2201(1964) as to infringement, validity and enforceability of Patents 3,093,883 and 3,166,693, relating to electrolytic capacitors, and that, therefore, the Court has jurisdiction to declare the rights of the parties with respect thereto; (2) that so much of Count Two as seeks a declaration of unenforceability of Patents 3,093,883 and 3,166,693 because of misuse states a claim upon which relief can be granted; and (3) that because the amended complaint fails to specify the other patents which plaintiff contends are unenforceable because of misuse, it is impossible for the Court to determine whether there exists an actual controversy between the parties within the meaning of 28 U.S.C. § 2201(1964) as to the enforceability of such unidentified patents, and that, therefore, on the present posture of the pleadings, the Court lacks jurisdiction to declare the rights of the parties with respect thereto.¹

The Rule 12(b)(1) Issue

The relevant background to the present litigation may be briefly stated.²PlaintiffComponents, Inc. is a small manufacturer of electrical equipment, including, among other things, electrolytic capacitors.DefendantWestern Electric Company, Incorporated is a large manufacturer of electrical equipment which owns numerous patents relating to electrical equipment, including electrolytic capacitors of the type manufactured by Components.

On June 27, 1960, Western and Components entered into a patent license agreement by which the parties exchanged non-exclusive licenses for, inter alia, solid electrolytic capacitors under their existing patents and future patents on inventions made before June 1, 1965.The patents licensed by Western included subsequently issued U. S. PatentsNos. 3,093,883 and 3,166,693.Components agreed to pay royalties to Western at a specified rate if it used Western's patents in the manufacture of solid electrolytic capacitors.No royalty was payable by Western to Components under the agreement.

Between 1960 and 1969 the record discloses frequent correspondence and meetings between Components and Western in an effort to resolve a continuing dispute between them over Components' failure to pay royalties under the license agreement and Western's desire to negotiate a broader license agreement covering additional electrical equipment, including semiconductive apparatus manufactured by Components.Western's position throughout these discussions was that the electrolytic capacitors being produced by Components were covered by PatentsNos. 3,093,883 and 3,166,693 and that, hence, royalties were payable under the terms of the 1960 license agreement.Components' contention was that its electrolytic capacitors were not covered by Western's two patents and that, therefore, it was not required to pay royalties under the license agreement.

On May 24, 1968, Western filed an action against Components in the Court of Chancery of the State of Delaware seeking an accounting for royalties claimed to be owed Western by Components under the 1960 agreement.In its answer to the complaint in the Delaware action, Components denies that it is using Western's PatentsNos. 3,093,883 and 3,166,693 and alleges, in part, as affirmative defenses the invalidity of those patents and their unenforceability because of misuse in violation of the antitrust laws.This action is still pending.

In a letter dated July 31, 1969, delivered by hand to officials of Western at the conclusion of a meeting on August 6, 1969, Components cancelled the 1960 license agreement.On October 24, 1969, Western acknowledged receipt of Components' letter of cancellation.

Both before and since the cancellation of the 1960 license agreement Components has made solid electrolytic capacitors of essentially the same kind by essentially the same procedures.

On or about October 28, 1969, Western instituted an action in the United States District Court for the District of Arizona against Dickson Electronics Corporation, alleging, inter alia, infringement of Western's PatentsNos. 3,093,883 and 3,166,693.Dickson is another small manufacturer of electrical equipment producing, among other things, electrolytic capacitors.Dickson, like Components, had entered into a license agreement with Western, granting rights under Western's PatentsNos. 3,093,883 and 3,166,693, and Dickson, like plaintiff, had cancelled the agreement as of January 17, 1968.This suit is also still pending.

The present action was commenced by Components on January 21, 1970.

An "actual controversy," between the parties, in the Constitutional sense, is necessary to sustain jurisdiction under the Federal Declaratory Judgments Act, 28 U.S.C. § 2201(1964).³Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-240, 57 S.Ct. 461, 81 L.Ed. 617(1937);American Needle & Novelty Co. v. Schuessler Knitting Mills, Inc., 379 F. 2d 376, 378(7th Cir.1967);Dr. Beck & Co. G.M.B.H. v. General Electric Co., 317 F.2d 538, 539(2d Cir.1963).It is defendant's position that an "actual controversy" within the meaning of the Act does not exist in a case such as this unless the defendant patentee has charged the plaintiff with infringement.Defendant also argues that so long as the 1960 license agreement remained in effect, there could not, as a matter of law, be a charge of infringement of the licensed patents; and that the record is devoid of any charge of infringement by Western subsequent to Components' cancellation of the license agreement on August 6, 1969.

It appears to be settled law that no charge of infringement can be asserted by a patentee against his licensee with respect to the licensed patents under a subsisting patent license agreement.Thiokol Chemical Corp. v. Burlington Industries, Inc., 313 F.Supp. 253, 255(D.Del.1970);MacGregor v. Westinghouse Electric & Mfg. Co., 45 F. Supp. 236, 237(W.D.Pa.), aff'd, 130 F.2d 870(3rd Cir.1942);cf.Tuthill v. Wilsey, 182 F.2d 1006, 1008(7th Cir.1950)(allegations by patentee in a complaint seeking royalties under a license agreement to be construed as assertions of "permissive use" under a contract and not a charge of infringement).It may further be conceded that, so far as the present record discloses, Western has not charged Components with infringement of its capacitor patents since the license agreement was terminated.⁴Western also correctly asserts that a number of cases have indicated that such a "charge" is a prerequisite to the maintenance of an action of this nature.SeeThiokol Chemical Corp. v. Burlington Industries, Inc., supra,313 F.Supp. at 255("In such proceedings * * * the courts have been careful to determine that the plaintiff has in fact been charged with infringement.* * * The charge of infringement creates a justiciable controversy between the parties. * * *");Tuthill v. Wilsey, supra,182 F.2d at 1008("* * * unless defendant here had charged plaintiffs with infringement of her patent rights, there could be no controversy under the patent laws and no right to relief under the Declaratory Judgments Act.")See alsoAmerican Needle & Novelty Co. v. Schuessler Knitting Mills, Inc., supra;Walker Process Equipment, Inc. v. FMC Corp., 356 F.2d 449, 451(7th Cir.), cert. denied, 385 U.S. 824, 87 S.Ct. 56, 17 L.Ed.2d 61(1966);Hartford National Bank & Trust Co. v. Henry L. Crowley & Co., 219 F.2d 568, 570-571(3rd Cir.1955).But, as Professor Moore observes, the requirement that there must have been a "charge of infringement" has been given a very liberal...