Consolidated Kinetics Corp. v. Marshall, Neil & Pauley, Inc.

• Decision Date: 06 May 1974
• Docket Number: No. 1572--I,1572--I
• Citation: 521 P.2d 1209,11 Wn.App. 173
• Court: Washington Court of Appeals
• Parties: , 182 U.S.P.Q. 434 CONSOLIDATED KINETICS CORPORATION, Appellant, v. MARSHALL, NEIL & PAULEY, INC. a corporation, d/b/a Amber Booth Company, and Air Control, Inc., a corporation, Respondents.

Page 173

11 Wn.App. 173

521 P.2d 1209, 182 U.S.P.Q. 434

CONSOLIDATED KINETICS CORPORATION, Appellant, v. MARSHALL, NEIL & PAULEY, INC. a corporation, d/b/a Amber Booth Company, and Air Control, Inc., a corporation, Respondents.

No. 1572--I.

Court of Appeals of Washington, Division 1.

May 6, 1974.

DeGarmo, Leedy, Oles & Morrison, Seattle, Freeman T. Eagleson, Jr., Columbus, Ohio, Seth W. Morrison, Seattle, for appellant.

Arnold, White & Durkee, Paul M. Janicke, Frank S. Vaden, III, Houston, Tex., Seed, Berry, Dowrey & Cross, Kenneth W. Vernon, Seattle, for respondents.

HOROWITZ, Judge.

Plaintiff sued defendants to enjoin them from manufacturing and selling a certain type of compressed fiberglass vibration isolation pad in violation of a contract between the parties dated August 9, 1967. Plaintiff appeals a judgment dismissing its action.

Plaintiff Consolidated Kinetics Corporation (Kinetics) and Marshall, Neil & Payley, Inc. and Air Control, Inc., its selling agent, (Marshall) are competitors in noise and vibration isolation systems for use in the building industry. Kinetics is the owner of U.S. Patent 3,095,187 ('187) dated June 25, 1963, describing an apparatus for isolating vibrations. The inventors named on the patent are Laurence L. Eberhart and Patrick M. Sweeney. Eberhart, assignor of Kinetics' patent '187, later designed, and in 1962 pursuant thereto, Kinetics manufactured for marketing by Owens-Corning Fiberglass Company a glass fiber unit isolation mount having a closefitting flexible covering, with notation thereon 'Pat. pending.' Kinetics' product is principally used in a floor system to isolate mechanical and sound vibration otherwise occurring in buildings, as from moving or rotating equipment.

In the fall of 1965 Eberhart, then president of Kinetics, learned that Marshall, through its Amber/Booth division, was offering a product for sale which appeared to be a copy of its glass fiber unit isolation mount. Findings of Fact No. 4, 5. A controversy followed. The parties finally resolved their controversy by executing an agreement dated August 9, 1967. The agreement stated Kinetics was the owner of certain 'U.S. patents and the inventions therein disclosed and claimed . . .' The patent numbers included patent '187. Under that agreement, the Amber/Booth division of Marshall, inter alia, agreed

not to manufacture, sell or offer for sale during the life of the patent listed in paragraph 2:1 last to expire, fiberglas isolation pads wherein the fiberglas material is of the type defined in the claims of said patents and wherein said pads include a flexible covering material to confine or appreciably resist the flow of air to and from the interstices of the pad.

See findings of fact Nos. 5, 6.

Amber/Booth then virtually withdrew from marketing of glass fiber isolation pads. By 1969 the Kinetics product became the accepted standard for a noise and vibration medium. In 1969 Amber/Booth determined to re-enter the rapidly expanding market for individual, high-density, precompressed glass fiber isolation pads, especially the market calling for pads with a covering. In an attempt to avoid the prohibition of the August 9, 1967 agreement, Amber/Booth encased its glass fiber isolation paid in a loose-fitting polyethylene envelope. The Amber/Booth pads were then sold and used in a number of buildings.

Kinetics considered Amber/Booth's actions in marketing the latter's product to be a breach of the August 9, 1967 agreement. Kinetics then sued to enjoin defendant's claimed continuing breach of contract. Marshall's answer, Inter alia, denied any breach and alleged a defense based on want of consideration, namely, that Kinetics' patents described in that agreement were void for noncompliance with the requirements of patentability specified in Title 35 U.S.C., chs. 10 and 11, § 100 et seq.

During trial the issues concerning the patents appear ultimately to have been confined to a consideration of the validity of patent '187. After trial the court entered detailed findings and conclusions generally favorable to Marshall on the issue of patent validity, and entered judgment dismissing Kinetics' complaint. The court found the Marshall product violated the August 9, 1967 agreement in that '(d)efendants' polyethylene envelope does appreciably restrict the flow of air to and from the interstices of the glass fiber pad.' Finding of fact No. 17. However, the court further found that '(t)he combination of the '187 was suggested by the prior art and does not produce the unexpected or surprising results asserted in the patent.' Finding of fact No. 31. The court also found:

On consideration of all the prior art, the combination of the '187 patent would have been as a whole obvious to a person (of) ordinary skill in the art at the time the invention was made.

Finding of fact No. 32. The court concluded: 'Claims 1, 2, 4, and 5 of plaintiff's patent 3,095,187 are invalid for obviousness.' Conclusion of law No. 1. The court refused to enter plaintiff's proposed finding of fact No. 32, a finding inconsistent with finding of fact No. 32.

Kinetics contends the court lacked jurisdiction to pass on the question of patent validity and therefore should have entered judgment for Kinetics because of Marshall's breach of the August 9, 1967 agreement. Kinetics alternatively contends the court erred in entering findings of fact Nos. 31 and 32, conclusion of law No. 1, and further erred in not entering Kinetics' proposed finding of fact No. 32.

We consider first the question of the trial court's jurisdiction to pass upon the question of patent validity. Kinetics argues the United States district courts have exclusive jurisdiction 'of any civil action arising under any Act of Congress relating to patents . . .' 28 U.S.C. § 1338(a). Kinetics then argues that by the August 9, 1967 claim settlement agreement, the Amber/Booth division of Marshall in effect agreed not to infringe patent '187; that in substance Kinetics' action for breach of contract is an action to enjoin patent infringement, a matter within the exclusive jurisdiction of the federal courts. We do not agree with Kinetics' position on the court's jurisdiction.

The courts recognize a distinction between jurisdiction of actions arising 'under any Act of Congress relating to patents . . .' (28 U.S.C. § 1338(a)), and jurisdiction to determine questions or issues of patent law in causes of action cognizable by state courts. State courts have jurisdiction to pass upon questions or issues involving patent laws. Pratt v. Paris Gas Light & Coke Co., 168 U.S. 255, 259, 18 S.Ct. 62, 42 L.Ed. 458 (1897); Kysor Indus. Corp. v. Pet, Inc., 459 F.2d 1010 (6th Cir. 1972); Koratron Co. v. Deering Milliken, Inc., 418 F.2d 1314, 10 A.L.R. Fed. 636 (9th Cir. 1969); Coty, Inc. v. Bourjois, Inc., 109 F.Supp. 431 (S.D.N.Y.1952). See Osgood Panel & Veneer Co. v. Osgood, 166 Wash. 315, 6 P.2d 661 (1932). The federal law on validity governs. Blumenfeld v. Arneson Prods., Inc., 172 U.S.P.Q. 76 (Cal.App.1971).

Lear, Inc. v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610 (1969), makes it clear that in an action in a state court to recover patent royalties required to be paid pursuant to contract, the state court has jurisdiction to consider the issue of patent validity as a defense to the action.

Since Lear, Inc. v. Adkins, Supra, state courts have passed upon the defense of patent validity in breach of contract cases. See, e.g., Keladiro, Inc. v. Valve & Primer Corp., 177 U.S.P.Q. 796 (Cal.Super.Ct., Alameda Cty. 1973); Blumenfeld v. Arneson Prods., Inc., Supra; American Harley Corp. v. Irvin Indus., Inc., 27 N.Y.2d 168, 315 N.Y.S.2d 129, 263 N.E.2d 552 (1970); Rialto Prods., Inc. v. Rayex Corp., 166 U.S.P.Q. 222 (N.Y.Sup.Ct.1970). See generally Chisum, The Allocation of Jurisdiction Between State and Federal Courts in Patent Litigation, 46 Wash.L.Rev. 633 (1971).

In American Harley Corp. v. Irvin Indus., Inc., Supra at 136--138, 263 N.E.2d at 556, Judge Breitel in his concurring opinion explained:

That validity of the patent is involved in an action is not determinative of jurisdiction. Although Federal courts have exclusive jurisdiction over cases arising under the patent laws (U.S.Code, tit. 28, § 1338, subd. (a)), State courts may determine the validity of a patent when incidental to an action based on contract or tort (see Middlebrook v. Broadbent, 47 N.Y. 443, 446--447; Zenie v. Miskend, 245 App.Div. 634, 637--639, 284 N.Y.S. 63, 67--70, affd. 270 N.Y. 636, 1 N.E.2d 367). The principle was recently affirmed in Lear, Inc. v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610 .. . The issue in determining jurisdiction is whether the alleged causes of action are in fact different from an action for infringement, protecting rights and interests consistent with, but apart from, those created by the patent laws.

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The existence of a Federal remedy will not preclude State courts from affording their own remedies, providing that relief is based on cognizable and separable common-law rights. Those with the power to enforce a patent may elect to waive the infringement and, instead, sue on the agreement relating to the use of the patented article. The State courts have jurisdiction even if damages would be measured by the same loss which results from infringement, and recovery would preclude further damages for the infringement. (Henry v. A. B. Dick Co., 224 U.S. 1, 14, 32 S.Ct. 364, 56 L.Ed. 645.) Invasions over which the State courts may have cognizance include palming off, or other forms of unfair competition, or affronts to contract rights based on patents, such as royalties (Lear, Inc. v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, (23 L.Ed.2d 610), supra; . . .).

Kinetics argues if the validity of a patent is the principal issue involved, even in a breach of contract case, the federal court's jurisdiction to resolve the issue of patent validity is exclusive. It relies on ...