Deering Milliken Research Corp. v. Textured Fibres, Inc., Civ. A. No. 68-705.

• Decision Date: 03 March 1970
• Docket Number: Civ. A. No. 68-705.
• Citation: 310 F. Supp. 491
• Court: U.S. District Court — District of South Carolina
• Parties: DEERING MILLIKEN RESEARCH CORPORATION, Plaintiff, v. TEXTURED FIBRES, INC., Virginia Mills, Inc. and Throwing Corporation of America, Defendants.

310 F. Supp. 491

DEERING MILLIKEN RESEARCH CORPORATION, Plaintiff, v. TEXTURED FIBRES, INC., Virginia Mills, Inc. and Throwing Corporation of America, Defendants.

Civ. A. No. 68-705.

United States District Court, D. South Carolina, Spartanburg Division.

March 3, 1970.

COPYRIGHT MATERIAL OMITTED

Thomas A. Evins, Means, Evins, Browne & Hamilton, Spartanburg, S. C., Simon H. Rifkind, and Jay Greenfield, New York City, for plaintiff.

Edward P. Perrin, Perrin & Perrin, Spartanburg, S. C., and McNeill Smith, Smith, Moore, Smith, Schell & Hunter, Greensboro, N. C., for defendants.

FINDINGS OF FACT, CONCLUSIONS OF LAW, OPINION and ORDER

DONALD RUSSELL, District Judge.

By its order of remand, the Circuit Court of Appeals directed this Court in this proceeding to answer three questions, supporting same with appropriate findings of fact. Deering Milliken Research Corp. v. Textured Fibres, Inc. (1969) 415 F.2d 875, 877, note 4. These three questions are:

(1) Are the contracts sued upon contracts "to be performed in whole or in part by either party in South Carolina" within the meaning of § 10.2-803(1) (g)?

(2) Is § 10.2-803(1) (g) as applied to this case valid under the Fourteenth Amendment to the United States Constitution?

(3) Is § 10.2-803(1) (g) valid under Article III, Section 17 of the Constitution of South Carolina?

Pursuant to such mandate, I make, on the basis of the record presented by the parties, the following Findings of Fact:

FINDINGS OF FACT

(1) The plaintiff is a corporation of South Carolina, which, by corporate merger effected in 1967, acquired all the assets, including contractual rights, of a Delaware corporation of like name.¹ It is engaged in textile research and development and in that connection maintains extensive laboratory and testing facilities at its headquarters in Spartanburg, South Carolina. In its laboratory and testing facilities, it seeks to develop new methods of textile manufacture and new textile products, for some of which patents are sought. It, also, attempts to secure exclusive legal rights to patents developed by others, basically in the textile field. In connection with patents owned by it or to which it has acquired exclusive rights, it grants licenses, furnishing, in some instances, at least, technical information and assistance in connection with such patents and their uses to its licensees.²

(2) The defendants Virginia Mills and Throwing Corporation of America were at the time of the commencement of this action North Carolina corporations, engaged in the textile business in that State; the defendant Textured Fibres, Inc. is a Delaware corporation, similarly engaged in textile business with its principal office and place of business in North Carolina.

(3) The plaintiff, at all times hereinafter stated, had the exclusive license in the United States from the French owners of certain inventions and patents for making crimped yarns, with the authority to grant such licenses for the use of such patents in the United States. These patents are generally identified by the parties as the FT patent rights and the manufacture thereby covered is described by the parties as the "ARCT" program.

(4) On September 25, 1963, the plaintiff and the defendant Virginia Mills, Inc. (to whose rights and duties thereunder the defendant Throwing Corporation of America subsequently succeeded and thereafter, in 1967, the defendant Textured Fibres, Inc. "succeeded to the same rights and duties")³ entered into a sub-license agreement, dealing with such FT patents and the processes thereby covered, and, on May 1, 1964, the plaintiff and the defendant Textured Fibres, Inc., entered into a similar agreement. The record before the Court is silent on the negotiations between the parties preceding the execution of the contract.⁴

By the terms of these agreements, the plaintiff granted to the defendants "a nonexclusive and nontransferable use license * * * to use the FT processes and FT machines for the purpose of making for use and sale crimped yarns in accordance with technical information and the inventions of said FT PATENT RIGHTS." In order to facilitate and promote the use of such patent rights by the defendants, the plaintiff agreed, also, (1) to furnish the defendants "such additional technical information and `knowhow' as is necessary in DMRC's opinion to enable LICENSEE (defendants) to practice the inventions licensed hereby", (2) to provide "further additional information as it similarly deems necessary to supplement information heretofore furnished", (3) to "disclose to LICENSEE (defendants) said additional information and `knowhow' after mill test has in DMRC's judgment confirmed that an improvement has been made and within sixty (60) days after the improvement has in DMRC's judgment been successfully reduced to practice in commercial production", (4) to grant to the defendants licenses to use any improvements acquired in such patents, (5) to instruct the personnel of the defendants, at the laboratories of the plaintiff, or at such other places as may be agreeable to the parties, "as to the best methods of practicing these inventions", and (6) "upon terms to be mutually agreed upon", to send technical personnel to the plants of the defendants "for the purpose of instructing" defendants' employees "in the said best methods of practicing the inventions."

In return, the defendant agreed to pay a fixed annual minimum royalty of $1,000 and a percentage royalty as calculated on the sales or use by the defendants of yarn processed under the patents licensed. The defendants also bound themselves to keep accurate records necessary to the computation of such royalty payments, and to furnish the plaintiff "on or before the tenth day of each calendar month a certified statement" of all yarn processed under the licenses, accompanied by payment of the agreed royalty based on such production. Such statements, as well as the accompanying payments were to "be sent by registered mail to DMRC at P. O. Box 1927, Spartanburg, South Carolina, U. S. A. * * *" or "at such other address as such party may hereafter in writing designate by written notice to the other." The plaintiff did not change the address at which payment of the royalty was to be made by the defendants.

These agreements were executed by the plaintiff in Spartanburg, South Carolina, and by the defendants in North Carolina.

(5) The technical information supplied its sublicensees by the plaintiff, as provided for in its sub-licenses to the defendants, in order to enable such sub-licensee to practice the invention, resulted almost entirely from research, testing and development work carried on by the plaintiff at its headquarters and laboratories in Spartanburg, South Carolina.⁵ A significant portion of such technical information and "knowhow" was developed by the scientists and engineers employed by the plaintiff at its laboratory in response to requests from its sub-licensees, such as the defendants, made as a part of their rights under the terms of their sub-license. To provide this service, as contemplated by its sub-license contracts, the plaintiff maintained a substantial staff of scientists and engineers at its Spartanburg headquarters and laboratories.⁶

(6) The machines used in the manufacturing processes covered by such patent rights were manufactured in France and were purchaseable exclusively from French manufacturers. However, the right to purchase or use such machines in the United States depended upon acquiring a sub-license from the plaintiff.

(7) Some time after acquiring their sub-licenses, the defendants purchased the necessary machines from the French manufacturers for the processing of yarn as permitted under such sub-license.

(8) Beginning a short time after securing its sub-license, the defendant Virginia Mills, Inc., and its successor and co-defendant Throwing Corporation of America, regularly made requests of the plaintiff at its headquarters and laboratory at Spartanburg, South Carolina, for technical assistance, laboratory testing and "know-how" information, practically all of which was furnished such defendants through work done and performed by the plaintiff by its technical services unit, at its headquarters and laboratory in Spartanburg, South Carolina. These requests for "technical service" began in March, 1964,⁷ and continued rather constantly until as late as April, 1967. For instance, at the outset the said defendants requested an evaluation of certain yarns, through testing in plaintiff's laboratory, to develop the necessary "FT-3 specifications to reproduce" certain samples furnished the plaintiff's technical service unit. The nature of these requests for technical assistance was further illustrated by the request of these defendants for the plaintiff to develop at its technical service unit in Spartanburg, "a complete operating procedure for the subjecting of Vycron yarn to the FT process," to be used by the defendants in processing yarn under the FT patents. On a succession of occasions, the plaintiff was, also, asked by these defendants to make tests at its laboratory in Spartanburg, South Carolina, on various yarns to determine the proper use of such yarns under the FT process and patents and the plaintiff conducted such tests and experiments, furnishing the said defendants with technical advice in that connection as well as with the results of such tests.⁸

For none of these technical services and tests did the plaintiff make any charge against the defendant Virginia Mills, Inc. or its successor corporation; and the dealings between the parties, as evidenced by the written record in this case, showed clearly that the services rendered such defendants by the plaintiff at its Spartanburg laboratory in this connection were regarded by the parties as an integral part of the plaintiff's obligations to its sub-licensee under the terms of the sub-license agreement between them.

(9) The plaintiff...