Douglass v. United States Appliance Corporation

• Decision Date: 23 September 1949
• Docket Number: No. 12141.,12141.
• Citation: 83 USPQ 41,177 F.2d 98
• Parties: DOUGLASS et al. v. UNITED STATES APPLIANCE CORPORATION.
• Court: U.S. Court of Appeals — Ninth Circuit

83 USPQ 41, 177 F.2d 98 (1949)

DOUGLASS et al. v. UNITED STATES APPLIANCE CORPORATION.

No. 12141.

United States Court of Appeals Ninth Circuit.

September 23, 1949.

Mellin & Hanscom, Oscar A. Mellin, Leroy Hanscom and Jack E. Hursh, San Francisco, Cal., for appellants.

Flehr & Swain, Paul D. Flehr, John F. Swain, San Francisco, Cal., for appellee.

Before GARDNER, Chief Judge (sitting by special designation), HEALY and ORR, Circuit Judges.

HEALY, Circuit Judge.

This appeal presents the question whether the estoppel running against an assignor of a patent to assert its invalidity extends to third persons who acquire by purchase other and later patents of the assignor found to infringe the assigned patent. We think in the present state of the law the question must be answered in the negative.

Ralph M. Keele made application for patent for a hair waving device and simultaneously for a valuable consideration assigned the application to appellee. On December 18, 1934, letters patent No. 1,984,585 issued to appellee on the application. Subsequently Keele devised another method and apparatus for hair waving, known as Koolerwave, and shortly afterwards entered into an agreement with Tomlinson I. Moseley for the promotion of this method, assigning a one-half interest therein to Moseley in consideration of the latter's agreeing to finance the development and patenting thereof. After a period of experimentation and development Keele applied for patents covering the device, and patents Nos. 2,187,473 and 2,187,474 were issued. In October, 1936, Keele and Mosely formed the Keelmo Company, and the two patents last above referred to (then in the form of applications) were assigned to it. In February, 1937 an exclusive license for the manufacture and distribution of these patented appliances was granted by the Keelmo Company to Rilling-Arnao Company, and the latter placed the Koolerwave apparatus extensively on the market.

In 1939 appellee brought suit against Keel Moseley, and the Keelmo Company, and also Beauty Shop Supply Co. (Rilling Arnao's western distributor), for infringement of letters patent No. 1,984,585. The trial of that case resulted in a dismissal on a finding that there was no infringement. On appeal (United States Appliance Corp. v. Beauty Shop Supply Co., et al., 121 F.2d 149) this court held the patent invalid for want of invention and affirmed the dismissal as to defendant Beauty Shop Supply Co. It decided, however, that Keele, Moseley, and the Keelmo Company were estopped from contesting the validity of the patent, held that their patented Koolerwave device infringed it, and ordered an accounting. In the proceeding for accounting an order was entered by the district court in May, 1944, awarding appellee one-half the royalties received by Keelmo under the two later Keele patents.

Meanwhile, in July, 1941, Keele had sold his stock in the Keelmo Company to one Soule. On May 21, 1943, the Keelmo Company sold and assigned to appellant Earl S. Douglass, for the sum of $4,000, the above mentioned patents Nos. 2,187,473 and 2,187,474, together with the Rilling-Arnao license. This circumstance becoming known to appellee, it moved in the accounting suit that it be awarded one-half the sum paid by Douglass, claiming that this amount was owing as its interest in the accountable profits of the Keelmo Company. The court granted the motion, amended its accounting order, and awarded appellee one-half the sales price of the two patents.¹ On January 1, 1945 Douglass, in consideration of the payment to him of $4,000, sold and assigned the two patents he had acquired from the Keelmo Company, together with the Rilling-Arnao license and royalties thereunder, to appellants Oscar A. Mellin and Walter Slack as joint tenants with right of survivorship. The amount paid by the latter to Douglass was furnished by Moseley with the understanding that Mellin and Slack would declare an irrevocable trust of the property and rights in favor of appellants Robin Moseley and T. Jefferson Moseley, minor children of Tomlinson I. Moseley. They accordingly executed such declaration.

In 1947 appellee brought the present suit against the several appellants here for infringement of the patent No. 1,984,585. The complaint alleged that Douglass' purchase of the Keelmo patents, his continuing of the Rilling-Arnao license, and his subsequent sale of the patents and license to Mellin and Slack, plus the latters' acquisition and their continuance of the license, constitute acts of infringement. The answer denied infringement and asserted the invalidity of the patent sued on. Judgment was entered holding all appellants infringers of the patent and declaring all estopped to deny its validity.

Preliminarily, it is important to recall the precise limits of this court's holding in the former suit involving the patent. The licensee Rilling-Arnao was not a party, and the opinion did not discuss the question whether a licensee of an assignor labors under the same disability as the assignor himself. The court did observe that the contract between Rilling-Arnao and Beauty Shop Supply Co., which was held not estopped, failed to disclose an agency relationship; but this observation was merely in reply to the argument that such a relationship in fact existed and served, as a matter of law, to bring Beauty Shop Supply...