Dunkley Co. v. California Packing Corporation

• Decision Date: 23 April 1920
• Docket Number: 572.
• Citation: 277 F. 989
• Parties: DUNKLEY CO. v. CALIFORNIA PACKING CORPORATION.
• Court: U.S. District Court — Southern District of New York

277 F. 989

DUNKLEY CO. v. CALIFORNIA PACKING CORPORATION.

No. 572.

United States District Court, S.D. New York.

April 23, 1920

Fred L Chappell, of Kalamazoo, Mich., and Drury W. Cooper and Robert F. Little, both of New York City, for complainant.

Gravath & Henderson and James R. Sheffield, both of New York City and Francis J. Heney, Frederick S. Lyon, and Kemper Campbell all of Los Angeles, Cal., and Nicholas A. Acker and Frank D Madison, both of San Francisco, Cal., for defendant.

AUGUSTUS N. HAND, District Judge. This is a suit for infringement of letters patent No. 1,104,175, issued July 21, 1914, to Samuel J. Dunkley, and letters patent No. 1,237,623, issued August 21, 1917, to the same person. The first patent relates to machines for peeling peaches or other fruit or vegetables, and the second to an improved process for peeling peaches or other fruit or vegetables. The claims in the first patent relied on are 5, 6, 14, 19, 20, 21, 22, 23, 24, 25, and 26, and in the second, 4, 5, and 7.

The first patent was held valid and infringed in a suit by the abovenamed complainant, the assignee of the patent, against the Central California Canneries Company, and the decree of Judge Van Fleet in that case was affirmed in the Circuit Court of Appeals for the Ninth Circuit (247 F. 790).

Both patents were held invalid for anticipation and lack of invention in the case of Dunkley Co. and Michigan Canning and Machinery Co. v. Pasadena Canning Company and George E. Grier (261 F. 203), by Judge Trippet, and his decision has been recently affirmed by the Circuit Court of Appeals of the Ninth Circuit (261 F. 386). Judge Rudkin, who wrote the opinion, did not place the decision upon anticipation or lack of invention, but upon noninfringement. He said as to the first decision of the Circuit Court of Appeals:

'For, assuming that the decision in that case should be followed here and is binding upon the appellees, the question of infringement was not there involved, because the Grier machine or device then before the court is not involved in the present case.'

The foregoing language of the decision of the Circuit Court of Appeals would seem to me to indicate that the court, while it did not attempt to disturb the decision between the parties in the prior case, declined to consider the question of anticipation there involved and to say whether it would follow its former decision or not, contenting itself with disposing of the question of infringement only.

After hearing the testimony, I was very clear that the complainant had not a valid patent, and that the decision of Judge Trippet was correct. As the Circuit Court of Appeals for the Ninth Circuit upon a different record from the one presented to me had held the original patent valid, and shortly after the briefs were submitted I learned that the appeal in the second case was soon to be heard, I thought it better to make no disposition of the matter until the Circuit Court of Appeals had passed upon a record not very dissimilar to the one before me, and had a chance to determine whether or not Judge Trippet was right in the decision of the case that seemed at first sight to differ from the first decision of the Circuit Court of Appeals. I confess I regret to have had no more definite disposition of the various findings of Judge Trippet, but as I have examined the voluminous briefs and the printed record of the testimony before me and some excerpts from the testimony in the other cases, I am more convinced than ever that complainant should not prevail.

At the very outset complainant is met by the very formidable defense that the defendant is a licensee under the Dunkley patents. The Dunkley Corporation granted a license to the California Fruit Canners' Association--

'for the benefit of itself and its successors * * * for the use of the said invention in connection with its business relative to the canning or treatment of fruit * * * the said license herein granted to be for the benefit of the said California Fruit Canners' Association and its successors for the full term of years of any letters patent which may hereafter be granted for the invention set forth in the said application Ser. No. 234,715 now pending in the United States Patent Office.'

It may be here noted that the foregoing application seems to have been divided in the Patent Office, and thereafter to have resulted in the two patents in suit.

After the above license was granted to the California Fruit Canners' Association, that corporation sold, transferred, and assigned to the defendant its 'business, franchise and property as a whole,' and since such sale has never done any business. The defendant thereafter reduced its capital stock, and about two months after the transfer acquired all but ten shares of the stock of the California Fruit Canners' Association. The transfer was accompanied by an agreement of the defendant to assume all the debts and obligations of the transferor.

The defendant insists that under these circumstances, although no merger or consolidation was technically affected, nothing was left of the California Fruit Canners' Association but a mere corporate shell, and that the transaction was in effect a merger carried out in the only way then possible under the California statutes.

In the case of Lightner v. Boston & Albany Railroad, 1 Low, 338, Fed. Cas. No. 8,343, there was a Massachusetts statute providing for the consolidation of the Boston & Worcester and Western Railroad corporations. The Boston & Albany Railroad was formed pursuant to this legislation, and the statute declared that the new corporation should have, hold, and enjoy all the powers, rights, privileges, franchises, property, claims, demands, and estates which at the time of such union were held and enjoyed by either of the then existing corporations. The old corporations were still kept in existence for certain purposes, but the court held that a license belonging to the original companies to use a patented invention passed to the Boston & Albany Railroad. In that case the word 'successors' does not seem to have appeared in the licenses. This case was referred to by the Supreme Court with approval in Lane & Bodley v. Locke, 150 U.S. 193, 14 Sup.Ct. 78, 37 L.Ed. 1049. That court, in citing the Lightner Case, said that it was there held:

'That a license, though not usually transferable, is transmissible by succession to a corporation formed by the union of two licensees succeeding to the obligations of both, for the reason that the consolidated company is the successor rather than the assignee of the original companies.'

In the Lane & Bodley Case it appeared that a copartnership which had obtained an implied license was incorporated. While it is true that there the patentee worked for the corporation as well as the partnership and there were thus other facts than the mere practical perpetuation of the copartnership in corporate form, nevertheless the transmission of the license by reason of the practical identity of the business of the partnership and the corporation was, in the opinion of the court, an apparent incident of the transaction.

In the case of Hapgood v. Hewitt, 119 U.S. 226, 7 Sup.Ct. 193, 30 L.Ed. 369, the court held that a license to a corporation, afterwards dissolved, would not pass to a corporation which had been formed by the stockholders of the defunct company, where there were no words indicating the right of the licensee to assign.

In Niagara Fire Extinguisher Co. v. Hibbard, 179 F. 844, 103 C.C.A. 330, the Circuit Court of Appeals for the Seventh Circuit held that a corporation which took from another, afterwards dissolved, all of its property, profits, and good will by a bill of sale, but without assuming any of the liabilities of the grantor, was not the legal successor of such grantor and did not succeed to its right under a contract granting it a license which by the terms of the contract was not assignable without the consent of the patentee.

In the present case the license was--

'for the use of the said invention in connection with * * * (the) business relative to the canning or treatment of fruit * * * the said license herein granted to be for the benefit of the said California Fruit Canners'...