Dunkley Co. v. California Packing Corporation

• Decision Date: 25 May 1921
• Docket Number: 231.
• Citation: 277 F. 996
• Parties: DUNKLEY CO. v. CALIFORNIA PACKING CORPORATION.
• Court: U.S. Court of Appeals — Second Circuit

277 F. 996

DUNKLEY CO. v. CALIFORNIA PACKING CORPORATION.

No. 231.

United States Court of Appeals, Second Circuit.

May 25, 1921

Plaintiff as assignee and owner sues on two patents covering the inventions of Samuel J. Dunkley, viz., No. 1,104,175, for a 'machine for peeling peaches and other fruit,' and No. 1,237,623, for a 'process of peeling peaches or other fruits or vegetables.'

These patents rest upon a single application filed by Dunkley November 29, 1904-- subsequently divided so as to separately produce the above referred to machine patent and process patent.

The history of these Dunkley patents is to be found in the reports. One Beekhuis applied on May 25, 1904, for patent upon 'apparatus for removing the skin from fruit' patent issued September 3, 1907, No. 864,944. Beekhuis was subsequently put into interference with Dunkley and the latter succeeded in taking from Beekhuis what are now claims 19-22, inclusive, of the machine patent. Dunkley v Beekhuis, 39 App.D.C. 494.

Beekhuis had assigned his patent to the California Fruit Canners' Association, which then instituted in the Patent Office a 'public use proceeding,' which Dunkley sought to prevent by praying for a mandamus against the Commissioner. In this he was defeated (United States ex rel. Dunkley v Ewing, 42 App.D.C. 176), but the Association above named withdrew its application for said proceeding on May 25, 1914. Thereafter the machine patent issued on July 21, 1914.

This left pending application for the process patent, which was put in interference with one Monte; the invention of the latter being owned by the same concern as the Beekhuis patent. In this interference Dunkley also prevailed in February, 1917 (Monte v. Dunkley, 46 App.D.C. 70), and thereafter Dunkley's process patent issued on August 21, 1917.

It is plain that Dunkley's real opponent in the Patent Office was the California Fruit Canners' Association, and contemporaneously with the abandonment by that concern of its 'public use proceeding,' and for a nominal consideration the plaintiff herein executed a license to its opponent for and under whatever patents might be ultimately granted upon the Dunkley application of November 29, 1904.

This license is dated May 22, 1914, and the words here important are as follows:

'Now therefore, be it known, that for and in consideration of the sum of $10 in hand paid by the California Fruit Canners' Association unto the said Dunkley Company the receipt whereof is hereby acknowledged, the said Dunkley Company does hereby grant unto the said California Fruit Canners' Association for the benefit of itself and its successors, a license free of royalties of any kind whatsoever, for the use of the said invention in connection with its business relative to the canning or treatment of fruit, granting unto the said California Fruit Canners' Association the free right for the use of any machine or machine or invention owned or controlled by the said Dunkley Company'-- and covered by the patents expected to grow out of the application aforesaid.

The license agreement continues that it is granted '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 inventions' disclosed in the aforesaid application.

In August, 1915, plaintiff sued upon its then recently granted machine patent in the Northern District of California, summoning as defendants numerous companies engaged in the canning of fruit, especially peaches, including the Griffin & Skelley Company and the Central California Canners' Company. In this case Dunkley prevailed. Central, etc., Co. v. Dunkley Co., 247 F. 790, 159 C.C.A. 648.

Within a fortnight after the lower court's favorable decision in the case just cited, this plaintiff began action against another alleged infringer in the Southern District of California. The process patent had not yet issued and suit was begun on the machine patent alone. Subsequently and in April, 1918, the suit was enlarged by supplemental bill so as to count upon the process patent also. It was then brought to trial and the bill dismissed, the trial court holding that the Dunkley machine invention could not be 'carried back beyond the summer of 1903' and was under the evidence anticipated. That court was 'clearly of the opinion that there is no validity at all' in the Dunkley process patent, wherefore the bill was dismissed. The appeal resulted in affirmance, but upon the ground of noninfringement. Dunkley Co. v. Pasadena, etc., Co. (C.C.A.) 261 F. 386.

This present suit was brought before the decision of the District Court for the Southern District of California adverse to the patents. A. N. Hand, J., followed the reasoning, and reached the conclusion of Trippet, J., in the last-mentioned California case. But the issues in this litigation differ from those in any of the preceding causes. Here, as there, anticipation and lack of invention are advanced by the defense; but in addition there is a plea of license growing out of the following uncontradicted facts:

The California Fruit Canners' Association is a corporation of California. After it obtained the above-recited license, it continued to carry on its business until November, 1916. At that time it sold, transferred, and assigned to this defendant, the California Packing Corporation (which is formed under the laws of New York), all its 'business, franchise and property as a whole,' including its good will and all its real and personal property.

It is not denied that this transaction was and is in accord with the law of California, which does not permit the express merger and consolidation of corporations.

Defendant by its contract of purchase assumed all the debts, obligations, and liabilities of the California Fruit Canners' Association, and since the purchase aforesaid defendant has carried on the business of its assignor or predecessor. It has also acquired additional canning plants, including especially those of Griffin & Skelley and the Central, etc., Co., which were two of the unsuccessful defendants in the suit brought in the Northern District of California.

Since the sale in November, 1916, the California Fruit Canners' Association has done no business, but shortly after said sale its capital stock was reduced to a par of $3,000 and all its assets (except $3,000) were distributed among its stockholders. The defendant herein has acquired all of this $3,000 par of stock (except eight shares) and is now the holder and owner of the same.

The decree below (appealed from by plaintiff) held: (1) That defendant during all the times complained of was a licensee of plaintiff; (2) that both the patents in suit are 'invalid, null and void.'

Frederick L. Chappell, of Kalamazoo, Mich., Drury W. Cooper, and Robert F. Little, White & Case, and Kerr, Page, Cooper & Hayward, all of New York City, and Chappell & Earl, of Kalamazoo, Mich., for appellant.

Cravath, Henderson, Leffingwell & De Gersdorff, of New York City, Pillsbury, Madison & Sutro, of San Francisco, Cal., and Frederick S. Lyon, of Los Angeles, Cal., for appellee.

Before ROGERS, HOUGH, and MANTON, Circuit Judges.

HOUGH Circuit Judge (after stating the facts as above).

The above statement shows that the license of 1914 was a settlement of expensive conflict between Dunkley and the Fruit Canners' Association; the consideration is manifest, entirely apart from the formal recital.

Two phrases of this document are especially important: (1) The association is licensed 'for the benefit of itself and its successors,' and (2) the privilege is granted for the use of the Dunkley invention 'in connection with (the association's) business relative to the canning or treatment of fruit.'

One preliminary contention may be put aside; it is suggested that,...