Farmland Irr. Co. v. Dopplmaier

• Decision Date: 22 March 1957
• Citation: 48 Cal.2d 208,66 A.L.R.2d 590,308 P.2d 732
• Parties: , 66 A.L.R.2d 590, 113 U.S.P.Q. 88 FARMLAND IRRIGATION CO., Inc., Plaintiff and Respondent, v. George DOPPLMAIER, Defendant and Appellant. Sac. 6581.
• Court: California Supreme Court

Page 732

308 P.2d 732

48 Cal.2d 208, 66 A.L.R.2d 590, 113 U.S.P.Q. 88

FARMLAND IRRIGATION CO., Inc., Plaintiff and Respondent, v. George DOPPLMAIER, Defendant and Appellant.

Sac. 6581.

Supreme Court of California, In Bank.

March 22, 1957.

Wilke, Fleury & Sapunor and Sherman C. Wilke, Sacramento, for appellant.

Theodore H. Lassagne and Naylor & Lassagne, Glendale, for respondent.

TRAYNOR, Justice.

Plaintiff in this action seeks a declaratory judgment that it is entitled to manufacture and sell irrigation equipment under a patent license agreement and a declaration of its duties under the royalty provisions of the license agreement.

Darrell C. Mansur invented certain improvements in agricultural sprinkling apparatus. He applied for a patent on his invention, and in the autumn of 1949, while his application was still pending, entered into negotiations with the Stout Irrigation Company, an Oregon coproration (hereinafter referred to as Stout), for the purpose of licensing Stout to manufacture and sell apparatus embodying the invention. Stout was represented in these negotiations by William H. Stout, its president and controlling shareholder, a man of considerable experience in the irrigation equipment business. Mansur, William H. Stout, and defendant Dopplmaier were all present at a demonstration of apparatus embodying the invention held near Fresno in September.

On December 5, 1949, Mansur and Stout entered into the license agreement that is the subject of this action. By this agreement Stout was given the right to make or have made and to sell apparatus embodying Mansur's invention, in return for which it promised to pay Mansur a royalty of three per cent of sums received from licensed sales. Stout was permitted to grant sublicenses on condition that it assume responsibility for the payment of all royalties due on sales by its sublicensees. Mansur retained the right to make and sell apparatus embodying the invention himself and to license others to do so, except that he agreed not to sell to manufacturers or distributors who were in business on December 5, 1949. Improvements in the invention made by either Stout or Mansur could be used by the other during the life of the agreement.

Stout manufactured and sold irrigation apparatus under the license until January 31, 1952. On that date the corporation was dissolved and its assets passed to its shareholders. On February 2, 1952, the shareholders sold the assets, including choses in action, to plaintiff, a California corporation, which proceeded to manufacture and sell under the license. Meanwhile Mansur had obtained his patent and assigned it to defendant together with his rights under the license. First Stout, and later plaintiff, tendered royalties udner the license to Mansure and defendant, Ansur's assignee. The first royalty payment was accepted without protest, but defendant rejected latter payments on the ground that they were computed on the basis of sums received only from sales of wheel and coupling units, whereas the license called for a royalty based on sums received from sales of the entire irrigation apparatus or any of its parts.

In June, 1951, defendant commenced an action against Stout in the United States district court for the district of Oregon for an accounting of royalties allegedly due under the license. Plaintiff sought to intervene on the ground that it had bound itself to pay any liability adjudged against Stout, and that its interests were inadequately represented. It also counterclaimed for a declaration of its rights under the license as Stout's successor or assignee. The district court denied the motion to intervene, and its order was later affirmed by the court of appeals on the ground that there was no showing that plaintiff was inadequately represented on the accounting issue, and that the issue made by the counter-claim was not involved in the action. Farmland Irrigation Co. v. Dopplmaier, 9 Cir., 220 F.2d 247.

Plaintiff then commenced the present action. A motion by defendant for a stay of proceedings pending final judgment in the Oregon action was denied. After trial on the merits, the court adjudged that the rights granted Stout under the license were assignable and had been assigned, through the shareholders, to plaintiff, and that under the license plaintiff was bound to pay royalties only on sums received from sales of wheel and coupling units and not on sums received from sales of any other parts of the apparatus. From this judgment defendant appeals.

We are confronted at the threshold with defendant's contention that the trial court abused its discretion in denying his motion for a stay of proceedings. When an action is brought in a court of this state involving the same parties and the same subject matter as an action already pending in a court of another jurisdiction, a stay of the California proceedings is not a matter of right, but within the sound discretion of the trial court. In exercising its discretion the court should consider the importance of discouraging multiple litigation designed solely to harass an adverse party, and of avoiding unseemly conflicts with the courts of other jurisdictions. It should also consider whether the rights of the parties can best be determined by the court of the other jurisdiction because of the nature of the subject matter, the availability of witnesses, or the stage to which the proceedings in the other court have already advanced. See Simmons v. Superior Court, 96 Cal.App.2d 119, 123-131, 214 P.2d 844, 19 A.L.R.2d 288; Pesquera Del Pacifico, S. De R. L., v. Superior Court, 89 Cal.App.2d 738, 740-741, 201 P.2d 553.

The parties to the present action are not identical with those in the Oregon action. Plaintiff is not a party to the Oregon action; it attempted to intervene as a party defendant, but was successfully prevented from doing so by defendant. Plaintiff brought the present action, not to harass defendant with multiple litigation, but to assert interests it claimed would not be adequately represented in the Oregon action. Defendant contends that nevertheless plaintiff should be compelled to await and be bound by the outcome of the Oregon action. In deciding whether the representation of plaintiff in the Oregon action was an adequate substitute for a present determination of its rights in a California court, the trial court was not bound by the federal court's determination that the representation was adequate to prevent intervention.

Moreover, all the issues in the present action are not involved in the Oregon action. Cf. Pesquera Del Pacifico, S. De R. L., v. Superior Court, 89 Cal.App.2d 738, 741, 201 P.2d 553. Although the complaint in the Oregon action calls for an adjudication of the licensee's obligations under the royalty provisions, the issue raised by plaintiff's second cause of action in the present case, it does not call for an adjudication of the assignability of the license and plaintiff's rights thereunder, the issues raised by plaintiff's first cause of action. Plaintiff sought to present these issues to the federal court in its counter-claim, but because the motion to intervene was denied, they weill not be adjudicated in that court. A stay of the present proceedings would therefore not only bring these issues no closer to determination, but would compel plaintiff to await a judgment that cannot respond to its needs. The trial court did not abuse its discretion in denying a stay that would have such an effect.

Defendant contends that the trial court erred in finding that Stout's rights under the license were assignable and had been assigned to plaintiff. Rights under a patent license, defendant argues, are not assignable unless express consent to assignment is contained in the license contract, and in the absence of such consent the contract must be construed as conferring purely personal, nontransferable rights. This rule of construction appears to be set forth in a line of federal cases of which the principal case is Hapgood v. Hewitt, 119 U.S. 226, 7 S.Ct. 193, 30 L.Ed. 369.

It is contended that because a United States patent is the creature of a federal statute and can be assigned only in the manner provided by federal law, the assignability of rights under a patent license is also a federal question and in the absence of statutory provision is to be determined by the decisional law of the federal courts. This reasoning fails to distinguish patent rights, whose assignability is admittedly governed by a specific statutory provision, 35 U.S.C. § 261, and rights created by a contract whose subject is exemption from a patent monopoly. It misconceives the policy of the federal patent statute and the relation between federal and state law in the area of patent rights.

Every action that involves, no matter how incidentally, a United States patent is not for that reason governed exclusively by federal law. The police power of the states, for example, has long been held to include reasonable regulation of the manufacture and sale of patented articles dangerous to public safety, Patterson v. State of Kentucky, 97 U.S. 501, 503-509, 24 L.Ed. 1115, and regulation of the transfer of patent rights to prevent fraud. Allen v. Riley, 203 U.S. 347, 355-357, 27 S.Ct. 95, 51 L.Ed. 216. A patent is not granted without reference to the general powers the states possess over their domestic affairs.

It has been established by a long line of cases, moreover, that an action to set aside, specifically enforce, or recover royalties on a patent license contract is not an action arising under the patent laws of the United States for the purpose of determining the exclusive jurisdiction of the federal courts. Wilson v. Sandford, 10 How. 99, 51 U.S. 99, 101, 13 L.Ed. 344; Albright v. Teas, 106 U.S. 613, 616-620, 1 S.Ct. 550, 27 L.Ed. 295; Dale Tile Mfg. Co. v. Hyatt, 125 U.S. 46, 51-54, 8 S.Ct. 756, 31 L.Ed. 683; Pratt v. Paris Gaslight & Coke Co., 168 U.S....