Gate-Way v. Hillgren

• Decision Date: 11 February 1949
• Docket Number: Civil Action No. 6778.
• Citation: 82 F. Supp. 546
• Parties: GATE-WAY, Inc. v. HILLGREN et al.
• Court: U.S. District Court — Southern District of California

82 F. Supp. 546

GATE-WAY, Inc. v. HILLGREN et al.

Civil Action No. 6778.

United States District Court S. D. California Central Division.

February 11, 1949.

Fred H. Miller, of Los Angeles, Colo., for plaintiff.

Hamer H. Jamieson, of Los Angeles, Cal., for defendants.

J. F. T. O'CONNOR, Judge.

The plaintiff herein, a corporation organized and existing under the laws of the State of California, has instituted this suit against both defendants herein for alleged violation of Letters Patent, No. 2,326,646, or more particularly Figure 1 thereof¹ (Exhibit 10 in case); and also for a declaratory judgment under Sec. 400 now §§ 2201, 2202 of Title 28 U.S.C.A. and for an accounting, against Carl Hillgren. The plaintiff likewise prays for costs of suit and for attorney's fees against both defendants.

The plaintiff alleges exclusive jurisdiction to exist in this court against both defendants, primarily by reason of paragraph 5 of Sec. 371 of Title 28 U.S.C.A.¹ regardless of a lack of diversity of citizenship of the parties.

Counsel have stipulated that both defendants are residents within the Southern Judicial District of California (Stipulation of Facts), which the court construes to mean citizens or domiciliaries of California.

James Hillgren contends, inter alia, that the suit against him should be dismissed for lack of diversity of citizenship under Sec. 41 of Title 28 U.S.C.A., Sec. 1332 of new Title 28 U.S.C.A., infra, in that plaintiff, the plaintiff's assignors and he are all citizens of the State of California; and Carl Hillgren, while not denying the jurisdiction of this court to try this suit under the patent laws of the United States, Sec. 371 of Title 28 U.S.C.A., Sec. 1338 of new Title 28 U.S.C.A., supra, contends, inter alia, that he has not infringed the patent in suit, or more specifically Figure 1 of the said patent, by reason of his acquisition of a shop right therein, and also of an oral license therein granted to him by his brother, James Hillgren, on June 2, 1942, prior to the assignment of the patent in suit by the said James Hillgren to the assignors of the plaintiff corporation on May 9, 1945, and, therefore, that the plaintiff's assignors bought the patent in suit from James Hillgren subject to these rights in the defendant, Carl Hillgren.

It appears that, prior to 1938, James Hillgren and Carl Hillgren were engaged in the business of manufacturing locks and doorknobs, and that, in the latter part of 1938, James Hillgren, while receiving a salary from the Hillgren Manufacturing Company, and while working there, conceived the idea for the doorknob which is the subject of this litigation. Carl Hillgren contends that a shopright was created in favor of the company and that the company operated under an oral license from James Hillgren until June 2, 1942, when he (Carl Hillgren) bought the company, including the shopright and the oral license to manufacture the device shown as Figure 1 of the patent in suit. This purchase was effected by an oral agreement, but there was a bill of sale in writing transferring the machinery, dies, etc. which had been and could only be used to manufacture the device shown in Figure 1 of the patent in suit, namely United States Letters Patent No. 2,236,646.

Carl Hillgren paid $20,000 for this license and this equipment to James Hillgren in June of 1942, and Carl Hillgren contends that he has owned the license to manufacture the device shown in Figure 1 of said patent, and the dies and machinery and business ever since; and at the time of the purchase it was agreed between the brothers, Carl and James Hillgren, that James Hillgren should retain the right to manufacture the device shown in Figure 3 of the patent in suit, and that Carl Hillgren could not manufacture that device and was not licensed to do so.

James Hillgren testified at the trial that when the partnership was dissolved between him and his brother they agreed that he (James) would retain Figure 3 in the patent, and that Carl should retain Figure 1. He further testified that Figure 1 and Figure 3 of the patent in suit (Exhibit 10) were separate and distinct.

About three years later, James Hillgren started a shop of his own at another location and began making preparations to market the device shown in Figure 3 of the patent in suit, as well as other devices since, according to his contention, the license to Carl Hillgren was non-exclusive, and James Hillgren had the right to manufacture anything he wanted to under the patent. It further appears that after he had worked at this a short time, and before he was ready to go on the market with his products, his wife decided he ought to retire on account of ill health, so he (James Hillgren) put an advertisement in the newspaper offering to sell the business. The advertisement was answered by Adolf Schoepe and Karl Reinhard. On August 10, 1943, United States Letters Patent No. 2,326,646, were issued to James Hillgren for an improvement in doorknobs. For reasons which will appear hereafter, it is not necessary for the court to discuss the construction of the patent nor adjudicate its validity or non-validity, but simply its alleged infringement by Carl Hillgren, and the court will assume that the patent is valid.

On May 8, 1945, an Agreement of Purchase and Sale was entered into between James J. Hillgren and Anna V. Hillgren, husband and wife, as sellers, and Adolf Schoepe and Karl Reinhard, as buyers, wherein the sellers agreed to sell and the buyers agreed to buy "the full and complete right, title and interest, free and clear of any liens, claims, encumbrances, easements and restrictions except only as (t)herein noted" in certain real estate, personal property and two patents, Nos. 2,326,646 and 2,348,737, respectively, for the total sum of $30,000, without their segregating the value of the property therein mentioned, and with the proviso that all rights and obligations thereunder should respectively inure to, and be obligatory upon, the successors and assigns of the parties thereto; that both parties should have the right to transfer and assign any of such rights and obligations, except those that were in the nature of personal covenants, provided, however, that such transfer or assignment should not release either party of the obligations so transferred or assigned without the written release of the other. (Italics supplied.)

Further, the sellers represented that they had full and complete right to enter into this agreement, and that they had full and complete title to all property to be sold and transferred or assigned to the buyers.

This Agreement of Purchase and Sale did not, and was not intended to, pass legal title to the property involved therein for a deed, bill of sale and an assignment of the patents would subsequently be necessary to accomplish these results.

Except for this factual background the court is not concerned with any phase of this Agreement of Purchase and Sale, except as to letters patent No. 2,326,646, and particularly Figure 1 thereof.

In fulfillment of this Agreement of Purchase and Sale, so far as it pertained to the passing of the legal title to patent No. 2,326,646 to the Gateway Manufacturing Co., a partnership composed of Adolf Schoepe and Karl Reinhard, James Hillgren, not joined by his wife as assignor, assigned the said letters patent to the said copartnership² on May 9, 1945; and thereafter by another Assignment dated July 31, 1946, the said Adolf Schoepe and Karl Reinhard, doing business as Gateway Manufacturing Company, a copartnership, assigned said patent to Gate-Way Inc., the plaintiff herein, both of which assignments recited that they transferred all right, title, interest and estate of the assignor(s) to the assignee(s) and for the use and behoof of the legal representatives thereof.

The Gate-Way, Inc., a corporation, plaintiff herein, claims the benefits of the promise of Carl Hillgren and Anna V. Hillgren (husband and wife) in the Agreement of Purchase and Sale of May 8, 1945, between Carl Hillgren and Anna V. Hillgren (as sellers) and Adolf Schoepe and Karl Reinhard (as purchasers), by mesne assignments, as the assignee of the patent in suit in the assignment from Schoepe and Reinhard, doing business as Gateway Manufacturing Company, a copartnership, dated July 31, 1946, which copartnership prior thereto had been the assignee of the patent in suit in the assignment from James Hillgren of May 9, 1945.

While the Agreement of Purchase and Sale of May 8, 1945 nowhere indicates that title was to pass to any partnership, (and the court entertained considerable doubt that this was a partnership agreement, for the copartnership of the Gate-Way Manufacturing Company was not mentioned therein, but only the names of Adolf Schoepe and Karl Reinhard as the purchasers,) counsel for the plaintiff has throughout the case taken the position that this Agreement was entered into in behalf of the copartnership, and, as counsel for the defendants has indicated that this Agreement of Purchase and Sale of May 8, 1945, was the Agreement of the copartnership³ the court will treat this admission as binding and hold that Adolf Schoepe and Karl Reinhard, as purchasers, were acting for the Gateway Manufacturing Company in said Agreement of May 8, 1945.

It would appear to this court that the plaintiff herein, by mesne assignments, would be entitled to enforce the promises of the Assignment of May 9, 1945, as well as the promises in the Agreement of Purchase and Sale of May 8, 1945, if the court felt it had jurisdiction over James Hillgren.⁴ In other words, the plaintiff; Gateway, Inc., a corporation, obtained by assignment of July 31, 1946, all the right, title and interest which the Gateway Manufacturing Co., a copartnership, as assignor, had in the patent in suit, no more and no less; and this Assignment related back, not only to the Assignment of May 9, 1945, when James Hillgren assigned the patent to the Gateway...