Guaranty Trust Co. of New York v. Union Solvents Corp.

• Decision Date: 29 December 1931
• Docket Number: No. 802.,802.
• Citation: 54 F.2d 400
• Parties: GUARANTY TRUST CO. OF NEW YORK et al. v. UNION SOLVENTS CORPORATION.
• Court: U.S. District Court — District of Delaware

54 F.2d 400 (1931)

GUARANTY TRUST CO. OF NEW YORK et al. v. UNION SOLVENTS CORPORATION.

No. 802.

District Court, D. Delaware.

December 29, 1931.

Merrell E. Clark and Maxwell Barus (of Fish, Richardson & Neave), and Philip C. Peck, all of New York City, and William G. Mahaffy, of Wilmington, Del., for plaintiffs.

M. K. Hobbs and George I. Haight (of Haight, Adcock & Banning), both of Chicago, Ill., and George F. Scull and Charles W. Mortimer (of Gifford, Scull & Burgess), both of New York City, and Charles F. Curley, of Wilmington, Del., for the defendant.

NIELDS, District Judge.

This is an infringement suit under United States patent No. 1,315,585, entitled "Production of Acetone and Alcohol by Bacteriological Processes," issued to Charles Weizmann September 9, 1919, upon an application filed December 26, 1916.

The first two plaintiffs, Guaranty Trust Company of New York and the Butacet Corporation, are the holders of the legal and equitable title of the patent. The term "plaintiff" as used in this opinion refers to the third plaintiff, the Commercial Solvents Corporation, a Maryland corporation, exclusive licensee under the patent. This company since 1920 has been operating the process described in the Weizmann patent, at Terre Haute, Ind., and Peoria, Ill., in the production of butyl alcohol and acetone, the principal products of that process. The defendant, Union Solvents Corporation, was recently incorporated and organized under the laws of Delaware. In 1930 it began commercial operations at its plant in Cincinnati, Ohio. It produces butyl alcohol and acetone and sells them in direct competition with the plaintiff.

The bill of complaint charges infringement and contains the customary prayers for relief. Defendant denies infringement and attacks the validity of the patent on five or more grounds, including lack of utility, lack of operability, indefiniteness, nonpatentable subject-matter, and the prior art.

The process of the Weizmann patent is a bacteriological fermentation process for the production of acetone and butyl alcohol. The principal use for butyl alcohol is as a solvent in the manufacture of nitrocellulose lacquers of the duco type, which are used extensively for finishing automobile bodies, furniture, and the like. The principal commercial use for acetone is as a solvent or absorbent in acetylene gas containers, in the manufacture of photographic films and of some types of artificial silk.

Dr. Charles Weizmann, the patentee, is an English biochemist and bacteriologist. Before the World War he had received training in the Pasteur Institute at Paris. During the war acetone was used extensively by the British government in the manufacture of an explosive called "cordite." A plant was installed at Kings Lynn in 1914 for the production of acetone by the bacteriological fermentation of starch from potatoes as the result of the work of a group of scientists. Production was not a commercial success and in March, 1916, the British government took possession of the works. Meanwhile, Dr. Weizmann having separated from the group of scientists devoted himself for two years to an intensive study of the subject. He applied for a patent for "Improvements in the Bacterial Fermentation of Carbohydrates and in Bacterial Cultures for the same," and in 1915 British patent No. 4845 was granted to him. Having learned of the Weizmann process, the British government decided to try it at Kings Lynn and Dr. Weizmann was placed in charge of the plant. Operations were highly successful. Large quantities of acetone and butyl alcohol were produced, although butyl alcohol was then regarded as a by-product. In the later years of the war England was short of food and required all of her own maize. Accordingly, the manufacture of acetone was shifted to Canada. In Canada the British government, under the name of British Acetones, Limited, operated the Weizmann process from August, 1916, until November, 1918, in a remodeled distillery, loaned and directed by Col. A. E. Gooderham. Here 6,000,000 pounds of acetone and about twice that amount of butyl alcohol were produced. After the United States entered the war, the British War Mission in this country incorporated a company in New York called Commercial Solvents Corporation for the purpose of operating the Weizmann process in our corn belt. A distillery was purchased at Terre Haute, Ind. It was remodeled and operated by an executive committee of the company consisting of Col. Gooderham, Robert D. Clarke, formerly an American distiller, and Joseph Banigan, a Canadian. Information necessary for the construction and operation of the Terre Haute plant was obtained from the Canadian plant. The bacterial cultures necessary to inaugurate the Weizmann process at Terre Haute were also obtained from Canada.

Production of acetone and butyl alcohol began at Terre Haute in May, 1918. About that time the United States Signal Corps became interested in the Weizmann process as a source of acetone for the manufacture of airplane "dope." The Signal Corps purchased a half interest in the Commercial Solvents Corporation of New York. Thereupon, another distillery was purchased and equipped at Terre Haute for operating under the Weizmann process, known as plant No. 2, which went into production in July or August, 1918. The United States received one-half of the acetone produced and likewise one-half of the butyl alcohol. Both plants were shut down shortly after the Armistice, having produced 1,670,000 pounds of acetone and 2,900,000 pounds of butyl alcohol. Although butyl alcohol at that time was considered a by-product, 1,000,000 pounds were sold to lacquer manufacturers.

It is significant to note the officers of Commercial Solvents Corporation (N. Y.) operating the Weizmann process at Terre Haute during the war. Robert D. Clarke was general manager. Nathaniel Frutkow was chief bacteriologist at Plant No. 1. His training in the process was acquired in the course of a six-day visit to the British acetones plant in Canada before operations at Terre Haute were under way. Fred H. Carter, who had been assistant bacteriologist at the Canadian plant for two years, was chief bacteriologist at Plant No. 2. When plaintiff bought out this war company and succeeded to its Weizmann rights, Carter was continued as bacteriologist but Clarke and Frutkow were dropped. Within the last year or two defendant entered the field with Clarke as a director and Frutkow as vice president and bacteriologist, positions they still hold.

In December, 1916, Weizmann filed in the United States Patent Office his application for the patent in suit. In July, 1918, the application was found allowable by the Patent Office. It was withheld from issue, however, by order of the Commissioner of Patents because it had been found to contain "subject matter which might * * * assist the enemy in this present war." After the Armistice, this order was revoked and the patent issued in September, 1919. In the meantime, Commercial Solvents Corporation (N. Y.) had secured a formal exclusive license under the patent to be issued on the Weizmann application. In January, 1920, plaintiff Commercial Solvents Corporation (Md.) purchased the assets of the New York corporation and secured an assignment of the exclusive license, which was executed also by Dr. Weizmann. Under this license plaintiff has been operating ever since.

Butyl alcohol had never been produced in commercial quantities in this country until the war operations under the Weizmann process. Any demand for "higher" alcohols for the manufacture of lacquers was supplied by amyl alcohol, a by-product of the manufacture of spirits. This supply was threatened by Prohibition. Lacquer companies purchased substantial quantities of butyl alcohol during the war and it proved a satisfactory substitute for amyl alcohol. Under these circumstances plaintiff purchased the Terre Haute plants and embarked upon its operations under the Weizmann process, principally for the production of butyl alcohol. From 1920 to 1923 production was irregular. Thereafter there was an extraordinary increase from 7,500,000 pounds of solvents in 1923 to about 107,500,000 pounds in 1929. The increased demand necessitated the building of a large additional plant at Peoria and other facilities at the aggregate cost of $6,000,000 and the payment of large royalties to the patent owners.

The record shows that an important and extensive new industry has now been developed and established upon the Weizmann process. In England the monopoly of the Weizmann patent was acquiesced in until 1926, when Synthetic Products Company began the manufacture of acetone and butyl alcohol. In the litigation that immediately ensued the Weizmann patent was held valid and infringed. Commercial Solvents Corporation v. Synthetic Products Company, Ltd., Reports of Patent Design and Trademark Cases, vol. XLIII, No. 7, pp. 185, 238. In the decade from 1920 to 1929, plaintiff continued to be America's only manufacturer of normal butyl alcohol and its only manufacturer of butyl alcohol of any kind by a fermentation process until Robert D. Clarke, Nathaniel Frutkow, and their associates formed the defendant company and in 1930 entered the field as an active competitor of the plaintiff. If the validity of the patent were a matter of doubt, the scale would be turned in favor of the patent under the facts above recited. Smith v. Goodyear Dental Vulcanite Co., 93 U. S. 486, 496, 23 L. Ed. 952; Auto Vacuum Freezer Co. v. William A. Sexton Co., 239 F. 898 (C. C. A. 2).

The Weizmann patent is for the fermentation of a mash of natural substances rich in starch, like corn mash, by means of bacteria which are identified in the specification of the patent by certain definite characteristics. "Fermentation" is the chemical change, or the decomposition into new chemical compounds, of a substratum, by living organisms, such, for example, as yeast or bacteria....