HALL LABORATORIES v. National Aluminate Corp.

• Decision Date: 24 March 1954
• Docket Number: Civ. A. No. 1192.
• Citation: 120 F. Supp. 684
• Parties: HALL LABORATORIES, Inc. et al. v. NATIONAL ALUMINATE CORP.
• Court: U.S. District Court — District of Delaware

120 F. Supp. 684

HALL LABORATORIES, Inc. et al. v. NATIONAL ALUMINATE CORP.

Civ. A. No. 1192.

United States District Court D. Delaware.

March 24, 1954.

COPYRIGHT MATERIAL OMITTED

Aaron Finger, of Richards, Layton & Finger, Wilmington, Del., Walter J. Blenko and Eugene F. Buell, of Blenko, Hoopes, Leonard & Glenn, and James K. Everhart, Jr., Pittsburgh, Pa., for plaintiffs.

Arthur G. Connolly, of Connolly, Cooch & Bove, Wilmington, Del., John T. Chadwell, Richard L. Johnston and Victor P. Kayser, Chicago, Ill., for defendant.

LEAHY, Chief Judge.

The complaint is for declaratory judgment by plaintiffs who are four corporations under the same management, against defendant, National Aluminate Corporation, which owns U. S. Patent 2,358,222, known as the Fink-Richardson patent, relating to the art of treating water. Plaintiffs seek a judgment declaring plaintiffs are relieved of their obligations under the non-exclusive and non-transferable license under the patent, granted to them by Nalco on January 29, 1948.

The license agreement¹ was part of a settlement of previous litigation between the parties in this court. In the earlier litigation, Buromin Co. v. National Aluminate Corp., D.C., 70 F.Supp. 214, our C.A. 538, plaintiffs on March 17, 1945, filed a declaratory judgment action² claiming invalidity and non-infringement of the Fink-Richardson patent.³ An answer and counterclaim⁴ and a reply⁵ were filed. Plaintiffs took depositions in Chicago, San Francisco, and far up in the Sierra Nevada Mountains east of Sacramento, California. Defendant took several hundred pages of depositions in Pittsburgh. Plaintiffs served notice to take depositions in Texas which were not taken because of the settlement of the case. Settlement negotiations were entered into, and a settlement was reached in January 1948, which included, inter alia, the license agreement, an agreement with respect to release of past infringement,⁶ a covenant not to sue⁷ and the entry on February 10, 1948, of an agreed judgment of dismissal of the complaint and counterclaim, entitled "Final Judgment",⁸ containing the recital counsel had represented to the court "that the parties hereto have compromised and settled this controversy, and the defendant has granted a license to the plaintiffs under Fink and Richardson patent No. 2,358,222."

Fink-Richardson patent 2,358,222 relates to treatment of hard or incrusting water with small amounts of polyphosphoric acid compounds to prevent incrustation, the process being known as "stabilization". Certain claims of the patent, for example, claims 18 and 19, are directed toward the use of 1 to 3 and not more than 9 ppm of polyphosphate in the treatment of water.⁹

Plaintiffs' practices are defined in recital (a) of the license agreement entered into by the parties on January 29, 1948 and provides "incrusting water be treated with a polyphosphoric acid compound by adding it to the water in minute amounts, usually of the order of one to three parts per million, and sometimes in amounts up to about nine parts per million."

After making three quarterly royalty payments under the license, plaintiffs brought this second declaratory judgment action to avoid the payment of further royalties on the purported basis there had been a change of "circumstances", or a "new situation", created since the execution of the license agreement by reason of a judicial interpretation based upon the teachings appearing in an early chemical textbook by a chemist named Fresenius.¹⁰

The litigation was an infringement suit brought by Hall Laboratories (one of the plaintiffs herein) against Economics Laboratory, involving the Hall reissue patent 19,719¹¹ and another patent, both owned by plaintiffs and both relating to water softening, the process being known as "sequestration". The decision of the trial court was the Hall reissue patent was anticipated by the Fresenius text.¹² This was more than six months prior to the settlement of plaintiffs' first case against Nalco in this court.

The Court of Appeals affirmed in its entirety the decision of the trial court. 8 Cir., 169 F.2d 65.

Defendant Nalco here was not a party to the Economics litigation and the Fink-Richardson patent¹³ was in no way involved there. The Economics litigation involved solely patents relating to water softening, i. e., sequestration, and did not involve any patents or practices relating to stabilization, which is the subject of Fink-Richardson. Plaintiffs conceded the Hall patent differs from the Fink-Richardson patent.¹⁴ The Hall patent was held invalid in the Economics case on the ground there was "no demonstrable distinction"¹⁵ between the patent and the Fresenius text, but the validity of the Fink-Richardson patent was in no way involved.

Despite plaintiffs' knowledge of the Fresenius text and the judicial interpretation which had been placed upon it by the trial court for over six months prior to the time of the compromise and settlement of their previous suit against Nalco, they did not plead it. The so-called "new situation" upon which they relied in their pending complaint in asking this court to relieve them of their obligations under their license agreement was solely the fact the Eighth Circuit had affirmed the decision of the District Court in the Economics case in its entirety. They claim this affirmance of the decision of the court below, not involving the Fink-Richardson patent, constituted an "eviction" from the benefits of their license agreement under the Fink-Richardson patent; their practices are now "justified by the art" as it existed prior to Fink-Richardson; and they should be held to be no longer liable under the license agreement.

Defendant Nalco filed a motion for summary judgment to dismiss the pending complaint with prejudice because:

1. Paragraphs 8 and 9 of the license agreement (Exhibit A to the complaint) set forth the sole conditions under which plaintiffs may be relieved of their obligations to pay royalties and since these conditions have not occurred, plaintiffs cannot prevail on their complaint.

2. Plaintiffs are liable to pay royalties under the license agreement irrespective of the prior art because the processes they admittedly use are the same as those described in the license agreement on the basis of the use of which they agreed to pay royalties.

3. Plaintiffs' past royalty payments bar them from denying liability for future payments on account of the same activities.

4. Plaintiffs will not be permitted to relitigate the same issues compromised and settled in the previous litigation.

5. Entirely aside from the terms of the license agreement, plaintiffs have not been evicted from the benefits of the license agreement.

In my opinion of September 20, 1950, I suggested the doctrine of Scott Paper Co. v. Marcalus Co., 326 U.S. 249, 66 S.Ct. 101, 90 L.Ed. 47, relied upon by plaintiffs in their brief in opposition to the motion, did not apply here, but I did not finally rule on the question and observed by denying the motion for summary judgment "there will be present at trial live and informed testimony or other evidence placing plaintiffs' practices vis-a-vis the Fresenius text".¹⁶

Defendant Nalco filed its answer and affirmative defenses on October 19, 1950. On November 1, 1950, Nalco filed a motion under Fed.Rules Civ.Proc. rule 42(b), 28 U.S.C., for an order setting for separate trial, prior to the other issues raised by the pleadings, the single issue as to the identity of plaintiffs' practices and the Fresenius text.

This court on January 22, 1951,¹⁷ granted Nalco's motion under F.R. 42 (b) and held: plaintiffs "should not be permitted to forget the prior litigation between the parties in this Court" which was compromised and settled; "plaintiffs should not be permitted to retry in another round of litigation all of those issues which they had raised in their prior declaratory judgment action", including the prior art cited in the previous action and in the present action of which plaintiffs had full knowledge for many years prior to the settlement of the former litigation; "there has been survival of the doctrine of estoppel against a patent licensee to contest validity of the licensed patent" which was definitely resolved and reaffirmed by the Supreme Court in Automatic Radio Mfg. Co., Inc. v. Hazeltine Research, Inc., 339 U.S. 827, 70 S.Ct. 894, 94 L.Ed. 1312, and a separate trial should be held on the single issue relative to Fresenius. I also held "if it so develops on this issue the decision is in favor of plaintiffs, then the parties can proceed on any other issues which could be said to remain, and which the court will decide could remain. If the decision on this issue is in favor of defendant, this would seem to end the cause in this court".¹⁸

The order of this court was entered February 12, 1951, granting defendant's motion for a separate trial under F.R. 42(b) "upon the single issue as to whether or not plaintiffs' practices correspond with the teachings of the Fresenius text."

Findings of Fact

1. This is a civil action seeking a declaratory judgment of non-infringement.

2. Defendant is owner of Fink-Richardson patent 2,358,222 issued on September 12, 1944 under which plaintiffs are licensed by virtue of an agreement dated January 29, 1948, entered into as a part of a compromise and settlement of earlier litigation in this court with respect to the same patent between the same parties, C.A. 538, 70 F.Supp. 214.

3. In the earlier litigation, plaintiffs sought a declaratory judgment the Fink-Richardson patent was invalid and not infringed by their practices sometimes referred to as the threshold treatment and called the "stabilization treatment" of industrial waters in view of various items of prior cited art. A final judgment reciting the parties had compromised and settled the suit and defendant had granted a license to plaintiffs under defendant's patent was entered by this court on ...