Hall v. Wright

• Citation: 125 F. Supp. 269
• Decision Date: 17 September 1954
• Docket Number: Civ. No. 7839.
• Court: United States District Courts. 9th Circuit. United States District Court (Southern District of California)
• Parties: Jesse E. HALL, Plaintiff, and Weatherford Oil Tool Company, Inc., a Texas corporation; Weatherford Spring Company of Venezuela, C. A., a Venezuelan corporation; Hall Development Company, C. A., a Venezuelan corporation; Weatherford, Ltd., a corporation of the Province of Alberta, Canada; Weatherford Internacional, S.A. de C.V., a corporation of Mexico; Nevada Leasehold Corporation, a Nevada corporation; Parker Industrial Products, Inc., a Texas corporation, Plaintiff-Interveners, v. Kenneth A. WRIGHT, Roland E. Smith, B & W, Inc., a California corporation, Adams-Campbell Co., Ltd., a California corporation; and California Spring Co., Inc., a California corporation, Defendants.

125 F. Supp. 269

Jesse E. HALL, Plaintiff, and Weatherford Oil Tool Company, Inc., a Texas corporation; Weatherford Spring Company of Venezuela, C. A., a Venezuelan corporation; Hall Development Company, C. A., a Venezuelan corporation; Weatherford, Ltd., a corporation of the Province of Alberta, Canada; Weatherford Internacional, S.A. de C.V., a corporation of Mexico; Nevada Leasehold Corporation, a Nevada corporation; Parker Industrial Products, Inc., a Texas corporation, Plaintiff-Interveners, v. Kenneth A. WRIGHT, Roland E. Smith, B & W, Inc., a California corporation, Adams-Campbell Co., Ltd., a California corporation; and California Spring Co., Inc., a California corporation, Defendants.

Civ. No. 7839.

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

September 17, 1954.

Thomas E. Scofield, Kansas City, Mo., and Philip Subkow, Los Angeles, Cal., for plaintiff and plaintiff-interveners.

Lyon & Lyon, Lewis E. Lyon, and Richard F. Lyon, Los Angeles, Cal., for defendants and counterclaimants.

MATHES, District Judge.

After a partial trial of the issues raised by the original pleadings, both sides were permitted to file amended and supplemental pleadings and new parties were brought in. Fed.Rules Civ.Proc. Rules 15, 21, 24, 28 U.S.C.A.

The case then proceeded to trial upon the issues raised by: (1) the second amended complaint for (a) reformation and cancellation of, damages for breach of, and a declaratory judgment as to rights and duties under, an alleged contract dated September 15, 1944 between plaintiff Jesse E. Hall and defendant Kenneth A. Wright, (b) treble damages for alleged violations of the antitrust laws, (c) damages and injunctive relief for alleged unfair competition, and (d) an accounting; (2) the "Answer of defendants Roland E. Smith, Adams-Campbell Co., Ltd., and California Spring Co., Inc.", and (3) the "Answer and Counterclaims of defendants Kenneth A. Wright and B. & W., Inc. to the Second Amended Complaint."

Plaintiff invoked the jurisdiction of this court upon the ground of diversity of citizenship, see 28 U.S.C. §§ 1332, 2201-2202, and under the Sherman and Clayton Acts, see 15 U.S.C.A. §§ 1-3, 15, 26.

While plaintiff and plaintiff-interveners were presenting evidence upon their case-in-chief, the parties reached a stipulation for partial judgment declaring that the alleged agreement of September 15, 1944 never constituted a contract between the parties Hall and Wright, and dismissing with prejudice: (a) all causes of action asserted against defendants Roland E. Smith, Adams-Campbell Co., Ltd. and California Spring Co., Inc., (b) all causes of action other than that for unfair competition asserted against defendants Wright and B & W, Inc., and (c) the counterclaims asserted by defendants Wright and B & W, Inc., for damages for alleged violations of the antitrust laws and for declaratory relief.

The trial then continued upon the issues raised by: (1) the fifth cause of action asserted in the second amended complaint grounded upon alleged unfair competition, and (2) the counterclaims of defendants Wright and B & W, Inc., for unfair competition and for alleged infringement of (a) Letters Patent No. 2,338,372 "Method for Conditioning Well Bores", issued January 4, 1944 to defendant Wright and later assigned to defendant B & W, Inc., (b) Letters Patent No. 2,374,317 "Well Production Equipment" — wall cleaning guide, issued April 24, 1945 to defendant Wright and later assigned to defendant B & W, Inc., and (c) Letters Patent No. 2,392,352 "Method of Placing Cement Plugs in Well Bores", issued January 8, 1946 to defendant Wright and later assigned to defendant B & W, Inc., and (3) the reply of plaintiff and plaintiff-interveners to these counterclaims.

Near the close of the trial, Letters Patent No. 2,671,515 "Well Bore Cleaning Scratcher", issued to plaintiff Jesse E. Hall on March 9, 1954. Since the claimed invention covered by this patent and the Patent-Office proceedings upon the application had previously been the subject of extended testimony in the case, leave was granted plaintiff Hall to file an amendment supplementing the second amended complaint by adding thereto as the "Seventh Cause of Action" a claim against defendants Wright and B & W, Inc. for alleged infringement of this newly-issued Hall patent.

Defendants Wright and B & W, Inc., filed a supplemental answer denying infringement, with a counterclaim against plaintiff and plaintiff-interveners for a declaratory judgment that Letters Patent No. 2,671,515 to Hall "are invalid and void as to each and all of the claims thereof." Plaintiff and plaintiff-interveners filed a reply to this counterclaim.

The trial then proceeded and, upon conclusion, the case was submitted for decision upon the issues raised by the amended and supplemental claims and counterclaims for unfair competition, patent infringement, and declaratory relief.

Among the acts of unfair competition claimed by plaintiff and plaintiff-interveners is the allegation that defendants Wright and B & W, Inc., both before and during the pendency of this litigation, have unfairly and without cause notified customers of plaintiff and plaintiff-interveners that the customers infringed the monopoly of the Wright Method Patent No. 2,338,372 by the use of scratchers in the cementing operations incident to completion of oil wells.

The evidence sustains the charge, since it is clear that the notices were given, directly and indirectly, without any intent that the notices serve as a preliminary to suit. Moreover, the notices were not given in good faith since Patent No. 2,338,372 does not teach or claim or even mention any method of carrying on the cementing operations incident to the completion of an oil well. Cf. Morton Salt Co. v. G. S. Suppiger Co., 1942, 314 U.S. 488, 62 S.Ct. 402, 86 L.Ed. 363; B. B. Chemical Co. v. Ellis, 1942, 314 U.S. 495, 62 S.Ct. 406, 86 L.Ed. 367; Schriber-Schroth Co. v. Cleveland Trust Co., 1940, 311 U.S. 211, 312 U.S. 654, 61 S.Ct. 235, 85 L.Ed. 132; Dehydrators Ltd. v. Petrolite Corp., 9 Cir., 1941, 117 F.2d 183; Celite Corp. v. Dicalite Co., 9 Cir., 96 F.2d 242, certiorari denied, 1938, 305 U.S. 633, 59 S.Ct. 101, 83 L. Ed. 407; Circle S Products Co. v. Powell Products, 7 Cir., 1949, 174 F.2d 562; Metro-Goldwyn-Mayer Corp. v. Fear, 9 Cir., 1939, 104 F.2d 892; Adriance Platt & Co. v. National Harrow Co., 2 Cir., 1903, 121 F. 827.

On the other hand, among the acts of unfair competition claimed by defendants Wright and B & W, Inc. is the allegation that plaintiff and plaintiff-interveners, during the pendency of this action, have notified the trade, "without probable cause, that they were entitled to an accounting from the trade for all Multiflex and Nu-Coil scratchers which the trade purchased from B & W, Inc., and that they were entitled to a royalty of $2.50 per scratcher from the trade for each Multiflex and Nu-Coil scratcher purchased by the trade."

The evidence also sustains this charge, since it is clear that the notices were given without any intent that the notices serve as a preliminary to suit. Here, too, the notices were not given in good faith; a royalty of $2.50 per $8 scratcher would not be within the bounds of economic reason.

These and other claims of unfair trade practices are asserted, each side against the other, with each invoking the equity jurisdiction of this Court. Briggs v. United Shoe etc. Co., 1915, 239 U.S. 48, 50, 36 S.Ct. 6, 60 L.Ed. 138; Rees v. Watertown, 1873, 19 Wall. 107, 86 U.S. 107, 122, 22 L.Ed. 72 upon the ground of diversity of citizenship. 28 U.S.C. § 1332. Hence the substantive law of California governing tortious conduct commonly referred to as unfair competition — unfair trade practices — is to be applied. Pecheur Lozenge Co. v. National Candy Co., 1942, 315 U.S. 666, 667, 62 S.Ct. 853, 86 L.Ed. 1103; Fashion Originators Guild v. Federal Trade Commission, 1941, 312 U.S. 457, 468, 61 S.Ct. 703, 85 L.Ed. 949; Franke v. Wiltschek, 2 Cir., 1953, 209 F.2d 493, 494; Cridlebaugh v. Rudolph, 3 Cir., 131 F.2d 795, certiorari denied, 1942, 318 U.S. 779, 63 S.Ct. 855, 87 L.Ed. 1147; Zephyr American Corp. v. Bates Mfg. Co., 3 Cir., 1942, 128 F.2d 380.

Section 3369 of the Civil Code of California provides in part that: "Any person performing or proposing to perform an act of unfair competition within this State may be enjoined in any court of competent jurisdiction. * * * unfair competition shall mean and include unfair or fraudulent business practice and unfair, untrue or misleading advertising * * *."

Use of the phrase "shall mean and include" indicates that the statutory definition was not intended to be restrictive or exclusive. Athens Lodge No. 70 v. Wilson, 1953, 117 Cal.App.2d 322, 255 P.2d 482. It is left to the courts to determine what conduct will constitute unfair competition in a particular case. Schwartz v. Slenderella Systems of California, Cal.App.1953, 260 P.2d 256 hearing granted, see Cal.Sup., 271 P.2d 857; MacSweeney Enterprises Inc. v. Tarantino, 1951, 106 Cal.App.2d 504, 235 P.2d 266.

While this litigation has been pending the businesses of the parties on both sides in the sale of scratchers for use in oil well cementing operations has grown rapidly and has spread to the oil producing sections of Mexico and Ecuador to the south and Canada to the north. Accompanying this growth, intensity of competition has increased and with it the unfair methods employed by both sides to influence the trade. A dozen or more suits involving one phase or another of their controversies have been commenced in Texas, Louisiana, Canada, Mexico and Venezuela, by plaintiff Hall or one of the interveners or both, against B & W, Inc. and Wright or one of them and one of the customers of B & W, Inc. Cf. Virtue v. Creamery Package Co., 1913, 227 U.S. 8, 33 S.Ct. 202, 57 L.Ed. 393; Crosley Corp. v. Hazeltine Corp., 3 Cir., 1941, 122 F.2d 925, certiorari denied, 1942, 315 U.S. 813, 62 S.Ct....