Hanes Corp. v. Millard, s. 74--1622

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtMcGOWAN
Citation174 U.S.App.D.C. 253,531 F.2d 585
Parties, 189 U.S.P.Q. 331 HANES CORPORATION, a North Carolina Corporation v. Julien MILLARD et al., Appellants.
Docket NumberNos. 74--1622,74--1623,s. 74--1622
Decision Date30 January 1976

Page 585

531 F.2d 585
174 U.S.App.D.C. 253, 189 U.S.P.Q. 331
HANES CORPORATION, a North Carolina Corporation
Julien MILLARD et al., Appellants.
Nos. 74--1622, 74--1623.
United States Court of Appeals,
District of Columbia Circuit.
Argued Feb. 27, 1975.
Decided Jan. 30, 1976.

Walter D. Ames, Washington, D.C., with whom Gary M. Hoffman, Washington, D.C., was on the brief, for appellants.

Robert B. Frailey, Philadelphia, Pa., with whom John F. Smith, Washington, D.C., was on the brief, for appellee.

Before RICHARD T. RIVES, * Senior Circuit Judge for the Fifth Circuit and McGOWAN and WILKEY, Circuit Judges.

Opinion for the Court filed by Circuit Judge McGOWAN.

McGOWAN, Circuit Judge:

Defendant-appellants in these appeals from the District Court are three French citizens who some years ago assigned a patent to Hanes, the plaintiff-appellee, in exchange for specified royalties. After the patent had expired appellants claimed that they were owed additional royalties under the assignment contract, and two of them initiated contractually-prescribed conciliation and arbitration proceedings. Shortly thereafter, Hanes filed this suit seeking declaratory relief, and after proceedings that we describe in more detail below, obtained a declaratory judgment that any claim, arising from the assignment contract, that appellants might wish to press was barred by the District of Columbia statute of limitations. For the reasons appearing below, we find that the District Court should not have exercised jurisdiction to render this declaratory judgment, and hence we reverse.


At the heart of this controversy is United States Patent No. 2,609,677, covering a technique for weaving hosiery. Issued in 1952, the patent had passed by 1962 into the hands of appellants, and in that year they assigned it to Hanes in exchange for payment of royalties on a specified basis on all hosiery manufactured and sold by Hanes under the patent. Hanes undertook to keep accurate records and render a monthly account of its production. In case of a default in royalty payments, or any other breach by Hanes of its obligations, the appellants were entitled to immediate reassignment of the patent without charge. Article 13 of the contract directed that '(a)ll disputes arising from the interpretation of this contract or issuing from it shall be finally settled according to the rules of conciliation and arbitration of the Chambre de Commerce Internationale through one or several arbitrators nominated in accordance with these rules.' 1

The patent expired on September 9, 1969. Sometime during the first half of 1973, appellants Millard and Manotte, but not Carbonnaux, filed a request for conciliation with the International Chamber of Commerce in Paris in accordance with Article 13. According to Hanes' complaint, appellants' claim is for unpaid royalties during the life of the patent. Hanes contends that the products for whose sale royalties are sought were not covered by the patent, 2 and rather than pursuing conciliation and arbitration, on June 18, 1973 brought suit seeking

Page 589

a declaration that the patent did not extend to the products in question, or, alternatively, was invalid altogether. Jurisdiction was claimed under the Declaratory Judgment Act, 28 U.S.C. § 2201 (1970), and 35 id. § 293. The latter section provides that a nonresident patentee may file with the Patent Office a designation of a United States resident upon whom process is to be served in litigation involving his patent, but, if no such designation is made, 'the United States District Court for the District of Columbia shall have jurisdiction and summons shall be served by publication or otherwise as the court directs.'

The sequence of events that followed requires a detailed explanation. Apparently no designation had been made by appellants, and service was therefore attempted by registered mail, return receipt requested. See Fed.R.Civ.P. 4(i)(1)(D). The letters were sent to the addresses, all in France, which were shown for appellants in the 1962 assignment contract. A copy of the summons was also served on the District of Columbia law firm which more than twenty years earlier had represented the individual who originally obtained the patent and later assigned it to appellants. A member of that firm responded on their behalf on July 26, 1973. Stating that he had been requested by a Mai$tre Robert Colomes of Troyes Cedex, France, to represent appellants in this matter, he asked for an extension of time in which to answer the complaint. His next filing was not an answer but a motion, filed on September 25, 1973, to dismiss or stay the action pending arbitration before the International Chamber of Commerce. 3

On November 6, 1973, the district judge denied the motion and called a status conference for November 16. At that conference the matter of the statute of limitations was first raised, not by the parties but by the district judge, who instructed the parties to file supplemental briefs on the question by December 20. He took no action on the motion that appellants had filed four days earlier for reconsideration of their request for a stay or dismissal pending arbitration.

On December 20 Hanes filed a supplemental brief, and one day later filed an amended complaint in which a newly-added 'Count II' requested the court to declare that any royalty claims by the appellants were barred by the three-year North Carolina statute of limitations, North Carolina being the state in which appellee corporation was registered and the site of the manufacture of the patented fabric. Hanes simultaneously moved for summary judgment on this latter count. Appellants' counsel filed no brief, but instead wrote a letter to the court in which he explained his quandary:

This letter is written in lieu of the brief requested by Your Honor at the status conference in chambers on November 16, 1973. Unfortunately, the defendants, neither personally nor through their French attorney, have made reply to my repeated requests for instructions and information, which requests have been made by airmail letters and by cablegram since I do not believe that the French attorney speaks English.

I have no idea whether the defendants wish to continue to have my firm represent them or whether they wish to take any additional action in the subject litigation. I probably was in error in ever attempting to contact the defendants, but service of a copy of the Complaint on my firm--albeit improper service--raised a presumption on my part that we had a duty to attempt to preserve defendants' rights.

J.A. exh. S.

On January 2, 1974, appellants' counsel received a further communication from Mai$tre Colomes. Apparently it resolved his doubts at least to the extent of persuading him to continue the defense. On January 11 he did so by filing with the court (1) a

Page 590

motion to strike Count II of the amended complaint or in the alternative for summary judgment thereon, (2) a memorandum in support of these motions, and (3) a supplemental brief in support of his pending motion to reconsider the denial of a stay or dismissal pending arbitration. On January 31 the district judge denied the motion to reconsider and entered summary judgment on Count II for the plaintiff. His grounds were as follows:

. . . Although the parties have debated the effect of North Carolina's statute of limitations, the Court notes that the relevant statute is actually that of the District of Columbia as litigation forum. (Citation omitted). In any case, both jurisdictions have a three-year statute of limitations for the recovery of a debt on a contract. D.C.Code § 12--301(7); G.S.N.C. § 1--52. Since no legal proceedings with regard to the disputed royalties were commenced within three years of the date on which the last royalty payment was due, the statute of limitations has run and defendants are barred from suing in either North Carolina or the District of Columbia for the recovery of such royalties on the basis of a simple contract claim. (Citation omitted). Defendants correctly note that the statute of limitations with regard to patent infringement has not yet run, 35 U.S.C. § 286, but that does not alter the fact that an action for breach of contract rather than patent infringement can no longer be maintained.

J.A. exh. V. Hanes' claims in Count I regarding the scope and validity of the patent the district judge regarded as 'either moot or premature'; they were moot insofar as they related to the threatened contract claims, which he had held could no longer be brought; they were premature insofar as they might relate to patent infringement claims, which had not been threatened.

On February 12 appellants filed two motions attacking the judgment. The first sought dismissal of the amended complaint for lack of personal jurisdiction over appellants and defective service of process. J.A. exh. W. The second was a motion to vacate or amend the January 31st order on the ground that 'summary judgment was not based on the evidence of record, did not reach the issue of when the cause accrued,' and was granted prematurely in violation of Fed.R.Civ.P. 56(a). J.A. exh. Y. The district court denied these motions on March 8. No. 74--1622 is the appeal taken from the January 31st and March 8th orders.

On April 5, 1974--the same day that they filed the appeal in No. 74--1622--appellants filed a further motion in the district court. This was for vacation of both the January 31st and March 8 orders on the ground that Hanes had fraudulently misled appellants' counsel with respect to service of process upon his clients. To explain, we must retrace our steps momentarily.

Appellants' counsel apparently assumed, perhaps on the basis of his communications with Mai$tre Colomes, that the registered letters by which service was first attempted reached their destinactions and that the receipts had been returned. In any case he made no claim based on...

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