Hanson-Van Winkle-Munning Co. v. UNITED STATES, ETC.

• Decision Date: 27 July 1938
• Docket Number: No. 1002.,1002.
• Citation: 24 F. Supp. 249
• Court: U.S. District Court — Northern District of West Virginia
• Parties: HANSON-VAN WINKLE-MUNNING CO. v. UNITED STATES GALVANIZING & PLATING EQUIPMENT CORPORATION.

24 F. Supp. 249

HANSON-VAN WINKLE-MUNNING CO. v. UNITED STATES GALVANIZING & PLATING EQUIPMENT CORPORATION.

No. 1002.

District Court, N. D. West Virginia.

July 27, 1938.

Toulmin & Toulmin, of Dayton, Ohio, Steptoe & Johnson and James M. Guiher, all of Clarksburg, W. Va., and D. H. Hill Arnold, of Elkins, W. Va., for plaintiff.

Edwards, Bower & Pool, of New York City, and Robinson & Stump, of Clarksburg, W. Va., for defendant.

BAKER, District Judge.

This suit is by Hanson-Van Winkle-Munning Company, a corporation, of New Jersey, with its principal office and place of business at Matawan, New Jersey, against U. S. Galvanizing & Plating Equipment Corporation, a corporation, of the State of West Virginia, and having a place of manufacture in Brooklyn, New York. Both plaintiff and defendant are manufacturers of full automatic plating equipment machines, and are in active competition with one another.

The plaintiff sold a full automatic plating machine to Revere Copper & Brass, Inc., of Rome, New York; the defendant having attempted to sell its machine to the same customer but losing out in competition with the plaintiff. It developed in the trial of this case that it is customary for a seller, in selling a full automatic plating machine, to include in the contract of sale a guarantee against infringement. It is also customary in selling such machines, which are very large and have to be built and assembled in the customer's plant, to show and demonstrate the machine in one's customer's plant to a prospective customer for installation in his plant. Therefore, it becomes important that when a machine is to be demonstrated there be no charge of infringement which would disturb the sale to the next customer.

The defendant, upon losing the order for the machine bought by Revere Copper & Brass, Inc., sent a letter notifying the plaintiff of infringement of Patent No. 1,959,799, which had thirty-eight (38) claims. It sent a copy of that notice of infringement to the plaintiff's customer, Revere Copper & Brass, Inc., and the latter called upon the plaintiff to make good upon its guarantee and to protect it from any such charge of infringement. The plaintiff called the defendant's attention to plaintiff's own prior patents, under which it made the Rome machine, which were of earlier date than that of the defendant's patent under which it had been notified. Thereafter, after a lapse of sometime the defendant notified the plaintiff and its customer, Revere Copper & Brass, Inc., of infringement of another of its patents, No. 1,475,198, which had some twenty-three (23) claims.

The plaintiff called upon the defendant to state which one of the twenty-three (23) claims was infringed, to which the defendant replied that it was unable to do so unless drawings, illustrating the machine it claimed to be an infringement, were supplied to it by the plaintiff. This controversy about the alleged infringement of the plaintiff's machine at Rome, at the plant of its customer, involved the question of the infringement and validity of these two patents of the defendant. Thereupon, the plaintiff herein filed an action in this Court on the ground of diversity of citizenship and more than $3,000, exclusive of interest and costs being involved, to restrain the defendant from suing its customer and from committing acts of unfair competition by sending notices in bad faith as to the alleged infringement, which, as claimed by the plaintiff, it had no sound reasons to send because it admitted that it did not know of the construction of the plaintiff's machine at Rome upon which the charges of infringement were based. Furthermore, this suit was brought under the Declaratory Judgment Act of the United States, 28 U.S.C.A. § 400, on the ground that there was a controversy as to the infringement and validity of its patents.

It sought the jurisdiction of this Court, in which the defendant was a resident, being a corporation of the State of West Virginia, and asked this Court to restrain the defendant from these unfair competitive acts and to determine the basis of these charges to see whether they were well-founded or not. The plaintiff also sought damages for this allegedly unfair conduct of the defendant.

Thereupon, the defendant accepted the jurisdiction of this Court and from time to time secured stipulations for extension of time for answer during the fall of 1935, this suit having been filed on the 23rd day of September, 1935. While awaiting defendant's answer, plaintiff was advised by representatives of the defendant that it intended to ignore the action of this Court and would proceed to file a Bill of Complaint for infringement of patents in suit against plaintiff's customer, Revere Copper & Brass, Inc., of Rome, New York. Thereupon, the plaintiff herein made a motion to restrain such action, which was set down for hearing thirty days hence to give the defendant opportunity to present any affidavits and to give this Court an opportunity to hear the parties. Three days before this Court reached the case for hearing on the motion for preliminary injunction, the defendant actually did file said Bill of Complaint in the Northern District of New York for the Eastern Division. When this cause came on for hearing these facts being revealed to the Court, it ordered this defendant to dismiss said suit and to cease any further unfair acts and to respect the jurisdiction of this Court. This action by the defendant came close to contempt and, at the very least, was disrespectful of the procedure and jurisdiction of this Court. Thereupon, this Court set this case down for immediate hearing, which was had at the earliest practical moment. At that time the defendant made a motion to dismiss this case for lack of jurisdiction of the Court, particularly on the ground that there was no actual controversy which was cognizant under the Federal Declaratory Judgment Act. This motion was denied. Thereafter, it filed its answer and entered into this Court by way of counterclaim, charging the plaintiff with infringement of its patents and averring that the patents were valid. The plaintiff replied setting up non-infringement and invalidity by way of prior art, prior publications, and prior uses of the patents in suit. At the trial the defendant renewed its motion to dismiss the case on the above grounds, despite the fact that it had already accepted the jurisdiction of this Court by filing its counterclaim. Prior to the trial, the defendant elected to rely upon seven out of the sixty-one claims in the two patents.

On the issue of unfair competition this Court finds the following:

(a) The several notices of patent infringement sent to the plaintiff had copies thereof sent by the defendant to the plaintiff's customer. No suit followed these charges of infringement to show good faith in sending the notices. The notices were spaced apart at an appreciable period in order to continue the pressure upon the plaintiff's customer. When the plaintiff asked the defendant to specify what claims it charged were infringed, defendant claimed it could not do so without having drawings of the machine furnished by the plaintiff to its customer.

This, on its face, showed bad faith and that charges of infringement were made without adequate investigation of the facts.

(b) Furthermore, after this case was ready for trial defendant did specify 7 claims out of the 61 claims in the two patents, showing that it did have the information to specify these claims and could have done so when requested so to do by the plaintiff. This, again, was bad faith. More important still, at the trial it developed that defendant's executives had seen the plaintiff's machine in Rome in operation, prior to sending the notices and had the fullest opportunity to determine the questions of infringement, and that the statements in their letters to the contrary were untrue. This, again, was bad faith. After this suit was brought and these issues were left to the determination of this Court, defendant did not seek immediately to try out the question of the jurisdiction of this Court. It waited until a motion for preliminary injunction came on for hearing. It continued its threatening attitude after this suit was brought and three days before the preliminary injunction motion was to be heard to restrain these threats, it did actually file the suit at Rome, which was an act of bad faith and unfair competition against the plaintiff, and certainly was disrespectful of the jurisdiction and process of this Court and substantial contempt thereof. This is mentioned as indicative of the determined course of this defendant to commit its acts of unfair competition by trying out these matters in the trade, rather than in a court of law.

(c) At the trial of this case it developed from the testimony of Attorney F. A. Bower, counsel for defendant, who was also acting as a witness, that a probable prior use and prior offer to sell had taken place by the defendant with respect to its first patent, No. 1,475,198. Upon motion of the plaintiff this Court ordered the records of the defendant produced. As hereinafter found, these records showed a prior offer to sell and a prior use on the part of the defendant, known only to it and to its potential customer, The Standard Parts Company of Cleveland, Ohio, at a time more than three years prior to the date of the filing of application for Letters Patent, which matured into Patent No. 1,475,198. It also developed from these records that Louis Potthoff was not the inventor of the invention covered by said patent, but that his employee, Schweinsberg, who later received Patent No. 1,428,563, was the inventor because he was the first one to produce a written dated disclosure to the attorneys for the defendant. This paper was found in the records of the defendant. Therefore, the Court finds this to be another act of bad faith because this defendant knew from its own records that...