Helene Curtis Industries v. Sales Affiliates
| Decision Date | 05 June 1952 |
| Citation | 105 F. Supp. 886 |
| Parties | HELENE CURTIS INDUSTRIES, Inc. v. SALES AFFILIATES, Inc. GILLETTE SAFETY RAZOR CO. v. SALES AFFILIATES, Inc. |
| Court | U.S. District Court — Southern District of New York |
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Kenyon & Kenyon, New York City, for Helene Curtis Industries, Inc. Theodore S. Kenyon, New York City, Maurice S. Cayne, Chicago, Ill., John A. Reilly, Malvin R. Mandelbaum, New York City, of counsel.
Morgan, Finnegan & Durham, New York City, for Sales Affiliates, Inc. George B. Finnegan, Jr., Granville M. Pine, Charles H. Tuttle, Stuart H. Johnson, Jr., New York City, of counsel.
Fish, Richardson & Neave, New York City, for Gillette Safety Razor Co. Henry R. Ashton, New York City, Edgar H. Kent, Boston, Mass., Harry Pugh, Jr., Rynn Berry, New York City, of counsel.
Hawkins, Delafield & Wood, New York City, for Walgreen Drug Co. of Texas and Skillern & Sons, Inc. Clarence Fried, New York City, of counsel.
Out of a rather involved situation has come the group of motions now before the court. Before setting the background of these motions, I shall first list them individually and ultimately dispose of them seriatim.
C.A., for summary judgment in its favor dismissing the complaint of Helene Curtis Industries, Inc. (hereafter referred to as Helene Curtis) in Civ. 71-280, a declaratory judgment action now pending in this district.
(a) for leave to file and serve an amended complaint in Civ. 71-280 adding as a party plaintiff Helene Curtis Sales, Inc.;
(b) for an expeditious hearing of Civ. 71-280 under Rule 57, Federal Rules of Civil Procedure;
(c) for an injunction restraining Sales Affiliates from proceeding in Civ. 4605 in the United States District Court for the Northern District of Texas, Dallas Division and from intimidating customers of Helene Curtis by threats of commencement of suits against them for infringement of the patent in suit.
3. Sales Affiliates moves under Rule 56, Federal Rules of Civil Procedure for summary judgment in its favor dismissing the complaint of Gillette Safety Razor Company (hereafter referred to as Gillette) in Civ. 71-284 which is also a declaratory judgment action now pending in this district.
4. Gillette moves:
(a) for an injunction restraining Sales Affiliates from prosecuting Civ. 4606 in the United States District Court for the Northern District of Texas, Dallas Division and from intimidating customers of Gillette by threats and commencement of suits against them for infringement of the patent in suit;
(b) granting Civ. 71-284 a trial preference in this district under Rule 57, Federal Rules of Civil Procedure.
5. Walgreen Drug Company of Texas (hereafter referred to as Walgreen) and Skillern & Sons, Inc. (hereafter referred to as Skillern) move:
(a) for an order granting them leave to intervene in Civ. 71-284;
(b) for an order staying Sales Affiliates from proceeding in the Texas action, Civ. 4606 in which these movants are defendants, until the final disposition of Civ. 71-284.
6. Helene Curtis moves for an order referring Civ. 71-280 to a master under Rule 53(b), Federal Rules of Civil Procedure, the reference to include all motions previously made except Helene Curtis' motion to enjoin Sales Affiliates in its Texas suit, Civ. 4605.
7. Gillette moves for an order referring Civ. 71-284 to a master under Rule 53(b), Federal Rules of Civil Procedure.
The patent in suit is No. 2,577,710. Application Serial No. 398,325 therefor was filed in the U.S. Patent Office on June 16, 1941 and the patent was finally granted on December 4, 1951, issuing in the name of Procter & Gamble as assignee. It covers a certain composition for so-called "cold" permanent waving solutions invented by Everett G. McDonough. All the parties appear agreed that cold permanent waves have revolutionized the mode by which the women of America, and, it is added, of most of the civilized world improve upon nature's bounty. The cold wave technique seems to have superseded an earlier "hot" wave method. An alleged quarter of a billion dollar industry has been built upon this new technique.
The history of the patent application is germane because of certain events which transpired during the course of its ten-year pendency in the Patent Office. While the patent application was awaiting disposition, McDonough assigned to Sales Affiliates the entire right, title and interest to the patent application. Thereafter, Sales Affiliates prosecuted it through the Patent Office.
On January 27, 1948, Sales Affiliates and The Procter & Gamble Company entered into an agreement under which Procter & Gamble agreed to pay "as advance royalties" the sum of $300,000. in exchange for certain benefits which included Sales Affiliates informing Procter & Gamble of its technical and promotional knowledge of cold hair-waving compositions. In this connection, Sales Affiliates issued to Procter & Gamble a non-exclusive license to make, use and sell hairwaving compositions under the patent application. The license embodied provisions for royalties to Sales Affiliates and gave Procter & Gamble a preferential royalty position as against any other licensees. The agreement further provided that in the event of an assignment to Procter & Gamble, "and during the period in which title is vested in Procter", Sales Affiliates was to retain the right to prosecute the application, to grant licenses consistent with the agreement, and to bring and defend suits on the assigned patent or application "in the name of Procter, if necessary, but at the expense of Affiliates, and Sales Affiliates shall be entitled to any recovery therefrom."
On July 22, 1949 these provisions were embodied in a mortgage assignment, to which Sales Affiliates and Procter & Gamble were signatories. By its terms Sales Affiliates assigned to Procter & Gamble the "entire right, title and interest" to the patent application until Sales Affiliates repaid the funds advanced to it under the January 27, 1948 agreement. The mortgage assigned, however, explicitly reserved to Sales Affiliates the right to grant licenses under the application as well as the rights to sue at its own expense as described supra. The assignment was duly recorded in the Patent Office.
By agreement dated June 21, 1951 the time for repaying the $300,000 was amended from January 21, 1951 until three years after the issuance of any patent on the application, but in no event later than December 31, 1954. The patent issued on December 4, 1951. Therefore the final date of repayment is three years thence. No part of the funds has as yet been repaid.
For some four years prior to the day the patent issued Sales Affiliates had been negotiating with Gillette and its predecessors in interest in The Toni Company (Toni is now a division of Gillette). The purpose of the negotiations was to obtain a license for the Toni business when the patent in suit should issue. Those negotiations continued after suit was commenced.
The course of affairs, both before and after issuance of the patent, is peppered with facts which indicate that the parties have been proceeding under some tension. The trade was informed by apparently neutral sources that litigation against infringers of the issued patent was a distinct possibility.1
There is evidence that the industry is in a very uncertain state at the moment.2 This is recent history the origins of which reveal most clearly the atmosphere in which these matters have evolved.
From the abundant affidavits and exhibits before me3, I cannot help but conclude that Sales Affiliates has behaved over the past years in a manner such that it has gained a reputation in at least some of the trade as a litigious organization. There is a ring of authenticity to the reputation, and the relevance of its litigiousness will presently appear in this opinion.
Even the patent application was not processed under completely harmonious conditions. It had originally been rejected by both the Patent Examiner and the Board of Appeals of the Patent Office, and did not issue until Sales Affiliates had prevailed in the District Court of the District of Columbia in a suit under R.S. § 4915, 35 U.S.C.A. § 63, to compel its issuance. Prior to the termination of that matter, the Patent Office had appealed the District Court's decision, but later agreed to dismissal of the appeal and allowance of claims somewhat modified from those ruled on by the District Court.
On the day the patent issued, a rash of law suits broke out. These and the swift maneuvers following them are the complicating elements in the motions before me. Here in the Southern District Helene Curtis and Gillette each began their own actions (Civ. 71-280 and Civ. 71-284 respectively) for declaratory judgments declaring the patent invalid and that they were non-infringers. The suits were begun within a matter of hours after the patent issued, with Helene Curtis filing its complaint in Civ. 71-280 (), fifty-nine minutes after the patent had issued at noon of December 4, 1951. Gillette filed its complaint in Civ. 71-284 here at 2:20 P. M. of that day. Later the same day Sales Affiliates filed four infringement actions against seven defendants in the District Court for the District of Columbia (Civ. 5017-51,4 Civ. 5016-51,5 Civ. 5018-51,6 and Civ. 5019-51).7
On February 15, 1952 Sales Affiliates answered and counterclaimed for damages in both actions pending here. The answers in substance alleged Gillette's breach of a confidential disclosure and Helene Curtis' attempt to prevent the issuance of the patent. Sales Affiliates served its instant motions for summary judgment (Motions 1 and 3) on that day.
On the same day in Washington several other matters occurred which...
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