Helene Curtis Industries v. Sales Affiliates
| Decision Date | 05 September 1957 |
| Docket Number | No. 341-344,Dockets 24524-24527.,341-344 |
| Citation | 247 F.2d 940 |
| Parties | HELENE CURTIS INDUSTRIES, Inc., Helene Curtis Sales, Inc. and C. V. Layden, doing business as Southwestern Beauty Products Company, Plaintiffs-Appellants, v. SALES AFFILIATES, Inc., Defendant-Appellee. The GILLETTE COMPANY, Skillern & Sons, Inc., and Walgreen Drug Company of Texas, Plaintiffs-Appellants, v. SALES AFFILIATES, Inc., Defendant-Appellee. SALES AFFILIATES, Inc., Plaintiff-Appellee, the Procter & Gamble Company, Involuntary Plaintiff, v. C. V. LAYDEN, doing business as Southwestern Beauty Products Company, Defendant-Appellant. SALES AFFILIATES, Inc., Plaintiff-Appellee, The Procter & Gamble Company, Involuntary Plaintiff, v. SKILLERN & SONS, Inc., Walgreen Drug Company of Texas, and The Gillette Company, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Second Circuit |
Cravath, Swaine & Moore, New York City (Bruce Bromley and Jack E. Brown, New York City, of counsel), for appellants.
Kenyon & Kenyon, New York City (Theodore S. Kenyon, New York City; Adolph A. Rubinson, Maurice S. Cayne, of Chicago, Ill., and Malvin R. Mandelbaum, New York City, of counsel), for Helene Curtis Industries, Inc., and others.
Henry R. Ashton, New York City (Edgar H. Kent, Boston, Mass. and Rynn Berry, New York City, of counsel), for The Gillette Co.
Hawkins, Delafield & Wood, New York City (Clarence Fried, New York City, of counsel), for Skillern & Sons, Inc., and others.
Morgan, Finnegan, Durham & Pine, New York City (George B. Finnegan, Jr., New York City, William D. Denson, Washington, D. C., Jerome G. Lee and Albert H. Brodkin, New York City, of counsel), for appellee.
Before CHASE, HINCKS and LUMBARD, Circuit Judges.
The question for decision is this: Where one federal court after protracted and expensive litigation, has already decided that a patent is invalid and has enjoined the defendant-patentee from suing thereon, may that court issue a supplemental injunction enjoining that patentee from suing customers of the plaintiffs under the cloak of another corporate shell in another circuit of our federal judicial system for infringement of a later-issued patent, which is invalid for substantially the same reasons as the earlier patent? We think the answer should be in the affirmative. On principle and logic, and on those precedents which look toward a sensible, flexible and expeditious administration of justice, we hold that the District Court has the power to enjoin the defendant's attempt to relitigate already-tried issues. We hold that the District Court should pass upon the Special Master's report, and, if it confirms the findings, it should give appropriate injunctive relief.
In summary, the Special Master found that both 323 and 710 are essentially the identical void invention and that accordingly 323 "must be deemed invalid by virtue of the findings of fact and conclusions of law embodied in the 710 judgment." He further found that Tidewater was Sales Affiliates' alter ego and that it was "nothing more than a corporate shell whose sole function is to endow the defendant with an artificially created domicile for the purposes of litigation." In short, the Special Master found that Sales Affiliates through its alter ego was enforcing in another circuit a patent which, under the findings and conclusions affirmed by this court, was invalid, although as yet not adjudicated.
Despite these findings, the Special Master recommended against expanding the terms of the injunction. The Special Master also recommended that the application to punish for contempt be dismissed and this was also adopted by the District Court. As to the matter of punishing for contempt under the circumstances of this case, we affirm on the opinion below. 148 F.Supp. 340. The District Court, without passing upon the findings of the Special Master, held that even if the findings were correct it should not and could not expand the judgment to enjoin assertion of rights under 323 and it denied the plaintiffs' application.
The principal milestones in this protracted patent litigation are as follows. On June 16, 1941, Sales Affiliates' assignor, Everett G. McDonough, filed a patent application for a "cold-wave" method for permanent waves for women which employs any one of a broad class of chemical compounds known as mercaptans. Ten and a half years passed before the patent, 2,577,710 (hereafter 710) was issued, during which time there were "countless actions, rejections, amendments, interferences and the like, running the entire gamut of Patent Office procedure and practice."1
Within a few minutes after the patent was issued on December 4, 1951, six law suits were filed, two in the Southern District of New York by Helene Curtis and The Gillette Company for declaratory judgments that the patent was invalid, and four by Sales Affiliates in the District of Columbia against seven defendants for infringement.2 In March 1952, Sales Affiliates commenced two infringement actions in the Northern District of Texas, Dallas Division, against customers of Gillette.
On June 5, 1952 Judge Irving Kaufman in the court below, passing upon numerous motions made by Helene Curtis and Gillette, granted injunctions pendente lite restraining Sales Affiliates and others from prosecuting the Texas actions and referred all the issues to a Special Master3 for hearing and report. 105 F.Supp. 886. We affirmed his decision in October 1952, 199 F.2d 732.
Meanwhile in June 1952, a few days after Judge Kaufman's decision, the District Court in Texas transferred the two Texas actions to the Southern District of New York for consolidation with the two actions there pending.
After two months of taking depositions, the trial before the Special Master commenced on October 21, 1952 and continued into January 1953, making a record of over 6,000 pages and almost 1,000 exhibits. Almost 1,000 pages of briefs were added to the labors of the Special Master who, finally on January 13, 1954, filed a report of 129 pages. His report recommended that Patent 710 be declared invalid on grounds of inadequate disclosure, lack of invention, anticipation and indefiniteness and that the suits brought by Sales Affiliates be dismissed. Judge Kaufman confirmed the report in a lengthy opinion, 121 F.Supp. 490, filed in April 1954, and entered judgments on May 6, 1954 in all four actions: he declared the invalidity of 710, and enjoined Sales Affiliates in the following language:
We affirmed in April 1956, 2 Cir., 233 F.2d 148, certiorari denied 352 U.S. 879, 77 S.Ct. 101, 1 L.Ed.2d 80.
Meanwhile, since August 13, 1949, a continuation-in-part patent application based on 710, filed by Sales Affiliates, was meandering through the Patent Office and finally on February 28, 1956 it emerged as Patent 2,736,323 (hereafter 323).
In January 1955, eight months after Judge Kaufman had found 710 invalid, Sales Affiliates had caused Tidewater Corp. to be organized in Virginia, and assigned to it the application for what later issued as 323 reserving a license (in the event that a patent should issue) in return for all of Tidewater's stock. On 323's natal day, February 28, 1956, Tidewater filed suits in the federal court at Norfolk, Virgnia, charging Helene Curtis and Gillette customers with infringement of 323.4
On May 8, 1956, one month after our affirmance of 710's invalidity, the plaintiffs moved in the four Southern District of New York actions (1) to enjoin Sales Affiliates, its officers, agents and privies, from bringing, prosecuting or threatening to bring or prosecute any suit charging infringement of 323 against the plaintiffs or any of their customers, and specifically the two actions already commenced in Virginia; (2) to have the defendant, its officers, etc. adjudged in contempt for violating the injunctive provisions of the judgments of May 6, 1954; and (3) to order the defendant to reimburse the plaintiffs for damages incurred, including costs and reasonable attorneys' fees in those proceedings. In brief, the plaintiffs alleged that 323 was invalid for the same reasons that 710 was invalid, and that the Virginia suits based on 323 were merely part of a scheme to circumvent the injunction regarding 710 by the use of a dummy corporation.
Judge Kaufman, on consent of the parties, 1957, 148 F.Supp. 340, 342, on May 12 again referred the issues of law and fact to Simon H. Rifkind as Special Master to report his findings of fact and conclusions of law on the motions and counter-motions. The order of reference provided that the Special Master "take further testimony, if necessary, and to report to the Court his findings of fact and conclusions of law thereon."
The proceedings which followed show that the parties had the fullest opportunity to develop and present any evidence bearing upon the two issues which the Special Master framed for trial. On May 14 the Master held a lengthy hearing concerning procedure. On May 16 Sales Affiliates filed a motion to dismiss the motions of the plaintiffs. There was a further lengthy hearing on May 18 of the motion to dismiss, and on May 31 the Master notified the parties of the two issues which he would try:
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