Hold Stitch Fabric Mach. Co. v. May Hosiery Mills

• Decision Date: 01 June 1946
• Citation: 195 S.W.2d 18,184 Tenn. 19,71 U.S.P.Q. 17
• Parties: HOLD STITCH FABRIC MACH. CO. v. MAY HOSIERY MILLS.
• Court: Tennessee Supreme Court

195 S.W.2d 18

184 Tenn. 19, 71 U.S.P.Q. 17

HOLD STITCH FABRIC MACH. CO. v. MAY HOSIERY MILLS.

Supreme Court of Tennessee.

June 1, 1946

Appeal from Chancery Court, Davidson County; Wm. J. Wade Chancellor.

Suit by the Hold Stitch Fabric Machine Company against May Hosiery Mills to assert all claims to inventions covered by patent for declaration of the parties' rights and to enjoin defendant from manufacturing, using or selling any processes or products covered by the invention and for general relief wherein defendant filed a demurrer. From a decree overruling the demurrer, the defendant appeals.

Affirmed.

A. Yates Dowell, of Washington, D. C., and George C. Anderson, Walker & Hooker, and Tyree B. Harris III, all of Nashville, for appellant.

Bass, Berry & Sims, of Nashville, for appellee.

CHAMBLISS Justice.

This is an appeal from a decree of the Chancery Court of Davidson County overruling a demurrer of defendant May Hosiery Mills to the bill filed by Hold Stitch Fabric Machine Company, both Tennessee corporations, which challenged the jurisdiction of the state court on the ground that the federal courts have exclusive jurisdiction of the issues involved. The question is one of first impression in this state.

The bill alleges:

1. That complainant is the assignee of one Clarence W. Minton to certain patent rights involving improvements in knitting machines and is entitled to the exclusive use of such inventions.

2. That defendant has notified complainant it claims the patents as its exclusive property and is entitled to assignment of all rights in them on the ground that the inventions were originated by Minton during and pursuant to his former employment with defendant.

3. That Minton denies defendant's claim and asserts his inventions were made away from defendant's premises and without compensation from defendant.

4. That by a written contract to purchase machines covered by the patents, entered into with Minton in 1941, defendant irrevocably recognized the ownership of said patents to be in Minton.

5. That in November 1944, defendant presented to Minton an instrument represented to be an agreement to assign Minton's future inventions to defendant; that Minton thereupon insisted that the instrument plainly show that it did not include existing inventions for which applications for patents were then pending; that, upon Minton's insistence, the instrument was amended, after which Minton executed and delivered it to defendant, no copy being furnished to Minton; that, however, defendant now claims that by execution of said instrument, it acquired certain rights in the patents later assigned to complainant; and complainant therefore calls upon defendant to produce said instrument.

6. That, unless restrained, defendant will begin production of machines containing improvements covered by the patents.

It is finally charged that the claims asserted by defendant to the patents constitute clouds upon complainant's title and interfere with his exploitation of said patents.

The prayer is that defendant be required to assert in this proceeding all claims it has in and to inventions covered by these patents, and to produce and file herein all instruments relating thereto; that the court declare the rights of the parties and decree complainant to be the exclusive owner of inventions covered by the said patents; that defendant be forever enjoined from the manufacture, use or sale of any processes or products covered by said inventions; and for general relief.

The defendant first filed a petition to remove the cause to the United States District Court for the Middle District of Tennessee, and it was so ordered. However, the federal district judge remanded the cause to the Chancery Court of Davidson County, on motion of complainant alleging that the principal issue involved, as shown by the bill, was the ownership of the patents in question; that any issue of infringement is dependent upon such issue of ownership; that, therefore, no jurisdiction existed in the federal court.

It thus appears that the only question for our determination is whether, looking to the allegations of the bill, the suit is one 'arising under the patent-right * * * laws of the United States', 28 U.S.C.A. § 371 (Fifth), and, therefore, within the exclusive jurisdiction of the Federal Courts. Indeed, counsel for appellant concedes that unless the bill is one involving infringement of a patent jurisdiction it is in the chancery court.

It is well established that a case involving patent rights does not necessarily 'arise under the patent laws,' and that a state court has jurisdiction to determine questions relating to patent rights when such questions are incidental or collateral to a main cause of action over which the courts of the state have jurisdiction. 40 Am.Jur. 654; Forster v. Brown Hoisting Machinery Co., 266 Ill. 287, 107 N.E. 588, Ann.Cas.1916B, 800 et seq.; Luckett v. Delpark, 270 U.S. 496, 46 S.Ct. 397, 70 L.Ed. 703; Pratt v. Paris Gaslight & Coke Co., 168 U.S. 255, 259, 18 S.Ct. 62, 42 L.Ed. 458; Laning v. National Ribbon & Carbon Paper Mfg. Co., 7 Cir., 125 F.2d 565; Carleton v. Bird, 94 Me. 182, 47 A. 154; Slemmer's Appeal, 58 Pa. 155, 98 Am.Dec. 248.

As said in Excelsior Wooden Pipe Co. v. Pacific Bridge Co., 185 U.S. 282, 286, 287, 22 S.Ct. 681, 683, 46 L.Ed. 910: 'There is a clear distinction between a case and a question arising under the patent laws.' (Emphasis ours.)

Although there is some confusion in the numerous opinions attempting to demark the line separating cases which 'arise under the patent laws' from those which do not so arise, but which merely 'involve a question' of patent law, certain guiding standards have been evolved and have become generally accepted.

To constitute a suit under the patent laws justiciable by a federal court, the complainant must assert some right or interest under those laws, or at least make it appear that some right or privilege will be defeated by one construction of those laws, or sustained by another. 40 Am.Jur. 653; Odell v. F. C. Farnsworth Co., 250 U.S. 501, 39 S.Ct. 516, 63 L.Ed. 1111.

Thus, it is clear that only a federal court may pass directly upon the question of infringement ( General Electric Co. v. Marvel Rare Metals Co., 287 U.S. 430, 53 S.Ct. 202, 77 L.Ed. 408; The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 33 S.Ct. 410, 57 L.Ed. 716; Excelsior Wooden Pipe Co. v. Pacific Bridge Co., supra; Cinema Patents Co. v. Columbia Pictures Corp., 9 Cir., 62 F.2d 310), or of the construction of the patent laws (United States ex rel. Steinmetz v. Allen, 192 U.S. 543, 24 S.Ct. 416, 48 L.Ed. 555), or of the validity of a patent. St. Paul Plow Works v. Starling, 127 U.S. 376, 8 S.Ct. 1327, 32 L.Ed. 251; Laning v. National Ribbon & Carbon Paper Mfg. Co., 7 Cir., 125 F.2d 565, 566; Forster v. Brown Hoisting Machine Co., 266 Ill. 287, 107 N.E. 588; Slemmer's Appeal, 58 Pa. 155, 98 Am.Dec. 248.

It is equally clear that where an action is brought on a contract of which a patent is the subject matter, either to enforce the contract or to annul it, the case arises on the contract and not under the patent laws, and the state court has jurisdiction. Briggs v. United Shoe Machinery Co., 239 U.S. 48, 36 S.Ct. 6, 60 L.Ed. 138; Pratt v. Paris Gaslight Co., 168 U.S. 255, 259, 18 S.Ct. 62, 42 L.Ed. 458; Dale Tile Mfg. Co. v. Hyatt, 125 U.S. 46, 8 S.Ct. 756, 31 L.Ed. 683; Shoemaker v. South Bend Spark Arrester Co., 135 Ind. 471, 35 N.E. 280, 22 L.R.A. 332; Smith v. Ayrault, 71 Mich. 475, 39 N.W. 724, 1 L.R.A. 311 ; 40 Am.Jur. 653; Annotations: 62 L.R.A. 538, § 23, et seq., 134 Am.St.Rep. 195(i).

Accordingly, an action may be maintained in a state court to enforce payment of royalties or license fees (Odell v. F. C. Farnsworth Co., supra; Felix v. Scharnweber, 125 U.S. 54, 8 S.Ct. 759, 31 L.Ed. 687; Hyatt v. Ingalls, 124 N.Y. 93, 26 N.E. 285), or for fraudulent representations concerning a patent. Page v. Dickerson, 28 Wis. 694, 9 Am.Rep. 532; Middlebrook v. Broadbent, 47 N.Y. 443, 7 Am.Rep. 457; Forster v. Brown Hoisting Machinery Co., 266 Ill. 287, 107 N.E. 588, Ann.Cas.1916B, 800, 805. So, also, it has been held that a state court has jurisdiction of a proceeding wherein the main issue is slander of title to a patent, even though the validity or infringement of the patent may be an incidental question. Flint v. Hutchinson Smoke-Burner Co., C.C., 38 F. 546. And where the gist of the action is to determine the title to a patent, the federal courts are without jurisdiction, even though questions of validity or infringement of the patent are involved in connection with such determination. Shoemaker v. South Bend Spark Arrester Co., supra; Jones Cold Store Door Co. v. Jones, 108 Md. 439, 70 A. 88, 129 Am.St.Rep. 446; New Marshall Engine Co. v. Marshall Engine Co., 223 U.S. 473, 32 S.Ct. 238, 56 L.Ed. 513.

In all such cases, the state courts are not prohibited from passing upon patents, their validity or their infringement, when this inquiry arises as an incidental or collateral part of a case properly triable in a state court. Wittemann Bros. v. Wittemann Co., 88 Misc. 266, 151 N.Y.S. 813; Reliable Incubator & Brooder Co. v. Stahl, 7 Cir., 105 F. 663, 44 C.C.A. 657; Ann.Cas.1916B, 804; Pratt v. Paris Gas Light & Coke Co., 155 Ill. 531, 40 N.E. 1032, affirmed in 168 U.S. 255, 18 S.Ct. 62, 42 L.Ed. 458.

As pointed out by the court in Laning v National Ribbon, etc., Co., supra , 'the most troubling cases are those of a hybrid nature,' in which complainant asserts rights under the patent laws and alleges infringement of these rights, but in which the first question to be determined is one unrelated to the patent laws, such as the interpretation of a contract, the establishment...