Jamesbury Corporation v. Worcester Valve Company

• Decision Date: 26 May 1971
• Docket Number: No. 71-1018.,71-1018.
• Citation: 443 F.2d 205
• Parties: JAMESBURY CORPORATION, Plaintiff-Appellee, v. WORCESTER VALVE COMPANY, Inc., Defendant, v. E. W. BLISS COMPANY, Intervener, Appellant.
• Court: U.S. Court of Appeals — First Circuit

443 F.2d 205 (1971)

JAMESBURY CORPORATION, Plaintiff-Appellee, v. WORCESTER VALVE COMPANY, Inc., Defendant, v. E. W. BLISS COMPANY, Intervener, Appellant.

No. 71-1018.

United States Court of Appeals, First Circuit.

Heard April 6, 1971.

Decided May 26, 1971.

COPYRIGHT MATERIAL OMITTED

James H. Tilberry, Cleveland, Ohio, with whom Robert V. Vickers, James W. McKee, Meyer, Tilberry & Body, Cleveland, Ohio, and Foley, Hoag & Eliot, Boston, Mass., were on brief, for appellant.

Robert F. Conrad, Washington, D. C., with whom Bowditch, Gowetz & Lane, Worcester, Mass., was on brief for The Jamesbury Corp., appellee.

Before ALDRICH, Chief Judge, McENTEE and COFFIN, Circuit Judges.

COFFIN, Circuit Judge.

This diversity action¹ in contract concerns the ownership of patent No. 2,945,666 (patent '666), which was developed by Howard G. Freeman, president of The Jamesbury Corporation. Jamesbury, the appellee, initially brought suit for infringement of the '666 patent against Worcester Valve Company, Inc. E. W. Bliss Company, the appellant, intervened in that suit, claiming ownership of the '666 patent. At trial below, reported at 318 F.Supp. 1 (D.Mass.1970), Worcester Valve did not participate; the sole issue was that of ownership of the patent rights.

In 1940, Freeman went to work as an inventor for Rockwood Sprinkler Company, then an independent concern which has since been acquired by Bliss. Among other products, Rockwood manufactured ball valves. Rockwood's ball valves utilized only a single seal or seat, could control the flow of fluid in only one direction, and tended to leak. Rockwood's customers occasionally requested a so-called double-seal ball valve, but Rockwood never developed one during Freeman's employment. In his employment contract with Rockwood, Freeman agreed

"without further consideration to give to Rockwood the full benefit and enjoyment of any and all inventions or improvements which he may make while in the employ of Rockwood relating to methods, apparatus, chemical substances, or methods of producing which are being used, manufactured or developed by Rockwood, or the use, manufacture and development of which was at the time of said invention or inventions in contemplation by Rockwood, and all inventions which are made or worked out on the time and at the expense of Rockwood * * *. Said Freeman further agrees that he will without additional consideration disclose promptly to Rockwood all of the above-described inventions or improvements which he may make while in the employ of Rockwood. * * *"

The major question is whether Freeman's admitted close-to-the-line actions, about to be described, breached this undertaking under the applicable law. Freeman had risen to become Rockwood's director of research, and had developed nineteen patents for Rockwood. By the fall of 1953 he had the confidence that he could develop a double-seal ball valve and profitably market it through a company of his own. He proceeded to read up on techniques applicable to a double-seal ball valve. Through a friend he sought out investors, and set the date of February 2, 1954 as that to which checks should be post-dated. He arranged his timely extrication from Rockwood by demanding a large salary increase on January 13, 1954, predictably not expeditiously granted, and resigned as of January 25. The organization meeting of his new corporation, Jamesbury, was held on January 29.

Up to this point nothing apparently had been put on paper. Not until February 1 or 2 had Freeman begun to make drawings or sketches of the '666 patent concepts.² Although Freeman has argued that his ideas were not even partly conceived until he left Rockwood, the district court found that before leaving Rockwood's employment he had "virtually" but not "completely" conceived the invention — that he "had gotten to the point where no more than a few additional days or perhaps few hours of thinking was required for him to put his ideas on paper in a form substantially the same as his later patent application." 318 F.Supp. at 7.

In mid-February, Freeman began testing his invention. In April, he encountered a mechanical difficulty in implementing his idea and he was assisted by Oscar R. Vaudreuil, who ran a machine shop. When the invention was finally perfected, a patent application naming Freeman and Vaudreuil as co-inventors was filed. The district court concluded that Vaudreuil was a spurious joint inventor whose name was added to the application to shield Jamesbury, to which the patent was assigned, from a claim that Freeman had made the invention while still at Rockwood. On appeal, Jamesbury strenuously argued that this finding was erroneous.³ The finding is clearly dictum and not binding in other litigation. 1B Moore's Federal Practice ¶ 0.4022, at 111 (2d ed. 1965). There is, however, evidence to support it, and we cannot say it is clearly erroneous.

Patent '666 was finally issued in 1960. In 1966, Bliss came across testimony given by Freeman in December 1965 and January 1966 in which he claimed to have first conceived of the idea for his invention in the first week of February 1954 and to have begun his drawings on February 1 or 2. These statements caused Bliss to believe that Freeman had actually invented the ball valve while he was still with Rockwood. Under the 1940 employment contract, the '666 patent would then have been Rockwood's, and now Bliss' property. Bliss promptly raised this claim as an intervenor in the Jamesbury-Worcester Valve suit.

Statute of Limitations and Laches

The initial issue that confronts us is whether Bliss is barred by the Massachusetts statute of limitations from raising the issue of ownership of patent '666 in 1966. Massachusetts' statute of limitations requires that contract actions be commenced within six years after the cause of action accrued. Mass.Gen.L.Ann. ch. 260 § 2. There is, however, an exception:

"If a person liable to a personal action fraudulently conceals the cause of such action from the knowledge of the person entitled to bring it, the period prior to the discovery of his cause of action by the person so entitled shall be excluded in determining the time limited for the commencement of the action." Mass.Gen.L.Ann. ch. 260 § 12.

Bliss argues that it did not discover evidence that Freeman had violated his contract until 1966 because Freeman had fraudulently concealed the time of his development of the patent.

It is true that Freeman's concealment took the form merely of keeping silent, but silence can be fraudulent concealment by a person, such as a fiduciary, who has a duty to disclose. Stetson v. French, 321 Mass. 195, 72 N.E.2d 410 (1947). Under his contract with Rockwood, Freeman had a duty to disclose any inventions. Moreover, the district court's findings indicate that Freeman took positive steps to conceal his possible liability to Rockwood by listing Vaudreuil as a spurious co-inventor.⁴ See, e. g., Baker v. Simmons Co., 325 F. 2d 580, 582 (1st Cir. 1963), cert. denied, 382 U.S. 820, 86 S.Ct. 49, 15 L.Ed.2d 67 (1965).

Jamesbury argues, however, that the 1966 testimony did not bring to light facts which revealed fraudulent concealment but only a suspicion of concealment. These suspicions, it argues, are insufficient to demonstrate fraudulent concealment, and hence the statute of limitations was never tolled. It cites two decisions of this court, Burns v. Massachusetts Institute of Technology, 394 F.2d 416, 420 (1st Cir. 1968), and Tracerlab, Inc. v. Industrial Nucleonics Corp., 313 F.2d 97 (1st Cir. 1963), which held that a tolled limitation period begins to run after facts are discovered which reveal fraudulent concealment, but that a suspicion of concealment is insufficient to start the statute running. These opinions were not concerned with the extent of knowledge a plaintiff must have to bring a delayed suit based on fraudulent concealment of a cause of action, but with the extent of knowledge he must have obtained as to the existence of his cause of action to be compelled to bring suit within the limitations period following the acquisition of such knowledge. The facts Bliss became aware of in 1966 were not sufficient to start the period running, but they were sufficient for Bliss to allege fraudulent concealment. This allegation is sufficient for Bliss to temporarily overcome the statute of limitations in order to attempt to prove at trial that Freeman had in fact fraudulently concealed the date of his invention.⁵

If the 1966 discovery was sufficient basis for suit, Jamesbury argues further, Bliss should have filed earlier because the testimony revealed no new facts to Bliss. Under Burns v. Massachusetts Institute of Technology, supra, a tolled statute begins to run if a plaintiff has facts which should give him knowledge of fraudulent concealment. But the district court found that Bliss had no such knowledge before 1966. Bliss had, of course, seen Jamesbury valves ever since the fall of 1954, and it knew of the patent application and issuance. But there is no evidence that Bliss knew before 1966 that Freeman claimed to have started his invention only one week after leaving Rockwood.

Alternatively, Jamesbury argues that Bliss is precluded by laches from seeking relief after such a passage of time. Laches requires not only a passage of time but also acquiescence in the alleged wrong by the tardy plaintiff. Tracerlab, Inc. v. Industrial Nucleonics Corp., supra at 102. Acquiescence would require that Bliss knew Freeman had invented the '666 ball valve when at Rockwood but that it did not act on its knowledge. The district court having found that Bliss had no knowledge, until 1966, of exactly when the invention was made, laches is no bar to this suit.

Freeman's Employment Contract

The central issue in this case is the interpretation of the word "invention" as it is used in the 1940 employment contract between Freeman and Rockwood.⁶ Bliss claims an undisclosed idea is an...