JR Clark Co. v. Jones & Laughlin Steel Corp.

• Decision Date: 03 April 1961
• Docket Number: No. 13113.,13113.
• Parties: J. R. CLARK COMPANY and John R. Clark, Plaintiffs-Appellees, v. JONES & LAUGHLIN STEEL CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

288 F.2d 279 (1961)

J. R. CLARK COMPANY and John R. Clark, Plaintiffs-Appellees, v. JONES & LAUGHLIN STEEL CORPORATION, Defendant-Appellant.

No. 13113.

United States Court of Appeals Seventh Circuit.

April 3, 1961.

Russell J. Ryan, Jr., Indianapolis, Ind., G. R. Harris, Pittsburgh, Pa., Thompson, O'Neal & Smith, Indianapolis, Ind., of counsel, for appellant.

Douglas L. Carlsen, Andrew E. Carlsen, Minneapolis, Minn., Harold B. Hood, Indianapolis, Ind., of counsel, for plaintiffs-appellees.

Before HASTINGS, Chief Judge, DUFFY, Circuit Judge, and MERCER, District Judge.

DUFFY, Circuit Judge.

This is a suit for the alleged infringement of Olander Patent No. 2,663,102, issued December 22, 1953. The validity of Claim 1 of this patent was upheld and the claim found to be infringed in J. R. Clark Company v. Geuder, Paeschke & Frey Co., D.C.E.D.Wis., 159 F.Supp. 948. This case in the Wisconsin District Court and the appeal therefrom will sometimes be herein referred to as the "Wisconsin litigation." This Court affirmed, 259 F.2d 737, and certiorari was denied, 359 U.S. 914, 79 S.Ct. 587, 3 L. Ed.2d 576. After receiving our mandate, the District Court referred the cause to a master for a determination of damages.

While the litigation above described was in process, defendant Jones & Laughlin Steel Corporation (Jones & Laughlin), with full knowledge of that litigation, and prior to an adjudication therein purchased from Geuder, Paeschke & Frey Co. (GP&F), the assets of that firm's Consumer Products Division which manufactured and sold ironing tables. These assets included a stock of 172 Model C-690 ironing tables; also tools and equipment for manufacturing such tables, and drawings of the Model C-690 table. Also included were raw materials. It is admitted by defendant that the Model C-690 ironing table manufactured by it was substantially identical with the Model C-690 ironing table sold by GP&F which was the accused device in the Wisconsin litigation.

In the instant case, plaintiffs moved for summary judgment, asserting defendant, Jones & Laughlin, was in privity with GP&F, and hence was bound by the judgment in the Wisconsin litigation. Defendant likewise moved for summary judgment, claiming Olander Patent No. 2,663,102 is invalid for double patenting of Olander Patent No. 2,663,101. The District Court held the fact situation in the case at bar clearly established privity between Jones & Laughlin and GP&F, and that Jones & Laughlin was bound by the judgment in the Wisconsin litigation under the doctrine of res judicata.¹ The Court granted plaintiffs' motion for summary judgment and denied defendant's motion.

Defendant's principal argument is that under the facts of this case, it is in no different position than any vendee, with notice, of manufactured articles which are found to infringe a patent in a suit brought by the patent owner against the vendor-manufacturer. Defendant cites General Chemical Co. v. Standard Wholesale Phosphate & Acid Works, Inc., 4 Cir., 101 F.2d 178. Defendant claims that the cited case well expresses the rule that a vendee of a manufactured article is not bound by a judgment of patent validity or infringement against its vendor, but nevertheless, can take advantage of a judgment of non-validity or non-infringement in favor of the vendor.

The case at bar is not one where a vendee merely purchased one or some limited amount of the alleged infringing product. Here, the defendant purchased from the manufacturer the entire business that was devoted to the production of ironing tables. A large number of these tables were Model C-690 which were held to infringe the Olander Patent.

The District Court relied on several cases including G. & C. Merriam Co. v. Saalfield, 6 Cir., 190 F. 927. In that case, the Court of Appeals said at page 932: "The case was already pending, and the whole controversy had been submitted for the judgment of the court. Though not a party, Saalfield was bound by the final decree of the court. If a third party may thus come into the acquisition of rights involved in pending litigation without being bound by the final judgment, and require a suit de novo in order to bind him, he might, pending that suit, alienate that right to another with the same result, and a final decree bearing fruit could never be reached." The prediction of the Court in the Merriam case as to what might happen quite accurately portrays what did happen in the case at bar, because Jones & Laughlin, after the adjudication in the Wisconsin litigation, but while the case was still pending in the courts, sold the ironing table business to Arvin Industries, Inc.

Defendant argues that the fact the entire business was sold is not ground for a distinction from the general rule, and relies upon this Court's opinion in Bank v. Rauland Corporation, 7 Cir., 146 F.2d 19. We think the trial judge was correct in distinguishing the Bank case although some language is used in that opinion which might give support to the contention of defendant in the instant case. Apparently the Court there was impressed by the combination of the consent judgment and the fact that the license agreement showed that the parties felt the questions of validity and infringement were still open.

We hold that the District Court was correct in granting the motion for summary judgment on the ground that Jones & Laughlin, who had sold some 20,000 tables substantially identical with the infringing device was, in fact and in law, in privity with GP&F, and should be bound by the judgment rendered in the Wisconsin litigation. See Acetol Products, Inc v....