JR CLARK COMPANY v. Jones & Laughlin Steel Corp.

• Decision Date: 09 May 1960
• Docket Number: Civ. A. No. IP 58-C-288.
• Citation: 186 F. Supp. 22
• Parties: J. R. CLARK COMPANY, and John R. Clark, Plaintiffs, v. JONES & LAUGHLIN STEEL CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of Indiana

186 F. Supp. 22

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

Civ. A. No. IP 58-C-288.

United States District Court S. D. Indiana, Indianapolis Division.

May 9, 1960.

Harold B. Hood, Indianapolis, Ind., Andrew E. Carlsen and Douglas L. Carlsen, Minneapolis, Minn., for plaintiffs.

Thompson, O'Neal & Smith, Indianapolis, Ind., G. R. Harris, Pittsburgh, Pa., for defendant.

STECKLER, Chief Judge.

This is a patent infringement suit in which both plaintiffs and defendant have filed motions for summary judgment. Defendant has also filed a motion to strike plaintiffs' motion for summary judgment. Additionally, there is pending, for consideration and disposition, a motion by plaintiffs to amend the Complaint, a Counterclaim by defendant for declaratory judgment, and objections filed by plaintiffs to certain interrogatories propounded by defendant. These matters have been carefully considered in the light of extensive briefs and oral arguments.

There appear to be no real issues of fact insofar as plaintiffs' motion for summary judgment is concerned, and counsel for the respective parties apparently agree that the dispositive issues in the case now before the Court are primarily issues of law.

The admitted factual developments leading up to the present motions are as follows. On December 22, 1953 the U. S. Patent Office issued the K. B. Olander patent 2,663,102, in suit, for an Ironing Table invention, the application for the patent having been filed June 9, 1950. After the patent issued Olander assigned his patent to John R. Clark, who in turn licensed it to The J. R. Clark Company of Spring Park, Minnesota.

On May 12, 1954 the Clarks, individual and corporate, filed a suit (C.A.No.6296) for infringement of claim 1 of the Olander patent, against Geuder, Paeschke & Frey Co. in the United States District Court for the Eastern District of Wisconsin, the accused structure there involved being identified as the Model C-690 ironing table. The suit was tried in January 1957 before the Honorable Robert E. Tehan, Chief Judge of that District, who on December 19, 1957 entered judgment for the plaintiffs, holding claim 1 of the Olander patent valid and infringed, granted an injunction, and awarded plaintiffs damages, costs and disbursements. Extensive findings of fact and conclusions of law by the Court are reported at 159 F.Supp. 948.

An appeal was taken by the defendant Geuder, Paeschke & Frey Co. to the Court of Appeals for the Seventh Circuit which, on October 10, 1958, affirmed the District Court in a unanimous decision written by Chief Judge the Honorable F. Ryan Duffy, reported at 259 F.2d 737. A petition for writ of certiorari was denied by the Supreme Court of the United States on February 24, 1959, 359 U.S. 914, 79 S.Ct. 587, 3 L.Ed.2d 576.

When the case was remanded to the District Court Judge Tehan, on plaintiffs' motion for accounting appointed a Special Master, Theodore L. Priebe, to take the account and prepare a report on the amount to be recovered by the plaintiff from the defendant. It appears that testimony has been taken by both parties, briefs have been filed, and the accounting stands submitted, awaiting the Master's report.

Meanwhile, however, the defendant in the Wisconsin suit, on August 12, 1959, filed a countersuit (C.A. No. 59-C-175) in the same court against the aforesaid Clarks, and in which Geuder, Paeschke & Frey contends that it should be relieved from, and that the Clarks should be restrained from enforcing, the mandated judgment in the previous suit, C.A. 6296. The asserted basis for said countersuit is that claim 1 of the Olander patent should be declared invalid because it is allegedly for the same invention as a claim appearing in a Hortman patent 2,896,347 which issued July 28, 1959 on an application filed April 12, 1950, or about eight weeks prior to the Olander filing date.

Simultaneously with the filing of the aforesaid countersuit on August 12, 1959 Geuder, Paeschke & Frey Co. also sought a stay of the accounting proceedings, conditioned on the outcome of the countersuit, but that was denied by Judge Tehan and the accounting in the original or main suit accordingly proceeded on schedule as above noted.

Referring next to the activities of the present defendant Jones & Laughlin Steel Corporation, it appears that by letter dated March 17, 1958 plaintiffs notified defendant that it was infringing the Olander patent 2,663,102, but defendant did not then discontinue making and selling the ironing tables that were accused of being infringements. At that time the judgment sustaining the Olander patent had been entered by the District Court in the original Wisconsin suit, but the aforesaid appeal had been taken to the Court of Appeals for the Seventh Circuit and it is understandable that plaintiffs preferred to await the affirming decision of October 10, 1958 by that Court before filing the present suit on November 13, 1958.

The present defendant's Answer to the Complaint herein, as well as its answers to interrogatories propounded by plaintiffs, set forth the essential facts upon which plaintiffs rely in their Motion for Summary Judgment to support their contention that Jones & Laughlin Steel Corporation was in privity with Geuder, Paeschke & Frey Co. and is accordingly bound by the judgment in the Wisconsin suit (C.A. 6296) under the doctrine of res judicata or estoppel by judgment. In this respect I am convinced that plaintiffs' position is correct and that the Court is compelled, under the prevailing authorities, to sustain plaintiffs' Motion.

The admitted and somewhat surprising facts are that on or about September 3, 1957, defendant Jones & Laughlin Steel Corporation, with full knowledge of the Wisconsin suit, which had been tried in January of the same year, "purchased from Geuder, Paeschke & Frey Co. the assets of that firm's Consumer Products Division which manufactured and sold * * * ironing tables" and those assets included "a stock of Model C-690 ironing tables" as well as "a supply of raw materials for making Model C-690 ironing tables." The assets also included "drawings of the Model C-690 ironing table * * * and tools or special equipment for manufacturing that ironing table." Defendant further admits that after said purchase and prior to commencement of the present suit it continued to manufacture Model C-690 ironing tables which "were substantially identical to the Model C-690 tables previously made and sold by Geuder, Paeschke & Frey Co.," and "also made and sold an ironing table known as Model C-691 which was of substantially the same construction as the Model C-690."

No less surprising is defendant's admission that "On or about June 1, 1958" (which was after the patent had been held valid and infringed in the Wisconsin District Court) "defendant sold to Arvin Industries, Inc. those assets above mentioned which related to the manufacture of ironing tables, together with defendant's inventory of finished ironing tables" including "an inventory of finished (Model C-690 and Model C-691) ironing tables, and parts for additional ironing tables of the same models, as well as tools and equipment which defendant had previously acquired from Geuder, Paeschke & Frey Co." (The foregoing quotes are from defendant's answer and answers to interrogatories.)

Being confronted by the foregoing situation I am impressed by the line of reasoning advanced in a number of cases, including the decision in G. & C. Merriam Co. v. Saalfield, 6 Cir., 190 F. 927, 931, where the Court said:

"* * * It is contended by counsel for the complainant that the parties are not the same, nor privies to those parties, because Saalfield was not a party to the former suit, and so not bound by the judgment, and, as estoppels must be mutual, the complainant is not bound. Let us refer to the facts. The suit in Massachusetts was commenced on August 9, 1904. The cross-bill was filed September 20th of the same year. The answer to the cross-bill was filed January 9, 1905. Replication to the answers to the bill and cross-bill were filed as early as February, 1905. Judge Colt's decision was filed January 9, 1907, and his decree, so far as it determined the rights of the parties, was affirmed by the Circuit Court of Appeals on January 30, 1908. In May, 1908, the defendant Saalfield `took over' the business of publishing the dictionaries from Ogilvie. The final decree was entered April 21, 1909. What was the precise nature of the contract between him and Ogilvie does not appear, and Saalfield refuses to disclose it. The court might well presume, if need be, that the contract was only of an agency and did not transfer a substantial right. But it is not material. The case was already pending, and the whole controversy had been submitted for the judgment 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."

In Alb, Inc. v. Noma Lites, Inc., 2 Cir., 231 F.2d 662, 663, the defendant in an earlier suit had sold the portion of its business which had been making the alleged infringing devices to the defendant in the action under consideration, who, like the present defendant, had full knowledge of the earlier suit. In affirming the judgment, based on the doctrine of res judicata the Court of Appeals said:

"In the prior suit had the court found against Noma Electric Corporation the judgment would undoubtedly have been binding on Noma Lites, Inc. which is successor to the interest of, and therefore, in privity with its former parent and predecessor. By parity of reasoning the judgment in favor of Noma Electric Corporation now operates here as collateral estoppel with respect to

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