Laning v. National Ribbon & Carbon Paper Mfg. Co., 7783.

• Decision Date: 20 February 1942
• Docket Number: No. 7783.,7783.
• Parties: LANING v. NATIONAL RIBBON & CARBON PAPER MFG. CO.
• Court: U.S. Court of Appeals — Seventh Circuit

125 F.2d 565 (1942)

LANING v. NATIONAL RIBBON & CARBON PAPER MFG. CO.

No. 7783.

Circuit Court of Appeals, Seventh Circuit.

February 20, 1942.

Gordon F. Hook and James P. Hume, both of Chicago, Ill., for appellant.

Herbert H. Kennedy, of Chicago, Ill., for appellee.

Before EVANS, KERNER, and MINTON, Circuit Judges.

MINTON, Circuit Judge.

This is a suit by plaintiff for a declaratory judgment to determine the title to certain patents and trade-marks, and for infringement. The parties both reside in Illinois. The jurisdiction of the court is alleged in paragraph 3 of the Complaint in these words: "3. This action is brought for a declaratory judgment, and patent and trademark infringement, jurisdiction of this United States District Court being based on The Declaratory judgment Act, to determine and establish title to certain patents, on the patent and trade mark laws of the United States, and on the right to injunctive relief thereunder."

In paragraphs 10 and 11 of the bill it is alleged that the patents and trade-marks have been and will be infringed by the defendant-appellee. The defendant denied the infringement and set up title to the patents and trade-marks in himself in his answer, and by way of counterclaim asked a declaratory judgment confirming his title to the patents and trade-marks.

The District Court in its findings of fact and conclusions of law dealt only with the question of title. It found the plaintiff had no title and declined relief to defendant on his counterclaim because all the necessary parties were not before the court. From the District Court's judgment denying that plaintiff had title to the patents and trademarks and denying that he was entitled to relief under the Declaratory Judgment Act, 28 U.S.C.A. § 400, plaintiff appealed.

The question of jurisdiction was raised during oral argument and stands at the threshold of this case. Although plaintiff is a citizen of Illinois and defendant is an Illinois corporation with a regular and established business in Chicago, Illinois, federal jurisdiction will be sustained if the action is one "arising under the patent" or "trade-mark laws." 28 U.S.C.A. § 41(7). Inasmuch as the same rules of law regarding jurisdiction will apply to both patents and trade-marks, we shall treat the case as one involving only a patent.

Unfortunately, the line separating cases which arise under the patent laws, of which only the federal courts have jurisdiction, 28 U.S.C.A. § 371(5), from cases which do not so arise but merely involve a question of patent law, of which the state courts have jurisdiction, is not as clearly demarked as might be wished. It is clear, however, that not every case involving a patent is one "arising under the patent * * * laws." See Pratt v. Paris Gaslight, etc., Co., 168 U.S. 255, 259, 18 S.Ct. 62, 42 L.Ed. 458; Grip Nut Company v. Sharp, 7 Cir., December 11, 1941, 124 F.2d 814; Walker on Patents, Deller's Edition, Volume 3, pages 1596-97. Illustrative of this proposition are actions to collect royalties or to enforce contracts, in which the decision turns solely upon a determination of the parties' rights under a subsisting contract. Luckett v. Delpark, Inc., 270 U.S. 496, 46 S.Ct. 397, 70 L.Ed. 703; New Marshall Engine Co. v. Marshall Engine Company, 223 U.S. 473, 32 S.Ct. 238, 56 L.Ed. 513; Pratt v. Paris Gaslight, etc., Co., supra; Wilson v. Sandford, 10 How. 99, 51 U.S. 99, 13 L.Ed. 344. Obviously, actions in which the sole issues raised are those of validity of the patent or infringement are cases arising under the patent laws. No question exists as to the nature of the cases we have discussed so far.

As might be expected, the most troubling cases are those of a hybrid nature, cases in which the plaintiff has claimed rights under the patent laws and has alleged infringement of these rights, but in which the sole question, at least the first question to be determined, has been the interpretation of a contract or some other question unrelated to the patent laws.

The federal courts have many times been called upon to decide the jurisdictional question in such cases. It is unnecessary for us now to attempt an exhaustive review even of the United States Supreme Court decisions on this problem, since the more important of these decisions have been so often reviewed and analyzed. See Luckett v. Delpark, Inc., 270 U.S. 496, 46 S.Ct. 397, 70 L.Ed. 703; Excelsior Wooden Pipe Company v. Pacific Bridge Company, 185 U.S. 282, 22 S.Ct. 681, 46 L.Ed. 910; Atherton Machine Co. v. Atwood-Morrison Co., 3 Cir., 102 F. 949.

Although a review of these cases discloses some uncertainty in the earlier decisions, we believe the following principles are now established.

1. If the plaintiff bases his action broadly on his rights under the patent laws and alleges infringement of those rights, the case is one arising under the patent laws and the federal courts have jurisdiction therein. Although the answer raises an issue foreign to the patent laws, for example, the existence or non-existence of a contract, or if the plaintiff in his complaint anticipates such a defense — even if subsequent pleadings show that the sole question to be determined is a matter of general law as opposed to patent law — yet the action is one arising under the patent laws. Healy v. Sea Gull Specialty Co., 237 U.S. 479, 35 S.Ct. 658, 59 L.Ed. 1056; 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 Company, 185 U.S. 282, 22 S.Ct. 681, 46 L.Ed. 910; Littlefield v. Perry, 21 Wall. 205, 88 U.S. 205, 22 L.Ed. 577.

2. If, however, the action is one in which the plaintiff asks affirmative relief as a basis for his right to relief for infringement, then the action is not one arising under the patent laws. Such an action belongs properly in a state court, and federal courts have no jurisdiction therein, in the absence of diversity of citizenship. An allegation of infringement in such a case must be construed as an allegation that the plaintiff, after his title to the patent has been established by the court, will seek relief from infringement. Wilson v. Sandford, 10 How. 99, 51 U.S. 99, 13 L.Ed. 344; Luckett v. Delpark, Inc., 270 U.S. 496, 46 S.Ct. 397, 70 L.Ed. 703; Lion Mfg. Corporation v. Chicago Flexible Shaft Co., 106 F.2d 930.

We believe this action falls within the second class.

In Wilson v. Sandford, 10 How. 99, 101, 51 U.S. 99, 13 L.Ed. 344, "the object of the bill was to set aside a contract * * *" and also to obtain an injunction against the further use of the machine, upon the ground that it was an infringement of plaintiff's patent rights. The court held that this was not an action arising under the patent laws, saying: "Now the dispute in this case does not arise under any act of Congress; nor does the decision depend upon the construction of any law in relation to patents. It arises out of the contract stated in the bill; and there is no act of Congress providing for or regulating contracts of this kind. The rights of the parties depend altogether upon common law and equity principles. The object of the bill is to have this contract set aside and declared to be forfeited; and the prayer is, `that the appellant's reinvestiture of title to the license granted to the appellees, by reason of the forfeiture of the contract, may be sanctioned by the court,' and for an injunction. But the injunction he asks for is to be the consequence of the decree of the court sanctioning the forfeiture. He alleges no ground for an injunction unless the contract is set aside. And if the case made in the bill was a fit one for relief in equity, it is very clear that whether the contract ought to be declared forfeited or not, in a court of chancery, depended altogether upon the rules and principles of equity, and in no degree whatever upon any act of Congress concerning patent rights." (Our it...