Lionel Corporation v. De Filippis

• Decision Date: 23 July 1935
• Docket Number: No. 7640.,7640.
• Citation: 11 F. Supp. 712
• Parties: LIONEL CORPORATION et al. v. DE FILIPPIS et al.
• Court: U.S. District Court — Eastern District of New York

11 F. Supp. 712

LIONEL CORPORATION et al. v. DE FILIPPIS et al.

No. 7640.

District Court, E. D. New York.

July 23, 1935.

John M. Cole, of New York City (Joel B. Liberman and Gustav Goodmann, both of New York City, of counsel), for plaintiffs.

Carl E. Ring, of New York City (William H. Woolley, of New York City, of counsel), for defendants.

GALSTON, District Judge.

The matter comes before the court on a motion to dismiss the complaint on various grounds which may be enumerated as follows:

First, because it appears from the complaint that there is an action between the plaintiffs and one of the defendants, Raymond de Filippis, pending in the Supreme Court of the state of New York, brought prior to the commencement of this action, which raises substantially all the issues raised by this complaint; secondly, because the individuals Cowen and Bonanno are not proper parties, for the reason that the complaint does not show any controversy between them and defendants; thirdly, that there is no diversity of citizenship and this court has no jurisdiction; that plaintiffs are estopped from denying the validity of de Filippis' patents while a license agreement is in effect and while a suit is pending in the state court to determine the rights under the license; and, finally, that no actual controversy between the parties exists as required by the Declaratory Judgment statute, section 274d of the Judicial Code (28 USCA § 400).

From the complaint it appears that the suit is brought pursuant to the Federal Declaratory Judgment Act. The allegation of an actual controversy between the parties is in respect to an alleged infringement by the plaintiffs of four United States letters patent, namely: No. 1,332,545, for a variable steering device for vehicles, issued March 2, 1920; No. 1,357,491, for an automatic steering device for vehicles issued November 2, 1920; No. 1,627,150, for a toy vehicle, issued May 3, 1927; and No. 1,808,776, for a vehicle issued June 9, 1931; all on the applications of defendant Raymond de Filippis, and, in addition, patent No. 1,756,539, for a vehicle, issued April 20, 1930, to one Hanna D. Findley, and now claimed to be owned by the defendant de Filippis. It is also alleged that all of these patents are claimed to be owned by the defendant Pierro, by virtue of an assignment from de Filippis to Pierro.

It appears that on January 4, 1932, an agreement was entered into between the Lionel Corporation, the plaintiff herein, and Raymond de Filippis in respect to the aforesaid patents, whereby the exclusive right to make, use, and sell articles embodying the inventions of the patents were assigned to the corporation. The instrument contained the usual provisions for payment of royalties.

Critical clauses in respect to termination are involved in the controversy in the state court and appear to be the following:

"8. The Company further agrees that it will on or before the 1st day of March, 1932, notify the Inventor whether or not it intends to manufacture and/or sell said articles, and if it should fail to do so, then this contract shall be deemed to have terminated, otherwise the same to remain in full force and effect as hereinbefore provided. Notice as provided for herein is to be deemed sufficient if sent by registered mail on or before the 1st day of March, 1932, addressed to the Inventor at the address mentioned at the head of this contract."

"10. The Company further agrees that unless the payment of the sum of $250 is made to the Inventor prior to March 1st, 1933, as royalties or advancement on account of royalties, and in the event in any subsequent year thereafter the amount paid to the Inventor as royalties or advancement on account of royalties is less than $250, then this agreement shall terminate and come to an end and the patents herein mentioned and any other patent which under this agreement shall enure to the benefit of the Company, shall revert to and become and remain the property of the Inventor; any advancement made on account of royalties to be deducted from the first royalties as and when due the Inventor."

On February 29, 1932, the Lionel Corporation wrote to de Filippis notifying him that it intended to manufacture and sell the articles mentioned in the agreement. A year later, on February 28, 1933, the corporation wrote to de Filippis that it had concluded not to manufacture any articles "in which your patent will be used and that we, therefore, relinquish any rights which we may have under agreement bearing date the 4th day of January, 1932, and consent that the said agreement be cancelled."

To this latter communication de Filippis on March 3, 1933, replied inquiring what the corporation intended to do with the other four patents that were assigned to the corporation.

No subsequent correspondence is referred to.

The complaint continues in recital that no royalties ever have been paid the defendant and no minimum payment was made such as is referred to in paragraph 10 of the agreement.

During April, 1933, the Lionel Corporation began the manufacture and sale of toy boats which, it is alleged, do not employ any of the inventions claimed in the patent heretofore referred to.

On May 8, 1934, a suit was instituted in the United States District Court for the Southern District of New York by Mario Caruso against the Lionel Corporation, in which suit ancillary receivers of the Lionel Corporation were appointed, and all persons were enjoined from instituting actions against the corporation. That receivership continued with the usual incidence of an equity receivership until March 20, 1935, when the ancillary receivers were discharged and their bond canceled.

Shortly prior to the discharge of the ancillary receivers, de Filippis, on March 2, 1935, caused to be served on the Lionel Corporation a summons in an action in the Supreme Court of the state of New York. That action was on March 26, 1935, discontinued without prejudice at the request of de Filippis by reason of the pendency of the receivership proceedings.

It appears by allegation that due notice of the receivership was given to all creditors and others having claims against the Lionel Corporation, and that neither of the defendants herein filed any claims against that defendant.

Then on or about April 29, 1935, de Filippis began another action in the Supreme Court of the state of New York by the service of summonses on the three plaintiffs herein, and on May 28, 1935, moved on de Filippis' affidavit for an examination of the defendants in that action in aid of framing a complaint in the Supreme Court. From those papers it appears that de Filippis alleged that the self-steering boats manufactured by the plaintiffs were under the patents included in the license agreement, and he claimed that royalties...