Loew's Drive-In Theatres v. Park-In Theatres

• Citation: 174 F.2d 547
• Decision Date: 08 April 1949
• Docket Number: No. 4316.,4316.
• Parties: LOEW'S DRIVE-IN THEATRES, Inc. v. PARK-IN THEATRES, Inc.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

174 F.2d 547 (1949)

LOEW'S DRIVE-IN THEATRES, Inc. v. PARK-IN THEATRES, Inc.

No. 4316.

United States Court of Appeals First Circuit.

April 8, 1949.

Hector M. Holmes, of Boston, Mass. (John L. Curran and Herbert B. Barlow, both of Providence, R. I., and Fish, Richardson & Neave, of Boston, Mass., on the brief), for appellant.

Leonard L. Kalish, of Philadelphia, Pa. (Melvin R. Jenney, of Boston, Mass., Thomas J. Flynn, of Providence, R. I., and Kenway, Jenney, Witter & Hildreth, of Boston, Mass., on the brief), for appellee.

Before MAGRUDER, Chief Judge, WOODBURY, Circuit Judge, and PETERS, District Judge.

WOODBURY, Circuit Judge.

The defendant in an action for unpaid royalties alleged to have fallen due under a licensing agreement prior to its admittedly legal termination by the plaintiff on June 1, 1938, and for damages for patent infringement thereafter, has taken this appeal from an interlocutory judgment entered for the plaintiff on the issue of liability.

The plaintiff-appellee, a New Jersey corporation, is the owner by assignment of United States patent No. 1,909,537 for a Drive-in-Theatre issued on May 16, 1933, to one Hollingshead. On June 1, 1937, it licensed the defendant-appellant, a Rhode Island corporation, to operate a drive-in theatre in Providence under the Hollingshead patent and the latter commenced operations under its license on July 21, 1937. The defendant paid a percentage of its gross receipts to the plaintiff as royalties in accordance with the terms of the license agreement until the close of its 1937 season in November of that year. It opened its theatre again in the spring of 1938 but it made no further reports of its business and paid no further royalties to the plaintiff on the advice of its counsel that the license was illegal and the Hollingshead patent was invalid for absence of patentable invention. Thereupon on June 1, 1938, the plaintiff cancelled the license for failure to pay royalties and subsequently filed its complaint in the instant action in which two causes of action are set out; one for unpaid royalties alleged to have become due under the license up to the date of its termination, and the other for infringement of the Hollingshead patent after the termination of the license.

In the court below the defendant-appellant interposed a variety of defenses. In the view we take of the case it will serve no useful purpose to enumerate them. It will suffice to say that after hearing the court below found them without merit, and holding all of the claims of the patent which had been put in issue, that is, claims 2, 4, 5, 6, 8, 10, 15, 16, and 19, valid and infringed by the defendant after the termination of its license, (indeed the defendant admits that it infringed "at least some of the Hollingshead claims in issue if those claims are valid") it enjoined the defendant from further infringement and ordered the parties to proceed to trial of the issue of damages in both causes of action in accordance with their pre-trial agreement to defer that issue until after the issue of liability should be determined in the plaintiff's favor.

Federal jurisdiction over the cause of action for patent infringement on the ground that it is one arising under an act of Congress relating to patents is obvious. 28 U.S.C.A. § 1338(a). But federal jurisdiction over the cause of action for unpaid royalties cannot rest upon the same ground for "It is a general rule that a suit by a patentee for royalties under a license or assignment granted by him, or for any remedy in respect of a contract permitting use of the patent, is not a suit under the patent laws of the United States, and cannot be maintained in a federal court as such." Luckett v. Delpark, Inc., 270 U.S. 496, 502, 46 S.Ct. 397, 399, 70 L.Ed. 703 and cases cited. And, although under Rule 18(a) Federal Rules of Civil Procedure, 28 U.S.C.A., the claim for unpaid royalties can with propriety be joined with the claim for patent infringement, such joinder does not enlarge or extend the jurisdictional limits fixed by Congress in the above section of the Code. The rule permitting joinder of causes of action "must, of course yield to the jurisdictional statute." Geneva Furniture Mfg. Co. v. Karpen, 238 U.S. 254, 259, 35 S.Ct. 788, 790, 59 L.Ed. 1295. The rule of general application controlling in patent cases "does not go so far as to permit a federal court to assume jurisdiction of a separate and distinct nonfederal cause of action because it is joined in the same complaint with a federal cause of action. The distinction to be observed is between a case where two distinct grounds in support of a single cause of action are alleged, one only of which presents a federal question, and a case where two separate and distinct causes of action are alleged, one only of which is federal in character. In the former, where the federal question averred is not plainly wanting in substance, the federal court, even though the federal ground be not established, may nevertheless retain and dispose of the case upon the nonfederal ground; in the latter it may not do so upon the nonfederal cause of action." Hurn v. Oursler, 289 U.S. 238, 245, 246, 53 S.Ct. 586, 589, 77 L.Ed. 1148. Thus if federal jurisdiction over the cause of action for unpaid royalties exists, it must rest upon the diversity of the citizenship of the parties and the amount in controversy between them.

The diversity of the citizenship of the parties to the instant case is clearly established by the pleadings and the findings of the court below. The amount of the unpaid royalties in controversy, however, is not, unfortunately, established with the same clarity.

In paragraph 3 of the plaintiff's complaint it is alleged generally that the jurisdiction of the court below "arises because the suit is one under the patent laws of the United States, and also because of diversity of citizenship of the parties, and the amount of the controversy, exclusive of costs and interest, is in excess of Three Thousand Dollars." The defendant originally denied this allegation in its answer. But at the pre-trial conference it withdrew its denial thereby permitting the allegation to stand as admitted, and the court below included in its opinion a finding in almost verbatim accordance with the allegation. Furthermore the court below stated as a conclusion of law that it had "jurisdiction over the claim for royalties, under the license agreement, because of the diversity of citizenship of the parties and because the complaint alleged that the amount in controversy, exclusive of interests (sic) and costs, is in excess of $3,000.00."¹

These allegations, findings and conclusions are not as sharp and clear-cut as they might be. They might be taken to establish only that the plaintiff had suffered damages under both causes of action amounting in the aggregate to more than the statutory minimum for federal jurisdiction. But we do not need to consider whether or not the damages in the federal and the non-federal causes of action may be aggregated to provide the requisite jurisdictional amount, for they can also be read to mean that the plaintiff's damages under the count for unpaid royalties alone amounted to over $3,000. And this is enough to confer jurisdiction, for to justify dismissal "It must appear to a legal certainty that the claim is really for less than the jurisdictional amount," or that the plaintiff "never was entitled to recover" the amount claimed "and that his claim was therefore colorable for the purpose of conferring jurisdiction," or that the plaintiff and defendant "have colluded to confer jurisdiction by the method of the one claiming a fictitious amount and the other failing to deny the veracity of the averment of amount in controversy." St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 289, 290, 58 S.Ct. 586, 590, 82 L.Ed. 845. Therefore, since on the record we cannot say "to a legal certainty" that the plaintiff's claim for unpaid royalties could not exceed the jurisdictional minimum, it follows that federal jurisdiction over the cause of action for those royalties on the ground of diversity of citizenship and amount in controversy must be taken as established.

Our jurisdiction over this cause of action on appeal, however, is another matter. For although injunctive relief is granted in the judgment appealed from and we have appellate jurisdiction over such judgments under 28 U.S.C.A. § 1292 (1) even though interlocutory, we have jurisdiction to review only that part of such judgments as have to do with the injunctive relief afforded and no other, Caterpillar Tractor Co. v. International Harvester Co., 3 Cir., 120 F.2d 82, 86, 139 A.L.R. 1 and cases cited, and the injunction issued in the case at bar only has to do with the cause of action for patent infringement. In so far as the non-federal cause of action for unpaid royalties is concerned the judgment only determines the issue of liability, leaving the issue of damages for later determination, and thus it is clearly not a final one. Hence it is not appealable as such.

Possibly it might reasonably be argued, however, although we have been unable to find any authorities in point, that our obvious appellate jurisdiction under the specific provisions of 28 U.S.C.A. § 1292 (1, 4) over the cause of action for patent infringement carries with it jurisdiction over the non-federal cause of action on the ground that it is one joined with and ancillary thereto. But this argument has not been made, indeed we have not had the assistance of argument on any of the jurisdictional questions here presented, and we see no occasion to ask for reargument as to those matters, because the conclusion we have reached on the appeal of the federal cause of action, over which we clearly have appellate jurisdiction, that the patent claims in suit are invalid for lack of invention, in all probability renders the question of our jurisdiction on appeal over...