De Luxe Game Corp. v. Wonder Products Co.

• Decision Date: 22 September 1958
• Citation: 166 F. Supp. 56
• Parties: DE LUXE GAME CORPORATION, Plaintiff, v. WONDER PRODUCTS COMPANY, a corporation, Defendant. REMPEL MANUFACTURING, INC., Plaintiff, v. WONDER PRODUCTS COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

166 F. Supp. 56

DE LUXE GAME CORPORATION, Plaintiff, v. WONDER PRODUCTS COMPANY, a corporation, Defendant.

REMPEL MANUFACTURING, INC., Plaintiff, v. WONDER PRODUCTS COMPANY, Defendant.

United States District Court S. D. New York.

September 22, 1958.

COPYRIGHT MATERIAL OMITTED

Keith, Bolger, Isner & Byrne, New York City, for plaintiff DeLuxe Game Corp.

Pennie, Edmonds, Morton, Barrows & Taylor, New York City, for plaintiff Rempel Manufacturing, Inc.

Kane, Dalsimer & Kane, New York City, for defendant.

BICKS, District Judge.

Two suits are pending in this Court against Wonder Products Company—one brought by Rempel Manufacturing, Inc., the other by DeLuxe Game Corporation— to declare U.S. Patents numbered 2,758,632 and Reissue No. 23,849 invalid in law and not infringed by either of the plaintiffs.

The defendant's affinity for a district in which the validity of said patents has been sustained has engendered a series of motions consistent only with a purpose to avoid adjudication of the controversy here and at apparent odds with its intention, repeatedly proclaimed in paid advertisements inserted in trade journals, to vigorously protect its patent rights. Round one went against the defendant. My learned brother, Judge Herlands, in a lengthy and carefully reasoned opinion reported at 157 F.Supp. 696, 697, denied defendant's motion for the relief set out in the margin.¹

The defendant is now before the Court on an application under Fed.R.Civ. P. 12(b) (7), to dismiss the counts of each of the complaints relating to U.S. Patent Reissue No. 23,849 for failure to join an indispensable party, or, in the alternative, to transfer both suits to United States District Court for the Western District of Tennessee, pursuant to 28 U.S.C.A. § 1404(a). The two patents involved in the litigation are closely related and it has not been made to appear that it would be desirable or in the interests of the efficient administration of justice to try the issues of validity and infringement separately as to each of them. The moving papers indicate that the alleged indispensable party, though not subject to the jurisdiction in personam of the aforesaid Tennessee District Court, would voluntarily submit thereto were this Court to grant the application to transfer. The suggestion implicit in this proffered submission to jurisdiction is that this Court lend itself to forum shopping. Courts have no sympathy with such ill-advised endeavors. See Clayton v. Warlick, 4 Cir., 1956, 232 F.2d 699, 706.

The party alleged to be indispensable is one William Baltz, to whom U.S. Patent Reissue No. 23,849 (Original No. 2,437,015) was issued. On May 28, 1948, Baltz and one Andrew G. Manning, the defendant's predecessor in interest, executed a writing which has been variously denominated as a "license", "exclusive license agreement" and "agreement" in part providing:

"Party of the First Part Baltz hereby grants, conveys all rights, license, franchise unto and under said patent to Party of the Second Part Manning, the defendant's predecessor in interest, his heirs, assigns, appointees, and successors to manufacture, make, design, construct, alter, modify and improve upon any articles to which said patent may be applicable, and to sell, acquire, deal in, purchase, dispose of, negotiate in relation to, promote sales of, advertise, and otherwise generally conduct business for the manufacture and sale of said article or articles throughout the United States and all foreign countries. Party of the First Part hereby expressly grants to the Second Party, his heirs, assigns, appointees and successors all rights and franchises for the use, manufacture and sale of any and all articles under said patent exclusively for an indefinite term of years."²

The breadth of the granting clause and the rights conferred upon the transferee left no beneficial interest in the patent to the patentee.³ The most formal instrument of absolute assignment could transfer no more. That the purchase price agreed to be paid by the transferee is deferred and is to be computed on the basis of a fixed stipend per article covered by the patent sold by the transferee does not transform the transaction into a mere license. Hook v. Hook & Ackerman, Inc., 3 Cir., 1951, 187 F.2d 52; American Type Founders, Inc., v. Dexter Folder Co., D.C.S.D.N.Y.1943, 53 F.Supp. 602. The defendant (having acquired through mesne assignments all the right, title and interest of Manning, the original assignee) is vested with a right to sue infringers in its name alone,⁴ and conversely, is subject to a suit for declaratory judgment brought by one whom it charges with infringement. See Hartford National Bank & Trust Co. v. Henry L. Crowley & Co., 3 Cir., 1955, 219 F.2d 568; Hook v. Hook & Ackerman, Inc., supra; United Lacquer Mfg. Corp. v. Maas & Waldstein Co., D.C.D.N.J. 1953, 111 F.Supp. 139. See also Bendix Aviation Corp. v. Kury, D.C.E.D.N.Y. 1950, 88 F.Supp. 243, 250.

Defendant argues that the provisions of the instrument of transfer obligating Baltz, the patentee, to defend at his own expense the subject patent against claims of infringement made by others and to prosecute all infringements made or attempted to be made upon said patent, constitute him an indispensable party to this litigation. In so urging counsel overlooks the distinction between the rights of the transferor and transferee inter se as to maintenance, defense and bearing the expense of litigation in connection with the patent, and the status or position of the transferor vis-a-vis a third party who institutes a declaratory judgment suit. It appears expressly that Baltz's undertaking to maintain and defend litigation was for the benefit of the transferee. His said obligation did not whittle down in the slightest the absolute character of the conveyance, nor constitute the transferee, certainly as against third parties, other than what appears to have been the clear intent—owner of all rights under the patent. A complete and irrevocable assignment of a patent is not transformed into a license by a provision obligating the patentee to defend the patent at his own expense for the benefit of the transferee.

Defendant's reliance upon Independent Wireless Telegraph Co. v. Radio Corporation of America, 1926, 269 U.S. 459, 46 S.Ct. 166, 70 L.Ed. 357; Technical Tape Corp. v. Minnesota Mining and Mfg. Co., D.C.S.D.N.Y.1955, 135 F.Supp. 505 and Caldwell Mfg. Co. v. Unique Balance Co., D.C.S.D.N.Y.1955, 18 F.R.D. 258, is misplaced. The transfers involved in those cases did not purport to convey complete ownership within the doctrine of the Waterman case, supra. Thus, in Caldwell, supra, the licensee was granted the right to manufacture and vend, but not to use, and in Technical Tape, supra, the grant was of a non-transferable exclusive license as to some uses of the teachings of the patent, a non-exclusive license as to others and no rights whatever as to still others. Although Independent Wireless, supra, involved an exclusive license to make, use and sell, the case was tried and was determined by the Circuit Court of Appeals on the theory that an exclusive license, rather than a Waterman v. MacKenzie assignment was involved. The Court was "loath to depart, if it could, from the theory on which the bill was framed and both courts had acted, unless required to do so." 269 U.S. at page 463, 46 S.Ct. at page 168. It found that it was not "required to do so" and, therefore, accepted the premise upon which the courts below had proceeded.

The Federal Declaratory Judgments Act, 28 U.S.C.A. § 2201 et seq., affords a much-needed remedy to the accused patent infringer enabling him to obtain prompt adjudication of his rights. He no longer need suffer the prejudice which results from being kept on the anxious seat. The patentee is deprived of the power to indefinitely adversely affect the business of an alleged infringer by threats, overt or otherwise. He no longer has the sole choice of time and form. See Borchard, Declaratory Judgments pp. 802-806 (2d ed. 1941). When an alleged infringer seeks to avail himself of this remedy, and the defendant...