Metals Disintegrating Co. v. Reynolds Metals Co., Civ. A. No. 1120.

• Decision Date: 18 May 1951
• Docket Number: Civ. A. No. 1120.
• Citation: 98 F. Supp. 201
• Parties: METALS DISINTEGRATING CO., Inc. v. REYNOLDS METALS CO.
• Court: U.S. District Court — District of Delaware

98 F. Supp. 201

METALS DISINTEGRATING CO., Inc. v. REYNOLDS METALS CO.

Civ. A. No. 1120.

United States District Court, D. Delaware.

May 18, 1951.

Arthur G. Connolly, of Wilmington, Del., Drury W. Cooper, Jr., and W. D. Keith (of Cooper, Byrne, Dunham, Keith & Dearborn), of New York City, for plaintiff.

Thomas Cooch (of Morford, Bennethum, Marvel & Cooch), of Wilmington, Del., and Raymond F. Adams and Curt Von Boetticher, Jr., of New York City, for defendant.

LEAHY, Chief Judge.

This is a patent infringement suit. After my earlier decision¹ denying defendant "Reynolds'" motion for summary judgment, Reynolds filed an answer to the amended complaint in which five affirmative defenses are contained. Plaintiff "Metals Disintegrating" now moves to strike paragraphs 23 to 25 (the second affirmative defense) of the answer, "on the ground that the defense as stated is res adjudicata between the parties to this case by reason of the decision of the United States District Court for the District of New Jersey * * * which decision was affirmed on appeal by the United States Court of Appeals * * *."² The motion seeks in addition to strike paragraph 25 of defendant's answer on the specific ground the District Court in New Jersey decided and the Court of Appeals affirmed that the license agreement of November 29, 1939, referred to in paragraph 25, is not an existing agreement.

The second affirmative defense is the only part of defendant's answer brought in question by plaintiff's present motion to strike, in order to test defendant Reynolds' legal position when, to use its own words, it "pleads a license under the patents in suit by reason of the agreement of November 29, 1939."³

Plaintiff's argument in support of its motion to strike runs this way: On November 29, 1939, plaintiff licensed defendant under certain of plaintiff's patents. The agreement was honored by the parties during the period 1939-1946. In 1946, defendant Reynolds refused to pay further royalties because it asserted the license was in violation of the antitrust laws, and likewise refused to accept an amended agreement proffered by plaintiff Metals Disintegrating in which the latter offered and sought to remove the objectionable provisions. Subsequently, Reynolds — defendant here — brought suit in the federal District Court in New Jersey,⁴ alleging the agreement violated the antitrust laws and seeking return of the royalties paid under the license. In that action, Reynolds contended the contract was "* * * from its inception * * * in whole illegal and void." Judge Fake granted the motion of Metals Disintegrating to dismiss the complaint as legally insufficient, holding the license agreement was illegal as violative of the antitrust laws, that the parties thereto were in pari delicto, and neither party could resort to the court for relief under the agreement.⁵ Plaintiff in the case at bar argues that in the face of such a holding, defendant Reynolds cannot, now, rely upon this contract to give it the preferred position of a licensee, with the accompanying immunity from the present patent infringement suit. Apart from the in pari delicto holding of the two courts in the New Jersey action, plaintiff argues further the holding that the agreement was illegal means the agreement was void and not merely voidable. Plaintiff relies upon the authorities cited by the Court of Appeals in its opinion; moreover it stresses the position taken on appeal by the present defendant when it was the plaintiff in the New Jersey action, viz., that the effect of Judge Fake's decision was to leave the parties in the same position they occupied prior to the execution of the agreement. In short, the argument is the New Jersey court held that the license agreement of November 29, 1939 "is not an existing agreement" and a fortiori the second affirmative defense of license cannot validly be pleaded.

Defendant Reynolds in opposition to the plaintiff's present motion asserts the New Jersey Court made no such holding. It rests its conclusion in part on the ground that Metals Disintegrating, upon Judge Fake's granting of the motion for summary judgment to the extent of dismissing the complaint, proposed an order to him in which it used language which, if the Court would have signed the order, would have constituted a finding the license agreement was void as violative of the Sherman Anti-Trust Law, 15 U.S.C.A. §§ 1-7, 15 note. Judge Fake, however, did not sign the proposed order; instead he signed an order submitted by Reynolds which held the parties were in pari delicto and the Court would, therefore, leave them where it found them. Moreover, Reynolds argues the Court of Appeals did not hold the agreement void but simply affirmed the finding of Judge Fake that the parties were in pari delicto. Reynolds further claims that Metals Disintegrating, throughout the proceedings in New Jersey, never affirmatively took the position the license agreement was nonexistent. Reynolds agrees with plaintiff to the extent that the New Jersey action is res adjudicata, but argues that the application of res adjudicata must lead to the conclusion that the license agreement exists because the New Jersey Court declined to hold the agreement void.

From the present arguments of the parties they are essentially in issue as to what was decided in the New Jersey action. If Judge Fake's decision means the license agreement is void, Reynolds cannot now rely on the agreement as a defense to Metals Disintegrating's suit for patent infringement. If, on the other hand, Judge Fake's decision means the license agreement was not void, then Reynolds is in the quite enviable position of being a licensee under a valid patent for which it need not pay any future royalties because the parties were once in pari delicto with relation to that agreement and because of that it may presently assert such a complete defense to any patent infringement suit by Metals Disintegrating now or hereafter brought. Judge Fake's opinion is silent as to whether the license agreement is void or whether it remains in existence. All Judge Fake decided was "* * * the parties are in pari delicto * * * The position of the parties is that they are left where they have placed themselves and...