Montecatini Edison, SPA v. Ziegler

• Decision Date: 05 October 1973
• Docket Number: No. 72-1281.,72-1281.
• Citation: 486 F.2d 1279
• Parties: MONTECATINI EDISON, S.P.A. (a corporation of Italy) Appellee, v. Karl ZIEGLER, Appellant, and E. I. Dupont de Nemours and Company (a corporation of Delaware).
• Court: U.S. Court of Appeals — District of Columbia Circuit

486 F.2d 1279 (1973)

MONTECATINI EDISON, S.P.A. (a corporation of Italy) Appellee, v. Karl ZIEGLER, Appellant, and E. I. Dupont de Nemours and Company (a corporation of Delaware).

No. 72-1281.

United States Court of Appeals, District of Columbia Circuit.

Argued March 5, 1973.

Decided October 5, 1973.

Arnold Sprung, Nathaniel D. Kramer, New York City, with whom James N. Dresser, Washington, D. C., was on the brief, for appellant.

Ralph M. Watson, New York City, of the bar of the Court of Appeals of New York, pro hac vice, by special leave of Court with whom A. Donald Messenheimer, Washington, D. C., was on the brief, for appellee.

Before McGOWAN and TAMM, Circuit Judges, and JAMESON,^* Senior United States District Judge for the District of Montana.

TAMM, Circuit Judge:

This is an appeal from a final order of the United States District Court for the District of Columbia dismissing appellant Ziegler's counterclaim.

Both parties have filed applications for patents claiming a certain process for homopolymerizing propylene. Two other parties have also filed applications claiming the same process. In order to resolve this conflict, the Patent Office instituted Interference No. 90,833, a proceeding to determine the question of priority of invention.¹ On September 15, 1969, almost ten years after the interference was declared, the Patent Office Board of Patent Interferences awarded priority of invention to Ziegler. The Montecatini Edison Company (hereafter, "Montecatini") then commenced this action under 35 U.S.C. § 146 (1970), which authorizes any party to an interference who is dissatisfied with the Board's award to proceed by civil action to obtain an adjudication of his right to a patent. Ziegler filed an answer requesting dismissal of the complaint as well as a declaration that his assignors were the prior inventors. In addition, the answer interposed a counterclaim which asserts that Ziegler is the rightful owner of "all property rights of, and sums and royalties received by plaintiff, Montecatini, in the United States in the olefin polymerization field."² The counterclaim alleges that Montecatini, surreptitiously and in violation of a relationship of trust and confidence between Ziegler and Montecatini, misappropriated certain inventions of Ziegler, and used them to "develop a patent position"³ in the United States in the field of olefin polymerization. According to the uncontradicted assertions of Montecatini both at oral argument of the motion to dismiss the counterclaim in the district court⁴ and in its brief on appeal,⁵ Montecatini's "patent position" in the field now includes eighty-five United States patents. The court is asked to impress a trust in favor of Ziegler upon all property rights of Montecatini in this field and to appoint a receiver pendente lite.⁶

Montecatini moved dismissal of the counterclaim pursuant to Rule 12(c) of the Federal Rules of Civil Procedure on the ground that the district court lacks subject matter jurisdiction of the counterclaim. The district court agreed and entered an order dismissing the counterclaim. The order was made final under Rule 54(b) of the Federal Rules of Civil Procedure and Ziegler took this appeal. We reverse.

Montecatini makes two contentions in support of the dismissal: first, that permissive non-Federal counterclaims such as Ziegler's are not cognizable in section 146 proceedings; second, that, even if such counterclaims may be entertained in section 146 actions, the district court lacks subject matter jurisdiction of the Ziegler counterclaim. The first contention takes various forms in the Montecatini brief⁷ and appears to be the rule of decision adopted by the trial court, as reflected in the following excerpt from its memorandum opinion:

The first and foremost consideration is the nature of the proceeding under 35 U.S.C. § 146. A party dissatisfied with the decision of the Board of Patent Interference on a question of priority of intervention between conflicting patent applications may pursue a civil action against the other parties to the interference proceeding. This action is not a standard civil action. It is more in the nature of a review of an administrative proceeding with inherent limitations on the issues which may be raised in the original claim or by counterclaim.

. . . .

In addition, counterclaims which are not compulsory are generally not allowed in actions arising under special statutory provisions.

Montecatini Edison, S.P.A. v. Ziegler, Civil Action No. 3291/69 (D.D.C., filed January 25, 1972). We believe that the district court erred in holding that permissive counterclaims may not be entertained in section 146 actions. This is a novel and complex question, however, and we would be remiss if we did not discuss the authorities relied upon by the appellee and the district court. Following that discussion we shall take up the question of subject matter jurisdiction over the Ziegler counterclaim.

I.

At the outset it must be pointed out that Montecatini's position (i. e., that permissive, non-Federal counterclaims may not be asserted in section 146 actions) is in derogation of both the express provisions and the underlying policies of the Federal Rules of Civil Procedure. Rule 13 provides that a pleading may state any permissive counterclaim and must state any compulsory counterclaim.⁸ The word "may" is not intended to confer any discretion upon the court with respect to a permissive counterclaim; rather, it gives the litigant a choice either to assert or not to assert a permissive counterclaim. If he elects to plead it, the court must entertain it so long as it is within the court's subject matter jurisdiction. Switzer Brothers, Inc. v. Locklin, 207 F.2d 483, 488 (7th Cir. 1953), cert. denied, 347 U. S. 912, 74 S.Ct. 477, 98 L.Ed. 1069 (1954); Michigan Tool Co., Inc. v. Drummond, 33 F. Supp. 540, 542 (D.D. C. 1938).⁹ In effect, Rule 13(b) confers upon a litigant the right to have his permissive counterclaim heard and determined along with the claims of his adversary. The objective of the Federal Rules with respect to counterclaims is to provide complete relief to the parties, to conserve judicial resources and to avoid the proliferation of lawsuits. Stewart-Warner Corp. v. Westinghouse Electric Corp., 325 F.2d 822, 827 (2d Cir. 1963), cert. denied, 376 U.S. 944, 84 S.Ct. 800, 11 L.Ed.2d 767 (1964). Thus, Montecatini assumes a great burden in attempting to persuade this court that the usual rule as to permissive counterclaims should not apply in a section 146 proceeding. We conclude that the burden has not been carried.¹⁰

Montecatini's argument on this point is founded upon two asserted principles of law, each relying upon a separate line of cases: (A) the parties to a section 146 action may not raise new issues which were not presented before the Patent Office in the antecedent interference proceedings;¹¹ (B) permissive counterclaims are generally not entertained in actions arising under special statutory provisions such as section 146.¹²

A. The first part of Montecatini's argument correctly states a rule of law in section 146 proceedings, but it is a rule which has no application to a counterclaim such as the one at issue on this appeal. This is clear from the very authorities cited by the appellee. In Radio Corporation of America v. Philco Corp., 201 F.Supp. 135 (E.D.Pa. 1961), aff'd, 309 F.2d 397 (3d Cir. 1962),¹³ for example, it was held that a defendant in a section 146 action cannot litigate the issue of patentability (of his adversary's application) in the district court after failing to properly raise the issue before the Patent Office. The rationale of this ruling was that the defendant had waived the defense since he did not take advantage of the opportunity to present it in the Patent Office:

An orderly policy of judicial administration dictates that a party in any adversary proceeding, including an interference, should not be permitted to circumvent initial stages in the prosecution of his cause by raising totally new issues at the review or appellate levels; otherwise a party might too easily ambush his opponent and, in this case, the Patent Office itself, after lengthy administrative proceedings. Courts should not be deprived of any assistance which might be gained from the expertise of the quasi-administrative agency, i. e., the Patent Office.

Defendant failed to raise this issue before the Primary Examiner, yet had adequate opportunity to do so.

Id. at 143. The same reasoning was adopted in Potter Instrument Co. v. Mohawk Data Sciences Corp., 309 F.Supp. 866, 867 (S.D.N.Y. 1969) and General Motors Corp. v. R. E. Dietz Co., 137 U. S.App.D.C. 100, 420 F.2d 1303, 1305-1306 (1969). In an analogous decision in a section 145 case, we have referred to this rule as a "phase of the doctrine of exhaustion of administrative remedies." DeSeversky v. Brenner, 137 U.S. App.D.C. 369, 424 F.2d 857, 859 (1970).¹⁴

While it is clear that these decisions enunciate a salutary principle of judicial administration, it is equally clear that this principle does not extend to the Ziegler counterclaim. The counterclaim pleads a common law cause of action sounding in tort and seeks various legal and equitable relief. Such a claim is obviously beyond the jurisdiction of a Patent Office tribunal. It was not presented before the Board of Patent Interferences because it could not be presented there. Under these circumstances, failure to assert the claim is not a waiver and Ziegler is not estopped from interposing his counterclaim in this action.¹⁵ Our conclusion on this point is reinforced by the fact that both joint claims and counterclaims have been entertained in the past in actions under section 146 and its predecessors where such claims could not have been decided by the Board of Patent Interferences and were not presented to it.¹⁶

In this connection, one further issue remains to be resolved. It is argued that the patent law...