Nippon Elec. Glass Co., Ltd. v. Sheldon

• Decision Date: 28 April 1980
• Docket Number: No. 79 Civ. 2525 (RLC).,79 Civ. 2525 (RLC).
• Citation: 489 F. Supp. 119
• Parties: NIPPON ELECTRIC GLASS CO., LTD., Plaintiff, v. Edward E. SHELDON, Defendant.
• Court: U.S. District Court — Southern District of New York

489 F. Supp. 119

NIPPON ELECTRIC GLASS CO., LTD., Plaintiff, v. Edward E. SHELDON, Defendant.

No. 79 Civ. 2525 (RLC).

United States District Court, S. D. New York.

April 28, 1980.

Hopgood, Calimafde, Kalil, Blaustein & Lieberman, New York City, by John M. Calimafde, and William L. Botjer, New York City, for plaintiff.

Arthur T. Fattibene, New York City, for defendant.

OPINION

ROBERT L. CARTER, District Judge.

Plaintiff Nippon Electric Glass ("NEG") is a Japanese corporation that manufactures glass "envelopes" in Japan for eventual use in color television picture tubes. NEG sells its glass envelopes in Japan to manufacturers of color television sets who place electronic components and phosphorescent coating into the glass envelopes to complete the picture tubes, which then are incorporated in color television sets.

Defendant Edward E. Sheldon, a New York resident, owns patents for vacuum and cathode tubes "of television type for X-ray protection."¹ In August 1978, Sheldon's attorney sent to Sony Corporation of America ("Sony") and Matsushita Electric Corporation of America ("Panasonic") letters stating that these corporations "need" licenses under Sheldon's patent for the color television tubes and receivers containing such tubes which they sell in the United States.

Sony and Panasonic responded that they did not manufacture the products covered by Sheldon's patents but bought them from NEG and a second supplier in Japan to whom defendant's letters had been referred. Apparently NEG entered an agreement with both Sony and Panasonic to indemnify them for any liability for infringement of the subject patents.

NEG then instituted this declaratory judgment action seeking a declaration that Sheldon's patents are invalid and that plaintiff's customers are not infringing them, as well as an injunction restraining defendant from threatening or prosecuting infringement actions against plaintiff or its customers based on these patents.

Defendant has moved to dismiss the complaint for lack of an actual case or controversy within the meaning of the Declaratory Judgment Act, 28 U.S.C. § 2201 ("Act")². Defendant argues that plaintiff's activities, confined to the manufacture and sale of glass "raw materials" in Japan, lack a sufficiently close nexus with United States commerce to support an actual controversy here. Defendant points to the complaint's failure: (1) to allege that plaintiff exports any product to this country that might be subject to a charge of patent infringement; (2) to claim that defendant has charged plaintiff with infringement; or (3) to assert that Sony and Panasonic are NEG's customers in the United States. Therefore, defendant argues, the complaint does not meet the test of a justiciable controversy in a patent suit, i. e., that plaintiff have a reasonable apprehension of liability for damages by virtue of its own activities or those of its customers. Finally, defendant contends that because NEG's conduct in Japan is beyond the reach of our patent laws and, therefore, defendant could not sue NEG for patent infringement, the doctrine of "comity" should preclude jurisdiction over this suit. For the reasons discussed below, defendant's motion is denied.

While it is well-settled that the Declaratory Judgment Act permits the federal courts to entertain only actual, concrete controversies, and not hypothetical questions, the distinction is one of degree to be determined on a case by case basis. Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-41, 57 S.Ct. 461, 463-64, 81 L.Ed. 617 (1937); Wembley, Inc. v. Superba Cravats, Inc., 315 F.2d 87, 89 (2d Cir. 1963); Blessings Corp. v. Altman, 373 F.Supp. 802, 805 (S.D.N.Y.1974) (Bauman, J.). Because the Act has the salutary effect of preventing patentees from threatening alleged infringers with lawsuits without risking a test of the patent's validity, this circuit has construed the "actual controversy" requirement of the Act liberally. Wembley, Inc. v. Superba Cravats, Inc., supra, 315 F.2d at 89; Blessings Corp. v. Altman, supra, 373 F.Supp. at 805.

Although some authorities indicate that a charge of infringement is a prerequisite to a finding of actual controversy, e. g., Aralac, Inc. v. Hat Corp. of America, 166 F.2d 286, 292 (3d Cir. 1948), the terms "charge of infringement" and "actual controversy" have been given an expansive interpretation by the courts. W. R. Grace & Co. v. Union Carbide Corp., 319 F.Supp. 307, 310 (S.D.N.Y.1970) (Tenney, J.); Blessings Corp. v. Altman, supra, 373 F.Supp. at 805.

In the instant case, the parties agree that the letters of defendant's counsel to plaintiff's customers constituted allegations of direct infringement by them of defendant's patents. Defendant claims, however, that plaintiff may not sue for declaratory relief as long as defendant has not charged plaintiff itself with contributory infringement. This is erroneous. The accusation need not be made directly to the declaratory judgment plaintiff, but may be made to its customers or to the industry at large. Aralac, Inc. v. Hat Corp. of America, supra, 166 F.2d at 292; W. R. Grace & Co. v. Union Carbide Corp., supra, 319 F.Supp. at 310. When a patent holder complains that a manufacturer's customers are guilty of direct infringement due to their use or sale of plaintiff's products, the patent holder is impliedly charging the manufacturer with contributory infringement as well. Walker Process Equipment, Inc. v. FMC Corp., 356 F.2d 449, 452-53 (7th Cir. 1966) (Swygert, J., dissenting); National Coupling Co. v. Press-Seal Gasket Corp., 323 F.2d 629, 630, 632 (7th Cir. 1963); Japan Gas Lighter Association v. Ronson Corp., 257 F.Supp. 219, 237 (D.N.J.1966). As defendant himself points out, the modern test for the existence of an actual controversy in a patent case has been stated to be whether plaintiff has a reasonable apprehension of an infringement suit or threat of one to itself and its customers if plaintiff continues the activity in question. Japan Gas Lighter Association v. Ronson Corp., supra, 257 F. Supp. at 237. Once defendant accused Sony and Panasonic of direct infringement due to their use of plaintiff's product, plaintiff had reason to fear that it could be sued as a contributory infringer. It, therefore, was entitled to seek declaratory relief, Sticker Industrial Supply Corp. v. Blaw-Knox Co., 367 F.2d 744, 747 (7th Cir. 1966), even though defendant has not yet directly charged plaintiff with contributory infringement. Were this not so, a patentee would be able to avoid suit by an injured manufacturer merely by not threatening him directly with infringement, while threatening his customers with suits. This result would frustrate the remedial purposes of the Act. Id. at 746.

Moreover, plaintiff has entered agreements with Sony and Panasonic to indemnify them against any liability they may incur due to the subject patents. This circuit has previously held that such an agreement between a manufacturer and its licensee-customer creates an actual controversy such that the manufacturer may seek a declaratory judgment of the patent's invalidity even when the indemnitor is not chargeable as a contributory infringer. Joseph Bancroft & Sons Co. v. Spunize Co. of America, 268 F.2d 522, 523 (2d Cir. 1959); see Wallace & Tiernan v. General Electric Co., 291 F.Supp. 217, 222 (S.D.N.Y.1968) (Frankel, J.). The argument for existence of an actual controversy is even stronger in the instant case, for plaintiff is chargeable as a contributory infringer under 35 U.S.C. § 271(b), (c).

Defendant's contention that plaintiff cannot be liable for contributory infringement because of the remoteness of NEG's activities from...