Paper Container Mfg. Co. v. Dixie Cup Co.

• Decision Date: 08 October 1947
• Docket Number: Civ. No. 990.
• Parties: PAPER CONTAINER MFG. CO. v. DIXIE CUP CO.
• Court: U.S. District Court — District of Delaware

74 F. Supp. 389

PAPER CONTAINER MFG. CO. v. DIXIE CUP CO.

Civ. No. 990.

District Court, D. Delaware.

October 8, 1947.

Thomas Cooch (of Marvel & Morford), of Wilmington, Del. (F. M. Warden (of Cromwell, Griest & Warden), of Chicago, Ill., of counsel), for plaintiff.

William H. Foulk, of Wilmington, Del. (Carlton Hill, Charles F. Meroni and M. R. Chambers (of Charles W. Hills), all of Chicago, Ill., of counsel), for defendant.

RODNEY, District Judge.

This is a proceeding under R.S. § 4915¹ to obtain a patent. The following facts may be material and sufficiently stated. On February 9, 1943 one Hulseman executed an application for Letters Patent for a "Cup Holder" which application the following day was assigned to the present plaintiff. On February 12, 1943 the application was filed in the Patent Office.

On November 15, 1943 an application for Letters Patent for a "Holder for Paper Cup" was filed in the name of one Herman Carew and the present defendant is assignee of Carew.

On February 25, 1944 interference was declared between the two applications and this interference was duly prosecuted.

During the interference proceedings and on November 8, 1945 the plaintiff made an assignment of the plaintiff's rights in the application, invention and any Letters Patent to be issued thereon, to Reconstruction Finance Corporation (hereinafter called R.F.C.) but retaining to the plaintiff certain rights to be hereinafter considered.

On January 8, 1946 the assignment of Hulseman to the plaintiff and the assignment from the plaintiff to R.F.C. were recorded in the Patent Office in appropriate volumes of Transfers of Patents.

On July 11, 1946 the interference, hereinbefore referred to, was decided by the Board of Interference Examiners with an award of priority of invention to the Carew application, being the defendant's assignor.

On January 2, 1947 the present plaintiff, in its name alone, instituted this action.

The defendant filed a motion to dismiss the complaint for lack of jurisdiction under Federal Rules of Civil Procedure, rule 12 (b), 28 U.S.C.A. following section 723c and subsequently, by a supplement to such motion, there was presented the two assignments of the Hulseman application and invention as above set out. By this motion there was presented the claimed status of R.F.C. as assignee of the plaintiff and as an indispensable party plaintiff and the propriety of such suit without the R.F.C. being a party thereto.

A hearing was had on such motion and after the hearing and before the determination thereof the plaintiff, on June 9, 1947, filed an amendment to its complaint under Rule 15(a), the purport of which was the joining of R.F.C. as a party complainant.

The defendant has filed a motion, under Rules 12(b) and 12(f), to strike the plaintiff's amendment to the complaint and, by stipulation, it was agreed that the court should consider both motions upon the hearing had and the authorities subsequently cited.

The questions will be considered in their natural and logical order.

1. Before considering the indispensability of R.F.C. as a party plaintiff in this action by reason of its status as assignee of the present plaintiff it is necessary to consider that assignment itself and the legal incidents flowing therefrom.

The assignment agreement specifically provides that as security for the plaintiff's loan from the R.F.C., the plaintiff "does sell, assign and transfer unto R.F.C. and its successors and assigns forever (subject only to the rights and licenses heretofore granted by the Assignor * * *) all right, title and interest of the Assignor in and to" all of the patents owned by the plaintiff assignor, all of the patent applications owned by the plaintiff, including the Hulseman application, and any and all other patents, applications and patents issuing thereon "hereafter acquired" by the plaintiff. These rights and interests are assigned to the R.F.C. in the following terms: "To Have and to Hold the same unto R.F.C. and its successors and assigns, forever, to its and their own proper use and behoof, to the full end of the respective terms for which any and all of said Letters Patent and applications for Letters Patent are now or hereafter granted, as fully and entirely as the same would have been held and enjoyed by the Assignor had this assignment and sale not been made."

The plaintiff, in the agreement, does reserve (1) a "personal, non-exclusive, non-assignable and royalty-free right and license * * * to make, use and vend the subject matter" of the Hulseman application; (2) the right to bring direct infringement suits in the name of the plaintiff and the R.F.C., provided the R.F.C. consents thereto in writing, or does not dissent thereto within a specified period; and (3) the right and privilege, as a condition precedent, of approving in writing any other license under the patents or applications, or any of them, granted by the R.F.C. to any other party making products or using processes directly competitive with the products and processes of the plaintiff. These licenses, rights and privileges, however, are reserved to the plaintiff for only so long as it shall punctually and fully discharge all obligations and agreements made by it to or with the R.F. C., and until the R.F.C. gives notice to terminate the reservations for failure so to discharge said obligations and agreements.

The agreement further provides that the assignment is made upon the express condition that if the plaintiff punctually and fully pays or causes to be paid to the R.F.C. the full amount payable upon the loan and fully keeps and performs every other act, covenant and agreement on its part to be done, kept and performed pursuant to any mortgage or to the assignment, or to any agreement made by the plaintiff with the R.F.C. in connection with the loan, all without fraud and delay and according to the true intent and meaning thereof, then the assignment shall be null and void, and the patents and applications shall be reassigned to the plaintiff, but shall otherwise remain in full force and effect.

In addition, the plaintiff expressly agrees to prosecute at its own expense all applications owned by it at the time or all thereafter acquired, in the United States Patent Office and Appellate Tribunals.

Much reliance is placed by the defendant on Waterman v. Mackenzie, 138 U.S. 252, 11 S.Ct. 334, 335, 34 L.Ed. 923, and its application is denied by the plaintiff. It is true that Waterman v. Mackenzie was not a suit under R.S. § 4915 but a suit in Equity largely for the infringement of a patent. The case discussed the rights incident to a purported assignment of a patent and the proper parties to enforce those rights. No reason is apparent which would prevent principles determining the parties necessary to protect a patent as by infringement suit from being considered also in the determination of the right to sue to establish that patent from which any future claims for infringement must ensue.

In Waterman v. Mackenzie, supra, the court considered, as to patents, the distinction between an assignment and a license, holding that the distinction was not in the name used but in the legal effect of the provisions. That court considered the terms of an instrument executed by the holder of a patent to another; in the instant case an instrument was given by the holder of a patent to R.F.C. with the reservation of certain rights to the holder and, subject to those reserved rights, all other incidents of the patent seem to be granted to R.F.C. If there be a distinction between the cases then it seems a distinction with little difference. The legal situation of the present facts seems to be as if the plaintiff had made an absolute assignment to R.F.C. and then R.F.C. had re-granted to the plaintiff all the rights concerning the patent which were retained or reserved by the plaintiff under the existing agreement. The extent and character of those reserved rights and the character of the interest of R.F.C. are the matters for consideration.

In determining whether such an assignment makes the R.F.C. the real party in interest and thus an indispensable party to this action let us consider the nature of the rights reserved by the plaintiff and especially as to whether those same rights, if affirmatively granted, would make the grantee an assignee or licensee. In Waterman v. Mackenzie, supra, it is said: "The patentee or his assigns may, by instrument in writing, assign, grant, and convey, either, (1) the whole patent, comprising the exclusive right to make, use, and vend the invention throughout the United States; or (2) an undivided part or share of that exclusive right; or (3) the exclusive right under the patent within and throughout a specified part of the United States. * * * Any assignment or transfer, short of one of these, is a mere license, giving the licensee no title in the patent, and no right to sue at law in his own name for an infringement. * * * In equity, as at law, when the transfer amounts to a license only, the title remains in the owner of the patent; and suit must be brought in his name * * *."

The mere fact that the instrument now considered states that the interest reserved by the plaintiff is a "non-exclusive" license is not, however, in itself, determinative of the character of the interest. Here, however, I find no facts which would remove the agreement from that status in which the parties clearly intended to place it. It is called a "personal, non-exclusive, non-assignable and royalty-free right and license * * * to make, use and vend * * *." It so appears to be. The two material rights reserved to the present plaintiff are (1) the right to bring suit for infringement in the name of the present plaintiff "and of R.F.C.," provided R.F.C. consents, or, if assent is requested, does not dissent within 90 days. Without this assent or express failure to dissent no such suit could be brought; (2) the...