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

• Decision Date: 26 August 1948
• Docket Number: No. 9546.,9546.
• Citation: Paper Container Mfg. Co. v. Dixie Cup Co., 170 F.2d 333 (3rd Cir. 1948)
• Parties: PAPER CONTAINER MFG. CO. v. DIXIE CUP CO.
• Court: U.S. Court of Appeals — Third Circuit

170 F.2d 333 (1948)

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

No. 9546.

United States Court of Appeals Third Circuit.

Argued June 24, 1948.

Decided August 26, 1948.

Rehearing Denied October 11, 1948.

Thomas Cooch, of Wilmington, Del. (Marvel & Morford, of Wilmington, Del., and Franklin M. Warden and Cromwell, Greist & Warden, all of Chicago, Ill., on the brief), for appellant.

Max R. Chambers, of Chicago, Ill. (William H. Foulk, of Wilmington, Del., and Charles F. Meroni, Carlton Hill, and The Firm of Charles W. Hills, all of Chicago, Ill., on the brief), for appellee.

Before BIGGS, Chief Judge, and McLAUGHLIN and O'CONNELL, Circuit Judges.

BIGGS, Chief Judge.

Paper Container Mfg. Company, the appellant, and Dixie Cup Company, the appellee, were in interference in the United States Patent Office upon the respective applications of Hulseman and Carew.The applications of the two inventors had been previously assigned by them to the parties herein.Priority of invention was awarded Dixie Cup on Carew's application by the Board of Interference Examiners on July 11, 1946.On January 2, 1947, Paper Container brought suit in the court below against Dixie Cup to obtain a patent under R.S. § 4915, 35 U.S.C.A. § 63.Dixie Cup filed a motion to dismiss under Federal Rules of Civil Procedure, rule 12(b),28 U.S.C.A., on the ground that the court below lacked jurisdiction of the subject matter because the suit was not being prosecuted by the real party in interest, Reconstruction Finance Corporation.RFC, while the interference was pending, had made a loan to Paper Container and had received as security an assignment of the Hulseman application.This assignment was duly recorded in the Patent Office.A hearing was had on Dixie Cup's motion to dismiss in the court below but before its determination Paper Container filed an amendment to its complaint under Rule 15(a) which purported to join RFC as a partyplaintiff.Dixie Cup moved to strike the amendment.It was stipulated that the court should consider both motions upon the hearing had and the authorities subsequently cited.The court dismissed the complaint for the reasons stated in its opinion.See74 F.Supp. 389.The appeal at bar followed.

The assignment executed by Paper Container to RFC, after recitals respecting the amount of the loan and the terms for its repayment, states that as security the assignor, Paper Container, does sell, assign and transfer to RFC "all right, title and interest of the Assignor in and to" the Hulseman application.¹The assignment further provides that Paper Container should have certain "licenses, rights, and privileges" and by the same instrument Paper Container entered into certain covenants with RFC, all as set out in the footnote.²It will be observed from an examination of the reservations that Paper Container (reservation (a)) reserved a "personal, non-exclusive, non-assignable, and royalty-free right and license to make, use and vend the subject matter" of the Hulseman application³ but that none the less (reservation (c)) RFC agreed that it would not license any person to engage in the manufacture of any product "directly competitive" with that of Paper Container without the latter's approval in writing.It follows that, although the license reserved to Paper Container is designated in the assignment as a "non-exclusive license", it is a good deal more than that and comes close to being an exclusive license, defeasible only by Paper Container's failure to repay the loan in accordance with its terms or to observe the other covenants of the assignment.Reservation (b) provides that Paper Container has the right to bring suit against any patent infringer (see note 1 supra) in its own name and in the name of RFC as complainants, upon procuring permission from RFC, the latter's consent to be presumed upon written request not denied within ninety days by RFC.

The covenants, (1) to (7) inclusive, referred to above, need not be discussed in detail.It is sufficient to state that covenant (4) states that Paper Container shall notify RFC of any interference in the Patent Office in respect to any application covered by the assignment, shall prosecute interferences at its own expense, and upon RFC's request shall grant associate powers of attorney to any attorney designated by the latter to prosecute the application to a final conclusion "in the United States Patent Office and all Appellate Tribunals".Covenant (5) provides that Paper Container shall diligently prosecute all applications "in the United States Patent Office and Appellate Tribunals" and will not abandon any application without RFC's written consent.Covenant (6) states that Paper Container upon RFC's request shall give to it or to its attorneys power to inspect the files of any application in the Patent Office, shall furnish copies of papers filed in respect to the applications and also shall give associate powers of attorney to any attorney selected by RFC to prosecute any application "in the United States Patent Office and all Appellate Tribunals" to a final conclusion, expenses incurred by RFC in the prosecution of any application to be chargeable to Paper Container.

If the clause "Appellate Tribunals" referred to in covenants (4), (5) and (6) be given strict construction it might be held that the reference was not intended to include a district court of the United States sitting in an R.S. § 4915 proceeding but was designated to embrace only the United States Court of Customs and Patent Appeals, as an administrative tribunal⁴ of the Patent Office, and the Supreme Court of the United States, whence appeals lie ultimately from the decisions of the Patent Office.We think, however, that it was the intention of the parties to include a district court of the United States sitting "in review"⁵ of the refusal of the Patent Office to grant a patent in an R.S. § 4915 proceeding within the phrase appellate tribunals as used in the covenants.⁶Covenant (5) provides expressly that Paper Container shall prosecute applications in the Patent Office and before appellate tribunals.The language of the so-called "abandonment clause" of covenant (5)⁷, indicates that Paper Container and RFC agreed implicitly that Paper Container alone and in its own name should prosecute applications, such as Hulseman's.Compare the provisions of reservation (b) that suits for infringement should be prosecuted in the names of both Paper Container and RFC.⁸Obviously it was not the intention of RFC to take part in proceedings in the Patent Office in its own name as assignee but to leave such proceedings to be prosecuted by Paper Container as assignee of Hulseman.The respective rights and standings of Paper Container and RFC must be determined by the terms of Paper Container's assignment to RFC.The indication is clear that both RFC and Paper Container understood and agreed that Paper Container should prosecute the Hulseman application to a final conclusion.

On examination of the reservations granted to Paper Container by RFC and the covenants of the assignment, we cannot say, as Dixie Cup contends, that under Waterman v. Mackenzie, 138 U.S. 252, 11 S.Ct. 334, 34 L.Ed. 923, that Paper Container is a mere non-exclusive licensee under the Hulseman application and for that reason had no right to institute the action at bar or that RFC is the only real party in interest, an indispensable party that alone was entitled to institute and maintain the instant suit.The Supreme Court in the Waterman case recognized that the assignor of a patent by an assignment couched in general terms consummates an act "equivalent to delivery of possession" of corporeal property and makes the title of the assignee "complete towards all other persons, as well as against" the assignor, but the Court added the qualifying phrase "unless otherwise provided in the mortgage".138 U.S. at page 260, 11 S.Ct. at page 337, 34 L.Ed. 923.The qualifications in the assignment in the case at bar are substantial and, in our opinion, are sufficient to constitute Paper Container as a real party in interest, an indispensable party.Shields v. Barrow, 17 How. 130, 139, 15 L.Ed. 158;United States v. Washington Institute of Technology, D.C. Del., 47 F.Supp. 384.It follows that both Paper Container and RFC are indispensable parties.

We turn now to the provisions of R.S. § 4915 to determine how they should be applied under the circumstances at bar.The section, in pertinent part, states: "Whenever a patent on application is refused by the Board of Appeals or . . . whenever any applicant is dissatisfied with the decision of the board of interference examiners, the applicant * * * may have remedy by bill in equity, if filed within six months after such refusal or decision; and the court having cognizance thereof, on notice to adverse parties and other due proceedings had, may adjudge that such applicant is entitled, according to law, to receive a patent for his invention * * *."The question is: Can Paper Container alone, without RFC, be deemed to be an "applicant" within the phrase "any applicant" as used in the statute?

The locii standi of Paper Container and RFC created by the terms of the assignment are anomalous.Each has a substantial interest in the Hulseman application and those interests are in a sense indivisible or, at least, joint.RFC is interested in having the application prosecuted to fruition.If this is not accomplished RFC's security for its loan to Paper Container will be correspondingly decreased.Paper Container's interest is substantially similar to that of RFC.If the Hulseman application is not prosecuted to a successful conclusion Paper Container will lose an asset which it expects (on repayment of the loan to RFC) to recapture in toto.RFC's interest is surely not "adverse" to that of Paper Container, nor is that of Paper Container "adverse" to the interest of RFC.The "adverse parties" referred to in R.S. § 4915...