Philadelphia Brief Case Co. v. Specialty Leather P. Co., Civ. A. No. 325-55.

• Decision Date: 26 October 1956
• Docket Number: Civ. A. No. 325-55.
• Citation: 145 F. Supp. 425
• Parties: PHILADELPHIA BRIEF CASE COMPANY et al., Plaintiff, v. SPECIALTY LEATHER PRODUCTS CO., Inc., Defendant.
• Court: U.S. District Court — District of New Jersey

145 F. Supp. 425

PHILADELPHIA BRIEF CASE COMPANY et al., Plaintiff, v. SPECIALTY LEATHER PRODUCTS CO., Inc., Defendant.

Civ. A. No. 325-55.

United States District Court D. New Jersey.

October 26, 1956.

Harold Markowitz, Newark, N. J., by Harry Langsam, Philadelphia, Pa., for plaintiff.

Norman N. Popper, Newark, N. J., for defendant.

HARTSHORNE, District Judge.

This patent case for infringement brought by the Philadelphia Brief Case Company, a partnership, as plaintiff, hereinafter called "Philadelphia", against the Specialty Leather Products Co., Inc., a corporation of New Jersey, hereinafter called "Newark", involves two somewhat unusual situations. In the first place, Philadelphia has attempted to join as an unwilling plaintiff, under the rules, Federal Rules of Civil Procedure, rule 19(a), 28 U.S.C., the patentee, its licensor, National Leather Handle Company, Inc., a corporation, hereinafter called "Chicago", together with certain individuals who formed and control Chicago. In the next place, at the trial Newark's President testified, without denial, that one of plaintiff Philadelphia's partners told him, when the infringement question first arose, that he, the Philadelphia partner, "is quite familiar with patents, knows a lot about them" and he is "sure if this (the present litigation) goes to court, which he intended to do, that he would be able to be successful in throwing out * * * the patent, and he was going to teach young Epton (one of Chicago's officers) a lesson * * * and if he is successful in having the patent declared null and void, which he is sure he could, he could save a lot of money."

Since Philadelphia was in fact a licensee from Chicago of the above patent, paying royalties to Chicago therefor, it is obvious that Philadelphia in fact, instead of seeking in this suit to prove that defendant Newark was an infringer of Chicago's valid patent, was hopeful that Chicago's patent would be declared void, thus negating any possible infringement, and that Philadelphia would no longer have to pay royalties, but could use Chicago's processes freely. This Court is, thus presented with a situation where, on the record, plaintiff Philadelphia desires in fact the very opposite of that which its papers ask; and here it seeks the aid of this Court to defeat the very patent on which it bases its rights, by making an unwilling plaintiff of Chicago, whose interests are clearly adverse to its own.

It was also not disputed that the reason why Chicago refused to enter this jurisdiction, where it could not be served, was because it claimed that Newark was not in fact infringing the above patent, Newark itself being a licensee from Chicago under an earlier basic patent. It further appears that Chicago is now suing Philadelphia in the United States District Court for the Eastern District of Pennsylvania for the royalties due under the above patent license to Philadelphia.

Since there was a definite dispute as to the right of Philadelphia to bring this patent infringement suit at all, because of the fact that Philadelphia's rights were based solely on two agreements with Chicago which in terms conferred licenses, it was ordered at pre-trial that, to save the time of all concerned, this preliminary issue be disposed of, on motion, before holding the trial on the merits. However, counsel did not do this. Thus, when the case came on for trial, this Court insisted that this issue be first tried, the above facts, together with the above two license agreements, thus being put in evidence and found as facts by this Court.

On this preliminary hearing the question was raised as to whether Philadelphia's refusal to arbitrate with Chicago their difference of opinion on Newark's infringing Chicago's patent, constituted a breach of a condition precedent to Philadelphia's right to sue. But, regardless of this, we turn to the question of what Philadelphia's right was to bring this suit for patent infringement at all under these two agreements — the sole basis of Philadelphia's rights — which make Philadelphia a licensee only.

In general, the right to sue under the patent laws on a patent, as distinguished from the right to sue for breach of a contract concerning a patent, naturally depends upon those laws. The 1952 Patent Act grants this right to sue solely to the "patentee". 35 U.S.C., Patents, § 281. The new act in terms is therefore somewhat more restrictive in that regard than the previous statute, which provides: 35 U.S.C. § 67 "Damages for the infringement of any patent may be recovered by action on the case, in the name of the party interested, either as patentee, assignee or grantee."

The Courts have held, under the old law, that only the patentee, or those having actual proprietary rights in the patent, can sue thereon, those claiming a mere contractual right in the patent, as distinguished from a right of ownership therein, being relegated to their common law or equitable actions for the violation of such contractual rights. Gayler v. Wilder, 1850, 10 How. 477, 13 L.Ed. 504; Waterman v. Mackenzie, 1891, 138 U.S. 252, 11 S.Ct. 334, 34 L.Ed. 923. Thus the patentee, or those to whom he has sold his patent rights, such as assignees, can sue on the patent in their own names. Hook v. Hook & Ackerman, 3 Cir., 1951, 187 F.2d 52. This is so even if their rights to the patent are limited in territory and in time, provided they are exclusive of the rest of the world in fact. United Lacquer Mfg. Corp. v. Maas & Waldstein Co., D.C.N.J. 1953, 111 F.Supp. 139. Though in such a case the proprietary owner is normally known as a grantee. Here, however, it should be noted that it makes little difference what name is given to this transfer of rights. Hook v. Hook & Ackerman, supra. It is the nature of the rights transferred which governs. On the other hand, if the transfer by the patentee, or his assigns, creates merely a bare license to make or use or vend the patented product, or all three, and this right is not exclusive as to the rest of the world, the patentee included, then both by the express terms of the statute and the statutory intent, as found by the courts, this bare licensee has no real proprietary interest in the patent. Thus he can not sue on the patent at all, but is relegated to his rights to enforce his license agreement as a contract. Gayler v. Wilder, supra; Waterman v. Mackenzie, supra.

Midway between these two extremes comes the holder of rights to the patent, who is often termed an "exclusive licensee", but whose license may not be strictly exclusive in fact. For while this so-called "exclusive licensee" is protected from any action by the real proprietor of the patent in the way of his granting other licenses to unknown third parties as an ordinary patent proprietor can do, such patent proprietor may retain use of the patent for himself and may even, before creating this "exclusive license" have named others as bare licensees. Hawkinson Co. v. Carnell, 3 Cir., 1940, 112 F.2d 396; Western Electric Co. v. Pacent Reproducer Corp., 2 Cir., 1930, 42 F.2d 116. Quaere, whether under the theory of these last two cases the same result would not follow were the patent proprietor in his "exclusive license" to have reserved to himself the right to create such a limited specific license thereafter. In any event, since the creation of such...