Pipe Liners, Inc. v. AMERICAN PIPE & PLASTICS

• Decision Date: 18 July 1995
• Docket Number: Civ. A. No. G-95-279.
• Citation: 893 F. Supp. 704
• Parties: PIPE LINERS, INC., Hydro Conduit Corporation, and Quail Pipe Corporation v. AMERICAN PIPE & PLASTICS, INC. and American Infrastructure, Inc.
• Court: U.S. District Court — Southern District of Texas

893 F. Supp. 704

PIPE LINERS, INC., Hydro Conduit Corporation, and Quail Pipe Corporation v.AMERICAN PIPE & PLASTICS, INC. and American Infrastructure, Inc.

Civ. A. No. G-95-279.

United States District Court, S.D. Texas, Galveston Division.

July 18, 1995.

Jon R. Trembath, Michael O. Sutton, Fish & Richardson, Houston, TX, for Pipe Liners, Inc. and Hydro Conduit Corp.

William M. Coats, Coats Rose Yale Holm Ryman & Lee, Houston, TX, Charles J. Brown, Carol D. Stevens, Brown Kelleher Zwickel & Wilhelm, Windam, NY, Edward D. Conan, James R. Muldoon, Bond Schoeneck & King, Syracuse, NY, for defendants.

Michael O. Sutton, Fish & Richardson, Houston, TX, for Quail Pipe Corp.

ORDER

KENT, District Judge.

This is a patent infringement case in which PlaintiffsPipe Liners, Incorporated("Pipe Liners"), Hydro Conduit Corporation("Hydro Conduit"), and Quail Pipe Corporation("Qual Pipe") allege that Defendants have infringed U.S. PatentNos. 4,985,196 and 4,986,951, both of which are patent claims for installing thermoplastic pipeliners inside an existing pipe.Before the Court now is Defendants' Motion to Dismiss Plaintiff Hydro Conduit for lack of standing to sue.For the reasons stated below, the Court finds that Defendants' Motion should be DENIED.

It is undisputed in this case that Plaintiff Pipe Liners owns all right, title, and interest in the patents in question, including the right to recover for any past, present, or future infringement of the patents.Plaintiff Hydro Conduit is the parent corporation of Pipe Liners and owns 100% of all Pipe Liner's assets, including the disputed patents.¹It is also undisputed that Hydro Conduit is intimately involved in the corporate affairs of its subsidiary.Hydro Conduit has provided cash to Pipe Liners at several points during 1995; the board members of the two corporations substantially overlap; its employees are responsible for marketing, sales, and licensee assistance for Pipe Liners; and Hydro Conduit is actively involved in Pipe Liner's management.(Plaintiffs' Response, Instrument # 12, at 5).

Nevertheless, Defendants argue that Hydro Electric lacks standing to assert a claim for infringement of the patents because it does not own legal title to them.A patent, of course, is a creature of statute, as is the right of the patentee to have a remedy for the infringement of the patent.In order to exercise that right, a Plaintiff must necessarily have standing as comprehended by the patent statute.Ortho Pharmaceutical Corporation v. Genetics Institute, Inc.,52 F.3d 1026, 1032(Fed.Cir.1995);Animal Legal Defense Fund v. Quigg,932 F.2d 920, 925, 18 USPQ2d 1677, 1681(Fed.Cir.1991).Relying primarily on Site Microsurgical Systems, Inc. v. Cooper Companies, Inc.,797 F.Supp. 333(D.Del.1992), Defendants allege that Hydro Conduit's status as a parent corporation is insufficient to grant it standing to sue in this case.The Court disagrees and finds that Defendants' reliance on Site Microsurgical is misplaced.

Site Microsurgical involved a motion by a subsidiary corporation to join its parent corporation in a patent infringement case.The District Court found that the motion should be denied because the Plaintiffs had submitted no legal authority for the proposition that "a parent corporation effectively has the patent rights of owners, assignees, and licensees by virtue of its ownership of a subsidiary holding patent."Id. at 338.Thus, the parent corporation could not be joined in a patent infringement suit seeking compensation for lost sales."Parties who do not hold legal title to the patent during the time of infringement are not permitted to recover for patent infringement."Id. at 337(emphasis added).

However, Site Microsurgical did not consider the separate issue of whether a parent corporation can be joined by the holder of legal title to a patent in an equitable action as opposed to a suit for damages for patent infringement.Plaintiffs argue that although Hydro Conduit does not own legal title to the patents in question, it does own equitable title, which is defined as "the beneficial interest of one person whom equity regards as the real owner, although the legal title is vested in another."Black's Law Dictionary 1486 (6th ed. 1990).Plaintiffs implicitly rely on the well-established, and remarkably old, doctrine that an equitable title to a patent accrues to a corporation in patents owned by its constituent corporation.Deller's Walker on Patents§ 359 (2d ed. 1965)(citingEdison Electric Light Co. v. New Haven Electric Co.,35 F. 233, 236(CC Conn.1888)).²

It is also well established that "a federal district court has jurisdiction to determine a `claim for infringement,' asserted by an adjudged equitable title holder, as a prerequisite to awarding equitable relief for that infringement."Arachnid, Inc. v. Merit Industries,939 F.2d 1574, 1580(Fed.Cir.1991).In this case, Plaintiffs' Original Petition seeks a variety of equitable remedies, including declaratory and injunctive relief, as well as several legal claims for damages.Because Hydro Conduit does not hold legal title to the disputed patents, the Court finds that Plaintiff clearly has no standing to join the remaining Plaintiffs in these legal claims.Nevertheless, under the persuasive case of University of...