Pittway Corp. v. BRK SHAREHOLDERS'COMMITTEE

• Citation: 199 USPQ 659,444 F. Supp. 1210
• Decision Date: 27 January 1978
• Docket Number: No. 76 C 3670.,76 C 3670.
• Parties: PITTWAY CORPORATION, Plaintiff, v. The BRK SHAREHOLDERS' COMMITTEE, Defendant.
• Court: U.S. District Court — Northern District of Illinois

444 F. Supp. 1210

199 USPQ 659

PITTWAY CORPORATION, Plaintiff, v. The BRK SHAREHOLDERS' COMMITTEE, Defendant.

No. 76 C 3670.

United States District Court, N. D. Illinois, E. D.

January 27, 1978.

J. William Hayton, James B. Moran, Bell, Boyd, Lloyd, Haddad & Burns, Chicago, Ill., for plaintiff.

Clemens, Hufmann, Mason, Kolemainen, Rathburn & Wyss, Chicago, Ill., for defendant.

MEMORANDUM OPINION

FLAUM, District Judge:

The instant action raises common but difficult questions in patent litigation recently addressed in two Seventh Circuit opinions, Milprint v. Curwood, 562 F.2d 418 (7th Cir. 1977), and Super Products Corp. v. DP Way Corp., 546 F.2d 748 (7th Cir. 1976), concerning the availability of declaratory judgment relief pursuant to 28 U.S.C. § 2201. Before the court is defendant's motion to dismiss¹ plaintiff's complaint on the grounds that as to one of plaintiff's claims for declaratory relief there does not exist a justiciable "case or controversy" between the parties, and as to plaintiff's other claim for declaratory relief that claim does not "arise under" the federal patent laws, 28 U.S.C. § 1338.² After considering the parties' arguments and submissions, this court must agree that this court lacks subject matter jurisdiction to adjudicate plaintiff's complaint and this cause must therefore be dismissed.³

Although undisputed, the relevant facts in this action are complex and must be set forth with some detail. In February, 1970, Pittway Corp. (Pittway) entered into an agreement with the shareholders of BRK Electronics, Inc. in which Pittway agreed to acquire all the assets of BRK Electronics. These assets included a certain United States patent application No. 709,415 which covered a smoke detection device containing two batteries, one of which monitored the battery which operated the detection device. In exchange for these assets, Pittway agreed to use its best efforts to obtain as broad a patent as possible based on the patent application No. 709,415 and to pay to the shareholders as the purchase price a specific amount for each device covered by the patent application. The agreement also provided that if payments by Pittway to the shareholders did not reach a specific figure within three years, any patent obtained based upon the No. 709,415 application would be transferred as directed by a BRK Shareholders' Committee.

On July 20, 1971, U.S. Patent No. 3,594,751 was issued pursuant to the No. 709,415 application. However, this issued patent did not contain within its scope a claim 13 which sought to patent a single battery self-monitoring smoke detector. By 1973 the payments by Pittway to the shareholders had not reached the agreed upon level and the BRK Shareholders' Committee, pursuant to the agreement, directed Pittway to transfer patent No. 3,594,751 to it. Thereupon the BRK Shareholders' Committee filed an application for a Reissue Patent which was granted in 1976 containing the claims in the original patent No. 3,594,751 as well as several additional claims. Claim 13, however, was not included in the Reissue Patent No. 28,915.

On June 16, 1976 several of the selling shareholders of BRK Electronics filed an action in the Circuit Court of Cook County, Illinois against Pittway. Burke v. Pittway Corp., Civ. No. 76 L 13079 (Cir.Ct. of Cook Cty., Ill., filed June 16, 1976). In their six-count complaint,⁴ the state court plaintiffs alleged that Pittway had breached its agreement, and its fiduciary duty to the selling shareholders, in not properly prosecuting the original patent application No. 709,415 and in not obtaining the broadest possible patent coverage for the invention embodied therein. In particular, the shareholders alleged that claim 13 should have been prosecuted more diligently and that Pittway's failure to do so damaged the shareholders. On December 21, 1976, in a one line order, the circuit court dismissed the shareholders' action on Pittway's motion.

On October 4, 1976, Pittway filed the instant action seeking a declaratory judgment: (1) that the original and reissued patents were invalid and not infringed by Pittway; and (2) "that it has not made or sold any products embodying any patentable invention disclosed in the application for the Original Patent that was not claimed therein," i. e. claim 13. As stated previously, defendant has argued that this court lacks subject matter jurisdiction to grant the relief sought by plaintiff on the grounds of lack of "case or controversy" and failure to allege a cause of action under the federal patent laws. This court shall consider each claim for declaratory relief made by plaintiff seriatum.

I. Invalidity and Noninfringement of the Original and Reissue Patent.

Although defendant concedes, and rightly so, that a suit for patent infringement or a declaratory action seeking a declaration of noninfringement "arises" under the federal patent laws and is properly brought in federal court, Arvin Indus., Inc. v. Berns Air King Corp., 510 F.2d 1070, 1072-73 (7th Cir. 1975), defendant argues that in the case at bar there is no actual controversy between the parties over the validity or infringement of the original patent No. 3,594,751, or of the reissue patent No. 28,915. Resolution of this issue is controlled by the principles set forth in Super Products Corp. v. DP Way Corp., 546 F.2d 748 (7th Cir. 1976).

In Super Products, the Seventh Circuit recognized that an action seeking a declaratory judgment pursuant to 28 U.S.C. § 2201 is not immune from the constitutional limitation on federal judicial power to "cases" or "controversies." 546 F.2d at 753, citing Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-40, 57 S.Ct. 461, 81 L.Ed. 617 (1937). As the court stated:

The case or controversy requirement limits the exercise of federal judicial power to suits that present "real and substantial" controversies involving "the legal relations of parties having adverse legal interests" and prohibits its exercise in suits that rest upon "a hypothetical set of facts." Aetna Life Insurance Co. v. Haworth, supra, 300 U.S. at 240-41, 57 S.Ct. 461. The Supreme Court has recognized that the difference between a hypothetical question and an actual controversy is "necessarily one of degree" and that the basic question is whether the facts alleged show a controversy of "sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941).

546 F.2d at 753. As applied to declaratory actions brought by alleged infringers seeking declarations of patent invalidity or noninfringement, the case or controversy requirement mandates that the plaintiff disclose in its complaint conduct on the part of the defendant/patentee, "that makes reasonable the plaintiff's apprehension that it will face an infringement suit or the threat of one if it commences or continues the activity in question." 546 F.2d at 753. Thus, while alleged infringers need not wait until they are sued for infringement or until an actual "accusation" of infringement is made to establish their rights by way of the declaratory judgment device, they may not obtain declaratory relief when there is no real threat of infringement litigation by the patentee.

In the case at bar, plaintiff relies on the filing of the state court action by the shareholders of BRK Electronics to support what it contends is a reasonable belief that there is a threat of infringement litigation against it by the holders of the original patent No. 3,594,751 and the reissue patent No. 28,915. Thus, in paragraph 8 of the instant complaint Pittway alleges that:

The complaint in the state action asserts that products made by plaintiff embody the alleged invention disclosed in said Patent and Reissue Patent . . ..

And, in paragraph 9, it is alleged that:

By reason of the foregoing there exists an actual controversy between the parties hereto as to whether any products made or sold by plaintiff have embodied any patentable invention disclosed in the application for the Original Patent and whether the Reissue Patent is valid and has been infringed by plaintiff.

This court cannot agree that from these allegations and other undisputed facts delineating the circumstances of this case that plaintiff Pittway has a "reasonable" apprehension of a patent infringement action being instituted by defendant. Thus, unlike Super Products where the plaintiff/alleged infringer had heard that the defendant/patentee had told others that it would institute patent infringement action against the plaintiff, 546 F.2d at 752, there has been no actual threat of infringement litigation made by the defendant BRK Shareholders' Committee to Pittway. While as stated previously it is not a necessary condition to a declaratory action by an alleged infringer that an actual accusation is made, the lack of such an accusation can be and is relevant in determining, along with all other facts, the reasonableness of the alleged infringer's apprehension of infringement litigation.

There are several other factors which militate against a finding that a case or controversy exists between these parties as to the infringement of the original and reissue patents. Unlike Sherwood Med. Indus., Inc. v. Deknatal, Inc., 512 F.2d 724, 728 (8th Cir. 1975), and Blessings Corp. v. Altman, 373 F.Supp. 802, 806-07 (S.D.N.Y.1974), where the courts found the declaratory judgment plaintiffs to have reasonable apprehensions of infringement actions, in the case at bar there is no prior history of infringement litigation between these parties or between the defendant and competitors of plaintiff producing products similar to Pittway's products. Also, in the state court complaint, the BRK Electronic shareholders expressly stated in paragraph 33 that because of Pittway's alleged failure to properly prosecute the original patent application, patent infringement litigation would...