Prelin Industries, Inc. v. G & G CRAFTS, INC.

• Decision Date: 15 September 1972
• Docket Number: Civ. A. No. Civ-72-95.
• Parties: PRELIN INDUSTRIES, INC., Plaintiff, v. G & G CRAFTS, INC., and George E. Barrow, Defendants.
• Court: U.S. District Court — Western District of Oklahoma

357 F. Supp. 52

PRELIN INDUSTRIES, INC., Plaintiff, v. G & G CRAFTS, INC., and George E. Barrow, Defendants.

Civ. A. No. Civ-72-95.

United States District Court, W. D. Oklahoma.

September 15, 1972.

COPYRIGHT MATERIAL OMITTED

John B. Hayes, Watts, Looney, Nichols & Johnson, Oklahoma City, Okl., Jack A. Kanz, Dallas, Tex., for plaintiff.

Jerry J. Dunlap and William R. Laney, Dunlap, Laney, Hessin & Dougherty, Oklahoma City, Okl., for defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

CHANDLER, District Judge.

This cause having come on for trial on September 6, 7 and 8, 1972 by the Court sitting without a jury, the parties appearing in person and by counsel, and the Court having considered the testimony and exhibits presented at the trial, all deposition testimony and exhibits, and the briefs of the parties, makes the following findings of fact and conclusions of law.

FINDINGS OF FACT

THE PARTIES

1. Plaintiff, Prelin Industries, Inc., is a Texas corporation, having its principal place of business in Dallas, Texas, and engaged in the business of manufacturing and selling electric oil refiners. The President of Plaintiff is, and was at the time of filing of this suit, Glen R. Priest.

2. Defendant, George E. Barrow, is an individual residing in Enid, Oklahoma, and is the President of the Defendant G & G Crafts, Inc.

3. Defendant, G & G Crafts, Inc., is a corporation of the state of Oklahoma, having its principal place of business in Enid, Oklahoma, and is engaged in the manufacture and sale of electric oil refiners.

4. Plaintiff and Defendants are in competition in the manufacture and sale of electric oil refiners. Electric oil refiners are devices used primarily on automobiles for cleansing the engine lubricating oil by removing both solids and volatiles (such as water and gasoline) from the oil as the oil is being circulated through the engine.

THE SUBJECT MATTER OF THE SUIT AND THE ISSUES

5. Plaintiff brought this suit against the defendants on February 14, 1971, contending

(a) that the Defendants have infringed United States Patent 2,839,196 to William C. Schwalge, granted on June 17, 1958, by manufacturing and selling electric oil refiners;

(b) that Defendants have unfairly competed with Plaintiff by:

(1) affixing decals or labels to oil refiner devices manufactured by Defendants and sold by Plaintiff, such decals or labels indicating that such devices were manufactured by the Defendant G & G Crafts, Inc., contrary to agreement with Plaintiff;

(2) falsely labeling such devices with labels indicating that they were made under U.S. Patent 3,550,781;

(3) marking such devices in the manner described for the purpose of surreptitiously learning the identity and location of Plaintiff's customers and distributors;

(4) fraudulently misrepresenting to Plaintiff's distributors and customers that Plaintiff was merely an agent of the Defendants, and/or that Plaintiff was owned by Defendants, and/or that Plaintiff was going out of business and would cease to provide its product for its customers and distributors, and/or that the business of Plaintiff had been acquired by the Defendants, and/or that Defendants had the sole and exclusive right to manufacture and sell the oil refiner device sold by Plaintiff, and that Plaintiff would no longer provide the product to its customers and distributors;

(c) that Defendants, to the damage of Plaintiff, have sold and are selling electric oil refiners to persons other than Plaintiff's distributors and customers with labels affixed thereto falsely designating Plaintiff as the source of origin, in violation of Title 15 United States Code Section 1121;

(d) that Defendants have violated Title 35 United States Code Section 292 by falsely mismarking oil refiner devices manufactured and sold by Defendants with United States Patent No. 3,550,781, such marking being effected for the purpose of deceiving the public.

6. Defendants, George E. Barrow and G & G Crafts, Inc., answered, denying liability of and for the charges asserted by Plaintiff, and by way of counterclaims, charged the Plaintiff with, inter alia:

(a) patent mismarking under 35 United States Code Section 292 by advertising and publicly representing that the electric oil refiners sold by Plaintiff were covered by one or more United States patents owned by Plaintiff or Glen R. Priest at a time when, in fact, neither the Plaintiff nor Glen R. Priest owned any United States patents;

(b) unfairly competing with the Defendants by:

(1) advertising the electric refiners sold by Plaintiff as being covered and protected by a United States patent owned by Plaintiff or Glen R. Priest when, in fact, neither Plaintiff nor Priest owned any United States patent;

(2) representing to its distributors, prospective distributors and the public at large that Plaintiff manufactured or controlled the manufacture of oil purifier and refiner devices being sold by Plaintiff, fully knowing that Defendants alone were the manufacturers of such devices and were completely independent of Plaintiff;

(3) subsequently to February 1, 1971, representing to the public at large and prospective distributors that Plaintiff was the exclusive distributor of electric oil refiners manufactured by Defendants when, in fact, at that time Plaintiff was merely a non-exclusive distributor of such refiners, and Defendants had the right to also distribute and sell such devices;

(4) subsequently to December 7, 1971, representing to its distributors and to prospective distributors and customers that Defendants had no right to control or intervene in any way in the marketing practices of Plaintiff when, in fact, the contract then in effect between Plaintiff and Defendants expressly granted to Defendants the right to oversee, control and intervene in the marketing practices of Plaintiff;

(c) violation of the Anti-Trust Laws of the United States and of the state of Oklahoma by, inter alia,

(1) entering into contracts with distributors of its electric oil refiners based upon falsely represented ownership or control of patents by Plaintiff;

(2) contracting for the sale and distribution of electric oil refiners upon the condition or understanding that the purchasers thereof from Plaintiff for resale shall not deal in the oil refiner devices of a competitor, or in any competitive oil refiner devices;

(3) conspiring to deter or eliminate competition in electric oil refiners by falsely stating or implying that the electric oil refiners marketed by Plaintiff were manufactured by Plaintiff, or that Plaintiff controlled their manufacture;

(4) falsely representing itself to possess sole and exclusive rights to sell electric oil refiner devices so as to portray and imply that no other sources of such devices existed, and thus deter efforts or designs to seek other competitive sources of such devices when Defendants legitimately constituted one such other source;

(5) conditioning the sale of oil refiner and purifier devices to distributors upon the agreement of such distributors not to compete with Plaintiff in the sale of any such devices or similar devices for a period of two years after such distributorship is terminated;

(6) conspiring, contracting and acting in restraint of trade and commerce among the several states in electric oil refiners by falsely asserting ownership of Schwalge U.S. Patent 2,839,196.

7. Between September of 1968 and the time of bringing of this suit, Plaintiff and Defendants constituted the sole known sources of electric oil refiner devices in the United States.

CHRONOLOGICAL SEQUENCE OF EVENTS AND ACTS OR THE PARTIES

8. In about 1961 or 1962, Defendant George E. Barrow commenced to sell in and around Enid, Oklahoma electric oil refiner devices manufactured by the Reclaimo Company, an Illinois corporation, with a principal place of business at Skokie, Illinois.

9. The Reclaimo electric oil refiners sold by Defendant George E. Barrow were made under William C. Schwalge United States Patent 2,839,196, a patent at that time owned by The Reclaimo Company, along with several other patents issued to William C. Schwalge on oil reclaimer devices.

10. In the middle of 1963, The Reclaimo Company encountered severe financial difficulties and ceased doing business, and as a result of this cessation, George E. Barrow could no longer sell electric oil refiners manufactured by that company.

11. In late 1963 or early 1964 George E. Barrow communicated to one or more officials of The Reclaimo Company, his desire to commence to manufacture electric oil refiners similar to those which had been manufactured by The Reclaimo Company and previously sold by him.

12. In late 1964, George E. Barrow, doing business as G & G Crafts in Enid, Oklahoma, commenced to manufacture and sell electric oil refiners.

13. No representative of the Reclaimo Company ever contended that the oil refiners made by Defendants infringed the Schwalge patent 2,839,196.

14. From 1964 until 1968, Defendants Barrow and G & G Crafts continued to manufacture electric oil refiner devices, and early during this period, modified or altered the design of the electric oil refiner device. The electric oil refiner which was manufactured after such modification included a hollow body or housing divided by a vaporization plate into a vaporization chamber in the upper portion of the housing, and a filter material chamber in the lower portion of the housing. The filter material chamber was filled with a fibrous material, such as cotton, and the vaporization plate carried upstanding protuberances or bosses having small holes formed therethrough to conduct oil from the bottom side of the vaporization plate to the top side of the protuberances or bosses. The holes formed through the plate were cylindrical, vertically extending, straight holes. The housing was covered by a removable lid which carried a heater for heating oil passing over the bosses onto the vaporization plate. Gases...