Product Engineering and Manufacturing, Inc. v. Barnes, 413-69.
| Decision Date | 10 April 1970 |
| Docket Number | No. 413-69.,413-69. |
| Citation | 424 F.2d 42 |
| Parties | PRODUCT ENGINEERING AND MANUFACTURING, INC., Appellant, v. Andrew F. BARNES, Appellee. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Duane C. Burton, Denver, Colo. (Philip H. Sheridan, Sheridan, Ross & Burton, Denver, Colo., on the brief), for appellant.
John E. Reilly, Denver, Colo., for appellee.
Before BREITENSTEIN, SETH, and HOLLOWAY, Circuit Judges.
This appeal presents as its sole issue the question of whether the district court properly dismissed a suit by Product Engineering and Manufacturing, Inc. seeking a declaratory judgment.
The pertinent facts are as follows: On September 9, 1968, Andrew F. Barnes, the defendant-appellee herein, filed a suit against Product Engineering and Manufacturing, Inc., in a State district court of Colorado. That action was brought to enforce a patent licensing agreement and to recover royalty payments allegedly due under the terms of a licensing agreement for the manufacture of a beet topping machine entered into between Barnes and Product Engineering. It was clearly a contract action.
On September 26, 1968, Product Engineering filed the instant action in the United States District Court for the District of Colorado seeking a declaratory judgment under 28 U.S.C. § 2201, and asserting jurisdiction under 28 U.S.C. § 1338(a). This suit was filed, and service had, prior to service of summons on Product Engineering in the State court action. Product Engineering alleges in this action that a patent had issued to Barnes and that Barnes asserts that the beet topping machine manufactured by Product Engineering is an infringement of the patent. No reference is made in the complaint to the agreement relating to this patent. Product Engineering denies the infringement and asserts that the patent is invalid.
On December 3, 1968, the State court stayed its proceedings pending a final determination or disposition in the federal court. The State court found that service of process was perfected first in the federal district court so that the federal court had jurisdiction over the subject matter and the parties prior to the State court "having jurisdiction over the parties * * *."
On May 15, 1969, the federal court granted Barnes' motion to dismiss Product Engineering's suit for declaratory judgment on the grounds that the action was purely a contract action which properly should be litigated in the State court, that the State action was filed first, and that there is no danger of the statute of limitations running if the action turns out to be a patent infringement suit. Product Engineering has taken this appeal from this dismissal.
A review of the pleadings filed in both the State and federal courts convinces us that the matters asserted by Product Engineering in the federal declaratory judgment action are no more than what would be a defense to the State court contract action. The trial court reached the same conclusion. Contract actions based on patent license agreements may be brought and maintained in a State court. Becher v. Contoure Laboratories, 279 U.S. 388, 49 S. Ct. 356, 73 L.Ed. 752. The rule adopted by the United States Supreme Court in Public Service Comm'n v. Wycoff Co., 344 U.S. 237, 73 S.Ct. 236, 97 L.Ed. 291, although laid down in a public law case, is dispositive of this case. The Court there referred to the Declaratory Judgment Act which created the remedy and stated that pursuant to it a court "may declare the rights" of the parties and thus no absolute right was given to the litigant but instead discretion was vested in the courts. We quote at some length from Wycoff as follows for the reason that the Court there specifically considered the attempted assertion of a defense by a declaratory judgment action:
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