Rogers v. Hensley

• Citation: 194 Cal.App.2d 486,14 Cal.Rptr. 870
• Parties: , 131 U.S.P.Q. 80 Edgar ROGERS, Plaintiff and Appellant, v. Clyde HENSLEY, Hensley Equipment Co., Defendants and Respondents. Civ. 19150.
• Decision Date: 02 August 1961
• Court: California Court of Appeals

Page 870

14 Cal.Rptr. 870

194 Cal.App.2d 486, 131 U.S.P.Q. 80

Edgar ROGERS, Plaintiff and Appellant, v. Clyde HENSLEY, Hensley Equipment Co., Defendants and Respondents.

Civ. 19150.

District Court of Appeal, First District, Division 2, California.

Aug. 2, 1961.

George B. White, San Francisco, for appellant.

Rhodes, Sabraw & Avera, Fremont, for respondents.

STONE, Justice pro tem.

Respondent Clyde Hensley, president of respondent Hensley Equipment Company, invented an earth-ripping devide which attached to the cutting edge of a bulldozer blade by means of a twin shank. He also perfected a similar device which could be used on a dozer blade as a brush rake. The principal feature of the invention is the design and method of attaching the equipment to the lower lip of a bulldozer blade so that no pressure is exerted on the thin breakable edge. Respondents were manufacturing these devices in 1951 when appellant Rogers called at their plant to inquire about having a ditching attachment for bulldozing blades manufactured. Hensley examined Roger's device and suggested changes, one of which was to utilize the Hensley twin shank method of attaching the mechanism to the bulldozer blade. The parties agreed to work together to perfect the device and appellant was given space in respondents' workshop. Together they perfected the 'Hensley-Rogers dozer ripper'. By oral contract the parties agreed that appellant should manufacture and respondents should market the jointly developed device on a '50-50' basis. After a few months, appellant notified respondents that he was moving his place of manufacture to another city; this caused a disagreement and the parties mutually rescinded the oral agreement. They then entered into a written 'cross-licensing' agreement pursuant to which each independently began to manufacture and market the jointly developed device under his own name brand. At the time the cross-licensing agreement was executed, Rogers and Hensley each had filed a patent application covering the devices he had perfected. Appellant Rogers was never granted a patent, but respondent Hensley received his sometime later.

After several months a dispute arose, respondents contending that it was not the intention of the parties to cross-license to appellant certain items covered by respondents' invention. Appellant's accounting was rejected by respondents because of the dispute, so appellant filed this action for an accounting based upon the cross-licensing agreement. He also sought an injunction restraining respondents from manufacturing any items licensed to appellant by the agreement. Respondents denied the principal allegations of the complaint and, by way of affirmative defense, alleged that appellant's representation that he had made a valid patent application was fraudulent. Respondents also filed a cross-complaint by which they sought reformation of the cross-licensing agreement; an adjudication that the agreement as reformed 'is rescinded and canceled'; that appellant be enjoined from manufacturing articles covered by respondents' patent; for an accounting; for damages by reason of appellant's interference with respondents' 'business relationships with his distributors and customers'.

Appellant contends that the state court lacked jurisdiction of the subject matter of the controversy, since the complaint and answer raised the question of the validity of appellant's patent application, and the issues raised by the cross-complaint required a determination of the claim or scope of respondents' patent. The Constitution of the United States delegates to the Federal Government exclusively the power to issue patents, and specifies that Congress shall have the power 'to promote the Progress of Scidence and useful arts, by securing for limited times to * * * Inventors the exclusive Right to their respective * * * Discoveries'. (U.S.Const. Art. I, Sec. 8(8). Congress has implemented this Constitutional provision by the following statute:

'The [Federal] District Courts shall have original jurisdiction of any civil action arising under any act of Congress relating to patents, copyrights and trademarks. Such jurisdiction shall be exclusive of the courts of the states in patent and copyright cases.' (28 U.S.C.A. § 1338(a).)

The constitutional provisions and the implementing statute appear to require the trial of patent issues in the Federal Courts. The United States Supreme Court, however, has determined that there is a distinction between patent issues raised by the case as pleaded and patent questions which are incidental to the case. The test which determines whether jurisdiction of an action involving a patent rests in a federal or a state court was enunciated by the United States Supreme Court in Prat v. Paris Gas Light & Coke Company, 168 U.S. 255, at page 259, 18 S.Ct. 62, 64, 42 L.Ed. 458, as follows:

'The state court had jurisdiction both of the parties and the subjectmatter, as set forth in the declaration, and it could not be ousted of such jurisdiction by the fact that, incidentally to one of these defences, the defendant claimed the invalidity of a certain patent. To hold that it has no right to introduce evidence upon this subject is to do it a wrong and deny it a remedy. Section 711 does not deprive the state courts of the power to determine questions arising under the patent laws, but only of assuming jurisdiction of 'cases' arising under those laws. There is a clear distinction between a case and a question arising under the patent laws. The former arises when the plaintiff in his opening pleading--be it a bill, complaint or declaration--sets up a right under the patent laws as ground for a recovery. Of such the state courts have no jurisdiction. The latter may appear in the plea or answer or in the testimony. The determination of such question is not beyond the competency of the state tribunals.'

Since the Pratt case, many federal and state court opinions have expressed the same principle in varying ways. An analysis of these cases and the rule which has evolved is summarized by the following note in 167 A.L.R., p. 1118:

'Reduce to its lowest terms, the correct rule is that if the plaintiff founds his suit directly on a breach of some right created by the patent laws, he makes a case arising under those laws and only a Federal court has jurisdiction; but if he founds his suit on some right vested in him by the common law, or by general equity jurisprudence, he makes a case arising under state law and only a state court has jurisdiction. In this respect it is to be remembered that there is no Federal common law or equity law. These are the juridical attributes of the localities. Their principles, when administered in a Federal court, are derived from the respective peoples of the states. A case founded on a principle of tort, contract, or equity law is a case arising under state law. And whichever court has jurisdiction by reason of the nature of the cause of action advanced by the plaintiff, that court may decide such issues as arise incidentally to a decision. If a plaintiff sues in a Federal court for infringement, and the defendant sets up rights under a contract, the court may reach its conclusion upon an issue of contract law. If the plaintiff sues in a state court for breach of a contract, the state court may decide an issue raised as to the validity or coverage of a patent, and even submit a question of priority to a jury. If the action be for breach of a contract to sell the plaintiff a valid patent, the state court may decide the validity of the patent. This is the almost universal rule.'

The courts of this state have followed the foregoing rule. Pendleton v. Ferguson, 15 Cal.2d 319, 326, 101 P.2d 81, 688; H. J. Heinz Co. v. Superior Court, 42 Cal.2d 164, 172, 266 P.2d 5...