SCM Corporation v. Brother International Corporation

• Decision Date: 12 August 1970
• Docket Number: No. 69 Civ. 4150.,69 Civ. 4150.
• Citation: 316 F. Supp. 1328
• Parties: S C M CORPORATION, a New York corporation, Plaintiff, v. BROTHER INTERNATIONAL CORPORATION, a New York corporation, Brother International Corp., a Japanese company, and Brother Industries, Ltd., a Japanese company, also known as Brother Kogyo Kabushiki Kaisha, Defendants.
• Court: U.S. District Court — Southern District of New York

316 F. Supp. 1328

S C M CORPORATION, a New York corporation, Plaintiff, v. BROTHER INTERNATIONAL CORPORATION, a New York corporation, Brother International Corp., a Japanese company, and Brother Industries, Ltd., a Japanese company, also known as Brother Kogyo Kabushiki Kaisha, Defendants.

No. 69 Civ. 4150.

United States District Court, S. D. New York.

August 12, 1970.

Proskauer, Rose, Goetz & Mendelsohn, New York City, for plaintiff; Stephen Rackow Kaye, Steven J. Stein, New York City, of counsel.

Kane, Dalsimer, Kane, Sullivan & Kurucz, New York City, for defendants; David H. T. Kane, New York City, of counsel.

OPINION

TENNEY, District Judge.

Defendants Brother International Corp. (hereinafter referred to as "Brother Japan") and Brother Industries Ltd. (hereinafter referred to as "Ltd."), both alien Japanese corporations neither licensed, registered nor residing in this country, move pursuant to Fed.R.Civ.P. 12(b) (2) (3) and (5) for an order dismissing the within complaint as to them on the grounds of lack of personal jurisdiction, improper venue and insufficiency of service of process.

Since resolution of the venue issue presented herein does not depend upon the complex factual setting underlying the instant patent infringement action, the Court will defer further summarization of the relevant facts until it considers defendants' attack upon this Court's jurisdiction over their person.

Plaintiff SCM Corporation (hereinafter referred to as "SCM") urges that venue is properly laid in this district because the moving defendants are alien corporations and are therefore amenable to suit in any United States District Court. This contention is, of course, predicated upon the applicability of 28 U.S.C. § 1391(d) to suits for patent infringement. That statute provides: "An alien may be sued in any district". Plaintiff recognizes that this provision is subscribed under the heading of "Venue Generally" as opposed to being embodied in the special patent venue statute, 28 U.S.C. § 1400(b), but urges this Court to adopt the views of Judge Mansfield as expressed in his well-reasoned opinion in Chas. Pfizer & Co. v. Laboratori Pro-Ter Prodotti Therapeutici S.p.A., 278 F.Supp. 148 (S.D.N.Y. 1967), in which he ruled that in a suit for patent infringement against a defendant alien corporation, not a resident of the United States and not having a regular and established place of business herein, venue may properly be laid in any district.

This, of course, carved an exception to the specific patent venue provision which provides that "any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business." 28 U.S.C. § 1400(b).

Defendants, in support of their motion, contend that Section 1400(b) is the exclusive venue provision applicable to suits for patent infringement. The authority they offer is formidable — two decisions by the Supreme Court, Fourco Glass Co. v. Transmirra Prod. Corp., 353 U.S. 222, 77 S.Ct. 787, 1 L.Ed.2d 786 (1957); Stonite Prod. Co. v. Melvin Lloyd Co., 315 U.S. 561, 62 S.Ct. 780, 86 L.Ed. 1026 (1942), and one recent opinion by the Court of Appeals for the Seventh Circuit, Coulter Elec., Inc. v. A. B. Lars Ljungberg & Co., 376 F.2d 743 (7th Cir.), cert. denied, 389 U.S. 859, 88 S.Ct. 103, 19 L.Ed.2d 124 (1967).

It should be noted that although in both of the Supreme Court cases cited above Section 1400(b) was held to be the exclusive statute with regard to venue in patent infringement actions, the defendants therein were domestic corporations amenable to suit in at least one district in this country. Neither the Fourco nor the Stonite Court ever considered whether Section 1391(d) was applicable in a patent action against an alien defendant. In Coulter, supra 376 F.2d at 746, however, the Court of Appeals for the Seventh Circuit specifically rejected the argument that Section 1391(d) should be applied to patent infringement suits against alien corporations, and held that in light of the Supreme Court's rulings that venue in patent infringement actions is governed exclusively by 28 U.S.C. § 1400(b), these provisions may not be supplemented by any general venue provision including § 1391(d).

To crystallize the issue, the Court may select any one of the following alternatives: it may blindly adhere to the unequivocal language of the Supreme Court in Fourco and Stonite, supra, and rule that § 1391(d) is inapplicable; it may follow the precedent of the Seventh Circuit in Coulter, supra, which is a specific holding involving an alien corporate defendant; finally, it may hold that § 1391(d) is applicable herein by following the decision of Judge Mansfield in Pfizer, supra.

After carefully considering these alternatives as well as their underlying authority, this Court is persuaded by and has decided to adopt the well-considered opinion of Judge Mansfield in Chas. Pfizer & Co. v. Laboratori Pro-Ter Prodotti Therapeutici S.p.A., supra.

As indicated by the Court in Pfizer, the rationale supporting application of § 1400(b) exclusively in infringement suits against domestic corporate defendants is conspicuously absent in situations involving alien corporate defendants. In Fourco, supra, the Court reasoned that the special patent venue statute, § 1400 (b), was the sole provision governing venue in a patent infringement action essentially because Congress re-enacted that statute without indicating any intent that it be supplemented by § 1391 (c), another venue statute. It was noted that since Congress re-enacted § 1400 (b) after the Court's decision in Stonite, supra, which held that § 1400(b) was exclusive with respect to § 52 of the Judicial Code (the predecessor to 28 U.S.C. § 1392(a)), without manifesting any intent that § 1392(a) should be permitted to complement § 1400(b), there was no basis for construing § 1391(c) as complementing or supplementing that section. The issues seemed legally indistinguishable to the Court which, after comparing § 1400(b) with its predecessor and carefully considering the Reviser's notes, concluded that the special patent venue statute was exclusive in its application.

Of course, neither the Fourco nor the Stonite Court ever considered whether Congress intended to reenact a statute so exclusive in its application as to "leave the courts of the United States open to aliens against citizens, and close them to citizens against aliens." In re Hohorst, 150 U.S. 653, 660, 14 S.Ct. 221, 224, 37 L.Ed. 1211 (1893). It would affront both reason and common sense to suppose that Congress intended to close the United States District Courts to citizens seeking recovery from alien defendant infringers who cleverly insulate themselves from the territorial boundaries defined in § 1400(b). Judge Mansfield underscored this problem when he wrote "the effect of holding § 1400(b)'s requirements exclusive in a suit against an alien would be to permit a foreign infringer, who conceivably could flood this country with merchandise known by it to infringe, to escape responsibility merely because it did not maintain a regular business here." Chas. Pfizer & Co. v. Laboratori Pro-Ter Prodotti Therapeutici S.p.A., supra, 278 F.Supp. at 153.

In In re Hohorst, supra, 150 U.S. at 662, 14 S.Ct. at 225, the Court considered an issue substantially similar to the one presented herein, and concluded that a then-existing statute which placed venue in the district wherein a defendant resided was "inapplicable to an alien or a foreign corporation sued here * * * especially in a suit for the infringement of a patent right; and * * * such a person or corporation may be sued * * * in any district * * *."

It would be useful at this point to indicate this Court's disagreement with the proposition that Hohorst, supra, insofar as it applies to alien defendants, was overruled either by Stonite, supra, or the original patent venue statute.

Admittedly, Hohorst is considered and discussed in Stonite, supra 315 U.S. at 564, 62 S.Ct. 780. I read this discussion, however, as merely delineating the problems created in the wake of the Hohorst decision. More specifically, after the decision in Hohorst some lower courts in patent infringement suits did not require that the suit be commenced in the disrict wherein the defendant resided, but instead permitted suits to be brought against a defendant wherever he could be found. This was apparently permitted by these courts in all patent infringement actions, whether against a domestic or foreign defendant. This, as noted by the Court in Stonite, supra at 565, 62 S.Ct. 780, is what prompted the enactment of the original patent venue statute.

That Section 1391(d) is applicable to patent infringement actions is further suggested by the Reviser's notes to that section. These notes read:

"Subsection (d) of this section is added to give statutory recognition to the weight of authority concerning a rule of venue as to which there has been a sharp conflict of decisions."

Thereafter the reader is referred to Sandusky Foundry & Mach. Co. v. De Lavaud, 251 F. 631 (D.C.Ohio 1918), a patent infringement action wherein it was held that Section 48 of the Judicial Code the predecessor to Section 1400(b), did not prevent a plaintiff from maintaining a suit against an alien defendant wherever he could be found. The Court specifically ruled that since aliens are not inhabitants of any district, they may be sued in any district wherein they can effectively be served. Sandusky Foundry & Mach. Co. v. De Lavaud, supra at 632.

A similar conclusion was reached in Japan Gas Lighter Ass'n v. Ronson Corp., 257 F.Supp. 219, 226 n. 6 (D.N.J. 1966), wherein the Court noted the great significance placed on the Reviser's notes by the Fourco Court and concluded "thus, if anything, the Fourco case suggests that even under § 1400(b), the prior case law that...