Security Materials Co. v. Mixermobile Co.
| Decision Date | 30 June 1947 |
| Docket Number | Civil Action No. 4249-WM. |
| Citation | 72 F. Supp. 450 |
| Court | U.S. District Court — Southern District of California |
| Parties | SECURITY MATERIALS CO. et al. v. MIXERMOBILE CO., Inc., et al. |
Hill, Morgan & Farrer, of Los Angeles, Cal., and Mellin & Hanscom, of San Francisco, Cal., for plaintiff Security Materials Co.
Lyon & Lyon, Reginald E. Caughey, and B. L. Hoyt, all of Los Angeles, Cal. for defendants.
This action, seeking an injunction and damages for alleged patent infringement, was brought by Security Materials Company, a California corporation, against Mixermobile Company, Inc., a California corporation, Co-Operative Building Materials, Inc., a California corporation, and J. Burke Long.
The complaint alleges that Harold A. Wagner and Gustave H. Wagner are the owners of certain letters patent of the United States; that plaintiff Security Materials Company is exclusive licensee for the southern California territory under the letters patent; that the patent owners refused to join voluntarily and are therefore named as involuntary plaintiffs; that defendants have infringed and threaten to infringe the rights of Security Materials Company as licensee under the patents, by using and offering for use or sale in southern California certain machines covered by the patents.
Defendants assert in their answer (1) that Security Materials does not have sufficient interest in the patents to maintain this suit and (2) that in all events the patented articles in controversy are no longer subject to any territorial limitation as to either use or sale.
The Facts.
The parties have stipulated for the purposes of this suit that only Patent No. 2,234,210 is involved, and the action has been dismissed without prejudice as to the other patents mentioned in the complaint. It is further stipulated that Patent No. 2,234,210 was issued to Harold A. Wagner and Gustave H. Wagner on March 11, 1941, and the patentees remain owners of the patent.
The patented article is known as "Mixermobile." As the name suggests, a "Mixermobile" is a mobile mixer, designed and intended to mix cement on the spot wherever needed. Each machine bears an identifying serial number.
In 1939 a Mixermobile was first demonstrated to Security Materials by one Morris S. Matheson. Subsequently Gustave H. Wagner came to Los Angeles and entered into negotiations with Security Materials for the sale, operation and use of Mixermobiles in southern California. These negotiations culminated in an agreement dated May 18, 1940, licensing the Security Materials Company.
This license agreement names Wagner Concrete Equipment Co. as licensor and Security Materials Company, a California corporation, as licensee. It is signed on behalf of the licensor: "Wagner Concrete Equipment Co. — by G. H. Wagner — by Harold A. Wagner."
A corporation named Wagner Concrete Equipment Co. was organized under the laws of Oregon on April 3, 1939 by G. H. Wagner, Harold A. Wagner and Eddie B. Wagner as incorporators. This corporation was dissolved on January 4, 1943.
The license agreement of May 18, 1940, recites that Wagner Concrete Equipment Co. "are sic the sole and exclusive owners sic of the right to manufacture * * * and to sell * * * Mixermobiles, together with the granting of right of use or sale within certain prescribed territories within the United States * * *"; that Security Materials "is desirous of purchasing two * * * and of obtaining the sole and exclusive right for a license for the sale and/or operation and/or use of said machine, as manufactured by the said Wagner Concrete Equipment Co. in the following described territory of California: All that section of southern California lying south of the northerly boundary line of the City of Bakersfield, California; and all of the County of San Bernardino extending north of prolongations of the northerly boundary line of the City of Bakersfield." Emphasis added.
The agreement provides that: "As a further consideration for * * * purchasing the aforesaid Mixermobile machines * * * Wagner Concrete Equipment Co. does hereby grant and/or license to Security Materials * * * the sole and exclusive right for the sale and/or operation and/or use of said Mixermobile machine in that section of the State of California hereinabove described."
The agreement also contains a warranty that Wagner Concrete Equipment Co. has the legal right to grant Security Materials "the exclusive rights" in southern California, and authorizes Security Materials to grant sub-licenses. Security Materials agrees to "use every reasonable effort to extend the use of the machine in order to properly take care of the territory * * *."
There is no reference in the agreement to any particular patent. However, Patent No. 2,234,210 was not issued to Harold A. Wagner and Gustave H. Wagner until some ten months after the license agreement was executed. The agreement does provide, however, that Security Materials "shall have the sole and exclusive right in said territory to every improvement in, or addition to, the said invention"; and further that: "* * * Wagner Concrete Equipment Co. affirms that if or when patents now pending are granted, it is their sic purpose to defend any proceeding for the revocation of the said letters patent, and to prosecute any infringement of said letters patent." Emphasis added.
When the license agreement of May 18, 1940 was executed, defendant J. Burke Long was Secretary of the Security Materials Company. A short time later, while still employed in that capacity and with full knowledge of the license in favor of Security Materials, defendant Long went to Oregon and negotiated a license agreement with the Wagners.
This agreement, dated July 1, 1940, was made "by and between Gustave H. Wagner and Harold A. Wagner, doing business under the firm name and style of Mixermobile Manufacturers * * * and J. Burke Long and Morris S. Matheson * * *," and granted to Long and Matheson the exclusive right to sell Mixermobiles throughout the United States, "excluding * * * California * * *" and several other western states. It was further provided that Long and Matheson "agree not to infringe or assist others in the infringement of * * *" the patents covering Mixermobiles. Emphasis added.
On December 9, 1940, a supplemental agreement was executed granting Long and Matheson the exclusive right to manufacture and sell Mixermobiles within the territory described in their license agreement of July 1, 1940, and within certain foreign countries. The supplement provided, as did the prior agreement, that the license could not be assigned by licensees Long and Matheson, without the written consent of the licensors, except to "such corporation as may be formed by Licensees, providing such corporation is controlled at all times by Licensees."
Thereafter Long and Matheson organized defendant Mixermobile Company, Inc., a California corporation, and assigned their rights under the original and supplemental license agreements to that corporation.
Three Mixermobiles, Nos. 323, 270 and 263, give rise to the controversy in this cause. It is stipulated: (1) that Mixermobile No. 323 was manufactured in Pennsylvania for defendant Long under authority of the Long and Matheson license agreement of December 9, 1940; (2) that Mixermobile No. 270 was purchased in Oregon on May 7, 1943, by defendant Long from Mixermobile Manufacturers, a co-partnership consisting of Harold A. Wagner and Gustave H. Wagner; and (3) that Mixermobile No. 263 was likewise purchased in Oregon on February 1, 1943, by defendant Mixermobile Company, Inc., and subsequently transferred to defendant Long.
It is also stipulated that defendant Long now holds legal title to all three Mixermobiles and that prior to the commencement of this suit he brought the machines into the southern California territory covered by the Security Materials license, where he has since used them and offered them for sale.
Before bringing the Mixermobiles to California, the machines were leased for use in different sections of the United States. On June 15, 1944, defendant Long entered into an agreement with defendant Co-Operative Building Materials, Inc., for the joint use and operation by the parties of the three Mixermobiles in this district, with an option granted Co-Operative to buy the machines.
The complaint in this action was filed on February 13, 1945. On September 25, 1945, Gustave H. Wagner, signing as secretary-treasurer of Wagner Concrete Equipment Co., wrote a letter to Security Materials Company purporting to terminate the license agreement of May 18, 1940. Plaintiff replied stating that in so far as Security Materials was concerned, the contract was not terminated.
On October 6, 1945, Gustave H. Wagner, signing as a partner of Mixermobile Manufacturers, wrote to defendant Long as follows:
Capacity to Sue.
The parties agree that the grantee of an exclusive license within a specified territory may maintain an action for patent infringement in the name of the patent owner; and where the owner of the patent is not within the jurisdiction of the court and refuses to join as plaintiff, the licensee may name him as co-plaintiff without consent. Independent Wireless Co. v. Radio Corporation of America, 1925, 269 U.S. 459, 468, 469-474, 46 S.Ct. 166, 70 L.Ed. 357; E. W. Bliss Co. v. United States, 1919, 253 U.S. 187, 192, 40 S.Ct. 455, 64 L.Ed. 852; Wyman v. Monolith Portland Cement Co., 9 Cir., 1930, 44 F.2d 328, 329.
But defendants contend that Security Materials is not an exclusive licensee, hence may not maintain this action. This is said to be so for two reasons: first, that the agreement of May 18, 1940, does not sufficiently identify the patent; and second, that...
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