SIMMONDS AEROCESSORIES v. Elastic Stop Nut Corp., Civ. A. No. 259-57.

• Decision Date: 07 August 1957
• Docket Number: Civ. A. No. 259-57.
• Citation: 154 F. Supp. 615
• Parties: SIMMONDS AEROCESSORIES, Ltd., Plaintiff, v. ELASTIC STOP NUT CORPORATION OF AMERICA, Defendant.
• Court: U.S. District Court — District of New Jersey

154 F. Supp. 615

SIMMONDS AEROCESSORIES, Ltd., Plaintiff, v. ELASTIC STOP NUT CORPORATION OF AMERICA, Defendant.

Civ. A. No. 259-57.

United States District Court D. New Jersey.

August 7, 1957.

Weisman & Freedman, Newark, N. J., by Joseph A. Weisman, Newark, N. J., for plaintiff.

Riker, Emery & Danzig, Newark, N. J., by Hamilton Hicks, New York City, and Curtis F. Prangley, Chicago, Ill., for defendant.

WORTENDYKE, District Judge.

In this diversity action for a declaratory judgment as to the validity of defendant's registered trade mark and for damages for unfair competition, the defendant directs a six-pronged attack upon the complaint. The defendant's motions may be placed in four categories:

(1) A motion to strike the entire complaint for failure to state a claim upon which relief can be granted under Fed. Rules Civ.Proc. rule 12(b) (6), 28 U.S.C.

(2) A motion to strike the complaint for failure to join indispensable parties, under Rule 12(b) (7).

(3) A motion to strike the first count of the complaint for lack of jurisdiction of the subject matter thereof, pursuant to Rule 12(b) (1).

(4) A motion to strike paragraph 16 of the first count of the complaint for failure to particularize the charge of fraud therein made as required by the provisions of Rule 9(b) or, in the alternative, to dismiss the entire complaint under Rule 12.

The Complaint

The plaintiff, a business corporation of the United Kingdom, claims that it manufactures and sells throughout the world, except in the United States of America, lock nuts provided with a red fiber insert which furnishes the necessary elastic properties for the locking of the nut to its bolt. Although originally patented by the inventor in the British Isles and in the United States of America, with licenses issuing first to the defendant for manufacture and sale in the United States and certain other countries, and subsequently to the plaintiff for manufacture and sale in parts of the world other than the United States, the patents and licenses in due time heretofore expired, and the product thereupon entered the public domain. Plaintiff alleges that, from the very inception of their manufacture and marketing, the fiber inserts in the lock nuts of both parties have been colored red, and in this form have been universally accepted as denoting the product of Rennerfelt, the inventor.

It appears further from the complaint that certain quantities of the plaintiff's product were shipped into the United States in 1953, in containers clearly labelled with the plaintiff's name, and that on June 1, 1954 defendant wrote to the plaintiff asserting the defendant's claim of an exclusive and proprietary right to use the color red for the fiber insert of elastic lock nuts, and demanding that the plaintiff desist from further use of that color for that purpose. Plaintiff rejected this demand by its letter of July 16, 1954 to defendant. On November 3, 1954, defendant applied to the United States Patent Office for registration, as its trade mark, of a cut or picture of an elastic lock nut with a red insert. Upon this application a certificate of registration was duly issued to defendant on September 6, 1955. In accordance with 15 U.S. C.A. § 1124, defendant recorded this registration in the Customs Bureau of the Department of the Treasury of the United States. Facsimiles of the registered trade mark were circulated at United States ports of entry to customs officers who, by Section 1124, are prohibited from allowing into the United States a product bearing a trade mark the same as or similar to a mark registered in this country.

Claiming that it had no knowledge of defendant's application for registration, plaintiff continued to export its product to the United States after June 1, 1954, and on October 4, 1955 a shipment of 143 drums of plaintiff's product was seized by the Collector of Customs at the Port of New York, and by plaintiff then withdrawn from importation to prevent forfeiture. Denying that defendant had any exclusive right to use a red color for the fiber insert of its lock nuts, and that its claim of monopoly of that color for that purpose is invalid, the plaintiff herein charges that defendant's registration was procured "by a false or fraudulent declaration, misrepresentation or means" and alleges that unless defendant's registration is cancelled and the embargo upon plaintiff's importation of its product into the United States is lifted, plaintiff will suffer substantial and irreparable damage. Plaintiff accordingly seeks:

(1) A declaratory judgment

(a) that plaintiff has the right to manufacture and import its product;

(b) that defendant never had any monopoly of the red color for its fiber insert;

(c) that defendant had no lawful right to procure the trade mark registration; and

(d) that said registration is void;

(2) An injunction against interfering with plaintiff's sale of its elastic lock nuts in the United States;

(3) A cancellation of defendant's registration;

(4) A directive to defendant to notify the Collector of Customs that defendant removes all objection and consents to the importation of plaintiff's product;

(5) An injunction against the assertion of any claim that plaintiff's product infringes that of the defendant;

(6) An adjudication that defendant's registration was procured by false or fraudulent representation; and

(7) Compensatory and punitive damages.

The second count of the complaint incorporates the allegations of the first count by reference, charges that the acts and omissions therein set forth constituted unfair competition with plaintiff's business, and seeks damages in the sum of $1,000,000.

Questions Presented by the Motion

(1) Has this Court jurisdiction of the subject matter of this action as disclosed by the allegations of the complaint?

(2) Does the complaint set forth a claim or claims upon which relief can be granted to the plaintiff in this action?

(3) Have all indispensable parties been joined herein?

(4) Is paragraph 16 of the first count of the complaint vulnerable to attack under Rule 9(b) ?

Plaintiff alleges that the action arises under the Trade Mark Laws of the United States. Plaintiff apparently charges as tortious conduct on the part of the defendant the latter's actions in applying for and obtaining a registration of its trade mark, with the consequent instigation of the Customs embargo against the importation of plaintiff's merchandise by the filing of a copy of the certificate of registration in the Bureau of Customs of the Treasury Department of the United States, as provided for by law (15 U.S.C.A. §§ 1124 and 1125).

Section 2201 of Title 28 of the United States Code provides that "in a case of actual controversy within its jurisdiction * * * any court of the United States, * * * upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought * * *." To the foregoing provisions a liberal construction has invariably been applied by and in the federal courts. Dewey & Almy Chemical Co. v. American Anode, 3 Cir., 1943, 137 F.2d 68, certiorari denied 320 U.S. 761, 64 S.Ct. 70, 88 L.Ed. 454.

It is obvious in the language of the Statute creating the remedy that unless (1) an actual controversy exists between the parties, and (2) the case is within its jurisdiction, this Court is without power to grant declaratory relief. Maryland Casualty Co. v. Pacific Coal & Oil Co., 1941, 312 U.S. 270, 61 S. Ct. 510, 85 L.Ed. 826. What, if any, is the actual controversy in the present case as it appears from the allegations of the complaint?

The Third Circuit Court of Appeals has construed the "actual controversy" requirement of 28 U.S.C.A. § 2201 as applied to cases involving patent infringement claims in Treemond Co. v. Schering Corp., 3 Cir., 1941, 122 F.2d 702; Dewey & Almy Chemical Co. v. American Anode, Inc., 3 Cir., 1943, 137 F.2d 68; and Aralac, Inc., v. Hat Corporation of America, 3 Cir., 1948, 166 F.2d 286. While recognizing that the Declaratory Judgment Act should be accorded a liberal interpretation, the Court is respectful of the admonition in Altvater v. Freeman, 1942, 319 U.S. 359, 363, 63 S.Ct. 1115, 1118, 87 L.Ed. 1450, that "the requirements of case or controversy are * * * no less strict under the Declaratory Judgment Act * * * than in case of other suits." In that case, jurisdiction was found insupportable under the Patent Laws (28 U.S.C.A. § 1338) because plaintiff failed to claim some right, title or interest under the Patent Laws, or to allege that some right or privilege would be "`defeated by one construction or sustained by the opposite construction of these laws'" (quoting from Pratt v. Paris Gaslight & Coke Co., 1897, 168 U.S. 255, at page 259, 18 S.Ct. 62, at page 64, 42 L.Ed. 458). Judge Murphy's language, 166 F.2d at page 291 in the Aralac case, supra, affords us helpful guidance toward comprehension of the utility of the Declaratory Judgment Act as a remedy in cases of patent infringement charges:

"Prior to the passage of the * * * Act the patentee was the only one in a position to initiate a suit against the alleged infringer or his dealers. An alleged infringer could not sue the patentee for a declaration that the plaintiff was not infringing or that the patent was invalid. Today the alleged infringer, once he is threatened by a patentee, has a remedy by a complaint for a declaratory judgment. Now the controversy between the parties as to whether infringement exists is in either instance essentially one arising under the Patent Laws."

Using the language of the same (Third Circuit) Court in Treemond Co. v. Schering Corp., supra, 122 F.2d at page 705, Judge Murphy adds: "`There can be no doubt that an actual controversy does not exist until the patentee makes some claim that his patent is being infringed.'" Because the defendant had never charged the...