AL Smith Iron Co. v. Dickson

• Decision Date: 04 September 1943
• Docket Number: No. 948.,948.
• Citation: 52 F. Supp. 566
• Court: U.S. District Court — District of Connecticut
• Parties: A. L. SMITH IRON CO. v. DICKSON.

52 F. Supp. 566

A. L. SMITH IRON CO. v. DICKSON.

No. 948.

District Court, D. Connecticut.

September 4, 1943.

Fish, Richardson & Neave, of Boston, Mass., and Wiggin & Dana, of New Haven, Conn., for plaintiff.

Daggett & Hooker, of New Haven, Conn., and Kenyon & Kenyon, of New York City, for defendant.

SMITH, District Judge.

This is an action for a declaratory judgment on the validity of a patent and for injunction and damages for unfair competition. Diversity of citizenship exists. The defendant is the sole licensee under a United States patent, No. 1,864,232, held by a British concern for the manufacture of hatch covers for ships, consisting of one or more planks assembled in a certain manner with the ends strengthened and protected by metal bands or shoes. Hatch covers are used in large numbers in all merchant ships, up to approximately 1,000 being required for each ship constructed under the present merchant-ship building program in this country. The United States Maritime Commission is the sole ultimate purchaser, and obtains hatch covers for its ships from joiner contractors who, in turn, purchase the bands and other material, and themselves manufacture the hatch covers. The patent does not cover the manufacture of the bands. The plaintiff in this action is engaged in the manufacture of iron and steel products and has made and sold one order of more than 30,000 bands to be used in the construction of hatch covers for merchant ships. The defendant falsely represented by magazine advertising and by his stationery that the patent covered the bands, and defendant engaged in the sale of bands with an implied license to practice the patent, at one time directly and later through two sublicensees. By this method, the defendant and his sublicensees obtained and maintained a virtual monopoly in the sale of the bands to be used in the manufacture of hatch covers.

Plaintiff has endeavored to continue and expand its manufacture and sale of the bands, but has been unsuccessful in obtaining any other orders than the one above referred to. The joiner contractors engaged in the manufacture of hatch covers, because of the existence of the patent and the licenses under it, have been and are unwilling to purchase bands from sources other than the defendant or his sublicensees. Plaintiff brought this action seeking a declaration that the patent is invalid, and an injunction against defendant and all others controlled by him to prevent his representing that the patent covers the bands, and against his threatening or instituting actions for infringement against the plaintiff or its customers, and asking an accounting and damages.

The misrepresentations as to the fact of the patent's covering the bands ceased when the plaintiff, on first being notified of defendant's claims as to the patent's covering the bands, questioned this claim of the defendant. Subsequent to the bringing of this action and the entry of a temporary injunction, defendant, with the consent of the patentee, negotiated new agreements with its sublicensees, requiring them to separate in their quotations and billings the charge for bands sold by them and a specified amount per hatch cover for royalty, and the Dickmar Company, exclusive sublicensee in the eastern territory, was granted the power and required upon request of purchasers from them, to issue licenses for making, use, or sale of the patented hatch covers upon a royalty in the same amount as that stated in the contract between defendant and his sublicensees to be the royalty due defendant per hatch cover. Bayer, nonexclusive sublicensee for the western United States, was required to make similar separation of prices charged for covers or parts thereof and the amount established as royalty, and was required to state that license for the making, use, and sale of patented hatch covers within Bayer's sales territory without restriction as to the source of manufacture of the bands, might be obtained from the defendant on payment of a similar royalty for each hatch cover.

None of the joiner contractors or other persons have made application either to the sublicensees or to defendant for licenses under this offer. All bands purchased for use in making hatch covers for the merchant-ship building program are obtained from the two sublicensees of the defendant at a price, exclusive of the amount stated to be royalty, higher than the price at which the plaintiff offers to sell the bands.

Defendant attacks the jurisdiction of the Court over the cause of action for a declaratory judgment on the validity of the patent in the absence of the patentee, claimed by defendant to be an indispensable party to any action involving the validity of the patent, relying on the decision of the Circuit Court of Appeals for the Second Circuit in Contracting Division v. New York Life Insurance Co., 1940, 113 F.2d 864, where the Court was held to lack jurisdiction over a cause of action against a bare licensee of a patent in the...