Stanley Works v. Globemaster, Inc.

• Decision Date: 12 August 1975
• Docket Number: Civ. A. No. 74-4110-T.
• Citation: 400 F. Supp. 1325
• Parties: The STANLEY WORKS v. GLOBEMASTER, INC., a Corporation of Texas, et al.
• Court: U.S. District Court — District of Massachusetts

400 F. Supp. 1325

The STANLEY WORKS v. GLOBEMASTER, INC., a Corporation of Texas, et al.

Civ. A. No. 74-4110-T.

United States District Court, D. Massachusetts.

August 12, 1975.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Joseph L. Cotter, Goodwin, Procter & Hoar, Boston, Mass., Peter L. Costas, Hartford, Conn., for plaintiff.

Fish & Richardson, Robert E. Hillman, Boston, Mass., for defendants.

OPINION

TAURO, District Judge.

This is an action for patent infringement and unfair competition brought by The Stanley Works Corporation against Globemaster, Inc., Globemaster New England, a regional subsidiary of Globemaster, Inc., and three individuals who are officers of both corporations, Robert Bernstein, Harold Klebanoff and Edmund Perwein.

The Stanley Works is engaged in the design, manufacture and sale of various products, including hand tools, which are widely used in this country and abroad. In 1971, it designed and developed a product called the "Center Square" which is used to determine the center of circular workpieces.¹ It obtained a patent on this device in 1973. Sometime thereafter, Globemaster, Inc. manufactured, and Globemaster New England marketed, a so-called "J Square" which, plaintiff alleges, duplicates the unique ornamental appearance of Stanley Works' Center Square. The Stanley Works thereupon instituted this lawsuit.

The Stanley Works is a Connecticut corporation with its principal place of business in New Britain. Globemaster, Inc. is a Texas corporation, with its principal place of business in Houston. Globemaster New England is a Delaware Corporation with places of business in both Houston and Lawrence, Massachusetts. The three individual defendants are all residents of Texas.

Currently pending are a series of motions by various defendants seeking dismissal of this action. All of the defendants challenge this court's subject matter jurisdiction and the service of process which was made upon them. Additionally, some of the defendants claim that this court lacks personal jurisdiction and/or that venue is improper in this district. The issues raised by the various motions to dismiss will be discussed in the following order:

1. Subject matter jurisdiction

2. Venue over Globemaster New England

3. Venue over Globemaster, Inc.

4. Service upon Globemaster New England

5. Service upon Globemaster, Inc.

6. Personal jurisdiction over and service upon Bernstein, Klebanoff and Perwein.²

I SUBJECT MATTER JURISDICTION

The parties agree, as they must, that this court has subject matter jurisdiction over that part of plaintiff's complaint alleging patent infringement. Federal district courts have exclusive jurisdiction over such actions, 28 U.S.C. § 1338(b);³United States v. American Bell Telephone, 159 U.S. 548, 16 S.Ct. 69, 40 L.Ed. 255 (1895); Homewood Industries v. Caldwell, 360 F.Supp. 1201, 1204 (N.D.Ill.1973), which is not defeated by allegations denying the merits of the claim. 1 J. Moore, Federal Practice ¶ 0.608.-7.

Nor can there be any serious question over this court's subject matter jurisdiction over plaintiff's claim of unfair competition under state law. There is complete diversity between plaintiff and defendants and, accepting as true the allegations of the complaint, the amount in controversy is considerably greater than $10,000. Moreover, 28 U.S.C. § 1338(b) gives this court subject matter jurisdiction over any unfair competition claim "when joined with a substantial and related claim" under the patent laws. Blanchard & Co. v. Charles Gilman & Son, 353 F.2d 400 (1st Cir. 1965). In the instant case, the factual allegations behind The Stanley Works' claims of predatory business practices in the alleged copying of the Center Square design and alleged simulation of plaintiff's marketing techniques, are so intimately linked to the allegations surrounding its claim of patent infringement that both issues should be considered in the same lawsuit. Certainly, Congress' desire to avoid piecemeal litigation in an already complex area of the law is well-served by treating these two claims together. See Reviser's Note to 28 U.S.C. § 1338(b).

The cases cited by the defendants, Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 84 S.Ct. 784, 11 L.Ed.2d 661 (1964), and Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234, 84 S.Ct 779, 11 L.Ed.2d 669 (1964), do not support their challenge to the unfair competition claim. In Sears the manufacturer of a floor-to-ceiling "pole lamp" brought an action against Sears Roebuck, alleging that the defendant's marketing of an identical lamp infringed upon plaintiff's design and mechanical patents and so confused the market as to constitute unfair competition under state law as well. The courts below found the patent invalid, but held that the plaintiff had made out a claim of unfair competition. The Supreme Court, reviewing only the unfair competition question, reversed. It held that state unfair competition laws could not prohibit what the federal patent laws allowed and, therefore, the copying of an unprotected article could not be barred. Compco was a companion case in which the court reached the same result.

Neither Sears nor Compco questioned the subject matter jurisdiction of a district court over an unfair competition claim pendant to a claim for patent infringement. Both cases were decided on the merits, after the patent-in-suit had been adjudged invalid, a point which is yet to be reached in the instant litigation.

Moreover, as the concurring opinion of Mr. Justice Harlan noted, both cases reached only the question of whether the mere "copying" of an unpatented item could be forbidden by state law. The court did not decide whether an unfair competition claim could be made out where the defendants made the additional allegation that the copying was done "with the dominant purpose and effect of palming off one's goods as those of another or of confusing customers as to the source of such goods . . .." Id. at 239, 84 S.Ct. at 783. Plaintiff's complaint may well raise those very issues. The motion to dismiss for lack of subject matter jurisdiction must therefore be denied.

II VENUE

Venue in patent infringement actions is governed exclusively by 28 U. S.C. § 1400(b).⁴ Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 77 S.Ct. 787, 1 L.Ed.2d 786 (1957); C. Wright, Law of the Federal Courts § 43, at 158 (2d ed. 1970). It provides a plaintiff two choices of forum. He may file an infringement action either "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." For a corporate defendant "the judicial district where the defendant resides" is the district of incorporation, Fourco Glass Co. v. Transmirra Products Co., 353 U.S. at 226, 77 S. Ct. 787, 1 L.Ed.2d 786, for an individual it is equivalent to domicile. Id.; Technograph Printed Circuits v. Packard Bell Electronics Corp., 290 F.Supp. 308, 324 (C.D.Cal.1968); Wydick, Venue in Actions for Patent Infringement, 25 Stan. L.Rev. 551 (1973). Because none of the defendants can be considered "residents" of Massachusetts, the plaintiff must show that they meet the alternative tests provided in 1400(b).⁵ Each must have a regular and established place of business in Massachusetts and commit an act of infringement here. The two elements are conjunctive; satisfaction of one will not suffice. The burden of proving proper venue is on the plaintiff. Grantham v. Challenge-Cook Brothers, Inc., 420 F.2d 1182 (7th Cir. 1969).

The meaning of "regular and established place of business" has been explored in a number of patent cases. See, e. g., General Radio Co. v. Superior Electric Co., 293 F.2d 949 (1st Cir. 1961); Coleco Industries, Inc. v. Kransco Manufacturing, Inc., 247 F.Supp. 571 (S.D.N.Y.1965); Clearasite Headware, Inc. v. Paramount Cap Manufacturing Co., 204 F.Supp. 4 (S.D.N.Y. 1962). It is apparent that the statute requires more than the minimum contacts necessary for establishing personal jurisdiction or for satisfying the "doing business" test of the general venue provisions of the Code: See 28 U.S.C. § 1391 (c).⁶

Mere "doing business" in a district is not of itself sufficient to confer venue in patent suits. Something more is required. It must appear that a defendant is regularly engaged in carrying on a substantial part of its ordinary business on a permanent basis in a physical location within the district over which it exercises some measure of control.

Manstantuono v. Jacobsen Manufacturing Co., 184 F.Supp. 178, 180 (S.D.N. Y.1960) (citation omitted).

The term "acts of infringement" has also evolved its own meaning in this context. Acts of infringement for purposes of 28 U.S.C. § 1400(b) are defined in 35 U.S.C. § 271. Section 271 lists such acts as the manufacture, use or sale of an infringing item. In this regard, the term sale has developed a practical rather than theoretical interpretation. It is no longer necessary for a completed transaction to take place in a district for venue to lie, Tyler Co. v. Ludlow-Saylor Wire Co., 236 U.S. 723, 35 S.Ct. 458, 59 L.Ed. 808 (1915) (dictum), so long as the defendant participates significantly there in the marketing activities leading to its consummation. Union Asbestos & Rubber Co. v. Evans Products Co., 328 F.2d 949 (7th Cir. 1964).

A.

Viewed in this light, Globemaster New England properly does not challenge venue in this district. With its local office in Lawrence, Massachusetts, it acts as the distributor of Globemaster products in New England and Upstate New York. There it employs a team of 15-20 salesmen, as well as supporting staff, whose sole responsibility is to sell Globemaster products throughout Globemaster New England's designated territory.⁷ Although Globemaster New England might best be described as a regional sales outlet servicing a portion of Globemaster, Inc.'s diverse market, the activities...