Stewart-Warner Corp. v. Westinghouse Electric Corp.

• Decision Date: 20 December 1963
• Docket Number: Docket 28292.,No. 92,92
• Citation: 325 F.2d 822
• Parties: STEWART-WARNER CORPORATION, Plaintiff-Appellee, v. WESTINGHOUSE ELECTRIC CORPORATION, Defendant, and Canadian Westinghouse Company, Ltd., Intervenor-Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

325 F.2d 822 (1963)

STEWART-WARNER CORPORATION, Plaintiff-Appellee, v. WESTINGHOUSE ELECTRIC CORPORATION, Defendant, and Canadian Westinghouse Company, Ltd., Intervenor-Defendant-Appellant.

No. 92, Docket 28292.

United States Court of Appeals Second Circuit.

Argued October 23, 1963.

Decided December 20, 1963.

Certiorari Denied March 9, 1964.

COPYRIGHT MATERIAL OMITTED

Augustus G. Douvas, Chicago, Ill. (Edwin T. Bean and Bean, Brooks, Buckley & Bean, Buffalo, N. Y., on the brief), for plaintiff-appellee.

Ralph H. Swingle, Pittsburgh, Pa. (Charles K. Rice and Jaeckle, Fleischmann, Kelly, Swart & Augspurger, Buffalo, N. Y., on the brief), for intervenor-defendant-appellant.

Before LUMBARD, Chief Judge, and MEDINA and FRIENDLY, Circuit Judges.

Certiorari Denied March 9, 1964. See 84 S.Ct. 800.

LUMBARD, Chief Judge.

Canadian Westinghouse Company Ltd. (Canadian), an intervenor-defendant in a patent infringement suit brought by Stewart-Warner Corporation against Canadian's parent, Westinghouse Electric Corporation, appeals from an order of the United States District Court for the Western District of New York, dated April 15, 1963, which dismissed certain of Canadian's counterclaims against Stewart-Warner, for patent infringement and unfair competition, and also struck certain of Canadian's affirmative defenses. As we are of the opinion that the district court abused its discretion in dismissing such counterclaims and striking such defenses we reverse the judgment of that court.

To summarize the matters in dispute, we take as true the allegations of Canadian in its moving papers for intervention and in its answer. During some years prior to 1959 Canadian, a corporation with its principal place of business in Hamilton, Ontario, developed a photoelectric line tracer. Among its employees were Frans Brouwer, a product development engineer, Derek Redman, a senior engineering assistant, and John Cheverton, another engineer. Canadian alleges that Brouwer and Cheverton were the inventors of the basic device; in July 1957 they assigned their interests to Canadian, including "all variations thereof, and improvements thereon" which they might thereafter make. One patent application of Cheverton and Brouwer resulted in United States patent #2,933,612, issued in April 1960; and an improvement invented by Brouwer resulted in patent #3,017,552, issued in January 1962. Both patents are owned by Canadian. The photoelectric line tracing equipment manufactured by Canadian is purchased by Westinghouse, its parent by virtue of 76 per cent ownership of Canadian's stock, and is distributed and resold in the United States by Westinghouse. Canadian under its contracts with Westinghouse is obligated to save Westinghouse harmless from patent infringement claims and is required to pay any patent litigation expenses.

Canadian alleges that Stewart-Warner, a Virginia corporation with its principal place of business in Chicago, was not engaged in the manufacture and sale of photoelectric line tracing equipment prior to 1959. In that year it conspired with Brouwer and Redman and Edward L. McDonald, Canadian's senior sales assistant, to obtain the benefits of Canadian's experience, know-how, designs, customers and markets. Stewart-Warner then hired away McDonald and Brouwer in September 1959, and Redman followed in December. Obviously it was only a matter of time before the parties would be embroiled in litigation somewhere in the United States.

Stewart-Warner served its complaint on Westinghouse on July 19, 1961, charging infringement of McLennan patent #2,489,305, issued on November 29, 1949, for an invention relating to a "Photoelectric Curve Following Device" which it had acquired by assignment. Venue was laid in the Western District of New York, where Westinghouse has a regular place of business and where it was alleged that it had committed acts of infringement. Stewart-Warner sought a preliminary and final injunction against further infringement by Westinghouse "and those controlled by" Westinghouse and an accounting for profits and damages, to be trebled for wilfulness. An amended complaint, served on November 2, 1961, added two counts alleging notice to Westinghouse, and knowing contributory infringement by the sale of photoelectric line scanning heads and "specially adapted electronic amplifier circuitry which constitute a material part of the patented invention, knowing the same to be especially made or especially adapted for use in an infringement" of its patent.

Westinghouse's answer denied the validity of the McLennan patent and denied infringement and contributory infringement. It admitted that Stewart-Warner had written Westinghouse asserting infringement of the McLennan patent by equipment purchased by Westinghouse from Canadian. It also asserted as affirmative defenses that McLennan was not the inventor or the first or sole inventor of the claimed invention; that the claimed invention had been previously patented or described, that it had been practiced and that any differences over the prior art, claimed by McLennan, lacked invention as they were obvious to one skilled in the art. Finally, it alleged that Stewart-Warner came into court with unclean hands by reason of having hired Brouwer, Redman and McDonald away from Canadian. Stewart-Warner's motion to strike these latter allegations was denied in May 1962.

On February 9, 1962, Canadian moved to intervene as a defendant and it attached its proposed answer, which was substantially the same as Westinghouse's answer with respect to the infringement and validity of the McLennan patent, and acts of unfair competition, but it added allegations of additional acts of unfair competition directed against Canadian.

Canadian's proposed answer also counterclaimed for a declaratory judgment that the McLennan patent was invalid, unenforceable, and not infringed. A second counterclaim was based upon Canadian's allegations of unfair competition. Still another counterclaim charged infringement by Stewart-Warner of the two patents originally issued to Cheverton and Brouwer and to Brouwer alone and subsequently assigned to Canadian. Canadian's counterclaims asked the usual relief of injunction, damages for unfair competition, and an accounting for profits and treble damages for wilful infringement of its two patents.

After hearing argument, Judge Henderson on February 23, 1962, granted leave to Canadian to intervene and received its answer and counterclaims. Several months later, in June 1962, Stewart-Warner moved to dismiss Canadian's counterclaim for infringement, its counterclaim for declaratory judgment insofar as it related to the new allegations of unfair competition, and its counterclaim for unfair competition. It also moved to strike those of Canadian's affirmative defenses which related to the additional allegations of unfair competition.

Ten months later, on April 15, 1963, Judge Henderson granted Stewart-Warner's motion without stating any reason for so doing. The grounds upon which Stewart-Warner had moved were that the counterclaims for infringement and unfair competition "improperly attempt to enlarge the issues of the main action and fail to state claims upon which relief can be granted. * * *" citing Chandler & Price Co. v. Brandtjen & Kluge, Inc., 296 U.S. 53, 56 S.Ct. 6, 80 L.Ed. 39 (1935), and that "venue is improper because plaintiff neither resides, is doing business, nor committed acts of infringement in the Western District of New York." Stewart-Warner moved to strike Canadian's allegedly improper affirmative defenses because "these allegations improperly attempt to enlarge the issues of the main action," and they are "immaterial * * * to any defense to the claims in the Amended Complaint."

The dismissal of Canadian's prayers for injunctive relief alleged in its counterclaims for patent infringement and unfair competition is appealable under 28 U.S.C. § 1292(a) (1). General Electric Co. v. Marvel Rare Metals Co., 287 U.S. 430, 433, 53 S.Ct. 202, 77 L.Ed. 408 (1932); Telechron, Inc. v. Parissi, 197 F.2d 757 (2 Cir. 1952); Cutting Room Appliances Corp. v. Empire Cutting Machine Co., 186 F.2d 997 (2 Cir. 1951); Switzer Bros., Inc. v. Locklin, 207 F.2d 483 (7 Cir. 1953), cert. denied, 347 U.S. 912, 74 S.Ct. 477, 98 L.Ed. 1069 (1954). The striking of the affirmative defenses and the portion of the counterclaims for declaratory judgment which assert those affirmative defenses is so inextricably interwoven with those portions of the order which are clearly appealable that we shall proceed to consider the merits of the entire order.

There is no doubt of the propriety of Canadian's intervention as the manufacturer and vendor to Westinghouse and others of the equipment alleged by Stewart-Warner to be an infringement of its McLennan patent. Chandler & Price Co. v. Brandtjen & Kluge, Inc., 296 U.S. 53, 56 S.Ct. 6, 80 L.Ed. 39 (1935); Yale & Towne Mfg. Co. v. Manning, Maxwell & Moore, Inc., 91 F.Supp. 106 (S.D.N.Y.1950); Western States Machine Co. v. S. S. Hepworth Co., 2 F.R.D. 145 (E.D.N.Y.1941). Thus the remaining and critical question is whether Canadian, being a proper party to intervene in the suit, may assert other related claims against Stewart-Warner.

The order of the district court cannot be sustained on any view of the law. Since the district judge did not state any reason for his decision, we proceed to examine the various grounds offered by Stewart-Warner in support of its motion. First, Stewart-Warner maintains that Canadian's counterclaims and certain of its affirmative defenses would improperly enlarge the field of litigation between Stewart-Warner and Westinghouse. We do not agree.

The issues between Stewart-Warner and Canadian and Westinghouse ought to be settled in one forum and in one suit. The charges and countercharges involve the validity of three patents in the field of photoelectric line scanning and line tracing equipment, whether any part...