Sticker Industrial Supply Corp. v. Blaw-Knox Co.

• Decision Date: 30 November 1966
• Docket Number: No. 15574.,15574.
• Citation: 367 F.2d 744
• Parties: STICKER INDUSTRIAL SUPPLY CORP., Plaintiff-Appellant, v. BLAW-KNOX CO., and A. J. Boynton & Co., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

367 F.2d 744 (1966)

STICKER INDUSTRIAL SUPPLY CORP., Plaintiff-Appellant, v. BLAW-KNOX CO., and A. J. Boynton & Co., Defendants-Appellees.

No. 15574.

United States Court of Appeals Seventh Circuit.

October 26, 1966.

Rehearing Denied November 30, 1966.

Howard M. Kohn, Cleveland, Ohio, Alan J. Altheimer, Lionel G. Gross, Howard L. Kastel, Chicago, Ill., Blythe D. Watts, H. F. Schneider, Watts & Fisher, Harold Galvin, Leslie L. Knowlton, Schlesinger, Galvin, Kohn & Landefeld, Cleveland, Ohio, Altheimer, Gray, Naiburg, Strasburger & Lawton, Chicago, Ill., for plaintiff-appellant.

Russell H. Clark, Chicago, Ill., William Henry Venable, Charles M. Thorp, Jr., Thorp, Reed & Armstrong, Pittsburgh, Pa., for defendants-appellees.

Before SCHNACKENBERG, FAIRCHILD and CUMMINGS, Circuit Judges.

CUMMINGS, Circuit Judge.

This case involves a method patent for adding solid alloys to molten steel in steel production. Count I of the complaint seeks a declaratory judgment that the patent is invalid. Count II seeks damages for unfair competition on the ground that defendants have been asserting the validity of the method patent, although they knew it was fraudulently obtained. Count III charges that defendants monopolized commerce, in violation of Sections 1 and 2 of the Sherman Act, by means of the fraudulently obtained method patent. The defendants moved for summary judgment,¹ and both sides filed affidavits and exhibits with respect to that motion. Defendants' motion was subsequently granted.

The plaintiff is an Ohio corporation manufacturing and selling specialized steel metal equipment to steel producers. Defendant Boynton is an Illinois corporation performing engineering services for the steel industry, and it owns this method patent. Defendant Blaw-Knox Co. is a Delaware corporation manufacturing and selling specialized steel equipment and is the exclusive licensee of this method patent.

Sticker and Blaw-Knox are the only manufacturers and sellers of variable-rate ladle feeders to the steel industry. A variable-rate ladle feeder is a machine which feeds solid alloys into ladles. The rate of feed of the alloy is varied by vibrating the feeder. This results in adding the alloy in proportion to the rate molten steel flows from the metallurgical furnace into the ladle. The method of adding alloys to molten steel by means of variable-rate metal feeders was the subject of a method patent issued in November 1964 to Boynton pursuant to an April 1964 judgment authorizing the Patent Office to issue a patent on this method. Tietig v. Ladd, 228 F.Supp. 637 (D.D.C., 1964). The claims had earlier been rejected by the Patent Office. Blaw-Knox is the exclusive licensee of the method patent.

Sticker and Blaw-Knox competed in the sale of variable-rate ladle feeders for several years prior to 1964. In 1965, Sticker was unable to obtain any more orders for such feeders, allegedly because of Blaw-Knox's patent infringement threats.

According to Sticker, its ladle feeders were built to order for its customers, are still in use by them and carry out the method claimed in this patent, but without being licensed thereunder. Sticker also claims that its feeders cannot be employed for any other use without alterations, and that there has been no substantial non-infringing use of its feeders.

In December 1961, Blaw-Knox's patent counsel wrote to plaintiff's President, stating that he was of the opinion that Boynton would receive this method patent, and that all Blaw-Knox's installations would infringe the method patent unless a license were obtained from Boynton. In this letter, Blaw-Knox's patent counsel also stated that plaintiff's customers' right to continue using plaintiff's ladle feeders would remain "to be settled" if Boynton's method patent application were granted.

In May 1964, Blaw-Knox sent notices to its customers that the Boynton method patent was just held patentable and that licenses were available. In effect, the notices indicated to the customers that they would need a license under the method patent or would be infringing it.

We have concluded that the Declaratory Judgment Act (28 U.S.C. Sec. 2201 et seq.) entitles plaintiff to an adjudication of the validity of this method patent as prayed in Count I of the complaint. Since both plaintiff and Blaw-Knox had been bidding on similar ladle feeders for the same customers, Blaw-Knox's patent counsel's December 1961 letter really amounted to a statement that plaintiff's installations, as well as Blaw-Knox's, would infringe the method patent unless licensed. Furthermore, various affidavits submitted by plaintiff in opposition to defendants' motion for summary judgment show that prospective customers did not buy plaintiff's ladle feeders because Blaw-Knox claimed their use would violate the Boynton method patent. In considering the affidavits and exhibits, all inferences must be resolved against the movant for summary judgment (Caylor v. Virden, 217 F.2d 739, 741 (8th Cir. 1955); 6 Moore's Federal Practice (2d ed. 1965) par. 56.15(3)), especially since Sticker, the opponent of the summary judgment, has filed material controverting the movant's. Cf. International Longshoremen's & Warehousemen's U. v. Kuntz, 334 F.2d 165, 168, note 4 (9th Cir. 1964); Moore, op. cit., par. 56.22(2).

In E. Edelmann & Co. v. Triple-A Specialty Co., 88 F.2d 852 (7th Cir. 1937), certiorari denied, 300 U.S. 680, 57 S.Ct. 673, 81 L.Ed. 884, this Court first held that the Declaratory Judgment Act permits an alleged infringer to test the validity of a patent, for it "was the congressional intent to avoid accrual of avoidable damages to one not certain of his rights and to afford him an early adjudication without waiting until his adversary should see fit to begin suit, after damage had accrued" (at p. 854). Unless the Declaratory Judgment Act is given a liberal interpretation in this field, patentes would be able to threaten a manufacturer's customers with suit and yet the patentee would be able to avoid suit by the injured manufacturer merely by failing to communicate an infringement threat directly to the manufacturer. See Treemond Co. v. Shearing Corporation, 122 F.2d 702, 704-705 (3rd Cir. 1941). That is why Professor Borchard has stressed that justiciability exists under the Declaratory Judgment Act if "the alleged infringer or his customers or dealers have been notified of the patentee's claim, however informal the method of notification or charge." Borchard, Declaratory Judgments, (2d ed. 1941), p. 807.²

Blaw-Knox, according to Sticker, has claimed that the unlicensed Boynton method use of Sticker's ladle feeders by Sticker's customers would violate Blaw-Knox's patent rights. A similar situation was...