Telephonics Corporation v. Lindly & Company

• Decision Date: 10 January 1961
• Docket Number: Civ. A. No. 20136.
• Citation: 192 F. Supp. 407
• Parties: TELEPHONICS CORPORATION and Fabrionics Corporation, Plaintiffs, v. LINDLY & COMPANY, Inc., Defendant.
• Court: U.S. District Court — Eastern District of New York

192 F. Supp. 407

TELEPHONICS CORPORATION and Fabrionics Corporation, Plaintiffs, v. LINDLY & COMPANY, Inc., Defendant.

Civ. A. No. 20136.

United States District Court E. D. New York.

August 16, 1960.

On Motion For Reargument September 7, 1960.

On Motion To Add Parties And For Stay January 10, 1961.

COPYRIGHT MATERIAL OMITTED

Brumbaugh, Free, Graves, & Donohue, New York City (Walter H. Free, George W. Whitney and Richard A. Lochner, New York City, of counsel), for plaintiffs.

Robert E. Burns, New York City (Allan Zelnick, New York City, of counsel), for defendant.

On Motion To Add Parties Plaintiff And For Stay January 10, 1961.

BYERS, District Judge.

This is a defendant's motion to dismiss a complaint in whole or in part, in an action in which plaintiffs seek a declaratory judgment respecting infringement and validity of two patents owned by defendant; and that plaintiffs have not used any secret or proprietary information pertaining to defendant in the manufacture or sale of machinery and apparatus designed for use by the textile industry and which is in competition with defendant's patented devices.

The complaint was filed October 1, 1959, and an amended complaint on October 6, 1959. By a consent order of January 8, 1960 the action was stayed. Pursuant to plaintiffs' later motion and by order of July 5, 1960, the stay was vacated, and the defendant was given twenty days in which to answer or otherwise move. This motion was made pursuant to notice dated July 20, 1960.

The gist of defendant's argument is:

(a) There has been no assertion by it, and none is now made, that plaintiffs have infringed patent No. 2,878,395, and hence there is no existing controversy as to that.

(b) The court lacks jurisdiction over the alleged betrayal of trade secrets and proprietary property because (1) there is no diversity, and (2) the issues are pending in a prior suit between the parties brought in the New York Supreme Court, Nassau County, which has not come to trial. (Probably it cannot for about five years.)

(c) The issue of infringement as to defendant's patent No. 2,907,535 is presented in an action filed October 6, 1959 in the United States District Court for the Eastern District of North Carolina in which this defendant is plaintiff, and these plaintiffs and their local sales agent Inderfurth are defendants, whereby this court is required to stay this action.

Background

The controversies between the corporate parties have their origin in the severance of relationship late in 1957, between Vincent E. Lynch and the defendant company, and his association with plaintiff Telephonics and its selling subsidiary Fabrionics, Lynch had been a vice-president, director and stockholder in the defendant company, and having joined himself to a competitor in the manufacture and sale of textile machinery and apparatus, and having apparently sought to extend the business of the latter in the territory in which he had previously been active as a salesman on defendant's behalf, he seems to have created the condition that has given rise to the pending disputes between Telephonics and Lindly.

It is apparent that a decision of this motion can have no bearing upon the merits of the controversy. It should be said however that a careful examination of the sundry affidavits and supporting data, convinces this court that the sooner these parties come to grips with their mutual grievances, the better for both of them. While most if not all litigation is entered into in the hope of financial reward, it is also true that it is at best a questionable substitute for conventional advertising; the courts have an interest in confining to apparent necessities, the number and scope of law-suits so far as justice permits as between contending litigants.

The patents involved

The first is No. 2,878,395, granted Mar. 17, 1959, app. filed July 16, 1956. This covers a photo-electric system that includes a light control circuit which actuates a device called a yarn inspector. It is called the yarn inspector patent.

The pending question is whether the defendant has asserted in substance or effect that plaintiffs have manufactured and sold a device or apparatus which infringes this patent. That subject will be discussed.

The second patent is No. 2,907,535, granted Oct. 6, 1959, app. filed Jan. 2, 1958, for a yarn tensioning device.

It seems that yarn as it comes from spools is run between discs which are pressed together to effect tension, which action according to this patent, is applied and controlled by electromagnetic force. Thus the patent is entirely unrelated to the first in function and construction.

There is no question that defendant charges plaintiffs with making and selling an infringing device. The defendant urges that in view of the cause which it filed in North Carolina, this case should not proceed until that one has been adjudicated. The subject will be discussed.

The matter of Lynch's alleged betrayal to plaintiffs of defendant's secret and confidential information concerning the subject matter of these patents, and otherwise.

The questions touching this branch of the controversy will be discussed.

Questions

1. Is there a justiciable controversy between the parties as to the first patent?

This means, has the defendant charged the plaintiffs with infringement?

The answer cannot be unequivocal in the sense that the motion papers afford conclusive information on the subject. Clearly there is a difference between asserting on the one hand that a given structure is in close imitation of another, and on the other hand that the second structure infringes a patent covering the first. The defendant asserts that it has strictly adhered to the first course, and meticulously avoided the second. If that be true so far as the motion papers disclose, does it follow that the plaintiff should be precluded from offering testimony by witnesses not thus far examined in the state cause, to the contrary? It seems obvious that a negative answer is required. No deposition testimony has been taken in this cause, and the effect of granting defendant's motion would be to preclude such, not to mention whatever testimony may be available at a trial.

For present purposes it is to be observed that the defendant's newspaper release of Sept. 8, 1958, describing the charges made in its State Court action contains the following:

"Plaintiff seeks damages charging that, among other things, the defendants have engaged in unfair competition by copying and reproducing Lindly Corp.'s yarn defect monitor equipments, such as its yarn inspector, electromagnetic yarn tension device and spun yarn inspector on which patents are pending." (Italics supplied.) On that date the yard inspector patent had been granted; The statement that these plaintiffs had copied and reproduced the yarn inspector device was essentially a charge of infringement, and would be so understood by those to whom it was thus publicly addressed.

In this connection see: Dewey & Almy Chemical Co. v. American Anode Inc., 3 Cir., 137 F.2d 68; Rhodes Pharmacal Co. v. Dolcin, etc., D.C., 91 F.Supp. 87; Crowley & Co. v. Philips, D.C., 104 F. Supp. 840.

It is now stated for the motion, that there is no present assertion of such infringement, but that will not suffice as a reason for granting this motion. If the defendant be so advised, it can admit in its answer that the plaintiffs' yarn inspector apparatus does not infringe patent No. 2,878,395. That possibility is not legally taken care of by the affidavits submitted in behalf of the motion.

The defendant argues that there has not been shown thus far a clear or future threat to sue for patent infringement.

It is probably a nice question of construction as to how far a patentee may go in skirting close to a threat of suing for infringement, in order to defeat an action for declaratory judgment on the subject, but that question can only be resolved in the light of all the testimony that can be developed at a trial. If these plaintiffs are unable to sustain their burden of proof, so much the worse for them, but nothing in the showing made thus far should deprive them of their day in court on the issue.

Research Electronics & Devices Co. v. Neptune, 2 Cir., 264 F.2d 246, cited by defendant, had to do with the exclusion from such a cause as this, of patents only pending but not issued, as to which the assertion of infringement was not found to be present.

The defendant has not demonstrated as a matter of law, that there is no justiciable controversy between these parties as to an assertion by defendant of infringement by plaintiffs of the defendant's said patent.

2. As to patent No. 2,907,535, is this court required to stay this case until the cause instituted on October 6, 1959 by the defendant in the Eastern District of North Carolina shall have been adjudicated?

The short answer is in the negative, for two reasons:

(a) This cause was started by the filing of this complaint on Oct. 1, 1959, and while the patent infringement paragraphs 7 to 10 inclusive do not refer specifically to the second patent, which had not then been granted, paragraph 11, which refers to defendant's assertion that Lynch had acquired certain secret and confidential information, alleges that it included:

"(a) The circuity, construction and operation of Defendant's equipment including * * * yarn tensioning devices and recorders;

"(b) Experimental and test work performed by Defendant with respect to such equipment;

"(c) Defendant's production techniques and technical know-how;

* * * * * *

"(f) Patent applications filed by Defendant; * * *."

The foregoing laid a sufficient foundation as a pleading, to justify the amended complaint which was filed Oct. 6, 1959 to include the second patent, as an essential part of the subject matter of the justiciable controversy between the parties, and so to relate it back to Oct. 1, 1959 within Fed.Rules Civ.Proc. rule 15(c), 28 U.S.C.

(b)...