Throwing Corp. of America v. Deering Milliken Research Corp.
| Decision Date | 06 August 1969 |
| Docket Number | C-141-G-68.,No. C-140-G-68,C-140-G-68 |
| Citation | 302 F. Supp. 487 |
| Court | U.S. District Court — Middle District of North Carolina |
| Parties | THROWING CORPORATION OF AMERICA, Plaintiff, v. DEERING MILLIKEN RESEARCH CORPORATION and Deering Milliken, Inc., Defendants. TEXTURED FIBRES, INC., Plaintiff, v. DEERING MILLIKEN RESEARCH CORPORATION, Defendant. |
McNeill Smith, Smith, Moore, Smith, Schell & Hunter, Greensboro, N. C., for plaintiffs.
A. L. Meyland, Greensboro, N. C., and Robert F. Conrad and Kurt Shaffert, Washington, D. C., for defendant.
The plaintiff in each of these actions seeks declaratory judgment as to the meaning of identically worded royalty provisions in two license agreements. The plaintiff, Throwing Corporation of America (hereinafter referred to as Throwing Corporation), is a North Carolina corporation maintaining its principal office and place of business in Alamance County, North Carolina. The plaintiff, Textured Fibres, Inc. (hereinafter referred to as Textured Fibres), is a Delaware corporation maintaining its principal office and place of business in Randolph County, North Carolina. The defendant, Deering Milliken Research Corporation (hereinafter referred to as DMRC), is a South Carolina corporation maintaining its principal office and place of business in Spartanburg, South Carolina.
Jurisdiction is based on diversity of citizenship and substituted service of process was made on DMRC in accordance with the North Carolina long-arm statute,1 as is permitted by Rule 4(d) (7) of the Federal Rules of Civil Procedure. Deering Milliken, Inc., a defendant in No. C-140-G-68, concedes that it has been served with a process and is properly before the Court.
DMRC made a special appearance and moved to dismiss both actions, or in lieu thereof to quash the return of service of summons, on the grounds that (1) it is a corporation organized and existing under the laws of the State of South Carolina with its principal place of business in Spartanburg, South Carolina, (2) it has not been domesticated under the laws of the State of North Carolina and has not appointed a resident process agent, (3) it has not by any action or inaction on its part designated the Secretary of the State of North Carolina as its agent for the service of process, and (4) the service of process upon the Secretary of the State of North Carolina, and return thereof, in these actions are insufficient to subject the DMRC to the jurisdiction of this Court.
In order to determine the jurisdictional questions presented by the motions, a brief review of the pertinent facts is necessary. On September 25, 1963, DMRC entered into a license agreement with a company named Virginia Mills, Inc., and this is the agreement which is the subject of controversy in No. C-140-G-68, in which Throwing Corporation is the plaintiff. On May 1, 1964, DMRC entered into a license agreement with Textured Fibres, which is the subject of the controversy in No. C-141-G-68. The two written agreements are executed on identical printed forms, differing only in the typewritten additions thereto. All such differences are irrelevant to a resolution of the motions before the Court. The preambles of these agreements cite that DMRC has exclusive rights to certain inventions and technical information relating to processes and devices for the manufacture of crimped synthetic yarns based upon the application of a false twist, the processes being called "FT processes" and the devices being called "FT machines." Each of the agreements provided that in exchange for a payment of royalties DMRC will not enforce these exclusive rights against the licensee.
Plaintiffs bought FT machines manufactured by a French machinery manufacturing company known as A.R.C.T. The license agreements require the licensee to keep track of the extent to which it uses the machines in the conduct of manufacturing yarns for its customers as a measure of the royalties paid to DMRC under the license agreement, and also permits DMRC to audit these records. The license agreements further provide for DMRC to furnish the licensee with such technical information and "know-how" which it deems necessary to enable the licensee to practice the invention, and to continue to furnish such additional technical information and "know-how" as DMRC may have or develop during the life of the license agreements. Such technical information is largely the result of research and development effort by DMRC at its corporate headquarters and laboratories at Spartanburg, South Carolina. A significant portion of this technical information is developed by the scientists and engineers of DMRC in response to requests made by licensees. On occasions, personnel of DMRC has visited the plants of licensees in North Carolina in order to facilitate the handling of technical problems encountered by the licensees. DMRC has 10 employees who have performed technical services to licensees in North Carolina at one time or another. On occasions, DMRC has employed independent manufacturers in North Carolina to perform work for it in North Carolina.
DMRC has 23 licensees located in North Carolina, 9 of which are similar to the licenses in these actions. DMRC states that in 1968 it received royalties of more than $10,000.00 from 14 of its licensees in North Carolina. The licensees are required to maintain true, accurate and detailed records showing all information necessary to the computation of royalties, and DMRC has adopted an audit program of its licensees, including its several licensees in North Carolina. It was the result of one of these audits that precipitated the present controversies.
DMRC has at various times advertised in publications distributed in North Carolina. Its advertising has been carried in such publications as the Daily News Record, National Review, Women's Wear Daily, Sports Illustrated, True, Red Book, and Life Magazine. Additionally, technical representatives and officers of DMRC have visited corporations in North Carolina from time to time to acquaint time with available licensing programs.
DMRC is a corporation engaged in the conduct of research and development, and is not engaged in the manufacture or sale of goods, products or equipment. Much of the technology with which it deals is related to the textile industry. In the course of its business activities, DMRC obtains exclusive legal rights to certain inventions and grants licenses and technical information to interested parties. DMRC is not domesticated in the State of North Carolina, nor is it authorized to transact business in this State. It has no mailing address or telephone number in this State. The license agreements in question were signed by the plaintiffs in this State and then executed by DMRC at its Spartanburg office.
N.C.G.S. § 55-144 provides:
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Deering Milliken Research Corp. v. Textured Fibres, Inc., Civ. A. No. 68-705.
...in question were to be performed "in part" in South Carolina conflicts with the opinion of the Court in Throwing Corp. of Amer. v. Deering Milliken Research Corp., supra, 302 F.Supp. 487 involving these same contracts between the parties, in which the statement is made that these contracts,......
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