Universal Oil Products Co. v. Root Refining Co., 716 and 895

• Decision Date: 09 October 1936
• Docket Number: 893 and 785.,No. 716 and 895,716 and 895
• Citation: 16 F. Supp. 846
• Parties: UNIVERSAL OIL PRODUCTS CO. v. ROOT REFINING CO. SAME v. SKELLY OIL CO.
• Court: U.S. District Court — District of Delaware

16 F. Supp. 846

UNIVERSAL OIL PRODUCTS CO. v. ROOT REFINING CO.

SAME v. SKELLY OIL CO.

Nos. 716 and 895, 893 and 785.

District Court, D. Delaware.

October 9, 1936.

Thomas G. Haight (of Wall, Haight, Carey & Hartpence), of Jersey City, N. J., William F. Hall and Charles M. Thomas (of Bacon & Thomas), both of Washington, D. C., and E. Ennalls Berl (of Ward & Gray), of Wilmington, Del., for plaintiff.

J. Bernard Thiess, Thorley von Holst, and Sidney Neuman (of Jones, Addington, Ames & Seibold), all of Chicago, Ill., and Arthur G. Logan (of Marvel, Morford, Ward & Logan), of Wilmington, Del., for defendants.

W. P. Z. German, of Tulsa, Okl., of counsel for Skelly Oil Co.

NIELDS, District Judge.

Hearing on issues raised by a special defense in answers to original bills in the nature of supplemental bills.

These supplemental bills aver that on January 14, 1936, plaintiff had "assigned its entire right, title and interest in and to the aforesaid invention and improvement, and in and to said letters patent" to Universal Oil Products Company, a Delaware corporation, and prayed that the assignee be substituted "as plaintiff in place, and instead, of its assignor, Universal Oil Products Company, a Corporation of South Dakota," plaintiff in these suits. Answers filed to these bills aver that the legal effect of a certain bill of sale and agreement entered into January 1, 1932, between said South Dakota corporation and said Delaware corporation, and the construction given said agreement by the parties, wrought an abatement of the original suits and deprived this court of jurisdiction to enter a decree awarding injunctions; and that the decrees themselves and the trial proceedings upon which they were based were nugatory.

Hereafter in this opinion Universal Oil Products Company, a corporation of the state of South Dakota, shall be referred to as "South Dakota," and Universal Oil Products Company, a corporation of the state of Delaware, shall be referred to as "Delaware."

A brief outline of the steps in the suits may be helpful. In 1929 South Dakota filed its bill of complaint against Root Refining Company charging infringement of the Egloff patent, and in 1931 charging infringement of the Dubbs patent. In 1930 South Dakota filed its bill of complaint against Skelly Oil Company on the Egloff patent, and in 1931 on the Dubbs patent. The Root cases were consolidated for trial and were tried throughout the summer of 1932, accumulating a record of 3,904 pages with 1,500 pages of exhibits. In May, 1934, an interlocutory decree was entered finding validity and infringement of the Dubbs and Egloff patents and awarding an injunction and an accounting of profits and damages. In June, 1935, this decree was affirmed by the Circuit Court of Appeals. 78 F.(2d) 991. Petitions for rehearing and for writs of certiorari were presented and denied. 296 U.S. 626, 56 S.Ct. 149, 80 L.Ed. 445. In February, 1936, Delaware set up in its bills of complaint in the nature of supplemental bills, the assignment to it of the Egloff and Dubbs patents and claims for damages, and praying that it be substituted as plaintiff in place of South Dakota, the plaintiff herein. An order was entered granting such leave and supplemental bills were filed in both of the Root cases. In March, 1936, Root filed answers to the supplemental bills setting up an abatement of the causes of action in both Root cases on January 1, 1932, when the bill of sale and agreement between South Dakota and Delaware was entered into. In its answer Root Refining Company prayed:

"1. That all proceedings, including the entry of the interlocutory decree, had herein subsequent to January 1, 1932, and prior to the filing herein of the Bill of Complaint in the Nature of a Supplemental Bill be abated, set aside, and held for naught.

"2. That the Bill of Complaint in the Nature of a Supplemental Bill heretofore filed herein by the Universal Oil Products Company of South Dakota be dismissed for want of equity."

In the Skelly cases there have been no trial proceedings. The cases are at issue. In February, 1936, an order was entered granting plaintiff leave to file supplemental bills substituting Delaware as sole party plaintiff in lieu of South Dakota. Answers were filed and the issues of abatement were by agreement consolidated for trial with the Root cases, it being stipulated that all evidence adduced in the Root cases was also adduced in the Skelly cases.

At the hearing in June, 1936, defendant Root Refining Company introduced the following in evidence:

Contract of January 1, 1932, between South Dakota and Delaware (reproduced at length in footnote).¹ Certain interrogatories propounded by defendant to plaintiff and the answers thereto. Affidavits of Hiram J. Halle filed in the case of Derby Oil Company v. Universal Oil Products Company in the District Court of the United States for the District of Kansas, Second Division. Affidavit of Sidney Neuman.

Defendant's position is that the evidence above recited establishes that before the trial in the Root cases South Dakota had sold and conveyed to Delaware (with the exception of the Trumble patent) all of its property and assets, including the monopoly of the patents in suit and the right to any recovery thereon, and had parted with all its right to equitable relief upon which its standing in this court depended, and therefore the causes of action then abated and the proceedings both in the Root and Skelly cases subsequent to January, 1932, and prior to February, 1936, were nugatory. A careful consideration of the evidence leads the court to conclude that it does not establish the position of the defendant above recited.

However, the important question whether the agreement of January 1, 1932, completely divested South Dakota of all title and interest in the patents and in the pending suits so that the suits abated and all proceedings were nugatory. Defendant does not question the procedure to substitute Delaware as plaintiff or its right to be so substituted and to have the benefit of all proceedings and of all decrees, provided the defense of abatement is not sustained.

When the suits were instituted in 1929, 1930, and 1931, South Dakota was the only proper plaintiff. In 1932 Delaware was formed by United Gasoline Corporation, owner of all the capital stock of South Dakota. Since December, 1934, Delaware has owned all the stock of South Dakota except one director's qualifying shares. At all times the directors (except the resident director of South Dakota), the officers, and the stockholders of South Dakota and Delaware have been the same. There never has been any possibility of defendant being required to answer to more than one person for infringements. If Delaware be substituted, it will be the only party capable of prosecuting the suit.

The defense of abatement cannot be sustained unless the agreement of January 1, 1932, is construed to be an assignment of the patents in suit and of the entire interest of South Dakota therein. Unless the agreement of January 1, 1932, be construed to be an assignment, there was no abatement of the suit before the actual assignment of January 14, 1936. Apparently defendant fully acquiesces in this position. Yet, abatement only occurs in an equity suit where the sole plaintiff has disposed of his entire interest. If South Dakota retained any interest in the patents, the suits never abated.

The Supreme Court holds that an assignment of a patent may be effected:

"(1) the whole patent, comprising the exclusive right to make, use, and vend the invention throughout the United States; or (2) an undivided part or share of that exclusive right; or (3) the exclusive right under the patent within and throughout a specified part of the United States. * * *

"A transfer of either of these three kinds of interests is an assignment, properly speaking, and vests in the assignee a title in so much of the patent itself, with a right to sue infringers. In the second case, jointly with the assignor. In the first and third cases, in the name of the assignee alone. Any assignment or transfer, short of one of these, is a mere license, giving the licensee no title in the patent, and no right to sue at law in his own name for an infringement." Waterman v. Mackenzie, 138 U.S. 252, 255, 11 S.Ct. 334, 335, 34 L. Ed. 923.

This court has said: "An assignment of a patent may be made only by an instrument in writing. R.S. § 4898 (Comp. St. § 9444 35 U.S.C.A. § 47). Conceding that no particular form of words is essential to effect an assignment of a patent (American Tobacco Co. v. Ascot Tobacco Works C.C. 165 F. 207), yet to constitute an assignment the instrument must be substantially a transfer, actual or constructive, with the clear intent at the time to part with the legal interest, in whole or in part, in the thing transferred, and with the full knowledge of the rights so transferred. Ormond v. Connecticut Mut. Life Ins. Co., 145 N.C. 140, 58 S.E. 997, 998. An instrument which does not purport to convey any present interest in an existing patent, or in one for which an application is pending, is not an assignment within the contemplation of R.S. § 4898. National Cash Register Co. v. New Columbus Watch Co., 129 F. 114, 116, 63 C.C.A. 616. There must be some operative words, expressing at least an intention to assign, in order to constitute an assignment." Minerals Separation, Ltd., v. Miami Copper Co. (D.C.) 275 F. 572, 575.

In considering the agreement of January 1, 1932, the above language that "operative words, expressing at least an intention to assign, in order to constitute an assignment," are most significant.

It is important to recall the purpose of the parties, who have the same officers and directors, in making the agreement. It was deemed impossible for Delaware in January, 1932, to take over the business and property of South Dakota in its entirety. Accordingly, there was specifically reserved to...