Vac-Air, Inc. v. John Mohr & Sons, Inc., 71-1880.

• Decision Date: 04 January 1973
• Docket Number: No. 71-1880.,71-1880.
• Citation: 471 F.2d 231
• Parties: VAC-AIR, INC., Plaintiff-Appellee, v. JOHN MOHR & SONS, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

471 F.2d 231 (1973)

VAC-AIR, INC., Plaintiff-Appellee, v. JOHN MOHR & SONS, INC., Defendant-Appellant.

No. 71-1880.

United States Court of Appeals, Seventh Circuit.

Argued December 12, 1972.

Decided January 4, 1973.

Ray T. McCann, Richard A. Mc-Dermott, Milwaukee, Wis., John H. Bishop, William J. Hallinan, James G. Staples, Chicago, Ill., for defendant-appellant.

Ronald E. Barry, Milwaukee, Wis., for plaintiff-appellee.

Before SWYGERT, Chief Judge, and CUMMINGS and SPRECHER, Circuit Judges.

SPRECHER, Circuit Judge.

This appeal requires us to draw the ever-troublesome line between the right on the one hand of a litigant to a determination of his claim or defense upon the merits despite the incompetency or lack of diligence of his attorney and the necessity on the other hand of the trial judge to control and manage litigation which threatens unduly to burden the court as a result of the attorney's failings.

On September 4, 1970, the plaintiff, Vac-Air, Inc., filed a two-count complaint against the defendant, John Mohr & Sons, Inc. Count I charged infringement by defendant of Patent No. 3,527,018, issued to Vac-Air on September 8, 1970, as assignee of Donald E. Jahnke. Count II charged common law unfair competition in that the defendant allegedly obtained a copy of the patent application about October 1, 1968, while negotiating for its purchase from Vac-Air and copied the "lifter" invention embodied therein. The complaint prayed for (1) a preliminary and permanent injunction against further infringement; (2) an accounting for damages under Count II; and (3) an award of attorneys' fees as an exceptional case under 35 U.S.C. § 285.

Vac-Air moved for a judgment by default on November 4, 1970, at which time defendant had failed to answer or otherwise plead as required to do by October 20. The motion was heard by the district court on November 19, at which time Keith J. Kulie appeared as the attorney for the defendant and orally pleaded that he was a sole practitioner in Chicago who had simply neglected to file an answer or other pleading or a timely motion for an extension. He also mentioned to the court that "the significance of the answer may be changed as a result of the action which is pending in the State Court in Waukesha . . . involving the issue of title to the invention that's disclosed and claimed in the patent here in suit."

The facts of the state court case referred to are disclosed in an opinion by the Supreme Court of Wisconsin in John Mohr & Sons, Inc. v. Jahnke, 55 Wis.2d 402, 198 N.W.2d 363 (1972), where it appears that Jahnke was employed by Hydrahone, which was purchased by Mohr in 1962. In 1964, Jahnke executed an employment contract with Mohr providing that Mohr was to be the owner of any invention Jahnke "made" during his employment which related to Mohr's business. Jahnke terminated his employment with Mohr on June 30, 1968. Jahnke organized Vac-Air in July and filed his application for Patent No. 3,527,018 on October 21, 1968.

In the state court case, Mohr had sued Jahnke and Vac-Air for specific performance of Jahnke's contract with Mohr to assign any patent by Jahnke relating to an invention made during his employment. Jahnke and Vac-Air counterclaimed for conspiracy by Mohr and some of its officers in restraint of trade under the Wisconsin antitrust law.

At the hearing of the motion for judgment by default in the federal district court, the judge concluded that although "it's just been sheer neglect, and I think the Plaintiff should have his default judgment, . . . I will provide that the judgment . . . will be vacated upon . . . $200 being paid, to include both costs and attorneys' fees."

A week later, the $200 was paid to the plaintiff and the appearance of Mr. Kulie and the answer and counterclaim of defendant Mohr were filed. The answer and counterclaim alleged that (1) Patent No. 3,527,018 was invalid as not satisfying the conditions for patentability set forth in 35 U.S.C. §§ 102 and 103; (2) Jahnke violated a 1962 agreement with Hydrahone that he would not compete while employed; (3) Jahnke violated a 1964 agreement with Mohr that "all inventions and improvements that I may make" during employment relating to Mohr's business "shall be the sole property" of Mohr; (4) Jahnke invented the device disclosed in Patent No. 3,527,018 while employed by Mohr; and (5) Jahnke began to compete with Mohr shortly after termination of his employment with Mohr in June 1968, by organizing Vac-Air. Mohr prayed that Vac-Air's complaint be dismissed, that Patent No. 3,527,018 be declared null and void, that the patent rights be transferred to Mohr and that Jahnke be enjoined from further competitive activity with Mohr.

At a status report in the district court on February 4, 1971, attorneys for both Vac-Air and Mohr conceded that the issues raised by Mohr's counterclaim were also at issue in the state court case which remained pending. On March 2, 1971, Joseph A. Gemignani filed an appearance for Mohr in addition to that of Mr. Kulie.

On March 4, 1971, Vac-Air served written interrogatories upon Mohr with answers due in 30 days. On April 14, Vac-Air moved for a judgment by default for failure to answer the interrogatories.

On June 14, 1971, the district judge, 52 F.R.D. 508, without hearing entered a default judgment in favor of Vac-Air and against Mohr, permanently enjoined Mohr from violating Patent No. 3,527,018, and ordered an ex parte hearing to determine plaintiff's damages.

In the meanwhile, in the state court case a jury had rendered a verdict upon which judgment had been entered (1) that Jahnke did not "make" the device while in Mohr's employment, (2) that Mohr and its officers wrongfully conspired to restrain competition by Jahnke and Vac-Air in the sale of vacuum lifters to the poultry packaging industry, (3) that there was malice on the part of Mohr, and (4) that Vac-Air's compensatory damages were $35,000. The jury also assessed punitive damages in the amount of $25,000 but the trial court reduced those to $500 and the Wisconsin...