VOLKSWAGEN OF AMER., INC. v. ENGELHARD M. & C. CORP., 74 Civ. 4966 KTD.

• Citation: 401 F. Supp. 1210
• Decision Date: 18 April 1975
• Docket Number: No. 74 Civ. 4966 KTD.,74 Civ. 4966 KTD.
• Parties: VOLKSWAGEN OF AMERICA, INC., Plaintiff, v. ENGELHARD MINERALS & CHEMICALS CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of New York

401 F. Supp. 1210

VOLKSWAGEN OF AMERICA, INC., Plaintiff, v. ENGELHARD MINERALS & CHEMICALS CORPORATION, Defendant.

No. 74 Civ. 4966 KTD.

United States District Court, S. D. New York,

April 18, 1975.

Brumbaugh, Graves, Donohue & Raymond, New York City, for plaintiff by Francis J. Hone, New York City, of counsel.

Fish & Neave, New York City, for defendant by William K. Kerr, David W. Plant, New York City, of counsel.

OPINION AND ORDER

KEVIN THOMAS DUFFY, District Judge.

Defendant Engelhard Minerals & Chemicals Corporation (hereinafter "Engelhard") has moved, pursuant to Fed.R.Civ.P. 12(b)(1), to dismiss for lack of subject mattter jurisdiction the complaint filed by Volkswagen of America, Inc. (hereinafter "VWA") on November 12, 1974, in which VWA seeks a declaratory judgment (28 U.S.C. § 2201) that the catalytic converter used in 1975 Volkswagens sold in the United States does not infringe two United States patents held by Engelhard (Nos. 3,441,381 and 3,565,830). VWA's suit also claims alternatively, that the two Engelhard patents are invalid.

Volkswagen of America is a wholly-owned subsidiary of Volkswagenwerk Aktiengesellschaft (Volkswagen of Germany, hereinafter "VWG") and is the exclusive importer and distributor of Volkswagen automobiles in the United States.

Affidavits filed by the parties with regard to the instant motion indicate that sometime in 1972 Engelhard approached VWG about possible licensing of Engelhard patents for use in design and manufacture of catalytic converters to be installed in Volkswagens beginning with the 1975 model year. Discussions and correspondence followed, all against the background of the tighter anti-pollution standards promulgated by the federal government for new cars sold in the United States after January 1, 1975. One such meeting occurred on December 13, 1973 in Wolfsburg, Germany. Volkswagen of Germany was not receptive to Engelhard's offers of licenses and had its own plans for a converter which assertedly was somewhat different than Engelhard's. The possibility of an infringement action by Engelhard was apparently discussed, but Engelhard claims that it did not have sufficient information about the design or composition of the Volkswagen catalytic converter to make an informed judgment about whether the catalytic converter would infringe Engelhard patents.

Thereafter, on March 18, 1974, VWG wrote to Engelhard, enclosing a drawing of the catalytic converter it planned to use and explaining why it did not feel licenses from Engelhard were necessary. Volkswagen of Germany claimed that its catalytic converter had a significantly different structure then Engelhard's and therefore did not come within patent no. 3,441,381. It also asserted that patent no. 3,565,830 was invalid in light of prior art.

Although Engelhard now characterizes the information VWG provided as fragmentary, the drawing and letter generated an extended and highly technical response from Joseph Feldstein of Engelhard (dated April 11, 1974) explaining in detail why the Volkswagen catalytic converter would still come within patent no. 3,441,381. He also claimed that patent no. 3,565,830 was not void for obviousness. Feldstein stated in part:

"Volkswagen may have utilized some engineering skill to adapt the catalyst to their automobile model but this does not avoid the Engelhard patent 3,441,381. No doubt a judge when viewing the Volkswagen structure, with its elements performing in the same manner and for the same purpose as those of the patent, would conclude that you in fact failed to devise a structure outside the coverage of the patent."

* * * * * *

"Therefore, we are of the opinion that the catalyst system to be utilized in the Volkswagen infringes the claims of our patent. No. 3,441,381"

* * * * * *

"You expressed the opinion that Engelhard's patent No. 3,565,830 is invalid in view of the Johnson et al. publication. We disagree. . . ."

* * * * * *

". . . because Engelhard is a United States patentee, we have recourse to the Tariff Act, which can thwart the importation into the United States of an infringing device."

* * * * * *

After listing the major auto companies licensed by Engelhard, the letter concludes: "We intend to assert and defend our patent rights not only as a matter of corporate policy but also because we have a firmly established licensing program. At the same time, we stand prepared, as we advised you in December, to offer you a license under our patents upon terms and at royalties we are certain you will find very reasonable. Inasmuch as we too would like the discussions between our companies to be concluded in mutual agreement, we are prepared to meet again with you to discuss a license agreement."

Volkswagen of Germany persisted in its decision not to obtain licenses from Engelhard (letter dated July 5, 1974), but Engelhard instead arranged another meeting on August 21, 1974. Another license offer was made, and again it was rejected. (Letter dated Sept. 5, 1974). Volkswagen of Germany, in rejecting the offer, noted in part:

". . . we believe that much more is at stake than merely the costs of the action to Engelhard. We believe that the overall situation on the catalyst market does not permit, in the interest of Engelhard, legal action against us on the basis of your position which, we are convinced, does not stand a chance and whereby especially the destruction of patent No. 3,665,830 is risked."

One final meeting, initiated by VWG, occurred between representatives of Engelhard and legal counsel for both VWG and the plaintiff, VWA. Again no agreement was reached. Engelhard claims that at the meeting it carefully avoided making any claim or charge of infringement. Engelhard also claims that at this meeting it renewed a request for a sample Volkswagen catalytic converter to enable Engelhard to appraise it in light of the Engelhard patents, but Engelhard states that no sample was ever supplied.

The meeting resulted in no agreement between the parties. A final letter passed from Engelhard to counsel for VWG and VWA, explaining why Engelhard believes that patent no. 3,440,381 is valid over prior art.

Shortly thereafter, VWA filed this action for a declaratory judgment that it had not infringed the Engelhard patents and in the alternative that such patents were invalid.

Engelhard's basic argument in support of its motion to dismiss is that no justiciable controversy exists in this case and that therefore this Court does not have subject matter jurisdiction under 28 U.S.C. § 2201. It argues that no threat or charge of infringement has been made, either to VWG or particularly to VWA, which is the only plaintif...