Waco-Porter Corp. v. Tubular Structures Corp. of America

• Decision Date: 01 October 1963
• Docket Number: No. 62-1658.,62-1658.
• Parties: WACO-PORTER CORPORATION, a Minnesota corporation, Plaintiff, v. TUBULAR STRUCTURES CORPORATION OF AMERICA, a California corporation, Mayco, Inc., a California corporation, Mayco Equipment Co., a California corporation, Shoring, Inc., a California corporation, McFadden-Shayne, Inc., a California corporation, and Marvin M. May, Defendants.
• Court: U.S. District Court — Southern District of California

222 F. Supp. 332

WACO-PORTER CORPORATION, a Minnesota corporation, Plaintiff, v. TUBULAR STRUCTURES CORPORATION OF AMERICA, a California corporation, Mayco, Inc., a California corporation, Mayco Equipment Co., a California corporation, Shoring, Inc., a California corporation, McFadden-Shayne, Inc., a California corporation, and Marvin M. May, Defendants.

No. 62-1658.

United States District Court S. D. California, Central Division.

October 1, 1963.

Irwin O. Spiegel, Beverly Hills, Cal., John Joseph Hall, Los Angeles, Cal., for plaintiff.

Kendrick & Stolzy, Elwood S. Kendrick, Jack Corinblit, Los Angeles, Cal., Roland E. Ginsburg, Beverly Hills, Cal., for defendants.

BYRNE, District Judge.

Plaintiff instituted this action for patent infringement, trade-mark infringement, unfair competition, and breach of contract and license agreement. Plaintiff moved this Court for a preliminary injunction against patent infringement with respect to two patents, trade-mark infringement, and unfair competition.

By Memorandum of Decision filed on July 31, 1963, 220 F.Supp. 724, the Court indicated its decision to grant the motion of the plaintiff for a preliminary injunction with respect to one of the patents and not to grant the motion with respect to the other patent. The Court indicated its decision to grant the preliminary injunction against trade-mark infringement and unfair competition. The patent with respect to which the Court decided to grant the preliminary injunction was patent No. 2,635,717 (sometimes referred to as the "Speedlock" patent).

On August 16, 1963, the plaintiff lodged Findings of Fact, Conclusions of Law and a Preliminary Injunction.

The defendants added new counsel, and on August 30, 1963, objected to the proposed findings and conclusions and preliminary injunction filed by plaintiff with respect to the granting of plaintiff's motion. Defendants also filed on August 30, 1963, a motion to modify the Court's Memorandum of Decision by changing its decision that the patent No. 2,635,717 is valid, and deleting directions for entry of a preliminary injunction with respect to this patent.

In the motion of defendants to modify the Court's Memorandum of Decision, filed August 30, 1963, the ground for modification is that the "Speedlock" patent, patent No. 2,635,717, is invalid in that it claims too much, i. e., it claims an old combination with an improvement of one part of the old combination, and the other old parts perform no new part in the combination.

Defendants contend that under Rule 60 of the Federal Rules of Civil Procedure, the Court has power to modify its Memorandum of Decision and also contend that the Court has inherent power to modify such Memorandum of Decision.

Since there has been no final order in this action, Rule 60 does not apply. The preliminary injunction proposed by the plaintiff is an interlocutory order, and not a final order. The Memorandum of Decision is not a final order.

However, it is clear that the Court has even more power to revise its interlocutory orders and decisions than its final orders, and such power over its interlocutory decisions is inherent. See In School District No. 5 v. Lundgren, 259 F.2d 101 (9th Cir., 1958). The question remains as to whether there is good cause to do so.

Validity of the patent was nowhere disputed in the documents filed up to the time of the hearing. Validity was not challenged at the hearing. Subsequently there was an answer filed contesting the validity of the patent. But this was too late. The Court was required to base its decision on the documents and evidence produced before and at the time of the hearing. Therefore, it is not inequitable to allow the injunction to be issued in the face of the present attack on validity of the patent.

In paragraph and objection Number V, defendants object to proposed Conclusion of Law 16, that defendants have not established patent or trademark misuse. This objection is very important, and in fact it is directed to an asserted error of law in the Court's holding on this point.

The authorities cited relate to patent misuse. The doctrine of trademark misuse has not been established to the satisfaction of this Court. In fact, it appears that there should not be a trademark misuse doctrine of the same type as the patent misuse doctrine, and where there are no unclean hands, the claim of trademark misuse should not constitute a defense. This is because the foundations of the claims are different. Patent law derives from the Constitution which states that the purpose thereof is to secure for a limited time to inventors the right to exclusive use of their inventions. On the other hand, trademark law under the federal statute is not limited by such Constitutional statements of purposes, for the federal trademark law is based on the Commerce clause.

Therefore, the Conclusion of Law 16 is correct insofar as it states that defendants have not established trademark misuse.

The serious objection is to the finding that defendants have not established patent misuse.

In the Court's original Memorandum of Decision, it was concluded that patent misuse was not established because it was not shown that the effect of certain restrictions was to tend to create a monopoly in a line of commerce or to substantially lessen competition in a line of commerce. Then it was concluded that since these effects or one of them was not established, it could not be said that the restrictions violated the Clayton Act, 15 U.S.C.A. § 14. It was concluded that patent misuse was not established because it was concluded that it was not established that the restrictions violated the Clayton Act, the pertinent federal antitrust statute.

Defendants contend that this holding was erroneous in law, for the reason that to establish the defense of patent misuse, it is not necessary to show a violation of the antitrust statute; it is sufficient merely to show certain restrictive agreements.

It appears that this position of defendants is well taken. The key case is Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488, 489, 62 S.Ct. 402, 86 L.Ed. 363 (1942).¹

As for the restriction in the agreement between plaintiff and defendants which restricted competition by defendants, this restriction terminated on July 1, 1962; thus this improper restriction has been abandoned, and the consequences of the misuse of the patent have been dissipated. Therefore, that restriction is no longer a defense.

As for the restrictions still in effect on other distributors, they constitute an attempt to restrain competition from the sale of non-patented items, and thus to extend the patent monopoly to unpatented articles. These restrictions constitute patent misuse, whether or not the defendant is a competitor of the plaintiff. See the Salt case, supra.

See also McCullough v. Kammerer Corp., 166 F.2d 759 (9th Cir., 1948), where the court held that a patent licensing agreement which gave licensee exclusive license to manufacture and use, but not to sell, patented oil well pipe cutter in the United States and its territories, but prevented both licensor and licensee from acquiring any other pipe cutter, is against public interest and precludes both licensor from recovering damages for infringement of patent.

However, the statements made by the court are broad enough to regard as patent misuse any agreement by which the licensor or patent owner requires the licensee not to compete with the patented device, and this would include a fortiori perhaps, the agreement requiring noncompetition in general. Here, the agreement used by plaintiff Waco required and requires the other distributors not to compete with the products which the distributor is permitted...