Watsco, Inc. v. Henry Valve Company

• Decision Date: 14 July 1964
• Citation: 232 F. Supp. 38
• Parties: WATSCO, INC., Plaintiff, v. HENRY VALVE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

232 F. Supp. 38

WATSCO, INC., Plaintiff, v. HENRY VALVE COMPANY, Defendant.

United States District Court S. D. New York.

July 14, 1964.

COPYRIGHT MATERIAL OMITTED

Samuel J. Stoll, Jamaica, N. Y., for plaintiff.

Burgess, Ryan & Hicks, New York City, by H. H. Hamilton, New York City, of counsel, for defendant.

EDELSTEIN, District Judge.

This is an action for patent infringement. Defendant, a corporation organized pursuant to the laws of Illinois, has moved, pursuant to Rule 12(b), Fed.R. Civ.P.¹ 28 U.S.C. to dismiss the complaint on the ground that venue in the Southern District of New York is improper. See 28 U.S.C. § 1400(b).² In the alternative the plaintiff has moved to transfer the action to what it considers to be a more convenient forum, the Northern District of Illinois, pursuant to 28 U.S.C. § 1404(a).³

The affidavits and memoranda submitted by the parties reveal that there is no dispute with respect to the following facts: Defendant is an Illinois corporation having its office and principal place of business in Melrose Park, Illinois. Defendant manufactures and sells tools and components for refrigeration and air-conditioner systems such as refrigerant flow controllers, valves, refrigerant conditioners, strainers, dryers and gauges. All manufacturing is done at its home office in Illinois. The patent in suit is #2,827,913 and involves the invention of a "self-tapping valve for Tubes, Pipes, Tanks and other conduits and Containers."⁴ The self-tapping valve operates along a tubular line and is mounted along the tube and a removable tool is engaged with the valve. The tool "detachably engages a portion of a valve needle forming a part of the self-tapping and self-sealing valve" which opens and closes the valve during its operation. The defendant, as part of its manufacturing operation, manufactures a SWING-TAP tube piercing valve which is made to operate together with a tubular line for mounting the valve and a swivel control valve.

Defendant has sales representatives located throughout the country who operate from their homes or from their privately maintained offices. Defendant does have, however, one district sales office in the United States, at 420 Lexington Avenue, in New York City, within the Southern District of New York. This office, which is the defendant's only other office besides its home office in Melrose Park, Illinois, was established in 1945. It consists of two private inner offices, and a reception and entrance area. These offices encompass approximately 600 square feet of office space. A full-time stenographer staffs the office and the office is supplied with three desks, telephone service, a type-writer, copy machine and three four-drawer file cabinets.

The New York sales office is under the supervision of defendant's Eastern District Sales Manager, C. W. Hudzietz. The stenographer, sales manager and a sales representative, J. A. Endweiss, Jr., occupy the office on a full-time basis. Both Mr. Hudzietz and Mr. Endweiss solicit orders in New York City and "adjacent areas" and both maintain their homes in close-lying suburbs of New York City. Defendant's solicitation of orders along the Eastern seaboard of the United States is directed by the New York City sales office. In addition to the District Sales Manager, two other sales representatives, whose territories range from North Carolina to Connecticut, report to the New York office. However, these latter two representatives report to the New York office only once or twice within a three month period. All of the sales personnel are full-time employees and are paid a fixed salary and commission. Defendant withholds income for payment of the New York State Income Tax and files unemployment tax returns with the State of New York as to all employees working out of the New York office.

Defendant is the lessee of the New York office and makes rental payments from its home office. The defendant's name is carried on the office door and in the New York City telephone directory. Defendant has no bank account in New York and maintains only a small petty cash fund of about $50 for the purchase of postage and other office incidentals. Sales within the Southern District of New York, which are made primarily to wholesalers, account for less than 3 percent of the defendant's total yearly business. The defendant points out — and lays heavy stress on this fact — that the New York sales office has no authority to accept orders which may result from the solicitations of its sales personnel. The home office controls the completion of the sales orders and has authority for the setting of prices, the approval of customer credit, the acceptance of orders, the shipment of the products, and the billing of customers directly. The New York office solicits orders by telephone and by mail and is not used as a showroom. The presence of a customer in the office is termed by the defendant to be "rare." The defendant characterizes its New York City office as basically a message center, as a meeting place, and as a place where customers can be solicited for orders personally.

Defendant admits that as a result of its solicitation activity some of the allegedly infringing SWING-TAP Tube Piercing valves have been sold to customers located within the Southern District of New York, although the orders for the valves were accepted in Melrose Park, Illinois. It also admits that sales representatives are furnished with sample products and catalogs, although no stock or inventory of products is maintained in New York City. Plaintiff alleges, on information and belief, that considerable quantities of the allegedly infringing Swing-Tap Tube Piercing Valves were distributed as samples, by the defendant's New York City office.

Plaintiff is a Florida corporation with its office and principal place of business in Hialeah, Florida. The patented device was designed and developed by employees of two New York corporations. These corporations are located in Queens County, which is in the Eastern District of New York. Plaintiff contends, without identifying the employees or their domicile, that employees who worked on the design and development of the device would be required as witnesses for the plaintiff. The defendant, in turn, claims that all its witnesses and business records which may be relevant to this action are located in Illinois.

It is well established that venue in patent infringement actions is governed exclusively by 28 U.S.C. § 1400(b). Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 77 S.Ct. 787, 1 L.Ed.2d 786 (1957); see Stonite Products Co. v. Melvin Lloyd Co., 315 U.S. 561, 62 S.Ct. 780, 86 L.Ed. 1026 (1942). Section 1400(b) provides that "Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business." Since defendant is incorporated and has its principal place of business in Illinois it is clear that it does not "reside" for venue purposes in this district. Fourco Glass Co. v. Transmirra Products Corp., supra at 226, of 353 U.S., 77 S.Ct. 787; Sperry Products, Inc. v. Association of American Railroads, 132 F.2d 408, 411, 145 A.L.R. 694 (2d Cir. 1942) (L. Hand, J.); See Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 60 S.Ct. 153, 84 L.Ed. 167 (1939). Therefore, since the second clause of § 1400(b) is worded conjunctively, plaintiff has the burden of showing that both elements are present in this district in order to predicate venue here. See Clearasite Headwear, Inc. v. Paramount Cap Manufacturing Co., Inc., 204 F.Supp. 4 (S.D.N.Y. 1962).

35 U.S.C. § 271 enumerates the various categories of activity that constitute patent infringement and it has been held that an act of infringement may be established by the manufacture, use or sale of the allegedly infringing item, 35 U.S.C. § 271(a)⁵ or by the sale of a material component of a patented item with knowledge that the component is especially made or adapted for use in a combination infringing article. 35 U.S.C. § 271(c). Dental Co. of America v. S. S. White Dental Mfg. Co., 266 F. 524, 525-26, (3rd Cir. 1920); Dover Corp. v. Fisher Governor Co., 221 F.Supp. 716 (S.D.Tex.1963). Defendant argues that plaintiff's patent is directed towards a combination which consists of a self-tapping valve, mounted on a tubular line, together with a removable tool controlling the valve. Defendant contends that because it has sold only what corresponds to but one component of the patented article — the SWING-TAP self-tapping valve — to customers within this district, that the sale of one component alone does not constitute an act of infringement. Defendant contends that it has not sold the SWING-TAP tube-piercing valve in combination with the removable tool — the "swivel control valve" — that it also manufactures. Defendant's control valve functions in the same manner as the removable tool and tool housing on plaintiff's device. Since it claims that it has not sold the "patented article" in total combination to third parties in this district, it contends, therefore, that it has not committed an act of infringement here.

The availability of the doctrine of contributory infringement, which is argued by both parties in their memoranda, renders it unnecessary to pass upon the accuracy of defendant's claim that only a portion of defendant's article was sold in this district. Under the doctrine of contributory infringement, a party is liable if it sells a component of a patented combination, which constitutes a material part of the invention, knowing "that the combination for which his component was especially designed was both patented and infringing." Aro Mfg. Co., Inc. v. Convertible Top Replacement Co., Inc., 84 S.Ct. 1526 (1964). 35 U.S.C. § 271(c). Infringement, as it is used in this portion of the statute, has been construed by the courts to...