Zip Mfg. Co. v. Pep Mfg. Co.

• Decision Date: 06 July 1928
• Docket Number: No. 4839.,4839.
• Citation: 27 F.2d 219
• Parties: ZIP MFG. CO. et al. v. PEP MFG. CO., Inc.
• Court: U.S. Court of Appeals — Sixth Circuit

27 F.2d 219 (1928)

ZIP MFG. CO. et al. v. PEP MFG. CO., Inc.

No. 4839.

Circuit Court of Appeals, Sixth Circuit.

July 6, 1928.

Edmund Rogers, of Denver, Colo., and Harold R. Moore, of Cleveland, Ohio (Thompson, Hine & Flory, of Cleveland, Ohio, on the brief), for appellant.

John F. Oberlin, of Cleveland, Ohio (Fay, Oberlin & Fay, of Cleveland, Ohio, on the brief), for appellee.

Before DENISON and MACK, Circuit Judges, and MOINET, District Judge.

DENISON, Circuit Judge.

The Zip Company is the owner of the Werder patent, No. 1,353,197, applied for August 8, 1918, and issued September 21, 1920, for a grinding compound which finds its chief utility in grinding valves of automobile engines; also the Werder improvement patent No. 1,534,196, issued April 21, 1925. The Pep Company owns the Holmes patent, No. 1,380,383, applied for September 27, 1920, issued June 7, 1921, for a similar compound. Holmes had been in the employ of the Zip Company, selling its product, which was called "Zip." Leaving that employment, he applied for a patent upon his compound, which he considered an improvement and which he named "Pep," and organized the Worcester Abrasive Company in New Jersey to manufacture and sell it. One Pusch became a general agent for the Pep Company, distributing its compound in Colorado.

The Zip Company brought an infringement suit against Pusch in that district, in April, 1921. It does not expressly appear, although it is a very natural inference, that the Worcester Company at once assumed the defense of this Colorado case. However that may be, about this time Holmes had ceased to be connected with the Worcester Company, and Ralph Root had become interested in it and was its president and/or general manager. The Worcester Company then, in April, 1922, went into bankruptcy, and at a trustee's sale, in June, 1922, Root became the purchaser of all its assets, including the Holmes patent — all of these assets being collateral to and useful only for a continuation of the business of making and selling Pep, supposedly under the Holmes patent.

In June, 1922, Root organized the Pep Manufacturing Company, under the laws of Delaware, and conveyed to it all the assets of the business, including the Holmes patent, which he had received by transfer from the trustee in bankruptcy, receiving in exchange therefor its entire capital stock. The same business was thereafter carried on under the name of the Pep Company. In May, 1923, the infringement case came on for trial. Pusch had paid no attention to it. The actual trial, to the knowledge of the plaintiff, was under the dominance of Root, as if he were the defendant. No change was made in the party defendant of record. Whether the plaintiff knew that the Worcester Company had gone out of business, and had been succeeded by Root, and he by the Pep Company, does not appear. Upon the trial the District Court dismissed the bill, holding that Werder had been anticipated in his invention by Hawes. On appeal, the Circuit Court of Appeals reversed this decree (2 F.2d 828), found that the Hawes anticipation was not established, and that there was infringement, and remanded the case accordingly.

On February 1, 1925, the Pep Company commenced suit in the court below against the Zip Company, obtaining sufficient service in the Northern district of Ohio, and alleging infringement of the Holmes patent. In its answer, the Zip Company counter-claimed, alleging infringement of both Werder patents, and setting up the decree in the Eighth Circuit Court of Appeals as an adjudication regarding the first patent and its infringement. Upon the trial, the court below held that the Holmes patent was invalid and the second Werder patent not infringed; that the first Werder patent was anticipated by Hawes; and that the Colorado decree as to the first Werder patent was not res judicata, because it did not appear that the Pep Company, the new corporation, had participated in the defense, to the knowledge of the plaintiff. Accordingly, the bill of complaint and the answer in the nature of a cross-bill were dismissed. The Zip Company alone appeals.

As to the first Werder patent: We find it unnecessary to consider the alleged anticipation by Hawes. The Circuit Court of Appeals, in Colorado, held it was not established, save by that merely oral and unsupported proof, which is insufficient for such a purpose.¹ The court below in the present case found such support in the written record of sufficiently early sales made by Hawes of a compound he called "Volcano," and it appeared that Volcano...