Opinion
No. 28.
December 3, 1928.
Appeal from the District Court of the United States for the Southern District of New York.
Action by the Dickinson Tire Machine Company against Frederick S. Dickinson and another, wherein defendants filed a counterclaim. Decree dismissing the bill of complaint, and awarding defendants affirmative relief under their counterclaim, and plaintiff appeals. Affirmed.
The action was originally brought in the Supreme Court of New York county and was removed by defendants to the District Court. The plaintiff corporation exists under the laws of Indiana, the corporate defendant is a Delaware corporation, and the individual defendant is a citizen and resident of New York. Plaintiff's bill alleges that defendant Dickinson was the original inventor of improvements relating to pneumatic tires and looms and machinery for making the same; that before the issuance of patents therefor he assigned to plaintiff all his right in them by instrument duly recorded in the Patent Office; that thereafter letters patent were issued in the name of Dickinson, but the plaintiff, by virtue of the assignment, became entitled to the exclusive right to make, use, and sell the inventions described therein; that subsequently Dickinson wrongfully and without plaintiffs authority assigned the patents to the defendant corporation; and that both defendants have manufactured the patented articles in infringement of plaintiff's rights, and threatened to continue infringement. The prayers for relief include an injunction against further manufacture and sale of the patented inventions and an accounting for past infringements.
The answer avers that the assignment alleged in the bill was conditional upon performance by plaintiff of its obligations under a contract of November 4, 1914, a copy of which is annexed to the answer; that by reason of plaintiff's failure to perform its obligations under said contract, and notice thereof given on September 3, 1916, all interest in the patents reverted to Dickinson; that for nine years thereafter plaintiff slept on its rights, if any it had; that Dickinson sold the patents to the corporation defendant, which expended large sums in their development, all to the knowledge of plaintiff and without protest by it. The defenses of laches and the statute of limitations were pleaded, and by way of counterclaim defendants asked that plaintiff be required specifically to perform its agreement to reassign its rights in the patents, and be enjoined from exercising any rights thereunder. Plaintiff filed a reply and the case came to trial.
The court adjudged that plaintiff's rights in the patents were terminated by the notice of April 3, 1916, and that its rights, if any, were barred by laches. The bill was dismissed upon the merits, and the relief prayed for in the counterclaim was granted. Further facts so far as material will appear in the opinion.
William M. Silverman, of New York City, for appellant.
Clark, Reynolds Hinds, of New York City (Roger Hinds, of New York City, of counsel), for appellees.
Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.
The first question is as to the jurisdiction of the District Court upon the removal. Although plaintiff made no motion to remand and raised no question of jurisdiction during the trial, it would be our duty to reverse the decree and direct that the case be remanded to the state court, if the suit were one not removable under the statutes. See Martin v. Snyder, 148 U.S. 663, 13 S. Ct. 706, 37 L. Ed. 602; Tennessee v. Union Planters' Bank, 152 U.S. 454, 14 S. Ct. 654, 38 L. Ed. 511. We pass without examination the question whether the suit involved separable controversies against the two defendants, so as to justify removal on the ground of diversity of citizenship, and rest our decision upon section 256 of the Judicial Code (USCA tit. 28, § 371), which confers exclusive jurisdiction upon the federal courts "of all cases arising under the patent right, or copyright laws of the United States."
The nature of plaintiff's suit must be determined from the allegations of the bill of complaint. The Fair v. Kohler Die Specialty Co., 228 U.S. 22, 25, 33 S. Ct. 410, 57 L. Ed. 716; Pratt v. Paris Gaslight Coke Co., 168 U.S. 255, 259, 18 S. Ct. 62, 42 L. Ed. 458; Excelsior Wooden Pipe Co. v. Pacific Bridge Co., 185 U.S. 282, 22 S. Ct. 681, 46 L. Ed. 910. The bill makes the usual allegations of a bill for patent infringement; it asserts title to the patents by assignment, plaintiffs exclusive right to manufacture and sell the patented articles, and defendants' infringement. It prays for an injunction and accounting. True, it demands other relief, which is not given in a patent suit, such as the appointment of a receiver and the cancellation of the conveyance by Dickinson to the corporate defendant. But the prayer for inappropriate relief does not change the character of plaintiff's bill.
The only cause of action asserted is the violation of plaintiff's rights under the patents; no defect in title is acknowledged, and no conveyance to plaintiff to complete its title is asked. The answer, it is true, asserts a revocation of any rights in the patents under plaintiffs agreement with Dickinson, and the controversy on the trial revolved about this issue. But this is no more than a denial of plaintiff's title. When the plaintiff bases his cause of action upon an act of Congress, jurisdiction cannot be defeated by a plea which merely denies the merits of the claim. As said in the Fair Case, supra, "jurisdiction is authority to decide the case either way." Were it otherwise, a decision that a patent was invalid would oust the court of jurisdiction to render it.
Upon the argument it was questioned whether an assignee may sue as owner of the patent when the assignment is made before the patent issued and the patent is subsequently issued to the assignor. Even if the question were to be answered in the negative, plaintiff's claim of right to do so would seem to present a case arising under the patent laws within the principles of the authorities above cited. But it has been conclusively settled that the equitable assignee under a recorded assignment may sue the assignor patentee for infringement. Littlefield v. Perry, 21 Wall. 205, 22 L. Ed. 577; Excelsior Wooden-Pipe Co. v. Pacific Bridge Co., 185 U.S. 282, 295, 22 S. Ct. 681, 46 L. Ed. 910. Consequently there is no doubt that the court had jurisdiction of the original bill. Its jurisdiction to decide the counterclaim arising out of the subject-matter of the suit is equally clear. See Moore v. N.Y. Cotton Exch., 270 U.S. 593, 46 S. Ct. 367, 70 L. Ed. 750, 45 A.L.R. 1370.
Of the merits little need be said. The District Court found that plaintiff broke its contract of November 4, 1914, thereby causing the condition of reverter in the assignments to become operative upon the expiration of a 30-day notice served on plaintiff April 3, 1916. Appellant concedes that, if it did break its contract, the decree was right. The contract provided:
"* * * And you [plaintiff] are to assume all future liability for expense in connection with the further development of said machinery, and for taking out of said letters patent upon the application heretofore made therefor."
Concededly, such money as plaintiff advanced was reasonably and economically expended, but was not enough, and plaintiff refused to advance more. Plaintiff attempted to prove that it was the understanding of the parties that the advances should be limited to $25,000. The exclusion of such evidence is the error chiefly relied upon in appellant's brief, although not specified in the assignment of errors. Under the rules of this court, errors not assigned will not be considered, unless the court of its own motion so wishes. It suffices to say that we regard the exclusion of the offered evidence as correct, for the phrase "all future liability" is inconsistent with an agreement to limit the amount of plaintiff's advances for obtaining the letters patent, and the written instrument appears to be a complete memorial of the agreement of the parties. The excluded letters and testimony, so far as they prove anything, tend to contradict the terms of the written contract as to advances, rather than to show that the writing was not intended to embody the whole agreement on that subject. It is elementary that, though the latter may be done, the former may not. 5 Wigmore, Evidence (2d Ed.) §§ 2430, 2444. Hence the court's finding that plaintiff's rights in the patents were terminated by notice in 1916 was correct. We are also satisfied that the finding of laches was amply sustained by the evidence.
The decree is affirmed.