Nachod & United States Signal Co. v. Automatic Signal Corp.
Opinion of the Court
. This is a suit brought under U. S. Revised Statutes, § 4915, 35 U.S.C.A. § 63, to obtain the issue of letters patent. The suit arises out of two Patent Office interferences Nos. 65,227 and 70,404 in which the Board of Appeals had awarded priority of invention to Henry A. Haugh, Jr., and the Commissioner of Patents had refused a patent on the application of plaintiffs Stolp and Richterkessing. Plaugh assigned his application involved in the interferences by mesne assignments to the defendant The Engineering & Research Corporation. The latter thereupon granted to Automatic Signal Corporation an exclusive license to manufacture, use and sell the devices covered by any patent that might be granted on the Haugh application. Stolp and Richterkessing assigned their applications to the plaintiff Nachod & United States • Signal Company. Automatic Signal Corporation, the exclusive licensee of the Haugh application, was originally joined as a defendant but, -appearing specially, succeeded 'in having the suit dismissed as against itself on the
ground that it was not an inhabitant of the district. The defendant The Engineering & Research Corporation also succeeded in obtaining a dismissal so far as it was concerned on the ground that Automatic Signal Corporation, against which-the suit had been dismissed, was an indispensable party. The sole question before us is whether Automatic Signal Corporation was such an indispensable party.
We held in Parker Rust Proof Co. v. Western Union Telegraph Company, 105 F.2d 976, decided March 6, 1939, that a defendant in the position of the Automatic Signal Corporation should be regarded as an indispensable party to a suit under Section 4915 in the absence of special circumstances which made joinder inequitable. The conclusion that the presence of the exclusive licensee was not necessary was reached because he knew of the pendency of the suit against the defendant from which he held his license, knew of the plaintiff’s ignorance of his interests, and also knew that the defendants, one of them the company of which he was president, instead of promptly filing their answer and setting up the defense that the licensee was an indispensable party to the suit, were obtaining an extension of time to answer and suppressing that special defense until it was too late for the plaintiff to bring suit in the District of Columbia and to obtain jurisdiction over him there by virtue of Title 35 U.S.C.A. § 72a. In the case at bar the plaintiff knew of the exclusive license because it alleged in the bill of complaint that Automatic Signal Corporation held an exclusive license from The Engineering Si Research Corporation and joined the licensee as a party. Instead of doing this, if the plaintiff had chosen to avail itself of the privilege granted by Title 35 U.S.C.A. § 72a, it could have sued in the District of Columbia and have obtained jurisdiction over both the inventor and the licensee before the six months’ statute of limitations created by Section 4915 had run. But it neglected to take advantage of Title 35 U.S.C.A. § 72a which was enacted in 1927 (Chapter 364, 44 Stat. 1934) to give relief in situations like the present and now finds itself without remedy under Section 4915.
A hardship may arise in a case where a plaintiff suing under Section 4915 does not know of the existence of an exclusive license and therefore makes only the inventor a party-defendant for, as a result,
It is, however, strenuously maintained on behalf of the plaintiffs that an exclusive licensee is not an indispensable party to a suit under Revised Statutes Section 4915. The contention is based on the arguments we rejected in Parker Rust Proof Co. v. Western Union Telegraph Company and we do not find it persuasive in the present case. The rights of an exclusive licensee are often far more extensive than those remaining in the inventor. To be sure, if the owner is not a party to a suit under Section 4915, though the exclusive licensee is, the suit cannot proceed. Armstrong v. De Forest, 2 Cir, 13 F.2d 438. Likewise an exclusive licensee cannot bring a proceeding for injunction or damages for infringement in his own name without joining the owner. Waterman v. Mackenzie, 138 U.S. 252, 11 S.Ct. 334, 34 L.Ed. 923; Independent Wireless Tel. Co. v. Radio Corporation of America, 269 U.S. 459, 466, 467, 46 S.Ct. 166, 70 L.Ed. 357. But none of these holdings negatives our conclusion that an exclusive licensee is an indispensable party. Section 4915 of the Revised Statutes requires “notice to adverse parties.” An exclusive licensee who has sufficient interest in the patent to compel an infringement suit (though nominally in the name of the patentee), Independent Wireless Tel. Co. v. Radio Corporation of America, 269 U.S. 459, 46 S.Ct. 166, 70 L. Ed. 357, should be regarded as coming within this definition.
For the contrary view, that an exclusive licensee is not a necessary party to a suit under Section 4915, reliance has been placed upon certain lower court decisions holding or asserting that an exclusive licensee is not an indispensable party-plaintiff in a suit for infringement brought by the patentee. Bowers v. Atlantic, Gulf & Pacific Co, C.C, 162 F. 895, 901; Comptograph Co. v. Universal Accountant Mach. Co, C.C, 142 F. 539, 545; Frankfort Whisky Process Co. v. Pepper, C.C, 26 F. 336; Nellis v. Pennock Mfg. Co, C.C, 13 F. 451, 455. Compare, also, D. M. Sechler Carriage Co. v. Deere & Mansur Co, 7 Cir, 113 F. 285. It is to be noted, however, that Taft, C. J, said in Independent Wireless Tel. Co. v. Radio Corporation of America, 269 U.S. 459, at page 466, 46 S.Ct. 166, at page 168, 70 L. Ed. 357, that “both the owner and the exclusive licensee are generally necessary parties in the action in equity”. If it be thought that the effect of the decisions just referred to has been to treat an exclusive licensee as a party not indispensable in an infringement suit they nevertheless do not show that such licensee is not an indispensable party to a suit in equity under Section 4915. So far as they may be thought to hold that exclusive licensees, while generally necessary parties in infringement suits, are not in all cases indispensable the rule they lay down seems to be derived from the provisions of U. S. Revised Statutes, § 4919, 35 U.S.C.A. § 67, which allows a recovery of damages at law “in the name of the party interested, either as patentee, assignee, or grantee”. The case at bar involves a different situation because of the express requirement of Section 4915 that notice must be given to “adverse parties.”
We think that an exclusive licensee is an indispensable party because he is an adverse party within the meaning of Section 4915 and that any hardship which may arise by reason of licenses that are outstanding without the knowledge of a plaintiff may be obviated by the means we have already indicated.
For the foregoing reasons the decree is affirmed.
Dissenting Opinion
dissenting.
I am of opinion that in a suit to obtain a patent under section 4915 of the Revised Statutes, 35 U.S.C. § 63, 35 U.S. C.A. § 63, an exclusive licensee under an adverse patent or application for patent is not an indispensable party defendant. Some of the reasoning in Parker Rust Proof Co. v. Western Union Tel. Co., 2 Cir., 105 F.2d 976, decided here March 6, 1939, is the other way, but in my opinion the reasoning as to this point should not be followed.
Section 4915 provides that when an application for patent has been denied by the Patent Office, the applicant may have remedy by bill in equity .to obtain a patent, “on notice to adverse parties”, the bill to be brought within six months after denial. For years it has been the practice for an applicant who has been defeated in interference proceedings in the Patent Office to bring suit under this statute, making the person who won the interference proceeding or his assignee the party defendant. See Morgan v. Daniels, 153 U.S. 120, 14 S.Ct. 772, 38 L.Ed. 657. Prior to the Parker Rust Proof Co. case it had not been suggested that an exclusive licensee under the adverse patent must also be joined as a defendant. The suit is ordinarily brought in the district whereof the owner of the prevailing application is an inhabitant, the general venue provision embodied in section 51 of the Judicial Code, 28 U.S.C. § 112, 28 U.S.C.A. § 112, applying to such a case. Arbetter Felling Mach. Co. v. Lewis Blind Stitch Mach. Co., 7 Cir., 230 F. 992. By the Act of March 3, 1927, 35 U.S.C. § 72a, 35 U.S.C.A. § 72a, Congress provided that suit under section 4915 might also be brought in the District of Columbia where there were several adverse parties residing in different districts.
Who are the “adverse parties” referred to in the section? The present owners of the conflicting patent, whether original applicants or later assignees, are manifestly indispensable defendants. Armstrong v. De Forest, 2 Cir., 13 F.2d 438; Hazeltine Corporation v. White, 2 Cir., 68 F.2d 715. They will lose their patent if the plaintiff wins his. On the other hand, no one would say, I take it, that ordinary licensees under the adverse patent are indispensable. An ordinary licensee has nothing but an immunity against claim of infringement by the owner. He has no title of any sort in the patent. United States v. General Electric Co., 272 U.S. 476, 489, 47 S.Ct. 192, 71 L.Ed. 362; General Talking Pictures Corp. v. Western Electric Co., 304 U.S. 175, 181, 58 S.Ct. 849, 82 L.Ed. 1273.
An exclusive licensee has like immunity from claim of infringement by the owner. By the license he acquires “the right not
There is additional ground for this conclusion. Section 4915 gives the remedy to the defeated “applicant”. The word “applicant” doubtless refers to the assignee in cases where the alleged inventor has assigned his application for patent. Gay v. Cornell, C.C., Fed.Cas. No. 5,280; Becker v. General Chain Co., 1 Cir., 273 F. 419. But persons who hold prospective license rights, exclusive or non-exclusive under the defeated application are certainly not “applicants” for a patent, and the statute does not contemplate that they initiate the suit or be joined with the applicant as parties plaintiff. Smith v. Thompson, C.C., 177 F. 721. This being the situation on the plaintiff’s side, there is no reason to believe that the “adverse parties” referred to in the statute embrace a larger class and include persons who have mere licenses under the prevailing application.
In the Parker Rust Proof Co. case it is said that a decree will necessarily affect the exclusive licensee’s rights under the conflicting patent, and that hence the exclusive licensee is an indispensable defendant under Shields v. Barrow, 17 How. 130, 15 L.Ed. 158. That argument proves too much, for if it is sound ordinary licensees would also be indispensable parties defendant. But the answer is that in the suit the licensee, having at most an equitable interest, is represented by the owner of the patent. Where a stranger sues to oust a trustee from the trust estate, the interest of a beneficiary is represented by the trustee, and in such cases the beneficiary is not a necessary party. Vetterlein v. Barnes, 124 U.S. 169, 8 S.Ct. 441, 31 L.Ed. 400; Kerrison v. Stewart, 93 U.S. 155, 23 L.Ed. 843; Beals v. Illinois, M. & T. R. Co., 133 U.S. 290, 10 S.Ct. 314, 33 L.Ed. 608; Jackson v. Tallmadge, 246 N.Y. 133, 158 N.E. 48. It is also urged that the rights of a licensee are frequently of more value than the interest of the owner of the patent. In Armstrong v. De Forest, supra, Judge Hough held that comparative values played no part in determining who were necessary parties, in a suit like the present one. I think he was right.
In practice the rule laid down by the majority will result in frustration of the remedy given by Congress in section 4915. Recording of licenses is not required. They may be created by oral agreement or even by conduct. There may be dozens of hidden exclusive licenses under a single patent, for different territories and for different uses. If the exclusive licensees are necessary parties, a suit to obtain a patent, brought against the owner of the
Reference
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- NACHOD & UNITED STATES SIGNAL CO., Inc., Et Al. v. AUTOMATIC SIGNAL CORPORATION Et Al.
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- 13 cases
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