Becher v. Contoure Laboratories, Inc.

29 F.2d 31, 1928 U.S. App. LEXIS 2603

• Court: Court of Appeals for the Second Circuit
• Decided: November 12, 1928
• Docket: 123
• Status: Published

Opinions

SWAN, Circuit Judge.

The relief sought on the motion for a preliminary injunction was twofold: (1) To prevent infringement of Beeher’s patent; and (2) to prevent the further prosecution by defendants of a suit pending between the same parties in the Supreme Court of the state of New York, wherein judgment had been entered directing Beeher to assign his said patent to Herbert Oppenheimer, one of the plaintiffs in that litigation and a defendant in this. But the whole argument centers upon the refusal of the District Court to enjoin prosecution of the state suit; if the state court had jurisdiction, its judgment precludes plaintiff from claiming infringement by the defendants. The appellant contends that .that court had no jurisdiction of the litigation, because it was a case arising under the patent laws of the United States, and so within the exclusive jurisdiction of federal tribunals. Section 256 of the Judicial Code (USCA, .tit. 28, § 371).

In the state suit, Oppenheimer and his assignee, Contoure Laboratories, were plaintiffs. They allege that Oppenheimer was the proprietor of an invention for a certain massaging instrument, and was engaged in devising improvements thereof; that he employed Beeher to make mechanical parts of said instrument, and Beeher agreed to keep secret and confidential such information as he should obtain from Oppenheimer in the course of doing such work; that Oppenheimer disclosed to Beeher his said invention, and modifications and improvements thereof, in order that Beeher might perform the agreed work, and that Beeher appropriated Oppenheimer’s ideas and invention, and jn violation of his aforesaid agreement made application for a patent upon said instrument, and obtained upon said application the issuance of letters patent No. 1,634,316; that in said application Beeher falsely stated that he was the inventor, although in fact, as Beeher knew, Oppenheimer was the inventor of said instrument; that Oppenheimer had assigned his interest in said invention and instrument to Contours Laboratories; that, upon learning of the patent issued to Beeher, Oppenheimer and his assignee demanded that Beeher discontinue making instruments pursuant to said letters patent, and assign the patent to them; that they have established a substantial trade in such instruments, and that Beeher’s sale of instruments such. as are described in said letters patent causes them irreparable injury. The prayer for relief is (1) that Beeher be declared a trustee ex maleficio for Oppenheimer’s as-signee of said invention and the letters patent; (2) that he be restrained from using or disposing of said instruments; (3) that he be enjoined from granting any rights under said letters patent; (4) that he deliver up to the plaintiffs all instruments in his possession; and (5) for damages and other appropriate relief. Beeher’s answer denied the allegations of the complaint; alleged the issuance to himself on July 5, 1927, of said letters patent, and that subsequently thereto Oppenheimer had amended a patent application w'hieh he had filed on June 26,1926, and an interference had been declared between Beeher’s letters patent and Oppenheimer’s amended application, which interference remained pending and undetermined in the Patent Office; and denied the jurisdiction of the state court. The state court sustained its own jurisdiction, and trial was had before a referee, who made a finding of facts supporting all of the allegations of the bill. Judgment was thereupon entered, adjudging Beeher a trustee ex maleficio for the benefit of Oppenheimer of the invention and letters patent, and directing him to execute an assignment of the patent. Injunctive relief was also granted in accordance with the prayer of the bill. Beeher then filed the present suit, to obtain an adjudication of the validity of his patent, and to enjoin the enforcement of the state court judgment.

The exclusive jurisdiction of federal •courts in cases arising under the patent laws does not preclude state courts from exercising their' customary common-law and equity jurisdiction merely because a patent is involved in the litigation. It is well settled that a state court may try questions of title, and may construe, enforce, or annul contracts relating to patents. Marsh v. Nichols, 140 U. S. 344, 11 S. Ct. 798, 35 L. Ed. 413; New Marshall Engine Co. v. Marshall Engine Co., 223 U. S. 473, 32 S. Ct. 238, 56 L. Ed. 513; Luckett v. Delpark, 270 U. S. 496, 46 S. Ct. 397, 70 L. Ed. 703; Binney v. Annan, 107 Mass. 94, 9 Am. Rep. 10; see also Wittemann Bros. v. Wittemann Co., 88 Misc. Rep. 266, 151 N. Y. S. 813; Hanson v. Hall Mfg. Co., 194 Iowa, 1213, 190 N. W. 967. This applies as well when a contract to assign is implied from the relationship of the parties as when it is express. Air Reduction Co. v. Walker, 118 Misc. Rep. 827, 195 N. Y. S. 120; Annin v. Wren, 44 Hun (N. Y.) 352, 353; Fuller & Johnson Mfg. Co. v. Bartlett, 68 Wis. 73, 31 N. W. 747, 60 Am. Rep. 838. In such cases, of course, the plaintiff asserts nothing which questions the validity of the defendant’s patent.

In the case at bar, the plaintiff in the state suit charged that the defendant got from him the ideas which were embodied in the patent. This fact, if true, would mean that the patent issued to defendant was null and void. Kennedy v. Hazelton, 128 U. S. 667, 9 S. Ct. 202, 32 L. Ed. 576. Merely to get an idea from another is not a tort; the inventor may have freely communicated it. In that event the inventor has no recourse, except to an interference in the Patent Office, if the borrower files an application for a patent embodying his idea. But the idea may have been obtained under circumstances which forbid the borrower to make use of. it for his own benefit. The complaint in the state suit alleged, and the court found, that Beeher bad agreed to keep secret and confidential such information as Oppenheimer gave him concerning his massaging instrument, and that, in violation of this agreement and of the confidential relationship between the parties, Beeher embodied this information in his application for a patent. If the invention had been merely a trade secret, Oppenheimer could have enjoined Beeher from using it for his own benefit, and could have compelled him to account for anything of value’which he had obtained by wrongful use of it. Morison v. Moat, 9 Hare, 241; Du Pont de Nemours Powder Co. v. Masland, 244 U. S. 100, 37 S. Ct. 575, 61 L. Ed. 1016. This should be equally true when -the secret is an invention.

The only question is whether the undoubted jurisdiction of the state court to compel a wrongdoer to account is divested because the incidental result will be to establish a fact between the parties which affects the validity of a patent. The exclusive jurisdiction of the federal courts in patent eases does not, we think, go so far. In Pratt v. Paris Gaslight & Coke Co., 168 U. S. 255, 259 18 S. Ct. 62, 64 (42 L. Ed. 458), Mr. Justice Brown says:

“The action under consideration is not one arising under the patent right laws of the United States in any proper sense of the term. To constitute such a cause the plaintiff must set up some right, title or interest under the patent laws, or at least make it appear that some right or privilege will be defeated by one construction, or sustained by the opposite construction of these laws. * * * There is a clear distinction between a case and a question arising under the patent laws. The former arises when the plaintiff in his opening pleading — be it a bill, complaint, or declaration — sets up a right under the patent laws as ground for a recovery. Of such the state courts have no jurisdiction. The latter may appear in the plea or answer or in the testimony. The determination of such question is not beyond the competency of the state tribunals.”

That case held that a state court is not ousted of jurisdiction by the fact that, incidentally to his defense, the defendant claims the invalidity of a certain patent. True, there the defendant set up the patent’s invalidity, while here it appears on the faee of the complaint, as it did in Middlebrook v. Broadbent, 47 N. Y. 443, 7 Am. Rep. 457. But it appears only incidentally and as an element of plaintiff’s proof. Oppenheimer’s complaint sets up no “right under the patent laws as ground for a recovery,” to repeat Justice Brown’s phrase. His cause of action is based on equitable principles applicable to any wrongful use of confidential information which the defendant had agreed to keep secret. It is true that a question of fact was decided, which determines the invalidity of Beeher’s patent as between the parties, and estops him upon that issue whenever it arises again between him and Oppenheimer. But, if the jurisdiction of state courts were limited by such incidental consequences, they would be unable to adjudicate all sorts of eases. Eor example, an action of replevin might involve the question whether the plaintiff had made a machine in defendant’s possession. That machine might he a prior use of an invention which defendant had patented. Surely it cannot be that the state court would have no jurisdiction of the replevin suit, because the judgment therein would establish that the machine was of plaintiff’s construction and so anticipated the patent. Yet the appellant must go so far to succeed in the ease at bar.

The appellant has cited no authority which clearly sustains his position, and none ha^, been found by independent research. In Cheatham Elec., etc., Co. v. Kentucky S. & S. Co., 213 Ky. 23, 280 S. W. 469, chiefly relied upon, plaintiff sought a declaratory judgment that certain patents owned by it gave it the right, denied by defendant,, to make and sell certain articles. The petition was rightly dismissed for lack of jurisdiction because plaintiff was asserting rights under the patent laws. The defendant filed a counterclaim, which was- somewhat comparable to Oppenheimer’s suit, and this was dismissed because it necessarily followed the disposition of the original petition.

In Standard Scale, etc., Co. v. McDonald, 127 F. 709- (C. C. Mo.), also relied upon, the bill alleged that Oreutt invented a wagon scale while employed by defendants; that he applied for a patent upon said invention, and later learned that the defendants had previously applied and obtained a patent for said invention; that they were not the original inventors, and obtained their patent by fraudulent representations to the Patent Office, and in fraud of the rights of the first inventor, Oreutt, who had assigned his invention to the plaintiff. The relief sought was an injunction to restrain defendants from ’ manufacturing under their patent, and an accounting. A demurrer was sustained to this bill, upon the ground that the issue of originality of invention was for determination in the interference in the Patent Office. This ease differs from the case at bar, in that there is no allegation that the defendants had contracted with Oreutt to keep secret his invention, or that the relations of the parties were such that defendants committed a tort upon Oreutt in disclosing it to the Patent Office. It is true that the defendants are alleged to have obtained their patent by a fraud upon the Patent Office and “in fraud of the rights of” Oreutt, but his rights thus referred to were apparently merely the inchoate right which every inventor has to apply for and secure a patent. It was not a right sustained by acknowledged common-law or equitable principles, and no conduct of the defendants was charged which amounted to a breach of contract or a tort. Judge Philips, in deciding the McDonald Case, relied upon Hoeltge v. Hoeller, Fed. Cas. No. 6574, which is similarly distinguishable from the ease at bar.

On the other hand, in Murjahn v. Hall, 119 F. 186 (C. C. S. D. N. Y.), where the allegations are similar, but contain the additional statement that the defendant induced the plaintiff to disclose his invention by representing that the information would be kept secret, the bill of complaint was sustained against demurrer. Judge Townsend’s opinion says (page 188) :

“Upon the facts submitted on demurrer in the case at bar, complainant had made an invention which he might legally keep secret, and thus secure the benefits to himself. Defendant obtained its disclosure by the representation that such disclosure would not deprive the complainant of the benefit of the invention, and that defendant would not disclose it to others, and would be a large purchaser of the paint; and, having learned it, he proceeded to use it to' complainant’s disadvantage and make large profits thereby. Upon those facts complainant should be. entitled to an accounting and an injunction.”

The basis of federal jurisdiction does not appear in the opinion. If it was diversity of citizenship, this decision would be an authority in favor of the jurisdiction of a state court. In commenting upon this case in the McDonald Case, Judge Philips remarked :

“The opinion of Judge Townsend, in the latter ease, is quite brief. The conclusion of the court would seem to have been in-fluéneed by the consideration that the defendant had, by cunning and deceit, obtained the complainant’s secret of invention, and that it inheres in the principles of equity jurisprudence to obstruct and prevent the enjoyment of the fruits of such fraud. It did not appear in that case, as in the one at bar, that the complainant had filed his application for a patent with the Commissioner of Patents, and that such application was pending before the Commissioner at the time of the issuance of the patent to the defendant.”

In the case at bar, the bill of complaint does not allege that Oppenheimer had filed an application in the Patent Offiee, although that fact is brought in by Becher’s answer. It is not, in our judgment, material. Oppenheimer is not asserting any right by reason of an application for a patent, nor any right under the patent laws. He is relying solely upon eommon-la.w and equitable principles to prevent a wrongdoer from projfiting by the disclosure of information obtained under circumstances which bound him to keep it secret, and to account for such profit as he has made by wrongful use of the information. It may be that the relief prayed and granted goes too far. Beeher has been ordered to assign a void patent. From Kennedy v. Hazelton, 128 U. S. 667, 9 S. Ct. 202, 32 L. Ed. 576, it appears that this should not have been ordered, because, as the court there points out, the only value which a void patent could have to the assignee would be to enable him to impose upon the public. But this goes merely to an error of law committed by the state court in its judgment, not to a lack of jurisdiction to render any judgment. On the court’s finding that Beeher had obtained knowledge of the invention under circumstances whieh bound him to keep it secret, Oppenheimer was entitled to an injunction against improper use by Beeher of such knowledge. Authority, as well as principle, sustains the state court’s jurisdiction to grant such relief. Smith & Egge Mfg. Co. v. Webster, 87 Conn. 74, 86 A. 763; Irving Iron Works v. Kerlow Steel Flooring Co., 96 N. J. Eq. 702, 126 A. 291. As to copyright, see Underhill v. Schenck, 238 N. Y. 7, 14, 143 N. E. 773, 33 A. L. R. 303; Hoyt v. Bates, 81 F. 641 (C. C. Mass.).

Appellant’s attorney upon the argument invited us to dismiss the bill, if we concluded that the state court had jurisdiction. On the authority of Mast, Foos & Co. v. Stover Mfg. Co., 177 U. S. 485, 20 S. Ct. 708, 44 L. Ed. 856, we have power to do so. Accordingly the decree is affirmed, and the cause remanded, with directions to dismiss the bill of complaint.