Edward F. Neidhart v. Neidhart S.A. The George Hyman Construction Company v. Spiroll Corporation, Ltd

510 F.2d 760, 166 U.S. App. D.C. 380

• Court: Court of Appeals for the D.C. Circuit
• Decided: February 18, 1975
• Docket: 73--1181
• Status: Published

Opinions

TAMM, Circuit Judge:

The sole question before us in these cases is whether the procedures authorized by section 293 of the Patent Codification Act, 35 U.S.C. §§ 1 et seq. (1970), are available to plaintiffs-appellants to effect service of process on the opposing parties. Answering this question in the negative, we affirm.

In Neidhart v. Neidhart, S.A., No. 72-1792, plaintiff-appellant Edward Neidhart, an American citizen residing in Illinois, filed suit in district court for the District of Columbia against defendantsappellees Neidhart, S.A., a Swiss corporation believed to own legal title to certain United States patents, and against Maria and Rico Neidhart, Swiss citizens and residents believed to be respectively sole owner and Chief Managing Officer of Neidhart S.A.¹ Appellant’s complaint alleges that Neidhart S.A. breached a sublicensing agreement which granted him the exclusive right to award sublicenses under the patents in question. Appellant sought a judgment declaring the validity of the sublicensing agreement and a modification thereof, and establishing that he is entitled to receive royalties due. Appellant also requested that the court permanently enjoin Neidhart S.A. from interfering and harassing him in the exercise of his sublicense rights.

In George Hyman Construction Co. v. Spiroll Corp., Ltd., No. 73-1181, plaintiff-appellant George Hyman Construction Co. (“Hyman”), a Maryland corporation, filed suit in district court for the District of Columbia against Spiroll Corp., Ltd. (“Spiroll”), a Canadian corporation owning certain United States patents. The complaint, as that in Neidhart, alleges that Spiroll breached an agreement which granted Hyman an exclusive territorial usé license of the Spiroll patents. Hyman sought a judgment declaring the existence and validity of the license, an order directing Spiroll’s specific performance, preliminary and permanent injunctions restraining Spiroll from granting conflicting licenses, and monetary damages.

Both plaintiffs-appellants attempted service of process pursuant to 35 U.S.C. § 293. In Neidhart, District Court Judge Flannery granted summary judgment in favor of Neidhart S.A., dismissing the summons and complaint with prejudice on the ground that the action is not “related to the validity or infringement of patents but rather an action involving an alleged breach of a sublicensing agreement . . . .” Consequently, he held section 293 “ineffective to validate the attempted service of process . . . .” Neidhart v. Neidhart, S.A., Civil No. 2240-71, Order filed June 15, 1972 (D.D.C.). In Hyman, District Court Judge Waddy quashed section 293 service of process as ineffective because “plaintiff seeks to enforce ordinary contract rights and not rights affecting the patent or rights arising under the patent . . . George Hyman Construction Co. v. Spiroll Corp., Ltd., Civil No. 1848-72, Order filed Dec. 7, 1972 (D.D.C.).

Thus, these cases involve the Patent Codification Act, 35 U.S.C. §§ 1 et seq. (1970), enacted in 1952 as the culmination of extensive efforts to revise the patent laws. Section 293 of the Act, providing for service and notice to nonresident patentees, reads:

Every patentee not residing in the United States may file in the Patent Office a written designation stating the name and address of a person residing within the United States on whom may be served process or notice of proceedings affecting the patent or rights thereunder. If the person designated cannot be found at the address given in the last designation, or if no person has been designated, the United States District Court for the District of Columbia shall have jurisdiction and summons shall be served by publication or otherwise as the court directs. The court shall have the same jurisdiction to take any action respecting the patent or rights -thereunder that it would have if the patentee were personally within the jurisdiction of the court.

35 U.S.C. § 293 (1970). Hence, the issue in the cases sub judice is whether actions to determine license rights are “proceedings affecting the patent or rights thereunder.” For reasons discussed below, we think not.

The legislative history provides some insight into the problems Congress sought to remedy through section 293. During extensive hearings on the proposed bill, the Department of State noted that section 293 (introduced as section 252)

has been added for the benefit of American residents desiring to bring action against foreign owners of United States patents. At the present time, American manufacturers threatened by charges of infringement of United States patents by persons resident abroad are especially handicapped by inability to bring suit for declaratory judgment.²

Testimony by the Chief of the Patent Litigation Unit of the Department of Justice was practically identical to this statement.³ The only other reference to section 293 in the hearings is a report by the Patent Law Committee of the Bar Association of the City of New York which offered the following addition to the section:

Acceptance of the grant of a patent hereafter shall constitute an irrevocable consent to be sued as provided in this section and appointment of the Commissioner of Patents as agent of the patentee to receive service of process under this section.

1951 Hearings 222. The suggestion was not incorporated into the bill. The House Report⁴ and the Senate Report⁵ characterize section 293 as being part of “a group of sections relating to remedy for infringement of a patent . ⁶ Both reports then note that “[s]ection 293 is a new section that is needed on some occasions to obtain jurisdiction over foreign patent owners that do not reside in the United States.”⁷

In light of the hearings and the Congressional characterization in the reports, it is clear that “occasions” specifically refers to suits concerning the validity or infringement of patents. The least that may be adduced from the legislative history is that Congress most assuredly did not contemplate application of section 293 to actions to determine license rights. Moreover, one commentator, well acquainted with the intricacies of the Act, opined that section 293 “will enable, for example, jurisdiction over a patentee residing in a foreign country to be obtained in a declaratory judgment action involving the validity or infringement of the patent.” ⁸ Again, controversies concerning license rights are notably absent from the examples cited.

Our interpretation of the scope of section 293 finds abundant support in case law. Since its enactment, section 293 has been primarily invoked in cases where plaintiffs sought declaratory judgments involving patent validity or infringement. See Abington Textile Machinery Works v. Carding Specialists (Canada), Ltd., 249 F.Supp. 823 (D.D.C. 1965); Scandia House Enterprises, Inc. v. Dam Things Establishment, 243 F.Supp. 450 (D.D.C.1965); Sealol Corporation v. Flexibox, Ltd., 242 F.Supp. 693 (D.D.C. 1965). See also Etablissements Henry-Le Paute v. American Greiner Electronics, Inc., 172 F.Supp. 228 (D.Conn.1959); Webster-Chicago Corp. v. Holstensson, 132 F.Supp. 287 (D.D.C.1955). In these cases, the applicability of section 293 was manifest, thus obviating the necessity for detailed analysis of the scope of “proceedings affecting the patent or rights thereunder.” Only one reported case has made such an analysis. North Branch Products, Inc. v. Fisher, 179 F.Supp. 843 (D.D.C.), rev’d on other grounds, 109 U.S.App.D.C. 182, 284 F.2d 611 (1960), cert. denied, 365 U.S. 827, 81 S.Ct. 713, 5 L.Ed.2d 705 (1961).

In North Branch, an action for a declaratory judgment concerning title to patents, the court held that

the phrase “proceedings affecting the patent or rights thereunder” . should be construed as synonymous with “actions under the patent laws of the United States” [see 28 U.S.C. § 1338(a)] and, therefore, should be-limited and restricted to actions for infringement of patents and actions for declaratory judgments to adjudicate the validity or infringement of patents. Since the case at bar is not within this group, Section 293 does not apply to it and hence service by publication under that Section was ineffective.

Id. at 845 — 846. The court’s rationale was twofold:

that the Section is included in the codification of laws relating to patents would seem to lead to the conclusion that the Section should be construed as being limited to actions under the patent laws, rather than extended to all actions affecting patents generally . [and 2] that otherwise a constitutional question would arise. . . . [i. e.] a possible lack of any constitutional basis for jurisdiction either over the subject matter or over the person.

Id. at 845. While we agree with the rationale of North Branch, we would not go so far as to say that 28 U.S.C. § 1338(a) and 35 U.S.C. § 293 are synonymous. The language of each is distinctly different, and Congress may well have intended each to encompass different situations. Nevertheless, absent a more definitive indication of Congressional intent, we cannot hold that license agreement controversies are among the situations embraced by section 293.⁹

In addition to the North Branch rationale, traditional concepts of federal jurisdiction in cases involving patents support our conclusion. It is, of course, well settled that not all cases somehow involving patents are within the domain of federal courts. See, e. g., Luckett v. Delpark, Inc., 270 U.S. 496, 46 S.Ct. 397, 70 L.Ed. 703 (1926); Wilson v. Sanford, 51 U.S. (10 How.) 99, 13 L.Ed. 344 (1850). However, amicus curiae, Department of Justice, asserts that “proceedings affecting the patent or rights thereunder” means “any matter affecting a patent or rights thereunder, whether the claim falls within the jurisdiction of the state courts or the federal courts.” Amicus curiae’s Br. at 13. Amicus curiae then concludes that Congress, through section 293, “has combined a grant of subject matter jurisdiction which springs into operation if the patentee cannot be sued elsewhere, with a long-arm statute conferring personal jurisdiction over nonresident patentees who fail to designate an agent for service of process.” Id. at 14—15. We cannot agree with this analysis. We find no indication whatsoever that Congress intended to abrogate the traditional separation of state court-federal court jurisdiction whenever a nonresident patentee is involved.

The instant cases, while termed patent license agreement controversies, are, quite simply, contract disputes. See 4 Walker on Patents §§ 380, 420 (Deller ed. 1965). The rights of the parties derive solely from the terms of their contracts. Appellants plainly have no rights under the patents; their rights, if any, are only those emanating from the “four corners” of their respective agreements. We see no reason to bring such matters within the realm of the federal judiciary nor do we think Congress intended such a result.¹⁰

In sum, we hold that where plaintiffs seek merely to resolve the existence, vel non, of patent license agreements and their rights thereunder, section 293 is not available to effectuate service of process on nonresident patentees.

Affirmed.

1 . Hereafter Neidhart S.A., Maria Neidhart and Rico Neidhart are collectively referred to as “Neidhart S.A.”

2 . Hearings on H.R. 3760 Before the Sub-comm. No. 3 of the House Comm, on the Judiciary, 82d Cong., 1st Sess., ser. 9, at 91 (1951) (emphasis added) [hereafter cited as 1951 Hearings].

3 . 1951 Hearings 98.

4 . House Comm, on the Judiciary, Revision of Title 35, United States Code, H.R.Rep.No. 1923, 82d Cong., 2d Sess. 10, 31 (1952) [hereafter cited as H.R.Rep.No. 1923].

5 . Senate Comm, on the Judiciary, Revision of Title 35, United States Code, S.Rep.No.1979, 82d Cong., 2d Sess. 9, 31 (1952) [hereafter cited as S.Rep.No.1979], U.S.Code Cong. & Admin.News 1952, p. 2394.

6 . H.R.Rep.No. 1923 at 10; S.Rep.No.1979 at 8 (emphasis added). Our dissenting colleague takes issue with this interpretation. We think that the language speaks for itself. The above-quoted phrase in its entire context reads:

Beginning with 281 is a group of sections relating to remedy for infringement of a patent, the suit in the courts. The present statutes on this matter are in confusion because they were written quite some time ago and court procedure and the names of actions and so on have changed since then. So the present sections were substantially reorganized into a group of sections fitting in at this place, with some changes.

Section 281 is a declaration which serves as a preamble to the others.

Section 282 introduces a declaration of the presumption of validity of a patent, which is now a statement made by courts in decisions, but has had no expression in the statute. The defenses to a suit for infringement are stated in general terms, changing the language in the present statute, but not materially changing the substance.

The next few sections relate to injunctions, damages, attorney fees, the statute of limitations, and to marking and notice; all of which together replace present statutes on suits, with a good deal of reorganization in language to clarify the statement of the statutes.

Section 288 is the companion section to the disclaimer section, 253.

Section 292 is a criminal statute relating to falsely marking an article as being patented when it was not patented, which is now the present law. But this section revises it and makes a few changes, and also makes it an ordinary criminal action as well as an informer action as in the present statute.

Section 293 is a new section that is needed on some occasions to obtain jurisdiction over foreign patent owners that do not reside in the United States.

H.R.Rep.No.1923 at 10; S.Rep.No.1979 at 8-9, U.S.Code Cong. & Admin.News, 1952, p. 2402. While we discern a color of support in this language for the dissent’s interpretation, we cannot agree that it “plainly” excludes section 293. The dissent states that “the group of sections dealing with court suits for infringement plainly stops before section 292. ...” Of course, the dissent does not reconcile this interpretation with directly contradictory views expressed at the hearings by the Department of State, supra, note 2, and the Chief of the Patent Litigation Unit of the Department of Justice, supra, note 3. Moreover, the dissent’s interpretation ignores the entire thrust of chapter 29 — “remedies for infringement of patent, and other actions.”

7 . H.R.Rep.No.1923 at 10; S.Rep.No.1979 at 9, U.S.Code Cong. & Admin.News 1952, p. 2403.

8 . Federico, Commentary on the New Patent Act, 35 U.S.C.A. at 58 (1954) (emphasis added).

9 . The dissent states that “The natural meaning of the words used [“affecting the patent or rights thereunder”] conveys, to me, the thought that a proceeding to determine, e. g., the extent of rights granted by an exclusive license granted by the patentee, or the validity of the license, is a ‘proceeding affecting rights under the patent.’ ” We are constrained to respond that frequently the “natural meaning” of statutory language is belied by the traditional jurisprudential foundations of a particular area of the law. This is especially true in the field of patent law, which seems to have a propensity for enigmatic aberrations. When enacted, who could have envisioned the • countless years of interpretation by practitioners and jurists alike that was, and undoubtedly will continue to be, engendered by the simple phrase “arising under the patent laws” ? “Natural meaning” simply will not suffice where, as here, other considerations necessitate more sophisticated interpretation.

10 . Appellant Neidhart and amicus curiae cite several district court cases in which section 293 was invoked by the United States for. jurisdiction over foreign corporations in antitrust actions involving patents — the district courts denied motions to dismiss. Appellant Neidhart’s Br. at 7-10; amicus curiae’s Br. at 8. We have examined those cases and do not find them applicable here.