Libbey-Owens-Ford Glass Co. v. Sylvania Industrial Corp.

154 F.2d 814, 69 U.S.P.Q. (BNA) 29, 1946 U.S. App. LEXIS 3898, 1947 Trade Cas. (CCH) 57,453

• Court: Court of Appeals for the Second Circuit
• Decided: March 26, 1946
• Status: Published

Opinions

CLARK, Circuit Judge.

To this action for infringement of a patent, Fed.Form 16, Federal Rules of Civil Procedure, Appendix of Forms, 28 U.S. C.A. following section 723c, defendants filed three defenses: first, admissions and denials of the paragraphs of the complaint, including denials of infringement and of the validity of the patent sued on; second', invalidity of the patent for lack of invention, ambiguity, etc., listing prior 'patents, publications, and user in detail; and third) “unclean hands,” in that plaintiff was using its patents unlawfully to extend its purported monopoly. Plaintiff moved under Federal Rules of Civil Procedure, rule 12 (b) (6), 28 U.S.C.A. following section 723c; to dismiss the Third Defense as a matter of law, and defendants moved for summary judgment under Federal Rule 56 on the basis of this defense. The párties filed affidavits, and the judge then wrote a considered opinion, D.C., 64 F.Supp. 516, holding the defense good as a pleading, but insufficient in law upon the “uncontradicted facts.” He therefore'stated that plaintiff’s motion would be granted, and defendants’ motion denied; and the order in question is in the limited form of dismissing the “Third Defense” in defendants’ answer and - denying defendants’ motion for summary judgment. Without attempting to proceed further below, defendants -took this appeal, which plaintiff has moved to dismiss on the ground that the order from which it is taken is not a final judgment.

An order merely striking one of several defenses and allowing the action to continue for adjudication of the rest would seem as nearly interlocutory as any pleading ruling can ever be; and such has been the universal view, both before the adopti6n of the new civil rules, United States v. Continental Casualty Co., 2 Cir., 69 F.2d 107; Rexford v. Brunswick-Balke-Collender Co., 228 U.S. 339, 33 S.Ct. 515, 57 L.Ed. 864, and since, United States v. Florian, 312 U.S. 656, 61 S.Ct. 713, 85 L.Ed. 1105, reversing (and restoring the first opinion in) Florian v. United States, 7 Cir., 114 F.2d 990; Shultz v. Manufacturers & Traders Trust Co., 2 Cir., 103 F.2d 771; Leonard v. Socony-Vacuum Oil Co., 7 Cir., 130 F.2d 535; Audi Vision, Inc. v. RCA Mfg. Co., 2 Cir., 136 F.2d 621, 147 A.L.R. 574 (decided by the court now sitting); Oppenheimer v. F. J. Young Co., 2 Cir., 144 F.2d 387; Toomey v. Toomey, App.D.C., 149 F.2d 19; and Markham v. Kasper, 7 Cir., 152 F.2d 270. This carries out a federal policy going back to the early days of the Republic, which “has shown no signs of weakness in recent years,” the “philosophy” of which “is that many mistakes, apparently important at the time, will be seen to be trivial from the perspective of a final disposition of the case, and that disputes will therefore be more expeditiously settled.” Perkins v. Endicott Johnson Corp., 2 Cir., 128 F.2d 208, 211, 212, affirmed Endicott Johnson Corp. v. Perkins, 317 U.S. 501, 63 S.Ct. 339, 87 L.Ed. 424. It is reiterated as a policy of desirable and affirmative substance “against piecemeal litigation” in Catlin v. United States, 324 U.S. 229, 233, 234, 65 S.Ct. 631, citing the Florian and other cases.¹

Defendants, however, assert that “there are two separate and distinct sets of facts involved in this case,'” citing Reeves v. Beardall, 316 U.S. 283, 62 S.Ct. 1085, 86 L.Ed. 1478. But that case as-' sumed and relied on the general rule against splitting appeals, re-enforced in Federal Rule 54(b), in order to make the decision madé necessary under that rule as to whether the appeal there had been taken from one of two separate and distinct claims, based upon “differing occurrences or transactions.” It lends no countenance to the idea that differing defenses to the same claim may be reviewed in piecemeal fashion. That would mean that pleading rulings on a multitude of matters could be separately appealed, e. g., separate rulings concerning payment, release, statute of limitations, .estoppel, accord and satisfaction, and other matters stated in Federal Rule 8(c), all of which are more distinct from the main claim than is the defense here involved. For it is quite clear that the defendant of unclean hands need not be pleaded, but, since it goes to the heart of the plaintiffs case, may be taken up without affirmative claim therefor. Gynex Corp. v. Dilex Institute of Feminine Hygiene, 2 Cir., 85 F.2d 103, 106; General Electric Co. v. Hygrade Sylvania Corp., D.C.S.D.N.Y., 45 F.Supp. 714, 718, and cases cited.

Indeed, the facts here must be examined to note how closely intertwined is this defense with the validity of the patent. Defendants’ pleading itself, set forth in full in the note,² is rather blind; but the affidavits make clear what is meant. Plaintiff’s patent, No. 2,056,462, is for an invention in the manufacture of molded articles from urea and formaldehyde. It has both product arid method claims, covering a.molding composition, or powder, made and sold by plaintiff, which, upon the application of heat and pressure according to the methods stated, may be shaped and hardened into plastic articl.es. Purchasers of the composition receive an implied license to use the process, while the grant of licenses under thé method claim (of which two are now outstanding) is confined to those persons who purchase the composition. The legal claim is that this extends the monopoly of the method claim beyond its scope and to the products made by the process; and there is cited the well-known series of cases culminating in Mercoid Corp. v. Mid-Continent Inv. Co., 320 U.S. 661, 64 S.Ct. 268, 88 L.Ed. 376, that the monopoly of a patent cannot be pressed to include an unpatented article. But Judge Bright, below, following Judge Leibell in General Electric Co. v. Hygrade Sylvania Corp., D.C.S.D.N.Y., 61 F.Supp. 531, did not see how this doctrine could apply, because the product itself was patented and there was no extension of the patent beyond what the patent grants. And this seemed to follow, because the combination of method and product claims in one patent is not illegal. Musher Foundation v. Alba Trading Co., 2 Cir., 150 F.2d 885, 889, certiorari denied Alba Trading Co. v. Musher Foundation, 66 S.Ct. 175.

In fact, this seems to go beyond the doctrine of unclean hands and to go to the validity of the patent itself, for, unless these claims are invalid, plaintiff seemingly can rely upon express claims in the patent for everything it has or asserts. Of course we are not settling this issue, but only pointing to its vital significance on the main issue of patent validity and the lack of even as much possible basis as with some other defenses for asserting it to involve a “differing occurrence or transaction” from the one sued upon. As a matter of fact, defendants — even under their other defenses, as we have seen — may present any facts or law supporting their contentions to the court below until the judgment does become final. Western States Mach. Co. v. S. S. Hepworth Co., 2 Cir., 152 F.2d 79.

In their memorandum of law to us defendants made a passing suggestion that their Third Defense was the type of claim which “could have been labeled a counterclaim” or “could have been set forth as the complaint in an action against the plaintiff” —a contention exploited somewhat more in a supplemental memorandum. This is an afterthought not presented below, and should not be considered now, United States v. Bennett, 2 Cir., 152 F.2d 342, 349, and cases cited, particularly as the allegations are not at all adequate under cases such as Lances v. Letz, 2 Cir., 115 F.2d 916, and McCurrach v. Cheney Bros., 2 Cir., 152 F.2d 365, to support a claim for a declaratory judgment. Had the matter been raised below, however, the defendants would have faced an obvious dilemma. If they had gone so far as to state a counterclaim upon a differing occurrence or transaction so that judgment upon it would have been appealable under Federal Rule 54(b), it would have been merely a permissive counterclaim under Federal Rule 13(b), and hence would require separate grounds of jurisdiction and perhaps venue —very likely lacking here. Derman v. Stor-Aid, Inc., 2 Cir., 141 F.2d 580; Lesnik v. Public Industrials Corp., 2 Cir., 144 F.2d 968; 1 Moore’s Federal Practice 695-700, id. 1945 Cum.Supp. 329-331; Crosley Corp. v. Westinghouse Electric & Mfg. Co., 3 Cir., 130 F.2d 474, 476, certiorari denied Westinghouse Electric & Mfg. Co. v. Crosley Corp., 317 U.S. 681, 63 S.Ct. 202, 87 L.Ed. 546; Leaver v. Parker, 9 Cir., 121 F.2d 738, certiorari denied Leaver v. Citizens Nat. Trust & Savings Bank of Riverside, 314 U.S. 700, 62 S.Ct. 480, 86 L.Ed. 560. But if defendants kept to their contention made here that the patent was invalid, they would be met with the cases holding that a counterclaim asking for no more than a defendant’s judgment on the original claim was a mere superfluity. See, e. g., Leach v. Ross Heater & Mfg. Co., 2 Cir., 104 F.2d 88; Altvater v. Freeman, 319 U.S. 359, 364, 369, 63 S.Ct. 1115, 87 L.Ed. 1450; 1 Moore’s Federal Practice, 1945 Cum.Supp, 318-320.³

Of course where jurisdiction exists and no question of separate appeal is involved, this question is not important. Cf. Barber Asphalt Corp. v. La Fera Grecco Contracting Co., 3 Cir., 116 F.2d 211. On the question of appeal, however, the case is not aided by the filing of a compulsory counterclaim, for it is now settled that dismissal of such a counterclaim is not separately appealable. This question was directly raised and considered at length in Audi Vision, Inc. v. RCA Mfg. Co., supra, where the appeal was dismissed; and that case has been expressly cited and followed in Toomey v. Toomey and Markham v. Kasper, both supra. It is the view of Professor Moore, 3 Federal Practice, 1945 Cum.Supp. 55, 140, 141, and of the Advisory Committee, which has reframed and restated Federal Rule 54(b) around it. See Second Preliminary Draft of Proposed Amendments to Rules of Civil Procedure, May, 1945, 62, 63. It is true that earlier Jefferson Electric Co. v. Sola Electric Co., 7 Cir., 122 F.2d 124, had held dismissal of such a counterclaim to be a final order; but as pointed out in the cases and authorities cited, the court appears to have been misled by the effect of Federal Rule 41 (b, c), making such a dismissal an adjudication upon the merits. It did not cite the more pertinent and decisive rule, 54(b). In that case the final judgment, resting on a different ground, 7 Cir., 125 F.2d 322, was reversed for dismissal of the counterclaim in 317 U.S. 173, 63 S.Ct. 172, 87 L.Ed. 165; but since this point was not brought before the Supreme Court, the later proceedings are not significant here.⁴ More recently, however, that Circuit cited and followed the ruling of the Audi Vision case in Markham v. Kasper, supra; and there seems now no dissent from it.

The broadening of the scope of the civil action by the new civil rules led not unnaturally to some initial confusion as to the working of Federal Rule 54(b), which has now been settled by the precedents even without the Committee’s proposed amendment. The law now carries out the historic federal policy. Of course there may be times when a quick appellate decision on a part of the case may be helpful, though one may expect that will rarely be so on the bitterly fought antitrust problems. But the policy is the fruit of experience and embodies a general judgment which is not to be cast aside for an occasional aberrant case. And the policy is more broadly based than merely upon the natural desire for the expeditious and direct way of handling a particular case; for it eschews the whole practice of encouraging appeals on rulings concerning the perfectibility of pleadings and the resulting emphasis upon pleading technicalities which ensues.⁵ And even if there be individual judicial doubts about the policy, it nevertheless seems both desirable and necessary that it be followed; for that is the essence of a procedure uniform throughout the country.

Appeal dismissed.

1 Overruling several cases, including United States v. 243.22 Acres of Land, 2 Cir., 129 F.2d 878, certiorari denied Lambert v. United States, 317 U.S. 698, 63 S.Ct. 441, 87 L.Ed. 558, which had allowed appeals from judgments of “taking” in condemnation cases.

2 “Third Defense. Defendants aver that plaintiff is not entitled to maintain this action or to the relief sought, because plaintiff is using said Letters Patent No. 2,056,462 unlawfully to extend the alleged monopoly purporting to be granted by the method claims thereof by selling, and .licensing others to sell, molding compositions with an implied license to the purchasers thereof to practice tlie methods purporting to be claimed by the said method claims and by confining the grant of licenses under the method claims to those persons who purchase from the plaintiff, or its 'licensees, the products .to be utilized in carrying out the method purporting to be patented, and further because plaintiff in this action against these defendants for alleged infringement of said method claims is using said Letters Patent No. 2,056,462 unlawfully in an attempt to extend the alleged monopoly purporting to be granted by the said method claims in an effort, to interfere with the sale of products not patented thereby.”

3 The issue which has somewhat divided tho courts is not whether there should be a merely redundant counterclaim — for which none of the courts contend — but as to the time of deciding this point, in fact, whether or not the counterclaim should be held until trial to see if then there arises even an “infinitesimal” need for relief, as mentioned in tke dissent in the Altvater case, 319 U.S. 359, 369, 63 S.Ct. 1115, 87 L.Ed. 1450. See Moore, loe. cit. supra; Borchard, Declaratory Judgments, 2d Ed. 1941, 812-814. In the Altvater and Mercoid cases there was no question of appealability, since both judgments were completely final.

5 As in state practice, where interlocutory appeals are favored, Audi Vision, Inc. v. RCA Mfg. Co., 2 Cir., 136 F.2d 621, 625, 147 A.L.R. 574; and see particular examples cited in Zalkind v. Scheinman, 2 Cir., 139 F.2d 895, at page 907, n. 5, certiorari denied 322 U.S. 738, 64 S.Ct. 1055, 88 L.Ed. 1572.

4 In fact irom the rather voluminous record in the Supreme Court, dealing with the most important issues of patent Jaw, it would be difficult to discover the history of this particular prior step. No mention of it appears in the petition or briefs for certiorari; and there are only the most fleeting references to it in the reprint of the opinion below, 7 Cir., 125 F.2d 322, at page 323, and in a sentence in petitioner’s brief. Hence, not having occasion to do so, the Supreme Court did not pass on the question whether the counterclaim was compulsory or permissive.