Robin Products Company v. Jerry J. Tomecek

465 F.2d 1193, 175 U.S.P.Q. (BNA) 135, 1972 U.S. App. LEXIS 7801

• Court: Court of Appeals for the Sixth Circuit
• Decided: August 23, 1972
• Docket: 71-1789
• Status: Published

Opinions

PHILLIPS, Chief Judge.

This is an appeal from an order of the District Court dismissing a declaratory judgment action for lack of jurisdiction. We vacate dismissal and remand.

The factual background as to events prior to October 1970 is simple and undisputed. Jerry Tomecek developed a cable clip for use in automobile heater controls and filed a patent application therefor. In 1968, during pendency of the application, he entered into an agreement with Robin Products whereby Robin was given the exclusive right to make, use and sell the clip. The agreement provided for the royalties based on sales with' a yearly minimum, an additional lump sum royalty upon issuance of the patent, and payment by Robin of the costs of obtaining the then pending patent and any improvement patents. The patent issued in May 1970.

Robin never made payments under the agreement, asserting that Tomecek had breached his warranty of title to the invention. This question had arisen in the course of Robin’s attempts to interest Chrysler Corporation in the Tomecek clip. Robin was informed that Chrysler was not interested in the Tomecek clip, that the clip had been invented by Chrysler personnel, and that Chrysler intended to provoke an interference in the Patent Office to resolve the question of priority of invention. At Chrysler’s request, Robin agreed to supply clips in accordance with Chrysler’s specifications.

In August 1970, Tomecek commenced arbitration proceedings pursuant to the contract in order to recover the minimum and lump sum royalties and patent procurement costs. Tomecek further exercised his rights under the termination clause of the agreement by letter of September 3, 1970, the termination to be effective October 23, 1970. On the eve of the arbitration hearing, Robin filed this declaratory judgment action, seeking a declaration that the Tomecek patent was invalid and was not infringed by the clips which it was selling to Chrysler. The arbitration was stayed by a show cause order filed with the complaint. Counsel informed this court at oral argument that the arbitrator has now stayed proceedings on his own motion pending termination of the interference proceedings in the Patent Office. Tom-ecek moved to dismiss the action on the ground that there was no case or controversy within the court’s jurisdiction. Supporting affidavits of Tomecek and his attorney were filed, alleging that no charge of infringement or infringement investigation had been made by either of them. Robin filed a verified response, subscribed to by Robin manager Martin Brown, which stated that Tomecek’s attorney orally had communicated with Brown after termination demanding future royalty payments and that this demand was regarded as a charge of infringement. The District Court conducted a hearing on the motion under R. 12(d), Fed.R.Civ.P. In addition to the affidavits, documentary evidence in the form of letters regarding the money due under the agreement and the arbitration proceedings were introduced. Counsel were permitted to argue, but Robin’s proffer of Brown’s testimony was refused. The District Court ordered the action dismissed without prejudice on the ground that there was no case or controversy.

The Declaratory Judgment Act, 28 U.S.C.A. § 2201, requires the existence of “an actual controversy within [the court’s] jurisdiction.” In actions of the type herein involved, a justiciable controversy is made out upon plaintiff’s showing of “any indirect or implicit or covert charge [of infringement] or threat [of suit or] any conduct or course of action from which any charge or threat could be inferred.” Goodrich-Gulf Chemicals, Inc. v. Phillips Petroleum Co., 376 F.2d 1015, 1019 (6th Cir. 1967). The alleged demand for payment of posttermination royalties is “conduct . . . from which any [infringement] charge . . . could be inferred,” if not an implicit charge of infringement.

We have referred above to the verified response of Robin, which is sworn to by Martin Brown. This response, in part, is as follows:

“Months after the patent license was cancelled, Tomecek’s attorney (Bruce Klaas, Esq.) orally advised Robin’s manager (Martin M. Brown) to the effect that Tomecek looked to and expected Robin to pay royalties under the patent for the past as well as the future. Robin took that to be a threat of patent infringement action, which appeared to be the way it was intended.”

Mr. Bruce Klaas, attorney for Tomecek, denies these representations, creating a controverted issue of fact.

The appropriate test is whether the course of action would be regarded by a reasonable man as a charge of infringement and was so regarded by the party seeking declaratory relief. The Brown affidavit asserts material issues of fact as to the circumstances of the communication and alleged demand. Resolution of these issues is required under the above test. Such resolution solely on documentary evidence was particularly inappropriate in the light of the proffer of Brown’s testimony. It is only in the clear absence of contested facts that an offer of proof may properly be denied. While the burden of proof on the issue of jurisdiction is on the party asserting jurisdiction, the opportunity to present such proof should not be foreclosed.

Although findings of fact or conclusions of law are not required in ruling on motions to dismiss for want of jurisdiction, R. 52(a), Fed.R.Civ.P., their absence in this case leaves us uncertain as to the precise basis of the decision of the District Court. The Declaratory Judgment Act “gave the federal courts competence to make a declaration of rights; it did not impose a duty to do so,” Public Affairs Associates, Inc. v. Rickover, 369 U.S. 111, 112, 82 S.Ct. 580, 582, 7 L.Ed.2d 604 (1962), and “confer [red] a discretion on the courts rather than an absolute right upon the litigant.” Public Service Comm’n v. Wycoff Co., 344 U.S. 237, 241, 73 S.Ct. 236, 238, 97 L.Ed. 291 (1952). Dismissal of the action in the exercise of this discretion would have been appropriate in light of Tomecek’s resort to the arbitration proceedings in which all issues could be raised. See Product Engineering & Mfg. Inc. v. Barnes, 424 F.2d 42 (10th Cir. 1970; cf. Lear, Inc. v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610 (1969).

The opinion of the District Court contains this closing paragraph:

“However, Defendant has asked that this also be considered a motion for declaratory judgment and that the dismissal be with prejudice. The court will not grant that motion and the dismissal will be without prejudice.”

We are unable to ascertain whether dismissal was ordered to be without prejudice because the court wished to leave no question that there was no adjudication on the merits or because the dismissal was in the exercise of its discretion to decline jurisdiction. Compare American Needle & Novelty Co. v. Schuessler Knitting Mills, Inc., 379 F.2d 376, 378 (7th Cir. 1967) with Walker v. Felmont Oil Corp., 262 F.2d 163, 165 (6th Cir. 1958), cert. denied, 361 U.S. 840, 80 S.Ct. 61, 4 L.Ed.2d 78 (1959).

Vacated and remanded for a further evidentiary hearing under Rule 12(d), Fed.R.Civ.P., on the issue of whether an actual controversy exists between the parties requiring a declaratory judgment.