Source: https://law.justia.com/cases/federal/appellate-courts/F2/486/1279/287357/
Timestamp: 2020-08-03 12:26:29
Document Index: 228979164

Matched Legal Cases: ['§ 146', '§ 146', '§ 135', '§ 146', '§ 63', '§ 135', '§ 153', '§ 231', '§ 107', '§ 107', '§ 63', '§ 1332']

Montecatini Edison, S.p.a. (a Corporation of Italy) Appellee, v. Karl Ziegler, Appellant, and E. I. Dupont De Nemours Andcompany (a Corporation of Delaware), 486 F.2d 1279 (D.C. Cir. 1973) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › D.C. Circuit › 1973 › Montecatini Edison, S.p.a. (a Corporation of Italy) Appellee, v. Karl Ziegler, Appellant, and E. I....
Montecatini Edison, S.p.a. (a Corporation of Italy) Appellee, v. Karl Ziegler, Appellant, and E. I. Dupont De Nemours Andcompany (a Corporation of Delaware), 486 F.2d 1279 (D.C. Cir. 1973)
US Court of Appeals for the District of Columbia Circuit - 486 F.2d 1279 (D.C. Cir. 1973) Argued March 5, 1973. Decided Oct. 5, 1973
Both parties have filed applications for patents claiming a certain process for homopolymerizing propylene. Two other parties have also filed applications claiming the same process. In order to resolve this conflict, the Patent Office instituted Interference No. 90,833, a proceeding to determine the question of priority of invention.1 On September 15, 1969, almost ten years after the interference was declared, the Patent Office Board of Patent Interferences awarded priority of invention to Ziegler. The Montecatini Edison Company (hereafter, "Montecatini") then commenced this action under 35 U.S.C. § 146 (1970), which authorizes any party to an interference who is dissatisfied with the Board's award to proceed by civil action to obtain an adjudication of his right to a patent. Ziegler filed an answer requesting dismissal of the complaint as well as a declaration that his assignors were the prior inventors. In addition, the answer interposed a counterclaim which asserts that Ziegler is the rightful owner of "all property rights of, and sums and royalties received by plaintiff, Montecatini, in the United States in the olefin polymerization field."2 The counterclaim alleges that Montecatini, surreptitiously and in violation of a relationship of trust and confidence between Ziegler and Montecatini, misappropriated certain inventions of Ziegler, and used them to "develop a patent position"3 in the United States in the field of olefin polymerization. According to the uncontradicted assertions of Montecatini both at oral argument of the motion to dismiss the counterclaim in the district court4 and in its brief on appeal,5 Montecatini's "patent position" in the field now includes eighty-five United States patents. The court is asked to impress a trust in favor of Ziegler upon all property rights of Montecatini in this field and to appoint a receiver pendente lite.6
The first and foremost consideration is the nature of the proceeding under 35 U.S.C. § 146. A party dissatisfied with the decision of the Board of Patent Interference on a question of priority of intervention between conflicting patent applications may pursue a civil action against the other parties to the interference proceeding. This action is not a standard civil action. It is more in the nature of a review of an administrative proceeding with inherent limitations on the issues which may be raised in the original claim or by counterclaim.
At the outset it must be pointed out that Montecatini's position (i. e., that permissive, non-Federal counterclaims may not be asserted in section 146 actions) is in derogation of both the express provisions and the underlying policies of the Federal Rules of Civil Procedure. Rule 13 provides that a pleading may state any permissive counterclaim and must state any compulsory counterclaim.8 The word "may" is not intended to confer any discretion upon the court with respect to a permissive counterclaim; rather, it gives the litigant a choice either to assert or not to assert a permissive counterclaim. If he elects to plead it, the court must entertain it so long as it is within the court's subject matter jurisdiction. Switzer Brothers, Inc. v. Locklin, 207 F.2d 483, 488 (7th Cir. 1953), cert. denied, 347 U.S. 912, 74 S. Ct. 477, 98 L. Ed. 1069 (1954); Michigan Tool Co., Inc. v. Drummond, 33 F. Supp. 540, 542 (D.D.C. 1938).9 In effect, Rule 13(b) confers upon a litigant the right to have his permissive counterclaim heard and determined along with the claims of his adversary. The objective of the Federal Rules with respect to counterclaims is to provide complete relief to the parties, to conserve judicial resources and to avoid the proliferation of lawsuits. Stewart-Warner Corp. v. Westinghouse Electric Corp., 325 F.2d 822, 827 (2d Cir. 1963), cert. denied, 376 U.S. 944, 84 S. Ct. 800, 11 L. Ed. 2d 767 (1964). Thus, Montecatini assumes a great burden in attempting to persuade this court that the usual rule as to permissive counterclaims should not apply in a section 146 proceeding. We conclude that the burden has not been carried.10
A. The first part of Montecatini's argument correctly states a rule of law in section 146 proceedings, but it is a rule which has no application to a counterclaim such as the one at issue on this appeal. This is clear from the very authorities cited by the appellee. In Radio Corporation of America v. Philco Corp., 201 F. Supp. 135 (E.D. Pa. 1961), aff'd, 309 F.2d 397 (3d Cir. 1962),13 for example, it was held that a defendant in a section 146 action cannot litigate the issue of patentability (of his adversary's application) in the district court after failing to properly raise the issue before the Patent Office. The rationale of this ruling was that the defendant had waived the defense since he did not take advantage of the opportunity to present it in the Patent Office:
Id. at 143. The same reasoning was adopted in Potter Instrument Co. v. Mohawk Data Sciences Corp., 309 F. Supp. 866, 867 (S.D.N.Y. 1969) and General Motors Corp. v. R. E. Dietz Co., 137 U.S.App.D.C. 100, 420 F.2d 1303, 1305-1306 (1969). In an analogous decision in a section 145 case, we have referred to this rule as a "phase of the doctrine of exhaustion of administrative remedies." DeSeversky v. Brenner, 137 U.S.App.D.C. 369, 424 F.2d 857, 859 (1970).14
Id. at 718. In concluding that its decision did no violence to the patent laws, the court relied upon the decision of the Supreme Court in Becher v. Contoure Laboratories, 279 U.S. 388, 49 S. Ct. 356, 73 L. Ed. 752 (1929). In that case the respondent had recovered a state court judgment impressing a trust upon the petitioner's patent on the ground that he had obtained it in breach of a confidential relationship with respondent. Petitioner then brought a separate action for infringement in the federal court requesting, among other things, that respondent be enjoined from enforcing the state court judgment. The petitioner's complaint was dismissed and the Supreme Court affirmed. Speaking for the Court, Justice Holmes concluded that respondent had a valid claim for relief which was completely independent of the patent laws:
Id. at 390-391, 49 S. Ct. at 357. Here, too, Ziegler's claims rest on grounds independent of the patent law, and he is not foreclosed from asserting them by the mere fact that an alternative remedy is afforded by the patent law. It should be emphasized, however, that we are now speaking, not of alternatives which were available in the proceeding under review, but of alternatives which might have been pursued by the institution of some other, unrelated proceeding. As we have stated above, however, if there had been means available for Ziegler to have presented his claims to the Patent Office in the proceedings now under review, his failure to utilize them would have been a waiver and he would be stopped from prosecuting them in this action.
(i) Brotherhood of Railway Trainmen v. Denver & Rio Grande Western Railroad, Co., 31 F.R.D. 297 (D.C.Colo.1962), cert. denied, 380 U.S. 972, 85 S. Ct. 1330, 14 L. Ed. 2d 268 (1965), involved a proceeding to enforce an award of the Railroad Adjustment Board. The enforcement proceeding is commenced by a petition setting forth the award of the Board. Under provisions in force at the time of the Brotherhood decision, the order was "prima facie evidence" of the facts it recited.20 In Brotherhood, the court dismissed a counterclaim by the delinquent employer which sought damages for losses resulting from a strike ages for losses resulting from a strike called by the union. Although the reasoning of the court is not explicit, it appears to conclude that the statute contemplated a summary enforcement procedure which should not be encumbered with counterclaims. While there appears to be some disagreement with this holding,21 we do not express any views as to its correctness. Suffice it to say that a section 146 action is a horse of an entirely different color. Section 146 contemplates a trial de novo of the issue of priority of invention.22 It is in no sense an enforcement proceeding but a review proceeding. Furthermore, the issues presented in a section 146 action are rarely as urgent as a railway labor-management dispute which might disable an important facility of interstate commerce.23
(ii) In Georgia Jewelers, Inc. v. Bulova Watch Co., 302 F.2d 362 (5th Cir. 1962), the court dismissed the bankrupt's counterclaim against the petitioners which charged abuse of process and conspiracy to destroy its financial reputation. The case is particularly inapposite because bankruptcy proceedings are expressly excepted from the usual rules as to counterclaims. Fed.R.Civ.Proc., Rule 81(a) (1). Order 37 of the General Orders and Forms in Bankruptcy, 11 U.S.C. following Sec. 1103, makes the Federal Rules applicable in proceedings under the Bankruptcy Act "in so far as they are not inconsistent with the Act." In Georgia Jewelers, however, the court found that " [t]here is really no place for such a counterclaim in the statutory scheme" since the bankrupt's counterclaim could not augment the estate or offset a creditor's claim. Id. at 369. Plainly, the reasoning of this decision cannot govern the present appeal.
(iii) United States ex rel. Rodriquez v. Weekly Publications, Inc., 74 F. Supp. 763 (S.D.N.Y. 1947), was a statutory24 qui tam action seeking to recover a penalty against the defendants for presenting fraudulent claims to the government. The court dismissed a counterclaim against the informer on the ground of public policy, stating that to permit such counterclaims would deter future informers' actions. While we express no opinion as to the correctness of this decision, it is clear that the court based its ruling upon considerations which do not arise in section 146 actions.
(iv) In Donnelly Garment Co. v. ILGWU, 47 F. Supp. 65 (W.D. Mo. 1942), an employer obtained an injunction against a union. After the injunction was ultimately vacated, the union presented a claim under section 7 of the Norris-La-Guardia Act25 for damages caused by wrongful issuance of the injunction. The union was not required to commence a separate action but proceeded in the same action (i. e. the employer's injunction suit) to seek an assessment of damages against the plaintiff-employer and his surety. The employer attempted to interpose a counterclaim for damages based upon the same conduct as to which the injunction had been granted. The court refused to entertain the counterclaim, stating that the assessment of damages proceeding was "merely a last step" in the employer's action, "in effect nothing more than an expansion of the proceeding looking to the taxation of costs." In addition, the court concluded that the statute contemplated "a speedy and summary proceeding" and that Congress did not intend for other issues to be determined therein. Id. at 68-69. Again, we think that this decision involved a question quite different from that under discussion and cannot control our decision of this appeal.
(v) United States v. John A. Johnson & Sons, 65 F. Supp. 514 (D. Md. 1945), aff'd, 153 F.2d 534 (4th Cir.), cert. denied, 328 U.S. 865, 66 S. Ct. 1372, 90 L. Ed. 1636 (1946), was a suit on behalf of a supplier under section 1 of the Miller Act26 against a government contractor and his surety to recover the price of supplies which had been delivered to a sub-contractor. The general contractor impleaded the sub-contractor and the latter counterclaimed against both the general contractor and the supplier. The court stated that the sub-contractor's claim did not arise under the Miller Act and dismissed the counterclaim.27 As a subsequent decision points out, the reason for the dismissal was not the "special statutory" nature of the Miller Act proceeding, as Montecatini contends, but the absence of subject matter jurisdiction over the counterclaim. United States v. Paul Tishman Co., 32 F.R.D. 223, 226 (E.D.N.Y. 1963).
In Michigan Tool Co., Inc. v. Drummond, 33 F. Supp. 540 (D.D.C. 1938), plaintiff brought an action under the predecessor of section 14628 to review a decision of the Examiner of Interferences awarding priority of invention to the defendant. Defendant counterclaimed for infringement. Upon plaintiff's motion to dismiss the counterclaim, our district court ruled as follows:
We hold, therefore, that a counterclaim, whether permissive or compulsory, may be asserted by a section 146 defendant to the same extent as in any other civil action governed by the Federal Rules, subject to the requirements of the doctrine of exhaustion of administrative remedies. We recognize, of course, that a counterclaim might unduly compound the labyrinthian complexity of some section 146 actions. This contingency is fully anticipated by Rule 42(b), however, which authorizes the court to order the separate trial of a counterclaim "in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy." See McFarlane v. Resinite Corp., 273 F. Supp. 224 (N.D. Ill. 1967); Michigan Tool Co., Inc. v. Drummond, 33 F. Supp. 540, 542 (D.D.C. 1938).
This issue was before us once before in North Branch Products, Inc. v. Fisher, 179 F. Supp. 843 (D.D.C.), rev'd, 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 that case, the plaintiff brought an action in the district court seeking a declaration that it was the sole owner of certain patents and patent applications then held in the name of the defendant, an employee of the plaintiff. The defendant-employee filed an answer to the complaint in which he included a counterclaim requesting affirmative relief against the plaintiff. Subsequently, the defendant moved to quash the summons and to dismiss the complaint on the ground that the district court lacked jurisdiction of both his person and the subject matter. The district court denied the motions, holding that the defendant, by invoking the court's jurisdiction in his counterclaim, had submitted his person to the jurisdiction of the court, thereby waiving any objection to service of process. In addition, the court held that the complaint stated a claim within its general original jurisdiction:
179 F. Supp. at 846, citing D.C.Code Sec. 11-306 (1951) (predecessor of Sec. 11-521). After concluding that it had both personal and subject matter jurisdiction, the court, on its own motion, dismissed the action under the doctrine of forum non conveniens. We reversed the latter ruling but sustained the district court's jurisdiction as to both the person and the subject matter. 284 F.2d at 614-615. With respect to subject matter jurisdiction, our opinion simply stated that an action "to determine the title or ownership [as between the parties] of patents" is within the "common-law equity jurisdiction of our District Court." Except for the brief reference which appears in the excerpt from the district court's opinion quoted above, neither our opinion nor that of the district court specifically addressed the requirement that "either or both" of the parties be a resident of or found within the District of Columbia.33 We did take up the question in a subsequent case, however, and there stated expressly what was implicit in our North Branch decision:
Kelberine v. Societe Internationale, 124 U.S.App.D.C. 257, 363 F.2d 989, 993 (1966) [citing D.C.Code Sec. 11-306 (1961), later appearing in D.C.Code Sec. 11-521 (1966)], cert. denied, 385 U.S. 989, 87 S. Ct. 595, 596, 17 L. Ed. 2d 450 (1966). Montecatini attempts to distinguish Kelberine, and particularly directs our attention to the following passage in the same opinion:
As we have stated, neither party disputes the applicability of section 11-521 on the question of subject matter jurisdiction. We note, however, that although the suit was commenced by Montecatini prior to the effective date of the District of Columbia Court Reorganization Act of 1970, Ziegler's counterclaim was not interposed until after that date.34 D.C.Code Sec. 11-501(1) (Supp. V 1972) is a transitional provision which continues the local jurisdiction of the district court as to " [a]ny civil action or other matter begun in the court before the effective date of the District of Columbia Court Reorganization Act of 1970." This raises the question of whether the counterclaim is a "matter begun" before the effective date by relation back to the date of the complaint. We do not decide that question, however, because another transitional provision clearly embraces the Ziegler counterclaim. Section 11-501(4) continues the local jurisdiction of the district court as to " [a]ny civil action [with certain exceptions not pertinent here] begun in the court during the thirty month period beginning on such effective date wherein the amount in controversy exceeds $50,000." According to the allegations of Ziegler's counterclaim, which are controlling as to the amount in controversy, the amount of his injury is "believed to amount to many millions of dollars."35 Since the counterclaim was filed within the prescribed thirty-month period, we conclude that the district court's jurisdiction of the counterclaim was not impaired by the 1970 Act.
35 U.S.C. § 135(a) (1970)
A. A permissive non-Federal counterclaim may not be interposed in an action under 35 U.S.C. § 146.
The Montecatini brief discusses several other decisions in addition to the ones we have mentioned. Except for two of these which are completely irrelevant, we believe they, too, come within the interpretation we have stated. See Cody v. Aktiebolaget Flymo, 306 F. Supp. 728, 730 (D.D.C. 1969), aff'd, 146 U.S.App.D.C. 345, 452 F.2d 1274 (1971), cert. denied, 405 U.S. 990, 92 S. Ct. 1254, 31 L. Ed. 2d 456 (1972); Sperry Rand Corp. v. Bell Tel. Laboratories, 173 F. Supp. 714, 715 (S.D.N.Y. 1959), appeal denied, 272 F.2d 29 (2d Cir. 1959)
See McFarlane v. Resinite Corp., 273 F. Supp. 224 (N.D. Ill. 1967) (suit under section 146 joining claims for infringement and unfair competition); Etten v. Lovell Mfg. Co., 4 F.R.D. 233 (W.D. Pa. 1945) (suit under predecessor of section 146 joining claim charging conspiracy to give false testimony); Michigan Tool Co. v. Drummond, 33 F. Supp. 540 (D.D.C. 1938) (counterclaim for infringement); E. I. du Pont de Nemours and Co. v. Atlas Powder Co., 24 F. Supp. 263 (D. Del. 1938) (counterclaim for infringement). Note that all of the preceeding cases but McFarlane were decided under the predecessor to section 146, Revised Statutes Sec. 4915, as amended (formerly codified at 35 U.S.C. § 63)
Id.; 35 U.S.C. § 135 (1970)
Act of May 20, 1926, ch. 347 Sec. 3, 44 Stat. 578, as amended, 45 U.S.C. § 153 subd. 1(p) (1970). The provision has since been amended to make the Board's order "conclusive" on the parties and to restrict the scope of review. An order can now only be overturned if the Board has failed to comply with the statute or has exceeded its jurisdiction or if the order is defective by reason of fraud or corruption committed by a member of the Board
Act of March 2, 1863, ch. 67 Secs. 3, 4, 12 Stat. 698, as amended. Presently codified, as amended, at 31 U.S.C. §§ 231, 232 (1970)
29 U.S.C. § 107 (1970)
29. U.S.C. § 107 (1970)
A second counterclaim against the general contractor was dismissed on other grounds. 65 F. Supp. at 527
35 U.S.C. § 63 (formerly codified at Revised Statutes Sec. 4915)
It is common ground that jurisdiction of the counterclaim cannot be based upon 28 U.S.C. § 1332 (diversity of citizenship) because both parties are aliens. Paragraph 1 of Ziegler Answer; Appellee's Brief at 26