Opinion ID: 692072
Heading Depth: 3
Heading Rank: 3

Heading: American's Counterarguments

Text: 35 American maintains that its action for a declaratory judgment of invalidity is entirely equitable in nature, and thus provides Lockwood no grounds to assert that he has been wrongfully deprived of a jury trial. American does not, however, cite a single eighteenth-century English suit in equity where, with the alleged infringer as plaintiff, the court adjudicated the validity of a patent. Instead, American cites a number of cases for the proposition that [t]he courts are unanimous ... in holding that there is no right to trial by jury in an action seeking only a declaration of patent invalidity and unenforceability. In addition, American broadly asserts that an action for declaratory relief is ordinarily equitable in nature, and that Lockwood's Seventh Amendment claim may be disposed of accordingly. We consider each of these arguments in turn, concluding that both are deeply flawed.1. Declaratory Judgment Decisions 36 American maintains that the absence of the right to a jury trial in an action for a declaratory judgment of invalidity has already been settled in a number of cases. We discuss these cases briefly. 13 37 American relies primarily on two cases from the Ninth Circuit. In Shubin v. United States Dist. Court, 313 F.2d 250, 136 USPQ 405 (9th Cir.), cert. denied, 373 U.S. 936, 83 S.Ct. 1539, 10 L.Ed.2d 690 (1963), the Ninth Circuit concluded that, because the defendant patentee sought only injunctive relief in its counterclaim of infringement, the alleged infringer's action for a declaratory judgment of invalidity could be tried to the bench. Because the parties had stipulated to the fact that no infringement had yet occurred, the court limited its holding to the peculiar pleadings of this case, as modified by its admissions and stipulations. Id. at 252, 136 USPQ at 406. In short, no claim for damages could have been brought. Applying Beacon Theatres, the court reasoned as follows: 38 The defendants seek only a permanent injunction against threatened infringement. This is not a legal issue. Defendants' only remedy would be in equity. 39 Id. at 251, 136 USPQ at 405-06 (emphasis in original). The court focused, as we have, on the sort of action the defendant patentee could have brought at common law to raise the issues presented in the case. The patentee's counterclaim for a permanent injunction against future infringement, paired with its stipulation to the absence of any claim for infringement damages, convinced the court that the issues in the case were purely equitable ones. Likewise, in Anti-Monopoly, Inc. v. General Mills Fun Group, 611 F.2d 296, 204 USPQ 978 (9th Cir.1979), a trademark case, the court focused on the fact that only injunctive and declaratory claims and counterclaims remained to be adjudicated, concluding that the action was equitable. In neither Shubin nor Anti-Monopoly, however, did the Ninth Circuit address whether an action for a declaratory judgment of invalidity standing alone entitles the defendant patentee to a jury trial on the factual questions relating to validity as a matter of right. Neither of the cases stands for the broad proposition America would have us draw from them. 40 American also relies on two cases from the Second Circuit. In Beaunit Mills, Inc. v. Eday Fabric Sales Corp., 124 F.2d 563, 565, 52 USPQ 196, 198 (2d Cir.1942), the Second Circuit faced the question whether the district court's order striking the defendant's jury demand was final for purposes of appeal. After dismissing the appeal as interlocutory, the court went on in dicta to ponder the merits of the defendant patentee's claim that it had been wrongfully denied a jury trial. While expressing some doubt on the question, the court suggested that, given the incidental nature of the patentee's claims, the Seventh Amendment question could best be resolved according to the principle that equity having assumed jurisdiction should go on to afford complete relief. Id. at 566, 52 USPQ at 199. 14 The Supreme Court, referring to the doctrine that equity may determine incidental legal rights in order to afford complete relief, has since made it clear that no such rule may be applied in the federal courts. Dairy Queen, 369 U.S. at 470, 82 S.Ct. at 896. 15 See also Kennedy v. Lakso Co., 414 F.2d 1249, 1252 (3d Cir.1969) (patent infringement case) (As a result of the decisions [in Beacon Theatres and Dairy Queen ], the doctrine that an action which seeks both damages and equitable relief is predominantly equitable and therefore may not be tried to a jury, has been reversed.); McCoid, Procedural Reform, supra note 11, at 5-6 (same). Beaunit, offering little more than a suggestion that the Supreme Court has since repudiated, offers American nothing at all. 41 In Diematic Mfg. Corp. v. Packaging Indus., 516 F.2d 975, 186 USPQ 241 (2d Cir.), cert. denied, 423 U.S. 913, 96 S.Ct. 217, 46 L.Ed.2d 141 (1975), as in Beaunit, the court considered whether a district court order was final for purposes of appeal--in this case, an order staying arbitration. In making its determination, the Second Circuit stated that an action is to be considered equitable for [these] purposes unless the equitable relief sought can be characterized as 'merely incidental.'  Diematic, 516 F.2d at 978-79, 186 USPQ at 244 (quoting Standard Chlorine, Inc. v. Leonard, 384 F.2d 304, 309 (2d Cir.1967)). While the general policy against allowing interlocutory appeals justified the presumption that the action was equitable in Diematic, 16 in this case the policies underlying the right to a trial by jury require just the opposite approach. See Dairy Queen, 369 U.S. at 473 n. 8, 82 S.Ct. at 897 n. 8 (It would make no difference if the equitable cause clearly outweighed the legal cause.... As long as any legal cause is involved the jury rights it creates control.) (quoting Thermo-Stitch, Inc. v. Chemi-Cord Processing Corp., 294 F.2d 486, 491 (5th Cir.1961)). Because the holding of Diematic was animated by policy concerns quite contrary to those of the Supreme Court's Seventh Amendment jurisprudence, we decline to pattern our decision in this case after it. 42 Finally, American argues that two early district court decisions concerning the right to a jury trial in declaratory judgment actions under the patent laws support its position in this court. Both Hall v. Kish, 11 F.R.D. 292, 88 USPQ 548 (N.D.Ohio 1951), and Brody v. Kafka, 73 USPQ 469 (S.D.N.Y.1947), involved an action for a declaratory judgment of invalidity and noninfringement; in neither case did the defendant patentee counterclaim for infringement damages, though both defendants made timely jury demands. In both cases, the district court concluded that, given the plaintiff's request for injunctive relief and the plaintiff's failure to counterclaim for damages, the issues involved were equitable and should thus be tried to the bench. First, because they are the decisions of district courts, Hall and Brody can at most persuade rather than bind us. Second, while we concede that these cases involve actions nearly indistinguishable from American's action against Lockwood, we conclude that their holdings have clearly been vitiated by both Beacon Theatres, 359 U.S. at 504, 79 S.Ct. at 953, and Dairy Queen, 369 U.S. at 472-73, 82 S.Ct. at 896-97, and thus decline to follow them. We also note that in the more recent case of Minnesota Automotive, Inc. v. Stromberg Hydraulic Brake & Coupling Co., the district court, citing both the contrary decision in Brody and the Supreme Court's subsequent decision in Beacon Theatres, came to the same conclusion regarding a defendant patentee's Seventh Amendment right to a jury trial as we come to today. 167 USPQ 165, 166 (D.Minn.1970). 2. Nature of Declaratory Relief 43 American's second major argument against Lockwood's right to a jury trial in this case focuses on what it maintains is the invariably equitable nature of declaratory judgment actions. 44 American asserts, for example, that its declaratory judgment action is most analogous to an equitable bill quia timet, and that declaratory judgment actions are inherently equitable. American relies primarily on the Supreme Court's decision in Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 300, 63 S.Ct. 1070, 1074, 87 L.Ed. 1407 (1943), to support both these propositions. In Great Lakes, the Court reviewed a challenge to the constitutionality of the Louisiana unemployment compensation program, a challenge initiated in the district court as a declaratory judgment action. The specific question before the Court in Great Lakes was whether considerations which have led federal courts of equity to refuse to enjoin the collection of state taxes, save in exceptional cases, require a like restraint in the use of the declaratory judgment procedure. Id. at 299, 63 S.Ct. at 1073. Analogizing to the discretion of the courts in suits quia timet, the Court held that, having been [c]alled upon to adjudicate what is essentially an equitable cause of action, the district court was as free as in any other suit in equity to grant or withhold relief upon established equitable principles. Id. at 300, 63 S.Ct. at 1074. Great Lakes does not, as American suggests, stand for the proposition that declaratory judgment actions are always, or even usually, equitable for Seventh Amendment purposes. No Seventh Amendment issue whatever arose in the case. 17 45 Contrary to American's assertions, it does not appear that an alleged infringer could have used a bill quia timet to challenge patent validity in a court of equity. We have not been informed of any such cases by American. Bills quia timet were used in actions such as controversies relating to property title, Holland v. Challen, 110 U.S. 15, 20, 3 S.Ct. 495, 497-98, 28 L.Ed. 52 (1884), or attempts to cancel private instruments, Di Giovanni v. Camden Fire Ins. Ass'n, 296 U.S. 64, 68, 56 S.Ct. 1, 3, 80 L.Ed. 47 (1935). Bills quia timet were generally appropriate if there was a danger that a defense at law might be prejudiced or lost if not tried immediately. Di Giovanni, 296 U.S. at 68, 56 S.Ct. at 3. Equity could also entertain a bill quia timet to appoint a receiver to protect some interest, to require security, or to compel a debtor to discharge a debt. See generally 2 Story Secs. 825-51, at 156-71. It is clear, however, that the bill quia timet has nothing to teach us about Lockwood's right to a jury trial in this case, an inversion of an infringement damages suit. 46 American also stresses that all suits for a declaratory judgment of invalidity that were brought after the passage of the Declaratory Judgments Act in 1934 but before the merger of law and equity in the federal system in 1938 were brought as bills in equity. American cites the following cases as examples of suits including a request for declaratory relief, brought in equity, in that four-year period: E.W. Bliss Co. v. Cold Metal Process Co., 102 F.2d 105, 41 USPQ 342 (6th Cir.1939); Derman v. Gersten, 22 F.Supp. 877 (E.D.N.Y.1938); Duro Test Corp. v. Welsbach Street Lighting Co. of Am., 21 F.Supp. 260 (D.Del.1937); Petersime Incubator Co. v. Bundy Incubator Co., 34 USPQ 251 (S.D.Ohio 1937); Cromwell Novelty Corp. v. Carp, 36 USPQ 413 (S.D.N.Y.1937); Lionel Corp. v. De Filippis, 15 F.Supp. 19 (E.D.N.Y.1936); Mitchell & Weber, Inc. v. Williamsbridge Mills, Inc., 14 F.Supp. 954, 32 USPQ 506 (S.D.N.Y.1936); and Ladenson Co. v. Overspred Stoker Co., 89 F.2d 242 (7th Cir.1937). American can rely on these cases only to show the mere fact that declaratory judgments were sought in courts of equity before the merger of law and equity, a fact not in dispute. None of the cases American cites discuss whether equity was the only proper forum or whether Seventh Amendment rights were at issue. 47 In sum, the cases American cites either focus on the presence of a request for injunctive relief and the absence of a request for monetary damages or involve issues other than the litigants' Seventh Amendment rights. What none of the cases discuss is a common law cause of action whereby an alleged infringer could call the patentee into court for an adjudication of a patent's validity. And only evidence of such a common law cause of action would support the position American takes in this case.