215 F. 377 | D.N.J. | 1914
The parties are citizens of the same state, engaged in a competitive business of manufacturing and selling submarine boats. The bill in each of the five cases alleges infringement of certain letters patent, relating to submarine boats. The answers to said bills, in addition to the usual defenses, set up as counterclaims alleged infringements of other letters patent, relating to submarine boats, malicious prosecution, and unfair competition, and are substantially alike. In connection with such counterclaims the defendant prays, inter alia, that the plaintiff be enjoined from infringing said letters patent; from unfairly competing with it in its business; for an accounting of the profits acquired by plaintiff; and the damages sufféred by defendant from the acts set out therein.
“The answer must state in short and simple form any counterclaim arising out of the transaction which is the subject-matter of the suit, and may, without cross-bill, set out any set-off or counterclaim against the plaintiff which might; be the subject of an independent suit in equity against him, and such set-off or counterclaim, so set up, shall have the same effect as a cross-suit, so as to enable the court to pronounce a final judgment in the same suit both on the original and cross-claims.”
The diverse interpretations referred to appear in the following cases: Terry Steam Turbine Co. v. B. F. Sturtevant Co. (D. C.) 204 Fed. 103 ; Adamson v. Shaler (D. C.) 208 Fed. 566; Klauder-Weldon Dyeing Machine Co. v. Giles (D. C.) 212 Fed. 452; Williams Patent Crusher Co. v. Kinsey Mfg. Co. (D. C.) 205 Fed. 375; Marconi Wireless Telegraph Co. v. National Electric Signaling Co. (D. C.) 206 Fed. 295; Salt’s Textile Mfg. Co. v. Tingue Mfg. Co. (D. C.) 208 Fed. 156; and Vacuum Cleaner Co. v. American Rotary Valve Co. (D. C.) 208 Fed 419. These were all suits in which the plaintiff sought to enjoin alleged infringements of patents and to obtain an accounting, etc. In the first three cases the courts struck out counterclaims seeking to enjoin alleged infringements of other patents, etc. In the fourth case the court struck out a counterclaim alleging unfair competition in trade, consisting of misrepresentation by complainant of its patent rights and the scope -thereof. In the other three cases the courts refused to strike out counterclaims setting up alleged infringement of patents, etc., and unfair business methods. The cases which denied the setting up of the counterclaims proceeded on the idea that only such matters as before the adoption of such rule could be set up by a cross-bill could be made the -subject of a counterclaim.
In the Turbine Case, the first of the reported cases dealing with this subject, the learned judge said that the main purpose of the permissive part of the rule was, “to dispense with cross-bills by requiring everything previously done by cross-bill to be thereafter done by answer only.” This, in my judgment, is so only as to the mandatory part of the rule, and, as to the permissive or optional part, the main purpose is to enable the defendant by answer to do precisely that which the plaintiff, by rule 26 (198 Fed. xxv, 115 C. C. A. xxv), may do in one bill, viz., “join * * * as many causes of action cognizable in equity as he may
Under the old system of pleading, a cross-bill was necessary to obtain for the defendant affirmative relief touching the matter of the original bill. A cross-bill, however, was not permitted unless it was based on or grew out of the subject-matter of the original bill.' It was treated as a mere auxiliary suit or as a dependency upon the original suit. Story’s Eq. PI. §§ 389, 399; Shipman’s Eq. PL §§ 210, 211; Morgan Co. v. Texas Central Ry. Co., 137 U. S. 171, 200, 11 Sup. Ct. 61, 34 L. Ed. 625; Harrison v. Perea, 168 U. S. 311, 320, 18 Sup. Ct. 129, 42 L. Ed. 478.; Stonemetz, etc., Co. v. Brown, etc., Co. (C. C.) 46 Fed. 851; New Departure Bell Co. v. Hardware Specialty Co. (C. C.) 62 Fed. 462; Weathersbee v. American, etc., Co. (C. C.) 77 Fed. 523; Springfield Milling Co. v. Barnard & Leas Mfg. Co., 81 Fed. 261, 26 C. C. A. 389; Hogg v. Hoag (C. C.) 107 Fed. 807; 16 Cyc. 331.
The “counterclaim arising out of the transaction which is the subject-matter of the suit,” and which, under the rule, must be set up in the answer, covers broadly stated, all matters which heretofore could have been pleaded by cross-bill. Therefore to limit the option given to the defendant to “set out any set-off or counterclaim against the plaintiff which might be the subject of an independent suit in equity against him’-’ to such claims as must be set up is to make the option fruitless. Marconi Wireless Telegraph Co. v. National E. S. Co. (D. C.) supra, 206 Fed. at page 302.
The distinction made in the rule between a “counterclaim arising out of the transaction” forming the basis of the original suit and one “which might be the subject of an independent suit,” brought by the defendant against the plaintiff, is the primary and influential distinction between what could be set up by a cross-bill and what could not. The provision that the claims arising out of such transaction must be set up in the answer is intended to put an end in .one suit to all the controversies that arise out of such subject-matter, legal (see rule 23-[198 Fed. xxiv, 115 C. C. A. xxiv], also new) or equitable; and the provision that the independent equitable causes of action may be so set up is intended to permit the defendant to litigate in the same suit.
Rule 26 (also a new rule) authorizes the plaintiff to “join in one bill as many causes of action cognizable in equity as he may have against the defendant,” aud a proper construction of rule 30 gives the defendant the same option; thus both parties are, in the matter of joining causes of action, placed on an equal footing. In the case of the plaintiff so joining, the court, by express authority contained in the concluding sentence of rule 26, is given discretion to order separate trials if it appears that sucli “causes cannot be conveniently disposed of together.” In case the joinder is the result of the defendant’s action, the court has a like discretion. Rule 30 declares that such counterclaim “shall have the same effect as a cross-suit,” aud by analogy, if not by necessary implication, the defendant in such cross-suit is to be treated as a plaintiff, and the joinder of different causes of action by him in one suit is subject to the court’s power of ordering separate trials if they “cannot be conveniently disposed of together.”
In Adamson v. Shaler, supra, the learned judge, following closely the view of the court in the Turbine Case, supra, advanced another thought which seemed to him to support their conclusions that only such counterclaims could he pleaded as formerly might have been introduced by cross-bill. He said (208 Fed. at page 568):
“If it, wore intended by rules 20 and 80 to enlarge the scope of equitable procedure by permitting answers to incorporate causes of action not related nor germane to the subject of the bill, then rule 31 [108 Fed. xxvii, 115 C. C. A. xxvii]. would naturally have the necessary provisions to enable a plaintiff to obtain such affirmative relief as, were the counterclaiming- defendant proceeding by original bill, the complainant could obtain, formerly by cross-bill, now by counterclaim. For example, in the case already referred to, a citizen of Illinois suing a citizen of Wisconsin upon a cause of action for foreclosure, the latter might, under the broad construction claimed for rule 30, set. up by counterclaim a cause of action for specific performance of a contract wholly unrelated to the subject-matter of the bill. Must the plaintiff, because of the limitations of rule 31 forego, for instance, his right to relief by way of reformation which he could formerly have asserted through cross-bill? Is there any way whereby a plaintiff through a ‘reply’ to such counterclaim can obtain affirmative relief? It would seem not; the effect of the rule is plainly to determine the point when and how an issue for trial upon the merits is created. Thus, if rule 30 be given the broad construction permitting a defendant in effect to file an original bill by way of counterclaim, we would have a system whereunder the defendant could answer fully all of complainant's original causes of action, but complainant, could in no event assert his right to affirmative relief upon a defendant’s original cause of action, set out by way of counterclaim.”
In my judgment, rule 30, whether read alone or in the light of the, ■other new rules, requires, subject to jurisdictional limitations to be presently considered, an interpretation permitting the defendant to set up against the plaintiff counterclaims unrelated to the transaction made 'the basis of the plaintiff’s bill, provided they “might be the subject •of an independent suit in equity against him.” Under such interpretation, the first ground of the present motion is untenable and the ■counterclaims must stand, unless incompetent for other reasons.
“That this defendant and Simon Lake, not a party to this suit, are now the iawful owners of said patents and inventions and all rights thereunder, and •have been continuously since prior to the infringement thereof by the plain•■tiff.”
In its brief, defendant asks leave to amend its answer in this particular to allege that it has an exclusive license from Simon Lake “for all government work”; and it contends that:
“Since that [government work] is the only work complained of in the bill of complaint,' and the only work complained of in these counterclaims, it will be seen that it is only the rights of the defendant (not the rights of Lake) which plaintiff, it is alleged, has invaded.”
The matter of the amendment, however, does not change the status of the defendant to maintain a suit to enjoin an infringement of such Lake patents. The license conveys no title to such patents, and the defendant is still only a part owner. True, by such license it secured additional rights as against the other part owner, but neither such rights nor such part ownership enables it to alone maintain a suit upon such patent against the present plaintiff.
“The general rule as to parties in chancery is that all ought to be made ■parties who are interested in the controversy, in order that there may be an end of litigation.” Williams v. Bankhead, 86 U. S. (19 Wall.) 563, 571 (22 L. Ed. 184).
In the present case, notwithstanding such license, it being exclusive •only as to a particular kind of work, the licensor has a vital interest in
As the right to counterclaim under the permissive provision of rule 30 depends upon the defendant’s right to bring an original suit against the plaintiff, and as all the necessary parties to maintain such suits on the Fake patents are not before the court, the counterclaims, so far as the Fake patents are concerned, are not maintainable in this proceeding, and must be struck out.
As to the third ground, that if the alleged malicious prosecution and unfair business dealings, is a cause of action, it is one between citizens of the same state, and not one arising under the Constitution or laws of the United States: The alleged malicious prosecutions, as set up, are but steps in the charge of unfair competition; and as the federal court’s jurisdiction over such causes of action depends upon diversity of citizenship (Ryder v. Holt, 128 U. S. 525, 9 Sup. Ct. 145, 32 L. Ed. 529; Elgin National Watch Co. v. Illinois Watch Case Co., 179 U. S. 665, 21 Sup. Ct. 270, 45 L. Ed. 365; Feschen & Sons v. Broderick & Bascom, 201 U. S. 166, 26 Sup. Ct. 425, 50 L. Ed. 710; Standard Paint Co. v. Trinidad Asphalt Mfg. Co., 220 U. S. 446, 31 Sup. Ct. 456, 55 L. Ed. 536), nonexistent in this suit, the counterclaims based on such unfair methods cannot stand unless they arise “out of the transaction which is the subject-matter of the suit.”
In the rule under consideration, the transaction “is the subject-matter of the suit,” and as the determination of what is the transaction in a given case may settle whether in such case the court has jurisdiction over such interposed cause of action, it is essential that no more be put into litigation under such mandatory provision of the rule than falls properly in the occurrences which make up such transaction. No rule of court is to be so read as to confer jurisdiction over causes not cognizable in the United States courts, and care must be taken that in the
As noted, the bills alleged infringement of certain patents. In such a suit, the defendant may interpose as a defense, not only any matter that would destroy the validity of the patents or the claims sued upon, but also that which estops the plaintiff from maintaining such suit. The defendant having the opportunity by strict answer to attack the plaintiff’s right to or the scope of his alleged monopoly, a right, it is to be observed, in no way depending upon any transaction with the defendant, the transaction referred to in the rule, so far as patent litigation is concerned, would seem to be limited to the occurrences that relate only to the alleged infringements. If the conduct of the plaintiff, other than that relating to the infringement, impinges upon the legal rights of the alleged infringer, while it is liable to an independent action for such conduct, it is not compelled to respond lo a counterclaim interposed to its suit for such infringement, for such a counterclaim docs not grow or arise out of the transaction which is the subject-matter of that suit.
Having ascertained the meaning to be given to the word “transaction” in tiie mandatory part of rule 30, and the test to be applied in determining whether a counterclaim can be entertained under such provision, I turn to the allegations of the answer concerning such counterclaims. In substance, they charge that the present suits, begun in the latter part of Í913, as well as cerLain other suits begun in the years 1902 and 1903, alleging infringement of other patents, and which were discontinued in the early part of 1913, without having been prosecuted or intended to have been prosecuted to a final conclusion, were malicious prosecutions, and parts of a scheme to injure defendant by preventing it from obtaining contracts for submarine boats, and from tier-forming contracts already obtained, and by preventing it from raising money to pay its obligations and obtain a proper working capital to carry on its business; that at the time such earlier suits were brought, and during their pendency, defendant was seeking to obtain contracts for the building and selling of boats to the United .Stales government; that such suits were brought and kept pending for the purpose of preventing defendant from obtaining such contracts; that by reason thereof, and the therein falsely asserted infringements, “falsely urged to the officials of the United States,” the defendant was prevented “from obtaining contracts or making sales”; that before the beginning of the earliest of such suits the plaintiff published, through the newspaper, its purpose to bring such suits, with the intent of prejudicing the public against the defendant, that its business might be injured; that it has since published numerous articles tending to injure defendant’s business, and has made unwarranted charges of infringement by defendant to various agents of the United States government, defendant’s only customer in this country, with the intent to prevent it from obtaining contracts from such government, and to injure its business ; that plaintiff has unlawfully caused limitations to be inserted in
None of the plaintiff’s patents cover a submarine boat in its entirety. Each relates to a special device designed to accomplish a particular function in a distinct operation or movement of a submarine vessel. The charge of infringement is not that the boat made and used by the defendant as a whole is an infringement, but that it embodies the inventions claimed in the respective patents. Assuming that such a cause of action, unfair competition, might find its origin in the transaction covered by such alleged infringement, it is evident that what the defendant has here alleged does not arise out of such transaction, but out of a series of acts embracing alleged infringements of other patents and covering many years of competition in the admittedly limited market for submarine boats.
The infringement suits pending between the parties prior to the institution of the present suits, as noted, were upon other patents. Each patent presents a separate legal right, and infringement of each patent separate and distinct transactions. Compared with the patents involved in the present suits, the transactions which were the subject-matter of the earlier suits were necessarily different. The business methods of the plaintiff which these counterclaims characterize as unfair, according to tire allegations of the counterclaims, began prior to the institution of the earliest of such prior suits, and were carried forward during their pendency, and the alleged injuries sustained by the defendant were, according to such allegations, the result of such unfair methods. The very theory of the pleader in these counterclaims is that the present suits are but subsequent steps in an already existing plan to unfairly compete with the defendant. Being such, they cannot be considered as malicious. Aside from the limitation of this mandatory provision of rule 30, it is manifest from the asserted facts that the alleged unfair competition is not an incident of the cause of action alleged in the plaintiff’s bill, and necessary to be decided to do complete justice between the parties as to that subject-matter, but that the al
The cases cited, and which furnish the main reliance of the defendant in support of such counterclaims, to wit, T. B. Woods Sons Co. v. Valley Iron Works (C. C.) 166 Fed. 770, and Onondaga Indian Wigwam Co. v. Ka-Noo-No Indian Mfg. Co. (C. C.) 182 Fed. 832; are not in point. In both these cases, the charges of unfair competition were joined in the bill alleging infringement, and were sustained on the ground that they were but different features or parts of the same transaction upon which the charge of infringement was based, and in fact but an aggravation of such infringement. In the case at bar, the charge of unfair competition made by the defendant is not connected with the alleged infringement of its patents, but arises out of a different transaction entirely, viz., the transaction which is the subject-matter of the plaintiff’s charge of infringement.
The counterclaims based on unfair competition, for the reasons given, must be struck out.
As to the fourth ground, viz., that such counterclaims are calculated to embarrass the trial of the action: It is sufficient to say that as but one counterclaim or charge of infringement based on the Peacock patent has survived the motion to strike, such ground is without merit.
In addition to striking out the counterclaims based on the Take patents and the charge of unfair competition, the prayers relating to such counterclaims must also be struck out.