Opinion
Civ. A. No. 747.
July 12, 1946.
Samuel E. Darby, Jr., of New York City, and E. Ennalls Berl (of Southerland, Berl Potter), of Wilmington Del., for plaintiff.
Walter H. Free (of Campbell, Brumbaugh Free), of New York City, and Arthur G. Connolly, of Wilmington, Del., for defendant.
Action by Zenith Radio Corporation against Dictograph Products Company, Inc., for a declaratory judgment of non-infringement and invalidity of a patent. On defendant's motion to restrain plaintiff from prosecuting the action or to dismiss the action.
Decision in accordance with opinion.
Plaintiff seeks declaratory judgment of non-infringement and invalidity of defendant's No. 2,258,638 and Reissue No. 22,658 covering improvements in bone conduction audiphones. The facts antecedent to the complaint show plaintiff, Zenith Radio Corporation, an Illinois corporation ("Radio"), has its plant in Chicago, where it manufactures "Zenith" products, e.g., radio receivers and hearing aids. Zenith Radionics Corporation, a New York corporation ("Radionics"), is a wholly owned subsidiary. Radionics operates solely in New York and New Jersey and distributes, to the exclusion of all others, Radio's products. Radionics makes no parts for the hearing aids; these are made in Chicago by Radio. All but one of the officers of Radionics are officers of Radio. All but two of Radionics' directors are directors of Radio. Radionics deals with Radio on an open account basis, but it maintains its own offices, warehouses and bank accounts; employs its own help; makes and files its own State and Federal tax returns; it reports, however, no separate financial statement and its profit and loss is merged with Radio's "Consolidated Income Account" as per Standard-Poors p. 6345.
Defendant, here, owner of the patents in suit, on September 24, 1945 instituted suit in the United States District Court for the Southern District of New York against Radionics, charging infringement "by selling or causing to be sold the inventions disclosed, described and claimed in said Letters Patent".
Plaintiff Radio states that defendant has elected to challenge the products manufactured by plaintiff by bringing suit against one of its customer-distributors — Radionics — although defendant knew plaintiff was the manufacturer of those products. Plaintiff thereupon on October 17, 1945 brought suit for declaratory judgment against validity and non-infringement of the two patents also challenged in the New York litigation.
Defendant states there are identical issues in both the New York and Delaware actions, i.e., (1) validity of No. 2,258,638 and Reissue No. 22,658 and (2) infringement of these patents by the manufacture and sale of the "Zenith" hearing aid devices. Defendant filed a motion to (1) restrain plaintiff from prosecuting the present action upon the ground the prior New York suit against Radionics is an action "between the same parties or their alter egos, and involving the identical issues"; or (2) to dismiss for lack of judicial controversy; or (3) to dismiss because the complaint fails to state a claim.
1. On the facts alleged in the complaint and if the allegations are proven, there can be no doubt a justiciable controversy exists and a claim for relief has been stated. The only point left is whether this action should be restrained. To crystallize the issues further, the issues of non-infringement and validity of defendant's patents directed at the "Zenith" hearing aids are the same in New York as here. But the question remains whether the present case and the New York case are between the same parties.
2. Ordinarily the court first acquiring jurisdiction of a controversy should proceed with it without interference. Crosley Corp v. Hazeltine Corp., 3 Cir., 122 F.2d 925, 930; Carbide Carbon Chemical Corp. v. United States Industrial Chemicals, Inc., 4 Cir., 140 F.2d 47, 49; American Automobile Ins. Co. v. Freundt, 7 Cir.; 103 F.2d 613, 617. Cf. Old Charter Distillery Co. v. Continental Distilling Corp., D.C. Del., 59 F. Supp. 528; Lockhart v. Mercer Tube Mfg. Co., D.C.Del., 53 F. Supp. 301. Here, difficulty is engendered by questions of res adjudicata. May it be said that a judgment found for or against defendant Radionics in the New York suit will be operative for or against plaintiff Radio here? While not a named party to the New York suit, if plaintiff Radio here will actually be in control of the New York litigation, will the New York judgment be binding on Radio? Cf. Caterpillar Tractor Co. v. International Harvester Co., 3 Cir., 120 F.2d 82, 84, 85, 139 A.L.R. 1, where it was already in the past tense that International had conducted the defense in an infringement suit against one of its dealers, had paid for the entire defense and through its patent department had furnished information and assembled evidence; and E.I. duPont de Nemours Co. v. Sylvania Industrial Corp., 4 Cir., 122 F.2d 400, 404, where, also in the past tense, although not a party to the first litigation, Sylvania's interest remained unabated and actually controlled the litigation as fully as if it had intervened.
3. To decide the questions just posed as to the effect of the New York judgment, is to decide the matter in vacuo, for there is no New York judgment, as yet, and hence no reason to decide the existence of plaintiff Radio's liability or absence of liability, for a New York decree against its wholly owned subsidiary Radionics. The New York court might find the patents in suit valid and infringed; I might think otherwise; or, the New York court might find the patents invalid and not infringed; I might, it is possible, find otherwise. On the present state of the record, there is not sufficient justification to make a prognosis that plaintiff here will actually control and direct the New York litigation. Plaintiff here, to afford itself a remedy, may or may not accept defendant's invitation to join the New York litigation. Awaiting further developments in the New York litigation, the present action will not be dismissed or restrained. If, however, circumstances develop so as to bring the matter within the facts of the Caterpillar Tractor Co. case, supra, defendant's motion may be renewed and the present action will be stayed until further order of the court, or until the New York proceeding terminates in a decree.