Petition for Writ of Certiorari — Pet, Inc. v. Kysor Industrial Corp.

AUG 15 1972

IN THE

Supreme Court of the United, Sietoooax JR.,CLERK

OCTOBER TERM, 1972 >=

—Te =2 5 3

PET INCORPORATED,

Petitioner,

v.

KYSOR INDUSTRIAL CORPORATION,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

DONALD E. DEGLING

Attorney for Petitioner

Fiso & NEAVE

277 Park Avenue

New York, New York 10017

Of Counsel:

Byron A. RocHE

12999 St. Charles Rock Road

Bridgeton, Missouri 63042

PETER ARMSTRONG

Varnum, Riddering, Wierengo

& CHRISTENSON

600 Old Kent Building

Grand Rapids, Michigan 49502

RicHarp G. HEywoop

Haverstock & Heywood

611 Olive Street

St. Louis, Missouri 63101

Lars I. KULLESEID

Fish & Neave

277 Park Avenue

New York, New York 10017

August 15, 1972

oz

et

SOTERA ORIG

ee TE a itil

TABLE OF CONTENTS

Opherbems Take ...... 2 ccc cccsccccsccccccccesocess

EL cccccedabensndneséckeceeeedasckenesens

Question Presented ...........ccccccccccccccsece

Eo ckcncebvedetee bkeciese cers aenene

EE Gr GP SIND cccncccewccceccccenesesesoe

Reasons for Granting the Writ ................44.

The Decision of the Court of Appeals Improp-

erly Restricts the Federal Courts in Determin-

ing Their Jurisdiction Under the Removal

Statute; the Decision is in Conflict with Deci-

sions of This and Other Courts .............

DT istckahscereateniedensnsenccubenedues

Appendix

Opinion of District Court (Sept. 1, 1971) ......

Appendix to District Court Opinion ..........

DE chibseleracsinesdecacetvecsivee

PEED vcdnvudcecesnecenadsescccesas

Opinion of the Court of Appeals (May 5, 1972)..

Order of the Court of Appeals (July 18, 1972) ..

TABLE OF AUTHORITIES

CASES

Blease v. Safety Transit Co., 50 F. 2d 852 (4 Cir.

i Ch eeicbetnbediekedtensabekes éeweis

Dole Refrigerating Co. v. Kold-Hold Mfg. Co., 185

ee PG BND bekebcccccvessdecscdesen

a oe BE MEPS OD RIOD LA

ii

PAGE

Downey v. Geary-Wright Tobacco Co., 39 F. Supp.

BE Ae SCENE nb db caecdcadensccceceniees 8

Eddy v. Prudence Bonds Corporation, 165 F. 2d 157

(2 Cir. 1947), cert. denied 333 U. S. 845 (1948) ... 6

Great Northern Ry. v. Delmar Co., 283 U. S. 686

EE ai ba MUbALERSEASKESbNnecesuncneadueens 6

BE: TOE eve ddsecndenesceverstenssedecesesss 8

Kolkin v. Gotham Sportswear, 10 F. Supp. 682 (S. D.

De Uh CEE Hdd sckdbskkdeeckseuesnecdnsaencaees 8

Lambert Co. v. Balt. Ohio R. R. Co., 258 U. S. 377

DEE ch. cebdenscacecndennakaoesnedeensesewens 8,9

Lear, Inc. v. Adkins, 395 U.S. 653 (1969) .......... 6

Lewis v. Pennington, 400 F. 2d 806 (6 Cir. 1968), cert.

denied 393 U.S. 983 (1968) ........ccccccccccece 6

Massillon-Cleveland-Akron S. Co. v. Golden State

Adv. Co., 444 F. 2d 425 (9 Cir. 1971), cert. denied

ee NEE Sccccdeuesccoccnnecesnseces 6

O’Brien v. Goldman Sachs Trading Corp., Trade

Cases (CCH) [1932-1939], § 55,014, page 55 (S. D.

By es EE OAs heh eadabenkdeccessedenssadeceee 8

Perry Coal Company v. N. L. R. B., 284 F.2d 910 (7

SL EE oc hind bakin ent eeb be Abaedas skencacius 6

Pocahontas Term Corp. v. Portland Bldg. & Const.

Tr. Co., 93 F. Supp. 217 (D. Maine 1950) ......... 8

Produce Terminal Realty Corp. v. New York, N. H.

é H. R. Co., 116 F. Supp. 451 (D. Mass. 1953) .... 8,9

Prospect Dairy, Inc. v. Dellwood Dairy Co., 237 F.

§. i eS ee rrr

ili

PAGE

S. E. Overton Co. v. International Brotherhood, Etc.,

115 F. Supp. 764 (W..D. Mich. 1953) ............ 8

Scapa Dryers, Inc. v. Abney Mills, 269 F. 2d 6 (5 Cir.

RRR Mes Aen aa iC 6

Sylgab Steel € Wire Corp. v. Strickland Transporta-

tion Co., 270 F. Supp. 264 (E. D. N. Y. 1967) ..... 8,9

OTHER AUTHORITIES

Se as ED oi cdc dacdeucecuddacsckicccace

ee SID kina nina ddueesdcduadawuseeanc.

Pee ee EE ccnnunebkacedenacceawexeaGenc

Corbin on Contracts, § 546, page 170, Vol. 3 (1960

DD Titkisebneesmavinihiinusednecensaskeedene 6

——

IN THE

Supreme Court of the United States

OCTOBER TERM, 1972

Per INcORPORATED,

Petitioner,

Vv.

Kysor INDUSTRIAL CORPORATION,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Petitioner, Pet Incorporated (‘‘Pet’’), prays that a

writ of certiorari issue to review the judgment of the United

State Court of Appeals for the Sixth Circuit in this action

brought by Kysor Industrial Corporation (‘‘Kysor’’) in

the Circuit Court of Wexford County, Michigan. The judg-

ment of the Court of Appeals reversed the district court’s

determination that the case is within the original jurisdic-

tion of the federal courts and remanded the case to the state

court.

Opinions Below

The opinion of the Court of Appeals is reported at 459

F. 2d 1010 and at 173 U.S. P. Q. 642. It is printed in peti-

tioner’s Appendix at pp. 21a-23a. The order of the Court

of Appeals denying Petitioner’s Petition for Rehearing is

printed in the Appendix at p. 24a.

The opinion of the District Court is not reported. It

appears in petitioner’s Appendix at pp. la-12a.

Jurisdiction

The judgment of the Court of Appeals was entered on

May 5, 1972. The order denying the Petition for Rehearing

was entered on July 18, 1972. The jurisdiction of this Court

a ee rm SIRS ERENY, BORG AERA OES MARRY EE ETI S

2

is invoked under 28 U.S. C. § 1254(1). The District Court

based its jurisdiction on 28 U.S. C. §§ 1441(b) and 1338(a).

Question Presented

In determining whether an action brought in the state

courts for alleged breach of an agreement is one ‘‘of which

the district courts have original jurisdiction’’ under the

removal statute, 28 U. S. C. §1441(b), must the federal

court be governed by the plaintiff’s assertions as to the

nature of the cause of action, as was the Court of Appeals

in this case, or should the federal court evaluate the facts

pleaded, including interpreting the agreement made a part

of the complaint, to determine the nature of the cause of

action, as did the District Court in this case?

Statute Involved

28 U. S. C. § 1441 provides in pertinent part:

‘*§ 1441. Actions removable generally

« * ad

‘*(b) Any civil action of which the district courts

have original jurisdiction founded on a claim or rigkt

arising under the Constitution, treaties or laws of

the United States shall be removable without regard

to the citizenship or residence of the parties.’’

Statement of the Case

This action for an alleged breach of a 1965 agreement

was commenced by Kysor in the Michigan state courts.

The agreement (App. pp. 15a-20a), which was attached

to and made part of the complaint, is between Dual Jet

Refrigeration Co. (now a division of respondent Kysor)

and Hussmann Refrigerator Co. (now a subsidiary of peti-

tioner Pet). Dual Jet and Hussmann both manufacture

refrigerated display cases for the sale of food products in

supermarkets.

ee

3

In the 1965 agreement the display cases manufactured

by Dual Jet were characterized by a circulation of low-

temperature air around the product area so that cooling

was accomplished by conductive heat exchange only, a

system knewn as ‘‘indirect’’ cooling. The Hussmann dis-

play cases were characterized by a system in which a portion

of the low-temperature air was circulated directly into the

product area while the remainder of the low-temperature

air was circulated around the product area. In short, the

Dual Jet display case involved ‘‘indirect’’ cooling of the

product, whereas Hussmann, in addition to ‘‘indirect’’ cool-

ing, used at least some ‘‘direct”’ cooling.

While both Hussmann and Dual Jet owned patents

covering various aspects of refrigerated display case tech-

nology, neither Hussmann nor Dual Jet owned patents

covering their respective systems of air circulation.

The 1965 agreement was entered into in settlement of

cross claims of patent infringement and the ‘‘covenants”’

granted each party an immunity against suit for patent

infringement so long as each party continued to manu-

facture display cases incorporating the type of cooling sys-

tem then in use by that party (App. pp. 18a-19a),

In 1971 Pet (‘‘Hussmann’’) changed from its former

cooling system and began manufacturing and selling display

cases using an ‘‘indirect’’ cooling system only. Kysor then

brought this action in the Michigan state courts alleging

that Pet had agreed not to manufacture display cases

using only the ‘‘indirect’’ ccoling system and that Pet’s

manufacture of such display cases constituted a breach of

the 1965 agreement. Kysor seeks damages and an injunc-

tion.

Pet removed the case to the United States district court

on the theory that on the allegations of the complaint, the

only cause of action available to Kysor was one for patent

infringement under the federal patent laws. Kysor’s motion

to remand the case to the state court was denied by the

OTOL. SOLITARY SERS IM MEP NL NY EID

TR re ee

4

District Court (App. p. lla). The Court of Appeals re-

versed, ordering the case to be remanded to the Wexford

Circuit Court (App. p. 23a).

Jurisdiction Under the Removal Statute; the

is in Conflict with Decisions of This and Other Courts.

The District Court, after thoroughly reviewing the com-

plaint and the appended agreement, found that the agree-

ment contained no covenant by Hussmann not to make a

display unit with a different type of cooling from that used

by it at the time of the agreement. The court found that the

parties expressly covenanted not to sue one another for

patent infringement so long as the cooling system used by

the other was unchanged, and that under the agreement, if

Pet should change its form of cooling system, Kysor had

retained only its right to sue for patent infringement. The

District Court said:

‘*. . . the contract specifically contemplates that each

party is free to commence an action for infringement

of its patents by the other in any other use than that

permitted in the contract and that is precisely what

plaintiff is doing here in every particular.’’ (App.

p. 10a)*

The court concluded that the true nature of the dispute

between the parties arose under the federal patent laws,

* The agreement states (App. p. 19a) :

“IV. GENERAL PROVISIONS

“‘1. This Agreement does not in any way prevent Dua

Jer from bringing suit against Hussmann. its subsidiaries,

licensees or sublicensees, in the event that any Duat Jet

patent rights are embodied in units other than the Hussmann

unit as herein defined.

**2. This Agreement does not in any way prevent Huss-

MANN from bringing suit against Dua Jet, its subsidiaries,

licensees or sublicensees in the event that any Hussmann

patent rights are embodied in units other than the Dua Jet

unit as hereih defined.’’

5

and that the cause of action being asserted by Kysor was for

patent infringement, a claim within the original—and ex-

clusive—jurisdiction of the federal courts. The District

Court said:

“*The basic right therefore asserted yp Bp to is

pr t based on federal law which is

acture exclusively a unit to which leintitt

claims patent rights. has to be the gravamen

of the action regardless of the characterization which

plaintiff may have endeavored to give it in the com-

plaint.’’ (App. p. 9a)

Kysor, in support of its position that it has a cause of

action for breach of contract, relied on language contained

in the section of the agreement devoted to definitions (App.

pp. 16a-18a) and not in the portion setting forth covenants.*

* The agreement states:

“I. DEFINITIONS

a * HussMANN unit: As used herein, the term “Huss-

the product area and in direct contact with the product

therein for cooling

the

maining portion of low tem temperature air into an air curtain

pg ag, ewe utilizing essentially only indirect prod

cooling.’’ (App. pp. 16a-17a).

———— ” -

The District Court determined that, when read in con-

text, the language pointed to by Kysor was not intended as

a covenant and did not give rise to a cause of action

for breach of contract (App. pp. 7a-8a).

The circumstance that Kysor’s asserted interpretation

of the agreement would make the agreement a clear viola-

tion of the anti-trust laws, e.g. Dole Refrigerating Co. v.

Kold-Hold Mfg. Co., 185 F. 2d 809 (6 Cir. 1950), and wholly

inconsistent with the federal policy favoring unhindered

commerce and full and free use of ideas, absent valid patent

rights, e.g. Massillon-Cleveland-Akron S. Co. v. Golden

State Adv. Co., 444 F. 2d 425, 428 (9 Cir. 1971), cert. denied

404 U. S. 873 (1971); Lear, Inc. v. Adkins, 395 U. 8. 653

(1969), was invoked by the District Court as confirmation

of the fact that its interpretation of the agreement was

correct (App. pp. 8a-9a). This was pursuant to the well

established doctrine that where, as here, a contract is sub-

ject to two different interpretations, one of which renders it

legal and the other of which renders it illegal, then the legal

interpretation should be adopted. Great Northern Ry. v.

Delmar Co., 283 U. S. 686, 691 (1931) ; Lewis v. Pennington,

400 F. 2d 806, 814-815 (6 Cir. 1968), cert. denied 393 U. 8.

983 (1968): Perry Coal Company v. N. L. R. B., 284 F. 2d

910, 914 (7 Cir. 1960); Scapa Dryers, Inc. v. Abney Mills,

269 F. 2d 6, 14 (5 Cir. 1959) ; Eddy v. Prudence Bonds Cor-

poration, 165 F. 2d 157, 161 (2 Cir. 1947), cert. denied 323

U. S. 845 (1948) ; Corbin on Contracts, § 546, pages 170-171,

Vol. 3 (1960 Ed.).

7

patent walidity and infringement and thus is exclu-

sively within federal jurisdiction under 28 U. S. C.

§ 1338(m).”’

And further:

**Kysor elected to assert only contract rights in State

Court. Pet may not, by asserting that Kysor’s only

valid emuse of action is by way of suit for patent

infringement, convert this action into one arising

under the patent laws of the United States.’’ (Em-

phasis im original) (App. p. 23a)

The opiniom of the Court of Appeals reflects a misunder-

standing of the basis of the District Court’s decision deny-

ing the motion to remand and of Pet’s contentions.

The Districtt Court recognized, as does Pet, that the fact

that federal issues may be raised by way of defense provides

no basis for removal to the federal courts of any cause of

action cognizable by the state courts ; and further that where

a plaintiff has claims arising under both state and federal

law, he may ellect to pursue the state court claim. Thus,

contrary to the statement in the opinion of the Court of

Appeals, neither the District Court, nor Pet has suggested

that this ease was removable from the state court merely

because a defemse based on the federal anti-trust laws could

be asserted against Kysor’s alleged cause of action for

breach of contract.

The jurisdictional theory underlying the District Court’s

decision is that the 1965 agreement between Kysor and Pet,

made a part of Kysor’s complaint in the state court, gives

rise to no state cause of action whatsoever, but reserves to

Kysor only the right to bring an action for patent infringe-

ment against Pet for conduct outside the immunity granted

by the agreement and that this was the right asserted by

the complaint (App. p. 9a).

As the professed basis for its decision the Court of

Appeals states that ‘‘Kysor elected to assert only contract

rights in State court’’ (App. p. 23a). This acceptance of

Kysor’s assertion as to the nature of its cause of action,

without analyzing the facts set forth in the complaint and

the agreement appended thereto to determine whether they

really give rise to such a cause of action, is wrong and incon-

sistent with decisions of this Court and other courts. If the

basic right underlying the plaintiff’s complaint arises under

federal law, then removal is proper because it is the real

nature of the claim rather than plaintiff’s characteriza-

tion of it that governs, Lambert Co. v. Balt. & Ohio R.R.

Co., 258 U. S. 377, 382 (1922); Blease v. Safety Transit Co.,

50 F. 2d 852 (4 Cir. 1931); Sylgab Steel & Wire Corp. v.

Strickland Transportation Co., 270 F. Supp. 264 (E. D.N. Y.

1967); Prospect Dairy, Inc. v. Dellwood Dairy Co., 237

F. Supp. 176 (N. D. N. Y. 1964); Produce Terminal Realty

Corp. v. New York, N. H. & H. R. Co., 116 F. Supp. 451

(D. Mass. 1953) ; S. E. Overton Co. v. International Brother-

hood, Etc., 115 F. Supp. 764 (W. D. Mich. 1953) ; Pocahontas

Term. Corp. v. Portland Bldg. & Const. Tr. C., 93 F. Supp.

217 (D. Maine 1950); Downey v. Geary-Wright Tobacco

Co., 39 F. Supp. 33 (E. D. Ky. 1941); Kolkin v. Gotham

Sportswear, 10 F. Supp. 682 (S. D. N. Y. 1935) ; O’Brien v.

Goldman Sachs Trading Corp., Trade Cases (CCH) [1932-

1939], par. 55,014, page 55 (S. D. N. Y. 1932); Hall v.

Chicago, R. I. é P. Ry. Co., 149 Fed. 564 (N. D. Iowa 1906).

The fact that Kysor states in its complaint, and insists

in argument, that it has a cause of action for breach of

contract, cannot give it one, when the agreement made part

of that complaint, when properly construed, gives Kysor

only a federal cause of action. As Justice Brandeis said in

Lambert Co. v. Balt. d Ohio R.R. Co., supra (258 U. S. at

383) :

‘**For, while it is true that a plaintiff by his first

pleading determines what right he will sue on and

that defenses, set up either anticipatorily by him or

in due course by the defendant, can not affect the

jurisdiction when it —— on that right, yet the

plaintiff may not, by alleging a frivolous claim or a

fictitious situation, confer upon a court jurisdiction

which, as determined by plaintiff’s real cause of

action, it has not.’’ (emphasis ed)*

Other federal courts have applied this rule to actions,

like this one, originally brought in the state court for breach

of contract, and have determined after reviewing the com-

plaint and the agreement between the parties that the under-

lying cause of action was not for breach of contract but was

one arising under federal law and subject to original federal

jurisdiction. Produce Terminal Realty Corp. v. New York,

N. H. @ H. R. Co., supra; Sylgab Steel & Wire Corp. v.

Strickland Transportation Co., supra.**

In the Produce Terminal case the terminal and the rail-

road had a contract relating to facilities to be provided by

the railroad. The terminal brought an action in the state

court for specific performance of the contract and an injunc-

tion against further violation of the contract. After removal

by the railroad on the ground that the claim arose under

federal law, i.e., the Interstate Commerce Act, the court in

refusing to remand the action interpreted the contract al-

leged in the complaint and stated:

“It is defendant's contention that the service

which plaintiff seeks to obtain by its action is an

undue and unreasonable preference or advantage to

* Although the District Court decided correctly that the cause of

action asserted by Kysor falls within the original jurisdiction of the

Co. v. Balt. & Ohio R.R. Co., supra (258 U.S. at 382-383). Accord-

ing to Lambert the jurisdiction of the federal court on removal

is derivative and if ‘‘the state court lacks jurisdiction of the subject-

matter or of the parties, the federal court acquires none.’’ Thus,

** The Court of Appeals did not discuss these cases, and neither

in the Court of Appeals, nor in the District Court, has Kysor at-

tempted to distinguish them.

EE ee ee

10

a particular customer under §3(1) of the Act, and

that the contract previously mentioned, if given the

interpretation for which plaintiff contends, is illegal.

... The —— pe says plaintiff, simply sets

forth the making of a contract, its breach by defend-

ant, and fraud by defendant inducing plaintiff to

enter into the transaction, and asks for specific en-

foreement of the contract, an injunction against fur-

ther violation and damages. No question of federal

law appears in this, plaintiff contends, and there is

no question of federal law involved until defendant

sets up the alleged illegality of the contract and

brings in the Interstate Commerce Act as a matter of

affirmative defense. (p. 453)

“It is true that the complaint says nothing about

the Act and sets forth only the contract between the

parties as the basis of the rights which it seeks to

enforce. This cannot change the essential nature of

the action. In the Interstate Commerce Act Congress

a provided x Sates aaa —

termining the es ights and duties of ship-

pers and carriers. If the rights which plaintiff claims

under its contract are only those given by the Act,

the contract adds nothing to them, and the mere fact

that the parties have spelled out these rights in a

private contract does not change the fact that they

P

New York,

45 A. L. R.

**Here the basis of federal law is in the case from

the beginning, since the facts which plaintiff alleges

in what purports to be an action to enforce a con-

tract are also the facts which would constitute a

cause of action under the Interstate Commerce Act,

and what plaintiff asserts as a contract right is bas-

ically a right arising under that Act.’’ (p. 454)

ll

Conclusion

The decision of the Court of Appeals below is in conflict

with decisions of this Court and of other courts, and im-

properly restricts federal courts in determining their juris-

diction under the removal statute. Certiorari should be

granted to resolve this conflict in an important area of

federal jurisdiction.

Respectfully submitted,

Donan E. Decuixe

Attorney for Petitioner

Fish & Neave

277 Park Avenue

New York, New York 10017

Tel.: 212-826-1050

Of Counsel:

Byron A. Rocue

12999 St. Charles Rock Road

Bridgeton, Missouri 63042

Peter ARMSTRONG

Varnum, Riddering, Wierengo & Christenson

600 Old Kent Building

Grand Rapids, Michigan 49502

Ricuarp G. Heywoop

Haverstock & Heywood

611 Olive Street

St. Louis, Missouri 63101

Lars I. Kuniesew

Fish & Neave

277 Park Avenue

New York, New York 10017

ee . -— -

APPENDIX

Opinion of District Court

UNITED STATES DISTRICT COURT

For tHe Western District or Micuican—

Souruegn Drvision—Granp Rapms

File G-162-71 CA 7

Kysor Inpustru. Corporation,

a Delaware corporation,

Plaintiff,

v.

Per Incorporate,

a Delaware corporation,

- Defendant.

Plaintiff Kysor Industrial Corporation, herein called

Kysor, on June 16, 197 1, commenced an action against Pet,

Incorporated, herein called Pet, in the Circuit Court for

Wexford County, Michigan, seeking injunctive relief and

damages for the alleged breach by Pet of an agreement

which had been entered into April 5, 1965, between plain-

tiff’s predecessor Dual Jet Refrigeration Company, herein

called Dual Jet, and defendant’s predecessor Hussmann

Refrigerator Company, herein called Hussmann. Plaintiff

incorporated therein a copy of that agreement and because

it is essential to the consideration of the issues here, a copy

is likewise attached as an appendix to this opinion along

with a copy of the complaint filed in the state court.

The gist of the plaintiff’s complaint in the state court is

that under the contract of April 5, 1965, Dual Jet and

Hussmann had reached an agreement in settlement of

several mutually asserted 1965 infringement claims which

each had made against the other arising out of the pro-

a eee

eae

2a

Opinion of District Court

duction and marketing by each of certain cooling systems

in refrigeration units. In settlement of these mutual claims,

the agreement was drafted so as to permit each company

to continue to manufacture the unit which it was then

producing and to that extent each covenanted not to sue

the other for any claimed infringement of patent rights

by reasons of the embodiment in the particular unit then

being produced. The parties encountered acknowledged

difficulty in defining the then existing units and the differ-

ences between them under that portion of the agreement

entitled ‘‘Definition’’ each of the two units was described

and in the descriptive paragraph pertaining to each, there

was contained the provision that it was understood that

each would not depart from its present engineering and

manufacturing knowhow in the direction of the unit then

being manufactured by the other.

Plaintiff’s complaint alleges that in the early part of

1971 defendant, in violation of the agreement, had changed

over to a cooling method which was employed by the plain-

tiff and had continuously since that time maufactured,

sold and distributed refrigeration units and cases manu-

factured in direct contravention to the agreement. Plain-

tiff alleged irreparable harm and damage by reason of

the defendant’s violation of the agreement and for relief

sought from the state court interlocutory and permanent

injunctive orders and damages. Upon application, the

circuit court for the County of Wexford had issued an

order to the defendant to show cause in that court on July

13, 1971, why the interlocutory injunctive relief should not

be granted as prayed, pending further proceedings in the

case. On July 8, 1971, defendant filed its petition for re-

moval in this court which automatically removed the case

from the jurisdiction of the Wexford County Circuit Court.

Defendant’s petition for removal was based upon the claim

of original and exclusive jurisdiction in United States Dis-

trict Courts on subject matter of the law suit under 28

USCA § 1338.

3a

Opinion of District Court

Plaintiff immediately filed in this court on J uly 9, 1971,

its motion to remand and because of the allegation of the

plaintiff that an immediate hearing was essential, in order

to avoid irreparable injury which would occur if the sched-

uled show cause hearing could not proceed on July 13, this

court granted an immediate hearing on the motion on the

same day.

Because the issues presented by the motion to remand

presented substantial issues and meritorious issues of the

law which were not capable of immediate decision, the case

was taken under advisement and briefs submitted.

The issue thus framed is whether or not from the com-

plainant’s statement of its own cause of action as set forth

in the complaint and regardless of federal questions which

might be interposed by the defense, there exists in the

complaint a case arising under the patent laws of the

United States which is exclusively within the jurisdiction

of the Federal courts or as contended by plaintiff, the

complaint pleads a cause of action for contract cognizable

only under state law and by state courts, there being ab-

sent any allegation of diversity of citizenship or any other

basis from which exclusive federal jurisdiction can be made

out.

The court agrees with the claim of plaintiff that the

question of original jurisdiction in the federal courts must

be presented in the plaintiff’s own statement of his case

and, Tennessee v. Union and Planters Bank, 152 US 454,

that generally the plaintiff has the right to decide in pur-

suing his own cause of action upon what law he will rely,

being free to commence his action in state court under

state law and to ignore any rights he might have otherwise

under federal law. The Fair v. Kohler Die & Specialty

Co., 228 US 22; Bell v. H ood, 327 US 678. Corollary to this

is the well accepted rule that the question of defense, based

upon federal law, do not give rights to the right of re-

moval to the federal court, the recourse being by appeal

to the Supreme Court of the United States if the decisions

_ —

4a

Opinion of District Court

of the state courts have not properly recognized and applied

the federal defense. The exclusive jurisdiction of this court

urged by defendant is conferred under Title 28 USCA Sec-

tion 1338(a) and (b) which reads as follows:

‘**(a) The district courts shall have original juris-

diction of any civil action arising under any Act of

Congress relating to patents, copyrights and trade-

marks. Such jurisdiction shall be exclusive of the

courts of the states in patent and copyright cases.

‘*(b) The district courts shall have original juris-

diction of any civil action asserting a claim of un-

fair competition when joined with a substantial and

related claim under the copyright, patent or trade-

mark laws.’’

The court cites with approval the quotations commenc-

ing at page 17 of defendant’s brief from Produce Terminal

Realty Corp. v. New York, N. H. & H. R. Co., 116 F Supp

451 (D. Mass. 1953).

‘There is no dispute as to the general rule of law

governing the decision here. The question of whether

this action is removable as one involving a federal

question depends upon whether the cause of action

set forth by plaintiff is one arising under federal

law. Jurisdiction is not conferred by the fact that

defendant may rely upon federal law as a matter of

defense. The question must be decided on the basis

of what appears in the complaint well pleaded, un-

aided by anything in the answer or petition for re-

moval. Gully v. First National Bank in Meridian,

299 US 109, 57 S Ct 96, 81 L Ed 70; Great Northern

Railway Co. v. Alexander, 246 US 276, 38 S Ct 237,

62 L Ed 713.

‘‘The decision must rest, however, on the facts set

forth in the complaint. If the basic right asserted

5a

Opinion of District Court

is one based on federal law, then the case is properly

here, whether or not the complaint expressly states

that the right sought to be enforced is a federal one.

It is the real nature of the claim and not the charac-

terization given it by plaintiff which must govern.

Strauss v. Schweizerische Kreditanstalt, D. C., 45 F

Supp 449, 450.

‘‘The gravamen of plaintiff’s complaint here is

that defendant has failed to provide plaintiff and its

licensees with adequate facilities for the handling of

its traffic in fruits and vegetables. The relief sought

is to compel the defendant railroad to ‘provide track

facilities for the track cars of the plaintiff’s licensees

for the adequate, prompt and convenient delivery of

their traffic.’ These facilities are clearly a service

included within the transportation of goods in inter-

state commerce which defendant is required by

§1(4) of the Act to furnish upon reasonable request.

Nutile Fruit Co. v. Boston & Maine Railroad, 155

I.C.C. 221. The complaint thus asserts a right aris-

ing under the Act.’’

See also S. E. Overton Company v. International Broth-

erhood, Etc., 115 F Supp 764, decided by the Hon. Raymond

Starr in this District in 1953.

The court has carefully considered the authorities cited

by the plaintiff in opposition to the motion to remand to

the effect that while federal courts have jurisdiction over

all cases arising under the patent laws, they do not have

exclusive jurisdiction of questions in which a patent may

be the subject matter of the controversy. Thus, in Cincin-

nati Shoe Co. v. Vigorith, 212 F 2d, 583, the United States

Court of Appeals for the Sixth Circuit, held that state

courts have jurisdiction to try the questions of title to

existing patents and jurisdiction upon federal courts is not

conferred by reason of the Declaratory Judgments Act,

28 USCA 2201, et seq. In a divided opinion, this Circuit

PRAM ie SANS A PAELLA LOT MOAN

a PERRET LN are ee se tee SPT CER es re ey aaa

6a

Opinion of District Court

held in Muskegon Piston Ring Co. v. Olsen, 307 F 2d 85 that

the state court rather than the federal district court prop-

erly had original jurisdiction over an action in which

plaintiff patent owner sought declaratory relief against

defendant Olsen who, it claimed, had ‘‘engaged in a course

of unfair competition with plaintiff consisting of disparage-

ment of plaintiff’s right to make and sell piston rings em-

bodying the invention disclosed in plaintiff’s patent, libel

and slander of plaintiff’s title to its patent, threats against

plaintiff ’s customers of liability in large amount for buying

and using rings embodying the disclosure of plaintiff's

patent, and interference with plaintiff’s right to license its

patent and otherwise to enjoy the lawful rights and benefits

of its patent’’.

In that case the court found that the defendant had not

manufactured the patented article nor had it at that time

become an infringer of the plaintiff’s patent. Prior to that

event plaintiff would not have been entitled to bring a patent

infringement case nor could the defendant have himself

have sought federal relief under the Declaratory Judgment

Act since Mr. Olsen could not have federal right of action

against plaintiff until a patent was issued to him and no

damages would accrue to him prior to the issuance of a

patent. ‘‘It follows that if the defendant Olsen does not

have a potential claim against Muskegon, the plaintiff here

as a potential defendant, upon which he can sue in the

federal court, no controversy under the patent laws exists,

upon which Muskegon can bring an action for Declaratory

Judgment in the federal court.’’ Muskegon Piston Ring v.

Olsen, supra, at page 89.

Likewise, the court has reviewed and considered both

Lear Corp. v. Adkins, 395 US 653 (1969) and Lear Siegler,

Inc. v. Adkins, 330 F 2d 595 (9th Cir. 1964) which will be

discussed later, but which initially at least in the contro-

versies before the state court involved an action for royal-

ties under a contract entered into between the parties.

7a

Opinion of District Court

Finding as it does that the question of exclusive federal

jurisdiction must be decided upon the complaint and agree-

ment attendant thereto, the court does not consider the

exhibits attached to defendant's brief and properly objected

to by the plaintiff. It has, however, in addition to the brief,

considered the further comment made by plaintiff in the

letter of its counsel dated July 29, 1971.

Neither has the court considered any additional facts

and claims asserted in the petition for removal which are

not contained in the plaintiff’s complaint. See Gully v. First

fational Bank of Meridian, 229 US 109 (1936); Great

Northern R R Co. v. Alexander, 246 US 276 (1918).

With the foregoing in mind, what is the real nature of

the claim asserted in plaintiff’s complaint? It is true that

nowhere does it specifically allege an infringement of its

patent rights by defendant, nor does it specifically invoke

federal law as a basis for its cause of action and relief

sought. This alone is not controlling, Downey v. Geary-

Wright Tobacco Co., 39 F Supp 33 (E D Ky 1941), (see

eases cited page 17 of defendant’s brief), for as acknowl-

edged by the plaintiff, it cannot defeat federal jurisdiction

by subterfuge or fraud and it is the essential character of

his claim that controls no matter how it might be disguised.

If the rights plaintiff claims are only those given by federal

law, then the contract means nothing and federal jurisdic-

tion will not be defeated thereby, (page 4 plaintiff’s brief).

Recourse must therefore be had to the contract itself to

determine whether the plaintiff’s action thereon is legiti-

mate or is merely a strategem to avoid what otherwise is

properly exclusive federal jurisdiction.

If the matter were simply construction of an enforce-

able contract with the question of patent rights and in-

fringement collateral thereto, plaintiff’s position would be

correct. On its face, the complaint purports merely to seek

the enforcement of one of its terms. Specifically, it secks

the enforcement by the court of that portion of the agree-

= dicate

hs

8a

Opinion of District Court

ment which appears in the definition of the Hussmann unit

at pages two and three of the agreement. If this were

merely a question of construing the contract and an ambi-

guity therein as to whether the undertakings of that par-

ticular provision gave Dual Jet a cause of action against

Hussmann for departing from its then-present engineering

and manufacturing know-how in the direction of the Dual

Jet unit, then the decision of the trial court would be merely

to ascertain whether or not this was intended to be a specific

covenant of Hussmann even though not within its covenants

under Section II or Section IV of the contract. Such a

decision, in the opinion of this court, would be a matter for

the state court. If, therefore, the provisions of the defini-

tion of the Dual Jet unit were to be determined as not giving

rights to any cause of action, that would end the matter.

If, on the other hand, construed in the light most favorable

to the plaintiff, that provision were determined to entitle

plaintiff to maintain an action, the question must then be

what the nature of that action is.

It is obvious to anyone examining the contract that its

principal thrust was an agreement not to sue for any in-

fringement of one’s patent by the then existing production

of a known and defined unit. It is equally true from the

allegations of the complaint that this issue is not involved

here for Kysor does not seek to use the covenants of the

contract to defeat a patent infringement action by Pet aris-

ing out of production of the Dual Jet unit as described in

the contract. What Kysor clearly alleges and seeks redress

for is the alleged unlawful manufacture by Pet of its own

Dual Jet unit and it seeks the protection of the contract and

undertakings of Hussmann that it would not do so. Such

agreements, absent the existence of valid patent rights, are

void under federal law and upon their face. Massillon-

Cleveland-Akron Co. v. Golden State Advertising Co., Inc.

444 F 2d 425 (9th Cir. June 8, 1971). (P.T.C.J. June 24,

1971, page D-1).

9a

Opinion of District Court

Therefore, it is apparent that the only cause of action

which will support the relief sought by Kysor in its com-

plaint is the cause of action under the patent laws of the

United States and under its patent rights to exclusivity of

production of the Dual Jet unit which is challenged by Pet’s

conduct. Indeed, such action was specifically contemplated

by the contract under paragraph I of section IV General

Provisions thereof which provides:

“This agreement does not in any way prevent

Dual Jet from bringing suit against Hussmann, its

subsidiaries, licensees or sublicensees, in the event

that any Dual Jet patent rights are embodied in units

other than the Hussmann unit as herein defined.”’

The basic right therefore asserted by Kysor is the right

based on federal law which is the right to manufacture ex-

clusively a unit to which plaintiff claims patent rights.

This has to be the gravamen of the action regardless of

the characterization which plaintiff may have endeavored

to give it in the complaint.

While it is true that many of the authorities cited by

defendant in its brief relate not to patent law, but to other

federal law, still the court cannot concur in the observa-

tion of plaintiff’s counsel in its memorandum of July 29

that these cases cited are unreliable as guides for de-

termining the existence of a federal question in unregu-

lated fields. On the contrary, exclusive federal jurisdic-

tion is granted specifically by statute and the statute in

turn is specifically authorized by the Constitution.

28 USC 1338(a) was enacted pursuant to the authoriza-

tion of Article I, Section 8, clause 8 of the United States

Constitution granting Congress the power.

To promote the Progress of Science and useful

Arts, by securing for limited Times to Authors and

Inventors the exclusive Right to their respective

Writings and Discoveries;

Weel

ES GL LY rs - Tes Tea

10a

Opinion of District Court

In short, the contract specifically contemplates that each

party is free to commence an action for infringement of

its patents by the other in any other use than that per-

mitted in the contract and that is precisely what plaintiff

is doing here in every particular.

Both parties have referred extensively to the Lear-

Adkins cases. Lear Corp. v. Adkins, supra and Lear, Sieg-

ler, Inc. v. Adkins, supra. Defendant cites them as au-

thority for the proposition that agreements not to in-

fringe are unenforceable as contrary to the public policy

favoring the free exchange of ideas which are not other-

wise protected by the patent laws. Plaintiff urges that by

an examination of both cases, it will be seen that the United

States Supreme Court condoned and, in fact, approved

the superior jurisdiction of the state courts over the issue

of infringement which arose in the action of the inventor

for royalties. Both agree that the United States Supreme

Court decision is a landmark in finally overthrowing the

doctrine of licensee estoppel; that a licensee who has en-

tered into a license agreement with a patent holder may

not, in seeking to defeat his contract, later challenge the

validity of the patent. It should first be noted that the

principal issue of the state case was the right of the in-

ventor to contract with Lear for its employment of his

skill and ideas prior to patenting, an issue which the Su-

preme Court of the United States held to be one primarily

for state determination. Thus, the second issue, that of the

validity of the subsequently obtained patent was not the

sole question in the case and was, in fact, a subject of a

separate federal action commenced by Lear under the De-

claratory Judgment Act in the United States District Court.

It is further to be noted that the specific issue of removal

from the federal court was never raised by Lear. Thus, one

cannot know under the Lear-Adkins cases what would have

lla

Opinion of District Court

been the results, had Lear in the state case removed the

same and had there been a petition to remand by Adkins.*

While matters of convenience and practicality are not

necessarily persuasive of what ought to be the purely legal

issue of federal jurisdiction, still some observation con-

cerning this is warranted. A remand in this case would

thrust upon the state court inevitably the obligation to de-

termine whether or not the subsequent unit manufactured

by Hussmann violated and infringed upon Kysor patents.

An order of remand in this case is not appealable (28 USC

1447(d), and therefore, any decision by that court would

necessarily have to be appealed through the state court

system and from the highest court of the state to the United

States Supreme Court. Thus, if it were then found that

the remand were improper and that jurisdiction were in

the federal court, at that stage, the proceedings would have

to be re-commenced in federal court. Defendant’s only

other recourse to obtain an earlier decision would be that

followed by Lear, i.e., commencing a separate patent case

under the Declaratory Judgment Act in federal court

which, unless stayed, would then proceed concurrently with

the state court, thus occupying the time of both.

Removal does not reflect upon the state court in any

way, as inferred by plaintiff’s brief (page 9). Nor does it

infer the case is likely to be mishandled in the state court,

but it is true that in this area of law, which has been so

carefully carved out for federal jurisdiction by the Con-

stitution, its application imposes less burden upon federal

*As an interesting side commentary, the court understands

that following the United States Supreme Court decision, an

12a

Opinion of District Court

courts accustomed to it than it does upon state courts

whose exposure to the field is necessarily more limited.

Accordingly, the plaintiff’s motion to remand is denied.

Ir Is So OnpEnep.

(s) Apert J. Ence.

District Judge

Dated : September 1, 1971.

Appendix to District Court Opinion

COMPLAINT

(Filed June 18, 1971 in the Circuit Court for

the County of Wexford, State of Michigan)

Plaintiff says:

1. Plaintiff is a Delaware corporation which has its

registered office and principal place of business in the City

of Cadillac, Wexford County, Michigan.

2. Defendant is a Delaware corporation which does

business in the County of Wexford, State of Michigan.

3. Defendant operates truck routes which traverse Wex-

ford County, State of Michigan.

4. The Dual-Jet Division of the plaintiff and the Huss-

mann Division of the defendant are both engaged in the

manufacture, sale and distribution of commercial refrigera-

tion units in direct competition with each other. The prin-

cipal distinguishing or identifying characteristic of the de-

fendant’s Hussmann Division’s product is that cooling is

accomplished by the direct blowing of cold air on the

product stored or displayed in the refrigerator unit. The

13a

Appendiz to District Court Opinion

principal distinguishing or identifying characteristic of

plaintiff’s Dual-Jet Division’s refrigerator unit is indi-

rect cooling by the blowing of cold air through a duct which

in turn is exposed to the product area and thus accomplishes

cooling.

5. In the year 1965 patent infringement claims on var-

ious features of their respective units were mutually as-

serted, one against the other, by plaintiff’s Dual-Jet Divi-

sion and defendant’s Hussmann Division. In settlement

and disposition of these mutual claims an agreement was

entered into between the two parties, who were both at

that time independent corporations rather than divisions

of the parties hereto as they are presently, whereby, among

other things, it was expressly agreed that the defendant’s

Hussmann Division would not adopt or change to the method

of cooling used by the plaintiff’s Dual-J et Division and

that plaintiff’s Dual-Jet Division would not adopt the

method of cooling used by defendant’s Hussmann Division.

On this basis it was agreed that neither party would in-

stitute or prosecute patent infringement claims against the

other.

A copy of such Agreement, dated April 5, 1965, which

is herein incorporated by reference, is attached hereto

and marked ‘‘Exhibit A’’.

6. By agreement dated J uly 27, 1966, a copy of which

is attached hereto and marked ‘‘Exhibit B”’, the defend-

ant at the time of acquisition of the Hussmann Corporation

by it assumed all of the rights, duties and obligations of

such Agreement, the terms of which are incorporated by

reference herein.

7. The plaintiff on its acquisition of Dual Jet, Inc. as-

sumed all of Dual Jet’s rights, duties and obligations under

said contract.

8. In the early part of 1971 the defendant, in total and

absolute disregard of the terms of said Agreement and

l4a

Appendiz to District Court Opinion

in direct violation of its terms changed over to and adopted

the method of cooling employed by the Dual-Jet Division

of the plaintiff, i.e., indirect cooling by passing cold air

through a duct rather than by blowing cold air directly

on the stored or displayed product. Defendant has con-

tinuously since that time manufactured, sold, offered for

sale and distributed refrigerator units and cases manu-

factured in direct contravention to the aforesaid Agreement

marked ‘‘ Exhibit A’’.

9. The defendant has thereby undertaken to usurp the

distinguishing and identifying characteristic of plaintiff’s

product in violation of the Agreement marked ‘‘ Exhibit

A’’, and in so doing threatens irreparable harm and dam-

age to the plaintiff’s business in a manner which is not

capable of ascertainment or compensation by an award of

money damages. Unless such violation is halted by order

of this Court directing specific performance of said con-

tract, the business of the Dual-Jet Division of the plain-

tiff will be irreparably damaged and destroyed.

Waenerore, plaintiff prays:

A. That upon reading and filing of this verified Com-

plaint there issue out of and under the seal of this Honor-

able Court an Order to Show Cause directed to the de-

fendant ordering and commanding the defendant to appear

before this Court at such time and place as is fixed in such

Order, and then and there to show cause why a temporary

injunction ought not to issue ordering and directing the

defendant to maintain the theretofore established status

quo and to absolutely desist and refrain from manufactur-

ing, selling, offering for sale or distributing the refrigerator

units or cases employing the indirect method of product

cooling or employing other than the method of cooling

entailing the direct blowing of cold air on the product

stored or displayed, and that such injunction continue

until the final disposition of this cause on its merits or

until further order of this Court in the premises;

lia

Appendix to District Court Opinion

B. That the defendant file answer to this Complaint

and that after a hearing upon the merits thereof this

Court make permanent the injunction prayed in Paragraph

A above;

C. That defendant be ordered to pay such damages and

compensation for the breaches heretofore caused by it

of the contract marked ‘‘ Exhibit A’’, and that the Court

also grant to the plaintiff such other and further relief

as may be required in equity and good conscience; and

D. That plaintiff be awarded its costs incurred in this

action.

Kysor Inpustriat Corporation

Raymond A. Weigel

Its President

AGREEMENT

This is an agreement entered into this 5th day of April,

1965, by and between Dua Jer REFRIGERATION Co., Chicago,

Illinois (hereinafter referred to as Dua Jer), and Huss-

MANN Rerricerator Co., St. Louis, Missouri (hereinafter

referred to as Hussmann).

WITNESSETH THAT:

A. Wuenrszas, Dvat Jer is engaged in the design, devel-

opment, manufacture and/or sale of upright refrigerated

display cabinets for the refrigeration of frozen food

products ;

B. Wuereas, Dvat Jer has made and acquired certain

inventions and improvements on upright refrigerated dis-

play cabinets and has acquired certain patent rights on

said upright refrigerated display cabinets by way of pat-

SO RES REP a ee

ES eS ee ee

16a

Appendiz to District Court Opinion

ents, patent applications and license under patents and

patent applications of others, in the United States and coun-

tries foreign to the United States;

C. Wuereas, Hussmann is engaged in the design devel-

opment, manufacture and/or sale of upright refrigerated

display cabinets for the refrigeration of fresh and frozen

food products ;

D. Wuerzas, Hussmann has made and acquired certain

inventions and improvements on upright refrigerated dis-

play cabinets and has acquired certain patent rights on said

upright refrigerated display cabinets by way of patents,

patent applications and license under patents and patent

applications of others, in the United States and countries

foreign to the United States;

E. Wuereas, Duau Jer is desirous of the freedom for

itself, its subsidiaries, licensees and sublicensees to make,

use and sell the Duat Jet unit, as hereinafter defined, in the

United States and foreign countries without suit for in-

fringement upon the patent rights of Hussmann ; and

F. Wuereas, Hussmann is desirous of the freedom for

itself, its subsidiaries, licensees and sublicensees to make,

use and sell the Hussmann unit, as hereinafter defined, in

the United States and foreign countries without suit for

infringement upon the patent rights of Duau Jer;

Now, THEREFORE, it is mutually agreed by the parties

as follows:

I. DEFINITIONS

1. Hussmann unit: As used herein, the term ‘‘Huss-

MANN unit’’ shall mean low temperature upright refrig-

erated display cabinets in which the main refrigeration

17a

Appendix to District Court Opinion

system shall include air distribution means for circulating

a substantial portion of low temperature air into and

through the product area and in direct contact with the

product therein for cooling the product, and to discharge the

remaining portion of low temperature air into an air cur-

tain across the open front of said cabinet.

Since it is difficult to ascribe an exact percentage with

respect to the ‘‘substantial portion’ of low temperature

air circulated into and through the product area accord-

ing to the foregoing definition of ‘‘HussMann unit’’, it is

understood and agreed that the salient characteristic of

the HussMann unit is the positive circulation of low temper-

ature air through the product area for direct and con-

trolled cooling of products by intentional engineering de-

sign and manufacture to provide this salient characteristic

and that Hussmann will not depart from its present engi-

neering and manufacturing know-how in the direction of

the Dua Jer unit utilizing essentially only indirect product

cooling.

2. Duat Jer unit: As used herein, the term ‘‘Dua Jer

unit’? shall mean low temperature upright refrigerated

display cabinets in which the main refrigeration system

shall include air distribution means for circulating sub-

stantially all low temperature air around the product area

in a duct having only conductive heat exchange therewith

for indirect cooling of the product and to discharge sub-

stantially all low temperature air from said duct into an

air curtain across the open front of said cabinet.

Since it is difficult to ascribe an exact percentage with

respect to ‘‘substantially all’’ low temperature air dis-

charged into the air curtain across the open front accord-

ing to the foregoing definition of “‘Dvat, JET unit’’, it is

understood and agreed that the salient characteristic of

the Dua Jer unit is the positive discharge of low tempera-

ture air into the air curtain for indirect cooling of products

by intentional engineering design and manufacture to pro-

18a

Appendix to District Court Opinion

vide this salient characteristic and that Duau Jer will not

depart from its present engineering and manufacturing

know-how in the direction of the Hussmann unit utilizing

direct and controlled product cooling.

3. Low temperature: As used herein, the term ‘‘low

temperature’’ shall mean any cabinet designed for main-

taining frozen food products at temperatures of about 0°

F. or colder.

4, Hussmann patent rights: As used herein, the term

‘‘HussMannw patent rights’’ shall mean all rights of Huss-

MANN in and to inventions, discoveries and improvements

conceived prior to January 1, 1965 on upright refrigerated

display cabinets, including all United States and foreign

patent applications and patents covering such inventions,

discoveries and improvements owned by HussMann or

under which Hussmann is licensed.

5. Dvuau Jer patent rights: As used herein, the term

‘“‘DuaL Jer patent rights’’ shall mean all rights of Dua.

Jer in and to inventions, discoveries and improvements

conceived prior to January 1, 1965 on upright refrigerated

display cabinets, including all United States and foreign

patent applications and patents covering such inventions,

discoveries and improvements owned by Dvat Jet or under

which Dvau Jet is licensed.

II. COVENANTS OF HUSSMANN

HussMann agrees not to bring suit for infringement

under any of the Hussmann patent rights against Dua.

Jet, or any of its subsidiaries, licensees or sublicensees,

for the manufacture, use or sale of any Duat Jer unit em-

bodying any of the Hussmann patent rights, but only inso-

far as they are embodied in the Duau Jer unit. This para-

graph is not to be construed as granting Dvat Jz7, its li-

19a

Appendiz to District Court Opinion

censees or sublicensees, any right or license under the Huss-

MANN patent rights.

III. COVENANTS OF DUAL JET

Dvat Jer agrees not to bring suit for infringement under

any of the Duau Jer patent rights against Hussmann or

any of its subsidiaries, licensees or sublicensees, for the

manufacture, use or sale of any Hussmann unit, embody-

ing any of the Dua Jer patent rights, but only insofar as

they are embodied in the Hussmann unit. This paragraph

is not to be construed as granting Hussmany, its subsidi-

aries, licensees or sublicensees, any right or license under

the Dua Jer patent rights,

IV. GENERAL PROVISIONS

1. This Agreement does not in any way prevent Dua

Jet from bringing suit against Hussmann, its subsidiaries,

licensees or sublicensees, in the event that any Dvau Jer

patent rights are embodied in units other than the Huss-

MANN unit as herein defined.

2. This Agreement does not in any way prevent Huss-

MANN from bringing suit against Dua J ET, its subsidiaries,

licensees or sublicensees in the event that any Hussmann

patent rights are embodied in units other than the Duat Jer

unit as herein defined.

3. This Agreement is assignable by either party along

with its entire business and rights in the upright refrig-

erated display cabinets, but is not otherwise assignable

without written consent of the other party.

4. Unless otherwise terminated by mutual consent be-

tween the parties, this Agreement shall not terminate until

the expiration of the last of the patents included within

the patent rights of either party.

20a

Appendiz to District Court Opinion

Ix Wrreess Wuensor, the parties have caused this

Agreement to be executed by their duly authorized officers

on the date first above written, and have caused their re-

spective corporate seals to be impressed hereon.

Dvat Jer Reraorratiox Co.

Hussmaxe Rerrioerator Co.

21a

Opinion of the Court of Appeals

No. 71-1916

UNITED STATES COURT OF APPEALS

For tae Srxra Cracurr

Kysor [xpvstaiat Corroratiox,

Plaintiff- Appellant,

v.

Per Ixconroraten,

Defendant- Appellee.

Arrzat from the United States District Court for the West-

ern District of Michigan, Southern Division.

Decided and Filed May 5, 1972.

Before Puniirs, Chief Judge, Weick, Cireuit Judge, and

Rvsix*, District Judge.

Pex Cunium. Kysor appeals from an order denying its

motion to remand the case to the State court from which it

was removed.

Since this order is interlocutory, appeal ordinarily would

await final judgment on the merits. However, Kysor’s mo-

tion for a preliminary injunction also was denied. Because

the case is properly before the court for review of the latter

remand issue must be reached. Mayflower Industries v.

Thor Corp., 184 F. 2d 537, 538 (3rd Cir. 1950), cert. denied,

341 U. 8. 903 (1951).

We reverse.

The relevant facts are undisputed and may be stated

briefly. Dual Jet Refrigeration and Hussmann Refrigera-

* Honorable Carl B. Rubin, Judge, United States District Court

for the Southern District of Ohio, sitting by designation.

— eee —

Opinion of the Court of Appeals

tor’ manufactured open display cases for food items which

must be maintained at low temperatures. In these units,

heating of the food by ambient air is prevented by directing

a cold air curtain across the open face of the unit. The prin-

cipal difference between the display cases of the respective

manufacturers was in the manner of cooling the food. The

Hussmann units utilized a direct cooling action in which a

substantial cold air flow was directed across the displayed

product before forming part of the air curtain. In the Dual

Jet units, the cold air was passed through ducts in the

shelves, indirectly cooling the food by conduction before

forming the air curtain.

Both Hussmann and Dual Jet owned patents covering

long as the cooling action used by the other was unchanged.

The agreement further provided as follows:

“[I}t is understood and agreed that . . . Hvsemaxs

will not depart from its present engineering and

manufacturing know-how in the direction of the Duat

Jer unit utilizing essentially only indirect product

cooling.

**[I}t is understood and agreed that . . . Duan Jer

will not depart from its present engineering and

manufacturing know-how in the direction of the

Hvssmaxy unit utilizing direct and controlled prod-

uct cooling.’’

Pet began manufacturing and selling display cases util-

izing indirect cooling action in 1971. Kysor brought an

* Dual Jet and Hussmann are now a division of Kysor and «

subsidiary of Pet, respectively. Both are Delaware corporations.

Manifestly there is no diversity of citizenship.

23a

Opinion of the Court of Appeals

action in the Cireuit Court for Wexford County, Michigan,

seeking injunctive and monetary relief. The complaint al-

leged that Pet's activities constituted a breach of the above-

quoted provisions of the agreement. Pet removed the ac-

tion to the United States District Court for the Western

District of Michigan. Kysor’s motions to remand to the

Wexford Cireuit Court and for a preliminary injunction

were denied.

Pet’s jurisdictional theory, upon which removal was

predicated, is that the agreement, construed as asserted by

Kysor in its complaint to bar Pet’s manufacture and sale

of indirect cooling units, was void and unenforceable under

federal anti-trust lsw in the absence of valid and infringed

patents. Pet therefore contends that the action turns on

questions of patent validity and infringement and thus is

exclusively within federal jurisdiction under 28 U.S.C.

§ 1338 (a).

We cannot accept this theory. It is well established that

every case involving patent issues is not a ‘‘civil action

arising under any Act of Congress relating to patents,”’ as

set forth in § 1338(a). Actions to enforce patent license

agreements are not within exclusive federal jurisdiction

i ing the availability of the invalidity defense.

See Lear, inc. vy. Adkins, 395 U. S. 653 (1969). Kysor is

free to file and maintain a contract action in State court

which may be subject to federal patent-anti-trust law de-

fenses. These issues are for the State court to resolve.

Kysor elected to assert only contract rights in State court.

Pet may not, by asserting that Kysor’s only valid cause of

action is by way of suit for patent infringement, convert

this action into one arising under the patent laws of the

United States.

Accordingly the order denying the preliminary injunc-

tion is vacated and the cause remanded to the District Court

with directions to enter an order, pursuant to 28 U.S.C.

§1447(c), remanding the action to the Wexford Circuit

24a

Order

(Filed July 18, 1972)

No. 71-1916

UNITED STATES COURT OF APPEALS

For rae Sixte Cracurr

Kysor [xpustriaL Corporation,

a Delaware corporation,

Plaintiff-Appellant,

v.

Petr IncorporaTep,

a Delaware corporation,

Defendant-Appellee.

Before Puuiirs, Chief Judge, Weick, Circuit Judge,

and Rusty, District Judge.*

Upon consideration, it is Orperep that the petition for

rehearing be and hereby is denied.

Entered by order of the court.

James A. Hicorns

Clerk

* Honorable Carl B. Rubin, Judge, United States District

Court for the Southern District of Ohio, sitting by designation.

iin paid