Petition for Writ of Certiorari — A. B. T. Manufacturing Corp. v. National Rejectors, Inc.

Ty FITTED

“Aiov 24 r059

IN THE

Supreme Court of the United States

Octoser Trem, 1950.

A.B.T. MANUFACTURING CORPORATION,

Petitioner,

vs.

NATIONAL REJECTORS, INC.,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE SEVENTH CIRCUIT AND BRIEF IN SUP-

PORT.

CuareNnce E. THREEDY,

Attorney for Petitioner,

111 West Washington Street,

Chicago 2, Illinois.

THE GUNTHORP. WARREN PRINTING COMPANY, 210 WEST JACKSON, CHICAGO

INDEX.

PAGE

Petition for Writ of Certiorari.......---+sseerttrtt! 1

Summary and Short Statement.......----+++e0: 2

Pabatiallh oo sven cece ck 8 ore ene een es se 9

Questions Weeeemted . «oss sc cc sececeseses cers 11

Reasons Relied Upon for Allowance of This Peti-

a ein kamke Ksee eee ee eee een S PORE RES 12

Brief in Support of Petition for Writ of Certiorari... 15

Statement of the Case......----ssererrrrrert 16

Specification ......--eeeeeeeeeerer essen 16

Ma nbd 50 8D TIAL I ETS ON 16

ED Ere ei A ney adage ae se 25

ME 5 58 Ke eh AREA TS 27

TABLE OF CASES.

Aktieselskabet Cuzea v. The Sucarseco, 294 U.S. 394. 10, 20

Anakin Lock Works v. Dillon Lock Works, 292 F. 45

ee se Lk tee biel, aapanaae 24

Bacardi v. Domenech Treasurer, 311 U.S. 150..... 9,18, 23

Baldwin v. Iowa State Traveling Men’s Association,

ee OO. ok. cin nadvalen tx earee ae eeeeh ete 10, 23

City of Des Moines v. Des Moines Water Co., 218 F.

939 (D. C. Iowa), affirmed 230 F. 570....---++++++> 21

Craft Tint Mfg. Co. v. Baker, 94 F. 24 369 (C.A.9)... 24

Duplate Corp. & Pittsburgh Plate Glass Company v.

Triplex Safety Glass Company of North America,

ee My ee ere eee eth 9,19

Exhibit Supply Co. v. Ace Patents Corp., 315 U. S.

il

Freeman on Judgments (Sec. 1352, p. 2776, 5th Ed.)... 29

Frink Co., inc. v. Erikson, 20 F. 2d 707 (C. A.1)...... 23

Hariell v. Tilghman, 99 U. S. 547... .............002. 19

Machine Co. v. Murphy, 97 U. S. 120................ 24

TE, ee Els Os GI 0 ocak ote nc snsacsennns 10

Merevid Corp. v. Mid-Continent Investment Co., 320

= FS a eee eee ape ere mmry rr ere Maken tame 19

Muncie Gear Works v. Outboard Marine Mfg. Co., 315

I Gs eka aidan pune s+ ananeeeee 10, 25

People v. Spring Lake District, 253 Ill. Supp. 479..... 21

Ruth v. Climax Molybdenum Co., 93 F. 2d 699 (C. A.

Be Se ekeee deter sa dawtedbads coven ceaveanees 24

Sanitary Refrigerator Co. v. Winters, 280 U.S. 30.... 24

Schriber-Schroth Co. v. Cleveland Trust Co., 305 U.S.

EP Eee et EEL OE SPD Oe OREO SY. 10, 25

Sheldon v. Metro-Goldwyn Pictures Corp., 309 U. S.

WE erat A ae Be a ein ie ny eee Aes 9, 18, 23

Siegel, Jacob Co. v. Federal Trade Commissioner, 327

Cee et et i vewesskaakenscasneesd 10,18

Standard Dental Mfg. Co. v. National Tooth Co. (C. C.

ee ee eer rey ter ere 19

Steingruber et al. v. Johnson et al., 35 F. S. 622 (D. C.

EG Utes Sah eau cae ews kW he wenn ethane sku 22

Stoehrer & Platt Corp. v. Lusse Bros., 7 F. 2d 87 (C. A.

Me. S. Cha sack Pu ba KAMA eth dK iwe Senses ake eh 24

United Carbon Co. v. Binney & Smith Co., 317 U. S.

Beh iady acide bin da Oh debe ub eeedneaseh 9, 18, 23

Williams Manufacturing Co. v. United Shoe Mfg. Co.,

BE ee Te I eka RULE Scie eeeatnn 10, 18, 24

IN THE

Supreme Court of the United States

Ocrosper TERM, 1950.

de Tse

A.B.T. MANUFACTURING CORPORATION,

Petitioner,

vs.

NATIONAL REJECTORS, INC.,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE SEVENTH CIRCUIT.

To the Honorable the Chief Justice of the United States

and the Associate Justices of the Supreme Court of the

United States:

Your petitioner, A.B.T. Manufacturing Corporation, re-

spectfully prays for a writ of certiorari to the Court of

Appeals for the Seventh Circuit to review the judgment

entered by that court on October 10, 1950.

The transcript of the record in the case, including the

proceedings in said Court of Appeals, is furnished forth-

with in accordance with Rule 38 of the Rules of this Court.

The decision of the Court of Appeals appears in the record

at page 269.* The opinion of the trial court appears in

the record at page 120.

*Such decision also appears in advance sheets of the United States

Patent Quarterly, Vol. 87, No. 4, p. 116.

ER Lay IONIC bacteria eas ae NENA Ca aman ca

SEI Say IL OIE SE TE SST KEGEL LEE LE LSE ITI

SUMMARY AND SHORT STATEMENT.

1. Respondent, a Missouri corporation, by its petition

(R. 26) filed June 10, 1949, sought judicial sanction of

respondent’s cancellation of the patent license (R. 140)

granted to petitioner by respondent, an accounting for

royalties due prior to such cancellation, an accounting for

general damages resulting from the claimed infringement

subsequent to the cancellation of the license, and for an

injunction restraining infringement of claim 1 of the li-

censed reissue patent 21,301 in suit (R. 184).

2. Petitioner, an Illinois corporation, by its answer

(R. 31, 38) denied that the respondent was entitled to the

relief prayed for. In such answer the petitioner pleaded

(R. 40) that the court should not sanction respondent’s

cancellation of the license. This upon the grounds that

while the petitioner in good faith believed and claimed that

the devices which it is manufacturing did not come within

the license, petitioner was ready and able to pay royalties

on such devices should they be adjudicated as coming within

the scope of such license.

3. The trial court by its judgment (R. 157) granted

respondent the relief prayed for. Such judgment was af-

firmed by the Court of Appeals for the Seventh Circuit

(R. 276).

4. The license referred to above was entered into De-

cember 7, 1939 as a settlement of the litigation instituted

July 11, 1939 by respondent’s complaint (R. 2) charging

petitioner with infringement of respondent’s patent 2,094,-

788 (R. 176).

5. By the terms of such license, respondent granted to

petitioner, in consideration of a royalty, the right te

CASEMENT IH, RPT AS WIN eS EY 2 ANCIENT

3

manufacture rejectors under its patent 2,094,788. By such

license, petitioner in turn granted to respondent a royalty-

free license under its patent, charged by petitioner in its

answer (R. 17) to respondent’s 1939 complaint (R. 2) to

be infringed by respondent.

§. The license provided that:

“TX, If either party hereto shall fail to perform any of

its obligations herein prescribed, then the aggrieved

party shall have the right to terminate this agreement

in so far as it affects the defaulted party, upon giving

to the defaulting party ninety days’ written notice

to that effect; however, if the defaulting party makes

good the breach within said ninety days, then this

agreement shall continue as though no default had

taken place.’’ (R. 142.)

7. The litigation initiated by respondent’s 1939 com-

plaint (R. 2) was terminated on December 7, 1939, by the

entry by the trial court below of a consent decree (R. 23),

stating an agreement of the parties with respect to the

validity and infringement of respondent’s patent 2,094,788

and petitioner’s patent 2,159,117.

8. After the filing of respondent’s 1939 complaint and

prior to the entry of such consent decree, and without the

knowledge of the petitioner and the trial court, respondent

surrendered to the Commissioner of Patents its patent

2,094,788 with an application (Def. Ex. 10) for a reissue

of such patent.

9. In such reissue application, in addition to reproduc-

ing the specification, drawings, and claims of Patent 2,094,-

788, the patentees unsuccessfully sought additional claims

which were not limited, as were the original patent claims,

to a ‘‘means for successively operating’’ a scavenger plate

and wiper blade.

10. The reissue patent (R. 184) which issued on Decem-

ber 19, 1939, by its specification discloses and claims a slug

; Spe Ae ee rege aie Hee SLI PIR REO TE .

ye et Se IRE RET IO ae FRED IEE I LN I RT IRI LS RL NR x —

4

rejector* having a scavenger plate carrying a coin track,

a magnet for arresting slugs on the track, and means for

successively operating the plate and a wiper blade, to move

the track from beneath the arrested slug before the blade

is moved to wipe such slug from the magnet.

11. Petitioner’s first knowledge of the issuance of such

reissue patent was as a result of respondent’s letter of

January 6, 1940 (R. 43), asking petitioner to interpret the

granting clause (R. 141)** of the license as extending to the

subsequently issued reissue patent. This the petitioner

did (R. 43). No corresponding change or modification was

made with respect to the consent decree.

12. Prior to the license, petitioner manufactured the

slug rejectors charged by respondent’s 1939 complaint to

infringe original claim 1 of Patent 2,094,788. Such rejec-

tors included a means for simultaneously operating a scav-

enger plate and wiper blade. This resulted in the move-

ment of the plate and blade not only simultaneously with

respect to each other but also simultaneously with respect

to an arrested slug.

13. Under the license and until petitioner’s business

was interrupted by World War II restrictions, petitioner

manufactured and paid royalties on rejectors, which, unlike

the rejectors charged by respondent’s 1939 complaint to

infringe original claim 1 of Patent 2,094,788, embodied a

means for successively operating a scavenger plate and

wiper blade. This resulted in the coin track being moved

from beneath the arrested slug before inovement was im-

*A slug rejector is a device used in coin-controlled machines and

its principal function is to segregate genuine coins from spurious

coins and tokens.

**“ TIT. National hereby by this agreement grants unto A. B. T.

a non-exclusive license and right to manufacture, sell and use coin

selectors embodying the patentable features shown, described and

claimed in the National Patent No. 2,094,788, the said license to be

for the full term of the said National patent.’’

5

parted to the wiper blade to wipe such slug from the

magnet.

14. After the lifting of war restrictions, and with re-

spondent’s knowledge (R. 45), petitioner engaged in the

manufacture and sale of the rejectors on which respondent

by its letter of September 24, 1947 demanded the payment

of royalties. Such rejectors embodied the scavenger plate

and wiper blade operating means emvodied in petitioner’s

rejectors charged by respondent’s 1939 complaint to in-

fringe patent 2,094,788.

15. Petitioner did not pay royalties on rejectors manu-

factured by it after the lifting of war restrictions. This

because petitioner believed and claimed that the patentees

by their reissue oath* and their acquiescence** in the re-

jection of claims not limited to rejectors having means for

successively operating the scavenger plate and wiper blade

were estopped from claiming, as respondent did in 1939

with respect to infringement of claim 1 of the original

patent 2,094,788, that rejectors embodying a means for

simultaneously, instead of successively, operating a scav-

enger plate and wiper blade were within the scope of re-

issue claim 1.

*In their oath filed as a part of the application for the reissue

patent in suit, the patentees averred :

“Ty all of the claims of said patent, limitations are included

whereby a certain movable plate and a certain movable blade

must be operated by certain means successively. The invention

may be constructed and embodied in such manner that such

successive operation is not necessary, and to this extent the

specification is defective or insufficient in failing to claim the

invention in terms not limited to such suecessive operation.

Claims 6, 7 and 8 of this reissue application, as presented here-

with, are not limited to such successive operation.’’ (Emphasis

briefwriter’s. )

**By reissue application claims 6 and 7, the patentees unsuccess-

fully sought to obtain claims, which unlike original claim 1, were not

limited to devices having means for successively operating a scav-

enger plate and a wiper blade.

2A a TS ee NR eT — - -

a hy Behe A nee CLITA OR PRATT, PY MATAR CES NDNA LORRI SORE APR OBST AT ROR

6

16. The trial court below concluded, and the Court of

Appeals in this case affirmed, that as the result* of the

operation of the plate and blade of petitioner’s rejectors

manufactured after the lifting of war restrictions, was the

same as that of petitioner’s rejectors made by it before

the issuance of the reissue patent and charged by respon.

dent’s 1939 complaint to infringe original claim 1 of patent

2,094,788, petitioner was estopped by the 1939 consent

decree (R. 23) to claim that such rejectors manufactured

by it after the lifting of war restrictions did not infringe

reissue claim 1, the Court of Appeals saying (R. 272):

‘‘Inasmuch as original claim 1 with its original

limitations has been preserved in the reissue patent

without change, no estoppel can grow out of the

reissue in so far as this claim is concerned. In this

situation it seems perfectly obvious that defendant

is fully bound by the doctrine of res adjudicata as to

all parts of the original judgment, which included a

finding that claim 1 of the original patent, which is

the same claim now before us, was valid and infringed.

And this defendant recognized by its consent to the

judgment, by taking a license to manufacture and by

its later agreement that the license applied to the

reissue patent. Being the same claim of the same

patentee which has been adjudged, as between the

parties, valid and infringed, the District Court prop-

erly decided that defendant is fully bound under the

doctrine of res adjudicata.,’’

17. Having received no royalties on such rejectors, re-

spondent by its letter of September 9, 1948 (R. 45) de-

clared petitioner in default of the license. In such letter

* The trial court held, and the Court of Appeals in this case

affirmed, that the petitioner’s rejectors responded to the ‘‘means

for successively operating a movable plate and a movable blade’’

of the combination of reissue claim 1, because the result of the opera-

tion of the scavenger plate and wiper blade of petitioner’s rejectors

was the movement of the track carried by the plate from beneath

the arrested slug before the blade contacted the slug to eject it from

arrested position.

7

respondent informed petitioner that unless such default

was cured within ninety days from the date of the letter,

the license would terminate. For reasons above stated,

petitioner did not pay the demanded royalties. There-

upon respondent filed its petition (R. 26) in the trial court

below. In such petition it sought, among other things, a

judicial sanction of the cancellation of the license.

18. Petitioner in its answer to such petition (R. 40)

pleaded that the court should not sanction respondent’s

cancellation of the license where, as here, the petitioner

in good faith believes and claims that the devices which

it is manufacturing do not come within the scope of the

license and petitioner offered in its answer to pay royal-

ties on such devices in the event they be adjudicated as

coming within the license.

19. With respect to this contention of the defendant

and in giving judicial sanction to respondent’s eancella-

tion of the license, the Court of Appeals in its opinion

(R. 275) said:

‘‘However, the circumstances of the case are not

such to persuade us that the court below erred in

declining to approve this contention of defendant.

Throughout the extended interval during which plain-

tiff claimed defendant was infringing defendant of

course might have made known its position by filing

a suit for declaratory judgment and depositing in

open court a conditional tender of royalties on all

devices claimed to infringe to await determination

of the court as to whether they did infringe. It knew

that plaintiff was insisting that it was infringing and

had given 90 days notice of termination. It took no

steps to protect itself. Furthermore, the court did

not forfeit the license; plaintiff did so, as it had a

right to do under the plain reading of the contract

of the parties. If defendant in good faith desired to

have the license contract continued it could have,

within the 90 days or even within six months there-

IR MB 2 an ix § . 9

PRR tg tpg CN Ne AAMT IE LO SE FEET ILRI TNS FEILER

qs Spree

lg ernst Sper as

8

after, taken proper steps to protect itself, as we have

indicated. We conclude that the District Court cor.

rectly disposed of the issue.’’

20. The reissue patent in suit dominates an entire jn.

dustry. Petitioner is the sole competitor of respondent

in the manufacture and sale of slug rejectors throughout

the United States. Respondent has granted no licenses

under the patent other than the one granted to petitioner,

JURISDICTION.

1. The decision of the Court of Appeals for the Sev-

enth Cireuit was rendered October 10, 1950 (R. 269).

9, A petition for rehearing was denied by the Court

of Appeals on November 9, 1950 (R. 277).

3, The jurisdiction of this Court is invoked under Sec-

tion 240(a) of the Judicial Code as amended by the Act

of February 13, 1925 (28 U. S. C. See. 347) and Section

5(b) of Rule 38 of this court.

4. Cases believed to sustain the jurisdiction are:

Rule 38, Section 5(b) reading: ‘‘Where a circuit

court of appeals has rendered a decision in conflict

with the decision of another circuit court of appeals

on the same matter; or has decided an important ques-

tion of local law in a way probably in conflict with

applicable local decisions; or has decided an import-

ant question of federal law which has not been, but

should be, settled by this court; or has decided a

federal question in a way probably in conflict with

applicable decisions of this court; or has so far de-

parted from the accepted and usual course of judicial

proceedings, or so far sanctioned such a departure

by a lower court, as to call for an exercise of this

court’s power of supervision.’’

Duplate Corp. & Pittsburgh Plate Glass Co. v.

Triplex Safety Glass Co. of North America,

298 U. S. 448.

Sheldon v. Metro-Goldwyn Pictures Corp., 309

U. S. 390.

Bacardi v. Domenech Treasurer, 311 U. 8S. 150.

United Carbon Co. v. Binney & Smith Co., 317

U. S. 228.

10

Williams Manufacturing Co. v. United Shoe Mfg.

Co., 316 U. S. 364.

Jacob Siegel Co. v. Federal Trade Commissioner,

327 U.S. 608.

Magnum v. Coty, 265 U. S. 597.

Aktieselskabet Cuzca v. The Sucarseco, 294 U, §,

394 at 399.

Baldwin v. Iowa State Traveling Men’s Associa.

tion, 283 U. 8. 522.

Schriber-Schroth Co. v. Cleveland Trust Co., 305

U.S. 47.

Exhibit Supply Co. v. Ace Patents Corp., 315

U. S. 126.

Muncie Gear Works v. Outboard Marine Mfg. Co.,

315 U. S. 759.

11

QUESTIONS PRESENTED.

——

1. Where the licensee under a patent, claims that

devices it is manufacturing do not come within the scope

of the license and for that reason has paid no royalties

on such devices, must such licensee to show good faith and

to protect itself against cancellation of the license by the

licensor

(1) file a suit for declaratory judgment to deter-

mine whether or not such devices come within the

scope of the license and

(2) also deposit in open court royalties on such

devices pending the disposition of such suit?

2, Should a court sanction a licensor’s cancellation of

a patent license for failure to pay royalties where the

licensee, with the licensor’s knowledge, claims that de-

viees which it is manufacturing do not come within the

scope of the license and in its answer to the licensor’s peti-

tion for judicial cancellation of the license, offers to pay

royalties on such devices, should contrary to the licen-

see’s claim, such devices be adjudicated within the license?

3. Where by a consent decree the parties acknowledge

the validity and infringement of only an original patent,

is the issue of validity and infringement of a subsequently

issued reissue of such original patent, in which the specifi-

cation, drawing, and claims of the original patent are

reproduced, res adjudicata as between the parties by rea-

son of such consent decree?

4. Did the Court of Appeals in this case, in holding

that because the result of the operation of petitioner’s

devices was the same as that of the device of reissue claim

1, apply the proper test of infringement?

SLEEPLESS ITT, MATRA BE EI I ME TAL TL a ee aN

12

REASONS RELIED UPON FOR ALLOWANCE OF

THIS PETITION.

-__e

Your petitioner contends that a writ of certiorari should

be allowed by this Court because:

1. By its decision in this case the Court of Appeals

has laid down an important rule of law of first impression

respecting the rights of a licensee under a patent in its

claim that devices which it is manufacturing and selling

do not come within the license; a rule of law which is far-

reaching in its effect because it affects without exception

every holder of a patent license.

2. The Court of Appeals in this case has laid down a

rule of law of first impression, in holding that a licensee

who claims that devices which it is manufacturing and

selling do not come within the scope of the license and

for that reason has paid no royalties on such devices,

must, in order to show good faith and to protect itself

against cancellation of the license by the licensor,

(1) file a suit for declaratory judgment to deter.

mine whether such devices come within the license, and

(2) tender into court royalties on such devices

pending such suit.

3. Because of the novelty and the far-reaching effect

of such question, it is of paramount importance that

this Court approve or disapprove such new and _ here-

tofore unheard of rule. Such question will constantly

arise in patent litigation. This Court should therefore

pass upon such question now and thereby establish an

acceptable rule of law to be followed by all Federal courts.

13

4. The question whether the validity and infringement

of a reissue patent is res adjudicata between the parties

by virtue of a consent decree entered into prior to the

issuance of the reissue patent and stating an agreement

with respect to the validity and infringement of only the

original patent, is an important question of first impres-

sion, it having never been passed upon by this or any other

Court.

5. It is of paramount importance to every member of

the public dealing with patents that this Court approve or

disapprove the radical departure by the Court of Appeals

in this case from the heretofore established rule that the

scope of a consent decree must be determined from the

decree itself and that such ecree cannot be modified

without the mutual consent of the parties.

6. The reissue patent in suit dominates an entire in-

dustry. The question whether the validity and infringe-

ment of such patent is res adjudicata between the parties

by virtue of a consent decree entered into prior to the

issuance of such reissue patent and stating an agreement

with respect to the validity and infringement of only the

original patent, is one of great importance. This by rea-

son of the fact that such question affects without excep-

tion every party who consents to the validity and infringe-

ment of an original patent. Such question will constantly

arise in patent cases. This Court should therefore pass

upon such question and thereby establish an acceptable

rule of law to be followed by all Federal courts. _

7. The Court of Appeals in this case by its decision

in holding petitioner’s devices infringement of reissue

claim 1, has applied a test of infringement which is con-

trary to the decisions of this Court and Courts of Appeals

of other circuits.

14

Wuererorg, it is respectfully submitted that this peti-

tion for writ of certiorari to the Court of Appeals for

the Seventh Circuit should be granted.

Respectfully submitted,

A. B. T. Manuracturine Corporarioy,

Petitioner,

By Cuarence EK. THreepy,

Its Attorney.

15

IN THE

Supreme Court of the United States

OcroBer TERM, 1950.

SR

A.B.T. MANUFACTURING CORPORATION,

Petitioner,

VS.

NATIONAL REJECTORS, INC.,

Respondent.

BRIEF IN SUPPORT OF PETITION FOR WRIT OF

CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE SEVENTH CIRCUIT.

To the Honorable the Chief Justice of the United States

and the Associate Justices of the Supreme Court of the

United States:

The decision of the Court of Appeals for the Seventh

Cireuit now sought to be reviewed was entered October

10, 1950 (R. 269).

Jurisdiction of this Court is invoked under Section 240(a)

of the Judicial Code as amended by the Act of February

13, 1925 (28 U. S. C. See. 347) and Sec. 5(b) of Rule 38

of this Court.

16

STATEMENT OF THE CASE.

To avoid repetition, reference is hereby made to the

statement on pages 2 to 8, supra, of the Petition for Writ

of Certiorari.

SPECIFICATION.

The following are the alleged errors of the Court of

Appeals for the Seventh Circuit which will be urged before

this Court:

1. The Court of Appeals erred in sustaining the find-

ing and conclusion of the trial court sanctioning and de-

claring the license agreement cancelled by respondent's

letter of September 9, 1948.

2. The Court of Appeals erred in affirming the finding

and conclusion of the trial court that the issues of validity

and infringement of the claims of a reissue patent are res

adjudicata by virtue of a prior consent decree stating an

agreement with respect to the validity and infringement

of the claims of only the original patent.

3. The Court of Appeals erred in finding that defend-

ant’s accused devices infringe reissue claim 1.

ARGUMENT.

Pornt I.

Respondent by its patent dominates an entire industry.

Petitioner is the sole competitor of respondent in the man-

ufacture and sale of slug rejectors throughout the United

States. No license other than the one granted to petitioner

has been granted by respondent under such dominating

patent.

By its letter of September 9, 1948 (R. 45) respondent

declared petitioner in default of its license (R. 140) be-

17

cause of petitioner’s failure to pay to respondent royalties

on devices manufactured by petitioner since the lifting of

war restrictions. In such letter respondent informed peti-

tioner that unless petitioner within ninety days from the

date of the letter cured the default by paying the demanded

royalties, the license would terminate. Because petitioner

believed and, with respondent’s knowledge (R. 45) ap-

proximately three years prior to the date of such letter,

claimed that such devices did not come within the scope of

the patent license, petitioner did not pay the demanded

royalties.

The Court of Appeals, upon respondent’s petition filed

one year after the date of such letter, gave judicial sanc-

tion (R. 275) to respondent’s cancellation of the patent

license. This notwithstanding that petitioner by its answer

(R. 40) te respondent’s petition offered to pay the de-

manded royalties should, contrary to petitioner’s claim

in tne above respects, it be adjudicated that such devices

were within the license (see Par. XIX of petitioner’s An-

swer, appearing in footnote below").

By its decision the Court of Appeals in this case has

given judicial sanction to a license under a patent dom-

inating an entire industry. It has laid down an important

rule of law of first impression respecting the rights of a

licensee under a patent in its claim that devices which it is

manufacturing and selling do not come within the license.

To petitioner’s knowledge, the Court of Appeals in this

*XIX. Defendant in further answer to plaintiff’s petition herein

states that while it has refused to pay to plaintiff royalties on slug

rejectors made and sold by defendant since on or about May 1945

because such slug rejectors do not infringe the claims of the reissue

patent No. 21,301, particularly claim 1 thereof, should it be finally

judicially determined, contrary to defendant’s position aforesaid,

that such slug rejectors do in fact infringe claim 1 of the said reissue

patent, defendant stands ready and is able to and will promptly pay

unto the plaintiff royalties on each of said slug rejectors at the rate

of royalty, to-wit, three cents (3¢) per slug rejector, provided for

in Paragraph IV of the hereinbefore referred to license agreement.

eyelets SAS ake Za PRCT S Te oa Lae i aa Ss RN ee RR atlas ei

18

ease has for the first time in the history of the law with

respect to patent licenses, laid down a rule of law requir.

ing a licensee

(1) to file a suit for declaratory judgment to deter.

mine whether or not devices which it is making and

selling come within the license and

(2) to deposit in open court pending such suit a

conditional tender of royalties on all of such devices

in order to show good faith in the licensee’s claim that

such devices do not come within the license and to protect

itself against cancellation of the license. Such a rule of

law is therefore one of first impression. Such fact con-

stitutes a special and important reason why this Court

should take jurisdiction under the general reserve of dis-

cretion indicated in Rule 38(5) of the Supreme Court

Rules.

In Sheldon v. Metro-Goldwyn Pictures Corp., 309 U. 8.

399 (decided March 1940), certiorari was granted by this

Court

‘‘in view of the importance of the question, which ap-

pears to be one of first impression in the application

of the copyright law.’’

See also Bacardi Corp. v. Domenech Treasurer, 311 U.S.

150 (decided December 9, 1940; United Carbon Co. v. Bin-

ney & Smith Co., 317 U. S. 228 (decided December 7, 1942);

Williams Manufacturing Co. v. United Shoe Mfg. Co., 316

U.S. 364; Jacob Siegel Co. v. Federal Trade Com missioner,

327 U. S. 608 (decided March 25, 1946).

Furthermore, the question whether a court should give

judicial sanction to a licensor’s cancellation of a license

under the above circumstance, is one of great importance

to every holder of a patent license. It is a question that

will constantly arise in future patent license cases. It af-

fects without exception every licensee of a patent license.

19

Furthermore, the decision of the Court of Appeals is

not only incompatible with the established authorities that

courts do not favor forfeiture,* but also has the effect of

securing for the licensor royalties on devices not covered

by the patent monopoly. This by reason of the fact that a

licensee may possibly elect to pay royalties on such de-

vices rather than comply with the rule announced by the

Court of Appeals in this case, by filing a petition for de-

claratory judgment to determine whether or not such de-

vices come within the scope of such license and by making

conditional tender of royalties pending determination of

such suit. This Court on numerous occasions has declared

that a patent monopoly cannot be extended beyond the

scope of the patent grant. Mercoid Corp. v. Mid-Continent

Investment Co., 320 U. S. 661.

As the new, novel and important questions presented

by this petition do not affect alone the parties to this liti-

gation, and as such questions will frequently arise in fu-

ture patent litigation, this Court should pass upon such

questions and thereby establish a uniform rule of law ap-

plicable to such questions and thereby furnish a guide for

Federal courts when confronted with such questions.

In Duplate Corp. é Pittsburgh Plate Glass Co. v. Triplex

Safety Glass Co. of North America, 298 U. S. 448 (decided

May 18, 1936), the Court granted certiorari

‘*to settle important questions as to the liability of

infringers.”’

*In Standard Dental Mfg. Co. v. National Tooth Co. (C. C. E. D.

Penna.), 95 F. 291 @ 294, the court said:

‘‘Forfeitures are not favored in equity, and the best considered

decisions hold that even licenses containing express stipulations

for their forfeiture are not, tpso facto, forfeited upon condition

broken, but remain operative and pleadable until rescinded by

a court of equity. 2 Rob. Pat. See. 822; White v. Lee, 3 F. 222;

Adams v. Meyers, 7 F. 208; Baker Mfg. Co. v. Washburn &

Moen Mfg. Co., 18 F. 172; Purifier Co. v. Wolf, 28 F. 814.”’

See to the same effect, Hartell v. Tilghman, 99 U. S. 547 @ 556.

i Tee veresef

20

notwithstanding the absence of conflict of decisions in dif.

ferent circuits.

In Aktieselskabet Cuzca v. The Sucarseco, 294 U. 8. 394

at 399, notwithstanding a lack of conflict of decisions, a

writ of certiorari was granted because of the novelty and

the importance of the question presented which had not

been decided by this Court. In that case, this Court said:

‘*Because of the importance of the question which

has not been decided by this court, a writ of certiorari

was granted.”’

If the novelty and importance of the question in the

cases referred to above, influenced this Court in granting

certiorari, it must with stronger reasons influence this

Court in the case at bar because of the character and

hereinbefore stated attendant effect of the opinion of the

Court of Appeals of the Seventh Circuit.

Petitioner is not soliciting, nor is it necessary that there

be, a retrial of the facts as are pertinent with respect to

the important question of first impression here presented.

Should this Court disapprove, as petitioner believes it

will, the aforesaid new and novel and harmful rule of law

laid down by the Court of Appeals, respondent would

be entitled only to an accounting for royalties. Such roy-

alties, as before stated, the petitioner stands ready and is

able to pay to respondent. Respondent would not be en-

titled to a cancellation of the license nor to an accounting

for damages for infringement nor to an injunction re-

straining infringement.

Upon the foregoing premises and in view of the undis-

puted fact that the respondent by its patent dominates an

entire industry, this Court is warranted in exercising its

discretionary power of granting the writ of certiorari

hereinbefore prayed for.

21

Pornr II.

The Court of Appeals in hoiding that the validity and

infringement of a reissue patent are res adjudicata between

the parties, by virtue of a consent decree entered into

prior to the issuance of the reissue patent* and stating an

agreement with respect to the validity and infringement

of only the original patent**, has decided a question which

is of great importance to the manufacturing public, par-

ticularly those dealing with patents. Such a rule is in-

compatible with the established rule of general law that the

scope of a consent decree must be determined by the de-

cree itself and that such decree cannot be modified in any

respects without the mutual consent of the parties to such

consent decree.

In People v. Spring Lake District, 253 Il. Supp. 479,

the Court said:

‘A consent decree is one based upon the consent

or agreement of the parties, which may supersede both

pleadings and evidence and even go to the extent of

pointing out and limiting the relief to be granted.

Such a decree is absolutely conclusive upon the con-

senting parties and cannot be amended or varied with-

out like consent, nor can it be reheard, appealed from,

or reviewed upon writ of error.’’

In City of Des Moines v. Des Moines Water Co., 218 F.

939 at 943, D. C. Iowa (affirmed 230 F. 570), the Court

said :

‘‘This order and everything in it was entered by

consent. In such cases, in the absence of fraud or

*At the time of entry of the consent decree in this case, neither

the trial court nor the petitioner had knowledge that respondent

had made application for the reissue patent.

**Upon application for reissue patent, the original patent is sur-

rendered to the Commissioner of Patents (see Rule 178 of the Rules

of Practice of the United States Patent Office).

WI We RRA

mistake, it cannot be modified or varied in any essen-

tial part without the consent of the parties to the

same.’’

The consent judgment (decree) is an agreement between

the parties to the litigation. The learned author Freeman

on Judgments (Sec. 1352, p. 2776, 5th Ed.), writes that a

court has no more authority to modify a consent judgment

than it would have to modify any other contract between

the parties.

In Steingruber et al. v. Johnson et al., 35 F. S. 622 at

663 (D. C. Tenn.), the Court said that it

‘“* * * is of the opinion that a consent judgment

cannot be amended, modified or corrected in any es-

sential particular except with the consent of all the

parties. If the court should in any way change,

amend, or alter the terms of a consent decree, it would

cease to be the agreement of the parties and would no

longer be a consent decree.’’

The question whether a consent decree stating an agree-

ment between the parties with respect to the validity and

infringement of only an original patent is res adjudicata

between the parties as to the validity and infringement of

a subsequently issued reissue patent, is one of first im-

pression and of great importance. Neither this nor any

other Court has ever passed upon such question.

The decision of the Court of Appeals herein is the first

in the history of patent law, to petitioner’s knowledge, to

extend a consent decree stating an agreement with respect

to the validity and infringement of only an original pat-

ent, to encompass a reissue of such original patent upon

the theory that such consent decree extends to such re-

issue patent because the specification, drawings and claims

23

of the original patent were reproduced in the reissue pat-

ent.*

The question is of great importance because it affects

without exception every consent decree in which the valid-

ity and infringement of only an original patent has been

or may be acknowledged.

The radical departure by the Court of Appeals from the

established rule of law that a consent decree cannot be

modified without the mutual consent of the parties, coupled

with the fact that the novel question presented is one of

first impression and of great importance to the public,

particularly those dealing with patents, justifies this Court

in exercising its discretionary power of granting a writ

of certiorari.

In Baldwin v. Iowa State Traveling Men’s Association,

Case No. 445, decided May 18, 1931, 283 U. S. 522, this

Court reviewed the novel question concerning the applica-

tion of res adjudicata on the question of jurisdiction over

the person of the defendant in the court which entered the

judgment.

In Sheldon v. Metro-Goldwyn Pictures Corp., 309 U. S.

390 (decided March 1940), certiorari was granted by this

Court

‘‘in view of the importance of the question, which ap-

pears to be one of first impression in the application

of the copyright law.’’

See also Bacardi Corp. v. Domenech Treasurer, 311 U. S.

150 (decided December 9, 1940) ; United Carbon Co. v. Bin-

ney & Smith Co., 317 U. S. 228 (decided December 7, 1942) ;

*The original patent and the reissue patent are two different

patents. The original patent and the reissue patent have different

_file wrappers. The validity and infringement of the claims of the

reissue patent involve for determination questions not involved in

the determination of the validity and infringement of the original

claims. Frink Co., Inc. v. Erikson, 20 F. 2d 707 at 712 (C. A. 1).

24

Williams Manufacturing Co. v. United Shoe Manufactur-

ing Co., 316 U. 8. 364; Jacob Siegel Co. v. Federal Trade

Commissioner, 327 U. 8S. 608 (decided March 25, 1946).

Pornt ITI.

The Courts below held petitioner’s rejectors to infringe

reissue claim 1 because the result* of the operation of

petitioner’s rejectors was the same as that of the device of

reissue claim 1. It failed to consider the structural differ-

ences between such devices. In so doing, it is petitioner’s

belief that the Courts below having predicated infringe-

ment upon a mere showing of results, have departed from

the established test of infringement as laid down in Sani-

tary Refrigerator Co. v. Winters, 280 U. S. 30; Machine Co.

v. Murphy, 97 U. S. 120 at 121; Stoehrer €& Platt Corpora-

tion v. Lusse Bros., 7 F. 2d 87 at 88 (C. A.3); Anakin Lock

Works v. Dillon Lock Works, 292 F. 45 (C. A. 8); Craft

Tint Mfg. Co. v. Baker, 94 F. 2d 369 (C. A. 9); Ruth v.

Climax Molybdemum Co., 93 F. 2d 699 (C. A. 10).

The Court of Appeals by its decision in this case has

held a patent which dominates an entire industry, as being

infringed because of the mere fact that the accused device

accomplishes the same result as that accomplished by the

claimed device. As petitioner is respondent’s sole com-

petitor in the manufacture and sale of slug rejectors, a

conflict of decisions of Courts of Appeals of different cir-

cuits, is improbable. (See affidavit of William Patzer ap-

pearing in the Appendix hereof.) In such a situation, it is

highly improbable that this Court would ever have the op-

*The trial court held, and the Court of Appeals in this case af-

firmed, that the petitioner’s rejectors responded to the ‘‘means for

successively operating a movable plate and a movable blade’’ of the

combination of reissue claim 1, because the result of the operation

of the scavenger plate and wiper blade of petitioner’s rejectors was

the movement of the track carried by the plate from beneath the

arrested slug before the blade contacted the slug to eject it from

arrested position.

25

portunity to resolve conflicting decisions of Courts of Ap-

peals of different circuits. In view of such situation and

the great importance of the questions presented, this Court

under the authorities of Schriber-Schroth Co. v. Cleveland

Trust Co., 305 U. S. 47; Exhibit Supply Co. v. Ace Patents

Corp., 315 U. S. 126 at 136; Muncie Gear Works v. Out-

board Marine Mfg. Co., 315 U. S. 759,* is fully justified

in granting the writ of certiorari as prayed for.

WuerEForE, your petitioner prays that its petition be

granted, that the writ of certiorari be issued and the case

reviewed, and the judgment of the Court of Appeals re-

versed.

Respectfully submitted,

A.B.T. Manuracrurinc CorPoRATION,

Petitioner,

By Cuarence KE. THreepy,

Its Attorney.

*In the Muncie case, supra, this Court said:

‘‘While there was no conflict of decision with respect to these

claims, we granted certiorari in view of the question pre-

sented and because the patent dominates a substantial portion

of an industry so concentrated in the Seventh Circuit that

litigation in other circults, resulting in a conflict of decisions,

is unlikely.”’ (citing Schriber-Schroth Co. v. Cleveland Trust

Co., supra).

BRE RAI RR EE CF ENO EIA LY LT PEI OE BY EESTI SANE

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27

APPENDIX.

ed

AFFIDAVIT OF WILLIAM PatTzer.

State OF ILLINOIS, a

County oF Cook. ,

I, William Patzer, being duly sworn, depose and say that

Lam of legal age, a resident and citizen of the City and

State aforesaid and president of the petitioner company,

AB.T. Manufacturing Corporation; that I am now and

have been for a period of more than twenty years, engaged

and associated with the manufacture of slug rejectors for

use by the vending machine industry; to the best of my

knowledge and belief the respondent has granted no licenses

under the patent in suit, No. Re-21,301, other than the

license granted to petitioner; that petitioner is the sole

competitor of respondent in the manufacture and sale of

slug rejectors of the type involved in this litigation.

Further affiant sayeth not.

Wiuiam Patzer.

SusscriBED AND sworn to before me this .......... day of

November, 1950.

Notary Public.

PS SN Ie RN NR VETS SB RIS NAP SERS TNR OE tte