Muskegon Piston Ring Company, a Corporation v. Ernest R. Olsen and National Piston Ring Company, a Corporation , 307 F.2d 85 ( 1962 )

CECIL, Circuit Judge.

This is an appeal from an order of the United States District Court for the Western District of Michigan, Southern Division, dismissing the complaint of the plaintiff-appellant. The complaint was dismissed on the motion of the defendants-appellees for the reason that it did not state a claim upon which relief could be granted (Rule 12(b) (6) F.R.Civ.P., 28 U.S.C.A.), in that it was not an action arising under the patent laws of the United States and the court had no jurisdiction to determine the issues presented. The parties will be referred to as plaintiff and defendants, as they were in the District Court.

We look to the complaint for the facts. The plaintiff is a Michigan corporation, with its principal office in Muskegon county, Michigan, and is the owner of United States patent No. 2798779, issued July 9, 1957, on application filed April 2, 1956. The defendant Ernest R. Olsen is a resident of Ottawa county, Michigan, and the defendant National Piston Ring Company is a Michigan corporation with its principal office in the Western District of Michigan.

The action is one for a declaratory judgment and is brought under section 2201, Title 28 U.S.C. Jurisdiction is claimed by virtue of sections 102, Title 35 and 1338, Title 28 U.S.C.

On May 9, 1957, the defendant Olsen filed an application, serial No. 658040, in the patent office of the United States for a patent. On or about July 10, 1958, he copied claims 1, 3 and 4 of plaintiff’s patent and requested an interference be declared between his application and the patent of the plaintiff. On October 20, 1958, an interference was declared which was still pending in the patent office at the time this appeal was perfected.

It is alleged in the complaint that Olsen, in his application for a patent and in its prosecution, charged that he was the inventor of the disclosure of plaintiff’s patent, that its subject matter was disclosed to plaintiff and other piston ring manufacturers prior to the filing date of the application for plaintiff’s patent and that plaintiff’s assignors wrongfully appropriated such disclosure in making their application for a patent. The plaintiff then denies the truth of these alleged charges or assertions of the defendant.

The plaintiff further alleged that Olsen “engaged in a course of unfair competition with plaintiff consisting of disparagement of plaintiff’s right to make and sell piston rings embodying 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.” The plaintiff also alleged that defendant threatened to sue plaintiff in the common law courts for wrongful appropriation of defendant’s claimed invention.

The National Piston Ring Company was named as a defendant for the reason that it had or claimed to have some interest through Olsen and that it joined with him in the course of conduct above described.

If this action is to be maintained in the District Court, the court’s jurisdiction must be within the provisions of section 1338(b), Title 28 U.S.C. “The district courts shall have original jurisdiction of any civil action asserting a claim of unfair competition when joined with a substantial and related claim under the * * * patent * * * laws.” Subdivision (a) of this section does not give the court jurisdiction as claimed by plaintiff. This gives the court “jurisdiction of any civil action arising under any Act of Congress relating to patents. . . .” No Act of Congress is alleged in the complaint as the basis of plaintiff’s cause of action. The allegations sound in tort, viz., unfair competition, libel and slander, threats against customers and interference with plaintiff’s right to enjoy the benefits of its patent.

Unfair competition, as charged, consists of disparagement of plaintiff’s right to make and sell piston rings embodying the invention disclosed in plaintiff’s patent. This is not unfair competition as it is generally defined in the federal courts. “It is a fundamental rule applicable to all cases of unfair competition that one man has no right to palm off his goods for sale as the goods of a rival dealer and that he cannot therefore be allowed to use names, letters or other indicia by which he may induce purchasers to believe that the goods which he is selling are the manufacture of another and this principle is applicable although no technical trademark is used by either.” James Heddon’s Sons v. Millsite Steel & Wire Works, 128 F.2d 6, 9, C.A. 6, cert. denied 317 U.S. 647, 63 S.Ct. 79, 87 L.Ed. 541. See also Louisville Taxicab & Transfer Co. v. Yellow Cab T. Co., D.C., 53 F.Supp. 272, 276, decree modified and affirmed 147 F.2d 407, C.A.6; Kellogg Co. v. Nat. Biscuit Co., 305 U.S. 111, 122, 59 S.Ct. 109, 83 L.Ed. 73.

Libel and slander, threats against plaintiff’s customers and interference with plaintiff’s right to enjoy the benefits of its patents, give rise to a cause of action under state law. True, a controversy between the parties is alleged, but whether the plaintiff is entitled to recover must be determined in the state courts. These alleged wrongs do not give rise to a cause of action under the patent laws of the United States. “A suit for damages to business caused by a threat to sue under the patent law is not itself a suit under the patent law. And the same is true when the damage is caused by a statement of fact — that the defendant has a patent which is infringed. What makes the defendants’ act a wrong is its manifest tendency to injure the plaintiff’s business and the wrong is the same whatever the means by which it is accomplished. But whether it is a wrong or not depends upon the law of the State where the act is done, not upon the patent law, and therefore the suit arises under the law of the State. A suit arises under the law that creates the cause of action. The fact that the justification may involve the validity and infringement of a patent is no more material to the question under what law the suit is brought than it would be in an action of contract.” American Well Works v. Layne, 241 U.S. 257, 259, 36 S.Ct. 585, 60 L.Ed. 987.

No question of infringement is involved here and there is no claim that the patent is invalid for lack of invention. Tuthill v. Wilsey, 182 F.2d 1006, 1008, C.A. 7. The defendants cannot sue for a cancellation of the patent on the ground of prior invention. Only the government can do that. (Eckert v. Braun, 155 F.2d 517, 519, C.A.7; United States v. American Bell Tel. Co., 128 U.S. 315, 9 S.Ct. 90, 32 L.Ed. 450; United States v. American Bell Tel. Co., 159 U.S. 548, 16 S.Ct. 69, 40 L.Ed. 255; Briggs v. United Shoe Machinery Co., 239 U.S. 48, 36 S.Ct. 6, 60 L.Ed. 138.)

The patent having been issued to plaintiff’s assignors is presumed to be valid. Section 282, Title 35, U.S.C. The burden of establishing invalidity rests on the defendants, if they assert it (idem). The defendants are in no position to raise that question in the federal courts from the facts as alleged in the complaint. The plaintiff is secure in its patent so far as may be ascertained from the complaint. The validity of plaintiff’s patent is not jeopardized, but its-business is.

The plaintiff must seek redress-, for this injury in the courts of the state-where the cause of action arises. American Well Works v. Layne, supra. Likewise, the defendant Olsen must seek his; remedy for the alleged unlawful and fraudulent appropriation of his prior invention in the state court. Lion Mfg. Corporation v. Chicago Flexible Shaft Co., 106 F.2d 930, 932, C.A.7; Papazian v. American Steel & Wire Company of New Jersey, 155 F.Supp. 111, 117, D.C.N.D.O.

An examination of the function of the Declaratory Judgment Act, Sec. 2201, Title 28 U.S.C., may be appropriate. It did not enlarge the jurisdiction of the courts over subject matter or parties (Borchard, Declaratory Judgments,, Second Edition, p. 233; Aralac, Inc. v. Hat Corporation of America, 166 F.2d 286, 291, C.A.3) or grant to a court jurisdiction which did not otherwise exist. Davis v. American Foundry Equipment Co., 94 F.2d 441, 443, 115 A.L.R. 1486, C.A.7; Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671, 70 S.Ct. 876, 94 L.Ed. 1194.

In this case the defendant Olsen was not in position to bring an action against the plaintiff in the federal courts. If he had manufactured the patented article and become an infringer he could have brought a declaratory judgment action against the patentee to have the rights of the parties determined. Similarly, the plaintiff would have had an action for infringement. “Prior to the passage of the Federal Declaratory Judgment Act the patentee was the only one in a position to initiate a suit against the alleged infringer or his dealers.” Aralac, Inc. v. Hat Corporation of America, 166 F.2d 286, 291, C.A.3; Grip Nut Co. v. Sharp, 124 F.2d 814, 815, C.A.7; Davis v. American Foundry Equipment Co., 94 F.2d 441, C.A.7.

The purpose of the Act was an '“intent to avoid delay and accrual of damages against one uncertain of his rights and to promote an early adjudication of the controversy between the parties without waiting until one of them should see fit to begin suit for coercive relief after damages had accrued.” Davis v. American Foundry Equipment Co., above cited, 94 F.2d at p. 442; Edelman and Co. v. Triple-A Specialty Co., 88 F.2d 852, 854, C.A.7, cert. denied, 300 U.S. 680, 57 S.Ct. 673, 81 L.Ed. 884; Milwaukee Gas Specialty Co. v. Mercoid Corporation, 104 F.2d 589, 591, 592, C.A. 7. Mr. Olsen could have no right of action in federal court against Muskegon for damages by virtue of his application for a patent until a patent was issued to him and no damages would accrue to him prior to the issuance of a patent. Gayler v. Wilder, 10 How. 477, 51 U.S. 477, 492, 13 L.Ed. 504.

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 Mus-kegon can bring an action for declaratory judgment in the federal court. Muskegon cannot confer jurisdiction on the court by a declaratory judgment action, if it did not otherwise exist.

It was said in Gully v. Interstate Natural Gas Co., 82 F.2d 145, 149, C.A.5, cert. denied, 298 U.S. 688, 56 S.Ct. 958, 80 L.Ed. 1407, “When, then, an actual controversy exists, of which, if coercive relief could be granted in it the federal courts would have jurisdiction, they may take jurisdiction under this statute, of the controversy to grant relief of declaration, either before or after the stage of relief by coercion has been reached.” (Emphasis added.)

We conclude that the cause of action set forth in the complaint did not arise under the patent laws of the United States and that the District Court was therefore without jurisdiction to hear and determine the issues presented.

Judgment affirmed.