Eastman Kodak Co. v. McAuley, S.D.N.Y., Judgment, Law, casemine.com

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Docket Number

Motions

Motion to strike : Denied

Attorney(S)

          Pennie, Davis, Marvin & Edmonds, of New York City (George A. Gillette, Jr., of Rochester, N.Y., of counsel), for plaintiff.           Harry Price, of New York City, for defendants.

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Smart Summary

Factual and Procedural Background

This action was brought by Eastman Kodak Company against Charles McAuley and another for patent infringement concerning certain film reels. The defendants filed a third party complaint against Bell & Howell Company, alleging an unlawful pooling of patents to create a monopoly in interstate commerce. The plaintiff moved for a bill of particulars, to strike certain matter from the third party complaint, and to strike the defendants' demand for a jury trial. The defendants moved for leave to serve summons and third party complaint on Bell & Howell Company.

Legal Issues Presented

Whether the defendants should be granted leave under Rule 14(a), F.R.C.P., to serve a third party complaint on Bell & Howell Company.
Whether the plaintiff is entitled to a bill of particulars regarding the third party complaint.
Whether certain allegations in the third party complaint should be stricken as immaterial, impertinent, or sham.
Whether the defendants' demand for a jury trial should be stricken given the nature of the relief sought.

Arguments of the Parties

Plaintiff's Arguments

The procedure of serving a third party complaint on Bell & Howell Company is improper under Rule 14(a) because Bell & Howell is not liable on any express or implied relationship to the plaintiff or defendants for the patent infringement claims.
Certain allegations in the third party complaint are redundant, immaterial, impertinent, or constitute erroneous legal conclusions and should be stricken.
The defendants' demand for a jury trial should be stricken because the request for equitable remedies precludes a jury trial as of right.
Defenses based on laches and estoppel may be insufficient as a matter of law and should be dismissed rather than stricken.

Defendants' Arguments

It is permissible under Rule 14(a) to bring in the third party defendant to avoid circuity of action and resolve related legal relationships in one proceeding.
The third party complaint alleges a conspiracy violating the Sherman and Clayton Acts, with the plaintiff acting on behalf of Bell & Howell, justifying the third party complaint.
Defendants seek a declaratory judgment adjudicating their rights under their own patent and denying infringement of plaintiff’s patent.
The demand for a jury trial is proper because no equitable relief is sought, and issues of fact triable by a jury are involved.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Balcoff v. Teagarden et al., D.C., 36 F.Supp. 224, 225	Permissibility of third party complaint under Rule 14(a) to avoid circuity of action and resolve related disputes in one suit.	Supported granting defendants' motion to serve third party complaint on Bell & Howell.
Dewey & Almy Chemical Co. v. Johnson, Drake & Piper, D.C., 25 F.Supp. 1021	Same principle on third party complaints and joinder of parties.	Reinforced permissibility of third party complaint in this context.
Catalin Corp. of America v. Catalazuli Mfg. Co., 2 Cir., 79 F.2d 593	Patent issuance raises presumption against infringement of another patent.	Supported defendants’ right to seek declaratory judgment on patent rights.
Reis v. Rosenfeld, 2 Cir., 204 F. 282	Same principle regarding patent presumption.	Applied to validate defendants’ declaratory judgment claim.
Knowles v. 138 West Forty Second Street Corp., 2 Cir., 43 F.2d 929, 930	Patent presumption against infringement.	Used to deny striking declaratory judgment request.
Hann v. Venetian Blind Corp., D.C., 15 F.Supp. 372	Declaratory judgment proper to adjudicate patent rights.	Supported court’s discretion to allow declaratory judgment claims.
E. Edelmann & Co. v. Triple-A Specialty Co., 7 Cir., 88 F.2d 852	Declaratory relief in patent disputes.	Confirmed propriety of declaratory judgment in patent infringement context.
Leach v. Ross Heater & Mfg. Co., 2 Cir., 104 F.2d 88	Declaratory judgment in patent cases.	Applied to uphold defendants’ declaratory judgment claim.
Stadium Mfg. Co. v. Plymouth Pajama Co., D.C., 24 F.Supp. 779, 781	On motion to strike, facts as pleaded must be accepted as true.	Used to deny striking parts of third party complaint.
New York Life Ins. Co. v. London, D.C., 15 F.Supp. 586, 590	Discretion of court in granting declaratory judgments.	Supported court’s discretion to deny striking declaratory judgment request.
Lumbermen's Mutual Casualty Co. v. McIver, D.C., 27 F.Supp. 702	Declaratory judgment discretion and procedure.	Reinforced court’s decision to allow declaratory judgment claims.
Kraus v. General Motors Corp., D.C. 27 F.Supp. 537	Allegations relevant to controversy should not be stricken if not prejudicial.	Applied to deny striking certain allegations in third party complaint.
Huber v. Pillsbury Flour Mills Co., D.C., 30 F.Supp. 108	Same as above regarding allegations and prejudice.	Used to support denial of motion to strike allegations.
United States v. Edward Fay & Son, D.C., 31 F.Supp. 413	Insufficiency of legal defenses should be challenged by motion to dismiss, not motion to strike.	Guided denial of motion to strike defenses based on laches and estoppel without prejudice to motion to dismiss.
Williams v. Collier, D.C., 32 F.Supp. 321	Equitable relief precludes jury trial as of right.	Considered but distinguished because no equitable relief was sought here.
United States Fidelity & Guaranty Co. v. Nauer, D.C., 1 F.R.D. 547	Jury trial allowed for factual issues in declaratory judgment actions.	Supported defendants' right to jury trial.
Aetna Casualty & Surety Co. v. Quarles et al., 4 Cir., 92 F.2d 321	Jury trial in declaratory judgment cases involving factual issues.	Applied to uphold jury trial right.
Bellavance v. Plastic-Craft Novelty Co., D.C., 30 F.Supp. 37	Right to jury trial in patent infringement cases.	Supported denial of motion to strike jury demand.
United States v. Esnault-Pelterie, 299 U.S. 201, 57 S.Ct. 159, 81 L.Ed. 123	Jury trial rights in patent and related cases.	Reinforced defendants' entitlement to jury trial.
Heide v. Panoulias, 2 Cir., 188 F. 914, cert. denied 223 U.S. 722	Jury trial in patent infringement suits.	Supported jury trial entitlement.
Trustees of Masonic Hall & Asylum Fund v. Fountain Electrical, etc., Corp., 2 Cir., 218 F. 642	Jury trial rights in patent cases.	Applied to uphold jury trial demand.
Tyler v. Boston, 7 Wall. 327, 74 U.S. 327, 9 L.Ed. 93	Patent similarity or difference issues may be submitted to a jury.	Supported jury trial for patent infringement issues.

Court's Reasoning and Analysis

The court granted the defendants' motion to serve a third party complaint on Bell & Howell Company under Rule 14(a), reasoning that the allegations of conspiracy and joint action between plaintiff and third party defendant justified their joinder to avoid circuity of action and resolve related disputes in one proceeding. The plaintiff’s motion for a bill of particulars was granted with defendants’ consent.

The court carefully reviewed the plaintiff's motion to strike various parts of the third party complaint. It found that allegations seeking declaratory judgment regarding defendants’ patent rights and non-infringement were proper and not sham, relying on precedent that issuance of a patent presumes no infringement of another patent and that declaratory judgment is within the court’s discretion. Allegations directly related to the controversy were not unduly prejudicial and thus were not stricken. Defenses of laches and estoppel were properly pleaded under Rule 8(c) and not subject to striking; any legal insufficiency should be addressed by a motion to dismiss.

Regarding the demand for a jury trial, the court held that since defendants sought no equitable relief but only adjudication of rights and money damages, they were entitled to a jury trial. The Declaratory Judgment Act permits jury trials on factual issues in such cases. The court cited multiple precedents affirming the right to jury trial in patent infringement and antitrust actions where legal issues are triable by jury.

Accordingly, the motions to strike portions of the third party complaint and the jury demand were denied, while the motions for leave to serve the third party complaint and for a bill of particulars were granted.

Holding and Implications

The court granted defendants' motion for leave to serve a third party complaint on Bell & Howell Company, granted plaintiff's motion for a bill of particulars, and denied plaintiff's motions to strike portions of the third party complaint and to strike the defendants' demand for a jury trial.

The decision allows the third party complaint to proceed, including claims of conspiracy in violation of antitrust laws and declaratory judgment on patent rights. Defendants retain the right to a jury trial on factual issues, as no equitable relief is sought. No new legal precedent was established; the ruling applies existing rules and case law to the procedural motions presented, facilitating consolidation of related claims and preserving parties' procedural rights.

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EASTMAN KODAK CO. v. McAULEY et al.

LEIBELL, District Judge.

Defendants have moved pursuant to Rule 14(a), F.R.C.P., 28 U.S.C.A. following section 723c, for leave to serve a summons and a third party complaint upon Bell & Howell Company, an Illinois corporation alleged to have a place of business within this district.

The plaintiff has moved under Rule 12(e)(f) for a bill of particulars and for an order striking certain matter from the third party complaint as redundant, immaterial and impertinent. This motion involves several subdivisions which will be hereinafter discussed.

Plaintiff's amended complaint is predicated upon alleged infringements by defendants of United States Patents in the manufacture and sale of certain film reels. Defendants' third party complaint alleges that the plaintiff and the third party defendant ‘ have pooled their patents contrary to law and are using and have conspired to use these patents in such a manner as to give themselves an absolute monopoly in interstate commerce in such reels even though they have no valid basis patents covering the same’ to the damage of defendants.

With respect to defendants' motion for leave to serve the cross-complaint upon the third party defendant, plaintiff contends that such procedure is not proper under Rule 14(a) on the ground that Bell & Howell Company is not liable on account of any express or implied relationship either to the plaintiff or to the defendants for all or any of plaintiff's claims for patent infringement against the defendants.

The third party complaint alleges a conspiracy on the part of plaintiff and third party defendant, in violation of the Sherman and Clayton Acts, 15 U.S.C.A. § 1 et seq., to injure the defendants. Defendants allege further that plaintiff is acting in behalf of the third party defendant. Consequently it is permissible for defendants to bring in the third party defendant in order that ‘ circuity of action may be avoided, and that disputed jural relationships ‘ growing out of the same matter’ be resolved in one action.' Balcoff v. Teagarden et al., D.C., 36 F.Supp. 224, 225; Dewey & Almy Chemical Co. v. Johnson, Drake & Piper, D.C., 25 F.Supp. 1021. Defendants' motion for leave to serve this third party complaint is granted. [Compare Rule 13(b) and (h), F.R.C.P.]

Plaintiff has moved for a bill of particulars of certain allegations in the third party complaint and in view of defendants' consent thereto said motion is granted.

Plaintiff also moves to strike certain allegations from the third party complaint as impertinent, immaterial and irrelevant and the various phases of this motion will next be considered seriatim.

Paragraphs 5, 17(c) and 17(h) of the third party complaint are attacked by plaintiff as immaterial, improper and sham, and also those parts of the prayer for relief numbered III and IV. Defendants allege the granting to them of United States patent No. 2,226,825 and state such patent grants to them the exclusive license to make use and sell the film reels shown in the patent. In paragraph 5 of the third party complaint defendants seek an adjudication of their rights under said patent by a declaratory judgment. The court cannot say that those allegations are impertinent or sham. The plaintiff is suing herein for an infringement by defendants of plaintiff's patent. In this circuit the issuance of a patent to a defendant raises a presumption that the procedure or construction following the patent issued to a defendant does not infringe the patent of another. Catalin Corp. of America v. Catalazuli Mfg. Co., 2 Cir., 79 F.2d 593; Reis v. Rosenfeld, 2 Cir., 204 F. 282; Knowles v. 138 West Forty Second Street Corp., 2 Cir., 43 F.2d 929, 930.

In addition it is proper for defendants to seek an adjudication by declaratory judgment that they are not infringing plaintiff's patent and the extent of their rights under their own patent. Hann v. Venetian Blind Corp., D.C., 15 F.Supp. 372; E. Edelmann & Co. v. Triple-A Specialty Co., 7 Cir., 88 F.2d 852; Leach v. Ross Heater & Mfg. Co., 2 Cir., 104 F.2d 88. Upon motion to strike, the facts as pleaded must be deemed true. Stadium Mfg. Co. v. Plymouth Pajama Co., D.C., 24 F.Supp. 779, 781. The advisability of granting a declaratory judgment is within the sound judicial discretion of the court. I am of the opinion that defendants' request for a declaratory judgment should not be stricken at this time. Better procedure requires that the necessity for a declaratory judgment be left to the trial court. New York Life Ins. Co. v. London, D.C., 15 F.Supp. 586, 590; Lumbermen's Mutual Casualty Co. v. McIver, D.C., 27 F.Supp. 702.

Plaintiff seeks to strike certain alleged erroneous conclusions of law pleaded in paragraphs 5, 17(c) and 17(h) of the third party complaint. From a reading of these paragraphs it is apparent that the matter pleaded has a direct relation to the controversy herein. Inasmuch as the presence of these allegations cannot be said to unduly prejudice the plaintiff the motion to strike them will be denied. Kraus v. General Motors Corp., D.C. 27 F.Supp. 537; Huber v. Pillsbury Flour Mills Co., D.C., 30 F.Supp. 108.

Plaintiff also seeks to strike paragraphs 13, 14, 17(g) and the last four lines of paragraph 18 and exhibits F, G, H and I of the third party complaint on the ground that these allegations are impertinent, immaterial and irrelevant. These allegations set up defenses of laches and estoppel which are properly pleaded as such under the new Rules of Civil Procedure, Rule 8(c). Clearly these defenses cannot be stricken as sham or immaterial.

However, the basis for plaintiff's motion is actually that these defenses are predicated upon violation of plaintiff's patents by third parties and may not be availed of by defendants. This question of sufficiency in law should be attacked by a motion to dismiss for insufficiency rather than by motion to strike as impertinent or immaterial allegations. United States v. Edward Fay & Son, D.C., 31 F.Supp. 413. I will deny the motion to strike these allegations without prejudice to a motion to dismiss the defense for insufficiency in law.

Plaintiff also moves to strike out defendants' demand for a jury trial of the issues involved (Par. 17 of the third party complaint) contending that defendants' request for equitable remedies precludes the defendants from obtaining a trial by jury as of right. Williams v. Collier, D.C., 32 F.Supp. 321. But in defendants' prayer for relief there is no request for equitable relief. Defendants merely seek an adjudication of certain rights and money damages for any violation thereof. The fact that a declaration of rights is sought does not bar the defendants from a jury trial of the issues raised if these issues were formerly triable by a jury. The Declaratory Judgment Act, 28 U.S.C.A. § 400 (3), provides as follows: ‘ When a declaration of right or the granting of further relief based thereon shall involve the determination of issues of fact triable by a jury, such issues may be submitted to a jury in the form of interrogatories, with proper instructions by the court, whether a general verdict be required or not. (Mar. 3, 1911, c. 231, § 274d, as added June 14, 1934, c. 512, 48 Stat. 955; as amended Aug. 30, 1935, c. 829, § 405, 49 Stat. 1027.)’ See United States Fidelity & Guaranty Co. v. Nauer, D.C., 1 F.R.D. 547; Aetna Casualty & Surety Co. v. Quarles et al., 4 Cir., 92 F.2d 321.

Defendants are entitled to a jury trial upon the issue of infringement inasmuch as no equitable relief is sought. Bellavance v. Plastic-Craft Novelty Co., D.C., 30 F.Supp. 37; United States v. Esnault-Pelterie, 299 U.S. 201, 57 S.Ct. 159, 81 L.Ed. 123; Heide v. Panoulias, 2 Cir., 188 F. 914, certiorari denied 223 U.S. 722, 32 S.Ct. 524, 56 L.Ed. 630; Trustees of Masonic Hall & Asylum Fund v. Fountain Electrical, etc., Corp., 2 Cir., 218 F. 642.

Defendants are likewise entitled to a jury trial in an action at law for violation of Clayton and Sherman Anti-Trust statutes and upon the issue of unfair competition, where they are suing for money damages only.

A question of similarities or differences in patents may properly be submitted to a jury. Tyler v. Boston, 7 Wall. 327, 74 U.S. 327,9 L.Ed. 93.

Accordingly the motion to strike the jury demand is denied.

Settle orders on notice in accordance with this opinion.

Eastman Kodak Co. v. McAuley