Schnell v. Peter Eckrich & Sons, Inc.

PETITIONER:Schnell
RESPONDENT:Peter Eckrich & Sons, Inc.
LOCATION:Convertible Top Replacement Co.

DOCKET NO.: 219
DECIDED BY: Warren Court (1958-1962)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 365 US 260 (1961)
ARGUED: Jan 11, 1961
DECIDED: Feb 20, 1961

Facts of the case

Question

Audio Transcription for Oral Argument – January 11, 1961 in Schnell v. Peter Eckrich & Sons, Inc.

Earl Warren:

Carl Schnell et al., versus Peter Eckrich & Sons, Number 219.

Charles J. Merriam:

If the Court —

Earl Warren:

Mr. Merriam

Charles J. Merriam:

Thank you, Mr. Chief Justice and if the Court please, this case arose from two patent infringement cases brought in Fort Wayne, Indiana against Peter Eckrich & Sons, who were — who were and are an Indiana corporation and resident in Fort Wayne and against the Allbright-Nell Company which was an Illinois corporation having its main place of business in Chicago and not normally subject to service of process in Indiana.

During the — there — there are two cases because one patent issued after the first and was started and was joined in the second case.

During the progress of the case was it developed that the Allbright-Nell Company was defending the litigation and controlling it in accordance with a contract which is set forth on Page 2 of the record.

Under that contract, it had the right to defend the case to the exclusion of Peter Eckrich and it agreed also to pay all of the damages and costs that might be awarded in that proceeding.

Because of that contract and because of the admission that it was in fact defending, proceedings were undertaken to force the Allbright-Nell Company to answer and it was served in Illinois.

And after that service, it moved to quash the service to the summons of subpoenaing and that motion was granted on the ground that merely defending the case did not constitute a general appearance and thereby bind Allbright-Nell Company to be sued in a District Court, it was not ordinarily subject to sue.

The Court however gave no opinion and granted an interlocutory appeal in both cases which were then taken to the Court of Appeals for the Seventh Circuit which decided two-to-one to affirm the District Court and the petition was taken from that decision of the Court.

It’s our position here that a defendant so named, who after being named as a defendant in the case, continues to control its defense.

In this case, they even instituted a counter claim in the name of Peter Eckrich asking for attorney’s fees, which would have come to the Allbright-Nell Company, is in fact a party and has entered a general appearance in the case.

It is conceded by our opponents and there’s no dispute in the Court that Allbright-Nell Company would be bound by the decision under res judicata.

That is not contested and I think that perhaps the most pertinent thing in that point is to explore what this Court said way back in Lovejoy against Murray, in 3 Wall. 1,18, was the reason for finding a res judicata against a person who was not a named party.

And the language of the case which is — the case is referred to by our opponents, it’s not in our brief, but the language is so good that it appears to me that it might be well to read just a couple of sentences.

The Court in quoting from Greenleaf on evidence said, “Justice requires that every cause be once fairly and impartially tried, but the public tranquility demands that having once — having been once so tried, all litigation of that question and between the same parties should be closed forever.”

And then they, I skip a little bit, “Under the term “parties” in this connection, the law includes all who are directly interested in the subject matter and had a right to make defense or to control the proceedings and to appeal from a judgment.”

This right involves also the right to adduce testimony and to cross examine it, examine the witnesses adduced on the other side.

Earl Warren:

What is that case Mr. —

Charles J. Merriam:

That is Lovejoy against Murray, 3 Wall. 1, 18.

It is cited in the brief of our opponents and it is also approved in another case cited by our opponents, the Souffront case in 217 U.S. 475.

In other words, if we go back to establish the basis upon which res judicata is established in this case, and it is admitted that it is here, is because the party who is so estopped is in fact a party and should be treated as one.

And if that is so, it is our position that when he comes into a case as the Allbright-Nell Company has done here, takes over the control of the defense, examines our witnesses and his own, he should be subject to the right of discovery on our part and he should be subject to the right not to be bothered by other suits brought by him.

And as was shown in — in petition for certiorari 389 which is still pending before this Court, the Allbright-Nell Company did institute a declaratory judgment suit in Illinois on one of the — on the reissue of one of the patents involved in this case.

And it’s our position that that kind of thing ought not to be permitted merely by dodging behind the unanimity which the defendant has here in effect established by not intervening as he has a right to do under Rule 24 of the Rules of Civil Procedure.

Rule 17 of course says that the case shall be prosecuted in the name of the real party in interest and I gather from the language of the heading which applies both to plaintiffs and defendant that the word “prosecute” is intended to cover both a plaintiff and a defendant.

At any rate, the filing of a counter claim here asking relief for the benefit of the Allbright-Nell Company would seem to well bind it within Rule 17.

Felix Frankfurter:

Of the — the respondent isn’t a real party in interest, is he?

I mean he can — if he is the real party in interest or — and you try to sue him on that basis, you wouldn’t have succeeded, would you?

Charles J. Merriam:

I think we would, Mr. Justice Frankfurter.

Felix Frankfurter:

In this case?

Could there be jurisdiction?

Charles J. Merriam:

Well, not jurisdiction in that state, no.

Felix Frankfurter:

Well, All right.

Charles J. Merriam:

— no right.

But the —

Felix Frankfurter:

That’s my point and you’re really — the whole controversy is centered around the venue provision and whether or not it’s been waived.

Charles J. Merriam:

Well, I think that’s so.

Felix Frankfurter:

Therefore, and I don’t see how to talk about real party in interest helps you any because if it is a real party in interest, then certainly you haven’t got venue in the Seventh Circuit.

Charles J. Merriam:

In the — in Indiana we would’ve in —

Felix Frankfurter:

In Indiana.

Charles J. Merriam:

— and in Illinois which is still the same circuit.

Felix Frankfurter:

I beg your pardon.

Would you?

Charles J. Merriam:

No, we would not if we had sued merely the Allbright-Nell Company in Indiana.

Felix Frankfurter:

Although in — in the sense it is the real party in interest to this litigation?

Charles J. Merriam:

That’s right.

Felix Frankfurter:

So that’s — what that looks to me is that either have a technical question, isn’t it?

We’ve had interchangeably used terms a little bit in your reference, in all of situations.

Charles J. Merriam:

Well, actually, of course in the proceedings in this case where it is controlling the situation and has come in to the Court and take an advantage of its processes —

Felix Frankfurter:

Well, how could it come in, who brought him in?

Charles J. Merriam:

No, it came in, in the first case before we brought the man.

In the first case, was brought only against Peter Eckrich originally.

Then when the contract was discovered, the pleadings were amended to include Allbright-Nell Company.

The second case, they were named in the very beginning.

I — I make no point of the difference; it’s merely a matter of fact.

Felix Frankfurter:

Well, did they come in and any — in any technical venue sense?

Charles J. Merriam:

No.

They haven’t done nothing in the case except to control it and it’s our position that does waive a venue but they — that is the only thing they have done.

They did not come in and waive service of process.

Charles J. Merriam:

They have done everything they can to protect themselves if under these circumstances they can protect themselves.

Felix Frankfurter:

Suppose you hadn’t named them and they had conflict — they had conference that’s able or actively had conducted the litigation, would that have been a waiver?

Charles J. Merriam:

Well, under the Ocean Accident case in 143 F.2nd which where that same thing happened, they held that they could name there was a party even after the case was over.

We don’t have to go that far.

In that case, the — after — after the proceedings, the insurance company was named as a party, it could not have been served in Ohio and that was a Sixth Circuit case.

Our opponent’s assert that the statute of Ohio gave jurisdiction outside of the State to serve an Illinois insurance company but the Court found otherwise because it — it quashed the service of summons on the company but held by having defendant, it was a party and could be so named and proceeded against it.

Felix Frankfurter:

The defended meaning that they actually (Inaudible) comfort to charge him a litigation?

Charles J. Merriam:

Yes, sir.

Felix Frankfurter:

And that’s what is called defending a suit for venue purposes.

Charles J. Merriam:

For venue purposes, they held that in that case, the —

Felix Frankfurter:

In that circuit (Inaudible)

Charles E. Whittaker:

Do I understand, Mr. Merriam that after you brought this and it should join Allbright-Nell, some type of process is extended to (Inaudible) the — it thereafter came in and moved to quash, the court sustained the motion to quash that process?

Charles J. Merriam:

That’s correct.

Charles E. Whittaker:

And thereafter, it moved to dismiss and that case is dismissed, is it correct?

Charles J. Merriam:

Yes, sir.

Charles E. Whittaker:

Now then, is it your claim that party did thereafter in defending the Peter Eckrich Company under this contract constituted an entry of appearance by the Allbright-Nell Company in the case?

Charles J. Merriam:

No, it’s our position that what is done theretofore in defending on behalf of Peter Eckrich & Sons constituted a general appearance.

The only reason for the service, Mr. Justice Whittaker was that up to that time, we had no way of establishing on the record that Allbright-Nell was in fact there.

That is an admission of Peter Eckrich & Sons that the Allbright-Nell Company was present, did not seem to us to be a sufficient basis on the record for so finding.

It was only after they were named as a party and did something that there is a basis on the record which would avoid collateral attack.

And that is the basis upon which there are quite a number of cases holding that it is not proper to add a finding in the record that so and so was defending the case where he is not named as a party because in another suit where he can say, you found that but I wasn’t in fact a party and it’s not binding on me.

Charles E. Whittaker:

I’m not sure I understand.

What if you say what Allbright-Nell had done before it was dismissed of is the subject, matter you rely on?

Charles J. Merriam:

Yes, sir.

Charles E. Whittaker:

Now, what it had done before was its own defense wasn’t it, moving to quash, and then to defend?

Charles J. Merriam:

No, there had been other proceedings, Your Honor.

There’re a number of depositions taken in the case and there had been motions.

There — there are number of depositions taken.

I — I know we had taken some, I think they had — the Peter Eckrich have taken some.

There was a counterclaim filed in the name of Peter Eckrich asking for attorney’s fees.

Charles J. Merriam:

Those are the things which we say constituted the waiver not the moving to dismiss nor do we face any claim of jurisdiction on the service in Illinois.

Felix Frankfurter:

But were — were all the — all the other actions taken in the name of Peter Eckrich?

Charles J. Merriam:

Yes, sir.

Felix Frankfurter:

Then how — how do you charge those against Allbright except that they were naturally interested under their agreement and as the whole of the tracking (Inaudible)?

Charles J. Merriam:

It is our position that they under their contract were appearing in a situation where they were acting as a party as defined by this Court in Lovejoy against Murray.

Felix Frankfurter:

That’s the question, whether it was a party.

Charles J. Merriam:

Well, in Lovejoy —

Felix Frankfurter:

A party is a very technical term, isn’t it or a concept?

Charles J. Merriam:

The language which I read in —

Felix Frankfurter:

I know language, I know — I mean language but let’s analyze this, Mr. Merriam.

What — a party then is somebody who’s merely is under a contract that is on this customer, is that it?

Charles J. Merriam:

No, a party who is under a contract to do it and does so in the —

Felix Frankfurter:

Does so.

Charles J. Merriam:

— in case and acts in such a way as to become bound the result of the litigation.

Felix Frankfurter:

Well, it maybe that the consequence over the — the whole process of a litigation may bind them on — on that theory to what extent to that runs, but where the threshold here, namely whether the mere fact that he’s carrying out his contract of the customer makes him a party and the venue set for the term and Congress has darn good reasons that made these localizing provisions or limitations.

Charles J. Merriam:

That is correct.

They — the have a venue privilege with, they may or may not waive.

There isn’t a question they can waive it.

Felix Frankfurter:

I’ve done my share in favor of getting waiver, Mr. Merriam.

Charles J. Merriam:

Yes, Your Honor.

Charles E. Whittaker:

Mr. Merriam, would your rule, if I understand it, not make every indemnitor, every liability ensure then a party to — a direct party to every suit for damages within the coverage of the policy?

Charles J. Merriam:

Not unless he did in fact go in and take over the litigation in his own interest.

Charles E. Whittaker:

Well, don’t they always do that even that the policy so provide.

Charles J. Merriam:

I think that the policies normally do so to provide it.

I assume that normally, they’re carried out and it would certainly cover the ones which did and that’s what the Ocean Accident & Guarantee case in the Sixth Circuit did.

They — they held — they — the insurance company which defended the case to be a party.

Charles E. Whittaker:

Well, your law doesn’t allow direct suits against liability insurance, doesn’t it, in Illinois?

Charles J. Merriam:

Well, I — that’s not my phase of the practice but it’s my understanding that you’re not — that you’re correct and you’re not even allowed, as I understand it, to name the insurance company or to utter any statement about the fact there is an insurance company to the jury.

Charles E. Whittaker:

Only one state provides momentarily more like it does and that is Louisiana.

Charles J. Merriam:

The situation so far as authority’s goal is that there are — the case below or is against me with the dissenting opinion of Mr. — of Judge Platt, there is the Ocean Accident case in the Sixth Circuit in my favor.

Charles J. Merriam:

Since the petition was allowed, the case of Dow versus Metlon in 281 F.2nd was decided by the Fourth Circuit and although Dow was my client, I did not know about that case until after it was reported and that case did not consider any of the really relevant law — earlier authority, it missed even the District Court cases in its own district.

It did not cite Ocean Accident and —

William O. Douglas:

What is that citation?

Charles J. Merriam:

281 F.2nd 292, Dow Chemical against Metlon.

The — our opponents have relied heavily upon the case of Merriam against Saalfield in 241 U.S. 22 and 28 but that case did not do anything more than decide that there was no res judicata present.

What happened there was that a copy right suit was brought in Ohio against Saalfield and after it had been remanded to the District Court or the Court of Appeals before a final judgment was entered an ancillary supplemental proceeding was filed against Ogilvie who was a New York resident and the Court held that, one, that there was no res judicata on — on the basis that he had defended.

The Court held there was no res judicata that would justify joining him and second, that even if there were, which is of course a dictum, this was not the proper kind of an ancillary proceeding (Inaudible).

So, that it did not attempt to pass upon the question that we have here either in the decision or in the dictum with which it followed it up.

Earl Warren:

Mr. Merriam, do you make any distinction at all between the case of a mere indemnitor such as an insurance company and a — and a, say, an automobile accident case and this case where it is claimed that — that the indemnitor himself was a tortfeasor and a proper party in — in the case had he been in the jurisdiction.

Charles J. Merriam:

I haven’t tried to, Mr. Chief Justice but I think one might well be done and a distinction might be made.

In this case of course, not only is there a charge that which is admitted that the devices here were made by the Allbright-Nell Company, there’s also a charge that the — there was a conspiracy between the Peter Eckrich & Sons and Allbright-Nell Company to have — to infringe the patent.

And while the factual basis of that is not shown here, the charge is made in the complaint and we feel it was justified.

I think a — a distinction might well be made upon that on the ground that the Allbright-Nell Company was not only defending its contractual liability here, but its own right.

And it of course, if there is a judgment of patent validity would be bound by it and therefore, it sells to other people.

This don’t appear in the record but it is in the record if it’s in the business of making them and I don’t think it’s hard to assume their (Inaudible) sales would be in jeopardy.

So, that’s here not only because of a contact but directly in its own interest for other matters and that might be a ground of distinction although we hadn’t felt it necessary to make it in the course of counterclaim which is filed here in that — in the name of Peter Eckrich asking for recovery which would go only to Allbright-Nell Company, is an additional ground.

We also think it’s important to preserve as this Court said in the Kerotest case to — and — I haven’t got the citation, I have only cited in the brief that there should not be more than one case on the same subject and the war should all be fought out in one spot would apply.

These people could’ve intervened under Rule 24 and come here or it has come to Indiana and have the whole war.

Instead of that, we have a war going on in the Indiana and another one which has been started on part of the subject matter in Illinois and it seems to us that the — the whole doctrine of what should fairly be done is best served by holding that a defendant who comes in and takes advantage of the discovery rules should be subject to them at the same time.

The Kerotest is 342 U.S. 181.

Felix Frankfurter:

Those might be argued, aren’t you going to — if Allbright have the principal people then why don’t you go into their jurisdiction and sue them there?

Charles J. Merriam:

Well that — actually, the time this suit was filed, the device was in Indiana that we were suing on, and at that time, it was the only one, but of course now, the — we could sue Allbright-Nell in Chicago, we couldn’t sue the Eckrich Company there who was a party with conspiracy.

Felix Frankfurter:

Well, after all by this (Inaudible) sending forth.

Charles J. Merriam:

Yes, and this happens or the Eckrich Company has agreed that it will go to Illinois if we ever go there but that should have nothing to do with the rights and we were the ones who selected the forum in the beginning and — and started there.

It does change a number of rights as to witnesses and depositions which they haven’t taken.

Felix Frankfurter:

And you are suggesting — what kind of a question is — and determined by some ultimate principles, a very tricky character.

Charles J. Merriam:

Well, sometimes it is and sometimes it isn’t, Your Honor.

I don’t think that the — the facts in this particular case really should determine what the words should be.

Felix Frankfurter:

No, no, I understand that but I mean even the general considerations on an ultimate consideration that you — the patent venue statute is a particular statute, isn’t it?

Charles J. Merriam:

Yes, sir.

Felix Frankfurter:

With particular provisions deferring from other venue statutes (Inaudible)

Charles J. Merriam:

Well, this Court has so held.

Earl Warren:

Mr. Rathburn.

M. Hudson Rathburn:

May it please the Court.

So that I don’t forget it, I would like to first refer to the Dow Chemical case in Mr. Merriam’s statement.

That case did not consider the early authorities that he had just cited.

On Page 297 of 281 F.2nd, the Court in the Dow Chemical case cites and paraphrases the Souffront case which Mr. Merriam just mentioned.

And they said that the principle of Souffront cannot be extended to satisfy venue requirements and to make one defending an action in the name of another party to the record to settle in (Inaudible).

So, the Court in the Dow Chemical case did consider the older authorities.

As — as respondent views this case, we have no question here of statutory interpretation, but that and venue statutes have been interpreted by this Court in Stonite and Fourco and there’s no dispute as to the fact that they exclude their — Section 1400 (b) exclusively governs patent problems and venue cases.

And neither is there any question as to whether or not venue or jurisdiction over the person can be waived, either expressly or by a course of conduct.

The respondent agrees and concedes that such a waiver can be made.

Marble and — the old case of Marble Metals versus — versus General Electric say that at 287 U.S. 430 and referred to in the Fourco case, clearly sets forth that venue maybe waived by conduct.

The question before the Court is simply this whether or not in a patent case, the course of conduct which is heretofore, been universally considered not to be the waiver should now be so considered.

Now petitioners refuse to meet that problem, they don’t.

They add — they seem to concede at least in their briefs, I’m not sure what Mr. Merriam’s position was during his argument that a manufacture not subject to jurisdiction or venue, they openly conduct the defense of his custom or without waiving its venue provisions if it is not named as a party, but that if it is named as party, the opposite result is reached.

I have yet to hear any adequate reason (Voice Overlap) for — I beg pardon?

Felix Frankfurter:

Is that the clear tort distinction that he made?

M. Hudson Rathburn:

That’s the distinction that he makes.

Charles E. Whittaker:

Just naming it as a party —

M. Hudson Rathburn:

He — I think —

Felix Frankfurter:

— although concededly — although concededly venue precludes bringing it into Court —

M. Hudson Rathburn:

That’s it.

Felix Frankfurter:

— if it conducts to the effect?

M. Hudson Rathburn:

That’s correct, Your Honor.

But I think he also concedes that if it is not named as a party, it can do exactly the same thing and there won’t be any way to bring it in the Court.

Felix Frankfurter:

How many — how many Court of Appeals cases have flatly adjudicated this problem?

M. Hudson Rathburn:

There are four that I am familiar with, Your Honor.

Felix Frankfurter:

And —

M. Hudson Rathburn:

One is the Freeman Sweet case which is cited in our brief.

Felix Frankfurter:

What are they (Voice Overlap) —

M. Hudson Rathburn:

The Freeman’s —

Felix Frankfurter:

— hurry up.

M. Hudson Rathburn:

The second one is the Dow Chemical case which is decided in the Fourth Circuit.

Felix Frankfurter:

That’s this — this 281?

M. Hudson Rathburn:

Yes and there’s a case in the Eighth Circuit which is cited at — which is 25 — no this, no I’m sorry, Your Honor, 96 F.2nd 979.

Felix Frankfurter:

That’s the Maine case (Inaudible)

M. Hudson Rathburn:

Kresge versus Winget Chemical Kickernick Co.

Hugo L. Black:

It’s not in your brief?

M. Hudson Rathburn:

Yes sir.

They’re all in our brief.

Hugo L. Black:

How do you spell that?

M. Hudson Rathburn:

Kresge Company, S. S. Kresge Company versus Winget Kickernick Company at 97 F.2nd 979, that’s cited at page 11 of our brief.

The Freeman Sweet case is cited at page 10 and the Dow Chemical case at Page 11.

Felix Frankfurter:

What’s the fourth, that — that’s three as I count it?

M. Hudson Rathburn:

The fourth one is this case, Your Honor.

Felix Frankfurter:

Oh, I beg your pardon.

Now, you started up by saying, the universal practice or — or was it universal —

M. Hudson Rathburn:

It has — I —

Felix Frankfurter:

What — what I want to know is this?

These four Court of Appeals’ decisions —

M. Hudson Rathburn:

Yes.

Felix Frankfurter:

— which deal precisely — explicitly with this problem, what is the decision of the four?

Are they all to your way?

M. Hudson Rathburn:

Yes, sir.

Felix Frankfurter:

What about District Courts?

M. Hudson Rathburn:

About what?

Felix Frankfurter:

District Courts.

M. Hudson Rathburn:

District Courts?

There are two —

Felix Frankfurter:

Of course there and those four —

M. Hudson Rathburn:

Yes.

Felix Frankfurter:

— had come up in the District Court, any — any District Court that didn’t go up?

M. Hudson Rathburn:

Yes there are two District Court cases in Illinois which petitioners rely on, both of which were appealed but in neither of which was this point raised on appeal and the court below speaking of them said that they could not be considered as adjudicating the point here in issue.

Felix Frankfurter:

Now, when you say patent law so patent practice, so why do you depend on what might be called practice.

M. Hudson Rathburn:

Yes.

Felix Frankfurter:

Are there any other — any other relevant material except the four decisions?

What do they — what do their reputable right on dealing with this problem there, is there any?

M. Hudson Rathburn:

I don’t think there has been any comment on it by writers on this particular problem that we have here.

Felix Frankfurter:

It calls upon —

M. Hudson Rathburn:

And whether you waive venue by this particular conduct.

Felix Frankfurter:

How — how recurrent is this?

M. Hudson Rathburn:

Well, the first to these cases that I’ve cited goes back to 96 F.2nd, Your Honor and those are all the cases that we’ve been able to find.

So it’s — to me, I didn’t know the other cases existed.

This was a completely novel theory.

I had read all the cases that say that by coming in and defending in a patent infringement suit by openly defending, it will become res judicata after final judgment.

But this proposition of bringing you in at the start of the case because you have been named and because you were controlling the defense was a completely novel proposition to me until this case came up.

Felix Frankfurter:

Well, the — controlling the defense isn’t decisive as you indicate?

M. Hudson Rathburn:

It is a res judicata.

Felix Frankfurter:

Yes.

M. Hudson Rathburn:

Yes.

Felix Frankfurter:

But I mean for that — but it doesn’t — that doesn’t take care of the venue problem.

M. Hudson Rathburn:

No, it doesn’t.

Felix Frankfurter:

So that the differentiation is the fact that you’re a main defendant.

M. Hudson Rathburn:

Yes, sir.

Felix Frankfurter:

But of course that is —

M. Hudson Rathburn:

That is their position.

Felix Frankfurter:

That’s the way the law grows by having lawyers take a new (Inaudible)

M. Hudson Rathburn:

Yes it is, Your Honor.

Now, this gives a rather unusual situation if this rule is adopted because it puts in the hands of the plaintiff complete control over whether or not the same course of conduct will be considered a waiver of the venue statute.

M. Hudson Rathburn:

If he names you, he said it is.

If he doesn’t name you, then you haven’t waived the venue statute and I don’t believe that as I — seven minute ago, I’ve — I’ve failed to seem the distinction.

Now, I’d like to look at some of the results that would follow.

If this rule is adopted and the manufacturer is named, there’s only — there are only two choices for a reputable manufacturer.

He can appear and defend a foreign jurisdiction and that disposes of the venue statute or he can file a declaratory judgment against the plaintiff in the plaintiff’s home jurisdiction and that will probably be a foreign jurisdiction.

So the protection that Congress has afforded to people charged with patent infringement is substantially initiated.

Felix Frankfurter:

I — I didn’t quite follow, he can get a declaratory judgment in his home?

M. Hudson Rathburn:

In the patent owner’s home.

Felix Frankfurter:

In the patent owner’s —

M. Hudson Rathburn:

Which maybe foreign to the manufacturer’s home forum.

So in either case, he has to litigate somewhere other than where Congress said he could be sued.

Now, if he’s not named, he has another choice.

According to this theory of petitioners, he could appear — not — not appear, I’m sorry.

He could take over the control of the defense but if by an amended complaint he was suddenly named the defendant, he’d have to stop or he’d be in court.

Now, I realize that amendments to complaints are within the jurisdiction or the discretionary powers of the District Court and they might not be granted, but I don’t Congress intends to leave venue questions up to the discretion of the District Court.

Felix Frankfurter:

What do you say to the — well, I’m interrupting?

M. Hudson Rathburn:

If — no.

Felix Frankfurter:

You go on ahead.

You — is there other instance?

M. Hudson Rathburn:

No, I — I think that petitioner’s arguments on the other side are — are largely words.

They say Allbright-Nell is actually present in court.

That doesn’t mean anything.

Allbright-Nell has not been represented in that courtroom except in connection with its motion to dismiss.

We, as attorneys for Peter Eckrich have no authority to act for Allbright-Nell in that case or put Allbright-Nell in the case.

They say that Allbright-Nell can take full advantage of the judicial processes of the District Court.

Again, that doesn’t mean anything.

We had — Allbright-Nell has no rights in that Court.

In fact, it’s been dismissed out of the Court.

All it’s doing is assisting Peter Eckrich in protecting its rights and there’s no affirmative relief being sought for Allbright-Nell.

Mr. Merriam once referred to the Peter Eckrich counterclaim for costs and attorney’s fees but those are not sought in behalf of Allbright-Nell and they couldn’t be awarded to Allbright-Nell in this case.

M. Hudson Rathburn:

Only after the trial can it be determined whether any or all of these expenses were paid by Allbright-Nell or Peter Eckrich and Peter Eckrich certainly cannot be awarded costs for any of the expenses that Allbright-Nell paid.

It’s my understanding in the few cost matters I’ve had that you have to make a showing that the items you asked for as costs have actually been expended by the person asking for the costs.

Certainly, the fact that Peter Eckrich has asked for costs is not a submission to jurisdiction by Allbright-Nell.

Now —

Felix Frankfurter:

Either the —

M. Hudson Rathburn:

— this question — excuse me.

Felix Frankfurter:

Do you agree that if this litigation on the merits had gone against Eckrich, it would’ve found Allbright?

M. Hudson Rathburn:

Absolutely.

Felix Frankfurter:

Well, then one naturally ask this question which I take it was rather the — who makes that, Mr. Merriam’s argument, namely if a non-technical party is so involved in the litigation into which he could not have been subject and in which — into which he could not have been drawn and into which he is not a formal party, yet he is so involved and related with it, inexplicably tied up with it that the judgment is foreclosed against him, why withdraw practical purposes before the Court.

M. Hudson Rathburn:

Because if res judicata is the only problem he has, there will have to be a new suit brought against him in his home jurisdiction where he is present and where an accounting will have to be held.

That is the one of the disadvantages of being, as you say, pulled into a foreign jurisdiction.

The other one is discovery proceedings.

Now, as a practical matter in this case, I don’t think the plaintiffs have been deprived of any discovery.

Allbright-Nell witnesses have testified voluntarily and they’ve been called, but there are hardships that can be inflicted on a corporation if it is sued in a foreign jurisdiction so far as taking depositions of its officers.

If their notice for deposition and the place where the sued is filed, they have to go in and get a protective order.

Some judges won’t give it to you.

Some judges will say, “The suit is here, you’re a party, you have to be here.”

Those are the only practical differences.

I think the difference is largely a matter of principle that we‘re concern with here is to whether or not by this sort of conduct, a patent owner can practically avoid the venue statute simply by running around and filing suits against costumers who own maybe one or two machines when they know about the manufacturer, they can sue the manufacturer.

In this case, both the plaintiff and Allbright-Nell, I should call the residence and the — the principle attorneys from both companies are in Chicago and I think Mr. Merriam didn’t quite state the whole case when he was asked about suing in Fort Wayne.

The — the machine that they charged to infringe was in Fort Wayne but it had been manufactured in Chicago and it had been manufactured not obviously before it was sent to Fort Wayne for use.

So, the infringing act that — that Allbright-Nell could’ve been charged with was completed and it was done in Chicago.

This is simply a question of they’re having, for some reason that I haven’t been able to find out, preferred to sue in Fort Wayne and having made that choice I don’t think that they should be permitted to draw the manufacturer in.

It happens that Fort Wayne and Chicago or not very far apart in this case but it could as well have been Florida and I’ve been in cases where that happened and where I resisted successfully exactly this thing but in the District Court.

This case —

Felix Frankfurter:

I quite —

M. Hudson Rathburn:

I beg your pardon.

Felix Frankfurter:

I beg pardon your.

I quite agree with you that the whole question is whether you have in any two sense waive of you?

M. Hudson Rathburn:

Yes.

Felix Frankfurter:

But what’s still — I’d like to get enlightment indictment on is why if Allbright are so committed to this litigation on purposely using different words, if they’re so committed to this litigation by their conduct in it but a human practical conduct in it that the fate of their interest is depending on the outcome of this litigation, that’s what I’m asking, am I not?

M. Hudson Rathburn:

Yes.

Well, the Constitution —

Felix Frankfurter:

Why if that is so, why isn’t such commitment, such — such dependence of their interest of safeguarding of their interest in this litigation to which they’re not a party, so intrinsically joining up with an entering into a — a relationship to, that that’s the best use of the term to the litigation that one case say they waive the right to abstain from being so involved.

M. Hudson Rathburn:

Because Your Honor, they have preserved the right not to be made a formal party so that they can’t get out.

Allbright-Nell can drop the defense of this suit tomorrow if question — if circumstances change.

They’re — they may cancel their indemnity agreement with Peter Eckrich for example.

They may decide that they want to change their structure and that this case isn’t worth defending involving only the one machine that Peter Eckrich makes.

Felix Frankfurter:

Well, they may —

M. Hudson Rathburn:

They are flexible as long as —

Felix Frankfurter:

They may think this isn’t a good case on which to go up if this was against him.

M. Hudson Rathburn:

That — that is correct.

And as long as they are not made a formal party, as long as it is not held that they have waived, they are free to do that.

Once there’s been a waiver they can’t withdraw from it.

Now, there are some other problems that arise and they ought to be considered I believe and that is whether or not what effect this would have on the general practice of giving indemnity agreements.

I think it can be said that it is the general practice of most manufacturers to defend their customers and that in these agreements, the manufacturer usually assumes — who assumes the financial risk, insist on the right to control of defense.

Now, first, I think it can’t be again said that patent indemnity agreements are socially desirable.

They ensure retailer or an end user of a manufacturer’s products that he won’t be subject to a claim for damages and he won’t be deprived to his use of the product.

Let’s say, serve to protect a group which are individually weak and who generally can’t — could not afford the expense of conducting a full-fledged defense of a patent infringement suit.

Now, they’re also desirable because they make it difficult for a patent owner who has a weak patent to assert it against weak defendants because generally, the manufacturer is the one and the only one who can vigorously resist an uncounted — founded claim of patent.

As we have previously indicated, the — that the manufacturer’s only recourse would be the two choices that I said, declaratory judgment or no indemnity agreement.

And while this might not be anything more than inconvenience to a large manufacturer, it could be disastrous to a small manufacture if he has only the choice of defending himself for pursuing a declaratory judgment suit in a — in a forum far removed from his home base.

Now, I’d like to look well briefly, this waiver rule that petitioner urges, would probably result in manufacturer’s failing to indemnify others and that — and if that were so, if that notice would be able to select favorable forums and by a series of suits against weak resistance or non-resistance build up a situation where that would greatly strengthen the prima facie validity of their patent and that it would be adjudicated in a weakly defendant suit and each time that happens it gets strong in the next suit.

Now, third, I think we should look at what advantages the patent owners get if this rule is adopted.

First, it gives them a virtually unlimited choice of jurisdictions in which they can force a manufacturer to defend the patent infringement action.

And it was to avoid just exactly this situation that the venue statutes in patent cases, the present statute and its predecessors were adopted.

In the Stonite case, in —

Hugo L. Black:

In which case?

M. Hudson Rathburn:

Stonite, 315 U.S., decided in our brief at Page 566.

This Court commented on the fact that that was the exact purpose of the special patent statute to limit jurisdictions and which patent infringement actions could be brought.

M. Hudson Rathburn:

The second patent owner would have a somewhat improved position as far as pretrial discovery is concerned, but they can get that by suing the manufacturer in his own jurisdiction.

Under the venue statutes, a patent owner can balance the advantage of suing a customer against advantages of obtaining full pretrial discovery against a manufacturer.

I don’t think he should be given both choices.

He can pick the customer where he wants to litigate and either preclude the manufacturer from defending or bring him in as a formal party to the litigation.

So far as I’ve been able to find, this exact case has never — this exact situation has never been faced by this Court in a patent case.

However, I view the Merriam v. Saalfield case somewhat differently than petitioner does.

That was a case involving unfair competition.

After the — if the case was openly defended by the owner of the copyrighted materials that were involved and this is what the Court said after the judgment against the named defendant, a supplemental bill was filed naming the person who had openly defended, a man named Ogilvie.

And the Court said, “Appellant’s case on the merits is rested upon the theory that Ogilvie was privy to the original suit against Saalfield and an actual who not an ostensible party thereto.”

In such a real sense that the final decree there would — in — would be res judicata against him.

That the District Court had jurisdiction to entertain a suit as against him notwithstanding he resided outside the district because by voluntarily coming in and defending for Saalfield, he had submitted to the jurisdiction and waived the objection.

Now, that is the argument that was made in the Saalfield case and this Court said, “This sufficiently shows the weakness of appellant’s position which upon analysis is found to be this, that upon the theory that Ogilvie will be estopped by a final decree if and when may it sought to bring him into suit before a final decree as if he were really estopped.

However, convenient this might be to a complainant in appellant’s position, it is inconsistent with elementary principles” and they refused to bring Oglivie into the case as a party under the supplemental bill.

Now, the Ocean Accident case which did permit the Court and in which the Court did compel the defending insurance company to come in is in many ways distinguishable.

In that case, they did not bring, attempt to bring them in until after judgment.

Also, under the Ohio laws, insurance company was directly liable to the plaintiffs, once the judgment had been obtained against the insured and I think that those are two distinguishing facts that should be considered.

I feel this way, that if the Ocean Accident case stands for what petitioner says, I am in complete agreement with the court below that that course should not be followed because while it might be socially desirable in insurance company cases to avoid the cost of the separate suit against the insurance company, I can see no social desirability invoking that rule in patent cases.

I believe I’ve already referred to the fact that both petitioner and respondent are residents of Chicago and that I have — unable to find no explanation as to why the suit is not in Chicago.

If it had been brought in Chicago, we wouldn’t be here.

I’d like to refer closing to the language this Court used in the Olberding case which is cited at Page 17 of respondent’s brief.

The case is reported at 346 U.S. 380 — 338 and the Court said, “The requirement of venue is specific and unambiguous.

It is not one of those vague principles which in the interest of some overriding policy is to be given a liberal construction.”

While we’re not concerned with a direct construction here of the venue statutes, I think we are concerned with the problem which would in effect broaden the venue statutes and I sincerely feel that the decision of the Court of Appeals in this case should be affirmed.

Thank you.

Earl Warren:

Mr. Merriam.

Charles J. Merriam:

Mr. Rathburn in stating that the plaintiffs were residents of Chicago has overlooked the fact that Mr. Schnell who is one of the petitioners is a German resident who lives in near Stuttgart, Germany.

I don’t place any reliance on that but that is correct.

Earl Warren:

What was that, I didn’t get that?

Charles J. Merriam:

The petitioner Carl Schnell is a German resident, a national living near Stuttgart, Germany not in Chicago.

Felix Frankfurter:

You can’t get him anyhow, even in Indiana or in Chicago?

Charles J. Merriam:

Well, as a plaintiff he could go to either place.

Felix Frankfurter:

He could incidentally.

Charles J. Merriam:

The Winget case which Mr. Rathburn has referred to was one in which the defending corporation was not named as a party and that appears from the opinion itself.

In the Freeman case, also, it’s our position they were not named as a party until after the trial was over when they merely asked to add them as a party to the pleadings.

And while Mr. Rathburn has said, I haven’t made clear my distinction between the case where they are named a party and where they’re not, I’ll — if I have made it clear, I’ll say it again.

I don’t think in justice, there’s any real reason for a distinction but if the man is not — the corporation is not named as a party, then there is no pleading to support a judgment against him.

And it seems to me that the pleadings must show that he is there and there’d be something of record to show that he is there other than a mere finding and that is held in plenty of these cases that it would be subject to collateral attack merely to make a finding against one not a party that he is a party.

And that’s why I have made the distinction in my argument for Freeman.

I think in justice that and of course the courts hold that it doesn’t make any difference as to being bound.

You’re bound whether you’re named or not.

The two facts that we have to bother as here of whether or not or one party is in the case taking full advantage of the Court’s time and its procedures, it should not be bound by those same procedures and whether it should not be bound to — not to start another suit while this one is going on.

Felix Frankfurter:

Mr. Merriam, before you sit down, I wondered if you’d say a word more about the Merriam case.

I quite agree that the case isn’t a decision, what do you say to Justice Pickering’s course of argument?

Charles J. Merriam:

Well, his — his argument, as I read it was that the petitioner or the plaintiff had put his ground on the basis that there was res judicata and he said this is not a proper argument that there is no res judicata.

Felix Frankfurter:

Yes, but there — why do you — a great deal of your argument unless I am doing injustice to it, a great deal or — or forcible part of your argument is that in as much as res judicata would operate against Allbright, it’s little unreal is that the face the actualities of life to say that they’re not before the Court.

Am I doing injustice to your argument?

Charles J. Merriam:

I think not, but there is this difference.

Felix Frankfurter:

Now, if that is so and Justice Pickering says, “There are good reasons for — for having res judicata applied, the litigation comes to an end.”

then they’ll all looks at the reality who says, was really you’ve — you’ve been the mainstay.

You’ve been — you’ve have been laboring order, at least you took it to get this result and therefore, you’re welcome to say that — that you aren’t really before the Court and you really were, but merely by sitting in and conducting a litigation, you don’t make yourself a party.

I’m not — I think that it’s not an unfair summary of what Justice Pickering’s line of argument was?

Charles J. Merriam:

Well, I think that this — there is this distinction Your Honor.

In the — or Merriam-Saalfield case, the naming of the party was not done in the original case, it was done by a supplemental bill and the argument was made if they had a right to file a supplemental bill as an insularly proceeding on the ground that there was res judicata.

There was a good deal of dispute is to whether Ogilvie was still in the case.

He — that was disputed but — and the Court passed it off on the ground we first — we find there isn’t res jusdicata which you allege and second, this isn’t an insularly proceeding —

Felix Frankfurter:

Well, are we —

Charles J. Merriam:

The — the argument which I am making was not made there whether it could’ve been or not, I would say that under the situation where it was a supplemental bill, they couldn’t have made the argument.

At any rate they didn’t and the Court didn’t answer it and I don’t think it would’ve been applicable under those circumstances.

Felix Frankfurter:

All I’m suggesting is that it would be a still nice requirement to — to suggest to the Court that that if you originally joined a non-coercible party, as a party, then you’re before the Court if you really defend.

But if you don’t originally join but later asked the Court to amend the complaint, you know that’s a little bit — been in — then you get a little too tied, isn’t it?

Charles J. Merriam:

I think not.

Felix Frankfurter:

And that there hasn’t been and as to as if you Ogilvie and Meyer.

Certainly today, anybody would grant after that, I would say that but certainly, with the present day of liberality about the amendment adding parties, was asking, it could be used or this Court make a distinction between originally having joined a non-coercible defendant and having him brought in later.

Charles J. Merriam:

Well, I think a defendant has a choice once he is named as a party, they know what he’s going to do from that time on and it’s important in that — in that phase of it.

I also believed —

Felix Frankfurter:

And we had the plain choice on — on Ogilvie and Merriam and they neither he could’ve come in without — if nobody would’ve objected, he would’ve been in.

Charles J. Merriam:

Well, he said, I’m not in anymore when it came to the supplemental bill and that’s one of the reasons he want to get out but didn’t pass on that and he said it was too late.

But here, there are two reasons, one is that the defendant has a choice and the other is that the Court can’t enter a proper order unless he is named because it would be subject to collateral attack.