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VAN PRODUCTS COMPANY v. GENERAL WELDING AND FABRICATING COMPANY (10/13/65)

decided: October 13, 1965.

VAN PRODUCTS COMPANY
v.
GENERAL WELDING AND FABRICATING COMPANY, APPELLANT



Appeal from decree of Court of Common Pleas of Erie County, Sept. T., 1958, No. 22, in case of Van Products Company v. General Welding and Fabricating Company and Vincent Q. Rapp.

COUNSEL

John G. Gent, with him James D. McDonald, Jr., Donald C. Winson, C. Arthur Wilson, Jr., B. D. Watts, and Curtze, Gent & McCullough, and Eckert, Seamans & Cherin, and Watts & Fisher, for appellants.

Will J. Schaaf, with him Stephen Jones, Charles Lovercheck, and Marsh, Spaeder, Baur, Spaeder & Schaaf, and Jones, Benson & Dwyer, for appellee.

Bell, C. J., Musmanno, Jones, Cohen, Eagen and O'Brien, JJ. Opinion by Mr. Justice Eagen. Mr. Chief Justice Bell dissents. Mr. Justice Roberts took no part in the consideration or decision of this case. Concurring Opinion by Mr. Justice Cohen.

Author: Eagen

[ 419 Pa. Page 250]

This is an appeal by General Welding and Fabricating Company (General) and Vincent Q. Rapp (Rapp)

[ 419 Pa. Page 251]

(jointly referred to as appellants) from a final decree of the Court of Common Pleas of Erie County granting a permanent injunction against appellants, restraining them from making, advertising and selling deliquescent desiccant air driers, and directing that appellants account to Van Products Company (Van) for all profits realized from the previous sale of such air driers.

The historical background may be summarized as follows:

Van was organized in 1944, and engaged in the making of air vises. In 1951, it was contacted by O. Clair Norton, who claimed to have invented a unique air drier that could be used profitably in many areas of industry and manufacturing to prevent and eliminate fouling, rusting and shortened life in tools and machinery operated by compressed air. Norton's brain child, following years of experimentation, was a deliquescent desiccant air drier. A desiccant is a substance which attracts and holds moisture; to deliquesce means to become liquid-like. Norton's idea was to channel the compressed air through a chemical mixture which would absorb the moisture in the compressed air lines and deliquesce in an orderly fashion. Only the chemical had to be replaced. This type of device was a substantial improvement over the expensive and cumbersome driers then in general use, which required regeneration and the use of alternate driers. The chemical compound used, to be known as "Dryolite", was in the form of a pellet consisting of 93 per cent sodium chloride impregnated with a small quantity of calcium chloride and sodium dichromate.

On June 23, 1953, the United States Patent Office issued a patent to Norton for the drier. These rights were then assigned to Van for the purpose of further development and for the sale of deliquescent desiccant air driers. In August 1957, Norton applied for a patent

[ 419 Pa. Page 252]

    on the desiccant used in the drier. This was never issued.*fn1

On September 1, 1953, Rapp was employed by Van. He had no previous experience in this field, and, at first, his duties involved handling Van's mail operation. As the development and sale of the air driers grew in volume and importance in the Van system, Rapp's position of importance and value increased, so that eventually he ran the gamut of tasks involved in this segment of Van's business to become the general manager of the entire operation. During the course of this employment, he was intimately involved with purchasing, selling, advertising, plan and blue prints drafting, training and conducting field experiments to overcome customer difficulties. In short, Rapp was thoroughly imbued, through his industrious application, with all the problems, processes and advantages involved in the production, sale, and maintenance of this type of drier. He learned everything there was to know about Van's drier, except the composition of the desiccant itself.

Beginning in 1952, General began to make, engineer and design parts for Van's drier; then from September, 1953, to February 1, 1958, General manufactured the entire drier on behalf of Van according to Norton's patent. It was in this connection that General and Rapp were introduced. Because of the complicated nature of the construction of these devices and the intimate knowledge of these matters possessed by Rapp, he began frequent visits to General to supervise construction. Then on February 1, 1958, suspecting that Rapp's loyalty lay more with General than with it, Van terminated Rapp's employment. One week later, Rapp was employed by General, and within days was actively planning the manufacture and sale of a

[ 419 Pa. Page 253]

    deliquescent desiccant air drier on General's behalf. He broke down the secret of the composition of the chemical formula used in the Van drier. He substituted urea for sodium chloride which performed the same function. On April 1, 1958, General sold its first deliquescent desiccant air drier, which, while not an exact duplicate or physically similar to Van's, was practically identical in function and concept.

On September 6, 1960, the United States Patent Office granted Rapp a patent for his desiccant. On March 16, 1965, Letters Patent were granted to Rapp and General for their drier.

On September 5, 1958, Van instituted this action for injunctive relief and an accounting. After prolonged hearings, the chancellor entered a decree in favor of Van. The court en banc subsequently made the decree final. This appeal followed.

The initial question for determination is whether or not the lower court had jurisdiction of the cause of action. Appellants strongly maintain that the issue basically involves patent rights, and that the decree of the lower court in effect deprives them of utilization of such rights and invalidates patents which they received. In short, they maintain that this is strictly "a patent case", and, therefore, exclusive jurisdiction is in the federal courts.

It is established beyond question that the district courts of the United States have exclusive, original jurisdiction of all civil actions arising under the patent laws: 28 U.S.C. § 1338(a). See also, Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225 (1964), and Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234 (1964). As recognized by this Court in Slemmer's Appeal, 58 Pa. 155 (1868), if the validity of a patent or patentability is the principal issue involved, then the jurisdiction of the federal courts is exclusive.

[ 419 Pa. Page 254]

However, it is our considered conclusion that patent rights are only indirectly involved and that, under the circumstances, jurisdiction is properly in the courts of this Commonwealth.

The gravamen of the action is the abuse of confidence by Rapp who, as a trusted employee, allegedly misappropriated secret information of Van and used it to produce and market a competing product manufactured by General. That the state courts have the power to enjoin the use of a trade secret in a proper case, there can be no doubt. See, Carl A. Colteryahn Dairy, Inc. v. Schneider Dairy, 415 Pa. 276, 203 A.2d 469 (1964), and Macbeth-Evans Glass Co. v. Schnelbach, 239 Pa. 76, 86 A. 688 (1913). And while patent laws may be involved, if they are purely incidental and collateral to the main issue of the case, and if jurisdiction exists over the parties and the subject matter in all other respects, our courts are not precluded from acting under their general equity powers: Quaker State Oil Refining Co. v. Talbot, 322 Pa. 155, 185 A. 586 (1936). See also, Becher v. Contoure Laboratories, Inc., 279 U.S. 388 (1929); Pratt v. Paris Gas Light & Coke Company, 168 U.S. 255 (1897); Hyde Corp. v. Huffines, 158 Tex. 566, 314 S.W. 2d 763 (1958); Bert Lane Co., Inc. v. International Industries, Inc., 84 So. 2d 5 (Fla. 1955); H. J. Heinz v. Superior Court Alameda County, 42 Cal. 2d 164, 266 P. 2d 5 (1954); L. A. Young Spring & Wire Corp. v. Falls, 293 Mich. 602, 292 N.W. 498 (1940); Annot., 170 A.L.R. 449, 495 (1947); and, 3 Robinson, Patents § 858 (1890).

This, in our opinion, is such a case. The pivotal and main issue here presented is whether or not the appellants caused damage to Van's business through the use of confidential material misappropriated by Rapp while he was in its employ.

Moreover, appellants' jurisdictional contention seems to be based upon a misconception of the nature

[ 419 Pa. Page 255]

    of a patent monopoly, i.e., that, in being issued Letters Patent, a patentee is thus granted an exclusive right to use and exploit his invention. In fact, the patent monopoly is a negative right. 35 U.S.C. § 154 provides that a patentee has "the right to exclude others from making, using, or selling the invention throughout the United States. . . ."*fn2

The right to make, use or sell, though a logical corollary, is dependent upon natural or common law. See, Bendix Aviation Corp. v. Kury, 88 F. Supp. 243, 247 (E.D.N.Y. 1950), and authorities cited, supra note 2. The issuance of Letters Patent gives the patentee no more right to use his invention than he enjoyed before. See, Amdur, Patent Fundamentals, at 53 (1948). Therefore, viewed in this light, the existence of patent rights is not controlling. Infringement actions may be prosecuted in the federal courts, and existing patent rights may be unchallengable in a state court; however, appellants' right to ...


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