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August 26, 1946

B. SIMON, Inc., et al.

The opinion of the court was delivered by: KNIGHT

The complaint in this action, commenced on June 22, 1943, alleges that plaintiff, a New Jersey corporation doing business in New York State, is the owner by assignment of Patent No. 2,320,327, relating 'to new and useful improvements in the application of spray metal to metal surfaces'; that defendants have infringed and threaten to continue to infringe and said patent; that defendants have derived unlawful gains and profits from such infringement. Plaintiff prays for preliminary and permanent injunctions, for an accounting, an assessment of costs and treble damages.

By consent of the parties' attorneys, a so-called final decree was issued on August 4, 1943, whereby the defendants were perpetually enjoined and restrained from violating said patent.

 Proof having have made that defendants had violated the final decree, this court, on November 26, 1945, granted an order declaring them in contempt of court for violating the decree and appointing a Special Master 'to hear evidence and report the items and amounts of sales or services in which the process of the patent in suit was used by the defendants or any of them subsequent to August 4, 1943.' Vide Metallizing Engineering Co., Inc., v. B. Simon, Inc., et al., D.C., 64 F.Supp. 848.

 Hearings were held before this court on September 17, October 8 and November 19, 1945, and, on January 8, 1946, there was an appearance before the Special Master. On May 28, 1946, this court granted a stay of further proceedings.

 On January 10, 1946, the U.S. Circuit Court of Appeals in Metallizing Engineering Co., Inc., v. Kenyon Bearing & Auto Parts Co., Inc., et al., 2 Cir., 153 F.2d 516, held Reissue Patent No. 22,397, based on the original Patent No. 2,320,327, specified in the complaint, invalid on the ground that the inventor's prior secret use for profit for more than one year before filing of his application was a public use and thus a bar or the patent under R.S. Sec. 4886, 35 U.S.C.A. § 31. On May 6, 1946, the U.S. Supreme Court denied certiorari, 66 S. Ct. 1016, and on June 10, 1946, 66 S. Ct. 1364, denied plaintiff's petition for rehearing under Supreme Court Rule 33, 28 U.S.C.A.following section 354. The overruled opinion of the District Court is reported in 62 F.Supp. 42.

 Defendants have moved to vacate the consent decree of August 4, 1943 to vacate and discharge the order of contempt of November 26, 1945, and for an allowance of actual costs including a reasonable counsel fee. Plaintiff, in opposition thereto, has moved for an order directing the Special Master to resume proceedings and awarding it costs and reasonable attorneys' fees.

 These motions hinge on the nature and scope of the said consent decree. Plaintiff contends that it is a permanent injunction and estops the defendants who consented to it. Defendants contend that it is only a preliminary injunction and must be interpreted according to a letter signed by plaintiff's president, dated July 31, 1943, and sent to defendants when they consented to the final decree. The letter reads as follows: 'A final decree having been signed between the parties in re Metallizing Engineering Co. Inc., the B. Simon Inc. et al, Civil Action File No. 1474, of even date herewith, it is hereby agreed on behalf of Metallizing Engineering Co. Inc., that said decree may be set aside on the application of any defendant in said action in the event that United States Patent No. 2,320,327 has been finally held invalid after every legal remedy with respect to the validity thereof has been diligently exhausted.'

 Defendants' instant motion to vacate the final decree is made pursuant to said alleged agreement. Plaintiff does not deny its letter of July 31, 1943, but urges that it is no part of and does not affect the decree, which is only voidable and ceases to be operative only when declared void and not nunc pro tunc. The decree had not yet been declared void.

 The final decree of August 4, 1943, provides as follows: 'Ordered, Adjudged and Decreed that the defendants and each of them and those controlled by the defendants and each of them be and they hereby are perpetually enjoined and restrained from directly or indirectly practicing or causing to be practiced any process embodying any invention of United States Letters Patent, 2,320,327, and from infringement upon or violating the said Letters Patent 2,320,327, in any way whatsoever.'

 Following said decree is the recital: 'The parties hereto hereby consent to the signing and entry of the foregoing final decree' -- signed on August 3, 1943, by the attorneys and solicitor for plaintiff and by the attorney for defendants.

 The plaintiff relies principally upon E. Ingraham Co. v. Germanow, 2 Cir., 4 F.2d 1002, 1003. In that case the District Court had entered a consent decree declaring a patent owned by plaintiff to be valid and enjoining defendants from infringing it. Later, in another suit against other parties, the patent was judged invalid. Thereafter plaintiff moved to punish defendants for contempt in violating the injunction. Its motion was denied by the District Court but the decree was reversed by the Circuit Court of Appeals. Judge Hand said: 'We do not see how the defendants can take advantage of the decision of this court in the later suit, to which they were not parties. The decree entered upon their consent is a good estoppel, though the issues were not litigated, and while it stands they are as much bound by it as though the later suit had never been brought. * * * While the decree stands they must obey it, and the plaintiff is entitled to the usual sanctions for its enforcement.'

 The case was remitted to this District Court, which thereupon granted an order declaring contempt and awarding compensatory damages. On appeal, the order was affirmed. 2 Cir., 9 F.2d 912, 913. The Court there said: 'By it (the consent decree) the defendants were not only estopped from making, using, and selling the entire article described in claims 3 and 4, but they were bound to admit in all and every relation regarding this article of manufacture with the plaintiff the validity and enforceability of these claims. For them the claims are good, no matter what they may be for other people.'

 In Lehman v. Appleton Toy and Furniture Co., 7 Cir., 148 F.2d 988, cited by plaintiff, a final decree of injunction had been entered declaring a patent valid and subsequently in an appellate court of the same circuit in another case, the patent was held invalid. It was there held that the defendant was bound by the decree and was not entitled to any restitution of royalties paid while the decree was in force and whether before or after the patent was held invalid.

 It is believed that the Ingraham case, supra, is directly in point here. This court had jurisdiction of the subject matter of the suit and the parties. The decree is voidable, but not void. It is in full ...

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