IN RE: Yarn Processing Patent Validity Litigation

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MULTIDISTRICT LITIGATION fen STR boo
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IN RE YARN PROCESSING ) N
PATENT VALIDITY LITIGATION ) DOCKET NO. 82 Co
OPINION AND ORDER be i
BEFORE ALFRED P. MURRAH, CHAIRMAN AND JOHN MINOR WISDOM, oo
EDWARD WEINFELD, EDWIN A. ROBSON, WILLIAM H. BECKER, JOSEPH
S. LORD, III, AND STANLEY A. WEIGEL, JUDGES OF THE PANEL
PER CURIAM SEE
preliminary Proceedings Before the Panel
The question whether to transfer this unusually
important litigation was first presented to the Panel on
a motion filed by Celanese Corporation ("Celanese" herein- oo
after) for an order transferring most of these thirty-five
actions in 4 districts® to the Southern District of Florida
for pretrial proceedings. Without explanation of the : oo |
reasons, this motion was withdrawn by Celanese. Because
of the apparent importance of the question of transfer to
1/ The motion did not include Leesona Corp. Vv. Custom Industries, -Inc., M.D.N.C., Civil Action No. 6-236-6-70 and Leesona Corp. V.
Duplan Corp., E.D.N.Y., Civil Action No. 70-C-1087.

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® Nthe parties, witnesses and to the administration of justice
an Order to Show Cause why the thirty-five actions, listed
in Schedule A hereof, should not be transferred to a single
district for coordinated or consolidated pretrial proceed-
ings, under § 1407, Title 28, U.S5.C., was issued by the
Panel. Pursuant to the Order to Show Cause the questions
whether and where to transfer were briefed and argued before
the Panel.
There was agreement among most and perhaps all the
affected parties that the actions should be transferred
under § 1407 to a single transferee district for pretrial
® proceedings, and indeed for trial of all actions triable in
the transferee district, because of original filing therein,
or prior or anticipated transfer thereto under § 1404 (a) ,
Title 28, U.S.C.
Multidistrict Nature of the Litigation
The litigation is multidistrict litigation within
the definition of § 1407. It involves litigation pending in
four districts involving common questions of fact. The
transfer of the litigation to a single district for con-
solidated or coordinated pretrial proceedings "will be for
® "the convenience of parties and witnesses and will promote

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® the just and efficient conduct of such actions."
Unusual Nature of the Litigation
and Patents Involved
The litigation is unusual, and its prompt disposition
is urgent to commerce in the very important double knit yarn
(sometimes "false twisting") industry, because it involves
primarily the validity of 6 basic patents which presently
dominate the double knit yarn industry.
The first 3 patents are usually referred to as the
"single heater patents.’ These patents involve methods and
equipment to impart a texture to raw yarn by thermal processing
eo of the yarn in one stage of heat treatment.
The second 3 patents are usually referred to as the
"double heater patents". > These patents involve methods and
equipment for processing the raw yarn in two sequential stages
of heat treatment, the first of which corresponds to the
process of the single heater patents.
Sometimes, but not always employed in addition to the
2/ Patent Nos. 2,803,105; 2,803,108; 2,803,109, which will
expire on August 20, 1974.
3/ Patent Nos. 3,077,724; 3,091,912; 3,472,011, which are
scheduled to expire in 1980.
®

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® Nsingle heater process and the double heater processes are
the three "high speed spindle" patents.
The inventors of five of the six single heater and
double heater patents are Nicholas J. Stoddard and Warren A.
Seem. > Stoddard and Seem, along with two other individuals,
formed a partnership known as The Permatwist Company
("Permatwist" hereinafter), to which they assigned their
patents. Permatwist subsequently assigned the five patents
to the Leesona Corporation ("Leesona'" hereinafter) which is
owner of the three spindle patents. Some of the parties to
® this litigation allege that Permatwist retained the right| to share in royalties received from licensees under the five
patents and was given a voice in the formulation of Leesona's
patent licensing policies.
Leesona later assigned the two double heater patents
held by it to a third corporation, Lex-Tex, Inc., a North
Carolina corporation, whose only stockholders are alleged
to be general counsel to Permatwist and one of Leesona's
outside patent counsel. Thereafter, the two double heater
4/ Patent Nos. 2,791,086; 3,044,274; 3,134,218.
5/ The sixth patent, one of the double heater patents, is Patent
No. 3,472,011, originally issued to Ernest Scragg & Sons, Ltd.
®

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» patents were reassigned to Lex-Tex, 1.td., a Florida corpora-
tion. These assignments were also allegedly subject to
Permatwist's residual interest. Lex-Tex, Ltd., later acquired
the third double heater patent and is engaged in the business
of licensing these three patents to producers of textured
yarn. It, too, is alleged to be solely owned by general
counsel to Permatwist and patent counsel to Leesona.
The remaining parties to this litigation are mainly
producers of textured yarn who at one time operated as
licensees under the Leesona single heater patents and Lex-Tex
® double heater patents and are now attacking the patents andthe licensing program. Several other plaintiffs have only
recently begun to produce textured yarn and are seeking a
declaration of the invalidity of some of the patents. Some,
but not all, of the single heater and double heater patent
licensees also employed the high speed spindle processes.
1. Further Background of This Multidistrict Litigation
Leesona has been engaged in litigation over these
patents for some time. That litigation has a long and
complicated procedural history, only part of which will be
® summarized here. The litigation began in August, 1969 when

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® .
Leesona's licensees under the single heater and high
speed spindle patents stopped royalty payments and
sought to terminate the license agreements. The first
suit by a licensee, Kayser-Roth Corporation, was filed
shortly thereafter in the Eastern District of New York,
seeking a declaratory judgment of non-infringement of
the single heater patents. Other suits were soon
filed in that district by other former licensees seeking
similar relief. In June, 1970, all these actions were
consolidated for pretrial purposes, first before Judge
Dooling and upon his recusal before Judge Zavatt.
® In the meantime, Leesona sued all of its licenseesin the state courts of Rhode Island in October, 1969,
seeking equitable relief including a construction of the
licensing agreements and a declaration of the validity of
®

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® a
the single heater patents. The defendants removed the
action to the United States District Court, where it was
dismissed for lack of derivative jurisdiction. Leesona V.
Concordia Mfg. Co., 312 F.Supp. 329 (D.R.I. 1970). Leesona
then filed a similar second suit, in the United States
District Court for Rhode Island, requesting a declaration
of the validity of the single heater patents.
At this point, with actions pending in Rhode Island
and New York and an additional related action filed in the
Western District of North Carolina, this Panel ordered the
C parties to show cause why all actions should not be trans-ferred to a single district court for consolidated or
coordinated pretrial proceedings under 28 U.S.C. § 1407.
Shortly thereafter the Rhode Island district court trans-
ferred Leesona's action against a number of licensee
defendants to the Eastern District of New York, pursuant to
© 28 U.S.C. § 1404(a), and stayed the Rhode Island action as
to the few defendants whose cases could not be transferred
under § 1404 (a). Leesona Corp. Vv. Duplan Corp., 317 F.Supp.
290 (D.R.I. 1970). When a stay of proceedings pending
disposition of the New York cases was also entered in the
|

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[ ”
North Carolina case, the Panel vacated its Order to Show
Cause. Since that time a number of additional related
actions have been filed in the Eastern District of Pennsylvania,
the Middle District of North Carolina and the Southern
District of Florida.
11. Actions Now Pending and Proceedings Therein
As noted above the twenty-four actions by former
licensees pending in the Eastern District of New York have
been consolidated for pretrial purposes. © An amended complaint
has been filed on behalf of all plaintiffs against Leesona,
® seeking a declaratory judgment of the invalidity, non-
infringement and unenforceability of the three single heater
and three spindle patents. This amended complaint also
asserts a claim for relief under Sections 1 and 2 of the
Sherman Act, 15 U.S.C. §§ 1, 2, alleging a conspiracy by
© Leesona and others to restrain and to monopolize interstate
trade and commerce in the sale of "false twisting" machinery
and processes. In the amended complaint Leesona is alleged
6/ These cases are now assigned to the Honorable Joseph C.
zavatt of that district. The action transferred from Rhode
Island, Leesona Corp. Vv. Duplan Corp., E.D. N.Y., Civil
Action No. 70-C-1087, has not been consolidated with these
actions.
®

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é ”to have acted with certain foreign and domestic companies
and individuals to pool their "false twist" patents, to
cross—-license illegally those patents and to leave Leesona
in control of the licensing of and royalties received
from the patents. Lex-Tex is named as one of the co-
conspirators but has not been made a party defendant, for
reasons discussed hereinafter. The five infringement
suits brought by it under one of the double heater patents
in the Southern District of Florida, mentioned hereinafter,
are alleged to be brought in furtherance of the alleged
conspiracy.’
The New York plaintiffs state that they have
é spent a total of "250 man days" (not 250 days) in dis-covery and have examined over 200,000 documents. They
have taken onedeposition, that of Leesona's chief patent
counsel, and have begun depositions of the partners of
Permatwist. However, Leesona the defendant has engaged
in no discovery, although much is anticipated, and at the
7/ Leesona has asserted several antitrust counterclaims
in this action alleging a conspiracy among the plain-
tiffs to breach their licensing agreements and boycott
Leesona's licensing program and to induce others to
do so. Plaintiffs are also alleged to have conspired
with the purchasers of the textured yarn by buying
machinery competing with Leesona's from sellers
designated by the warn purchasers.

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-10-
é first pretrial conference before Judge Zavatt on
September 24, 1971, it was concluded that at least an
additional year of discovery was required before a
meaningful trial date could be discussed.
The Eastern District of Pennsylvania action was
brought in 1970 by Sauquoit Fibers Co. ("Sauquoit"
hereinafter), another former licensee of Leesona, against
Leesona, Permatwist and the individual partners of
Permatwist. The complaint seeks a declaration of the
invalidity of the single heater patents and also includes
one of the double heater patents in its allegations of
patent misuse.8 As a second cause of action, Sauquoit
alleges that the defendants have conspired to violate
é Sections 1 and 2 of the Sherman Act by their conduct
with respect to these patents.
Discovery in the Eastern District of Pennsylvania
actions has been narrowly limited to issues presented by
two motions for summary judgment. One motion is made by
plaintiff Sauguoit for summary judgment on the issue of
8/Patent	No. 3,091,912.
®

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é Nvalidity of the three single heater patents. The other
motion is as made by defendants Permatwist and its individual
partners for summary judgment on the ground that they have
assigned all their interest in the patents to Leesona. Prior
to the filing of the Celanese action in Florida, a third
motion was filed by Leesona in the Eastern District of
Pennsylvania action requesting the transfer of Sauquoit's
claim against it to the Eastern District of New York or,
alternatively, a stay of the proceedings pending disposition
of the New York cases. These motions have neither been fully
briefed nor submitted to the court for decision.
é Two of the three actions pending in the Middle
District of North Carolina are also brought by former
licensees of Leesona, namely Texfi Industries, Inc., and
Universal Textured Yarns. The complaints name both Leesona
and Lex-Tex as defendants and ask a declaration of the
invalidity of two of the double heater patents.’ Both
plaintiffs are also plaintiffs in the consolidated New York
action and, in addition, Universal Textured Yarn is the
defendant in an infringement action filed by Lex-Tex in
9/ Patent Nos. 3,091,912 and 3,077,724.
®

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é -Florida. Lex-Tex has filed motions to dismiss both these
actions as to it. The third North Carolina action is
brought by Leesona for infringement of one of its high
speed spindle patents. 0
The remaining six actions are pending in the Southern
District of Florida, and assigned to Judge C. Clyde Atkins.
Five of them were brought by Lex-Tex in 1971 against various
defendants for infringement of one of the double heater
patents. 1! One of the defendants, Concordia Manufacturing
Co., Inc., has interposed an antitrust counterclaim to
Lex-Tex's allegations of infringement. Two other defendants,
é Hialeah Knitting Mills, Inc., and Leumas Knitting Mills, Inc.,
have alleged the misuse and unenforceability of the double
heater patent relied on by Lex-Tex.
The sixth action in the Southern District of Florida
was filed in June of 1971 by Celanese and Fiber Industries,
Inc. The complaint names Leesona, Lex-Tex, Permatwist and
its individual partners as defendants and seeks a declaratory
judgment of the invalidity of both the single heater and
10/	Patent	No. 3,044,247.
11/ Patent No. 3,091,912.
®

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é Ndouble heater patents. However, it contains no mention of
the high speed spindle patents. Some discovery was accom-
plished in this action before it was consolidated with the
other five actions in the Southern District of Florida and
further discovery stayed pending the action of this Panel.
These six actions in the Southern District of Florida were
originally brought before the Panel in a motion filed by
Celanese, requesting transfer of most of these cases > to
the Southern District of Florida for pretrial proceedings
on issues limited to the validity of the single and double
heater patents. The motion was later withdrawn without
é explanation and an Order to Show Cause was then entered by
the Panel affecting all thirty-five actions in four districts
now under consideration.
III. Decision on the Question Whether to Transfer
The existence of common questions of fact in these
cases is established by the background already recited.
The recurring question of the validity of each one of the
patents in issue will present common issues of fact. In
12/ See Footnote 1.
®

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é addition, there is an important factual interrelationship
between the validity of the single heater and double heater
patent groups since one (or more) of the single heater
processes is apparently the first step in the double heater
processes. To allow the litigation to proceed independently
in more than one district on the issue of the validity of
the patents would result in repetitive discovery and a need-
less duplication of effort. Further, under the decision of
Blonder-Tongue Laboratories, Inc. v. University of Illinois
Foundation, 402 U.S. 313 (1971), it is desirable that all
é® interested parties be allowed to participate in the initialpretrial proceedings including disposition of the motions
for summary judgment on the validity issues. And pretrial
of misuse, unenforceability and the similar antitrust
issues raised by some of the complaints, answers and counter-
claims will result in the exploration of a common factual
background concerning the alleged misuse and enforceability
of these patents. For all these reasons, the prompt assign-
ment of the pretrial of these cases to a single judge is
desirable and necessary for the convenience of the parties
and witnesses and to assure the just and efficient conduct
®

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é -
of the litigation. With some minor qualifications this
conclusion is not controverted.
The only party with differing views concerning the
need for transfer is Sauquoit. Sauquoit requests that
transfer be deferred pending decision by the district court
on the motions for summary judgment in the Eastern District
of Pennsylvania. Celanese favors immediate transfer but
contends the early disposition of the issue of the validity
of the single and double heater patents is the key to the
litigation, and wants to assure its expeditious determination
é by excluding from the transfer or by deferring dispositionof all antitrust claims and the patent claims concerning the
high speed spindle patents. Neither of these qualified con-
tentions are acceptable. Although the general concept of
separate trial of patent validity and antitrust issues may
have validity in some circumstances (see, Components, Inc.
v. Western Electric Co., Inc., 318 F.Supp. 959 (S.D. Me. 1970);
Manual for Complex and Multidistrict Litigation, §4.3 at 56),
it would be initially unwise to arrange that these factually
related issues proceed in different districts, under 28 U.S.C.
§ 1407. The Panel's experience indicates it is best to place
@

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® -16-
all actions before a single judge who can then decide on the
most expeditious manner of preparing the cases for trial.
As stated above Sauquoit requests that any initial order
of transfer specifically exclude its action because of the
motions for summary judgment filed therein concerning the
validity of the single heater patents and Permatwist's interest
in the patents. It contends that if it prevails on these
motions it will have won a victory for all plaintiffs and
that if it is unsuccessful it will at least have narrowed
the issues.’ We cannot agree to carve these vital common
C issues out of the litigation. The motions pending in
Pennsylvania are of significance to all parties and all
parties should have the opportunity to participate in the
briefing and argument so that the issues may be fully and
finally determined.
13/ At the hearing counsel for Sauquoit conceded that it was
impossible to predict how long it would take to secure a
decision of the motions, which are not fully briefed and
have not been argued. Even if the motions were decided for
Sauquoit the possibility of appeals would further delay
transfer of the case. And in the event the patents were
determined invalid by the Pennsylvania court, a further
decision concerning the applicability of collateral
estoppel under Blonder-Tonque Laboratories, Inc. v. Univ.
of 111. Found., 402 U.S. 313 (1971) would be required.
Leaving decision of these critical motions in the Eastern
District of Pennsylvania increases the probabilities of
conflicting decisions at the district and appellate court
levels of that district and circuit and of the transferee
district and circuit.

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@® -]7=-
We have concluded that there should be an immediate
transfer under § 1407 to a single transferee district to make
possible consolidated or coordinated pretrial proceedings in
the transferee district.
IV. Decision on Selection of the Transferee District
The real dispute between the parties to this litigation
concerns the selection of a transferee district. Leesona,
Lex-Tex, Permatwist and its individual partners, along with
plaintiffs Celanese and Fiber Industries, favor the Southern
® District of Florida. The New York plaintiffs, Sauquoit Fibersand the remaining parties urge selection of the Eastern
District of New York.
The parties are agreed on the importance of placing these
cases in a pretrial posture which will also make possible a
decisive trial of the principal common issues in a single district.
We have often stated that Sections 1404 (a) and 1407 may be used
. . . . Cs . 14
together to achieve the just and efficient processing of litigation.
14/ "Sections 1404 (a), 1406(a), and 1407 are not mutually exclu-
sive and, when appropriate, should be used in concert to effect
the most expeditious disposition of multidistrict litigation."
In re Koratron Patent Litigation, 302 F.Supp. 238, 242
(J.P.M.L. 1969); see, In re Grain Shipment Litigation, 300
F.Supp. 1402 (J.P.M.L.); In re Silver Bridge Disaster Litiga-
( tion, 311 F.Supp. 1345 (J.P.M.L.)

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® -
When a determination under Section 1404 (a) has preceded the
Panel's decision under Section 1407, we have shown deference
to the district court decision. In re Master Key Antitrust
Litigation, 320 F.Supp. 1404 (J.P.M.L. 1971). And when, as
here, our decision precedes some potential transfers under
Section 1404 (a), we believe it our duty to select the transferee
district best able to serve as trial forum as well.
We are convinced that of the two proposed districts,
the Southern District of Florida is better suited to pretrial
and ultimate trial of the principal issues involved in the
ys . 1 . .
o litigation. > Our summary of the underlying facts of thislitigation indicates the importance of having Lex-Tex present
as a party in order to secure a conclusive determination of
15/ It may be that certain of the actions, particularly Leesona
Corp. v. Duplan Corp., E.D.N.Y., Civil Action No. 70-C-1087
and Leesona Corp. v. Custom Industries, Inc., M.D.N.C., Civil
Action C-236-G-70, are not transferable to Florida under
28 U.S.C. §1404 (a). Nevertheless, all issues raised in
these suits, as well as many of the parties, are present
in other actions and can be conclusively determined by
pretrial and trial in Florida. The New York plaintiffs
also argue that Permatwist and its partners may not be
subject to the jurisdiction of the Florida court and note
that these defendants have motions to dismiss pending in
the Celanese action. They fail to explain how this problem
would be obviated by transfer to New York, however, and we
must conclude that the possible dismissal of these defendants
is a risk present in both proposed transferee districts.

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( -19~
all common issues. Lex-Tex is owner of all three double heater
patents and is an alleged conspirator with Leesona and others
to misuse and exploit these and other patents in a manner
violative of the antitrust laws. In spite of its obvious
importance as a necessary party to litigation finally dis-
posing of the double heater patents, Lex-Tex has not been
named a defendant in the Eastern District of New York. The
briefs and arguments of the parties have created grave doubt
whether it can be made a party defendant in that district for
purposes of trial. Counsel for the New York plaintiffs
® conceded at the hearing that Lex-Tex was not named in the
amended complaint because the plaintiffs initially doubted
whether it could be sued there. And although they contend
their doubts have lessened, they assert that several additional
months of discovery is necessary before they can decide whether
to add Lex-Tex as a defendant in New York. In the meantime
discovery material to this question, conducted in litigation
” to which Lex-Tex is not a party is not usable against it. No
such problem is presented in Florida, where Lex-Tex is
incorporated and maintains its only office.
Transfer to Florida will be both for the convenience
®

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® wo
of parties and witnesses and the just and efficient conduct
of the litigation. Although other districts may be more
convenient to particular parties and witnesses, the transfer
of this litigation to a single district for pretrial and trial
of a substantial number of actions triable there is of such
importance that it outweighs such minor inconveniences. The
discovery completed in other districts will not be lost by
the transfer to Florida, as the New York plaintiffs concede,
and it seems clear that a great part of discovery remains to
be completed.
C Finally, we reject the argument of the New York
plaintiffs that the earlier transfer under § 1404 (a) of the
Rhode Island case to New York supports transfer of all actions
to that district. In reaching its decision, the Rhode Island
court gave considerable weight to the objective of securing
a single adjudication of the issues raised by the actions
then pending. It concluded that while the issues of the
licensees' patent infringement and Leesona's antitrust viola-
tions could not be decided in Rhode Island, all issues could
be determined in New York. Leesona Corp. v. Duplan Corp.,
317 F.Supp. 290, 300-301 (D.R.I. 1970). The decision to
Q

Case MDL No. 82 Document 2 Filed 04/30/15 Page 21 of 38
® —21-
transfer to New York, however, was reached before the Lex-Tex
double heater patents were injected into this litigation.
After the transfer to the Eastern District of New York of
the Rhode Island cases, the New York plaintiffs filed their
amended consolidated complaint naming Lex-Tex as a conspirator
with Leesona in violating theantitrust laws, and the Florida
actions concerning the double heater patents were filed.
Because of these changed circumstances and because of the
obvious interrelationship between the single and double heater
patents, we think the decision of the Rhode Island court
® made before developments now before us can be given little
weight in reaching our decision. In the present circumstances,
the same considerations which lead the Rhode Island court to
select New York as transferee forum compel us to select the
Southern District of Florida.
In summary we conclude that the following considera-
tions warrant the selection of the Southern District of
Florida as the transferee district over the Eastern District
of New York:
1. It is apparent that a speedy fully controlling
determination of the validity and enforce-
ability of each of the three single heater
Qo

Case MDL No. 82 Document2 Filed 04/30/15 Page 22 of 38
° =and three double heater patents, at least,
is necessary and desirable. Because Lex-Tex,
owner of the double heater patents, is a
party in the Southern District of Florida
and was not at the time of submission a
party in the Eastern District of New York,
there is no assurance that there could be
a binding adjudication of the validity and
enforceability of the double heater patents
in actions triable in the Eastern District
of New York. To say the least it is admit-
tedly doubtful that Lex-~Tex can ever be made
a party defendant in the Eastern District of
New York. Further, in failing to include all
issues and all necessary parties in their
cases, New York plaintiffs have failed to
qualify as "early comers" to the litigation,
if indeed being an "early comer" is a criterion
for selection of the transferee district.
2. In the absence of Lex-Tex as a party defendant
in the Eastern District of New York it is not
presently possible to schedule speedy pretrial
and trial of the validity and enforceability
issues of the interrelated double heater and
single heater patents in the Eastern District
of New York. No one denies that the efficiency
of the pretrial and early trial of all issues
before a single judge and a decision binding
on as many parties as possible is necessary
in the interests of justice. See, e.g.,
Butterfield v. Oculus Contact Lens Co.,
332 F. Supp. 750 (N.D. Ill. 1971).16 This is
currently possible only in the Southern District
of Florida.
3. Because of the doctrine of collateral estoppel
applicable in patent validity actions (under
Blonder-Tongue Laboratories, Inc. v. University
of Illinois Foundation, 402 U.S. 313 (1971),
it is peculiarly desirable that in such multi-
district patent litigation the transfer under
16/ In the cited opinion, Judge Hubert Will, transferee
judge in the Butterfield Patent Litigation, 328
F. Supp. 504 (J.P.M.L. 1968), determined the issues
of validity, estoppel and marking in all cases where
defendants were either located in the transferee
® : district or consented to trial there.

Case MDL No. 82 Document 2 Filed 04/30/15 Page 23 of 38
® ee	§ 1407 for pretrial proceedings be made to
a district in which full pretrial and trial
of the single and double heater patent issues
can be completed and final judgment can be
entered in a reasonable time, thereby con-
cluding all issues and all patent owners if
the patent is found invalid. Only in the
Southern District of Florida can we say with
assurance that this can be done.
4. Secondarily involved are the three high speed
spindle patents, which some processors use.
These patents are owned by Leesona, which is
a party in the actions in the Eastern District
of New York and the Southern District of
Florida (as Leesona is also suable in the
Southern District of Florida). If it is
desirable to include the high speed spindle
patents in the priority schedule for pretrial
and trial in the Southern District of Florida,
there are many ways in which this can be done
with or without the approval of the transferee
judge.
5. All relevant discovery on the common issues
C of fact heretofore had by plaintiffs in any	cases in the Eastern District of New York can
be readily made usable (even in respect to
Lex-Tex) in all the actions by appropriate
pretrial orders. Nothing discovered need be
forfeited or lost, and no one will be penalized.
In this connection, it is noted that defendants
in those actions have reserved their privileges
to make- discovery and have made none.
6. We see nothing sinister in the fact that Celanese
filed its action after unsuccessfully seeking
to negotiate a license agreement. Nor do we
see anything sinister in its bringing its=action
in the only jurisdiction, of those under con-
sideration, in which it could establish without
serious doubt jurisdiction and venue in respect
to the owners of the single heater, double
heater and the high speed spindle patents.

Case MDL No. 82 Document 2 Filed 04/30/15 Page 24 of 38
@ NBIT IS THEREFORE ORDERED that all actions on the
attached Schedule A (other than those now pending in the
Southern District of Florida) be, and hereby are, trans-
ferred to the Southern District of Florida and, with the
consent of that court, are assigned to the Honorable
C. Clyde Atkins for coordinated or consolidated pretrial
proceedings pursuant to 28 U.S.C. § 1407.

Case MDL No. 82 Document 2 Filed 04/30/15 Page 25 of 38
C SCHEDULE A : " DOCKET NO. 82	SOUTHERN DISTRICT OF FLORIDA	nn	Yeo Rl OF FLORIDA
Celanese Corp., et al. v. Leesona Corp., et al. Civil Action
No. 71-1026-Civ-CA
Lex-Tex, Ltd., Inc. v. Universal Textured Yarns, Civil Action
Inc., et al. No. 71-83-Civ-~Ca
Lex-Tex, Ltd., Inc. v. Concordia Manufacturing Civil Action
Co., Inc., et al. No. 71-84-Civ-Ca
Lex-Tex, Ltd., Inc. v. Hialeah Knitting Mills, Civil Action
Inc. No. 71-385-Civ~-CA
Lex-Tex, Ltd., Inc. v. Leumas Knitting Civil Action
No. 71-387-Civ-CA
Lex-Tex, Ltd., Inc. v. Universal Knitting Civil Action
Mills, Inc. No. 71-386-Civ-Cca
MIDDLE DISTRICT OF NORTH CAROLINA :	—_—n ena Rib OF NORIH CAROLINA
Universal Textured Yarns, Inc. v. Lex-Tex, Ltd., Civil Action
Inc., et al. No. C-38-G-71
C Texfi Industries, Inc. v. Lex-Tex, Ltd., Inc., Civil Actionet al. No. C-73-G-71
Leesona Corp. v. Custom Industries, Inc., et al. Civil Action
No. C-236-G-70
EASTERN DISTRICT OF PENNSYLVANIA	Seen eo tr Ll OF PENNSYLVANIA
Saquoit Fibers Co. v. Leesona Corp., et al. Civil Action
No. 70-1728
EASTERN DISTRICT OF NEW YORK	Zep oYooandbl	Ur NEW YORK
Kayser-Roth Corp. v. Leesona Corp., et al. (*) Civil Action
No. 69-C-1084
Leesona Corp. v. Duplan Corp., et al. Civil Action
No. 70-C-1087
(*) Master case for 24 consolidated actions.

Case MDL No. 82 Document 2 Filed 04/30/15 Page 26 of 38
Co | MUTI- Lo . BEFORE THE JUDICIAL PANEL Se HET LSAT pT
ON im |
MULTIDISTRICT LITIGATION HR 22 jor eT
IN RE YARN PROCESSING PATENT ) CERT ne 0 oe
VALIDITY LITIGATION ) DOCKET NO. 82 or -
Jay
DISSENTING OPINION | anita
BEFORE ALFRED P. MURRAH, CHAIRMAN, AND JOHN MINOR WISDOM, CL . a ’
EDWARD WEINFELD, EDWIN A. ROBSON, WILLIAM H. BECKER, JOSEPH } EE
§. LORD, III, AND STANLEY A. WEIGEL, JUDGES OF THE PANEL
JUDGE EDWARD WEINFELD, with whom JUDGES JOHN MINOR WISDOM
AND STANLEY A. WEIGEL join, dissenting:
Various actions pending in four district courts are =
before the Panel on its order to show cause why they should SE
not be transferred to a single district for coordinated or nN
1 . .
consolidated pretrial purposes.’ In all, there are thirty-five :
actions pending in four districts -- twenty-five in the Eastern
District of New York, one in the Eastern District of Pennsylvania, :
three in the Middle District of North Carolina, and six in the }
Southern District of Florida. The actions revolve about patents
used in the processing of synthetic yarn and the manufacturing :
of machines for that purpose, and described as (1) the single CL
1/ Previously, Celanese Corporation (Celanese) and Fiber
Industries, Inc., plaintiffs in a Florida action, moved
for an order under 28 U.S.C. §1407 (except in an action
pending in Rhode Island and one pending in North Carolina),
but for reasons which do not appear withdrew their motion,
following which the Panel issued the instant order to show -cause.

Case MDL No. 82 Document2 Filed 04/30/15 Page 27 of 38
@ neheater patents, 2’ (2) the double heater patents ,3/ and (3) the
spindle patents, related to false twist spindles and spindle
drives for false twisting machinery (the Hilbert patents) .&/
The patents are generally referred to as the "false twist"
patents. False twisting is the most widely used method of
texturizing yarn by means of thermal processing.
The issues in the various lawsuits include validity
of the patents, infringement, patent misuse and antitrust
violations. The actions, with related and assorted claims and
counterclaims, present a classic case for transfer under
section 1407(a). Indeed, all the contending litigants appear
in agreement that the actions should be transferred for coordi-
nated pretrial purposes, but disagree as to the district of
® transfer, and also as to whether the transfers should encompass
all claims and counterclaims.
I agree with the majority determination that all
claims and counterclaims should be transferred to a single
district for coordinated or consolidated pretrial proceedings;
however, I dissent from the transfer of the cases to the
Southern District of Florida, where suits were filed only this
year, instead of to the Eastern District of New York, where
2/ Consisting of 3 patents, Nos. 2,803,105; 2,803,108;
2,803,109, which expire in 1974.
3/ These consist of 3 double heater patents, Nos. 3,077,724;
3,091,912; 3,472,011, which remain in force, expiring in
ten to fifteen more years.
Q 4/ Patent Nos. 2,791,086; 3,044,247; 3,134,218.

Case MDL No. 82 Document2 Filed 04/30/15 Page 28 of 38
- 3 =
C actions have been pending since 1969 and pretrial discovery
and procedure has been carried on in substantial degree. In
my view, transfer to Florida of the actions penalizes diligent
litigants, rewards the latecomer, runs counter to the command
of the statute that the transfers shall be "for the convenience
of the parties and witnesses," and defeats rather than
"promote	[s] the just and efficient conduct of such actions.”
The Parties
The parties to the various litigations include
Leesona Corporation (Leesona), the owner of the single heater
and spihdle patents, and alleged by a number of litigants to
be the sole manufacturer in the United States of false twisting
C machinery; Permatwist Company (Permatwist), a partnershipcomposed of original patent owners who reserved certain con-
trols under the single heater and double heater patents and
allegedly share in royalties received under Leesona's licensing
program; Lex-Tex, Ltd., Inc. (Lex-Tex), a North Carolina
corporation, subsequently incorporated in Florida under the
same name and alleged to be a related or affiliated corporation
of Leesona, from which it acquired title to the double heater
patents; Celanese Corporation (Celanese), the most recent
litigant, which seeks a declaratory judgment of invalidity
of the false twist patents; licensees, processors of yarn,
and others who instituted the first lawsuits attacking the
Q

Case MDL No. 82 Document2 Filed 04/30/15 Page 29 of 38
@ oes	validity of the patents and charge the patent owners and
others with a continuing antitrust conspiracy and misuse of
patents.
THE VARIOUS ACTIONS
1. Eastern District of New York
(New York actions)
: These are the earliest, the First having been commenced
by a licensee against Leesona in August 1969. In all, there
are twenty-four actions, which have been consolidated. A
number of plaintiffs in the twenty-four consolidated actions
were named as defendants in the remaining action commenced by
Leesona in the District Court of Rhode Island, and transferred
to New York, pursuant to section 1404 (a) of Title 28.3/ The
® New York plaintiffs, formerly licensees under Leesona's false
twisting licensing program, assert various claims against
Leesona with respect to the patents, including invalidity,
misuse, an antitrust conspiracy with other alleged conspirators,
including Lex-Tex, plaintiff in five of the Florida actions,
which actions are charged to be part of the continuing conspiracy.
In essence, the plaintiffs in the New York actions seek a
declaratory judgment declaring the patents invalid; also a
judgment of non-infringement and unenforceability of the single
heater and spindle patents, as well as relief under the Sherman
Act. Leesona has counterclaimed, charging plaintiffs with
C 5/ zaesona Corp. v. Duplan, 317 F. Supp. 290 (D. Rhode Island,Ty	—

Case MDL No. 82 Document2 Filed 04/30/15 Page 30 of 38
@ Co	a conspiracy among themselves, and to induce others, to breach
their licensing agreements and to boycott Leesona's licensing
program. Upon this record, there can be no question that with
respect to the various issues presented in the different
actions, the New York cases are the most advanced.
2. Eastern District of Pennsylvania
This action was commenced in June 1970, by Sauquoit
Fibers Co., a licensee, against Leesona, for a declaratory
judgment that the single heater process is invalid. The com-
plaint also contains charges of misuse, including the double
heater patents,	and antitrust violations by Leesona and
Permatwist and its partners.
® Plaintiff has moved for summary judgment declaring
the single heater patents invalid and Permatwist and the
individual defendants have moved for partial summary judgment
on the ground that they they no longer own the patents but the
motions have not been argued. These, of course, can be heard
and disposed of by the transferee judge.
3. Middle District of North Carolina
Three actions were commenced, the earliest in
October 1970. Two plaintiffs (Universal Textured Yarns and
Texfi Industries), licensees, have named Lex-Tex and Leesona
as defendants and seek a declaratory judgment of the unenforce-
ability of the Lex-Tex-Leesona licensing program and invalidity
Qo

Case MDL No. 82 Document2 Filed 04/30/15 Page 31 of 38
- -
@ of the double heater patents. The two plaintiffs are alsoplaintiffs in the New York consolidated actions against Leesona,
and one (Universal Textured Yarns) is named as a defendant in
an action commenced by Lex-Tex in the Southern District of
Florida. The third action in this district was commenced by
Leesona against Customs Industries Inc. for alleged infringement
of one of the spindle patents.
4, Southern District of Florida
Six actions were commenced in this district, and in
point of time they are the latest filed -- from January 21 to
June 1971. The last action was filed on June 28, 1971 by Celanese
Corporation and Fiber Industries, Inc. against Leesona and Lex-
Tex, and seeks a declaratory judgment of invalidity of the six
C single heater and double heater patents.The other five actions were commenced by Lex-Tex Ltd.,
a Florida corporation®/ and assignee of Leesona patents, and
charge various defendants (some plaintiffs in the New York action;
one, as already noted, a plaintiff in an actior in North Carolina),
with infringement of one of the double heater patents. A defendant
in one of those actions has interposed an antitrust counterclaim
against Lex-Tex and others have asserted the unenforceability of
the patent because of misuse by Lex-Tex. All the cases have
been assigned to one judge.
6/ 1t is alleged Lex-Tex was originally incorporated in North
Carolina, but later moved to Florida and there incorporated,
allegedly because the climate there was considered more
receptive for favorable adjudication of patents. Affidavit
( of Phillips, p. 10

Case MDL No. 82 Document2 Filed 04/30/15 Page 32 of 38
. 7 -
C Celanese, the latest entry in the controversies, joinedLeesona and Lex-Tex in asking that all actions be transferred to
Florida, but sought to limit the transfer to the single and
double heater claims, and urged upon the Panel that the spindle
patent claims and their related issues, as well as the antitrust
claims be severed and transferred to another district, presumably
New York.
Apparently there is more than meets the eye in
Celanese's filing of its action in Florida for a declaratory
judgment of invalidity, in close proximity to the filing by
Lex-Tex of its actions in that district. The New York
plaintiffs, the licensees, have charged that the suit was
filed only after Celanese, Leesona and Lex-TexZ unsuccessfully
® sought to conclude an agreement which would have given Celanesea lower and discriminatory royalty rate than that granted to
other licensees, and that the suit by Celanese and those by
Lex-Tex in Florida are in fact in furtherance of a purpose
to benefit Celanese at the expense of other licensees. Whether
these claims are of substance or groundless, I am of the view
that Celanese should not at this late hour be permitted to
interrupt the orderly procedures which have gone forward in
the New York actions for over two years. Whatever the merits
7/ Thedoubt referred to by the majority that Lex-Tex, named
as a conspirator in the New York actions, can be made a
party-defendant in that district for purposes of trial is
beside the point. Whether plaintiffs succeed or not in
subjecting Lex-Tex to jurisdiction there, a transfer under
Section 1407 (a) of the Florida actions to New York will
( permit the depositions in all actions to proceed apace, no	matter where the cases are eventually tried.

Case MDL No. 82 Document2 Filed 04/30/15 Page 33 of 38
® -of Celanese's position with respect to the patent it challenges,
these can be readily advanced by participating in the current
procedures in the consolidated New York claims.
I am persuaded a compelling case has been made that
judicial economy, efficiency of administration and expeditious
resolution of the issues presented by these litigations will
most readily be achieved by a transfer to the Eastern District
of New York, and that such a disposition will most effectively
and speedily terminate these complex and complicated litiga-
tions. That district is the most convenient for the witnesses,
Parties and counsel.
The deposition and discovery process has moved
® forward there with dispatch. A comprehensive plan forconsolidated discovery of the patent and antitrust issues was
there developed under the guidanee of District Judge John F,
Dooling, to whom the cases were originally assigned for all
purposes.®’ To date, the plaintiffs, initially under his
supervision and later that of former Chief Judge Zavatt, have
gone forward with the pretrial procedures on a broad front
encompassing all issues. All parties can benefit from
discovery thus far had in the consolidated New York actions.
The discovery process has to date resulted in the
production of a massive volume of material and documents, all
stored in New York, and the transfer of them from New York to
( g/ Judge Dooling later found it necessary to disqualify himself.

Case MDL No. 82 Document2 Filed 04/30/15 Page 34 of 38
® -Florida would impose an undue and unwarranted burden upon
diligent litigants. Plaintiffs already have examined over
200,000 documents, including 300,000 pages, have copied 130,000
for use on the trial, have spent 250 man days in discovery and
examination, and have taken more than 3,000 pages of testimony
of witnesses, with examinations still in progress. The deposi-
tion of Leesona's chief patent counsel alone consumed twenty-four
full day sessions in New York, and resulted in 2500 pages of
testimony, and is not yet completed. Depositions of three
Permatwist partners have taken another fourteen days, with one
deposition completed and those of two other witnesses scheduled
for this past month, and may be in progress or have been com-
C } pleted at this writing. Chief Judge Zavatt has indicated heis ready and available to try the case whenever the parties
have completed their pretrial discovery proceedings. A study
of the voluminous record here presented fully bears out the
statement of an attorney on the Steering Committee in the New
York consolidated actions made before this Panel that he had
"never seen a case that would constitute a model for multidistrict
litigation or complex litigation that has moved along as effectively
and as efficiently as the case in New York ."2/
ir contrast, in the Florida action so recently filed,
there has been comparatively little discovery, particularly so
3/ Hearing of Judicial Panel on Multidistrict Litigation, Oct. 29,
Qo 1971, p.

Case MDL No. 82 Document2 Filed 04/30/15 Page 35 of 38
@ oNsince dismissal was sought of the Celanese action by one
defendant for improper service, lack of jurisdiction and
improper venue, and also because stays of proposed depositions
were granted. To date, document discovery has been meager
and limited to a handful of documentg located in the Lex-Tex
office there, and depositions have only been scheduled but
none taken. There is testimony that the total Lex-Tex files
in its Florida office consist of one 12-inch drawer of a filing
cabinet, only half of which is current, and obviously can be
moved with slight, if any, inconvenience. Leesona maintains
records pertaining to its six owned patents in Rhode Island,
its principal place of business, and other records pertaining
® to patents in question are located at Permatwist's office inPhiladelphia, and still other records are in New York. Leesona
and Lex-Tex have failed to make any showing that any relevant
records are in Florida.
It is of some significance that Leesona's action
against sixty licensees, commenced in Rhode Island the principal
place of business of Leesona, was, on a section 1404 (a) motion,
transferred to the New York district. ? also of significance is
10/ In all, the claims against 30 defendants were transferred to
the Eastern District of New York; the others, which were not trans-
ferable under Hoffman v. Blaski, 363 U. S. 335 (1960) were severed
and stayed. See Leesona Corp. v. Duplan Corp., 317 F. Supp. 290,
300 (D.R.I. 1970).

Case MDL No. 82 Document2 Filed 04/30/15 Page 36 of 38
® =
that Leesona, in the Pennsylvania suit, moved to transfer
that action under Section 1404 (a) to the New York district;ll/
further, that a number of Leesona's licensing agreements, no
matter where entered into and regardless of where the licensees
or Leesona do business provide that disputes thereunder are
to be conducted in New York. These factors strongly militate
against Leeson's plea for transfer to Florida -- if New York
is a convenient district for Leesona for arbitration regardless
of where the other disputants are located and also for a Section
1404 (a) transfer, it certainly is convenient for pretrial purposes
of these actions.
The convenience of all litigants and witnesses dic-
o tates New York as the proper transferee district. The record
here gives support to the licenseesg' charge that Lex-Tex Ltd.,
a Florida corporation, is a nominal corporation, organized as
a conduit to receive royalty payments; that it performs no sub-
stantial business of any kind in Florida; that its sole stock-
holders are two attorneys, one a resident of Washington, D.C.,
who represents Leesona in this litigation, and the other, general
counsel to Permatwist, who resides in Philadelphia, Pennsylvania.
With the exception of an attorney in Florida who is a nominal
II/ I am notunaware of Leesona's contention that the motion was
made before the Florida suits were commenced, but this circumstance
does not down the basic facts upon which it applied for the transfer
"for the convenience of parties and witnesses in the interests of
justice . . . ." :

Case MDL No. 82 Document2 Filed 04/30/15 Page 37 of 38
® president and employee of Lex-Tex, no other person in Florida
has knowledge of the basic facts upon which the various suits
are grounded. Surely there is no basis for any rational claim
that as to these attorneys Florida is a more convenient forum
than New York. And any other persons, directors and officers
of Lex-Tex having knowledge of the relevant facts are located
or reside at places far more accessible and convenient to New
York than to Florida.
As to Celanese, New York is the natural and most
convenient district for transferee purposes. It maintains
its principal place of business there; its house patent counsel,
who are "of counsel" in the Florida action, are located in New
® York City, and Celanese and Fiber Industries trial counsel arelocated in Washington, D.C. Celanese conducts no yarn process-
ing activities in Florida, and no New York plaintiff conducts
yarn processing there. While the Florida plaintiffs asserted
"many retired persons formerly employed by various parties
(including Celanese) . . . now reside in the Southern District
of Florida and are 'likely witnesses,	'" with the single exception
of one of the patentees who allegedly resides in Florida, whether
as a permanent resident or transient vacationer is not stated,
neither the names of the purported witnesses nor the nature of
their testimony is stated.l2/
12/7 CE. Oil & Gas Ventures - First 1958 Fund Ltd. v. Kung, 250 F.
Supp. 744, 756-57 (S.D.N.Y. 1966); Strypek v. Schreyer, 118 F. Supp.
[ 918 (S.D.N.Y. 1954). -

Case MDL No. 82 Document2 Filed 04/30/15 Page 38 of 38
The New York plaintiffs either have their principal
place of business in New York, or transact business or main-
tain offices there, and the majority there keep records rel-
evant to the litigation. Most of the attorneys representing
these litigants maintain offices there. These twenty-four
plaintiffs are represented in the consolidated action by a
Steering Committee of attorneys with offices in New York,
Washington, D.C., and Greensboro, North Carolina. These
attorneys, although widely separated, have functioned effectively
as a team, have actively participated in the pretrial deposition
discovery procedure in the New York district, and find it most
convenient. Thus, in terms of actual experience extending
® over a two-year period, that district has been a satisfactoryforum for the efficient conduct of the litigation. All parties,
whatever the issues in their respective cases, have much to
gain by a transfer to that district, and much to lose by a
transfer elsewhere.
Surely we have an interest in avoiding repetitious
and duplicative discovery .1¥ With discovery in the most advanced
"state in the New York actions, and hardly off the ground in other
districts, in the words of this Panel, "Judge [Zavatt's] familiarity
with this litigation compels the selection of the District of
[Eastern New York] as the only practical transferee forum at this
time. "14/ The transfer should be to that district.
9 | I37 Cf. In re Frost Patent, 316 F. Supp. 977, 979 (J.P.M.L. 1970);	Tn re Gypsum	Wallboard,	303 F. Supp. 510 (J.P.M.L. 1969).
14/ In re Frost Patent, 316 F. Supp. 977, 978 (J.P.M.L. 1970).