Law School Case Brief
Am. Well Works Co. v. Layne & Bowler Co. - 241 U.S. 257, 36 S. Ct. 585 (1916)
A suit for damages to business caused by a threat to sue under the patent law is not itself a suit under the patent law. And the same is true when the damage is caused by a statement of fact, that defendant has a patent which is infringed. What makes defendants' act a wrong is its manifest tendency to injure plaintiff's business and the wrong is the same whatever the means by which it is accomplished. But whether it is a wrong or not depends upon the law of the State where the act is done, not upon the patent law, and therefore the suit arises under the law of the State. A suit arises under the law that creates the cause of action. The fact that the justification may involve the validity and infringement of a patent is no more material to the question under what law the suit is brought than it would be in an action of contract. If the State adopted for civil proceedings the saying of the old criminal law: the greater the truth the greater the libel, the validity of the patent would not come in question at all. In Massachusetts the truth would not be a defense if the statement is made from disinterested malevolence. Mass. Rev. Laws ch. 173, § 91.
American Well Works Company ("Well Works") sued Layne & Bowler Company ("Layne") in state court after Layne claimed Well Works' pump infringed Layne's pump and after Layne claimed it would sue Well Works, and anyone that purchased Well Works' pump, under the patent laws. Well Works claimed its business was harmed by Layne's threats to sue under the patent laws. The lower court dismissed the action on the ground the cause of action arose under the patent laws and thus the state court lacked jurisdiction to hear the action.
Did the state court have jurisdiction to hear the case at bar?
The United States Supreme Court held that Well Works was claiming an injury to its business. The damage was done by a threat to sue under the patent laws. However, whether either party had a patent or infringed those patents did not make the action one under the patent laws. It did not matter how Well Works' business was injured. Whether Layne's action in making the threat was wrong would be determined by state law, not patent law. Since the state determined whether Layne's action was wrong, it had jurisdiction over the action.
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