In the 1941 case of Stonite Products Co. v. Melvin Lloyd Co., the U.S Supreme Court ruled in favor of Stonite Products, reversing a decision by lower courts that had dismissed its complaint against Melvin Lloyd Company for lack of jurisdiction. The dispute involved patent rights and unfair competition claims between two Pennsylvania companies operating within the same district but different divisions. The lower court held it did not have jurisdiction because both parties resided in the same state and district, despite being from different divisions within that district. However, upon appeal to the Supreme Court, this ruling was overturned with Justice Frankfurter delivering an unanimous opinion stating that under federal law (28 USC §112), each division should be treated as a separate district for purposes of diversity jurisdiction when one party brings suit against another residing in a different division.

In the dissenting opinion for Stonite Products Co. v. Melvin Lloyd Co., Justice Frank Murphy argued that the majority's decision to affirm jurisdiction of federal courts in patent cases, even when they involve state law issues, was a misinterpretation of Section 48 of the Judicial Code. He contended that this section only grants exclusive jurisdiction to federal courts over actions "arising under" patent laws and does not extend to all controversies involving patents. In his view, if an action involves both a patent issue and another legal question grounded in state law (like contract or tort), it should be heard by state courts unless Congress explicitly states otherwise. By interpreting Section 48 broadly, he believed that the majority undermined principles of federalism by unnecessarily expanding federal court power at the expense of state sovereignty.