Title: Stanfield v. Osborne Industries, Inc.

State: kansas

Issuer: Kansas Supreme Court

Document:

232 Kan. 197 (1982)
654 P.2d 917
PHILLIP W. STANFIELD, Appellee, Cross-Appellant,
v.
OSBORNE INDUSTRIES, INC., Appellant.
No. 52,877

Supreme Court of Kansas.
Opinion filed December 3, 1982.
Don W. Noah, of Noah & Harrison, P.A., of Beloit, and Dorsey L. Baker, of Haight, Hofeldt, Davis & Jambor, of Chicago, Illinois, argued the cause and were on the briefs for appellee, cross-appellant.
James D. Oliver, of Foulston, Siefkin, Powers & Eberhardt, of Wichita, argued the cause, and Jerry G. Elliott, of the same firm, Malcolm Litman, of Litman, Fisburn & Gold, of Kansas City, Missouri, and Richard E. Dietz, of Osborne, were with him on the briefs for appellant.
The opinion of the court was delivered by
McFARLAND, J.:
This is an action by plaintiff, Phillip W. Stanfield, to recover royalties from defendant, Osborne Industries, Inc., under a patent licensing agreement. Stanfield and Osborne have each appealed the judgment of the trial court. The Court of Appeals essentially affirmed the trial court, but extended the *198 maximum period of time that royalties could be recovered. The case is before this court upon petitions for review from each appealing party.
Numerous issues have been raised in the appeal and cross-appeal herein. We are satisfied the Court of Appeals opinion herein, Stanfield v. Osborne Industries, Inc., 7 Kan. App.2d 416, 643 P.2d 1115 (1982), adequately disposed of all issues raised in the appeal and cross-appeal except the issue relative to whether the licensing agreement requires Osborne Industries to pay royalties on sales occurring after the date Stanfield's patent application was ultimately rejected by the United States Patent Office. We approve the Court of Appeals opinion as to such other issues and shall confine this opinion to said royalty issue.
Under such circumstances, the factual statement will be highly summarized. Stanfield, an Osborne County resident of limited formal education, was handy at making and repairing items in his backyard shop. Stanfield was aware of a long-standing problem of hog raisers  newly farrowed pigs being lain on and killed by the sow as they sought out her body heat. He designed a rigid heating pad that would provide adequate artificial heat for the baby pigs, but have the ability to withstand the severe environmental stresses inherent in such usage. He called this idea a "pork pad."
Stanfield presented this idea to some local Osborne businessmen and Osborne Industries was created. A licensing agreement was prepared by attorneys for both sides. The agreement gave Osborne exclusive right to manufacture certain items of animal heating equipment including the pork pad. After Stanfield came to work for Osborne, no new products were developed. Of the listed ideas, specifically referred to in the agreement, only the pork pad proved to be commercially acceptable.
By virtue of having affirmed the Court of Appeals on the other issues, the pork pad manufactured by Osborne will be considered for all purposes to be the original pork pad referred to in the licensing agreement. The matter of royalties on the pork pad is the sole issue before us.
Any right Stanfield has to receive royalties is wholly dependent upon the patent licensing agreement, an instrument the parties have stipulated is unambiguous. Regardless of the construction of a written instrument made by the trial court, on appeal the *199 instrument may be construed and its legal effect determined by the appellate court. State Bank of Parsons v. First National Bank in Wichita, 210 Kan. 647, 504 P.2d 156 (1972).
Where the provisions of a written contract are clear and unambiguous, there is no occasion for applying rules of construction. In such cases, the contract must be enforced according to its terms so as to give effect to the intention of the parties, and this must be determined from the four corners of the instrument itself. Steel v. Eagle, 207 Kan. 146, 483 P.2d 1063 (1971).
Although lengthy, the entire licensing agreement must be reproduced herein. When reading the agreement it is helpful to bear in mind the three constructions heretofore given the agreement relative to payment of royalties on the pork pads:
(1) Right to royalty was conditioned upon securing a patent. When the patent application was ultimately and finally denied on March 31, 1978, all right to future royalty payments ended (Osborne);
(2) Right to royalty payments would continue a maximum of 17 years from March 31, 1978, date of the denial of the patent (trial court); and
(3) Right to royalty is to continue however long Osborne manufactures pork pads (Stanfield and Court of Appeals).
The licensing agreement is as follows:
"LICENSE AGREEMENT
"WITNESSETH THAT:
"A. PORK PADS
"3. Five-foot Pad - This pad is for nurseries.
"B. PET EQUIPMENT
"3. Heated Dog Dish.
The parties agree Stanfield had a duty to file and prosecute an application for a pork pad patent and to cause issuance of Letters of Patent upon allowance of a patent. They agree he duly sought a patent. The parties sharply disagree as to the contractual effect of the rejection of Stanfield's patent application by the federal authorities.
In determining the intention of the parties, reasonable rather than unreasonable meanings are favored. The court should avoid unreasonable interpretations where a contract provision is reduced to an absurdity and the parties' intent vitiated. Jackson v. Farmer, 225 Kan. 732, 594 P.2d 177 (1979).
Of particular significance is paragraph six of the agreement which provides in relevant part:
The pork pads were in the category of "above named products" and were not products which Stanfield had introduced and developed for Industries. Items so developed for Industries were expressly made subject to royalty payments even though not patentable. No comparable provision exists in the contract as to the specifically named products.
Obtaining and defending the patent is a common thread throughout the entire agreement. Reference to patents appears at least once in eight of the sixteen numbered paragraphs. The agreement was to remain in full force "throughout the life of the U.S. Letters of Patent."
A patent is conferred upon the inventor by the federal government pursuant to Article I, § 8, of the United States Constitution, to provide the holder with an exclusive right to make, use and sell the invention in the market place for seventeen years. Black's Law Dictionary 1281 - 1282, (4th ed. rev. 1968), 35 U.S.C. § 154 (Supp. IV 1980). See also Kreimer v. Midland Industries, Inc., 164 Kan. 325, 328, 188 P.2d 660 (1948).
Under the interpretation of the trial court, rejection of the patent application still affords Stanfield the same seventeen-year right to royalties as if his idea had been patentable. Under the interpretation of the Court of Appeals, Stanfield is potentially far better off having his application rejected than if he had been issued Letters of Patent. By state appellate judicial decree, he obtains exclusive rights to an idea in perpetuity  something that cannot be granted by federal patent authorities.
We conclude the reasonable and proper interpretation of the agreement from the four corners to be that the ultimate rejection of Stanfield's patent application by federal authorities on March 31, 1978, terminated all right of Stanfield to royalties on pork pads sold after that date in the absence of an express provision to the contrary. Of necessity, the case must be remanded to the trial court for mathematical computation of the royalties due from the cessation of royalty payments on December 31, 1976, through March 31, 1978.
The opinion of the Court of Appeals is reversed insofar as it is *204 inconsistent with this decision and affirmed as to all other issues. District court affirmed in part and reversed in part with directions.