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Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

J!l .. 5 ~ 

ROBERT L. HOECKER 

Clerk 

AUTOMOTIVE RADIATOR SUPPLY COMPANY, ) 

) 

Plaintiff-Appellant, ) 

) 

v. ) No. 89-5193 

) (D.C. No. 87-C-156-E) 

DANIEL RADIATOR CORPORATION, ) ( N. D. Okla. ) 

) 

Defendant-Appellee, ) 

) 

v. ) 

) 

JOHN T. FIELDS, ) 

) 

Third-party-defendant- ) 

Appellant. ) 

) 

ORDER AND JUDGMENT* 

Before LOGAN, MOORE, and BALDOCK, Circuit Judges. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App . p • 

34(a); 10th Cir. R. 34.1.9. 

submitted without oral argument. 

* 

The case is therefore ordered 

This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

Appellate Case: 89-5193 Document: 010110099998 Date Filed: 02/15/1991 Page: 1 
This appeal challenges the district court's grant of summary 

judgment in favor of defendant Daniel Radiator Corporation 

(Daniel) based on its holding that a license agreement between 

Daniel and third-party defendant John T. Fields did not require 

Daniel to pay royalties for certain component parts held by Daniel 

in inventory at the termination of the agreement. The district 

court's ruling that Daniel had not breached a contract with 

plaintiff Automotive Radiator Supply Company (ARSCO), of which Mr. 

Fields is the president and sole shareholder, is also challenged. 

Because we hold that the process of manufacture does not encompass 

mere storage in inventory of constituent parts, we affirm. We 

also affirm the district court's denial of the breach of contract 

claim brought by ARSCO. 

The facts of this case are uncontested. Mr. Fields and 

Daniel were parties to a license agreement which covered the right 

to manufacture and distribute a device used to ultrasonically 

clean radiators. The agreement terminated on February 24, 1986. 

Mr. Fields has a patent on the cleaning method he developed, but 

not on the device itself or any of its components. The license 

agreement required that, at termination, a royalty would be due 

from Daniel only on the devices already assembled or in the 

process of manufacture at the time of termination. 

There is no contention by the parties that the license 

agreement was ambiguous. Its interpretation, therefore, is a 

question of law and reviewable de novo. Isaac v. Temex Energy, 

Inc. (In re Amarex, Inc.), 853 F.2d 1526, 1529 (10th Cir. 1988). 

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Appellate Case: 89-5193 Document: 010110099998 Date Filed: 02/15/1991 Page: 2 
After reviewing the parties' briefs, depositions and 

stipulations, the district court found that "under a proper 

construction of the License Agreement, unless a device was 

completed or in the process, no royalties would be due to Fields 

if the manufacture commenced after [the License Agreement was 

terminated.]" Automotive Radiator Supply Co. v. Daniel Radiator 

Corp., No. 87-C-156-E, order at 4 (N.D. Okla. Oct. 12, 1989). 

The primary component parts which Daniel had in inventory at the 

time of termination were the tank, the ultrasonic generator, the 

heater and possibly the controls for the generator and the heater. 

Rec. Vol. III at 19. While there was testimony that many of the 

components are made specifically for the device, id. at 7, there 

is no evidence that Mr. Fields has a patent on any of these parts. 

Instead, Mr. Fields' patent is described by each party's 

respective expert as a "method patent." Id. at 13; Rec. Vol. II 

at 4. In general, a method patent does not depend on the form of 

the device used, CMI Corp. v. Metropolitan Enters., Inc., 534 F.2d 

874, 881 (10th Cir. 1976), and can only be infringed by using all 

of the steps or stages of the patent. Enqlehard Indus., Inc. v. 

Research Instrumental Corp., 324 F.2d 347, 351 (9th Cir. 1963), 

cert. denied, 377 U.S. 923 (1964). The focus is on the process, 

not on the warehousing of components necessary to fashion the 

device required by the process. 

The scope of the patent aside, Mr. Fields argues that, under 

the terms of the license agreement, he is to be paid a royalty on 

any device which is in the process of being manufactured at the 

3 

Appellate Case: 89-5193 Document: 010110099998 Date Filed: 02/15/1991 Page: 3 
time of the termination of the agreement. Section VII(d) of the 

agreement provides: 

On termination of this Agreement, Licensee shall have 

the right to sell any remaining Devices covered by the 

license which it has in its possession or control, or 

which are in the process of being manufactured for it; 

however, it shall remain obligated for any and all 

royalties due licensors upon the sale of the Devices." 

Mr. Fields defines the process of manufacture as beginning at the 

time the component parts are acquired. See Rec. Vol. III at 30. 

We disagree. 

While the Supreme Court has not reached the question of when 

manufacture begins under these precise circumstances, it has 

addressed the issue in the context of a combination patent. In 

Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972), the 

Court rejected the view that the term "makes" connotes "the 

substantial manufacture of the constituent parts of a machine." 

Id. at 527-28. We hold that because the substantial manufacture 

of the constituent parts of a machine does not constitute 

"manufacture," neither does the acquisition of such parts for 

storage until assembly at some future date. As with the inventor 

in Radio Corp. v. Andrea, 79 F.2d 626 (2d Cir. 1935), "[Mr. 

Fields'] monopoly does not cover the manufacture or sale of 

separate elements capable of being, but never actually, associated 

to form the invention. Only when such association is made is 

there a direct infringement of his monopoly." Id. at 628 (quoted 

in Deepsouth, 406 U.S. at 529). 

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Appellate Case: 89-5193 Document: 010110099998 Date Filed: 02/15/1991 Page: 4 
• 

ARSCO's arguments in support of its breach of contract theory 

are rejected for substantially the reasons stated by the district 

court. The judgment of the United States District Court for the 

Northern District of Oklahoma is AFFIRMED. 

Entered for the Court 

Bobby R. Baldock 

Circuit Judge 

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Appellate Case: 89-5193 Document: 010110099998 Date Filed: 02/15/1991 Page: 5