Opinion ID: 403697
Heading Depth: 1
Heading Rank: 2

Heading: Tortious Inducement.

Text: 41 Rauenhorst contests the jury's findings of tortious inducement of Fabcon to breach the contract on the grounds, first, that any inducement was justified as a matter of law under Lear, Inc. v. Adkins. Alternatively, it is argued that the district court failed to properly instruct the jury as to the elements of tortious inducement. 42 In Snowden v. Sorenson, 246 Minn. 526, 75 N.W.2d 795 (1956), the Minnesota Supreme Court set forth the following elements essential for recovery of damages for inducing breach of contract: (1) the contract; (2) the wrongdoer's knowledge thereof; (3) his intentional procurement of its breach; (4) without justification; and (5) damages resulting therefrom. Royal Realty Co. v. Levin, 244 Minn. 288, 292, 69 N.W.2d 667, 671; Sorenson v. Chevrolet Motor Co., 171 Minn. 260, 214 N.W. 754, 84 A.L.R. 35. 75 N.W.2d at 799. 43 In Lear, Inc. v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610 (1969), the Supreme Court held that (1) a patent licensee is not estopped from challenging patent validity, id. at 671, 89 S.Ct. at 1911; and (2) overriding federal patent policy allows a licensee to discontinue royalty payments while challenging patent validity, id. at 673-74, 89 S.Ct. at 1912-13. Rauenhorst asserts that Lear establishes Fabcon's right to refuse to pay royalties, the alleged breach in this case, and that because Fabcon was justified in its actions, its sole owner Rauenhorst was neither unreasonable nor unjustified in urging it to so act. 11 44 The question presented is what action is justified under Lear. In Lear, a licensing agreement was entered into before any patent was issued. The terms of the agreement required that royalties be paid until such time as the patent was held invalid. The licensee ceased payment of royalties while the licensor was still applying for the patent and notified the licensor of its belief that the patent sought was invalid. Upon receiving the patent licensor brought a breach of contract action, and the licensee asserted the defense of patent invalidity. Notwithstanding the contract provision requiring the payment of royalties until a determination of patent invalidity, the Supreme Court held that the licensee could challenge a patent's validity and be freed from liability at least from the time he refuses to pay the contractual royalties. 395 U.S. at 674, 89 S.Ct. at 1913. Therefore, Lear permits an accused infringer to accept a license, pay royalties for a time, and cease paying when financially able to litigate validity, secure in the knowledge that invalidity may be urged when the patentee-licensor sues for unpaid royalties. Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 346, 91 S.Ct. 1434, 1451, 28 L.Ed.2d 788 (1971). 45 Several courts have discussed the questions of whether mere cessation of royalties will suffice under Lear and what comprises a challenge to validity. Although a challenge does not necessarily require that the licensee initiate the adjudication regarding patent validity, see Lear; Blonder-Tongue; Troxel Manufacturing Co. v. Schwinn Bicycle Co., 465 F.2d 1253, 1260 (6th Cir. 1972), cert. denied, 416 U.S. 939, 94 S.Ct. 1942, 40 L.Ed.2d 290 (1974); it is at least apparent that the reason for cessation of royalties must be patent invalidity. See PPG Industries, Inc. v. Westwood Chemical, Inc., 530 F.2d 700, 706-07 (6th Cir.), cert. denied, 429 U.S. 824, 97 S.Ct. 76, 50 L.Ed.2d 86 (1976). However, because the policy behind the Lear decision was the public interest in early adjudication of patent invalidity, see PPG, 530 F.2d at 705, two circuits have held that more than mere nonpayment of royalties is required; the licensee must take the additional affirmative step of notifying the patentee-licensor of invalidity. PPG; American Sterilizer Co. v. Sybron Corp., 614 F.2d 890, 897-98 (3d Cir.), cert. denied, 449 U.S. 825, 101 S.Ct. 88, 66 L.Ed.2d 29 (1980). 46 Fabcon ceased payment of royalties in February 1973. In March 1973 Fabcon's president proffered the reason of entitlement to a credit under a most-favored-licensee clause, but in April 1973 Gerald Rauenhorst asserted on behalf of Fabcon the claim of patent invalidity. It appears, therefore, that Fabcon's actions were authorized under Lear at least as of the time of Rauenhorst's involvement in April 1973 and that any urging by Rauenhorst to do that which Fabcon was legally entitled to do was justifiable under the circumstances. Because Rauenhorst established justification or the presence of exceptional circumstances which show that no tort was in fact committed and lawful excuse which excludes actual and legal malice, Johnson v. Radde, 293 Minn. 409, 196 N.W.2d 478, 480 (1972), the district court should either have directed a verdict for Rauenhorst on the tortious inducement claim or entered a judgment notwithstanding the verdict. 47 Because it appears that a verdict should have been directed for Rauenhorst, the issue of jury instructions need not be reached. In addition, the issues involving Rauenhorst's liability for compensatory and punitive damages need not be resolved. 48