Opinion ID: 1547286
Heading Depth: 1
Heading Rank: 2

Heading: Estoppel, etc.

Text: It is quite evident that the main reliance of appellant in the court below and here is upon its contention that the conduct of appellee in connection with the violation of the license by appellant is such as to defeat this action. In presenting this matter, the ingenuity of able counsel has left no legal ground untouched. They claim estoppel, ratification, acquiescence, approval, implied license, waiver, election, and kindred doctrines. While there are differences in the rules of law governing these various grounds, it seems unnecessary to burden this opinion with such legal definitions, as we are convinced there is no ground in the evidence for sustaining any of them. This involves a discussion of the purport of so much of the evidence as relates to these matters. Prior to 1927, appellant discovered that the type of washing machine (as distinguished from the patented attachments) which it was making was being replaced in the purchasing public esteem by machines differently constructed and differently performing the washing operation. Thereupon, it set to meet this change in public demand. The result was that it devised the machine objected to by the licensor. By September or October, 1927, it had constructed, by hand, a working model. Convinced of the practicability and sales attraction of this construction, it laid out money for dies and machinery designed for production of this new type machine. In the December, 1927, number of a trade journal it advertised this new machine, describing it and offering introductory samples on attractive terms. A few machines were produced in the last days of that month. There was a small production in January, 1928, an increase in the subsequent months until good production was reached in June, 1928. From thence on to the trial, it produced this machine for several years, replacing the form and character of material of the washing tub in later models, but preserving in all the washing machinery and methods. The situation relied upon by appellant to show estoppel, etc., is made up of various items concerning each of which something should be said. One of these is that appellee, with full knowledge that appellant intended to make this new machine and apply thereto the licensed articles and knowing that such would require the expenditure of substantial money for dies and machinery to make this change, stood by and did not object until after such expenditures had been incurred. The evidence does not justify this position. As to these matters, there is but one dispute in the evidence as to which there is a direct conflict, depending on the remembrance or veracity of the two conflicting witnesses and without anything in the evidence outside of their testimony to point to a determination of that conflict in favor of appellant. [1] The trial court found that the first information appellee had of this contemplated change in type of machine was in January, 1928. We think this finding is slightly inaccurate. The first information coming to appellee was some time in December, 1927, when the above advertisement in the trade journal was brought to the attention of the chairman of the board of the Maytag Company. On December 14, 1927, this chairman (F. L. Maytag) notified his district manager, at Kansas City, that appellant was advertising a cast aluminum tub, which in appearance to the laymen would be recognized as the Maytag; and that the advertisement stated appellant would, during December only, ship a sample machine at carload discount. He requested that Ireland procure one of these machines through one of the Maytag nearby dealers and ship it as soon as you get it. Your prompt attention to this will be appreciated. To this Ireland replied, December 16th, that he had arranged to have a dealer at Liberty, Mo., order the machine and ship it direct from Kansas City, stating, they hope to be able to do this tomorrow or Monday at the latest. There was a further letter from Ireland to Maytag, of December 17th (not set out but referred to in the record), advising that appellant would not be in production until after January 1st. To this Maytag answered, on December 19th, suggesting that Ireland have the dealer submit his order and let it stand for delivery as soon as the machine is in production. The thirteenth machine produced was delivered to the dealer, about January 16th, and promptly shipped to appellee, at Newton, Iowa, where it seems to have been received about January 24th. It was then sent to the attorneys of appellee, in Chicago, for their inspection and action. April 2, 1928, the attorneys wrote appellant calling attention to the terms of the license limiting the application of the licensed articles to the type of machine covered thereby; calling attention to a recently litigated case between appellee and another company in Ohio, regarding a similar subject-matter; and demanding that appellant immediately discontinue the use of the patented wringers on this new machine and discontinue marking such machines licensed thereunder, and also informing them that unless they heard promptly appellee would be obliged to take steps necessary to prevent such wrongful acts. Shortly after receipt of this letter the president of appellant made a trip to Toledo to investigate the litigation referred to in the above letter. Although he determined that the decree entered in that litigation was by consent, he sent an attorney to Chicago to confer with the attorney of appellee regarding the matter. The result of this conference was that appellant's attorney was told that appellant could not attach the licensed mechanism to that machine. Thereafter, appellant continued to make the machine and, apparently, to build up production, since his testimony is that good production was not reached until June. July 19, 1928, this suit was filed. The above recital makes clear that there was no standing by on the part of appellee. As soon as it had information of the change it acted to procure an actual machine for submission to its counsel for their judgment of the rights of appellee. It obtained this machine as soon as possible, and it was promptly submitted to counsel. About a month after such submission the above letter of April 2d, notifying appellant that it was violating and must cease violating the license, was sent. After that letter there appears to be no unjustifiable delay in bringing the action. Another matter which should be noticed in this connection is the expenditure claimed by appellant. The testimony shows a total expenditure of something over $64,000. Of this amount, over $16,000 was spent before production began; that is, before appellee had knowledge of the change in machine. $35,000 was spent after April 2d, when the notice of violation was sent to appellant; thus, more than $51,000 of the more than $64,000 spent was expended either before knowledge of appellee or after notice to appellant. There was neither standing by on the part of appellee nor any expenditure by appellant which was induced by the attitude of appellee. Another matter strongly pressed by appellant is that royalties were accepted and retained upon the changed machines. This is true, but it is also true that appellee had a legal right to such royalties; the question here being whether its acceptance and retention thereof was an indication that it consented to the violation of the license or was such action that appellant might properly infer such consent and act thereon. When it is considered that the matter was under investigation until April 2, 1928, was in suspension between then and the time suit was filed, on July 19th following, and that this suit was filed, it seems impossible for the appellant to reasonably infer any such consent. There is no basis for such position. To this may be added that the evidence clearly shows that this action of appellee had not the slightest influence upon appellant continuing its violation of the license. The reason why it continued to violate this license is tersely stated by its president, who, being asked as to his going ahead with plans to complete the machine and put it on the market after investigating the Ohio case, answered, We had no alternative. It was either that or go busted. In August, 1928, and because of a suggestion from its counsel, appellee instructed the National Household Devices Company, which was the royalty collecting agency of appellee, to write appellant not to send any royalties on the new machine, and to advise it whether appellant had been paying royalties on the new machine and, if so, the amount thereof, with the understanding that it should be refunded to you. This letter was referred by appellant to its counsel, who wrote a careful, noncommittal answer, stating that they regarded the letter as but a studied attempt to lay a foundation for Mr. Maytag and his company to avoid the legal consequences of their knowledge and acts, and stating that Mr. Maytag and his company had known for a long time that the royalties were being paid on all machines manufactured by appellant, and that all of such machines had been manufactured with the knowledge, acquiescence and approval of the Maytag Company, both by words and by conduct. The letter also stated that all royalties that had been paid have been properly paid and properly due under its contract and subsequent circumstances, and it expects to continue to pay the royalties thereunder in the future, the same as it has in the past. This correspondence seems to have ended this attempt at segregating future or refunding past royalties. We see nothing in this situation concerning the royalties to avoid the effect of the license. Another item bearing upon this matter is the furnishing of license labels to place upon the machines made by appellant. This matter, standing alone, might cause hesitation, although it is explainable on the theory that certainly up into 1931, appellee had no reason to believe that all machines made and sold by appellant were violative of the license, and since it had requested (in August, 1928) information concerning the number of machines in connection with the royalty payments and had been rebuffed it might, without loss of right, continue to furnish labels. But when this item is considered in the entire situation, it is impossible to give it great importance. There was never a moment from the letter of protest of April 2, 1928, when appellant did not know that appellee was vigorously denying the right of appellant to apply the licensed attachments to any machines except those covered by the license. It never had reason to believe any change in that position, and it never acted in reliance upon any such change. Another matter is the contention of appellant that others under licenses of identical form were permitted to use the licensed apparatus on washing machines other than covered by their licenses. Whether this is true or not, or the reason therefor, is of no consequence to appellant. It cannot affect the rights of the parties under this license. There is no business or legal connection between this license and that to any one else. Each stands upon its own terms, and the action of appellee in regard to any one of them has no effect upon the legal rights of the parties to any other license. Another matter, not greatly stressed here, is delay in prosecution of this action to judgment. The record reveals the suit filed July 19, 1928. A considerable number of pleadings resulting in a reply to an amended answer and cross-bill, filed December 8, 1930, followed by defendant's application for commission to take depositions, filed December 27, 1930, allowed by order, March 18, 1931, depositions taken as late as November 2, 1931, by appellant, with trial beginning July 7, 1933. This record, unquestionably, shows delay in determination of this suit, but to what such delay is attributable does not at all appear in the record. If appellant desired to rely upon this ground, it should have presented and preserved in the record evidence justifying the conclusion that culpable delay was attributable to appellee.