Opinion ID: 372519
Heading Depth: 2
Heading Rank: 1

Heading: The License Claims

Text: 27 On appeal, Mannington first contends that under the most favored licensee clause of the License Agreement it is entitled to the more favorable foreign sales rights contained in Congoleum's subsequent license to GAF. Specifically, Mannington claims that it has the right to sell in the six additional nations where GAF was licensed to sell and that its foreign licenses, like those granted to GAF, should be terminable only for cause. 28 The district court rejected this contention on two grounds. First, it held that the License Agreement and the Letter Agreement were not integrated documents, and that the License Agreement's most favored licensee clause therefore could not apply to the foreign sales rights granted in the Letter Agreement. Alternatively, it held that because the scope of the most favored licensee clause is limited to the terms of licenses which were granted under Congoleum's United States patents, the clause did not extend to GAF's foreign sales licenses, which were granted under Congoleum's foreign patents. Because it felt that the meaning of the agreement was clear, the court refused to consider extrinsic evidence of the parties' intent. 29 We think that the district court was in error in concluding that the License Agreement and Letter Agreement could not be read together as a single instrument. The two documents were negotiated and executed simultaneously as part of the settlement of a single litigation. The Letter Agreement makes explicit reference to the terms of the License Agreement. Moreover, the subject matter of the agreements, while not identical, is closely related. On several important issues, the Letter Agreement is unintelligible without reference to the License Agreement, which contains the royalty provisions applicable to both domestic and foreign licenses, as well as the definition of Licensed Products applicable to both agreements. These instruments therefore fall within the rule that where separate writings are made as part of a single transaction relating to the same subject matter, they may be read together as one agreement. 12 Schlossman's, Inc. v. Radcliffe, 3 N.J. 430, 435, 70 A.2d 493, 495 (1950); General Elec. Credit Corp. v. Castiglione, 142 N.J.Super. 90, 360 A.2d 418, 424 (LawDiv.1976). Moreover, given the strong indications of interdependence between the two documents, the absence of an express incorporation clause is not decisive. American Express Co. v. Rona Travel Service, Inc., 77 N.J.Super. 566, 187 A.2d 206 (Ch.Div.1962). 30 Even if the two agreements are read together, however, it is evident that the rights granted by Paragraph 16 of the License Agreement do not extend to the terms of the foreign licenses granted in GAF's License Agreement. Paragraph 16 entitles Mannington to most favored licensee treatment only with respect to licenses granted to a third party under one or more of the PATENT RIGHTS. Those patent rights are expressly defined in the Agreement as rights under Congoleum's United States patents. The protections of the most favored licensee clause thus extend to the terms of the foreign sales licenses granted to GAF only if those licenses can in any meaningful sense be said to have been granted under Congoleum's United States patents. It is clear that they cannot. Congoleum's United States patents give it no legal power to limit foreign manufacture, use or sale of the patented products. See Deepsouth Packing Co. v. Laitram, 406 U.S. 518, 524, 531, 92 S.Ct. 1700, 32 L.Ed.2d 273 (1972). The power to grant restrictive foreign sales licenses to GAF must therefore flow from Congoleum's legal right as patentee to limit the manufacture, use, and sale of the patented product in the country of license. Thus the foreign sales licenses granted to GAF can only have been granted under Congoleum's foreign patents, and the most favored licensee clause does not extend to them. 31 In an effort to create an ambiguity, Mannington argues that, as a practical matter, GAF's right to sell arises at least in part under the United States patents, since it is under those patents that GAF's domestic manufacturing license was issued. Without a domestic license to manufacture, Mannington argues, GAF would have no product to sell in those foreign countries where it was licensed under the Letter Agreement. Therefore, it argues, GAF's foreign sales rights must arise under the United States patents. This contention is factually unfounded, since GAF is licensed to manufacture under Congoleum's foreign patents as well, and therefore need not depend on its United States manufacturing rights for access to the patented products. But even if Congoleum were able, as a practical matter, to prevent the foreign sale of the patented product by terminating GAF's domestic license agreement, that fact would not be decisive. For Paragraph 16 makes the relevant consideration not the source of the licensee's supply of the patented product, but the source of Congoleum's power to grant the license. In the case of GAF's foreign licenses, that power can only have arisen under the foreign patents. 32 Mannington next contends that under the most favored licensee clause it is entitled to the benefits of Paragraph 13(b) of the GAF License. That Paragraph provides, in pertinent part: 33 LICENSOR agrees that licensee may continue to make, use and sell such floor coverings pursuant to the provision of this agreement, and LICENSOR covenants not to sue LICENSEE with respect to the manufacture, use or sale of such floor coverings or LICENSEE'S customers with respect to the use or resale of such floor coverings, provided that a royalty is paid to LICENSOR under the terms of this agreement for such floor coverings. 34 Mannington reads this covenant not to sue as conferring upon GAF, and upon GAF's customers, freedom to sell the patented product in any foreign country without fear of an infringement action whether or not GAF is licensed to sell in that country. Extension of this right to Mannington and its customers would, it argues, entitle it to continued foreign sales rights. As the district court pointed out, however, the covenant not to sue applies only to sales made pursuant to the provision of the agreement. It must be construed as subject to, and no broader than, the express grant of domestic and foreign sales rights in Paragraphs 4(a) and 4(b) of the GAF License. Thus it cannot be read as establishing the principle that sales in violation of the license agreement are not subject to an infringement action, and Mannington may not claim the benefit of that principle under Paragraph 16, even with respect to its domestic licenses. Moreover, as we noted above, insofar as the protections of Paragraph 13(b) extend to sales made pursuant to sales licensees granted under foreign patents, Paragraph 16 is in any event inapplicable. GAF's covenant not to sue therefore cannot be read to authorize foreign sales by Mannington or its customers in countries where it is not licensed to sell. 35 Mannington also argues that Congoleum's conduct gave rise to an irrevocable license by estoppel to sell in all foreign countries license to GAF. Congoleum counters that the doctrine of license by estoppel is inapplicable to licenses granted under foreign patents, which should be governed by foreign law. The district court did not determine the applicability of foreign law to the estoppel claim because it concluded that even under domestic law Mannington was entitled to no relief. We agree. 36 In order to establish a license by estoppel, Mannington was required to prove four elements: 37 (1) infringement; 38 (2) knowledge by the patent owner of the infringement; 39 (3) conduct of the patent owner which misleads the infringer into believing that the patent owner has abandoned his patent or acquiesced in the infringement; and 40 (4) reliance by the infringer on such conduct. 41 Minnesota Mining & Mfg. Co. v. Berwick Indus., Inc., 373 F.Supp. 851, 869 (M.D.Pa.1974), Aff'd, 532 F.2d 330 (3d Cir. 1976). After trial, the district judge ruled that Mannington had failed to prove that it was at any time actually misled into believing that Congoleum had abandoned its patent or acquiesced in its infringement by Mannington. He therefore declined to determine whether the other three elements of an estoppel were present. 42 There is ample record evidence to support the conclusion that Mannington was at all times aware that Congoleum had not abandoned its patent. Between May 1970, and mid-1971, Mannington on numerous occasions sought expanded foreign license rights. Each time it was rebuffed by Congoleum. The text of the July 17, 1970, License Amendment Agreement, the cover letter to that agreement, Williams' internal memorandum of November 5, and the Arthur Andersen report and worksheets all indicate that Mannington was aware that Congoleum had not acceded to its request for increased foreign license rights, and that it did not intend to entertain Mannington's request for extended rights until after the conclusion of the Armstrong litigation. 43 On this appeal, Mannington concedes that the district court's findings are sufficient to support the conclusion that Mannington never believed that Congoleum had abandoned its patents. But it argues that those findings will not support its further holding that Mannington did not believe that Congoleum had acquiesced in Mannington's infringement. Mannington relies principally upon Congoleum's failure to bring an infringement action against it until July 1974, more than four years after Congoleum first learned of Mannington's infringing sales. But it is undisputed that until 1976 Congoleum was engaged in a series of infringement actions against Armstrong. The general rule is that a patentee has no duty to bring an action against an alleged infringer during the pendency of another infringement action on the same patent, and that when the infringer has notice of the pending action, he may not rely upon any resulting delay as a basis for a claim of estoppel. Advanced Hydraulics, Inc. v. Otis Elevator Co., 525 F.2d 477, 482 (7th Cir.), Cert. denied, 423 U.S. 869, 96 S.Ct. 132, 46 L.Ed.2d 99 (1975); CF. Minnesota Mining & Mfg. Co. v. Berwick Indus., Inc., 532 F.2d at 334 (laches). Mannington's conceded awareness of the Armstrong litigation was sufficient to put it on notice that Congoleum had not acquiesced in its infringing conduct.