Court Opinion

ID: 6868372
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:57:37.44766+00
Date Added: 2024-06-11T16:05:21.840599
License: Public Domain

SIMONS, Circuit Judge
(dissenting).
I am unable to concur. When the basic patents for automatic valve-in-head blowers and tubes of chromium alloy were adjudicated as valid and infringed by the appellees, the parties compromised their differences to avoid further litigation, and entered into the license agreement. Bayer secured rights under four minor patents and limited rights up to 18% per cent, chromium under the Snow & Cox patent. This enabled it to make nonautomatic blowers with tubes of low-chromium content but did not permit it to compete with the superior apparatus of the appellant. To compensate for this, Bayer was given a 10 per cent, price differential. Neither at the time of the agreement nor for many years thereafter was the appellant making the nonautomatic blower, so that the differential permitted competition not with apparatus of the same type but with appellant’s superior product. The prices fixed in Schedule A were on both licensed and unlicensed equipment.
Thomas, president of the appellant company, testified and also wrote in a letter in evidence, “There were many reasons for making this price differential — the two most important ones were, first, that we felt you should have a price advantage by reason of not building an automatic valve, and, secondly, that you should have a price advantage by reason of the fact that you were only permitted to build alloy elements containing not more than 18%% of chrome.”
It is clear that without the price concession Bayer secured nothing by its license. Its rights under the minor patents were insufficient to put it on a fair trading basis with its competitor.
In 1934, the appellant bid on blowers required by the Navy and the city of Cleveland at prices lower than those in Schedule A and without notice to Bayer. It claims the right to do this because its tenders were on apparatus not including any equipment covered by the licensed patents. The court *650held, this to be a breach of the agreement since Schedule A was intended to and did include not only licensed apparatus but all of the licensor’s product which at the time of the agreement entered into competition with the licensed equipment. I think its reasoning sound.
Paragraph 6 of the license is unambiguous in respect to the obligations of the licensee. It requires no reasoning to demonstrate it. It is not clear as to the obligations of the licensor. The latter’s prices are the prices of the then current Schedule A without any express limitations therein to licensed equipment, unless the court reads into them the limitations expressed in the provision dealing with the licensee’s obligations.
If not obvious, the ambiguity is at least latent, and it is settled law that the facts and circumstances under which a contract was entered into, and the manner in which it was practically construed by the parties may be looked to, not only to resolve an ambiguity which clearly appears, but to determine initially whether it in fact exists. Merriam v. United States, 107 U.S. 437, 2 S.Ct 536, 27 L.Ed. 531; Ohmer v. Allen, 79 F.(2d) 942 (C.C.A. 6); Sampliner v. Maryland Casualty Co. (C.C.A.) 63 F.(2d) 332. “You cannot have a description in writing that will shut out all controversy, even with the help of a map.” Shadlow v. Cottrell, L.R. 20 Ch.D. 90, quoted with approval by Chief Judge Cardozo in Marks v. Cowdin, 226 N.Y. 138, 123 N.E. 139, “The general rule in the interpretation of written instruments is that it is permissible for the expositor to place himself as nearly as possible in the position of the maker of such instrument, and to this end parol evidence is admissible to show the facts and circumstances surrounding such maker at the time the instrument was executed,” Matthews v. LaPrade, 130 Va. 408, 107 S.E. 795, 799, quoted with approval in Colonial Ice Cream Co. v. Southland Ice Utilities Corporation, 60 App.D.C. 320, 53 F.(2d) 932. “The question the court is seeking to answer,” says Prof. Williston (Contracts, vol. 3, 1780), “is the meaning of the writing at the time and place when the contract was made.” This ought to be too elementary to require discussion.
An evil day has indeed dawned for the parties to a written contract when through mere ineptitude of its draughtsman, equity turns a deaf ear to the circumstances which disclose its true purpose and intent and the conscience of the chancellor sleeps. The decree below should be affirmed, at least so far as it governs the parties during the life of the Garland patent.