Court Opinion

ID: 9443449
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:20:32.182422+00
Date Added: 2024-06-11T17:29:29.375898
License: Public Domain

CHASE, Circuit Judge
(dissenting m
Par^'
I agree with Judge CLARK that we have jurisdiction to decide this appeal on the merits but, instead of reversing the judgment, I would modify it in one respect and then affirm it as modified.
The General Time Corporation, a Delaware corporation, brought this action for a declaratory judgment against Padua Alarm Systems, Inc., a New York corporation hereinafter called Padua, and one Parissi, a resident of New York, to determine which of the defendants was entitled to royalty payments which the plaintiff was obligated to pay as licensee under a patent license agreement entered into between General Time and Parissi. After a trial without a jury, the court held that PadUa was entitled to the royalties and entered judgment to that effect. Defendant Parissi has appealed. Decision here turns' upon the proper interpretation to be given to two contracts, the license agreement mentioned above and an agreement between Padua and Parissi for the disposition of royalty payments on certain patents.
The facts are that Parissi was granted four patents in 1937, as follows: On March 9th, Nos. 2073585, 2073586 and 2073587, each for a “Telephone System,” and on November 9th, No. 2098631 for an “Electric Lighting Fixture.”
At ^ t¡me he made the inventions on whi<± these ts issued) Parissi was employed by Padua> which he had heiped or. . lrvon- , ... , .. . , ganize m 1920, owned a majority of its stock and was dominant in its management. West-t -l • . em Electric Co., Inc. became interested ,, . ,, , , m obtaining the right to use these patents jn telephone dejd andj jn tbg WOrds of £be djstrict court, “it is plainly apparent that it became expedient to obtain the consent of both Parissi and Padua to the execution of a license agreement with Western.” Consequently, on September 12, 1939, Parissi made an agreement with Padua giving to Padua the right to license Western Electric Co., Inc., jointly with Parissi and this Hcense was ex_ ecuted about a week later. 0n September 26, 1939, Parissi and Padua entered into another agreement, the recited consideration for which being “the possible existence of certain moral or financial obli.gations accrued to (Padua), because of any aid or assistance of any nature whatsoever rendered to (Parissi) in pursuit of his achievement in acquiring * * * the above recited patents or in any and all subsequent transactions or negotiations per-taining thereto ¥ * ¥” In this agree-ment, Parissi “agrees to grant and does hereby grant to (Padua) the right and privile£e> jointly with (Parissi), to consummate any and all agreements or contracts relating to any or all of the above recited patents or any claim or claims contained therein.” The only “recited patents” were the four patents hereinabove set forth, The contract further provided “that any and all monies or other valuable consider-ations accruing from sales, leases, licenses, contracts, etc. as above referred to shall be paid in full to (Padua)” and that Padua would pay “ten per cent (10%) of all monies or other valuable considerations re-ceived for royalties, sales or other transactions involving the above recited patents or any of them” to Parissi. Padua also agreed to pay to Parissi “the sum of One Thousand Dollars ($1000) upon the execu*360tion and delivery of each, and every contract dated subsequent hereto, which shall license others to manufacture, use, lease or sell telephone control apparatus units.” This agreement was recorded in the U. S. Patent Office on May 11, 1945.
On May 14, 1945 Parissi executed the General Time Instruments Corporation license above mentioned in which he represented that he was the owner of these same four-patents and further represented that he had “made additional developments relating to the subject matter of said patents, said developments including a Nurses’ Call System and a Silent Alarm Clock." By this license, General Time Instruments Corporation was granted “a non-exclusive, irrevocable license under said patents and said additional developments and under any improvements thereon or relating to the subject matter thereof, whether patented or unpatented, which Parissi may hereafter make or develop, and/or to which Parissi has or may hereafter acquire title, * * *
^ On March 28, 1949, these same parties , , , , 1 • 1 _c executed another agreement which refer- *, ,* , £■** ia m\aí! j .j , red to that of May 14, 1945 and provided as . J follows:
“1. The following United States Let- ^ , A 1- £ t t • i. 1 ters Patent and Application for United _ T .p, , . 1 , , . ^ states Letters Patent are included m the . . . patents, applications, and inventions set , . , , ’ , forth, m the above identified agreement: °
Patent No Issued Title
o aaa >~t a o n r ao r*i 1 “ui 2,444,748 7-6-48 Clock with Visible . * .... A1 and Audible Alarm y^QSiris
2,458,724 1-11-49 Lamp , 0C 6
Application
No. Filed Title
705,068 10-23-46 Signalling Device
“2. The present agreement shall in no way modify any of the terms of the agreement of May 14, 1945, nor shall it exclude any past, present, or future invention which is included in the agreement of May 14, 1945. The sole purpose of the present agreement is to make definite the inclusion of the above listed patents and application in the agreement of May 14, 1945.”
'From this it is plain that the parties intended to, and did, make it certain that Patent No. 2,444,748, for the clock, was a patent on subject matter included in the license granted General Time Instruments Corporation on May 14, 1945. This was granted in consideration of the payment $5000 to Parissi, upon the execution of agreement, as an advance royalty pay-men^ 1° l36 credited against future royalties 'which were to be payable at the rate of five cents “for each clock or other device incorporating the constructions licensed * * * manufactured and sold under this license.
The licensee made the payment of $5000 to Parissi and has since manufactured and sold clocks covered by Patent No. 2,444,748 on which additional royalties have accrued and been paid into court, in accordance with an order made on stipulation of the parties, where they are held subject to disposition in accordance with the final judgT, , . - ment in this action. It has not manufac, . A £ , / tured or sold, as yet, any of the devices cov- , \ , . a1 ered by the other patents grouped in the license.
T - .. ^ L ,, It was held that the royalties were pay, 1 . t> j • able to Padua since it was entitled to re. , , . . ceive, under its agreement with Parissi any ’ royalties payable under a license covering ¿ . , , , , the telephone and electric socket patents. Even though the license included other pat-ented devices in which Padua had no in-, , . .. * _ terest, the royalties payable by General * J . . , Time were not apportioned between the aparate patents but were payable for immumty from claims for the infringement of any and all of them.
Although Parissi granted this license uni-laterally, Padua has exercised its privilege t0 act as co-licensor of the. four patents in which it had an interest by ratifying the license and, consequently, it is now to be given effect as though it had originally been granted by both. There was no provision for the computation of royalties which would be payable solely for the manufacture and sale of any particular patented device but royalties were to be computed and were *361payable for the entire license protection, at five cents per unit, for the manufacture and sale of every device which, but for the license, would have infringed any of the patents. In the absence of any such provision for the allocation of the royalties the failure of the licensee for the time being to ma.ke and sell anything covered by more than one patent does not alter the fact that the royalties paid were not only for the protection needed presently but for the assurance of the protection as to the other patents whenever the licensee might need it. It agreed to pay the price it did to obtain freedom to do business for the life of the license without infringing any of the patents covered by it and, whether it would have paid that price for anything less is but a matter of conjecture. The privilege covered the group of patents as a whole and to measure the price for that entire privilege at a flat rate in cents per unit of a product as to which any part of the privilege was exercised was permissible. Cf. Automatic Radio Mfg. Co. v. Hazeltine Research, Inc., 339 U.S. 827, 70 S.Ct. 894, 94,L.Ed. 1312. Their intent in this respect , . , , . .. is apparen rom t e anguage o t e icense and that intent controls to prevent any judicial division or allocation of royalties to a particular patent or patents on the basis of whether one patent or more covered devices on which royalties are payable. Cf. Cosden Oil Co. v. Scarborough, 5 Cir., 55 F.2d 634; Traiman v. Rappaport, 3 Cir., 41 F.2d 336, 71 A.L.R. 475
Any seeming harshness resulting from this construction of the license agreement follows not from anything inherent in such a construction, or in the license itself, but because of the prior contract between Padua and Parissi. On the facts of this record that seems to have been an improvident one on the part of Parissi though, if all the circumstances appeared, they might show that it was not. However that may be, it did not require Parissi to tie into a license of those patents in which Padua had an interest, other patents in which it had none. He did, however, tie them in as part of the inducement to General Time to take the license. Having secured whatever advantage that may have given him in his negotiations with General Time leading up to the execution of the license, he should bear the burden of what-ever disadvantage flows from his contract with Padua.
in 0ne respect, however, the judgment is too broad. It provides that all payments under the General Time license subsequent to those made into court shall be made tó Padua. The latest of the four patents covered by its agreement with Parissi will ex-p¡re on November 9, 1954. After that date, the license agreement will apply only to patents covering the so-called additional developments and in which Padua has no in-terest. Consequently, the failure to pro-vide for the allocation of royalties between the two groups of patents will then no longer be controlling and the judgment should, accordingly, be modified to make royalties accruing after November 9, 1954 payable to Parissi.
As so modified) T would affirm the judg_ merd