Court Opinion

ID: 3625629
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:06:18.035227+00
Date Added: 2024-06-11T13:15:56.108717
License: Public Domain

The license agreements in this case purported to grant performance rights to the defendant for which it agreed to pay royalties. For some time these royalties were paid, but, having learned of the ruling in Brown v. Select Theatres Corp.
(56 F. Supp. 438) the licensee withheld payment of future royalties and demanded repayment of royalties previously paid. Withholding payment of royalties and deposit of the royalties withheld in a special account, pending determination of the licensor's rights in "The Merry Widow", cannot be taken as a renunciation of the license agreement. The licensee clearly intended to retain whatever protection the license gave it and declared its intention that no one's rights should be prejudiced. To this end the unpaid royalties were deposited and earmarked in a special account. Not having repudiated the license agreement, the defendant licensee continued to produce the play, and two questions are presented upon this record: (1) is the licensee liable for royalties as they accrue, and (2) may the licensee recover past royalties paid by him?
Having agreed to pay royalties for a license to produce the play, the licensee remained liable unless and until it renounced the license and the right to rely upon it if sued for infringement. (Saltus v. Belford Co., 133 N.Y. 499; Marston
v. Swett, 66 N.Y. 206, cf. same case, 82 N.Y. 526; Hyatt v.Dale Tile Mfg. Co., 106 N.Y. 651, affd. sub nom. Dale TileMfg. Co. v. Hyatt, 125 U.S. 46, opinion in Court of Appeals by PECKHAM, J., reported in footnote, 125 U.S. 46, 49; Hyatt v.Ingalls, 124 N.Y. 93; Outcault v. Bonheur, 120 App. Div. 168;  Drackett Chemical Co. v. Chamberlain Co., 63 F.2d 853.)
Although it is often said that the licensee is estopped to deny the licensor's title, the question involved is not one of copyright but simply of contract, as we held in Saltus v.Belford Co. (supra).
I find no evidence in the record to support any claim of fraudulent misrepresentation by the licensor which would vitiate the agreement, and in this connection it is to be noted that the licensee has neither repudiated the agreement nor returned or offered to return the dramatic scripts, musical scores and other material relating to the dramatic production of "The Merry *Page 175 
Widow" delivered pursuant to the contract. Outcault v.Bonheur (supra) is authority for requiring payment of royalties under such circumstances.
The question being one of contract law, recent decisions of the Supreme Court of the United States dealing with patents used in aid of monopoly, such as Katzinger Co. v. Chicago Mfg. Co.
(329 U.S. 394) and MacGregor v. Westinghouse Co.
(329 U.S. 402) are not controlling.
Nor is Scott Paper Co. v. Marcalus Mfg. Co. (326 U.S. 249,254) in point on that question. In that case it was held that the patent laws requiring dedication of the invention to the public upon the expiration of the patent precluded the invocation of the doctrine of estoppel. Quite obviously, when a patent expires, licenses under the patent necessarily expire with it. Perhaps, if in this case the license had been grounded upon a statutory copyright, that might also be the effect of the expiration of the statutory copyright. But the subject matter of the license agreements in this case was the sole right to produce the operetta in the United States and Canada and there was neither reference to the statutory copyright or its expiration nor proof that the licensee or the licensor had knowledge thereof.
The licensee was bound to perform the terms of the license agreement at least until it did renounce the licensor's right to require a license to produce "The Merry Widow". Since no such renunciation was ever made, the licensee continued liable for the royalties as they accrued and was not entitled to recover royalties which had been paid. The rejection of a claim for patent royalties because of asserted invalidity of a patent without unequivocal renunciation of its protection does not relieve the licensee of the obligation to pay royalties (Skinner v. Wood Mowing  Reaping Mach. Co., 140 N.Y. 217).
In my opinion the judgment of the Appellate Division should be reversed and the matter remitted to the Supreme Court with directions to enter judgment in favor of plaintiff in the sum of $8,888.25 on its complaint, and dismissing the counterclaims.
LOUGHRAN, Ch. J., LEWIS and FULD, JJ., concur with DESMOND, J.; THACHER, J., dissents in opinion in which CONWAY and DYE, JJ., concur.
Judgment affirmed. *Page 176