Case: RADCLIFFE MORRIS URQUHART v. THE UNITED STATES
Abbreviation: Urquhart v. United States
Decision Date: 1953-01-13
Docket Number: No. 49384
Citation: 124 Ct. Cl. 441
Volume: 124
Reporter: United States Court of Claims Reports
Court: United States Court of Claims
Jurisdiction: United States
Parties: RADCLIFFE MORRIS URQUHART v. THE UNITED STATES
Judges: Madden, Judge; Whitaker, Judge; Littleton, Judge; and Jones, Chief Judge, concur.
Pages: 441–464

Head Matter:
RADCLIFFE MORRIS URQUHART v. THE UNITED STATES
[No. 49384.
Decided January 13, 1953.
Plaintiff’s motion for rehearing overruled April 7, 1953]
The Reporter's statement of the case:
Mr. Arthur J. Phelan for the plaintiff. Messrs. Hogan and Hartson, Mr. J. Matthews Neale, and Messrs. Strauch, Nolan and Diggins were on the brief.
Mr. James P. Burns, with whom was Mr. Assistant Attorney General Holmes Baldridge for the defendant. Mr. Roy C. Hackley, Jr., Mr. T. Hayward Brown and Mr. William W. Fleming were on the briefs.

Opinion:
Howell, Judge,
delivered the opinion of the court:
The petition in this case as originally filed on November 29, 1949, was for the alleged unauthorized use of United States letters patent Nos. 2,106,043 and 2,198,585, which patents were issued jointly to Radcliffe Morris Urquhart and his brother, George Gordon Urquhart, the original plaintiffs. On December 29,1949, George Gordon Urquhart formally assigned to Radcliffe Morris Urquhart his entire right, title, and interest in the two patents in suit and also the right to sue for and recover for all past and future infringements of the two patents. Since that date, Radcliffe Morris Urquhart has been the sole owner of both patents in suit, and is now the sole plaintiff in this case.
On September 11, 1950, the plaintiff and defendant filed a joint motion to permit defendant to withdraw its general traverse and to substitute therefor a special plea of misuse of the alleged patent monopoly by the Urquharts, the original plaintiffs. On September 18, 1950, the defendant filed its special plea of misuse of the patent monopoly on the ground that the licensing system of the Urquharts with respect to the two patents in suit was a misuse of the patent monopoly contrary to public policy and law, and in violation of the policy of the anti-trust laws. Pursuant to the allowance of the motion and defendant's special plea, the parties proceeded to trial solely on this issue.
Modern firefighting technique has demonstrated that a very efficient method for fighting oil or gasoline fires is to cover the burning material with a blanket of foam. Two kinds of foam have been used for this purpose, one being known as "chemical foam" because it is formed by the reaction of chemicals which when brought together produce a foam consisting of a fluid intermixed with bubbles of gas. The other type of firefighting foam is known as "mechanical foam." In this type, bubbles of gas or air are entrained by physical agitation of a firefighting fluid to which a foam-forming material is added.
The patents in suit deal with the production of mechanical foam, patent No. 2,106,043, relating both to a foam-producing mechanism and a method of producing mechanical foam, and patent No. 2,198,585 relating to a method of producing mechanical foam. The mechanism and methods covered by these two patents are sufficiently illustrated for the present purposes by claim 4 of patent No. 2,106,043 and claim 1 of patent No. 2,198,585, which read as follows:
4. Apparatus for producing foam, comprising means for supplying a foam-forming material, means for passing a stream of water through a constricted opening, a channel receiving such stream of water and connected to the means for supplying the foam-forming solution, whereby the water withdraws the solution therefrom, means for exposing the resultant mixture to gas in a manner to cause commingling of said gas with said mixture, and means for increasing the surface of said mixture exposed to said gas.
$ $ $ ‡ ‡
1. Method of producing a fire-extinguishing foam which comprises ejecting one or more high velocity streams of liquid from a corresponding number of nozzles in such manner as to impart a high degree of turbulence to the body of said stream of liquid, thereby finely subdividing the same, and aspirating air from the atmosphere into and by means of the resulting stream of subdivided liquid in the presence of a foam promoting agent.
No particular kind of foam-forming material or "stabilizer", as it is sometimes called, is covered by any claim of either of the two patents in suit. In fact, the patents emphasize this, for the following statement with reference to this material is made in both patents:
This will usually be an aqueous solution of a secondary extract of licorice, extract of tan bark, saponin, or other suitable substance. These are known in the trade as "stabilizers". The invention is not limited to the use of any particular type of foam-forming material.
So far as the present issue is concerned, the foam-forming material or stabilizer is an unpatented material.
The Urquharts have not commercially manufactured or sold foam producers or foam stabilizers for mechanical foam but instead have depended upon the issuance of licenses for the promotion of and compensation for the use of the two patents in suit. The Urquharts formulated two different licensing plans, each of which involved the licensing of the unpatented foam-forming material.
Under one plan the Urquharts entered into license agreements with three appointed manufacturers of fire-extinguishing equipment and supplies, namely, The National Foam System, Inc., Fire Appliance Company, and Walter Kidde & Company. These three agreements were substantially the same in character, and the pertinent portions of them as typified by the National agreement appear in findings 11 and 12. They provide for license fees payable to the Urquharts of 15 percent of the net selling prices of all foam producers and foam stabilizers sold by the manufacturer throughout the life of the patents. Each of these agreements specifies that the Urquharts granted to any purchaser of foam producers from the manufacturer—
a non-exclusive license under said Patents during the term of said Patents or either of them to use said Foam Producers with Foam Stabilizers upon which license fees are paid by or in behalf of the purchaser to The Urquharts, in the practice in the United States of the processes of making foam covered by said Patents or either of them.
These agreements were further implemented by two license notices based on drafts prepared by the Urquharts' counsel. These licenses are exemplified by the following notices which were used by the National Company on its containers of foam stabilizers and foam producers, respectively :
National "Aer-O-Foam" liquid contained herein is useful in the generation of foam in accordance with the processes protected by the following patents
U. S. #2106043
U. S. #2198585
A part only of a fair consideration for a license to practice the processes of said patents, until the contents are consumed has been included in the purchase price of this product. The consideration so included entitles the purchaser to use said liquid until consumed in producing foam by means of apparatus on which has been paid the remainder of a fair consideration for the right to practice the processes of said patents.
This National ' Aer-O-Foam" Nozzle foam producer is useful in the production of foam in accordance with the processes protected by the following patents:
United States No. 2,106,043 United States No. 2,198,585
A part only of a fair consideration for a license to practice the processes of said patents for the period of the normal life of said foam producer has been included in its purchase price. The consideration so included entitles the purchaser to use it in producing foam from stabilizers on which has been paid the remainder of a fair consideration for a license to produce foam by said processes until consumption thereof.
The other licensing plan of the Urquharts was a direct license to the ultimate user and was known as "a consumer's license". Subsequent to September 30,1947, a direct consumer license form was printed and has been in existence in the Urquharts' files. The pertinent portions of this license agreement, which is rather lengthy in character, are set forth in detail in finding 1'5. In this agreement, which was to be between an ultimate user and the Urquharts, the license fee to be paid by the consumer to the Urquharts on the unpatented foam-forming material, however or wherever obtained, was 10 cents a pound unless purchased from an appointed manufacturer.
We next make a comparison of the royalty rates in the two different licensing plans. In the 1947 catalog of the National Foam System, Inc., the price per gallon of the unpatented foam-forming material or stabilizer in lots of less than 100 gallons is listed as $4.50 per gallon; in lots of 100-199 gallons, $4 per gallon, and in lots off 200 or more gallons, $3.80 per gallon. According to the manufacturers' agreement, the net license fee of 15 percent paid to the Urquharts as applied to these three prices would be $0.6750, $0.60 and $0.57 per gallon, respectively. The parties have stipulated that the foam-forming material sold by the National Company weighed 9.4 pounds per gallon, and by the use of such conversion figure the consumer's license at 10 cents per pound calls for a license fee of a straight $0.94 per gallon for this unpatented material. It therefore follows that anyone operating under a direct consumer license would be required to pay a higher royalty on the stabilizer to practice the patent than one who acquires a license by purchasing this material from an Urquhart-appointed manufacturer.
A license notice was printed on the back of the invoices for sales by the National Company of foam stabilizers and foam producers. This license notice concludes with the following sentence:
Consumer licenses to use the processes of the foregoing patents upon payment of fair license fees with apparatus, chemicals and stabilizers however obtained are available upon application through us.
Dollar volume of sales of stabilizers and equipment by the National Company within the six years preceding the filing of the petition in this case had been in the relationship of approximately 75 percent stabilizer to 25 percent equipment.
It would obviously be adverse to the interest of an appointed manufacturer to negotiate a direct license between a consumer and the Urquharts, and there is no evidence that any consumer license for the use of the two patents in suit was ever requested from the Urquharts or ever executed.
By their two licensing plans involving different royalty rates, the Urquharts have created two different classes of customers, one favored over the other in the purchase of unpatented materials, and have enlarged the monopoly of the patents beyond their legal scope by channeling trade in unpatented materials through their appointed manufacturers. At no time under the direct consumer license would it have been possible for a purchaser who desired to buy unpatented stabilizer from a competitor of the Urquharts' appointed manufacturers, to do so except on royalty terms less favorable to him.
The Urquharts have attempted to justify the higher royalty rate by contending that they intended to furnish additional services, such as those of an engineering nature and "know-how," in addition to a license. This contention is clearly inconsistent with the phraseology of the consumer license, plaintiff's exhibit 14, which specifically sets forth that the license fees are "for the practicing of said processes," the consumer license further providing in paragraph 8 thereof, that—
The Urquharts do not guarantee the working or performance of any processes hereby licensed or the working or performance of any Foam Producers, their sole relationship to the business being that of licensor of the patent rights.
Also, assuming that an individual was operating under the consumer license and merely desired to replenish a supply of stabilizer, under plaintiff's contention each time he did so he would be paying unnecessarily for engineering services and "know-how."
One of the leading cases dealing with a like situation is Carbice Corp. v. American Patents Corp., 283 U. S. 27. The patent there in suit was directed to a transportation package consisting of a shipping box or carton in which ice cream or other foodstuffs could be shipped and in which was also placed a small container holding a quantity of solid carbon dioxide, popularly known as "Dry Ice". The "Dry Ice" was supplied by an exclusive licensee of the American Patents Development Corporation known as the Dry Ice Corporation, which manufactured the solid carbon dioxide. The Carbice Corporation also manufactured solid carbon dioxide and was charged with contributory infringement because it sold this product to customers of the Dry Ice Corporation with knowledge that the dioxide was to be used by the purchaser in transportation packages like those described in the patent. The Supreme Court said, at pp. 33 and 34:
The Dry Ice Corporation has no right to be free from competition in the sale of solid carbon dioxide. Control over the supply of such unpatented material is beyond the scope of the patentee's monopoly; and this limitation, inherent in the patent grant, is not dependent upon the peculiar function or character of the unpatented material or on the way in which it is used. Relief is denied because the Dry Ice Corporation is attempting, without sanction of law, to employ the patent to secure a limited monopoly of unpatented material used in applying the invention. ' *
Another case in point is that of Leitch Manufacturing Company v. Barber Company, 302 U. S. 458. The Barber Company and the Leiteh Manufacturing Company were competing manufacturers of a bituminous emulsion which was an unpatented stable article of commerce. Such, emulsion was used by builders of roads as a coating. The Barber Company acquired the process patent sued upon and sought to use it to secure a limited monopoly in the business of producing and selling the bituminous material for practicing and carrying out the patented method. The company itself did not engage in road building or competing with road contractors. The Barber Company sued the Leitch Manufacturing Company as a contributory infringer. The Supreme Court stated, at pp. 461 and 463:
That the patent did not confer upon The Barber Company the right to be free from competition in supplying unpatented material to be used in practicing the invention was settled by the rule declared in the Oarbiee case. The Court held in the Og/rbice case that the limitation upon the scope or use of the patent which it applied was "inherent in the patent grant." It denied relief, not because there was a contract or notice held to be inoperative, but on the broad ground that the owner of the patent monopoly, ignoring the limitation "inherent in the patent grant", sought by its method of doing business to extend the monopoly to unpatented material used in practicing the invention. By the rule there declared every use of a patent as a means of obtaining a limited monopoly of unpatented material is prohibited. It applies whether the patent be for a machine, a product, or a process. It applies whatever the nature of the device by which the owner of the patent seeks to effect such unauthorized extension of the monopoly.
In Pyrene Mfg.Co.v. Urquhart, 69 F. Supp. 555, involving the same two patents now before us, the District Court for Eastern District of Pennsylvania said at pp. 560 and 561:
The Urquharts have adopted and have stated their purpose to adhere to a policy which discriminates between users of the process who buy stabilizer from the manufacturing licensees and users who buy it elsewhere. If and when any non-manufacturing would-be user, who expects to buy his stabilizer in the general market, applies direct to the Urquharts for a license to use the process, he will be charged a royalty which, other things being equal, will make it more expensive for him than .for those who have obtained licenses by purchasing from the manufacturing licensees. The discrimination in volved is, not as the Urquharts appear to view it, between manufacturers and users but between two classes of users. The effect of the discrimination is to limit free competition in the stabilizer field by penalizing users who buy from all except certain manufacturers. in other words, the Urquharts have the intention (and the power if their patents are valid) to use their patents to interfere with free competition in unpatented stabilizer. That the law forbids. This announced policy may or may not be the reason why no prospective users have applied to the Urquharts for licenses, but it is not necessary that such be the fact. The rule against misuse of the patent monopoly is based on the policy of the anti-trust laws and these laws forbid an agreement or conspiracy in restraint of commerce, whether followed by overt acts carrying it into effect or not.
I, therefore, hold that in the present case the Urquhart counterclaim is barred by reason of the misuse of the patents.
Also, in National Foam, System, Inc. v. Urquhart, 103 F. Supp. 433, which case involved the same patents and the same licensing plans of the Urquharts now before us, the District Court for the Eastern District of Pennsylvania, after reviewing the same facts which we have set forth, stated at p. 435:
In the Pyrene case (Pyrene Mfg. Co. v. Urquhart), D. C., 69 F. Supp. 555, this Court held that the license agreement was invalid because of misuse of the patent in connection with the sale of unpatented stabilizer. The Court of Appeals, in its final opinion, refrained from passing upon the question. However, I have not found anything in this record to change my view.
Because of misuse of the patents, the plaintiff is not entitled to recover and his petition is therefore dismissed.
It is so ordered.
Madden, Judge; Whitaker, Judge; Littleton, Judge; and Jones, Chief Judge, concur.
FINDINGS OF FACT
The court makes findings of fact, based upon the evidence, the report of Commissioner Hayner H. Gordon, and the briefs and argument of counsel, as follows:
1. This is a patent suit alleging unauthorized use by or for the United States of (1) an alleged invention covered by United States patent No. 2,106,043 which issued January 18, 1938, to Radcliffe Morris Urquhart and George Gordon Urquhart, the original plaintiffs, on an application filed in the Patent Office November 8, 1937, as a division of an application filed October 18, 1932, and (2) an alleged invention covered by United States patent No. 2,198,585, which issued April 23, 1940, to the Urquharts on the application filed in the Patent Offiee October 18, 1932. The title of the former patent is "Method and Apparatus for Foam Generating and Distributing." The title of the other patent is "Method for Generating and Distributing Fire Extinguishing Foam."
2. As to each of the two patents in suit, from the date of issue thereof to the date of filing the petition herein, November 29, 1949, the Urquharts were the owners thereof and of any cause of action thereunder which may be encompassed by the petition in this case.
By an instrument dated December 29, 1949, George Gordon Urquhart formally assigned to Radcliffe Morris Urquhart his entire right, title and interest in and to the two patents in suit and the alleged inventions of such patents, and also the right to sue for and recover for all past and future infringement of the two patents in suit and for past and future royalties or other income that may be obtained under the two patents in suit.
Since December 29, 1949, the plaintiff, Radcliffe Morris Urquhart, has been the sole owner of the two patents in suit and of any cause of action thereunder which may be encompassed by the petition in this case.
3. On September 11,1950, the parties filed a joint motion to permit defendant to withdraw its general traverse and to substitute therefor the special plea of misuse by the Urquharts, the original plaintiffs, of their alleged patent monopoly, and to separately try such issue.
On September 18,1950, the defendant filed a special plea of misuse of the patent monopoly contrary to public policy and law and in violation of the policy of the antitrust laws. The joint motion was allowed by the Court.
Pursuant to the motion, defendant's special plea and the order of reference in this case, the parties proceeded before the Commissioner with a separate trial directed solely to the misuse issue.
For the purpose of the trial on the question of the alleged misuse of the patents by the Urquharts, and for no other purpose, the parties have stipulated that the patents in suit are valid and have been infringed by the defendant.
FIRE FIGHTING FOAM
4. In fighting or extinguishing fires such as oil or gasoline fires, an efficacious method is to cover the burning material or area with a blanket of foam. This assists in checking evaporation from volatile liquids and prevents access of air to the fire.
One type of fire fighting foam is known generally to the trade as "chemical foam," because the foam is formed of entrained bubbles of gas generated by reacting chemicals. Another type of fire fighting foam is known in the trade as "mechanical foam," which 'is so called because it consists of entrained bubbles of gas or air, the entraining and bubble formation being accomplished by mechanical and physical means.
5. Both patents in suit relate to the production of mechanical foam. Urquhart patent in suit No. 2,106,043 relates both to an apparatus or foam-producing mechanism and to a method of producing mechanical foam. TJrquhart patent in suit No. 2,198,585 relates to a method of producing mechanical foam.
Apparatus claim 4 of patent No. 2,106,043 and method claim 1 of patent No. 2,198,585 read as follows:
4. Apparatus for producing foam, comprising means for supplying a foam-forming material, means for passing a stream of water through a constricted opening, a channel receiving such stream of water and connected to the means for supplying the foam-forming solution, whereby the water withdraws the solution therefrom, means for exposing the resultant mixture to gas in a manner to cause commingling of said gas with said mixture, and means for increasing the surface of said mixture exposed to said gas.
1. Method of producing a fire-extinguishing foam which comprises ejecting one or more high velocity streams of liquid from a corresponding number of nozzles in such manner as to impart a high degree of turbulence to the body of said stream of liquid, thereby finely subdividing the same, and aspirating air from the atmosphere into and by means of the resulting stream of subdivided liquid in the presence of a foam promoting agent.
For the present issue these claims are sufficient to typify the Urquhart apparatus and method.
6. In order to practice the method described and claimed in the patents in suit, both apparatus (sometimes known as a "foam producer") and foam-forming material (sometimes known as a "stabilizer") are required. No foam stabilizer, as such, is covered by any claim of either of the two patents in suit, that is, the foam stabilizer is an unpatented material insofar as the patents in suit are concerned. This is made clear by the following statement contained in both patents:
This will usually be an aqueous solution of a secondary extract of licorice, extract of tan bark, saponin, or other suitable substance. These are known in the trade as "stabilizers." The invention is not limited to the use of any particular type of foam-forming material.
The practice of the method covered by the method claims of the patents in suit is not limited to the use of the specific foam producers to which apparatus claims of the patent in suit No. 2,106,043 are directed. It is also possible to practice the method covered by at least some of the process claims with unpatented foam producers.
7. Adequate technical knowledge and experience in the art of making mechanical foam are necessary in order to determine the types, quantities, arrangements and methods of use of stabilizers, foam producers, and other apparatus which will best satisfy the requirements of different potential users of mechanical foam for protecting particular fire hazards. Such knowledge and experience are now possessed, in varying degrees, by the Urquharts and by the following manufacturers of fire fighting equipment and supplies: American-LaFrance-Foamite Corporation, Gordon F. Hurst formerly doing business as Fire Appliance Company, Na tional Foam System, Inc., Pyrene Manufacturing Company, and Rockwood Sprinkler Company.
8. The above manufacturers of fire fighting equipment and supplies are in contact with prospective users of fire fighting foam through the sale of fire fighting equipment and supplies. In all cases where foam installations are sold, these manufacturers are interested in making certain that the users have the knowledge to properly use the foam producers and foam stabilizer to assure a continued good reputation of their products.
9. Other than in research the Urquharts have not made or sold and do not make or sell foam producers or foam stabilizers for mechanical foam, and they do not and have not commercially practiced the method of the claims in suit. The Urquharts depended upon the issuance of licenses for the promotion of and compensation from the use of the patents in suit.
THE URQUHARTS' LICENSE AGREEMENTS
10. Pursuant to their licensing plan pertaining to the patents in suit, the Urquharts have entered into agreements with three manufacturers of fire extinguishing equipment and supplies, namely with National Foam System, Inc., Philadelphia, Pa. dated April 15, 1941; with Gordon F. Hurst, doing business as the Fire Appliance Company, San Jose, California dated July 21, 1943; and with Walter Kidde & Company, Inc., Belleville, New Jersey dated February 19, 1943. So far as the issues here are concerned, the Urquharts' agreements with the three above-mentioned appointed manufacturers are substantially the same.
The Urquharts were willing to grant manufacturers' agreements to any respectable concern.
11. In Article 1 in each of the Urquharts' agreements with their appointed manufacturers, the following definitions are set out:
Whenever used in this agreement the term
(a) "Foam Producer" means any device or apparatus for use in the practice of any of the processes covered by either of said Patents;
(b) "Foam Stabilizers" means foam-stabilizing and/or foam promoting substances for use in the prac tice of any of the processes covered by either of said Patents:
(c) 'Net selling prices" means the gross selling prices charged by The Manufacturer to the consumer for Foam Producers and Foam Stabilizers including containers, less sales and use taxes, freight, lighterage, transportation charges, credits for goods spoiled or returned if replaced without cost to the consumer, or duties of any character.
12. By the terms of Article 5 of each of their agreements with the Urquharts, the appointed manufacturers agreed to
pay to The Urquharts for and on behalf of purchasers from The Manufacturer of Foam Producers and Foam Stabilizers, throughout the term of the last expiring of said Patents, license fees of fifteen percent (15%) of the net selling prices of all Foam Producers and all Foam Stabilizers sold by The Manufacturer in the United States during each such period.
And, in Article 4 in each of such agreements with their appointed Manufacturer, the Urquharts granted to any purchaser of "Foam Producers" from the manufacturer
a nonexclusive license under said Patents during the term of said Patents or either of them to use said Foam Producers with Foam Stabilizers upon which license fees are paid by or in behalf of the purchaser to The Urquharts, in the practice in the United States of the processes of making foam covered by said Patents or either of them.
The appointed manufacturers were not themselves licensed to practice the processes claimed in the patents except for demonstration purposes.
13. The Urquharts' counsel drafted certain forms of license notices to be used as a pattern by the manufacturers referred to in finding 10. Pursuant thereto, the form of license notice used by National on its containers of "Foam Stabilizers" read as follows:
National "Aer-O-Foam" liquid contained herein is useful in the generation of foam in accordance with the processes protected by the following patents U. S. #2106043 U. S. #2198585
A part only of a fair consideration for a license to practice the processes of said patents, until the contente are consumed has been included in the purchase price of this product. The consideration so included entitles the purchaser to use said liquid until consumed in producing foam by means of apparatus on which has been paid the remainder of a fair consideration for the right to practice the processes of said patents.
The notice used by National on its Foam Producers read as follows:
This National "Aer-O-Foam" Nozzle foam producer is useful in the production of foam in accordance with the processes protected by the following patents: United States No. 2,106,043 United States No. 2,198,585
A part only of a fair consideration for a license to practice the processes of said patents for the period of the normal life of said foam producer has been included in its purchase price. The consideration so included entitles the purchaser to use it in producing foam from stabilizers on which has been paid the remainder of a fair consideration for a license to produce foam by said processes until consumption thereof.
The license notices used on the "Foam Stabilizer" and the "Foam Gun" (foam producer) by the Fire Appliance Company were substantially similar to the National notices.
14. In addition to the license notice referred to in the previous finding, National also printed a license notice on the back of its invoices for sales of "Foam Stabilizers" and "Foam Producers". This invoice notice also followed a form prepared by the Urquharts' counsel. This notice referred to certain chemical foam patents not involved in this suit as well as the two patents in suit. This notice read as follows:
The price paid for any "National" dry powder foam generator, or "National" mechanical or air foam producer, included on the face of this invoice, covers partial payment of a license fee entitling purchaser to use said dry powder foam generator, or mechanical or air foam producer, throughout its normal life, with "National" generator chemicals or "National" foam stabilizers, respectively, on which has been paid the remainder of a fair license fee to produce foam from said chemicals or stabilizers until consumed in accordance with the methods protected by the following patents:
United States No. 1,829,714 United States No. 2,090,601 United States No. 2,106,043 United States No. 2,198,585 Canada No. 273,459
The price paid for any "National" generator chemicals or "National" foam stabilizers included on the face of this invoice covers partial payment only of a license fee entitling purchaser to use said generator chemicals or foam stabilizers until consumed in the production of foam in accordance with the methods protected by the foregoing patents. Said chemicals may be lawfully used in any foam generator or mechanical or air foam producer on which has been paid the remainder of a fair license fee to practice the inventions of said patents.
Consumer licenses to use the processes of the foregoing patents upon payment of fair license fees with apparatus, chemicals and stabilizers however obtained are available upon application through us.
15. After seeking legal advice and some time subsequent to September 30, 1947, when an earlier corrected printed proof copy was forwarded to the Urquharts by their counsel, a direct consumer license form was printed and has been in existence in the Urquharts' files. The date of origin of the earlier printed copy used as a proof copy is unknown. The term "Consumer's License" as used therein means a license to the ultimate user as distinguished from a license through an appointed manufacturer's agreement.
The pertinent portion of this form is as follows:
WHEREAS The Urquharts represent that they are the owners of United States Letters Patent Nos. 2,106,-043 and 2,198,585 (hereinafter referred to as said Patents); and
WHEREAS, the Licensee is desirous of acquiring a non-exclusive right to practice the processes covered by said Patents;
NOW THEREFORE, the parties hereto, each in consideration of the covenants of the other herein and of the sum of One Dollar ($1.00) in hand paid to the Urquharts, and of other good and valuable considerations, the receipt whereof is hereby acknowledged, hereby covenant and agree as follows:
(1) Whenever used in this agreement the term
(a) "Foam Producer" means any devices or apparatus for use in the practice of any of the processes covered by either of said Patents;
(b) "Foam Stabilizers" means foam-stabilizing and/or foam promoting substances for use in the practice of any of the processes covered by either of said Patents;
(2) The Urquharts covenant that they own the entire right, title and interest in said Patents including the exclusive right to bring suits for past or present infringement of said Patents, and that they have the power to grant the rights hereinafter granted to the Licensee under said Patents.
(3) The Urquharts covenant, for themselves, their successors and assigns, that during the term of said Patents or either of them they will not institute or prosecute any suit against the Licensee charging infringement of said Patents or either of them because of the use by the Licensee in the United States of Foam Producers and Foam Stabilizers in practicing the processes of making foam covered by said Patents or either of them.
(4) (a) The Urquharts hereby license the Licensee upon the herinafter stated terms and conditions to practice the processes disclosed and claimed in said Letters Patent.
$ $ $ $ $
(5) (a) The Licensee covenants and agrees to pay to the Urquharts during the continuance of this agreement license fees for the practicing of said processes computed on the basis of the extent of contemplated use of said process which is determined by the amount of chemicals and the capacity of apparatus installed for the practice of the processes, when, needed, to wit, until changed as hereinafter provided, Ten Cents ($.10) per pound for each pound of Foam Stabilizer manufactured or purchased for consumption in the practice of the processes of said Patents; provided, however, that Licensee is not required to account for or pay license fees on Foam Stabilizers purchased from manufacturers or suppliers, appointed by the Urquharts, who shall have already paid the Urquharts for the right to have said Foam Stabilizers used in the practice of said processes of producing foam in accordance with the processes covered by said Patents.
(b) In addition to the license fees above provided for, Licensee shall pay to the Urquharts a further license fee for the practicing of said processes computed on the capacity of the apparatus used in the production of foam by said processes, to wit, until changed as hereinafter provided, Fifty Cents ($.50) per gallon on the water capacity, based on rates in gallons per minute at one hundred pounds inlet water pressure, of each Foam Producer manufactured or purchased by the Licensee for use in practicing of said processes, which payment will entitle the Licensee to use said Foam Producers under the terms and conditions hereof and during the term of this license in the practice of the processes of said Patents; provided, however, that the Licensee is not required to account for or pay licensee fees for use of foam Producers purchased from manufacturers or suppliers, appointed by the Urquharts, who shall have already paid the Urquharts said licensee fees as hereinafter provided.
(c) The license fees set forth in Articles 5 (a) and 5 (b) hereof shall continue in effect for the full term of this agreement unless changed as provided by Article 5 (d) hereof.
(d) As a protection against fluctuations in currency values, it is understood and agreed that on or before October 1, —, and thereafter on or before each October 1st of each year during the continuance of this agreement, the Urquharts shall have the right to serve written notice on the Licensee of changes in the aforesaid license fees, and after such notice said changes shall become effective commencing on the following January 1st and shall continue in effect thereafter until further changes are made by further written notice as herein provided.
(6) The Urquharts from time to time will appoint manufacturers and suppliers of Foam Stabilizers and Foam Producers who will be authorized to pay to the Urquharts, for account of Licensee, license fees for the practice of the processes by Licensee with apparatus and chemicals furnished by said manufacturers and suppliers.
(7) (a) The Licensee shall keep, or cause to be kept, full and accurate accounts showing the number of Foam Producers and quantity of Foam Stabilizers manufactured or purchased by it for use in practicing the processes hereby licensed, excepting Foam Producers and Foam Stabilizers purchased from manufacturers and suppliers appointed by the Urquharts as above provided and, within forty-five days after each quarterly period ending on the last days of January, April, July and October of each year during the term of this agreement, shall furnish to the Urquharts written statements under oath specifying the total number of such Foam Producers and quantity of Foam Stabilizers manufactured by or for the Licensee,, or purchased from others than manufacturers or suppliers appointed by the TJrquharts as above provided during the preceding quarterly period. The Licensee shall allow the TJrquharts at all times by their agents or attorneys to examine and make copies of such books, accounts and entries of the Licensee as may serve to determine the number and quantity of Foam Producers and Foam Stabilizers acquired as aforesaid for use in practicing the processes hereby licensed, and the Licensee shall produce all such accounts and entries upon request.
(8) The TJrquharts do not guarantee the working or performance of any processes hereby licensed or the working or performance of any Foam Producers, their sole relationship to the business being that of licensor of the patent rights.
(9) Licensee may terminate this license at any time upon giving the TJrquharts ninety (90) days written notice of its intention to terminate this license provided that prior to any termination Licensee shall make payment of all sums due up to the date of termination.
16. The National Foam System, Inc., one of the TJrquharts' manufacturing licensees, issued a catalog in 1947 which illustrates and describes in some detail various forms of equipment for the use of mechanical foam in fire fighting. The equipment ranges from foam-producing nozzles for use on fire hose to foam producers permanently mounted in the bilges of ships or near the top of oil tanks such as are found in oil refineries or oil storage fields. The catalog also contains reference to the stabilizer or liquid used to produce foam, and indicates that this is packed in metal containers, the smallest of which is a 5-gallon container with a grip handle for easy handling.
With reference to the nozzles, the catalog advertises four sizes provided with nominal thread diameters of 1" to 2%" for attaching the nozzle to the end of a fire hose. The lower end of the nozzle is provided with a pick-up tube which may be inserted into a portable container of foam-forming material, the mixing of this material with the water taking place in the nozzle. An illustration on page 3 of the cata log shows the use of a nozzle on the conventional fire hose, with the pick-up tube inserted in a 5-gallon container of foam-forming material.
17. With reference to permanent installations such as the protection of oil tanks, spray booths or dip-tanks, the catalog not only illustrates various devices to be permanently installed but includes drawings showing the proper arrangement of water and foam pipes and location of control valves, and contains numerous tables and charts to enable the user to install the proper size of foam producer and pipes for various types of fire protection.
Illustrative of the engineering data given, the catalog sets forth in tabular and graph form, on pages 18 and 19, the types of foam producers, operating pressures, and water required for storage tanks of various sizes and diameters. The tables set forth the gallons of foam-producing liquid required for the protection of tanks of various sizes, taking into consideration the nature of the product stored, i. e., whether gasoline, kerosene, lubricating oil or crude petroleum. The last page of the National catalog contains a graph showing pipe friction losses for various sizes and lengths of pipe, and in addition, carries the following statement:
The foregoing information is offered as a guide for estimating purposes. Our engineering service is maintained for the benefit of our customers. Should any unusual condition obtain, we shall gladly submit our recommendation.
18. The basic difference between the manufacturer's licenses and the consumer's license form adopted by the Urquharts is found in the license fees. In the manufacturer's agreement, the fee to be paid the Urquharts was 15 percent of the net selling price of foam producers and stabilizers, whereas in the consumer's license form the license fee was 50 cents per gallon on the water capacity, based on rates in gallons per minute at 100 pounds inlet pressure of each foam producer, and 10 cents per pound for each pound of foam stabilizer. It has been stipulated by the parties that the stabilizer sold by the National company weighs 9.4 pounds per gallon.
According to this price list, the price per gallon of foam stabilizer sold by the National company in lots less than 100 gallons is $4.50 per gallon; in lots of 100-199 gallons, $4 per gallon, and in lots of 200 or more gallons, $8.80 per gallon. According to the manufacturer's agreement, the net license fee of 15 percent applied to these three prices would be $0.6750, $0.60 and $0.57 respectively whereas the license fee, according to the consumer's license form, would be a straight $0.94 per gallon.
It has been stipulated by the parties that "the dollar volume of sales of stabilizer and equipment by National Foam System, Inc. within the six years preceding the filing of the petition herein has been in the relationship of approximately 75 percent stabilizer to 25 percent equipment."
19. The price, the royalty under manufacturer's license, the license fee under the consumer's license form, and capacity in gallons per minute at 100 pounds' pressure, of the four foam-producing nozzles listed on page 2 of the National catalog are set forth in the following tabulation:
Type Price of nozzles Royalty under manufacturer's license License fee under consumer's license Capacity in gallons per minute at 100-pounds pressure RP-1J4RP-3___ RP-6___ RP-12._ $45.00 55.00 75.00 100.00 $6.75 8.25 11.25 15.00 $7.50 15.00 30.00 60.00 15 30 120
The comparison made in this and in the previous finding is based solely on royalty fees for the foam-forming material and foam-forming nozzles for screwing onto the end of a fire hose.
20. A consumer desiring a consumer license would have to pay the Urquharts a larger license fee than a consumer dealing with a supplier having a manufacturer's license agreement with the Urquharts.
There is no evidence that any consumer license was ever requested from the Urquharts or executed.
21. In the present case the Urquharts attempted to justify a higher fee for direct consumer licenses on the ground that they intended to furnish services, including those of an engineering nature, to the consumers in addition to a license.
This contention is inconsistent with the consumer license form (finding 15) which specifically sets forth that the license fees are "for the practicing of said processes," the consumer license form further providing, in paragraph 8 thereof, that
(8) The Urquharts do not guarantee the working or performance of any processes hereby licensed or the working or performance of any Foam Producers, their sole relationship to the business being that of licensor of the patent rights.
22. There is in evidence a certain Settlement Agreement, dated October 4,1946, between the Urquharts, National, and the United States Government. From this Settlement Agreement it appears that prior to January 1,1946, National had sold "Foam Producers" and "Foam Stabilizers" to the Government and in accordance with National's agreement with the Urquharts dated April 15, 1941, the prices charged by National included a royalty to cover the practice of the methods of the patents here in suit. Under the Royalty Adjustment Act various departments of the Government issued notices and orders followed by an order of April 15, 1944, directed to the Urquharts and National, authorizing a 5-percent royalty with an annual ceiling of $100,000 to be paid to the Urquharts by National under its agreement of April 15,1941 (supra), and as the result of such notices and orders, certain controversies arose between the Urquharts, National, and the Government, which controversies the agreement undertook to settle.
Except for a qualified release to the Government from any and all claims of infringement of the patents in suit arising out of the manufacture, use or sale of articles or materials procured by the Government prior to January 1, 1946, the Settlement Agreement does not embody any license under the patents in suit. The Settlement Agreement had no effect upon the royalty provisions of National's agreement with the Urquharts except with respect to National's dealing with the Government, and except to that extent had no relation to or effect upon the operation of the Urquharts' licensing plan here in issue.
CONCLUSION OE LAW
Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes that as a matter of law the plaintiff is not entitled to recover, and the petition is dismissed.
Judgment is rendered against plaintiff for the cost of printing the record herein, the amount thereof to be entered by the clerk and collected by him according to law.