Stevens v. Marco

• Citation: 305 P.2d 669,147 Cal.App.2d 357
• Court: California Court of Appeals
• Decision Date: 31 December 1956
• Parties: C. H. STEVENS, Plaintiff and Appellant, v. Vincent A. MARCO, Marco Industries Company, et al., Defendants and Respondents. Civ. 21559.

Page 669

305 P.2d 669

147 Cal.App.2d 357

C. H. STEVENS, Plaintiff and Appellant, v. Vincent A. MARCO, Marco Industries Company, et al., Defendants and Respondents.

Civ. 21559.

District Court of Appeal, Second District, Division 2, California.

Dec. 31, 1956.

Hearing Denied Feb. 27, 1957.

J. Robert Maddox, Beverly Hills, for appellant.

John P. McGinley, Los Angeles, for respondent Marco.

Robert N. Gold, Beverly Hills, for respondent Marco Industries Co.

Loeb & Loeb, Herman F. Selvin, Los Angeles, for respondents.

FOX, Justice.

Plaintiff appeals from a judgment of nonsuit in an action in which he sought damages for breach of contract, fraud, money had and received and goods sold and delivered.

Under familiar rules of appellate procedure in considering the propriety of a nonsuit, we must resolve every evidentiary conflict in plaintiff's favor, accept as true all evidence adduced, direct or indirect, supportive of plaintiff's case and indulge in every legitimate inference which may be drawn from such evidence for plaintiff's benefit. Aguirre v. City of Los Angeles, 46 Cal.2d 841, 844, 299 P.2d 862; Singer v. Marx, 144 Cal.App.2d 637, 301 P.2d 440. In our statement of the record, the court assumes as established all evidence, and every proper intendment therefrom, favorable to plaintiff's causes of action.

In 1942, plaintiff was employed by Consolidated-Vultee Aircraft in San Diego, California, as an electrical engineer. He had never finished high school and was self-educated in his profession. In the middle of 1942, plaintiff's work was devoted to the design of the electrical systems installed in military aircraft. While so engaged, the idea occurred to him that various lights used in aircraft to indicate whether or not particular aeronautical equipment was functioning might give a false impression because of a burned out bulb. He conceived a device, which would be part of the indicator light assembly, by which the pilot could test the bulb and quickly determine whether it was defective.

Plaintiff had no experience with patents or patent applications but he was interested in having this device patented and commercially exploited. Plaintiff made a sketch of such a device and, through a friend named Wilford, was introduced to defendant Marco. He was told Marco had the facilities to develop and market the device. Marco was an attorney and an officer, stockholder and sales manager of the Searl Aero Industries, a corporation capable of manufacturing the indicator-light device in quantity. Marco told plaintiff that if Searl were given the sales and production rights he would obtain the necessary patent protection at no cost to plaintiff.

On July 15, 1942, the parties executed a written contract under which Marco agreed to proceed diligently with the engineering development of the light and to secure at his own expense and in his own name the necessary patent protection. Plaintiff agreed to assign to Marco all right, title and interest in the light as well as the exclusive right to patent, manufacture and sell the light in exchange for three percent interest in any patent, or, at plaintiff's election, in return for payment of 3% of the net sales price of all lights sold. Upon signing of this agreement, plaintiff assigned his interest in the light to Marco.

On February 13, 1943, the contract was modified in certain respects. The new contract recited (1) that patent applications had been filed in Marco's name; (2) that Marco would assign a 3% interest in the patent to plaintiff upon its issuance; (3) that Searl had been given an exclusive contract to manufacture the light and was authorized to pay plaintiff 3% of the net sales price. Plaintiff expressly warranted in the contract that Consolidated had no property rights in the light and agreed that if others claimed rights in the patent or an infringement, payment to him might be suspended until settlement of the dispute. On February 18, 1943, Marco filed an application for a patent on what was termed a 'tell-tale and testing light.'

In March, 1943, a question arose as to whether Consolidated had some interest in the light because of an invention agreement which plaintiff had previously signed with Consolidated. Marco went to San Diego to discuss the matter with an official of Consolidated and subsequently engaged in negotiations with Consolidated regarding the matter. On April 24, 1943, Consolidated sent Marco a waiver of 'all right in and to the indicator light invented by C. H. Stevens.'

Thereafter, Searl proceeded with the development of the light. Plaintiff actively assisted in the process of preparing a prototype and checked the reactions of pilots to the light in test flights. In June, 1943, Searl commenced production of the light. Certain companies, including one called Dial Light, were given sales licenses. In August, 1943, plaintiff received his first royalty check, and subsequent payments were remitted to him monthly.

On October 12, 1943, Marco filed a second application for a patent for what he described as a 'signal light.' In his statement accompanying the application, Marco described the invention as 'of a generally similar nature to that constituting * * * my copending application * * * upon which the present device constitutes an improvement.' Marco never showed plaintiff either of the patent applications filed in his name. For convenience, these applications will be subsequently denominated Marco 1 and Marco 2, respectively.

In 1944, plaintiff informed Marco that he would like a new contract to be drawn. Marco acquiesced. Plaintiff employed an experienced patent attorney named Curtis to prepare the agreement. It was signed on March 9, 1944 So far as material, it recited that Marco was the inventor of the indicator light devices which were the subject of the two patent applications, that he owned an interest in, and controlled the business of Searl, a licensee of the invention, and that plaintiff had contributed valuable engineering services in their development which entitled him to compensation. It was therefore agreed that Marco would use his best business judgment and diligence in developing and selling the device and would pay plaintiff, on the fifteenth of each month, 3% of 95% of the gross selling price of the lights, including devices embodying this invention or improvements. The improvements would include all inventions by Marco or Searl during the life of the agreement, which was stated to be for the terms of the patents, if granted, or, if disallowed, for ten years thereafter. Plaintiff agreed to assign to Marco any improvements he might make on the light. Marco agreed to keep books of account showing sales which would be accessible to plaintiff.

After the execution of this agreement, an engineer named Fred Aves, who was employed by Searl, perfected a device known as a 'light shutter and dimmer,' a unit which could be attached to and used in combination with the signal lights on which Marco had made patent application. The device was assigned to Marco. On June 7, 1944, Aves applied for a patent on this shutter. Plaintiff testified he had no knowledge either of the Aves patent application or its ultimate issuance until 1953.

With the passage of time, the volume of sales increased beyond Searl's capacity to meet the demand. Thereupon Marco licensed Dial Light Co. to manufacture and sell the light in the territory east of the Mississippi River and limited Searl's area of operations to the western part of the United States. Plaintiff was advised of this arrangement. Although he continued to receive royalties from Searl, plaintiff failed to obtain royalties from the Dial Light operation. He complained of this in a series of letters to Marco in the spring of 1945.

Plaintiff did a great deal of work in propagating acceptance and sale of the light. At Marco's request, plaintiff was successful in obtaining approval of the light by the Air Force, enabling it to be used on military planes and increasing its sales potential. Marco supplied plaintiff with an entertainment expense account, sample lights, and advertising material, and plaintiff went on sales tours for the purpose of soliciting orders for the light. He made one complete sweep of the aircraft industry on both the east and west coast pushing the sales of the indicator light.

On June 13, 1945, Marco wrote a letter to Stevens regarding the Dial royalties. The concluding part of this letter reads, in part as follows: 'Another matter of great importance is that our patent attorneys have reported that conflicting patents exist between our panel light patents and a patent obtained and filed on January 25, 1938, and granted on March 5, 1940, Number 2192345. This patent has been assigned to one of the large light companies in 1940, who retained the property rights of the same. It might be that you have some views on this matter as no doubt this conflict will end in litigation very soon.'

It will be recalled that prior to the time this letter was written Marco had filed three patent applications, two in his own name and the third in the name of Aves, although he was assignee thereof. Marco was represented by patent attorneys in Washington, D. C., one of whom was named Crammond. As the claims made for the various devices were processed through the Patent Offices, the patent examiners cited to Marco's attorneys various earlier patents relating to the subject matter of the applications either as examples of prior art or as possibly consituting a block with respect to approval of all the claims advanced. In addition, the Patent Office indicated that there was a misjoinder in Marco 1 and Marco 2 of unrelated inventions and required a separation between the claims relating to a pilot lamp system and those relating to the shutter. Various amendments to the claims were made by Marco's attorneys in their efforts to meet objections of the Patent Office and its rejection of particular...