American Sign and Indicator Corp. v. Schulenburg, 12509-12511.

Citation267 F.2d 388
Decision Date09 July 1959
Docket NumberNo. 12509-12511.,12509-12511.
PartiesAMERICAN SIGN AND INDICATOR CORPORATION, Plaintiff-Appellant, v. Edward J. SCHULENBURG et al., etc., Defendants-Appellees. TIME-O-MATIC, INC., Plaintiff-Appellee, v. AMERICAN SIGN AND INDICATOR CORPORATION, Defendant-Appellant. TIME-O-MATIC, INC., Plaintiff-Appellant, v. AMERICAN SIGN AND INDICATOR CORPORATION, Defendant-Appellee.
CourtU.S. Court of Appeals — Seventh Circuit

Wilfred S. Stone, Chicago, Ill., Cameron Sherwood, Walla Walla, Wash., Henry S. Wise, Danville, Ill., for American Sign & Indicator.

Charles B. Spangenberg, Chicago, Ill., Donald S. Baldwin, Danville, Ill., Sidney Wallenstein, Chicago, Ill., for Schulenburg, Time-O-Matic.

Before SCHNACKENBERG, HASTINGS, and KNOCH, Circuit Judges.

KNOCH, Circuit Judge.

The following issues were presented to the District Court in this cause:

(1) Was there an oral contract between Williams Brothers, Inc. and Time-O-Matic Company (hereinafter called "TOM Co") whereby the latter was to manufacture and sell exclusively to Williams Brothers, Inc., equipment for displaying time and temperature on a single panel of lights, and whereby Williams Brothers, Inc., was to purchase all equipment for these signs from TOM Co?

(2) Was there a confidential relationship between TOM Co and American Sign and Indicator Corporation (hereinafter called "ASI") and Williams Brothers, Inc.?

(3) Is Patent No. 2,673,976 (owned by ASI) valid? Are TOM Co and its successor Time-O-Matic, Inc., (hereinafter called "TOM") estopped to deny its validity?

(4) If the patent is valid was it infringed?

(5) If ASI has failed to establish the oral contract or the confidential relationship, and the patent is invalid, is TOM entitled on the basis of unfair competition, to damages and to restrain ASI from interfering with the sale of its equipment for displaying time and temperature on a single bank of lamps?1

On or about August 17, 1956, TOM had sought declaratory judgment that the patent in suit was invalid and not infringed. TOM also sought to restrain alleged unfair competition by ASI and prayed damages therefor. ASI filed suit on or about October 31, 1956, against Edward J. Schulenburg, Edward J. Schulenburg, Jr., Helen E. Schulenburg, and Marie V. Pottebaum, partners operating under the name of TOM Co and its successor TOM, to recover damages for breach of alleged oral contract and confidential relationship, in addition to injunction and accounting for damages from patent infringement. The two causes were consolidated.

The District Court found the patent invalid, and found no such contract or confidential relationship between the parties as alleged by ASI in its complaint. The District Court, therefore, enjoined ASI from charging TOM or its customers with infringement of the patent. In addition, the District Court found no unfair competition on the part of ASI as complained of by TOM, and denied injunction. Both ASI and TOM appealed.

A brief survey of the factual situation giving rise to these actions will be helpful. This Court may not set aside the findings of fact of the District Court unless we find them clearly erroneous. Rule 52(a), Federal Rules of Civil Procedure, 28 U.S.C.A.; Hyster Co. v. Hunt Foods, Inc., 7 Cir., 1959, 263 F.2d 130, 133; Simmons Co. v. A. Brandwein & Co., 7 Cir., 1957, 250 F.2d 440, 445.

In 1949, Charles and Luke Williams, partners in the business of cleaning, painting, selling and installing neon signs organized Williams Brothers, Inc., a corporation of the State of Washington.

During the month of May, 1952, the Williams Brothers incorporated ASI (also in the State of Washington, with places of business in Spokane, Washington, and Chicago, Illinois) to sell a sign alternately displaying time and temperature on a single bank of lights, or on one reading panel.

TOM Co, in Danville, Illinois, for a number of years was a manufacturer and seller of control equipment for signs.

Northwestern Agencies, Inc., in Seattle, Washington, was TOM Co's distributor or manufacturer's representative in the Pacific Northwest. Coastal Sales Co., at Seattle and Spokane, Washington, was TOM Co's jobber or sign supply house. Both sold electrical equipment for other manufacturers as well.

The Williams brothers knew that TOM Co had for many years been selling electrical control equipment for signs displaying time and temperature separately. On or about May 23, 1951, Charles Williams telephoned J. W. Sutphin, TOM Co's Sales Manager. Charles Williams asked if TOM Co could build and supply control equipment to display time and temperature alternately on a single bank of lights, and at what price. Sutphin, in this telephone conversation, in the hearing of W. E. Bachman, TOM Co's specifications engineer, stated that TOM Co could supply the equipment, but that he would have to figure out the means and price.

The District Court found that Charles Williams disclosed no details or plan of accomplishing the desired end result. Charles Williams had no drawings or details for use of the mechanisms. The idea of the single bank display was not a trade secret, nor was it confidentially disclosed to TOM Co at this or any other time. Nor had TOM Co solicited the idea.

After consultation with Sutphin and Donald Banks in TOM Co's engineering department, Bachman wrote Charles Williams May 25, 1951, quoting standard list prices for one numeral clock mechanism at $880, one numeral thermometer control at $1,980, and estimated cost of one relay panel for switching the lamp bank alternately from clock mechanism to thermometer control at $600. No charge for engineering was included. He enclosed sketches of the composite lamp bank and numeral styles for a lamp bank, together with explanation for placing lamps in a composite lamp bank, and photographs of the time and temperature controls.

On or about June 26, 1951, the Williams brothers gave Greek Wells, patent attorney, photostats of a proposed sign design for the Spokane and Eastern Branch of the Seattle First National Bank, Spokane, Washington, including alternate display of time and temperature on a single bank of lamps. Application for copyrighting the sign design was received in the United States Copyright Office July 3, 1951, and copyright was registered July 31, 1951. The idea and the design were thus published more than one year prior to the filing of application for the patent on December 19, 1952. Wells' sketch allegedly made in June, 1951, discloses no wiring, details of mechanisms, nor use of lifter bars. The District Court found that E. J. Schulenburg, TOM Co's manager, (who was away from the factory when Charles Williams telephoned and Bachman wrote on May 25, 1951), later suggested lifter bars instead of the relay panel.

On or about June 27, 1951, Williams Brothers, Inc. presented the Spokane and Eastern Bank with the completed sketch of the proposed sign, and under date of July 10, 1951, wrote the Bank that this would be the only known unit displaying correct time and temperature alternately from the same reader panel. At the Williams brothers' request, Sutphin sent the Williams brothers a letter dated August 31, 1951, stating that TOM Co had "never furnished equipment for a combination time and temperature indication" * * * "from a common, composite lamp bank."

In September, 1951, when the Williams brothers requested Wells to file application for a patent, they had no sketches or diagrams for accomplishing alternate display of time and temperature.

At a meeting, on or about September 21, 1951, in Seattle, Washington, where the proposed sign for the Bank was discussed, Schulenburg instructed the Williams brothers in construction of the lamp bank, placement of lamps on the sign, location of the control thermometer and operation of the equipment TOM Co would furnish.

The District Court found that the Williams brothers made no effort to treat the proposed sign as a confidential disclosure, and that there was no oral understanding or agreement, express or implied, that Williams Brothers, Inc. would purchase all its control equipment for the alternate display signs from TOM Co or that TOM Co would sell such equipment solely to Williams Brothers, Inc., although Schulenburg did state TOM Co would refer inquiries to Williams Brothers, Inc.

On or about September 26, 1951, without TOM Co's knowledge, Williams Brothers, Inc. guaranteed the Bank exclusive use of the alternate display sign on the strength of an alleged "patent pending". No patent application had yet been filed.

About October 19, 1951, Williams Brothers, Inc. ordered control equipment for the Bank's proposed sign from Coastal Sales Company, which, in turn, placed its order with TOM Co about October 25, 1951.

TOM Co's employees planned the wiring and use of lifter bars (as suggested by Schulenburg in place of the originally quoted relay panel) on the numeral clock and numeral thermometer control mechanism under the control of its flasher to produce the alternate display of time and temperature. The control equipment was built by TOM Co in Danville, Illinois, and shipped December 12, 1951, to Williams Brothers, Inc.

It arrived in Spokane, about December 15, 1951, in separate units, with complete wiring diagrams and instructions. The Williams brothers had built the cabinet and the lamp bank, having obtained the information on how to lay out the lamp bank from TOM Co. The Williams brothers had sold, repaired, and assembled signs, but they had never manufactured or assembled any of these units. With the aid of an employee and using the...

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    ...Wagner, 220 F.Supp. 715 (N.D.Ill.1963); American Sign & Indicator Corp. v. Schulenberg, 167 F.Supp. 20, 30 (E.D.Ill.1958), aff'd 267 F.2d 388 (7th Cir. 1959). To be in good faith, the communications to the customers must not contain any misstatements or other language which is unsupported b......
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    ...1339 (1931); Risdon Iron & Locomotive Works v. Medart, 158 U.S. 68, 15 S.Ct. 745, 39 L.Ed. 899 (1895); American Sign & Indicator Corp. v. Schulenburg, 267 F.2d 388 (7th Cir., 1959), cert. den. 361 U.S. 886, 80 S.Ct. 157, 4 L.Ed.2d 121 (1959); Application of Lawson, 228 F.2d 249 (C.C.P.A., 1......
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