643 F.2d 289 (5th Cir. 1981), 79-3893, CMS Industries, Inc. v. L. P. S. Intern., Ltd.

Docket Nº:79-3893.
Citation:643 F.2d 289
Party Name:217 U.S.P.Q. 20 CMS INDUSTRIES, INC., Plaintiff-Appellee, v. L. P. S. INTERNATIONAL, LTD. and Sam C. Evans, Defendants-Appellants. MINNESOTA MINING AND MANUFACTURING COMPANY, Etc., Plaintiff-Appellee, v. SEE INTERNATIONAL, LTD., Stop-Loss Incorporated, Sam Evans, Defendants-Appellants, v. Elmer WHITAKER, CMS Industries, Inc., and Fred Langley, Defe
Case Date:April 22, 1981
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 289

643 F.2d 289 (5th Cir. 1981)

217 U.S.P.Q. 20

CMS INDUSTRIES, INC., Plaintiff-Appellee,

v.

L. P. S. INTERNATIONAL, LTD. and Sam C. Evans,

Defendants-Appellants.

MINNESOTA MINING AND MANUFACTURING COMPANY, Etc., Plaintiff-Appellee,

v.

SEE INTERNATIONAL, LTD., Stop-Loss Incorporated, Sam Evans,

Defendants-Appellants,

v.

Elmer WHITAKER, CMS Industries, Inc., and Fred Langley,

Defendants-Appellees.

No. 79-3893.

Unit B

United States Court of Appeals, Fifth Circuit

April 22, 1981

Page 290

[Copyrighted Material Omitted]

Page 291

Hanes & Young, Paul L. Hanes, Atlanta, Ga., for defendants-appellants.

Haas, Holland, Lipshutz, Levison & Gibert, Hugh W. Gibert, Atlanta, Ga., for Elmer Whitaker and Fred. R. Langley.

Johm M. Sikes, Jr., Atlanta, Ga., John C. Barnes, Stanley G. DeLaHunt, St. Paul., Minn., for Minnesota Mining Mfg. Co.

Appeal from the United States District Court for the Northern District of Georgia.

Before GODBOLD, Chief Judge and HATCHETT, Circuit Judge, and MARKEY [*], Chief Judge.

MARKEY, Chief Judge:

SEE International, Inc. and Sam C. Evans (collectively, SEE) appeal from a judgment that Elmer Whitaker (Whitaker) is entitled to royalties from Minnesota Mining and Manufacturing Company (3M), under a license to make, use, and sell anti-theft systems covered by six patents. 1 We affirm.

Background

In 1969 SEE, owner of the involved patents, concluded a license agreement with 3M. 2 In Article II of that agreement, SEE purported to grant to 3M "an exclusive license and right to license others ... throughout the world." That grant, however, was made subject to a "retention by (SEE) (or a company in which (SEE) owns at least fifty-one (51) percent of the outstanding voting stock) of a non-transferable right ... to make, use and sell...." 3 3M agreed to pay a royalty calculated as a percentage of sales.

On June 27, 1972, SEE executed an assignment of the patents to its majority-held subsidiary, Stoplifter International, Inc. (Stoplifter), in which SEE sold, assigned, and transferred to Stoplifter "the entire right, title and interest in and to the said patent(s)...." The assignment was recorded in the Patent and Trademark Office pursuant to 35 U.S.C. § 261.

Page 292

On the same day, June 27, 1972, Stoplifter and SEE signed another agreement, unrecorded in the Patent and Trademark Office, in which SEE purported to reserve "the unrestricted right and license ... to contract for, make, design and sell ... systems embodying the invention ... without the payment of any royalty ...," and SEE retained all rights to any "present or future agreements, royalties, or license fees which are due...." The unrecorded agreement also provided that SEE reserved the unrestricted right "which may be exercised by ... any duly authorized assignee" to practice the invention, and that SEE would enjoy "all the benefits under said ... Patents ... as if the same had been retained."

In February 1973, all assets of Stoplifter were transferred to Stop-Loss, Inc. (Stop-Loss) another majority-held subsidiary of SEE. It is undisputed that whatever rights in the patents existed in Stoplifter were validly transferred to Stop-Loss.

In 1977, after several years of manufacturing and selling equipment covered by the patents, Stop-Loss became subject to liquidation proceedings in Delaware for failure to pay a state franchise fee. On February 23, 1978, the Delaware Chancery Court issued an order requiring publication of a liquidation plan and setting June 5, 1978 as the deadline for filing of claims against Stop-Loss. On July 7, 1978, that court issued an order approving that plan. The plan transferred Stop-Loss's interest in the patents to Whitaker, a stockholder, officer and director of Stop-Loss, in discharge of a secured claim Whitaker held against Stop-Loss. An assignment of the patents to Whitaker was executed for Stop-Loss on July 11, 1978.

On February 8, 1978, Whitaker, obviously without waiting for completion of the Chancery proceeding, entered an agreement with CMS Industries, Inc. (CMS), reciting that Whitaker was the owner of the patents and granting a non-exclusive license throughout the United States to CMS to make, use, and sell the patented equipment in return for royalty payments to Whitaker.

On February 22, 1978, CMS filed a patent infringement suit against L. P. S. International, Ltd. (LPS), a subsidiary of SEE, and Sam Evans, a principal in both SEE and LPS. SEE had licensed LPS to make, use and sell equipment covered by the patents. The CMS complaint alleged that it was the "assignee" of Whitaker's interests in the patents and that LPS and Evans were infringing those patents.

3M filed an interpleader complaint on June 22, 1978, naming as defendants SEE, Stop-Loss, Evans, Whitaker...

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