Galion Iron Works & Mfg. Co. v. JD Adams Mfg. Co.

• Decision Date: 01 June 1942
• Docket Number: No. 7900.,7900.
• Citation: 128 F.2d 411
• Parties: GALION IRON WORKS & MFG. CO. v. J. D. ADAMS MFG. CO.
• Court: U.S. Court of Appeals — Seventh Circuit

128 F.2d 411 (1942)

GALION IRON WORKS & MFG. CO. v. J. D. ADAMS MFG. CO.

No. 7900.

Circuit Court of Appeals, Seventh Circuit.

June 1, 1942.

Harker H. Hittson, of Columbus, Ohio, for appellant.

Louis McClennen, James A. Ross, and Verne A. Trask, all of Indianapolis, Ind. (Ross, McCord, Ice & Miller and Schley & Trask, all of Indianapolis, Ind., of counsel), for appellee.

Before EVANS and SPARKS, Circuit Judges, and LINDLEY, District Judge.

LINDLEY, District Judge.

On February 5, 1936, plaintiff and defendant entered into an agreement under which plaintiff granted defendant a license to manufacture motor graders embodying one or more claims of Winsor patent 2,020,271. The present suit arose out of this contract and involves two separate claims; the first for royalties claimed to have become due after July 6, 1938, and the second for judgment upon an arbitrator's award made in an ex parte proceeding by the arbitrator named in the contract.

Under the agreement, defendant agreed to pay royalties on graders sold by it after February 5, 1936. Section (d) provided that if in any suit the patent should be held invalid or not infringed, no royalties should be due until reversal, with respect to those graders manufactured by defendant substantially of "the same design and construction as that involved in the supposed litigation and within the scope of the claims involved."

The subsequent suit of Galion Iron Works & Mfg. Co. v. Beckwith Machine Co., D.C., 25 F.Supp. 73, affirmed 3 Cir., 105 F.2d 941, resulted, July 6, 1938, unfavorably to the Winsor patent. There a grader known as the Caterpillar Auto Patrol was held not to infringe Winsor. Consequently our question is whether defendant's graders are substantially of the same design and construction as the Caterpillar Auto Patrol. The District Court so held, and the evidence supports the finding.

Both the Caterpillar products held not to infringe and defendant's graders are power operated machines with a relatively long vehicle frame comprised of spaced, elongated, symmetrically arranged side members and cross members, with a power traction unit at the rear and a steering unit at or near the front end of the frame. Each has a grader blade adjustably mounted on the frame to operate on material along the path of travel. Each has a mechanism between the side members and the power unit to hold the implement in a fixed relation to the frame, independent of the steering wheel unit. In both the engine is supported at three spaced points upon the frame. Each has the operator's station between the engine and the grader blade, except that in a few models of defendant's graders it is located over and to the rear of the motor. And both place their engines over the axle except in a few models of defendant. These slight differences are of no importance. Galion I. W. & M. Co. v. J. D. Adams Mfg. Co., 7 Cir., 105 F.2d 943.

In view of this substantial evidence supporting the finding of the trial court, it should be accepted by this court. Barbour v. George, 7 Cir., 84 F.2d 281, 282; Universal Gas Co. v. Central Illinois Public Service Co., 7 Cir., 102 F.2d 164, 166. Moreover there is no substantial evidence to the contrary. Consequently, the decision in Galion Iron Works & Mfg. Co. v. Beckwith Machine Co., D.C., 25 F.Supp. 73, having been unfavorable to the Winsor patent and the motor graders manufactured by defendant being of substantially the same design and construction as those involved in the unfavorable suit, defendant was justified under the contract in refusing to continue payment of royalties after July 6, 1938.

Under the second claim, plaintiff alleges that it is entitled to $28,179.63 awarded it by the arbitrator mentioned in the license contract.

Clause 4 of the contract, under which plaintiff claims relief, provided that the arbitrator should be vested with sole authority and power to receive, consider and decide upon any complaint presented by either party claiming a violation of the license contract with respect to prices, terms of sale, and payment of royalties. If the arbitrator should find that the contract had been violated in any of these respects, he was authorized to assess as "liquidated damages," and "not as a penalty," not less than 100 per cent nor more than 500 per cent of the total royalty payments payable.

In satisfaction of the judgment in the first Galion Iron Works & Mfg. Co. v. J. D. Adams Mfg. Co. suit, supra, Adams paid Galion $19,825, representing unpaid royalties, and costs of $300.25. Shortly after this, plaintiff asked the arbitrator named in the contract to ascertain the amount of its alleged liquidated damages suffered by reason of defendant's refusal to pay royalties until compelled to do so under the judgment.

The arbitrator found plaintiff's expenses in the suit to be $25,218.11 plus accrued interest on unpaid royalties of $1,925 and $103.65 costs, a total of $28,179.63, and awarded this amount to plaintiff as actual liquidated damages in the form of additional royalties. Defendant refused to participate in the arbitration and claimed that the award was of no effect. The District Court sustained defendant's contention.

Assuming the binding effect of the agreement to arbitrate, plaintiff did not see fit originally to avail itself of that remedy. Rather it brought suit. A right to arbitration arising out of mutual agreement, like any other contractual right, may be waived, amended or altered. The Belize, D.C., 25 F.Supp. 663, appeal dismissed 2 Cir., 101 F.2d 1005; Radiator Specialty Co. v. Cannon Mills, Inc., 4 Cir., 97 F.2d 318, 117 A.L.R. 299; La Nacional Platanera v. North American F. & S. S. Corp., 5 Cir., 84 F.2d 881. Commencement of a suit in court rather than reliance upon arbitration, with answer by the opposing party upon the merits, is a waiver of the right to arbitrate by both parties. The Belize, D.C., 25 F.Supp. 663; McKenna Process Co. v. Blatchford Corp., 304 Ill. App. 101, 25 N.E.2d 916. The plaintiff brought suit to recover unpaid royalties which defendant claimed it did not owe. It had a clear right to have the dispute arbitrated. This right was abandoned by suit; in that abandonment defendant acquiesced by answer on the merits. Plaintiff could have sought arbitration but it exercised its option of bringing suit. By its election, it waived its right to arbitration.

By the contract the arbitrator was granted sole authority and...