Perma Research & Development Co. v. Singer Co.

• Decision Date: 11 April 1975
• Docket Number: No. 66 Civ. 665 KTD.,66 Civ. 665 KTD.
• Citation: 402 F. Supp. 881
• Parties: PERMA RESEARCH & DEVELOPMENT COMPANY, Plaintiff, v. The SINGER COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

402 F. Supp. 881

PERMA RESEARCH & DEVELOPMENT COMPANY, Plaintiff, v. The SINGER COMPANY, Defendant.

No. 66 Civ. 665 KTD.

United States District Court, S. D. New York.

April 11, 1975.

COPYRIGHT MATERIAL OMITTED

Poletti, Freidin, Prashker, Feldman & Gartner, New York City, for plaintiff; Paul R. Grand, Paul R. DeRensis, New York City, of counsel.

Winthrop, Stimson, Putnam & Roberts, New York City, for defendant; Terence H. Benbow, Elizabeth M. Taylor, Eugene G. McGuire, Jonathan K. Lagemann, Rebecca H. Rawson, New York City, of counsel.

OPINION

KEVIN THOMAS DUFFY, District Judge.

This case has had a long and tortured history. It was instituted on March 9, 1966, and the operative facts go back several years prior to that time. The trial spanned eight months and included many thousands of pages of exhibits.

Basically, it is a breach of contract action, plaintiff and defendant having entered into two contracts, one on June 18, 1964, the other on December 21, 1964. By judicial curtailment of the issues, only the breach of the December 21, 1964 contract was the subject of the trial but in order to put into perspective all of the claims, counterclaims and defenses of the parties it is necessary to review the negotiations leading to the June 18, 1964 contract, the relationship of the parties while operating thereunder, and particularly the knowledge gained by the defendant during the period starting with the negotiations leading to the June 18, 1964 contract and ending with the December 21, 1964 contract; and also the performance by the defendant under the December 21, 1964 contract.

Both contracts¹ involve an anti-skid device for automobiles invented by the president of the plaintiff, Frank Perrino (hereinafter "Perrino"); patented by him and the patents assigned first to the plaintiff corporation and thereafter pursuant to the December 21, 1964 contract to the defendant. It should be remembered that anti-skid devices for automobiles were not generally marketed prior to 1964, and that there is no attack whatsoever on the patents which underlie this suit.

This action started as one to set aside the December 21, 1964 contract and to enforce certain provisions of the June 18, 1964, contract. That complaint was dismissed by Judge Frederick vanPelt Bryan of this Court except that Judge Bryan found that a cause of action lay in the "Wherefore" clause of the complaint that the defendant may have not used its "best efforts to market and manufacture" the invention assigned to it under the December 21, 1964 contract. Civil No. 66-665 (S.D.N.Y., filed March 29, 1968), aff'd 410 F.2d 572 (2d Cir. 1969).

Thereafter, Judge MacMahon of this Court, in denying another motion for summary judgment, further delineated the issue of "best efforts" as follows:

". . . we think that `best efforts' here means that Singer was required to continue collaborating with Perma for a reasonable length of time in a good faith effort to solve the problems then preventing marketing of the product."

* * * * * *

"For example: (1) Did Singer use its best efforts for a reasonable time . . . to perfect the product under all the circumstances? (2) In view of the fact that the device was not `fail-safe,' was Singer justified in abandoning the contract either because it was impossible to make the device `fail-safe' or because it could not be made `fail-safe' without unreasonable, unwarranted or impractical efforts and expenditures of time and money out of all proportion to engineering and economic realities?" 308 F.Supp. 743, 748-49 (S.D.N.Y. 1970)

While I defined the issues at the start of trial in a somewhat similar manner to that of Judge MacMahon, I permitted extraordinary latitude to the defense to prove all that it could and to make any arguments it wished as to its defenses and its counterclaim. Since the case was tried without a jury I permitted certain evidence to be received which is of questionable probative value. All of this was done with a view that this trial would mark an end to this litigation.

In summary, I find for the plaintiff on the claim that was tried. I also find that the counterclaim advanced by defendant was totally sham as a matter of fact.

This opinion is to be considered findings and conclusions as required by Rule 52 of the Federal Rules of Civil Procedure.

I. BACKGROUND OF THE PARTIES

Frank Perrino, although a person without formal engineering training, has been a "tinkerer" all his adult life. After being discharged from the Air Force, where he received training as a airplane mechanic, he returned to his native New England where he invented an accelerator brake and filed for a patent in 1959. An anti-skid control was part of this accelerator brake patent application. In 1962, a separate patent application was filed for the anti-skid invention. Thereafter, the anti-skid was separated into five patent applications representing different aspects of the device. These applications matured into five separate patents between 1966 and 1969 after the assignment of them to the defendant.

Perrino founded the plaintiff corporation, Perma Research & Development Company (hereinafter "Perma") under Delaware law and has been its president at all relevant times. Perma has its principal place of business in North Attleboro, Mass.

The Singer Company (hereinafter "Singer") is a New Jersey corporation with its headquarters in Rockefeller Center, New York, N. Y. While originally started as a manufacturer of sewing machines, it has become a widely diversified manufacturing concern. The 1965 annual report for the Singer Corporation shows sales of $980 million from manufacturing and sale of heating and air conditioning equipment, technical products, business machines and computers, and a variety of other devices, of course including sewing machines. During 1965 alone, Singer spent $18 million on its various research and development activities.

Both parties acknowledge that this Court has jurisdiction over this action based on diversity of citizenship. 28 U. S.C. § 1332.

II. BACKGROUND TO THE NEGOTIATIONS LEADING TO THE JUNE 18, 1964 CONTRACT

After the invention of the accelerator brake and the recognition that the anti-skid control could be separated from it, Perrino tried to interest various people in the automotive industry in the devices. Of particular note is the fact that he took the anti-skid device to the Bendix Corporation in 1960, where it was considered by Stanley I. MacDuff, who tested it once by driving it home and who recommended that Bendix decline any interest in the device. (As we will see later, this was the same Stanley I. MacDuff whom the defendant Singer employed as an expert when it became apparent that this case would go to trial and who was permitted to give "expert" testimony at trial). Perrino, on behalf of Perma, was apparently unable to interest anyone in the anti-skid device but continued working on it at North Attleboro, Mass.

Perma also arranged to have tests made of its anti-skid device by certain automotive companies and by the Motor Vehicle Research of New Hampshire (hereinafter "M.V.R.N.H."), apparently a private organization owned by one Andrew White. M.V.R.N.H. agreed to do the testing for a portion of the capital stock of Perma and White became a member of the Board of Directors of Perma. M.V.R.N.H., thereafter, issued a glowing report on the Perma anti-skid device. Much of the report, however, only hints at conclusions and little firm test data is contained therein. Armed with this report and a promotional film, Perrino, on behalf of Perma, set out again to sell some manufacturer on the anti-skid control device. Apparently this effort was again unsuccessful although Perma had put together a number of hand-tooled, hand-finished proto-types.

Apparently in late 1963 or early 1964, Perma had arranged for a distribution agreement of the anti-skid device with a small number of automotive equipment distributors and new car dealers and had entered into a contract for the manufacture of the device by the Worcester Stamped Metal Company of Worcester, Mass., which in turn had sub-contracted with others for the manufacture and assembly of some of the components of the device.

Perma, through Perrino, continued to try to interest safety officials, highway patrols, insurance companies and others in the device. Apparently some officials of the Singer Company (Canada) Ltd. saw the promotional film, the M.V.R.N. H. bulletin and advised the management of the Elizabeth, N. J., Singer plant of the device.

During the period of the early 1960s, imports of cheaper sewing machines (particularly Japanese made models) had cut into Singer's share of the sewing machine market. Singer had already started to diversify its product line and yet much of Singer's Elizabeth plant, which had been engaged principally in the manufacture of sewing machines, stood idle.

III. THE NEGOTIATIONS FOR THE JUNE 18, 1964 CONTRACT

In February 1964, representatives of Singer's Elizabeth, N. J., plant travelled to North Attleboro, Mass., to meet with Perrino and other representatives of Perma. Perrino apparently told the Singer people at that time that the Perma anti-skid device was "fail-safe" (or in plaintiff's version, "had fail-safe features") and "that in case of a failure, that the car would revert back to its normal braking". The Singer representatives were also assured that in the event of some internal failure "the unit in effect deactivated and reverted back to the original brake system on the car". The Singer people were also shown the Perma promotional film which stated "The Perma anti-skid control . . . includes a fail-safe feature which will automatically revert to the standard braking system in case of failure." These statements or ones similar to them allegedly were reiterated by Perma officials in the months leading to the June contract.

Similarly, Singer was told that the device was "perfected" and that Perma had...