Laursen v. O'BRIEN

• Decision Date: 18 June 1937
• Docket Number: No. 6026.,6026.
• Citation: 90 F.2d 792
• Parties: LAURSEN v. O'BRIEN.
• Court: U.S. Court of Appeals — Seventh Circuit

90 F.2d 792 (1937)

LAURSEN v. O'BRIEN.

No. 6026.

Circuit Court of Appeals, Seventh Circuit.

May 20, 1937.

Rehearing Denied June 18, 1937.

Amos H. Englebeck, of Akron, Ohio, and Arthur Wickham, of Milwaukee, Wis., for appellant.

W. H. Frawley, V. M. Stolts, and W. H. Frawley, Jr., all of Eau Claire, Wis., for appellee.

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

EVANS, Circuit Judge.

This appeal is from a judgment, upon verdict, rendered in an action upon an oral contract of employment wherein appellant was the employer and appellee the employee. The alleged agreement concerned the promotion of appellant's inventions by appellee and covered the period from January, 1922, to July, 1926. After an extended trial wherein both appellant and appellee appeared as witnesses, the jury rendered a verdict for $10,000 for appellee, to which the court added interest.

At the close of the evidence appellee elected to seek a recovery upon a quantum meruit basis — for services rendered. This was because the alleged oral contract was void in view of the Wisconsin Statute of Frauds (St.Wis.1935, § 241.02).

The invention, the promotion of which was the goal of the services rendered, concerns a "Process of and Apparatus for Making Rubber Tubes with Tapered Ends." (Patent No. 1,530,128, applied for March 5, 1924, issued March 17, 1925.)

The evidence was sharply controverted and previous litigation in the Sixth Circuit Laursen v. Lowe (C.C.A.) 46 F.(2d) 303, wherein appellant and one Lowe were the parties, supplied additional issues. That was an equity suit for an accounting — a suit for compensation of services rendered for promoting sales under appellant's above-mentioned patent. Appellee was a witness and held an employment contract with Lowe from which it appeared Lowe was to share the compensation by him received from appellant with O'Brien.

The legal issues are no less complicated than the facts and involve inter alia: res adjudicata, because of privity (in connection with the Sixth Circuit suit); estoppel, laches in institution and prosecution of the suit; sufficiency of the evidence to go to the jury or to support the verdict; lack of right to recover quantum meruit; lack of right to sue because of appellee's adjudication as a bankrupt in 1924; loss of right to recover interest on judgment because of laches; rulings on appellant's several motions during trial.

Appellant is a resident of Ohio and appellee, of Wisconsin. They had been identified in other ventures, appellee as promoter and stock salesman for U.S. Auto Gear Shift Co. and Gillette Rubber Co., and appellant as an inventor and stockholder and officer in such companies.

They cooperated in their respective capacities of promoter and inventor, to perfect a concrete pump. O'Brien claims to have secured permission for Laursen to use the laboratory facilities of Gillette Rubber Co. to produce a better pump for which a patent might be obtained. Thereafter, in 1922, so he claims, it was called to his attention that if a means of manufacturing tubes and tires without the use of "rags" (to secure beveled edges on the tubes during vulcanization) could be devised, such discovery would materially reduce manufacturing costs and would be of great value. O'Brien persuaded Laursen to substitute this problem for his study of pumps. O'Brien again secured for Laursen the use of the laboratory and equipment of Gillette Rubber Co. and the cooperation of its employees. A means was thereafter provided for obviating the use of "rags." (It is hereafter described in greater detail.) O'Brien claims that he was the originator of the "idea" covered by the patent, but Laursen claimed it and secured a patent thereon. O'Brien contends that Laursen agreed to pay him a sum equal to his losses in two other ventures in which they had been interested, and which had failed. This loss was claimed to be $250,000.

The exact services which O'Brien performed are somewhat hazily described, but they included the showing of the patented invention to possible licenses and extolling its merits. At least six licenses were executed under this patent. Appellant received $900,000 in royalties from these licenses. O'Brien was, according to some evidence, in constant contact with the Gillette Company and aided in maintaining the amicable relations between the parties. He testified that he was employed by no one else during the period of the contract, and that he devoted all his time to Laursen's interests. Contradiction of this unswerving devotion to Laursen's interests appears in O'Brien's income tax returns for the period in question. Amounts, ranging from $419 to $5,076, annually, were reported as earnings from other employments.

O'Brien received no payment from Laursen (except $100) for services during the period in question. He received $4,328.72 between December 24, 1923, and May 8, 1924, from Lowe.

In his previous employments O'Brien had sold huge blocks of stock of the corporations which he was promoting and in which Laursen was interested.

The invention which forms the basis of this litigation concerns the means of making a beveled or sloping end of a rubber tube, during the process of vulcanizing the rubber. A sheet of rubber is placed around a pole or mandrel. Previously, rags were tied around the end of the tube to hold the sheet of rubber tightly against the pole. The rubber becomes soft during vulcanization, and therefore at the places of pressure it assumes a thinner shape. Heretofore steam had been used in the process of vulcanization. The Laursen process, however, utilizes hot water. It is asserted to be a more satisfactory means of complete and uniform vulcanization. Also, the Laursen process substitutes for the rag pressure, a rubber constrictor which is cut from a flat rubber sheet in the shape of a doughnut. This rubber constrictor is placed over the rubber tubing after it is on the mandrel, and effectively holds the tubing tightly to the pole and at the same time molds the end of the tubing into a beveled end. It is a very simple idea, and its patentability is not before us, nor does the outcome of this litigation depend upon the validity of the patent. The fact that six large companies have taken license contracts with substantial royalty payments based on number of tubes manufactured is material as bearing on the value of O'Brien's services, if recovery be permitted.

In the Ohio litigation the Sixth Circuit reversed an accounting decree against Laursen. In that suit Lowe sought compensation for services for promoting Laursen's inventions. The District Court found in his favor, but the Court of Appeals held that Lowe had not established his right to compensation. There was no denial of the existence of a contract-employment relationship.

It is argued that O'Brien's relation to the Lowe litigation bars his right to recover in this action. O'Brien was a witness, but not a party. There is no evidence of his having shared the expense of the litigation. The evidence, here and there, points to several possibilities of relationship between O'Brien and Lowe, to-wit: each an employee of Laursen; Lowe, the employee of Laursen, and O'Brien, the employee of Lowe; Lowe and O'Brien, joint contractors with Laursen; O'Brien, a double employee of Laursen,...