Banner Metals, Inc. v. Lockwood

• Decision Date: 07 March 1960
• Citation: 178 Cal.App.2d 643,3 Cal.Rptr. 421
• Court: California Court of Appeals Court of Appeals
• Parties: , 125 U.S.P.Q. 29 BANNER METALS, INC., a corporation, Plaintiff and Appellant, v. Warren H. LOCKWOOD and Mid-West Metallic Products, Inc., a corporation, Defendants and Respondents. Civ. 23836.

Page 421

3 Cal.Rptr. 421

178 Cal.App.2d 643, 125 U.S.P.Q. 29

BANNER METALS, INC., a corporation, Plaintiff and Appellant, v. Warren H. LOCKWOOD and Mid-West Metallic Products, Inc., a corporation, Defendants and Respondents.

Civ. 23836.

District Court of Appeal, Second District, Division 1, California.

March 7, 1960.

Hearing Denied May 4, 1960.

Gibson, Dunn & Crutcher, Richard H. Wolford, Los Angeles (John L. Endicott, Charles E. Rickershauser, Jr., Los Angeles, of counsel), for appellant.

Hyde, Meyer, Baldwin & Doran, Roudebush, Adrion, Brown, Corlett & Ulrich, Myron W. Ulrich, Cleveland, Ohio, for respondent Mid-West Metallic Products, Inc.

Overton, Lyman & Prince, Carl J. Schuck, Los Angeles, for respondent Lockwood.

LILLIE, Justice.

By way of an action for declaratory relief, and as successor in interest to the corporation by which defendant Lockwood was formerly employed, plaintiff sought a decree that it is the equitable owner of a certain invention patented by defendant Lockwood, and therefore entitled to an assignment of title and all rights and interests thereto; in the alternative, plaintiff company asked it be given 'shop rights' in the invention, thereby entitling it to manufacture and otherwise use the device or item without obligation of any kind. From a judgment adverse to such claims plaintiff has appealed.

The trial was a lengthy one,--the reporter's transcript exceeding 1600 pages, and voluminous findings covering a fiveyear year span of events were made. These findings are not challenged as unsupported by the evidence; rather, it is contended that findings as to certain probative facts compelled a conclusion or finding of ultimate fact contrary to those conclusions reached by the trial court. This contention makes it necessary to set forth in chronological detail the various matters leading up to the present litigation; and in so doing, as we are required to do, we view the evidence in the light most favorable to defendants-respondents, resolving all conflicts and indulging all legitimate and reasonable inferences to uphold the findings of the lower court. In re Estate of Bristol, 23 Cal.2d 221, 223, 143 P.2d 689.

Lockwood was originally employed as a salesman by a Los Angeles metal and wire manufacturing company during the years 1947 and 1948. Subsequently, in 1950, he was hired as a salesman and sales manager for the Los Angeles operation of Coleman-Pettersen Corporation (an Ohio concern) which had acquired the assets of Lockwood's previous employer and was likewise engaged in the wire and metal fabricating business as a 'jub shop,' making specific articles in wire or sheet metal to the order of specific customers. The trial court found that Lockwood's employment contract was oral and had no definite term; that he did not, as a part of his employment, agree to assign to Coleman any invention he might conceive. In this connection it was further found that Lockwood had no duty to conceive any invention during his employment by Coleman--his duties as Coleman's sales manager were solely to sell its wire and metal products, including receptacles, to new and old customers, to contact persons and concerns to ascertain their needs for Coleman's wire and metal products and services, to contact new and old customers to attempt to sell them wire and metal products to replace, to ascertain such persons' problems in the field of wire and metal products which Coleman was able to supply, and to design possible solutions for such problems for consideration by such customers or Coleman. It was also found that Lockwood, during his employment by Coleman, performed the foregoing duties.

The record discloses that Coleman's method of operation was to take some product made by it for a particular customer and ascertain if it could be sold to other companies. This, it appears, was tried with a number of products, but the most successful was a wire and metal flat bakery tray and a delivery cart for use in handling and transporting baked goods.

In the early part of April, 1952, Lockwood commenced work in Coleman's Cleveland plant; he had been directed to instruct its Cleveland salesmen on selling the bakery items which were being sold in Los Angeles. Later that same month (April) Lockwood conceived the idea which is the basis of the patent; and, specifically, during one weekend in his motel in Cleveland he drew 'little sketches' and silhouettes, and, after cutting them out and using pins, worked paper models of receptacles together. A few days later Lockwood was referred by his family attorney to a patent lawyer; and he made a sketch of the idea for him.

On May 23, 1952, about one month later, Lockwood took some fibreboard models to the same patent attorney. These models, Lockwood testified, were made of materials purchased by him from Sears and Roebuck Company. The attorney was requested by Lockwood to commence work on the patent search and preparation of a patent application, for which services he paid the attorney out of his own funds. Approximately one month later he again supplied the patent attorney with three more sketches of the invention; these, he stated, had been done by him at home.

On August 15, 1952, Coleman sold substantially all its assets to Fanner Metal Products Company which, the court found, employed Lockwood 'as its salesman in Cleveland' and under 'no duty to invent.'

On September 16, 1952, Lockwood's patent application was filed. He paid from his own funds for all legal services and disbursements in connection therewith, receiving no reimbursement therefor from anyone. As set forth in the application, the invention is one which allows two or more identical receptacles to stack one on top of another when filled, and to nest into each other when empty; an essential feature being that the nesting and stacking are accomplished without the use and without the necessity of turning the receptacle. Thereafter at home and on his own time Lockwood continued his search for a practical application of his invention and prepared a full scale drawing, on cardboard, of a receptacle incorporating his invention. In the months of April or May of 1953, also at home, Lockwood built a wooden jig, and bent wire parts to that drawing. These parts he welded together into three individual receptacles on Fanner's sample room welder after, the plant's and his own, working hours on his own time.

In April of 1953, Lockwood disclosed his invention to William Coleman, the vice president of Fanner. He explained that it was his own invention for which he had personally applied for a patent; he further stated his belief that it was an item which Fanner could exploit. According to the record, Mr. Coleman was non-committal, expressed no interest and made no further inquiry concerning it. During the following month (May) or June, Lockwood made three more receptacles to test the structural strength of his designs. The parts for the three receptacles were formed at home, and the welding was done by Lockwood after hours on Fanner's sample welder. The wire used in all six receptacles, including the three previously made, was taken by Lockwood from Fanner's sample room and cost $4.20 for all six units. In this respect the trial court found that the Fanner wire and equipment so used 'were negligible and unimportant and in no substantial way produced or contributed to the development of a receptacle of a commercially acceptable form.'

In June, 1953, Lockwood left Fanner's Cleveland plant and returned to Los Angeles. Some time prior to August 1, 1953, he discussed his further employment by Fanner in Los Angeles with Vincent Ryan, the general manager of Fanner's Los Angeles plant. At that time he informed Ryan of his invention and that he had a patent application thereon; and asserted complete and unencumbered title thereto. He further stated his belief that his invention could be a worthwhile item for Fanner to manufacture and sell and that he was interested in licensing Fanner to do so.

The court found the foregoing matters to be true and further found that Fanner's representative (Ryan) did not question Lockwood's title and expressed an interest in the invention. Relying on said expression of interest, Lockwood disclosed the invention and demonstrated the receptacle to Ryan.

In August, 1953, Lockwood's duties at Fanner included (for the first time) the establishment of standard items for general sale designated in the trade as 'proprietory items.' At or about this time Lockwood again demonstrated his invention and showed his patent drawings to Ryan and others. Ryan informed him that he would contact the company attorney for the purpose of working out a licensing agreement. Lockwood then gave Ryan his patent application and drawings. About one week later Ryan informed Lockwood that he wanted to postpone any discussion on the invention for 2 or 3 weeks. Lockwood handed Ryan an outline of a proposed license agreement which set forth Lockwood's ownership of the invention and the proposed royalty agreement. About 3 or 4 weeks later Lockwood again approached Ryan about the license agreement. The latter inquired if Lockwood had any potential user interested in any receptacle containing the invention. Lockwood knowing of no such potential user, Ryan then suggested that the matter 'slide a little bit longer.'

In September or October, 1953, Safeway Stores, Inc., had a problem involving unit delivery of merchandise to their stores. Lockwood and a Fanner engineer named Wilson endeavored to solve this problem for Safeway, but reached the conclusion that Fanner's then current products were not suited. This precipitated an inquiry from Lockwood, in the course of the conversation with Ryan, that the Safeway problem might finally be the one to which his invention could finally be adapted. Nothing materialized at that time with respect to Lockwood's suggestion.

Soon thereafter Wilson (the Fanner engineer) developed an...