Boris v. Moore

• Decision Date: 12 June 1957
• Docket Number: Civ. A. No. 4724.
• Citation: 152 F. Supp. 602
• Parties: Violet Virginia Kohagen BORIS, administratrix d.b.n.c.t.a. of the estate of F. C. Kohagen, deceased, and Martha Armonies and Georgiana Callahan and Lyle Trucker, Plaintiffs, v. James R. MOORE and Hamilton Manufacturing Company, a corporation, Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

152 F. Supp. 602

Violet Virginia Kohagen BORIS, administratrix d.b.n.c.t.a. of the estate of F. C. Kohagen, deceased, and Martha Armonies and Georgiana Callahan and Lyle Trucker, Plaintiffs, v. James R. MOORE and Hamilton Manufacturing Company, a corporation, Defendants.

Civ. A. No. 4724.

United States District Court E. D. Wisconsin.

June 12, 1957.

Culhane & Culhane, Minneapolis, Minn., and John J. Burke and Gerald P. Hayes, Sr., Milwaukee, Wis., of counsel, for plaintiffs.

Leonard, Street & Deinard by Benedict S. Deinard, Minneapolis, Minn., Robert A. Hess, Milwaukee, Wis., of counsel, for defendant James R. Moore.

A. F. Rankin, Manitowoc, Wis., for defendant Hamilton Mfg. Co.

GRUBB, District Judge.

This action is brought for certain patent royalties, the rights to which are alleged to have arisen prior to October 1937. The complaint was dismissed as to the defendant Moore by order of this court of even date herewith, 152 F.Supp. 595, on the ground it failed to state a claim against him upon which relief could be granted.

The issue of liability having been severed from the issue of damages, and the separate defense of laches having been then severed from the other issues on liability, the issue and separate defense of laches was tried before the court during the period from December 26, 1956, to January 17, 1957. The only question now before the court is: Whether it is established that the plaintiffs are barred by laches or estopped from asserting their claims.

The merits of the liability question were not litigated at the hearing on this separate issue. The court assumes, for the purpose of this decision, that the plaintiffs had the rights they allege, and finds that such rights arose at the time alleged, i. e. prior to October 1937.

A brief history of this case is as follows: Prior to October 1937 the plaintiffs acquired from Moore certain rights in the royalties from a clothes dryer machine that Moore invented. On April 8, 1937, the plaintiffs, Moore, and other persons organized the Universal Dryer Co. for the purpose of exploiting the dryer. Moore contracted with the Universal Co. to make it his exclusive licensee. The plaintiffs, Moore, and others had shares in Universal. These shareholders were, at this time, in a position to enjoy any profits that Universal might realize as Moore's exclusive licensee. On October 23, 1937, J. G. Callahan, under whom one of the plaintiffs claims, the President of Universal, died. On December 4, 1937, the plaintiffs and the other shareholders in Universal entered an agreement to dissolve the Universal Co.; Moore licensed one Storm Manufacturing Co. exclusively to manufacture and sell the dryer; the plaintiffs were made third party beneficiaries of the Storm license contract in the same percentages in the royalties as are alleged in the complaint. On July 28, 1938, after the Storm Co. had manufactured only a very few, if any, dryers, the Storm Co. license contract was cancelled by Moore and the Storm Co. Subsequently, on November 5, 1938, Moore assigned his patent rights to one F. W. Griswold. On November 9, 1938, Griswold licensed the Imperial Appliance Corp. to manufacture and sell the dryer. On November 10, 1938, Imperial contracted with the defendant Hamilton Co. to allow Hamilton to manufacture the dryer. Thereafter, on November 29, 1941, Imperial sublicensed Hamilton to manufacture and sell the dryer, the contract to be effective January 1, 1942. Hamilton first manufactured dryers during 1939, and continued to do so at an increasing annual rate until 1943, when the war forced a considerable reduction in manufacture and sales. It was not until 1946 that very substantial manufacture and sales were resumed, although some machines were produced and sold in each of 1943, 1944 and 1945. The instant action was commenced on June 10, 1949.

From time to time this opinion will note other incidents, contracts, demands, etc., that various parties to this lawsuit contend are relevant and material. The court is of the opinion that the foregoing is a complete chronology of the pertinent facts as far as the issue and separate defense of laches is concerned, except for those contributing to the issue of the defendants' prejudice.

The law of the defense of laches is generally very well settled. Laches is an inexcusable, unreasonable, or prejudicial delay in the assertion of a right to the disadvantage or injury of another. Rome Grader & Machinery Corp. v. J. D. Adams Mfg. Co., 7 Cir., 1943, 135 F.2d 617; Universal Coin Lock Co. v. American Sanitary Lock Co., 7 Cir., 1939, 104 F.2d 781; Potash Co. of America v. International Minerals & Chemical Corp., 10 Cir., 1954, 213 F.2d 153. Laches may also be expressed as being a lack of diligence in prosecuting a claim to the injury of another. The person accused of the delay must have known, or should have known, of the rights which it is asserted he was dilatory in urging. Lapse of time alone does not establish the defense.

The defense is equitable, and it is precisely a balancing of equities, or equitable considerations, in the individual case that the court should employ in reaching its decision. It is in the sound discretion of the trial court to determine whether or not the equities of the case before it warrant a finding of laches, to prevent injustice. Laursen v. O'Brien, 7 Cir., 1937, 90 F.2d 792.

While passage of time alone does not establish the defense, it is an essential element. Analogous statutes of limitation are not conclusive but rather useful as aids in determining the equities. See Holmberg v. Armbrecht, 1946, 327 U.S. 392, 66 S.Ct. 582, 90 L.Ed. 743.

Possibly the single general principle remaining to be stated is that the delay, which the defense contemplates, is not delay in bringing claims to the attention of the defendant. It is "* * * delay on the part of the plaintiff in instituting litigation on his claims * * *." (Emphasis supplied.) Brennan v. Hawley Products Co., 7 Cir., 1950, 182 F.2d 945, 948.

Additional relevant facts in the instant case are that on November 21, 1941, Harry C. Gowran died, and on February 15, 1948, Clarence Clago died. At the time Hamilton acquired its manufacturing contract from Imperial, and at the time Griswold licensed Imperial, on November 10th and 9th of 1938, respectively, Gowran was the president of Hamilton, and Clago was the president of Imperial. Gowran and Clago were the principal negotiators between the two companies during their relationship in 1938. The records of the Storm Co. were apparently removed from Minneapolis to Texas in February or March of 1949. In any case, the defendants assert that these are not any longer available, and no one has demonstrated that they are.

When Hamilton took on the manufacture of this dryer machine in 1938, the success of the venture was by no means assured. The product was new, and Hamilton had no experience in sales of laundry equipment. At the time Hamilton took on the manufacture of the dryer in 1938-1939 the dryer was, in the words of Hamilton's then vice-president, "crude"; "it had not been engineered". There was no tumbler-type clothes dryer on the market at that time. It was unknown whether the public would accept the device. In 1938 and early 1939 the dryer had neither the approval of Underwriters' Laboratories nor of the American Gas Association. The development of this product and its manufacture and sale resulted in a loss to the defendant Hamilton of $77,599 from 1938 through 1941. At the close of 1946, the defendant Hamilton had experienced a net loss of nearly $300,000.

The second element of prejudice to the defendants is made out clearly to the satisfaction of the court. The deaths of Gowran and Clago, the unavailability of the Storm Co. records, and the financial change of position of Hamilton alone are sufficient in this regard. The plaintiffs' position that it was Hamilton's duty, as a licensee, to exploit the patent, and that therefore Hamilton sustained no prejudice in doing what it was legally obligated to do in any case, does not impress the court. Hamilton may be presumed to have entered upon this undertaking in the first instance only with the assurance that it was dealing with the exclusive licensee of the only owner of the patent involved. It is not well taken to assert that one is not prejudiced because he obligated himself legally to do what he would never have begun or pursued had he known of the rights he alleges the plaintiff was dilatory in enforcing.

Had the plaintiffs brought the instant action promptly, the defendant Hamilton (as well as Moore, if the plaintiffs had claimed affirmative relief from him) could have paid the royalties into court, or retained them in its own hands and taken the proper measures to have the validity of the conflicting claims judicially determined. As an alternative, had the plaintiffs brought the instant action seasonably, Hamilton could have tendered its defense to the group of persons to whom Hamilton was, in fact, paying the royalties (hereinafter called "the Harwood group"), and thereby caused them to be bound by the judgment of the court, and avoid the hazard of subsequent litigation that might be instituted by the "Harwood group" to recover royalties in which the plaintiffs could establish interests in the litigation.

It is the first element of the defense that is most vigorously attacked by the plaintiffs. For the purpose of the issue, it will be assumed that the plaintiffs had rights, as alleged in the complaint, and that these rights arose prior to October 1937, also as alleged in the complaint. There was then a delay of nearly twelve years, at least, between the origin of plaintiffs' rights and the date this action was commenced (i. e. from some time prior to October 1937 to June 10, 1949). Hamilton acquired its first rights in the manufacture of the clothes dryer in question on November 10, 1938, from which date it is approximately ten and one-half...