Bucky v. Sebo

• Decision Date: 18 November 1953
• Docket Number: No. 80,Docket 22820.,80
• Citation: 208 F.2d 304
• Parties: BUCKY et al. v. SEBO et al.
• Court: U.S. Court of Appeals — Second Circuit

208 F.2d 304 (1953)

BUCKY et al. v. SEBO et al.

No. 80, Docket 22820.

United States Court of Appeals Second Circuit.

Argued October 8, 1953.

Decided November 18, 1953.

Paul Kolisch, New York City, for plaintiffs-appellees.

Emanuel R. Posnack, New York City (Jonas J. Shapiro and Janet Perlman, New York City, of counsel), for defendants-appellants.

Before CHASE, Chief Judge, and CLARK and FRANK, Circuit Judges.

FRANK, Circuit Judge.

An agreement between plaintiffs and defendant Sebo, dated December 4, 1944, gave Sebo an exclusive license under plaintiffs' patents Nos. 2,239,379 and 2,292,044, relative to cameras. The agreement provided that the licensee should never contest validity and would not infringe or aid others to infringe; it also provided that, if the licensee made default in the payment of agreed royalties and failed to remedy the default within fifteen days after written notice, "the licensors may, at their option, cancel this agreement and revoke the license." The corporate defendant was a sub-licensee. After paying royalties for some time (in the aggregate amount of some $17,000), there was a default, and, after the required notice of default, the plaintiffs notified Sebo in writing on March 25, 1949, that they "hereby cancel the agreement of December 14, 1944, and hereby revoke the licenses therein granted." Some five months later, on August 30, 1949, plaintiffs brought this suit for infringement of the patents.

1. The trial judge held, in effect, that there was no infringement. We think there was none. The judge did not pass on the patents' validity. But he held defendants estopped to deny both infringement and validity, and it is suggested that impliedly he found defendants guilty of unfair competition. See his opinion, 115 F.Supp. 555. On the basis of his findings and conclusions, he perpetually enjoined defendants from directly or indirectly making, using or selling the cameras which they had been making and selling and which did not infringe plaintiffs' patents.

2. Plaintiffs' complaint contains no suggestion of either infringement-estoppel or unfair competition. The pre-trial order, although it specifies validity-estoppel as an issue to be tried, is utterly silent concerning those other two issues. Since the pre-trial order was not expressly "modified at the trial," pursuant to Rule 16, it is arguable that neither of those issues was open. But as plaintiffs' counsel during the trial made at least a brief reference to the issue of estoppel re infringement, and as defendants' counsel did not then object or ask an adjournment, we think that the trial judge was at liberty to consider that issue, for we read Rule 16 in the light of Rule 15(b), Fed.Rules Civ.Proc., 28 U.S. C. (We shall take up later the matter of unfair competition.)

3. We think, for the following reasons, the judge erred in respect of estoppel concerning infringement: During the existence of a patent license, the licensee may be estopped to contest validity.¹ But even this estoppel usually vanishes when the license terminates, either because of lapse of time or through complete repudiation of the license by the licensee or by act of the licensor.² This is the more true as to infringement. For it is well settled that, even during the existence of the license, the licensee is not estopped to prove that his product is not within the claims of the patent.³

True, some cases hold that, when the license still endures and the licensor sues for royalties under the license agreement, the licensee is estopped to deny infringement in special circumstances such as these: (a) The license agreement specifically designates as included in the license the specific product on which the licensee has refused to pay royalties.⁴ (b) The patent has become widely associated with a name by which the licensee continues to label his product.⁵ We have found no case in which any such estoppel doctrine has been applied after termination of the license. Little wonder. For it would be peculiarly improper to apply it when — as here — the licensor has elected not to sue for royalties due under the license, but, instead, to cancel it and to sue on the patent for infringement.⁶

4. It is suggested, however, that some of the trial judge's findings of fact and conclusions add up to a determination of unfair competition. Although no mention of unfair competition was made in the pleadings or in the pre-trial order or at the trial, we would be disposed to hold that the trial judge or we could consider it, subject to the right of defendants to ask an opportunity to present further evidence to the trial court on that issue.⁷

There are findings which, if sufficiently supported by the evidence, might perhaps justify, not the permanent injunction which the judge ordered, but one enjoining the sale of defendants' cameras unless accompanied by appropriate notification that these cameras are unrelated to plaintiffs' and their patents.⁸ These findings are as follows:

The plaintiff, Gustav Bucky, "first dealt with Carl J. Sebo, the father of the individual defendant, concerning the manufacture and production of cameras under the patents. After experimentation with Sebo, Sr., a model of a commercial structure was built, Bucky organized a corporation called Consolidated Research Corporation; in trade, he abbreviated the name to Coreco; and sold the first commercial product brought forth in collaboration with Sebo, Sr. under the patents in suit as the `Coreco-Bucky Camera.'" The license agreement "provides that `the licensee will use the name Coreco-Bucky to designate products which he makes and sells under this agreement, and will so mark, label and describe all such products, which practice shall continue during the full term of this agreement unless amended in writing by the parties hereto.' It was never so amended." A "brochure published in 1948 by defendants to the number of 10,000 or 15,000 was distributed until March 1949 when the licensing agreement was cancelled, to hospitals, clinics, doctors and men of scientific pursuits. The brochure presents the defendants' product as the Bucky camera, developed by Bucky and protected by the patents in suit. About 600 or 700 cameras were sold by defendants at a price of $750 a camera, each with a limited number of attachments. The accused product has been the only model manufactured and sold since the beginning of operations by the defendants under the license. All the cameras sold during the license period had a small plate affixed with the legend `Coreco-Bucky' and a plate bearing the numbers of the Bucky patents in suit; since filing of suit the plate with the patent numbers has been no longer affixed and the legend on the remaining plate has been changed to read `Coreco.' Save for these changes, the defendants have continued to market cameras of identical construction as before cancellation. No notice was sent to prospective customers that the license from Bucky had been cancelled; to the contrary, the defendants continued to represent their product as the Bucky camera, made under his patents." "Plaintiffs called a pathologist who testified that the accused product was known in the medical profession as the `Bucky' camera, and that it was put on the market with a small plaque affixed to it which read either `Bucky-Coreco' or `Coreco-Bucky.' He also testified that the camera had been displayed in an exhibit of Coreco at the Atlantic City meeting of the American Medical Association held in June 1949, and that it had then been orally represented to him as the Bucky camera or an `outgrowth of it' and that the manufacturers `had bought out the rights of Dr. Bucky.' Plaintiffs also called an internist who testified that defendants' product was shown again in June 1951 at a technical exhibit of Coreco, that it was then orally represented by defendants as the `Bucky' camera and that Coreco `have now acquired the rights to the Bucky camera and are now manufacturing it.'"

We turn to the evidence which might be said to support these findings:

(1) Gustav Bucky testified that the few cameras sold before the license agreement were "experimental models" and "not a production model." He had no recollection as to "any details" of such sales. This evidence does not support any inference that any "commercial product" had been so sold before the license agreement as to create any public impression that Coreco-Bucky meant a camera made by Bucky or under the plaintiffs' patents. Accordingly, that defendants' cameras, after the cancellation, have been labeled Coreco did not, on that score, constitute unfair competition.

(2) The brochure published in 1948 related to the Coreco-Bucky cameras and indicated that they were made under plaintiffs' patents. Sebo testified that in March 1949, when the license was cancelled, there were on hand three or four thousand copies of this brochure but that most of them were dumped although "a few might have gotten out. They were not distributed in any mass quantity." For a short time after the cancellation, defendants substituted "sales sheets" until 1950, when they put out a new brochure which omitted any reference to plaintiffs' patents and which related solely to Coreco cameras without any mention of Coreco-Bucky.

(3) Plaintiffs' own witnesses stated that the camera sold during the period of the license agreement and before its termination was known as "the Bucky camera."

(4) The sole testimony as to oral representations consisted of the following: Plaintiffs' witness, Janoff, testified that he had seen cameras exhibited under the name Coreco at the American Medical Association meeting at Atlantic City in June 1951. The following colloquy then ensued:

"Q. Did you have a conversation with any person at that exhibit? A. Yes.

"Mr. Posnack: Your Honor, I am going to offer the same objection as to any testimony with respect to a conversation about these cameras.

"The Court: Overruled. I am not giving

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