Chicago Pneumatic Tool Co. v. Ziegler

• Decision Date: 20 August 1945
• Docket Number: 8454.,No. 8453,8453
• Citation: 151 F.2d 784
• Parties: CHICAGO PNEUMATIC TOOL CO. v. ZIEGLER.
• Court: U.S. Court of Appeals — Third Circuit

151 F.2d 784 (1945)

CHICAGO PNEUMATIC TOOL CO. v. ZIEGLER.

Nos. 8453, 8454.

Circuit Court of Appeals, Third Circuit.

Argued February 7, 1944.

Reargued May 18, 1945.

Decided August 20, 1945.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Lawrence Bristol, of New York City (Morgan, Lewis & Bockius and W. Heyward Myers, Jr., all of Philadelphia, Pa., on the brief), for appellant.

Joseph G. Denny, Jr., of Philadelphia, Pa., for cross-appellant.

Before BIGGS, GOODRICH, and McLAUGHLIN, Circuit Judges.

BIGGS, Circuit Judge.

Charles H. Haeseler, an inventor, for some years prior to 1919 had been an employee of the petitioner, Chicago Pneumatic Tool Company. On January 27, 1919 Haeseler entered into an agreement with the Tool Company cancelling certain prior patent-licensing contracts entered into by him with his employer. The new contract listed certain patents and a number of pending patent applications owned by Haeseler. Included in these was an application, No. 6,269, for Letters Patent of Belgium. By the terms of the agreement Haeseler granted to the Tool Company the exclusive right to make and sell the tools, machines and devices disclosed in the patents and applications "* * * to the full end of the terms for which said Letters Patent are or may be granted * * *." The right to use the machines and devices was not included in the license to the Tool Company. The Tool Company, as licensee, agreed to pay Haeseler in monthly installments on the first day of each calendar month a minimum royalty of $10,000 "* * * for each and every year during the term of this contract * * *." Another paragraph of the agreement stipulated that "during the term of the continuance of this contract" Haeseler should not engage in any competitive business, that the licensee should have the exclusive right to make and sell any and all improvements to "the tools, machines and devices manufactured and sold by virtue of this agreement" and that the licensee "upon the indication of its desire to use * * * the inventions and improvements" should pay all expenses incurred by Haeseler in connection with such improvement patents. The contract stipulated also that the licensee should pay "any and all taxes and expenses of any kind whatever incident to the prosecution of patent applications and of keeping alive all Letters Patent" of the foreign countries named in the agreement. The contract also set up a schedule for the payment of royalties by the Tool Company to Haeseler for sales made of machines and devices embodying the inventions described in the patents and applications.

The Tool Company expressed dissatisfaction with this contract and on January 27, 1921, Haeseler and the petitioner executed another agreement. This, by its terms was "to be supplemental to and form a part of" the 1919 contract. In consideration of the payment to him of $2,000 "and of other valuable considerations moving between the parties" Haeseler granted the petitioner the exclusive right to make, use and sell the several tools and devices described in two pending applications for patents "* * * to the full end of the terms for which said Letters Patent may be granted * * * subject to the terms and conditions * * *" of the 1919 contract. The agreement also gave to the petitioner the exclusive right to make, use and sell any machines, tools and devices that might be invented by the licensor during the continuance of the 1919 agreement and subject to its terms, "* * * whether or not such tools, machines and devices be of the same class as * * * those referred to in * * * the 1919 agreement, or be improvements thereon."

The minimum royalty, prescribed by the first agreement, with the possible exception of one instalment, was paid to Haeseler by the Tool Company, and after his death, to his widow, the original respondent herein, until April 30, 1936.¹ The Tool Company then stopped making the payments. Mrs. Haeseler demanded that they be continued for reasons which will appear hereinafter. The petitioner refused the demand and brought suit seeking a declaration by the court below that its obligations under the contracts had terminated with the payment made by it on April 30, 1936. Mrs. Haeseler died. Her daughter Mrs. Ziegler, the substituted respondent, filed an amended answer and counterclaim, asserting that certain of the patents covered by the agreements expired subsequent to April 30, 1936 and that the life of the contracts, and hence the Tool Company's obligation to pay the royalty, endured until the last monopoly granted by these patents had expired. The court below found that the petitioner's obligation to pay the royalty continued until January 29, 1941 and purportedly² gave judgment for the respondent for $833.33 a month with interest up to and including the date last stated.³ Both parties have appealed, Mrs. Ziegler in part because the court below imposed on her the cost of proving the expiration date of a Belgian patent covered by the 1919 agreement.

That there is a justiciable controversy within the purview of the Declaratory Judgments Act, Section 274d of the Judicial Code, 28 U.S.C.A. § 400, may not be doubted. The existence of such a controversy is to be determined by the decisions of the federal courts. Dewey & Almy Chemical Co. v. American Anode, Inc., 3 Cir., 137 F.2d 68, and the authorities therein cited. It is clear also that the provisions of the Act are procedural and create no new substantive rights. Sinclair Refining Co. v. Burroughs, 10 Cir., 133 F.2d 536; McCarty v. Hollis, 10 Cir., 120 F.2d 540. The jurisdiction of the district courts of the United States was not enlarged by the Act. Putnam v. Ickes, 64 App.D.C. 339, 78 F.2d 223; Doehler Metal Furniture Co. v. Warren, 76 U.S.App.D.C. 60, 129 F. 2d 43, 45-46, certiorari denied 317 U.S. 663, 63 S.Ct. 64, 87 L.Ed. 533; Borchard, Declaratory Judgments, 2nd Ed. p. 233. The petition in the case at bar alleges diversity of citizenship and jurisdictional amount. The respondent's counterclaim contains similar allegations. Suit was brought in the District Court of the United States for the Eastern District of Pennsylvania. In diversity cases the district courts must apply the conflict-of-laws rule of the State in which they sit. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477. It is necessary therefore to apply the conflict-of-laws rule of Pennsylvania. Under the Pennsylvania conflict-of-laws rule the interpretation of a contract is determined by the law of the place of contracting. Benners v. Clemens, 58 Pa. 24. By the law of Pennsylvania a contract is made when and where the last act necessary for its formation is done. W. G. Ward Lumber Co. v. American Lumber & Mfg. Co., 247 Pa. 267, 93 A. 470, Ann. Cas.1918A, 451. See Newspaper Readers Service, Inc. v. Canonsburg Pottery Co., 3 Cir., 146 F.2d 963, 965. Our difficulty in the case at bar lies in determining when and where the last acts necessary for the formation of the contracts sub judice were performed. No evidence was offered as to where the contracts were executed or delivered and this question was not dealt with on the briefs of the parties or in the opinions of the court below.⁴ In the absence of proof as to the place of occurrence of the operative facts we will presume that they occurred in Pennsylvania. See American Type Founders, Inc. v. Lanston Monotype Mach. Co., 3 Cir., 137 F.2d 728, 729; Black & Yates v. Mahogany Ass'n, 3 Cir., 129 F.2d 227, 233, 148 A.L.R. 841, certiorari denied 317 U.S. 672, 63 S.Ct. 76, 87 L.Ed. 539. We, therefore, will apply the law of Pennsylvania in interpreting the contracts.

I

If the life of the monopoly of any patent named or granted under an application named in the 1919 contract extends beyond the lives of all of the respective monopolies of the patents named or granted under an application named in the 1921 agreement, Mrs. Ziegler's rights in the suit at bar rest in the 1919 agreement and it is unnecessary to discuss specific provisions of the 1921 agreement other than to state that Haeseler and the Tool Company agreed that the 1921 agreement should be supplemental to and form a part of the 1919 agreement. For the reasons hereinafter set out we conclude that the life of the monopoly of the Belgian Patent No. 247,347 granted on Application No. 6,269 must be treated as having extended beyond the monopoly of any patent named or granted under an application named in the 1921 contract.

Application No. 6,269 was filed with The Minister of Industry, Labor and Supplies of the Kingdom of Belgium on November 6, 1914 at Havre, France, the temporary seat of the Belgian Government during the First World War. The application was filed pursuant to the Belgian Act of May 24, 1854 but issued, according to the statement appearing upon its face, pursuant to the Belgian Act of October 11, 1919. Despite the limitation in the license of the 1919 contract authorizing the Tool Company only to make and sell the device, and perhaps because of the provision of the 1921 agreement hereinbefore specifically referred to, the Belgian patent issued in the name of the Tool Company. Under the Belgian law the monopoly of a patent ordinarily endures for twenty years from the date of the filing of the application. If other conditions and circumstances, to be discussed hereinafter, had not intervened, the monopoly of the Belgian Patent No. 274,347 would have expired on November 6, 1934, a non-critical date in the determination of the case at bar. The circumstances and conditions referred to are as follows.

Article 13 of the Belgian Act of October 11, 1919,⁵ provides in pertinent part: "In computing the duration of patents which had not expired before the 1st of August, 1914, no account shall be taken of the time between this date and the falling due of the first annuity which shall follow the date to be fixed by the Government in execution of paragraph 2 of Article 11." Paragraph 2 of...