Crowell v. Baker Oil Tools, 8850.

• Decision Date: 07 November 1938
• Docket Number: No. 8850.,8850.
• Citation: 99 F.2d 574
• Parties: CROWELL v. BAKER OIL TOOLS, Inc.
• Court: U.S. Court of Appeals — Ninth Circuit

99 F.2d 574 (1938)

CROWELL v. BAKER OIL TOOLS, Inc.

No. 8850.

Circuit Court of Appeals, Ninth Circuit.

November 7, 1938.

Joseph F. Westall and Henry G. Bodkin, both of Los Angeles, Cal., for appellant.

Oscar A. Mellin, of Oakland, Cal., and Benjamin F. Bledsoe and Kenneth K. Wright, both of Los Angeles, Cal., for appellee.

Before GARRECHT and HANEY, Circuit Judges, and ST. SURE, District Judge.

HANEY, Circuit Judge.

A decree adjudicating to be valid and subsisting, a license agreement from appellant to appellee, and a license agreement from appellee to appellant, is challenged by the latter.

Appellee filed a bill alleging ownership of patent No. 1,685,307 issued to Baker, September 25, 1928; patent to Baker No. 1,748,007, issued February 18, 1930; and patent to Mellin, No. 1,859,593, issued May 24, 1932; and infringement thereof by appellant. Appellant answered, alleging among other things that he had a license from appellee to manufacture and sell the subject matter of each claim alleged to be infringed. In a counter-claim appellant alleged infringement of patent No. 1,432,017, re-issue patent No. 16,516, issued to him on October 17, 1922 and January 4, 1927, respectively. In answer to the counter-claim appellee alleged that on August 1, 1935, appellant had granted it a license to manufacture and sell devices embodying the inventions of the last named patent.

Had further pleadings been permitted, the issues thereunder would have been, according to briefs of counsel, whether or not the license granted appellee had been rescinded by appellant for (1) fraud, (2) mistake, or (3) failure of consideration. Such were the issues presented to the court below, and in part are the issues raised here.

It appeared that in 1927, appellant brought suit against appellee charging infringement of re-issued patent No. 16,516. The Lorraine Corporation, hereinafter referred to as Lorraine, having an interest under a license granted it by appellant prior to and on May 7, 1930, was made a party. Appellee's officers conferred with appellant in regard to settlement of the suit in 1931, and thereafter. Appellee's attorney, Mellin, testified that on March 21, 1932, he prepared an agreement for execution by appellant and appellee by which appellant was to execute a license, which was attached thereto, as soon as he was able to cancel the license granted Lorraine, and had given a copy thereof to appellant. Appellant denied that he had ever seen the agreement. Sometime during the year 1932, appellant brought suit against Lorraine to cancel the license he had granted.

On August 25, 1932, appellant wrote appellee setting forth the terms on which he would dismiss the infringement suit. Mellin shortly afterwards prepared a license agreement which was presented to appellant. One of appellee's officers testified that appellant said he was delaying the matter because he was then unable to grant a license, which testimony appellant denied.

Nothing further was done until June, 1934. After conferences with appellee's officers, appellant on June 7, 1934, wrote appellee stating his terms for granting appellee a license. Appellant testified that during the month he employed Mellin as his attorney in the suit against Lorraine, at the suggestion of one of appellee's officers. The officer mentioned testified that the employment was suggested by appellant. An amended bill was prepared and filed by a firm with which Mellin was associated.

On July 7, 1934, Mellin prepared an agreement to settle pending litigation and forwarded them to appellee. On August 7, 1934, appellant and appellee executed an "Agreement To Settle Pending Litigation". By the agreement appellant agreed to dismiss the infringement suit against appellee and to execute a license agreement attached thereto in the event that he was successful in the suit against Lorraine. Appellant testified that Mellin represented the agreement to be one for dismissal of the suit only, and that he did not understandingly read it before he signed the same, and did not fully read the agreement until March 30, 1935. Mellin and one of appellee's officers testified that appellant examined the agreement closely. In addition, there was a change made in the license attached to the agreement, which was initialed by appellant.

Mellin was substituted of record as appellant's attorney in November, 1934 in the suit against Lorraine. The case was tried in January, 1935. After the special master before whom the case was tried had indicated that his findings would be in favor of appellant, on March 30, 1935, appellant wrote appellee saying that the object of the agreement executed on August 7, 1934 was to settle the infringement suit, that the same had been settled, which released both appellant and appellee from any further obligations under the agreement, and that he was not willing to sign the license agreement. On the following day, appellee wrote appellant stating that it would fully perform its obligations under the agreement of August 7, 1934, and that it demanded full performance on appellant's part. On April 6, 1935, appellant wrote appellee suggesting that a conference be had. Appellant testified that the letter was written at Mellin's suggestion. Although appellee on April 8, 1935 agreed to the conference, the same was not held.

On June 3, 1935, Mellin, at appellant's request wrote Halliburton Oil Well Cementing Company a letter giving notice that it was infringing appellant's patents.

At Mellin's request, appellant on July 15, 1935 wrote Mellin stating the terms which he "would require to be met in order to avoid further litigation" with appellee. The royalties asked for grant of a license by appellant to appellee were the same as those mentioned in the agreement of August 7, 1934. Appellant testified that on July 26, 1935, he had a conference with Mellin.

To understand the nature of the conversation it is necessary to refer briefly to the patents mentioned. All of the methods relate to a method or apparatus for cementing oil wells. The device is placed between lengths of casing, the casing is lowered in the drill hole, cement is forced down the casing to the apparatus where it then is forced through apertures and sets around the casing. The most important features are the valves in the device, to control the outward flow of cement, and preventing the cement from returning into the apparatus and casing. None of the patents above mentioned are before us, except No. 1,859,648. The device shown in that patent consists of a length of casing, filled with cement or other lapideous material with the exceptions as follows: In the center is a small hole which leads into a larger aperture called a valve chamber. At the top where the hole enters the valve chamber is a seat against which a ball may rest. The bottom of the valve chamber is shaped so that the ball will not prevent passage of material into another hole, which enters another valve chamber. In the latter, the ball seats at the bottom of the valve chamber, but does not prevent material from entering the top of the chamber. Leading from the lower chamber are ports through the casing. In operation cement is pumped down the casing into the hole of the apparatus through the upper valve chamber, and into the lower valve chamber. The ball seats at the bottom of the lower valve chamber, thus forcing the cement to follow through the ports outside the casing. After completing the cementing operation the inward pressure of the cement causes the ball to seat at the top of the upper valve chamber, thus preventing further flow of the cement inwardly. After the cement is set the lapideous material is then drilled out.

At the conference on July 26, 1935, appellant testified that he sketched a device he wished to make, using the ball valve principle and stated that he wished to obtain a license from appellee for that purpose. It is admitted that he showed to Mellin a file of a patent application by appellant, which he later abandoned, showing use of lapideous material. Appellant's version of the conference was that insofar as the use of lapideous material was concerned as shown in appellee's patent No. 1,859,648 a license therefor was unnecessary because of prior publication, and that what he told Mellin he wished to get was a license to use ball valves. Mellin's version of the conference was that appellant did not state he wished to use ball valves, but wished to make the device shown in the abandoned application, which did not use ball valves, and all that appellant requested was a license so that he could use a device with lapideous material free from any embarrassment arising from appellee's patent No. 1,859,648.

On July 27, 1935, appellant wrote Mellin stating that he was enclosing a copy of a patent, and also quoting a claim in his abandoned application. Referring to the agreement of August...