Drackett Chemical Co. v. Chamberlain Co.

• Decision Date: 13 March 1933
• Docket Number: No. 6129.,6129.
• Citation: 63 F.2d 853
• Parties: DRACKETT CHEMICAL CO. v. CHAMBERLAIN CO.
• Court: U.S. Court of Appeals — Sixth Circuit

63 F.2d 853 (1933)

DRACKETT CHEMICAL CO. v. CHAMBERLAIN CO.

No. 6129.

Circuit Court of Appeals, Sixth Circuit.

March 13, 1933.

Walter F. Murray, of Cincinnati, Ohio (Frank L. Zugelter, of Cincinnati, Ohio, on the brief), for appellant.

Wm. H. Parmelee, of Pittsburgh, Pa. (Allen & Allen, of Cincinnati, Ohio, and Byrnes, Stebbins, Parmelee & Blenko, and George E. Stebbins, all of Pittsburgh, Pa., on the brief), for appellee.

Before MOORMAN, HICKS, and HICKENLOOPER, Circuit Judges.

HICKENLOOPER, Circuit Judge.

The Drackett Chemical Company, having commenced, in 1921, the manufacture of a drainpipe solvent which consisted of caustic alkali and powered aluminum, was served by the Chamberlain Company with notice of alleged infringement of its patents to Isaacs, No. 1,010,768, and to Smith, No. 1,019,377. Thereupon the two companies entered into negotiations which culminated on December 1, 1922, in a license agreement granting to the Drackett Chemical Company an exclusive right under these patents to sell to the grocery trade only. There is nothing in the record to show that all questions of royalties for past infringement were not also then settled to the entire satisfaction of both parties. Under date of August 9, 1924, the earlier license agreement was modified so as to give to the Drackett Chemical Company the nonexclusive right to sell to the hardware and drug trade. The right to sell to the grocery trade remained exclusive.

On September 9, 1925, appellant and appellee joined as plaintiffs in a suit against the B.T. Babbitt Company for infringement of the Isaacs patent by the sale of a drainpipe solvent which likewise was composed of caustic alkali and particles of aluminum. This cause came on for final hearing in May, 1928, and at the hearing the judge indicated that he did not consider that the Isaacs patent covered the Babbitt product. Thereupon the Drackett Chemical Company notified the Chamberlain Company that, while it would continue to send credit memoranda covering royalties, such royalties would be paid only if the Isaacs patent were held valid in the pending litigation, and that, if this patent were held invalid, the Drackett Chemical Company would consider itself absolved from any further obligation to pay royalties. Under date of September 14, 1928, the United States District Court for the Southern District of New York, in which court the Babbitt action was pending, rendered its decision finding the Isaacs patent invalid in so far as it claimed "a heat generating compound composed of aluminum and dry caustic alkali" (claim 1 of the Isaacs patent). No appeal was prosecuted to this decision. The Drackett Chemical Company has never manufactured or sold any of the compounds claimed in the Smith patent.

Under these circumstances, the District Court held in the case at bar that, by continuing to mark its cans with the notation "U. S. Patent 1,010,768" (Isaacs patent), and to market its product in the cans so marked until on or about December 5, 1928, when the Isaacs patent expired, the Drackett Chemical Company was estopped to deny liability under the license agreement, or to deny that the product so marked actually embodied the invention covered by the patent. A final decree was accordingly entered covering the stipulated royalties which had accrued from April 1, 1928, through December 5, 1928. From this decree the defendant below appeals.

For more than fifty years it has been recognized that a plea or answer that the patent is void is not, of itself, a sufficient defense to an action for royalties under a license agreement, but that evidence of what may be called an eviction is such defense. White v. Lee, 14 F. 789 (C. C. Mass. 1882). In H. C. White Co. v. Morton E. Converse & Son Co. (C. C. A.) 20 F.(2d) 311, 313, Judge Learned Hand tersely expresses this doctrine: "It is quite true that a licensee may not dispute the validity of the patent in a suit for royalties. U. S. v. Harvey, 196 U. S. 310, 25 S. Ct. 240, 49 L. Ed. 492; Marston v. Swett, 66 N. Y. 206, 23 Am. Rep. 43; though the contrary is the case after decree of invalidity in another suit" — citing Ross v. Fuller (C. C.) 105 F. 510, infra. To the same effect, see Walker on Patents (6th Ed.) § 355; McKay v. Smith, 39 F. 556 (C. C. Mass.); Ross v. Fuller & Warren Co. (C. C.) 105 F. 510; In re Dr. Voorhees Awning Hood Co. (D. C.) 187 F. 611, 626; Universal Rim Co. v. Scott, 21 F.(2d) 346, 348 (D. C. Ohio); Macon Knitting Co. v. Leicester Mills Co., 65 N. J. Eq. 138, 149, 55 A. 401; Marston v. Swett, 82 N.Y. 526, 534.

We are cited to no case in the Supreme Court, and we know of none, adjudicating the precise issue here presented. In Eureka Co. v. Bailey Co., 11 Wall. 488, 491, 20 L. Ed. 209, it is held that, if the defendant was engaged in manufacturing a certain type of machine before it took a license, and the license agreement was made on due deliberation and...