Eskimo Pie Corporation v. National Ice Cream Co.

• Decision Date: 11 July 1927
• Citation: 20 F.2d 1003
• Parties: ESKIMO PIE CORPORATION v. NATIONAL ICE CREAM CO.
• Court: U.S. District Court — Western District of Kentucky

20 F.2d 1003 (1927)

ESKIMO PIE CORPORATION v. NATIONAL ICE CREAM CO.

District Court, W. D. Kentucky, at Louisville.

July 11, 1927.

Humphrey, Crawford & Middleton, of Louisville, Ky., and Henry Bussey Floyd, of Chicago, Ill., for plaintiff.

Eugene R. Attkisson, of Louisville, Ky., and Joseph Dugan, of Washington, D. C., for defendant.

DAWSON, District Judge.

This is a suit in equity for the alleged infringement by the defendant of patent 1,404,539, issued to Christian K. Nelson, the alleged inventor, and to one Stover, assignee of a one-half interest therein, which patent by proper assignment is now owned by the plaintiff, Eskimo Pie Corporation. The case is before me on the motion of the plaintiff for a preliminary injunction.

The general rule governing the granting of preliminary injunctions in patent infringement cases is that the injunction should not be granted, except where the validity of the patent has been adjudicated, or where its validity may fairly be presumed by reason of long acquiescence on the part of the public, or where the preliminary showing persuasively points to its validity, and unless the proof on the preliminary showing tends to clearly show infringement. National Cash Register Co. v. Remington Arms Co., 286 F. 367 (3d Cir.); Milwaukee Printing Co. v. Stover, 290 F. 387 (7th Cir.); Continental Wire Fence Co. v. Pendergast (C. C.) 126 F. 381.

This rule is especially applicable where, as in this case, there is no claim nor showing of insolvency on the part of the defendant nor probability of irreparable injury resulting to the plaintiff. It is now generally accepted by the courts that, if the defendant is estopped to question the validity of the patent, that fact supplies the lack of adjudication or acquiescence. Time Telegraph Co. v. Himmer (C. C.) 19 F. 322; Daniel v. Miller (C. C.) 81 F. 1000; Mellor v. Carroll (C. C.) 141 F. 992; Northern Insulating Co. v. Union Fibre Co. (D. C.) 199 F. 793; Continental Wire Fence Co. v. Pendergast (C. C.) 126 F. 381.

The evidence presented to the court on this motion clearly establishes infringement, if the patent is valid. With the exception, however, of an agreed judgment in the District Court of New Jersey, to which this defendant was not a party, there has been no adjudication, so far as the court is advised, of the validity of Nelson patent, 1,404,539; nor does the proof show any such public acquiescence in the claim of Nelson as the inventor as to presumptively establish validity. The plaintiff contends, however, that the defendant is estopped to deny the validity of the patent in this proceeding, and that this fact, in connection with the convincing evidence of infringement, entitles it to a preliminary injunction. The plea of estoppel is based upon certain stipulations contained in a license granted by the Russell Stover Company, the former owner of the patent in question and plaintiff's predecessor in title, to the defendant, National Ice Cream Company, of Louisville, Ky., dated the 30th day of January, 1922, by the terms of which the defendant was authorized and licensed to manufacture, sell, and distribute, in designated territory, under the name of "eskimo pie," the product described in the patent in question, during the life thereof.

Paragraph 7 of this license contract reads as follows:

"It is understood and agreed that licensee shall not have the right to use said trade-mark, trade-name, designs, or prints upon any other goods than those which are the subject-matter of this contract, and that said licensee further agrees that he will not test, contest, or deny the validity of the patent above identified or in any way assist others in so doing. As a further consideration for the granting of this license, licensee agrees that he will not at any time during the period of this contract sell or offer to sell any product manufactured under the process described in the above identified application or any product similar thereto under any trade name except such as is designated by owner."

The record discloses that, after operating under this license for a short time, the defendant ceased to make any of the product covered by the patent, or to exercise any of its rights or fulfill any of its obligations as licensee, and, after repeated efforts on the part of the licensor to get the defendant to resume operations under the license, the defendant, on the 13th day of June, 1923, by letter of that date, notified the plaintiff that it did not intend to resume operations under the license, and demanded the return of certain alleged unearned royalties which it had paid in advance as such licensee.

Matters were allowed to remain in this condition, without any action on the part of the plaintiff other than sporadic attempts to induce the defendant to resume operation under the license, until September 17, 1925, when it wrote a letter to the defendant, canceling the license because of failure on the part of the defendant for two years to manufacture, sell, or distribute any of the product it was authorized so to do under its license. The defendant acquiesced in this cancellation, and in the month of December, 1926, it commenced to manufacture and sell a confection under the trade-name of "pik-nic," which was practically identical with "eskimo pie," formerly made and sold by it under its license. The plaintiff regarded this conduct as infringement, and promptly so notified the defendant and demanded its cessation. On December 22, 1926, the defendant, through its counsel, denied infringement, intimated that the Nelson patent was invalid, and declined to cease the acts of alleged infringement.

In considering the question of whether the defendant is estopped in this action to deny the validity of the Nelson patent, it might be helpful to have clearly in mind certain settled principles touching the rights of the parties under patent license contracts. Where a patent license contract by its terms runs for a definite period, or for the life of the patent, as in this case, one party to the contract, without fault of the other, cannot terminate it. If he attempts so to do, the other party may disregard this attempt and treat the license as still in force. Thus, in this case, the defendant on its own motion could not have annulled the contract, as it attempted to do by its letter of June 13, 1923. Had the plaintiff so desired, it could have disregarded this attempt and treated the contract as still in force.

If it had so elected, then, when the defendant commenced to manufacture "pik-nic" bars, the plaintiff could have recovered the same royalties on these as the contract stipulated were to be paid on "eskimo pie," as it is the law that the royalty fixed by the license may be recovered, not only on the licensed product, but on its equivalents as well. St. Paul Plow Works v. Starling, 140 U. S. 184, 11 S. Ct. 803, 35 L. Ed. 404; Barber Asphalt Paving Co. v. Headley Good Roads Co. (D. C.) 283 F. 236.

In such an action on the license contract, defendant, upon well-settled principles not peculiar to patent law, would have been estopped to question the validity of the patent. This would be true, even though the license contract contained no express recognition of the patent's validity or agreement not to question its validity. Tate v. Baltimore & Ohio Railroad Co. (C. C. A.) 229 F. 141; Miami Cycle Co. v. Robinson (C. C. A.) 245 F. 556; Kohn v. Eimer (C. C. A.) 265 F. 900; Dunham v. Bent (C. C.) 72 F. 60; Eureka Co. v. Bailey Co., 11 Wall. (78 U. S.) 488, 20 L. Ed. 209; Magic Ruffle Co. v. Elm City Co., Fed. Cas. No. 8,949; Finley Rubber Tire Co. v. Consolidated Rubber Tire Co. (C. C.) 116 F. 629; Philadelphia Creamery Co. v. Davis & Rankin Building & Mfg. Co. (C. C.) 77 F. 879; Reece Folding Machine Co. v. Earl & Wilson (D. C.) 205 F. 536; Indiana Mfg. Co. v. J. I. Case Mfg. Co. (C. C. A.) 154 F. 365; United States v. Harvey Steel Co., 196 U. S. 310, 25 S. Ct. 240, 49 L. Ed. 492; Martin v. New Trinidad Lake Asphalt Co. (D. C.) 255 F. 93; Moore v. National Water-Tube Boiler Co. (C. C.) 84 F. 346; Chicago & Alton Ry. Co. v. Pressed Steel Car Co. (C. C. A.) 243 F. 883; United Machinery Co. v. Caunt (C. C.) 134 F. 239; Barber Asphalt Paving Co. v. Headley Good Roads Co. (D. C.) 284 F. 177; Holmes, Booth & Haydens v. McGill (C. C. A.) 108 F. 238; Victory Bottle Capping Machine Co. v. O. & J. Machine Co. (C. C. A.) 280 F. 753; Burr v. Duryee, Fed. Cas. No. 2,190.

On the other hand, plaintiff had the right to acquiesce in the repudiation and to cancel the contract, treating the defendant thereafter as an infringer. This it did, not only by its letter of September 17, 1925, but by express declaration in the bill, but in my opinion the license contract continued in force until September 17, 1925, the date of the cancellation.

Under this state of case, the plaintiff is entitled to an accounting, to determine what royalty, if any, had accrued under its license up to the date of its cancellation, and to recover such amount, and as to this claim the defendant is estopped to plead the invalidity of the patent. From the date of the cancellation of the license contract the defendant is to be treated as any other infringer, subject to the same liabilities and entitled to the same defenses as any other infringer, unless it be held that the agreement in the license not to contest the validity of the patent continues in force after the contract has by the conduct of the parties been terminated.

With the exception of the right of a patentee to control, by license contract, the use, manufacture, and sale of the patented product to an extent which would be illegal in other contracts, patent license contracts are governed by the same general rules and are to be construed as are other contracts. The aim of the court should be to so construe the contract as to carry out the intention of the parties, if such construction does not render it invalid.

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