Foundry Services v. Beneflux Corporation, 262
| Decision Date | 14 July 1953 |
| Docket Number | No. 262,Docket 22690.,262 |
| Parties | FOUNDRY SERVICES, Inc. v. BENEFLUX CORPORATION. |
| Court | U.S. Court of Appeals — Second Circuit |
Cahill, Gordon, Zachry & Reindel, New York City, for defendant-appellant. Jerrold G. Van Cise, Jerome Doyle, William M. Sayre, New York City, of counsel.
Glass & Lynch, New York City, for plaintiff-appellee. Simon Brett, New York City, of counsel.
Before L. HAND, AUGUSTUS N. HAND and CHASE, Circuit Judges.
Plaintiff-appellee and Foundry Services, Limited, an English corporation, are parties to a contract concerning the manufacture and sale of fluxes and related products made according to secret processes owned by the latter. One of the provisions of the contract, which is called a license agreement, is that Foundry Services Ltd. would not manufacture or sell such products in the United States or Canada. The plaintiff brought this suit to enjoin defendant The Beneflux Corp., a wholly owned subsidiary of Foundry Services Ltd., from violating this provision, and for damages and an accounting for profits attributable to violations which have already occurred. This appeal is from an order granting the plaintiff-appellee's motion for an injunction pendente lite.
In 1932 the English corporation, owning and controlling various secret processes, recipes and formulae, began to manufacture fluxes and allied products used to facilitate the casting of molten metal. It sold its products in England and on the continent of Europe, but not in the United States or Canada. The appellee, then in business in the United States, did not deal in products of the kind made by Foundry Services Ltd.; and in 1934 the appellee made the contract with Foundry Services Ltd. which is the basis of this suit. The now pertinent rights and obligations of the parties pursuant to the terms of that contract follow.
The appellee, therein called the Licensees, was granted an exclusive license to manufacture and sell in the United States and Canada, but not elsewhere, the products of the English corporation, called the Licensors. The English corporation agreed to communicate at once to the appellee a full and accurate description of the secret processes, recipes and formulae then possessed by it and also of all new products, developments and alterations while the agreement remained in force.
The appellee was to pay to the Licensors royalties based on sales, with a minimum annual royalty of $250 for the first year, $500 for the second, $1,000 for the third, and $1250 thereafter. The appellee also agreed not to "manufacture, sell or be interested in the manufacture or sale of any fluxes, or other products competitive with the products of the subject of this agreement during the continuance of this agreement and for a period of two years after the termination thereof."
The original contract term was five years, but the appellee was given the right to continued renewals of that term provided it made annual sales at least equal to stated minimum amounts. It was further provided that the Licensees could terminate the agreement by giving the Licensors "six calendar months notice of their intention so to do" and, if the Licensees did not make sales equal to the specified minimum amounts for two consecutive years the Licensors could terminate the agreement by giving a like notice.
For a while the contract was performed in a way that was apparently mutually satisfactory; but after some years the Licensors, whose business elsewhere had flourished, became dissatisfied with the amount of sales made by the appellee. This dissatisfaction brought about its decision in 1951 to try to get relief from the provisions prohibiting its making sales in the United States and Canada in competition with the appellee.
It so happened that a business firm in Mexico wanted a sample of one of the fluxes that were covered by the agreement, and early in April 1951 it sent a check for $5.00 to the Licensees and requested that as much flux of the type desired as that sum would buy be sent to it. On April 9, the Licensees wrote to the Licensors that the request had been received and also another inquiry from Mexico. The Licensees suggested that, if arrangements for Mexican representation had not been concluded, they could make shipments there and they requested the views of the Licensors on that matter. In the course of following correspondence on that subject, the Licensors learned that five pounds of flux had been sent in response to the request. It later attempted to terminate the agreement by notice, on the ground that the Licensees had broken it by making the sale. The Licensees did not acquiesce in that attempt at...
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...U.S. 251, 264-265, 66 S.Ct. 574, 90 L.Ed. 652.21 Difficult to reconcile with my colleagues' decision here is Foundry Services, Inc. v. Beneflux Corp., 2 Cir., 206 F.2d 214, 216, opinion by Judge Chase. There, but a few months ago, this court reversed a temporary injunction order restraining......
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