General Time Corp. v. Padua Alarm Systems

• Decision Date: 17 September 1952
• Docket Number: Docket 22281.,No. 217,217
• Citation: 199 F.2d 351
• Parties: GENERAL TIME CORP. v. PADUA ALARM SYSTEMS, Inc. et al.
• Court: U.S. Court of Appeals — Second Circuit

199 F.2d 351 (1952)

GENERAL TIME CORP. v. PADUA ALARM SYSTEMS, Inc. et al.

No. 217, Docket 22281.

United States Court of Appeals Second Circuit.

Argued April 8, 1952.

Decided September 17, 1952.

Herbert P. Kenway, Kenway, Jenney, Witter and Hildreth, Boston, Mass., Turner & Turner, John H. Schneider, Troy, N. Y., Koenig & Pope, St. Louis, Mo., for defendant-appellee.

Andros & Smith, Albany, N. Y., Charles H. Andros, Harry A. Smith, Albany, N. Y., of counsel, for defendant-appellant.

Before CHASE, BIGGS, and CLARK, Circuit Judges.

PER CURIAM.

Though the court is divided in its views nonetheless there is sufficient agreement among its members to permit the disposition of the case without remand. Judge CHASE and Judge CLARK, though of different opinions as to the merits of the controversy, agree that the court has jurisdiction to decide the case on its merits and that the provisions of Rule 54(b), Fed.Rules Civ. Proc., 28 U.S.C., relating to judgment upon multiple claims are inapplicable. Judge BIGGS, while voting with Judge CLARK on the merits, is of the view that the court is without power to entertain the appeal because he thinks that a claim within the purview of Rule 54(b), asserted by Padua, remains undisposed of. The positions of the Judges appear more fully in their respective opinions.

The net result is that a majority of the court (Judge CHASE and Judge CLARK) agree that the court possesses the power to adjudicate the controversy. A majority of the court (Judge BIGGS and Judge CLARK) agree that the decision on the merits should be in favor of Parissi. Accordingly the judgment is reversed with the direction to the court below to enter judgment in favor of Parissi as indicated in Judge CLARK'S opinion.

CLARK, Circuit Judge (concurring).

The controversy here is between the two defendants, Parissi, an inventor, and Padua Alarm Systems, Inc., a corporation originally formed by him, but with which he is now at odds. The subject matter is royalties, payable by plaintiff General Time Corporation for the manufacture and sale of a "Silent Alarm Clock," patented by Parissi, but claimed by Padua to be covered by and subject to the terms of a co-licensing contract between it and Parissi. Plaintiff, a Delaware corporation, being faced with the conflicting claims of these New York defendants, brought suit for a declaratory judgment in the diversity jurisdiction of the court below and obtained permission to deposit the accrued royalties with the court. After a trial, the court construed the co-licensing contract, together with the license agreements to plaintiff, as giving Padua superior rights to the royalties and ordered the moneys on deposit in the court, as well as those paid Parissi directly, to be turned over to Padua. Parissi now appeals.

The story goes back to 1920 when the company was incorporated as Padua Holdup Alarm Corporation, to exploit certain of Parissi's inventions of that date. Parissi himself was an incorporator and owner of sixty per cent of the stock, and from 1920 to 1938, as president, vice-president, and general manager, controlled its operations and management. He remained as a director with an active interest from 1938 to 1941, but his domination of the corporation was reduced. In 1941 he ceased to be an officer or employee and went to work elsewhere. He has disposed of stockholdings so that he no longer has stock control of the corporation; as this case shows, armed warfare now obtains between them.

The devices originally exploited by the company were holdup alarm systems for banks, soon extended for use in mercantile establishments. From this Parissi's interests turned towards signalling instruments generally and beginning in 1931 he worked upon systems of light signals for telephone circuits. On March 9, 1937, he obtained three patents, Nos. 2,073,585-6-7, each for a "Telephone System" and each for a light signal or "silent alarm" "in a telephone system" as all the many claims in each patent specified. On November 9, 1937, he obtained Patent 2,098,631 for "Electric Lighting Fixture," consisting of a combined switch and three-way socket for an incandescent lamp so fashioned as to permit of the use of the light for ordinary as well as flashing or signalling purposes. Parissi claims that he offered the original ideas to Padua, which would have nothing to do with them; so he developed the devices himself and secured patents on them on his own time and at his own expense. But when Parissi came to seek exploitation of the patents, Padua made claims to them. Specifically in 1939 the parties arranged a favorable license with the Western Electric Company; to assure good title to the licensee Parissi arranged to make Padua a co-licensor, the license was jointly given, and Western Electric paid an initial $5,000, which was paid by Padua to Parissi on September 23. Immediately thereafter Parissi and Padua entered into the contract of September 26, 1939, which is the basic agreement in this suit.

In this contract Parissi recites his ownership of the four patents — specifically described by number, date of issue, and subject — states that he "is duly cognizant of the possible existence of certain moral or financial obligations" to Padua because of aid and assistance in securing the patents and in subsequent "transactions or negotiations pertaining thereto," and specifies that he desires "voluntarily and without admission of legal necessity therefor, to fully and forever liquidate and discharge any and all obligations of said nature or semblance. Therefore, for the above-expressed intent and purpose, both parties hereto agreed to accept the following terms and considerations: Party of the First Part herein, agrees to grant and does hereby grant to Party of the Second Part herein, the right and privilege, jointly with Party of the First Part, to consummate any and all agreements or contracts relating to any or all of the above recited patents or any claim or claims contained therein." (I have added emphasis to the part of most significance in our later discussion.)

Other terms provided that all returns from sales or licenses should be paid to Padua, but only for the length of time that it "shall maintain its present corporate existence"; upon a sale, transfer, or devolution of its corporate franchise, all its rights were to cease and all royalties or other payments due for the devices became payable to Parissi. And Padua agreed to pay Parissi $1,000 upon the execution of every subsequent contract of license for telephone control apparatus units and further to pay him ten per cent of all royalties received, "involving the above recited patents," together with an additional ten per cent to his patent lawyer to whom he was obligated on an earlier conditional fee arrangement, as well as five per cent to its own secretary, McRedmond, for compensation and reward for experimental work and in negotiating the Western Electric contract.

Meanwhile Parissi had been working on the development of a "Silent Alarm Clock," a clock which would signal first by a flashing light and then after an interval of a few minutes by the usual bell. At least as early as 1936 he was trying to interest clock companies in it, and in the summer of 1939 McRedmond wrote a number of such companies. By July, 1939, at least one, the Ingersoll-Waterbury division of the Waterbury Clock Company, had expressed interest in the idea, and thereafter Parissi and McRedmond made a demonstration to it. But nothing then came of the project. Parissi testified that the clock was not developed to the point of success; it employed a single rotating cam to trip both signals and the resulting intervals between the light flashes and the ringing of the bell were so long as to deprive it of utility. McRedmond claimed that by carefully filing the cam this difficulty was overcome; and he produced a model, asserted to be the same as that upon which the earlier work had been done, which appeared to operate successfully on demonstrations in the courtroom below. He also said that the failure to exploit the device was due to the commitments of the clock companies to the war effort, then necessary. The sharp conflict in the testimony which thus developed need not be resolved, as I shall point out in more detail below; for it is clear that the device then under study, whatever its eventual operability, was never used commercially. And although the parties apparently were not then aware of the fact, it seems concededly covered by an earlier patent, the Sholden patent 2,026,070, for an "Alarm Clock" issued to one C. E. Sholden, December 31, 1935, on an application of May 22, 1933.

After Parissi left Padua he developed an alarm clock with the signalling devices he desired; this he achieved by using two cams, one to start the light signal, the other to start the bell signal. While the device could be incorporated in an electric clock, that was not necessary and it was equally usable with a spring clock; it did not employ an electric circuit for its actuation. Parissi applied for a patent on it August 28, 1945, and Patent 2,444,748 was granted him July 6, 1948, upon a "Clock with Visible and Audible Alarm Means." Then the difficulties presented by the prior art, and notably the Sholden patent, were discovered and an application for a divisional reissue was made March 5, 1949. The patent was reissued August 22, 1950, as Re. 23,261 with the broader claims which might cover the single cam clock now omitted.

Meanwhile Parissi had succeeded in interesting the plaintiff in his device and on May 14, 1945, entered into a contract whereby he gave plaintiff a non-exclusive irrevocable license in the non-telephone field under the four patents of 1937. He further represented that "he has made additional developments relating to the subject matter of said patents, said additional developments including a Nurses' Call System and a Silent Alarm Clock." (I am again...