Glen Manufacturing, Inc. v. Perfect Fit Industries, Inc.
| Decision Date | 01 May 1969 |
| Docket Number | No. 63 Civ. 3513.,63 Civ. 3513. |
| Citation | 299 F. Supp. 278 |
| Parties | GLEN MANUFACTURING, INC., Plaintiff, v. PERFECT FIT INDUSTRIES, INC., Defendant. |
| Court | U.S. District Court — Southern District of New York |
Kane, Dalsimer, Kane, Sullivan & Smith, New York City, for plaintiff, by David H. T. Kane, New York City; William J. Stellman and James R. Sweeney, Hofgren, Wegner, Allen, Stellman & McCord, Chicago, Ill., of counsel.
Ward, Haselton, McElhannon, Brooks & Fitzpatrick, New York City, for defendant, by Robert M. Freeman, New York City; Arthur H. Seidel and Joel S. Goldhammer, Philadelphia, Pa., of counsel.
OPINION, FINDINGS OF FACT AND CONCLUSIONS OF LAW
This is an action by plaintiff, Glen Manufacturing, Inc. (hereinafter "Glen"), against defendant Perfect Fit Industries, Inc. (hereinafter "Perfect Fit"), for breach of a so-called licensing agreement with respect to the manufacture, use and sale of toilet tank covers and for an accounting by defendant to plaintiff of the royalties due and owing under said licensing agreement, and for appropriate judgment.
Jurisdiction is based upon diversity, the plaintiff being a Wisconsin corporation and the defendant a Pennsylvania corporation having its place of business in the City of New York.
It is conceded that the defendant has manufactured and sold toilet tank covers and has not paid any royalties thereon to the plaintiff, except that royalties have been paid on all tank covers manufactured by the Queen Chenille Company of Dalton, Georgia, and sold by defendant. (Pretrial order, ¶ 3(a) (3))
The case was tried to the court without a jury on the issue of liability only.
Plaintiff contends that the license agreement in question is clear and unambiguous and must be interpreted according to its plain and ordinary language, requiring the payment of royalties on each and every toilet tank cover manufactured or sold by defendant whether it is within the scope of plaintiff's United States Letters Patent No. 2652874 or not.
The defendant raises the following affirmative defenses:
1. That the agreement to pay royalties covers only toilet tank covers coming within the scope of United States Letters Patent No. 2652874 and that the defendant has not made or sold any toilet tank covers coming within the scope of said patent;
2. That if the agreement is interpreted to mean that royalties are due and owing for each and every toilet tank cover manufactured or sold by defendant whether it is within the scope of the said patent or not, the plaintiff is barred from seeking relief because of misuse of said patent, particularly in that plaintiff has sought to restrain competition in the toilet tank cover industry by requiring royalties on toilet tank covers not within the scope of the said patent.
3. That the agreement is unenforceable because it binds defendant not to contest the validity of the said United States Patent and a Canadian Patent, No. 524616, beyond the termination of the agreement and that this constitutes a patent misuse.
4. That the agreement is unenforceable because the royalty is so high as to be confiscatory and constitutes a patent misuse.
5. That the agreement is unenforceable because plaintiff has granted Bell Industries, Inc., another licensee, a royalty which is one-half the rate charged to plaintiff's other licensees, including defendant, and that this constitutes a misuse.
After hearing the testimony of the parties, examining the exhibits, the pleadings and the proposed Findings of Fact and Conclusions of Law submitted by counsel, this court makes the following Findings of Fact and Conclusions of Law.
1. Plaintiff is a Wisconsin corporation, having its principal office and place of business at Milwaukee, Wisconsin; defendant is a Pennsylvania corporation, having a place of business in the City of New York.
2. Plaintiff is the owner of United States Letters Patent 2652874, issued September 22, 1953 (Pl. Ex. 15, p. 1), and Canadian Patent No. 524616, issued May 1, 1956 (Pl. Ex. 15, p. 2).
3. Commencing in 1959 and prior to August 17, 1960, a number of tiolet tank cover manufacturers requested and received from plaintiff licenses to manufacture and sell toilet tank covers. .
4. Commencing on or about August 17, 1960, negotiations were entered into between defendant and plaintiff with respect to the execution of a licensing agreement by plaintiff to defendant with respect to the manufacture and sale of toilet tank covers, and on June 25, 1962 an agreement was executed between plaintiff and defendant. (See Pl. Ex. 15) After recitation of the fact that plaintiff is the owner of United States Letters Patent No. 2652874, issued on September 22, 1953, that defendant desires to acquire a license for itself and its subsidiary, C. & H. Tufting Co. (hereinafter "C&H"), to manufacture toilet tank covers under said patent, the said contract contained the following terms: (1) Glen granted Perfect Fit and C&H a non-exclusive license to make, use and sell products covered by said patent; and (2) Glen made a similar grant to Perfect Fit to make, use and sell products covered by Canadian Patent No. 524616, issued May 1, 1956, owned by plaintiff. Paragraph (4), which is the principal provision involved in this suit, is as follows:
"(4) PERFECT FIT and C. & H. agree to pay to GLEN a royalty of ten (10) cents on each toilet tank cover made or sold by PERFECT FIT or C. & H. after the date of this agreement, for the full term hereof, provided however, that only one payment of royalty will be made by PERFECT FIT or C. & H. on any single toilet tank cover sold under this agreement." (Emphasis supplied)
5. The contract further provided that the license should continue until the expiration of the said United States Patent and that Perfect Fit and C&H will not at any time after the date of the agreement contest the validity of the said United States Patent or the said Canadian Patent, and this covenant shall survive the termination of the agreement.
6. After the execution of the license agreement, defendant commenced manufacturing and selling toilet tank covers. No royalties have ever been paid by the defendant to the plaintiff on toilet tank covers manufactured or sold by it since the execution of the license agreement except that royalties have been paid on all tank covers manufactured by the Queen Chenille Company of Dalton, Georgia and sold by defendant. (Pretrial order ¶ 3(a) (3))
7. Up to March 31, 1964, defendant has sold approximately 157,400 toilet tank covers upon which no royalties have been paid. (Trial minutes, p. 11)
8. Plaintiff has demanded of defendant and continues to demand royalties on all tank covers regardless of whether or not they are covered by the scope of the patent. (Pretrial order ¶ 3(a) (5))
9. Plaintiff has license agreements with other licensees, all of which contain a requirement for payment of royalties "on each toilet tank cover made or sold" by the licensees, except that the license with a certain company, Norwood, provided that royalties were due on "each toilet tank cover sold to Sears Roebuck and Company, Simpson Sears Ltd., or any of their subsidiaries." (Pretrial order ¶ 3(a) (6))
10. The license agreement involved in this case is clear and unambiguous and the word "each" as used in paragraph (4) of the said license agreement is used in its common and ordinary sense, requiring payment of a royalty on each and every toilet tank cover manufactured or sold by defendant whether or not such toilet tank cover comes within the scope of plaintiff's United States Patent No. 2652874.
11. Even when the correspondence between plaintiff and defendant is considered, there is no interpretation of the license agreement indicated nor any intent shown except that royalties were to be paid on each and every toilet tank cover manufactured or sold by defendant whether or not it came within the scope of plaintiff's patent.
Unless the provisions of a contract are ambiguous or uncertain, or there is a showing of mistake, fraud or deception, a court must interpret the contract exactly as it is written. Douglass v. Douglass, 88 U.S. 98, 21 Wall. 98, 22 L.Ed. 479 (1874); Florida Canada Corp. v. Union Carbide & Carbon Corp., 280 F.2d 193, 196 (6th Cir. 1960), cert. denied 364 U.S. 902, 81 S.Ct. 234, 5 L.Ed.2d 194 (1960).
Since the license agreement involved in this case is clear and unambiguous, and since there is no evidence of mistake, fraud or deception in the same agreement nor any allegation by defendant to that effect, this court may not alter its provisions in any way. The said agreement can only be interpreted to require royalties on each and every toilet tank cover manufactured or sold by defendant regardless of whether it comes within the scope of plaintiff's said patent.
By requiring royalties on all toilet tank covers manufactured or sold by defendant whether or not the toilet tank covers come within the scope of United States Patent No. 2652874, plaintiff is guilty of a patent misuse. This royalty structure has the effect of raising the cost of non-patented, competing toilet tank covers, thereby restraining their output and tending to lessen competition in the toilet tank cover industry.
This practice is in open conflict with both the antitrust and patent laws. The antitrust laws generally seek to insure the proper working of the free enterprise system by preventing artificial market restraints. To promote scientific innovations and invention, the patent laws grant a monopoly to the patentee for a limited time, subject to the strict limits of the patent. Where the patentee seeks to use its patent monopoly to suppress the manufacture and sale of non-patented competing items in any manner other than that of free competition, the courts have a duty...
To continue reading
Request your trial
-
Kearney & Trecker Corp. v. Cincinnati Milacron, Inc.
...any sales pyramid constructed on the basis of an antitrust violation. 35 To the same effect see Glen Manufacturing, Inc. v. Perfect Fit Industries, Inc., 299 F.Supp. 278, 284 (S.D.N.Y., 1969). 36 Cf., Bendix Corp. v. Balax, Inc., 471 F.2d 149, 159 (7 Cir., 1972); Prelin Industries v. G & G ......
-
Carter-Wallace, Inc. v. Riverton Laboratories, Inc.
...except upon a finding of unfairness, bad faith, or inequitable or unconscionable conduct." Glen Manufacturing, Inc. v. Perfect Fit Industries, Inc., 299 F.Supp. 278, 285 (S.D.N.Y. 1969). See Monolith Portland Midwest Company v. Kaiser Aluminum & Chemical Corporation, 407 F.2d 288 (9th Cir. ......
-
Richards v. Liquid Controls Corp.
...devices outside the scope of the patent'. (Citing Morton Salt Co. v. G. S. Suppiger Co., supra, and Glen Manufacturing Inc. v. Perfect Fit Industries, Inc. (S.D.N.Y.1969), 299 F.Supp. 278.) These cases, however, are not relevant. Here, Richards has neither conditioned the license of his pat......
-
Uniflow Manufacturing Co. v. King-Seeley Thermos Co.
...90 S.Ct. 90, 24 L.Ed.2d 84; Rohr Aircraft Corp. v. Rubber Teck Inc., 266 F.2d 613, 624 (9th Cir.); Glen Mfg. Inc. v. Perfect Fit Industries, Inc., 299 F.Supp. 278, 285 (S.D.N.Y.1969); See also Minnesota Mining & Mfg. Co. v. Norton Co., 426 F.2d 1117 (6th Cir.). No such finding was made by t......
-
Unraveling the patent-antitrust paradox.
...rights to their discoveries for limited periods to promote new ideas and innovation."); Glen Mfg., Inc. v. Perfect Fit Indus., Inc., 299 F. Supp. 278, 282 (S.D.N.Y. 1969) ("To promote scientific innovations and invention, the patent laws grant a monopoly to the patentee for a limited time, ......