Henry J. Kaiser Co. v. McLouth Steel Corporation

• Decision Date: 22 June 1959
• Docket Number: No. 16900.,16900.
• Citation: 175 F. Supp. 743
• Parties: HENRY J. KAISER CO., Vereinigte Oesterreichische Eisen Und Stahlwerke Aktiengesellschaft Oesterreichisch-Alpine Montangesellschaft and Brassert Oxygen Technik AG., Plaintiffs, v. McLOUTH STEEL CORPORATION, Defendant.
• Court: U.S. District Court — Western District of Michigan

175 F. Supp. 743

HENRY J. KAISER CO., Vereinigte Oesterreichische Eisen Und Stahlwerke Aktiengesellschaft Oesterreichisch-Alpine Montangesellschaft and Brassert Oxygen Technik AG., Plaintiffs, v. McLOUTH STEEL CORPORATION, Defendant.

No. 16900.

United States District Court E. D. Michigan, S. D.

June 22, 1959.

George E. Brand, George E. Brand, Jr., Detroit, Mich., John A. Dienner and Edward C. Grelle, Chicago, Ill., for plaintiffs.

William B. Cudlip and T. Donald Wade, Dickinson, Wright, Davis, McKean & Cudlip, Detroit, Mich., John Vaughan Groner and Ronald F. Ball, Fish, Richardson

& Neave, New York City, for defendant.

FREEMAN, District Judge.

Plaintiffs filed an action in this court alleging that on July 23, 1957, United States Letters Patent No. 2,800,631, hereinafter called the Suess patent, were issued to Theodor Eduard Suess, et al., and that, since the date of issuance of said Letters Patent, plaintiffs, by various licensing agreements, have had the exclusive, irrevocable right and license under said patent to sub-license others to use the processes contained therein for producing products and to sell such products. The complaint, as amended, further alleges that defendant has been and will continue infringing said patent unless enjoined by the court. Therefore, plaintiffs pray for injunctive and other relief.

Defendant's answer contains a counterclaim, Count II of which alleges that an agreement was entered into between plaintiff Kaiser and defendant McLouth Steel Corporation on November 19, 1954, to the effect that Kaiser, in consideration of $100,000, agreed to sell and did sell to defendant certain "know how," together with the right and license to use said "know how," including drawings, engineering and metallurgical or other written data or information relating to an "oxygen steel process;" that the "know how" purchased by McLouth from Kaiser included each and every substantial or material fact disclosed in the Suess patent; and that defendant, by reason of such purchase of "know how" from Kaiser, became entitled to a paid-up license under the Suess patent. In their answer to this count of the counterclaim, plaintiffs admit that the "know how" disclosed to McLouth disclosed the same or substantially the same subject matter disclosed in the Suess patent and included each and every substantial or material fact disclosed in the Suess patent.

Plaintiffs then filed a motion for summary judgment under Rule 54(b) and Rule 56(b) and (c) of the Federal Rules of Civil Procedure, 28 U.S.C.A. alleging that there is no genuine issue of fact involved under Count Two of said counterclaim and that plaintiffs are entitled to such a judgment as to Count II as a matter of law and that defendant is not entitled to a paid-up or other license under the Suess patent.

Thereafter, defendant filed a cross-motion for summary judgment as to Count Two of its counterclaim wherein it is also alleged that there is no material issue of fact involved and defendant is entitled, as a matter of law, to a fully paid-up license covering the subject matter of the Suess patent.

Both parties agree that there is no issue of fact involved in the determination of these motions for summary judgment and that the legal effect of the agreement of November 19, 1954, is solely a question of law for the determination of the court.

The contract in question, consisting of Kaiser's proposal to McLouth dated October 8, 1954, which was accepted by defendant and became effective November 19, 1954, provided essentially for the sale of "know how" and the furnishing of certain services by Kaiser to McLouth in connection with that sale, together with the right to a license under any patents which from time to time in the future Kaiser might own or control or under which Kaiser may have the right to grant a license, relating to the oxygen steel process. Numbered Paragraphs 1 and 6 of the proposal are primarily involved in these motions and, insofar as pertinent, are as follows:

"1. HJKCo. or Construction Co., or either or both of them, will acquire and provide McLouth with the `know how' which HJKCo. or BOT is entitled to acquire as set forth above and is continuing to acquire and develop in connection with such Oxygen Steel Process and facilities employing such process, including but not limited to drawings, engineering and metallurgical or other written data or information relating to such Oxygen Steel Process. In this connection HJKCo. or Construction Co., or either or both of them, will provide reasonable consultation services and advice from time to time, as well as the general supervision of any additional services which McLouth may wish to obtain as outlined in paragraph 3 hereof, and at McLouth's request HJKCo. will arrange for a representative or representatives of McLouth to visit and to study the methods and practices in use at plants now or hereafter operated by any of the parties described in paragraph A-4 of the above-mentioned Option Agreement utilizing such process. * * * The services mentioned in this paragraph will be available for the fixed fee mentioned below.

"6. In the event HJKCo. shall own or control or have the right to license others under any patent containing a claim or claims covering apparatus or processes used by McLouth in its practice or use of the Oxygen Steel Process, it will grant to McLouth, at its election as provided below, a non-exclusive right and license to practice or use the subject matter of such claim or claims. HJKCo. shall notify McLouth in writing from time to time of all such patents and McLouth shall be entitled to the continued practice or use of the subject matter of any claim or claims of such patent for a period of six months after receipt of such notice without payment of royalties or without incurring any other obligation to HJKCo.

* * * * *

"In the event of McLouth's failure to notify HJKCo. in writing of its acceptance of a license under the terms hereinabove set forth within a period of six months after receipt of notice from HJKCo. of any such patent, the right of McLouth to a license thereunder in accordance with the terms hereof shall forthwith terminate and the provisions of this paragraph shall no longer be applicable to such patent and the rights and liabilities of the parties with respect to such patent shall be determined as though this agreement had never been made. Failure to accept a license under any one or more such patents shall be without prejudice to McLouth's right to a license under any other such patent."

Defendant contends that, since the disclosure of facts by Kaiser in performance of its contract to furnish "know how" admittedly resulted in a disclosure of the entire subject matter of the Suess patent, it, therefore, now has a paid-up license to use that subject matter without payment of royalties or exercise of its option rights under Paragraph 6 of the agreement. Defendant bases its contention on two legal theories: (1) that it has a paid-up license as a result of an implied license derived from the contract to sell "know how" and (2) that Kaiser is estopped to assert its license against defendant because of its sale of the disclosures of the claims in the Suess patent under the "know how" agreement. In support of such contention, defendant argues that plaintiffs, having contracted to sell "know how" and having disclosed the claims of the Suess patent in performance of this contract, cannot now derogate from its grant and enforce its patent rights.

Plaintiffs contend that Paragraph 6 of the agreement expressly provides for the contingencies that have occurred and resulted in this suit, and that Paragraph 6 evidences an intention of the parties that, if Kaiser should obtain a right to license others under any patent "containing a claim or claims covering apparatus or processes used by McLouth in its practice or use of the oxygen steel process * * *," McLouth will have an option to accept a license under that patent, subject to a royalty payment of twenty-five cents per ton of steel produced. Thus, plaintiffs argue, there is an express provision in this contract for granting licenses under after-acquired patents and this provision negates defendant's contention that it has purchased the subject matter of the Suess patent as an incident of the disclosures of "know how" and, therefore, is entitled to an implied license.

It is quite true, as defendant argues, that there is a body of law holding that "a grant necessarily carries with it that without which the thing granted cannot be enjoyed." Edison Electric Light Co. v. Peninsular Light, Power & Heat Co., 6 Cir., 1900, 101 F. 831, 836; Cold Metal Process Co. v. Republic Steel Corp., D.C.N.D.Ohio, 123 F.Supp. 525, affirmed 233 F.2d 828, certiorari denied 1955, 352 U.S. 891, 77 S.Ct. 128, 1 L.Ed. 2d 86; United Printing Machinery Co. v. Cross Paper Feeder Co., D.C.Mass. 1915, 220 F. 322. It is also true that the cases hold that "where the owner of a patent grants to a licensee the right to use a patented machine, the grant carries with it, by necessary implication, a license under any other patent of the licensor which would be infringed by operation under the grant." Frederick B. Stevens, Inc. v. Steel & Tubes, 6 Cir., 1940, 114 F.2d 815, at pages 819-820. However, an application of these broad principles to the facts of this case, as contended for by defendant, presents grave difficulties.

It is a cardinal principle of construction of contracts that "all parts of the writing, and every word in it, will, if possible, be given effect." 17 C.J.S. Contracts § 297, p. 711; Sawyer v. City of San Diego, 138 Cal.App.2d 652, 292 P.2d 233; Associated Truck Lines v. Baer, 346 Mich. 106, 77 N.W.2d 384.

It is also well established that "no word in a contract is to be rejected or treated as a redundancy, or as meaningless, if any meaning which is reasonable and consistent with the other parts can be given to it." 17 C.J.S. ...