Jenkins Petroleum Process Co. v. Sinclair Refining Co.

• Decision Date: 18 February 1932
• Docket Number: No. 939.,939.
• Citation: 56 F.2d 272
• Parties: JENKINS PETROLEUM PROCESS CO. v. SINCLAIR REFINING CO.
• Court: U.S. District Court — District of Maine

56 F.2d 272 (1932)

JENKINS PETROLEUM PROCESS CO. v. SINCLAIR REFINING CO.

No. 939.

District Court, D. Maine, S. D.

February 18, 1932.

Philip G. Clifford, of Portland, Me., for plaintiff.

Verrill, Hale, Booth & Ives, of Portland, Me., for defendant.

PETERS, District Judge.

The litigation in which this bill in equity for discovery is a recent development has its origin in a written contract between the parties, dated October 2, 1916, recited in full in an opinion of this court in the case of Jenkins Petroleum Process Co. v. Sinclair Refining Co., 32 F.(2d) 247. In that suit the plaintiff sought by a bill in equity to compel the assignment to it by the defendant of letters patent, U. S., 1,285,200, dated November 19, 1918 (originally applied for by one E. W. Isom, September 10, 1917), claiming that certain improvements in the art of cracking hydrocarbons, covered by said letters patent, equitably belonged to the plaintiff under the terms of the contract above mentioned, by which a certain still for treating petroleum, devised by one Jenkins, was loaned to the defendant for experimental purposes, with an agreement that any improvements which might be developed as a result of experiments with it should accrue to the benefit of the plaintiff.

It was held by this court affirmed by the Circuit Court of Appeals in the case of the same title, 32 F.(2d) 252, 254, that the plaintiff had not made out a case entitling it to an assignment of the letters patent. The appellate court, however, directed that the bill be kept in court for possible further proceedings, and handed down the following mandate:

"The decree of the District Court is affirmed so far as it denies specific performance of the contract of October 2, 1916. But so far as it dismissed the bill as to other issues involved, it is reversed; and as to those issues the case is remanded to the District Court with directions to transfer it to the law side of the court, where within thirty days from the date of this order the plaintiff may have leave to amend its bill of complaint into an action at law for breach of the contract of October 2, 1916."

Under the authority of this mandate, the plaintiff amended its bill of complaint into an action at law to recover damages for the alleged breach of the contract of October 2, 1916, which contract was in the form of a letter written by the plaintiff to the defendant, in which the following language was used:

"It is further definitely understood and agreed between us that any improvements, whether of a mechanical nature or in the process, which may be developed as the result of the work of your engineers and experts in familiarizing themselves with the Jenkins apparatus and process, shall accrue to the Jenkins Petroleum Process Company, and that you shall so far as you are able to do, cause your employees carrying on such experimental work to execute applications for patents for the United States and any other countries to protect any such improvements, but at the expense of Jenkins Petroleum Process Company and to assign said applications, together with the improvements they are intended to protect, to the Jenkins Petroleum Process Company."

The declaration, now embracing three counts, alleges in substance that the defendant's expert, Isom, in familiarizing himself with the Jenkins apparatus and process, did develop improvements to which the plaintiff was entitled, and that Isom made an application for a patent covering the same; but that, in contravention of the agreement between the parties, the defendant caused Isom to assign his application to the defendant instead of to the plaintiff, and that the defendant used the application to obtain a patent covering the alleged improvements and has made extensive and profitable use of it, and has failed and refused to compensate the plaintiff for its use.

The allegations in the plaintiff's declaration that the defendant broke the contract because it failed to cause Isom, its agent, to assign his application for letters patent to the plaintiff and to turn over to the plaintiff the improvements that he had discovered in the Jenkins process, are obviously well pleaded, and, if there is any breach of the contract, it is exactly in that respect. The further allegations that the defendant failed to assign the patent subsequently obtained on the Isom application, but used it widely and profitably in its business and refused to pay the plaintiff for its use, seem to me entirely irrelevant to any issue in the action at law, and indicate that the plaintiff — while it has changed the form of its original action — has not changed its theory that it is equitably entitled either to the Isom patent or to the benefit the defendant reaped from it. As it has been decided that the plaintiff is not entitled to the Isom patent, and as this is not a suit for infringement, it is clear that the question of the use or the value of the use of the Isom patent by the defendants has no materiality whatever.

The pending suit at law is and should be regarded simply as an action to recover damages for the failure of the defendant to cause to be turned over to the plaintiff something alleged to be of value, viz., the Isom application and the improvements covered by it. The letters patent show that Isom assigned his application to the defendant. It is asserted by counsel that the records of the Patent Office show that the application had been so assigned when it was filed, in which case it would seem that any breach occurred not later that September 10, 1917, when the application was filed. For a breach of the contract, the plaintiff is entitled to compensation commensurate with its loss at the time of the breach. This cannot take the form of compensation for defendant's use of the property after the breach, even if it is difficult to fix the value of the property or otherwise determine the amount of the plaintiff's loss at the time of the breach.

In this form of action, the plaintiff is entitled to recover the full money equivalent of the property it has been wrongfully deprived of, but "the rights of the parties in respect to a breach of the contract became fixed at the time thereof." 17 Corpus Juris, 880.

The allegation of the plaintiff in its several counts in the declaration that the defendant has "failed and refused to compensate said plaintiff for said wide and extensive and profitable use," occurring over a long period and years after the date of any breach, is mere surplusage, and must be so considered when this suit comes to trial.

In this situation, and with this background, the plaintiff brings this bill of discovery in aid of its action at law, alleging that for the period of ten years or more subsequent to November 19, 1919, the defendant carried on an extensive business in the cracking of petroleum oils, operating many stills embodying the characteristic features of the Isom patent, and producing a large quantity of gasoline and other petroleum products with that patent as the basis of its production; further alleging that the...