Ottinger v. General Motors Corporation

• Decision Date: 05 April 1939
• Citation: 27 F. Supp. 508
• Parties: OTTINGER v. GENERAL MOTORS CORPORATION.
• Court: U.S. District Court — Southern District of New York

27 F. Supp. 508

OTTINGER v. GENERAL MOTORS CORPORATION.

District Court, S. D. New York.

April 5, 1939.

Armand E. Lackenbach, of New York City (Otto C. Sommerich and Raymond T. Heilpern, both of New York City, of counsel), for plaintiff.

Drury W. Cooper, of New York City (Thomas J. Byrne and Drury W. Cooper, Jr., both of New York City, of counsel), for defendant.

LEIBELL, District Judge.

This is a motion for summary judgment, under Rule 56 of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c. Plaintiff, a citizen and resident of New York, moves for summary judgment with respect to the first cause of action and for a partial summary judgment on the second cause of action, pleaded in the bill of complaint. Both the first and second causes of action are based upon a written contract dated May 20, 1927, between the plaintiff and the Ternstedt Manufacturing Company, a corporation incorporated under the laws of Michigan and now a subsidiary of the defendant, also a corporation, but incorporated under the laws of Delaware. Plaintiff in this suit joins in the bill of complaint, as amended, four causes of action on contract and two causes of action for equitable relief, on alleged patent infringements: some are pleaded as independent claims; others as alternate claims. Rule 18, Federal Rules of Civil Procedure.

The facts pertinent to this motion are as follows: — Leon Ottinger in March of 1924 filed in the United States Patent Office an application for Letters Patent, Serial No. 696,426, for an Outside Door Handle Bushing. On May 20, 1927, plaintiff and the Ternstedt Manufacturing Company entered into a contract under the terms of which plaintiff granted the Ternstedt Manufacturing Company (defendant's predecessor in interest) a non-transferrable and non-divisible exclusive license to manufacture, sell and use in the United States and Canada, the invention described in the application for patent, Serial No. 696,426, which matured into Patent No. 1,641,988, which in turn was reissued as No. 17,787 on September 2, 1930.

The contract of May 20, 1927 (Exhibit annexed to the complaint) contains the following provisions: —

"2. The Company shall pay to the Patentee a royalty on each and every device used or sold embodying the subject matter of the invention or the equivalent thereof as defined by the allowed claims of the said pending application or the claims of any patent which may issue thereon, at the rate of one-half of a cent (½ cent) for each and every such device of the first three million used or sold during each calendar year; three-eighths of a cent ( 3/8 ) for each and every such device of the next two million used or sold during each calendar year; and one-fourth of a cent (¼) for each and every such device used and sold above the last mentioned amount during each calendar year. (The calendar years commence January 1, 1928). * * *"

"4. For each and every such device used or sold by the Company prior to January 1, 1928, the Company shall pay to the Patentee a royalty thereon at the rate of one-half of one cent (½) for each device. The Company shall pay to the Patentee a minimum sum of five thousand dollars ($5000.00) for the year beginning January 1, 1928, and a minimum sum of ten thousand dollars ($10,000.00) for each subsequent year during the existence of this contract."

"13. The Company on or after July 1, 1930, has the right to cancel this contract by the giving of six months' written notice to the Patentee, upon payment of royalties and/or prorata annual payments accrued or earned to the date on which said cancellation becomes effective."

As a result of certain interrogatories propounded to defendant the parties have stipulated that on or about December 30, 1933, said Ternstedt Manufacturing Company sold, assigned and transferred unto defendant, its manufacturing business and most of its assets and liabilities, "* * * including all rights and obligations irrespective of the time and manner of their accrual under the license agreement referred to in the complaint, which was executed on the 20th day of May, 1927, and that defendant then assumed and now assumes such obligations; that defendant admits that it operated under said license agreement from said 30th day of December, 1933 until the time, namely December 31, 1937, that termination of said license agreement was sought to be effected by the notice of June 28, 1937."

The first cause of action alleges that the Ternstedt Manufacturing Company failed to pay the minimum royalty of $10,000 due for the year 1932, pursuant to the terms of said agreement, except the sum of $6,529.55, leaving a deficiency for said year of $3,470.45. Defendant answers that the conduct of the plaintiff in failing to make a demand for the $3,470.45 for a period of five and a half years constitutes a waiver and that plaintiff is estopped to claim this sum. Plaintiff asks for summary judgment on this first cause of action.

As part of its second cause of action plaintiff relies on paragraph "13" of the contract of May 20, 1927, which required that as conditions precedent to its cancellation the defendant should (1) give six months' written notice of cancellation and (2) pay all royalties and/or prorata annual payments accrued or earned to the date on which said cancellation becomes effective. Arguing from the premise that the sum of $3,470.45 was due and owing both at the time notice of cancellation of the contract was given on June 28, 1937 and at the present time, plaintiff contends that the contract is still in force and on this motion seeks summary judgment in the sum of $10,000 for the year 1938 with interest.

Plaintiff's affidavit on this motion practically restates the principal parts of his pleading of the first and second causes of action, and of the stipulation, and asserts that defendant's answer is a sham, interposed in bad faith.

Defendant's answer alleges that plaintiff by his conduct in threatening a patent infringement suit in June, 1938, conceded the due cancellation of the agreement of May 20, 1927; and that plaintiff in accepting and acknowledging the final payment of royalties for the last quarter of 1937 without asserting that it was deemed necessary that the alleged 1932 deficiency be paid as a condition to the cancellation of the license agreement, has by his conduct in not speaking, when he was in duty bound to speak, waived any right to demand payment of the 1932 deficiency as a condition precedent to the cancellation of the contract.

Paragraph "4" of the contract of May 20, 1927, leaves no doubt as to plaintiff's right to have received at the end of 1932 a minimum of $10,000 for the year 1932. Summary judgment on this count must be granted unless the facts set out in the special defenses of the answer and in defendant's answering affidavit and the exhibits attached thereto raise a genuine issue of fact as to implied waiver or estoppel, on which defendant would be entitled to a...