Park-In Theatres v. Paramount-Richards Theatres

• Decision Date: 08 December 1948
• Docket Number: Civ. A. No. 1072.
• Citation: 81 F. Supp. 466
• Parties: PARK-IN THEATRES, Inc. v. PARAMOUNT-RICHARDS THEATRES, Inc., et al.
• Court: U.S. District Court — District of Delaware

81 F. Supp. 466

PARK-IN THEATRES, Inc. v. PARAMOUNT-RICHARDS THEATRES, Inc., et al.

Civ. A. No. 1072.

United States District Court D. Delaware.

December 8, 1948.

Arthur G. Connolly, of Wilmington, Del., and Leonard L. Kalish, of Philadelphia, Pa., for plaintiff.

William S. Potter, of Southerland, Berl & Potter, of Wilmington, Del., Charles R. Fenwick, of Washington, D. C., and Gibbons Burke, of New Orleans, La., for the defendants.

RODNEY, District Judge.

This matter arises upon a motion by defendants under Rule 12(b) (6)¹ to dismiss the patentee's complaint, which alleges two causes of action. The first cause of action is for an accounting for royalties under a patent license agreement and the second and alternative cause of action is based upon an infringement of the patent in case the defendants claim their actions have not been had pursuant to the patent license.

The complaint alleges that plaintiff, holding valid patents covering the erection and operation of drive-in theatres, entered into a written agreement of November 20, 1940 with one Elwood R. Clay, a copy of which is attached to the complaint; that attached to and forming a part of such agreement was a blank form of a license agreement identified in the agreement of November 20, 1940 as "Exhibit A," which is also included in the complaint; that Elwood R. Clay, in entering into the agreement, acted as agent or attorney in fact for E. V. Richards, president of Paramount-Richards Theatres, Inc., one of defendants, and that Richards or Paramount-Richards Theatres, Inc., was the principal in respect to said agreement. The complaint alleges that defendant, Paramount-Richards Theatres, Inc., owns the majority or all of the capital stock of the other defendants and directs and controls their activities and formulates and determines their policies, and that the agreement of November 20, 1940 was assigned by Elwood R. Clay to Paramount-Richards Enterprises, Inc. on or about September 20, 1941, and accepted by that company on October 20, 1941.

The complaint alleges that, pursuant to the terms of the contract of November 20, 1940, defendants or their officers erected, used and operated seven drive-in theatres as follows: three in Louisiana, viz., at Shreveport, Baton Rouge and New Orleans, and one each in Pensacola, Florida, Jackson, Mississippi, Texarkana, Texas and Mobile, Alabama.

The complaint then alleges that defendants made partial and inadequate royalty payments as required by the contract in respect to five of said theatres and up to certain dates set out in the complaint and as to the drive-in theatres erected and operated in Mobile and New Orleans made no royalty payments at all. The complaint seeks the ascertainment of the amount of royalties and judgment for the amount so found to be due.

On the contingency that defendants contend they did not erect, operate or sell the above theatres under the license agreement, plaintiff alleges alternatively a second cause of action for infringement of its patent through such acts and seeks treble damages therefor.

Defendants have moved under Rule 12 (b) (6) to dismiss the complaint upon the ground that it fails to state a claim upon which relief can be granted in that plaintiff is not entitled to any relief for the reason that it was and is unfairly using its patent monopoly. The motion is bottomed upon Paragraph 3 of the license agreement² attached to and allegedly a part of the agreement of November 20, 1940 and Paragraph 3 is in these precise words, "Licensee covenants and agrees that it will not either directly or indirectly promote or aid the making, construction, use or operation of any drive-in theatre not licensed by Licensor."

The plaintiff suggests that four questions are here involved and, with the order somewhat transposed, these questions will be severally considered.

1. "Did Section 3 of Exhibit 3-A in fact appear in any license agreement granted by the plaintiff under the patent in suit?"

The plaintiff contends that Exhibit 3-A is nothing more than a blank form of license agreement which sets out the intention of the parties on November 20, 1940 as to what they thought would be an acceptable form of specific license in the future if and when certain of the patented structures were to be constructed, and that there is nothing in the complaint, to which it contends we are limited, to indicate that such specific license agreement was ever executed by the parties. Plaintiff contends that Exhibit 3-A is not an actual existing agreement insofar as we are concerned on this motion inasmuch as the blanks are not filled in.

The agreement of November 20, 1940 (Exhibit 3) recites that plaintiff is the owner of "certain Letters Patent particularly referred to and described in the form of License Agreement which is attached hereto, made part hereof and marked `Exhibit A'; and * * * The parties mutually agree that they are contracting herein with respect to certain License Agreements which may hereafter be entered into between them pursuant to the terms hereof, and that said License Agreement or Agreements, in each instance, shall be in accordance with the "form of License Agreement attached hereto, marked `Exhibit A', and made a part hereof by reference, as fully as though set forth at this point at length, except that in each instance said License Agreement shall be completed by filling in the blank spaces appearing in said `Exhibit A' with the proper applicable statements called for by such blanks, such as the date, the location of the theatre, et cetera."

At the outset it might be noted that nowhere in Exhibit 3 itself does there appear the number or title of the Letters Patent which it is recited plaintiff owns and with reference to which the parties contracted. Unless we can look to Exhibit 3-A which does contain the number of plaintiff's patent and recites that it is for a drive-in theatre, there might be some question as to whether Exhibit 3 could be enforceable at all as a complete contract because of indefiniteness.

It is true there are certain blanks in Exhibit 3-A, but what is the nature of such blanks? Exhibit 3 adopts Exhibit 3-A in toto except that it is provided the license agreement shall be completed by filling in the blank spaces with the "applicable statement called for by such blanks, such as the date, the location of the theatre, et cetera." The date and location of the theatres, i. e., territory covered by the license, are set out in Exhibit 3. Because certain portions of the whole agreement (Exhibits 3 and 3-A) are left blank is no reason in itself to hold the complete and definite portions unenforceable. A contract is not invalidated and cannot be avoided merely because part of it was blank when entered into or because certain of its terms were to be exactly fixed at a future time. Eno v. Prime Mfg. Co., 314 Mass. 686, 50 N.E.2d 401, 405; Kirkman Corp. v. Owens et al., 62 Cal.App.2d 193, 144 P.2d 405, 407; McTee & Co., Inc. v. Brown Fun. Home, Inc., La.App., 183 So. 558, 559. I see nothing so essential to the blank portions of this agreement to warrant a holding that the agreement is invalid or unenforceable in its completed parts.

It is not necessary that the spaces for signatures of the parties to Exhibit 3-A be filled in, because Exhibit 3-A is part of Exhibit 3 and the latter instrument is signed by both parties. The terms of Exhibit 3-A do not merely indicate what the parties thought would be an acceptable form of license agreement in the future, but rather they are specific covenants and obligations which the parties accepted when they signed Exhibit 3 and one of these binding covenants is Paragraph 3.

Exhibit 3 makes Exhibit 3-A a part thereof "as fully as though set forth at length." I am of the opinion that Exhibits 3 and 3-A constitute the agreement between the parties and that Paragraph 3 of Exhibit 3-A was an existing part of the agreement of November 20, 1940 and must be so considered by me.

2. The second question suggested by the plaintiff is, "Does the complaint establish that the license agreement has not been cancelled or modified and that Section 3 is still in effect therein?"

Plaintiff contends that even if Exhibit 3-A is an actual existing agreement, yet it is incumbent upon the defendants on this motion to show that the agreement is still in effect and that plaintiff has not purged itself of any unwarranted provision by cancelling or amending the agreement, since the patent becomes enforceable as soon as any illegal provision has been modified and its effect dissipated.

There is ample authority indicating that a patentee who has been misusing its patent monopoly may maintain infringement proceedings once it is determined that the improper practice has been abandoned and its consequences dissipated. Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488, 493, 315 U.S. 788, 62 S.Ct. 402, 86 L. Ed. 363; B. B. Chemical Co. v. Ellis, 314 U.S. 495, 498, 62 S.Ct. 406, 86 L.Ed. 367; National Lockwasher Co. v. George K. Garrett Co., 3 Cir., 1943, 137 F.2d 255, 256; Campbell v. Mueller, 6 Cir., 1947, 159 F.2d 803, 806, 807; United States v. Vehicular Parking, Ltd., D.C.Del., 54 F.Supp. 828, 835; Id. 61 F.Supp. 656, 658.

Plaintiff here filed its complaint and attached thereto a copy of the whole agreement of November 20, 1940 (Exhibits 3 and 3-A). Pursuant to Rule 10(c), the copy is a part of the complaint for all purposes. Defendants have moved to dismiss on the ground that the complaint as filed shows that the plaintiff is not entitled to relief. Plaintiff included in its complaint the agreement containing the provision objected to and is chargeable with the implications of such provision. It would seem that any affirmative duty should be upon the plaintiff to show in its complaint as filed that any objectionable provision has been eliminated.³ In connection with this point, the Supreme Court has stated that "It will be appropriate to consider peti...