Penley Bros. Co. v. Hall

• Citation: 84 F.2d 371
• Decision Date: 03 June 1936
• Docket Number: No. 3141.,3141.
• Parties: PENLEY BROS. CO. v. HALL.
• Court: U.S. Court of Appeals — First Circuit

84 F.2d 371 (1936)

PENLEY BROS. CO. v. HALL.

No. 3141.

Circuit Court of Appeals, First Circuit.

June 3, 1936.

Frank H. Haskell, of Portland, Me. (Eiffel B. Gale, of Boston, Mass., on the brief), for appellant.

Robert Hale, of Portland, Me. (Brooks Whitehouse and Verrill, Hale, Booth & Ives, all of Portland, Me., on the brief), for appellee.

Before BINGHAM, WILSON, and MORTON, Circuit Judges.

MORTON, Circuit Judge.

This is an appeal by the defendant from a final decree for the plaintiff in a suit in equity. We shall refer to the parties, plaintiff and defendant, as they appeared in the District Court. The suit is on a patent license agreement to recover royalties. No specific relief was prayed for except an account and payment of the sum found due. The District Judge held that royalties were due according to the terms of the agreement, and he directed that the account of them should be carried to June 6, 1935, about seventeen months after the beginning of this suit, on which date the agreement became terminated.

The points raised by the present appeal are: (1) Whether the case is within the jurisdiction of the federal court; (2) whether the claim can be prosecuted by a suit in equity, or should be sued at law; (3) whether the plaintiff is precluded from recovering because of her own breach of the license agreement; and (4) whether the account should have been carried forward to include items not due when the bill was filed.

The facts are not in dispute. Prevost, the plaintiff's testator, obtained United States patent No. 1,382,931, dated June 28, 1921, on "clothes pins and manufacture thereof." By the agreement sued on, he granted the defendant an exclusive license under this patent. The terms of this license agreement as far as here material were that the defendant would pay stated royalties (one-half cent per gross) on all clothespins manufactured by it under the patent, and that: "5. The licensee will use its best endeavors to detect every suspected infringement of the said letters patent, and on discovery of any suspected infringement, the licensee, at its own cost, may take all necessary proceedings for effectually protecting and defending said letters patent. In such event, the inventor agrees to render to the licensee every assistance in his power, except financial assistance, in helping the licensee to protect and defend the same. 6. If the said letters patent shall be judicially determined to be invalid, then this agreement shall forthwith become void, but without prejudice to the right of the inventor to recover any moneys due to him thereunder."

The defendant believed that the patent was being infringed by one Swezey, a manufacturer in Vermont, and called the matter to Prevost's attention by letter dated June 3, 1932. In this letter the defendant said that it would "go ahead with the suit against Swezey as you (Prevost) suggested"; that "the suit should be brought in your (Prevost's) name as patentee and in our (the defendant's) name as licensee"; that "we hope that Claim 2 will hold good, but we know there are prior patents that may make trouble. However, we are willing to go ahead under our agreement with you to start this suit and test out Claim 2 to see if it will hold." Prevost indorsed the letter: "The above meets with my approval and I hereby agree to the same." Before the infringement suit was instituted, Prevost died; and the plaintiff was in due course appointed his executrix. After her appointment, she signed and made oath to the bill of complaint in the infringement suit against Swezey, which was prepared by counsel for Penley Bros. Company and was also signed by that company. The date of her jurat to the bill was August 3, 1932. It was duly filed in the federal court for the district of Vermont on or about August 20, 1932.

Under date January 3, 1933, the plaintiff wrote to the defendant the following letter:

"Dear Sirs:

"I hereby repudiate and rescind any and all agreements or consent that may be contained, expressly or impliedly, in a letter dated June 3, 1932, addressed to Alfred L. Prevost, 124 Highview Avenue, Melrose, Massachusetts, and alleged to have been assented to by him with his signature, copy of which was handed to Mr. Chamberlin at the office of Ellis Spear, Jr., Esq., on Friday, December 30, 1932.

"I have instructed Mr. Spear orally and in writing to dismiss without prejudice the patent suit brought in my name as executrix and in the name of Penley Bros. Company v. Christopher Swezey, Inc., in the United States District Court for the District of Vermont. My father was not informed of some material facts in connection with this patent suit and neither was I, and I hereby repudiate and rescind any and all action that has been taken in connection with the patent suit in the name of my father or of myself, except the dismissal thereof.

"Yours very truly "Louise A. Hall Signed "Executrix of the Will of Alfred L Prevost."

To this letter the defendants answered that they could not conceive what material facts the plaintiff and her father were not informed about or not made acquainted with; that the dismissal of the suit against Swezey would be prejudicial to Penley Bros. Company and would result in great injury to their business; that they believed that the plaintiff should co-operate and render every assistance in her power, except financial assistance, in helping to protect and defend the patent; and that they could not agree to a dismissal of the suit. The plaintiff replied under date of January 24, 1933, that she had what she believed to be reliable information that Swezey was not in fact manufacturing or selling infringing clothespins, and saw no reason why the suit should not be dismissed. The defendants answered that they had positive information to the contrary, and that Swezey's plant was now in operation on infringing clothespins; that the plaintiff's demand for dismissal of the suit was a breach of the covenants of the license; that they should pay no further royalties after that date (February 10, 1933), and considered themselves relieved of any further obligation under the license, and she was free to do with the patent as she saw fit; that "the situation is a business situation and we cannot afford to pay royalty any longer when it is perfectly clear that the patent affords us no vestige of protection." In view of the subsequent outcome of the Vermont suit, it seems clear that the plaintiff was mistaken in her statement that the patent was not being infringed. The infringement suit was not pressed to trial at that time.

On January 19, 1934, the present suit to recover royalties was begun. The defendant then pressed the infringement suit to hearing; and on June...