Republic Engineering & Mfg. Co. v. Moskovitz

• Decision Date: 17 March 1964
• Docket Number: No. 31424,31424
• Court: Missouri Court of Appeals
• Parties: REPUBLIC ENGINEERING & MANUFACTURING COMPANY, a Corporation, Plaintiff- Respondent, v. Milton A. MOSKOVITZ, Micro Precision Engineering Company, a Corporation, and Apex Metal Products Co., a Corporation, Defendants-Appellants, and Harry Frankel, Defendant, Cross Claimant-Respondent.

Page 649

376 S.W.2d 649

141 U.S.P.Q. 409

REPUBLIC ENGINEERING & MANUFACTURING COMPANY, a Corporation, Plaintiff- Respondent, v. Milton A. MOSKOVITZ, Micro Precision Engineering Company, a

Corporation, and Apex Metal Products Co., a

Corporation, Defendants-Appellants, and

Harry Frankel, Defendant,

Cross Claimant-Respondent.

No. 31424.

St. Louis Court of Appeals, Missouri.

March 17, 1964.

Motions for Rehearing or Modification or Clarification and

to Transfer to Supreme Court Denied April 13, 1964.

Edmund C. Rogers, John T. Rogers, Clayton, Ben V. Zillman, Hilmar L. Lax, St. Louis, for defendants-appellants.

Ralph W. Kalish, St. Louis, for defendant-respondent.

Malcolm I. Frank, Bernard Mellitz, Frederick M. Woodruff, St. Louis, for plaintiff-respondent.

DOERNER, Commissioner.

This is an action in equity involving two written contracts. Plaintiff Republic Engineering & Manufacturing Co., the licensee under a patent license agreement, filed its petition praying that defendants Moskovitz, Micro Precision Engineering Co., and Apex Metal Products Co. be enjoined from continuing their breach of the license agreement. Named as only a nominal party in plaintiff's petition, defendant Frankel filed a cross-claim against defendant Moskovitz in which he asked that, in accordance with a contract between them, Moskovitz be compelled to assign to him an interest in certain patent applications. This appeal is brought by defendants Moskovitz, Micro Precision, and Apex Metals from a final judgment and decree granting certain relief to plaintiff Republic Engineering and cross-claimant Frankel. In the interest of clarity we will consider first the appeals as they relate to plaintiff's complaint.

The facts essential to a decision of the plaintiff's claim are these: defendant Moskovitz is an experienced inventor of automotive parts, including ball joints for front wheel suspension assemblies, in which field he considers himself an expert. In 1950 Moskovitz and cross-claimant Frankel organized a corporation named Republic Engineering & Manufacturing Co. This company was not the plaintiff corporation, and to distinguish between them it will be referred to as Old Republic. Frankel contributed the money to launch Old Republic, and for his part Moskovitz permitted it to manufacture and sell, under an unwritten license, certain automotive replacement parts which Moskovitz had invented. In 1953 Old Republic was operating at a loss. Moog Industries, Inc., a manufacturer of automobile parts for the replacement market as distinguished from the original equipment market, was not then making ball joint suspension devices but desired to enter that field. To that end it entered into negotiations with Old Republic and its owners, Moskovitz and Frankel. As a result, Old Republic changed its name to Neo-Tech Engineering & Manufacturing Co., Moog formed a wholly owned subsidiary, the plaintiff, Republic Engineering, and two contracts were executed, both on June 17, 1953. The first was an agreement between Neo-Tech as Seller, plaintiff Republic Engineering as Buyer, and Moskovitz and Frankel as Guarantors, whereby Neo-Tech sold its physical assets and good will to plaintiff for $166,884.37. The only portion of this sales contract which is pertinent to the present litigation is paragraph 7 thereof, which reads:

'7. Seller and Guarantors and each of them, jointly and severally, agree that for the period of five (5) years from and after the date of this Agreement neither Seller nor Guarantors nor any of them will become interested or participate, directly or indirectly, as owner, employee, stockholder, partner, sales agent, or in any other manner, in any business operating in the United States of America or any part thereof which business in any way competes in the replacement market with the lines of motor vehicle merchandise described as follows: tie rod ends, drag links, ball joint suspension parts, all front end parts, piston rings, leaf springs, coil springs, king bolts and shackles.'

Coincidently with the execution of the sales contract a second written instrument titled 'License Agreement' was entered into by Moskovitz, Frankel and Neo-Tech, as licensors, and plaintiff Republic Engineering, as licensee. The pertinent terms of that agreement will be quoted later. It is presently sufficient to say that the agreement granted plaintiff Republic Engineering the exclusive right to make, use and sell certain automotive devices designed, or to be designed in the future, by Moskovitz, in consideration of the promise of Republic Engineering to pay specified royalties. In addition, the agreement provided that Moskovitz was to work for plaintiff Republic Engineering until December 31, 1953, at a salary of $100 per week.

Following the execution of the sales contract plaintiff took over the machinery, tools, equipment and inventory of Neo-Tech and engaged in the manufacture and sale of some, but not all, of the devices that had previously been produced by Neo-Tech. The employment of Moskovitz by plaintiff did not terminate on December 31, 1953, as contemplated by license agreement, but continued on until August, 1956, when Moskovitz severed the relationship following an altercation with one Cole, the works manager of Moog Industries.

Thereafter, apparently around the early part of 1960, Moskovitz undertook to design other ball joints. His efforts culminated in the development of two types of such devices for replacement purposes, one for General Motors cars and the other for Chrysler made automobiles. We will refer to them collectively as the Moskovitz ball joints. Sometime in February, 1960, Perfect Equipment Corporation of Kokomo, Indiana, which dealt in automotive replacement parts, learned of the development of the Moskovitz ball joints and entered into negotiations with Moskovitz. As a result, Moskovitz caused the defendant Micro Precision Engineering to be incorporated, the stock of which is wholly owned by him. On June 10, 1960 Micro Precision and Perfect Equipment entered into a written agreement in which it was recited that Micro Precision made or had made for it 'certain devices' useful with existing automobiles. Micro Precision agreed to sell such devices exclusively to Perfect Equipment, and Perfect Equipment agreed to buy exclusively from Micro Precision in such quantities as it might need. Significantly, the phrase 'ball joints for front end suspensions' or similar language was not used in the agreement, and nowhere therein is there any description of the so-called 'devices.' During the course of the negotiations Moskovitz told the representatives of Perfect Equipment that he had formerly worked for Moog Industries (plaintiff's parent company) and that he had designed Moog's ball joints but had severed the relationship. He did not, however, inform them that he had entered into a license agreement with plaintiff Republic Engineering, nor did he discuss patents.

Although Perfect Equipment had only a sample ball joint, immediately after the execution of the contract with Micro Precision it endeavored to sell the Moskovitz ball joints, and took orders pending delivery. Some indication of Perfect Equipment's success may be gathered from the fact that the initial order it placed with Micro Precision was for 10,000 units for one make of car, and its second order was for 42,000 units for four other makes. Both of these orders were placed with Micro Precision before or about the time defendant Apex Metal Products, which manufactured the ball joint assemblies for Micro, made its first shipment.

Plaintiff first learned of the development of the Moskovitz ball joints in February, 1961 when they were exhibited in Perfect Equipment's booth, manned by Moskovitz, at the annual show of the Automotive Service Industry Association in Los Angeles. Shortly thereafter plaintiff obtained some of the Moskovitz ball joints which Perfect Equipment was selling, examined and tested them, and reached the conclusion that they came within the scope of the exclusive license agreement which Moskovitz had granted to it. By a letter dated March 28, 1961, plaintiff Republic advised Moskovitz that it understood that he had evolved substantial improvements in tie rod ends and ball joint designs coming within the scope of its exclusive license agreement, and that he was producing and selling them. Plaintiff demanded that Moskovitz supply it with all pertinent information regarding such improvements, which it claimed he was obligated to do under its license agreement, and that he cease and desist from producing and selling such devices in violation of that contract. Moskovitz did not answer plaintiff's letter. Plaintiff thereupon caused applications for patents on the Moskovitz ball joints in the name of Moskovitz to be prepared, and requested Moskovitz to sign the applications. He refused to do so on the grounds that the Moskovitz ball joints were not new or novel, and that they therefore were not patentable. As authorized by the patent laws, 35 U.S.C.A. Sec. 118, plaintiff Republic thereupon filed the unsigned applications with the Patent Office, supported by affidavits as to its interests. The evidence showed that the applications were pending at the time this cause was tried. Plaintiff also learned that Moskovitz or Micro Precision was having defendant Apex Metal Products manufacture the Moskovitz ball joints. By a letter dated April 24, 1961 plaintiff advised Apex that under plaintiff's license agreement with Moskovitz it had the exclusive right to make and sell the ball joint devices which Apex was making, warned Apex that it was aiding and abeting Moskovitz to breach his contract, and called upon Apex to stop manufacturing such devices forthwith, on pain of being held responsible. Apex was advised by Moskovitz' lawyer to pay no attention to the letter. It did not discontinue making the Moskovitz ball joints until around August 1, 1961, more than two months...