Rubsam Corp. v. Gen. Motors Corp.

• Decision Date: 10 November 1937
• Docket Number: April Term, 1937.,No. 41,41
• Citation: 281 Mich. 691,275 N.W. 735
• Parties: RUBSAM CORPORATION v. GENERAL MOTORS CORPORATION.
• Court: Michigan Supreme Court

281 Mich. 691

275 N.W. 735

RUBSAM CORPORATION

v.GENERAL MOTORS CORPORATION.

No. 41, April Term, 1937.

Supreme Court of Michigan.

Nov. 10, 1937.

Action by the Rubsam Corporation against the General Motors Corporation. Judgment for defendant, and plaintiff appeals.

Affirmed.

Appeal from Circuit Court, Jackson County; John Simpson, judge.

Argued before the Entire Bench, except BUTZEL, J.

Whiting & Kleinstiver, of Jackson, for appellant.

Milburn & Semmes, of Detroit (Prewitt Semmes, of Detroit, and Drury W. Cooper and C. Blake Townsend, both of New York City, of counsel), for appellee.

BUSHNELL, Justice.

On May 4, 1923, plaintiff's assignors licensed defendant to manufacture, use, and sell motor wheels, incorporating Rubsam's inventions as set forth in United States patent No. 1,395,362. This license was nonexclusive and did not require the licensee to pay any specified minimum amount of royalty; the licensor was to receive 1 1/2 cents for each wheel of a size applicable to cars of the touring type, weighing less than 2,000 pounds, and 2 cents a wheel, applicable to cars of greater size. The license not only included the inventions set forth in the patent named, but also ‘any and all improvements thereon, as described in any further patents or patent rights which may be issued to or acquired by licensors, always excepting any and/or all rights under Patent No. 1,403,439 to Mott, and which licensee may elect to acknowledge as such and use within the United States,’ etc.

The invention or inventions were those pertaining to ‘vehicle wheels, and particularly to those types of wheel which are provided with removable or detachable tirecarrying rims.’ The inventor's application was filed March 9, 1918, renewed on March 19, 1921, and letters patent were issued on November 1, 1921, under the aforesaid number, hereinafter designated as the ‘first patent.’ Charles F. Rubsam, the inventor, was later granted three other patents, hereinafter designated as the ‘second,’ ‘third,’ and ‘fourth’ patents, numbered and dated as follows: 1,576,225, March 9, 1926; 1,576,226, issued the same day; and 1,622,846, March 29, 1927.

On March 13, 1926, plaintiff wrote defendant advising it of the issuance of the second and third patents and stating: ‘Under clause 1, page 1, of said agreement, we submit these patents to you to make an election as to whether or not you desire to operate under them.’

Defendant replied on April 10, 1926, saying: ‘We are not interested in either of these patents in view of the fact that we own patent No. 1,165,096, issued to Harbridge on December 21, 1915.’

This correspondence was followed on August 20th by a written demand upon defendant for payment of accrued royalties under the license agreement, and the added claim by plaintiff that wheels with demountable rims, used on Buick and Chevrolet cars, embodied the invention covered by the first patent and infringed the second and third patents. A few days later defendant was advised of the issuance of the fourth patent and was given the opportunity of electing to use the same.

Plaintiff later filed a disclaimer in the United States Patent Office on August 23, 1928, affecting the first patent and intending ‘to more clearly define the invention.’

No royalties were paid for the use of any of the inventions and, on January 20, 1928, defendant advised the original licensors that:

‘In accordance with clause 9 of the agreement entered into between you and General Motors Corporation on the 4th day of May, 1923, we hereby give notice of cancellation to take effect immediately following the period of ninety days from date of your receipt of this notice, as provided for in said clause.

‘We further advise you that there are no sales to report under said agreement, and no royalties due.

‘This letter will also confirm the statements made to you in the past, that we are not interested in patents Nos. 1,576,225, 1,576,226 and 1,622,846, to which you called our attention, as notwithstanding explanations given by you and your attorney, we feel that these patents are absolutely invalid, at least in so far as they might be alleged to relate to anything we have ever manufactured.’

On September 27, 1928, plaintiff began a suit in equity in the District Court of the United States for the Eastern District of Michigan against General Motors Corporation, Buick Motor Company, Jaxon Steel Products, and Chevrolet Motor Company, as defendants, claiming royalties from defendant General Motors Corporation under the license agreement and damages caused by the use and infringement of the four patents by the other defendants.

The District Court (57 F.(2d) 581) Judge Simons presiding, considered defendant's denial of use and infringement as well as the challenge to the validity of all the patents, and held that, although the question of infringement was a rather close one, the line was so narrow that certain considerations stated in the court's opinion must weigh the scales in plaintiff's favor, and that the first three patents were infringed by constructions of the defendant; that the license was for the benefit of all the defendants and ordered a reference to a special master for the purpose of determining the amount of plaintiff's damages as to both royalties and infringement. The court held the fourth patent to be invalid and void.

An appeal was taken by defendants to the Circuit Court of Appeals, where an opinion was written by Judge Hickenlooper (see General Motors Corp. v. Rubsam Corp., 65 F.(2d) 217, 223) holding that, because there was no diversity of citizenship, the District Court erred in retaining jurisdiction of the cause of action for breach of contract and accounting under the license agreement but that there was jurisdiction to entertain the patent infringement aspect of the case. The court then discussed the claims of the first, second, and third patents and held each to be invalid for insufficiency of disclosure and claim description. The opinion was concluded with this language: ‘It is therefore unnecessary to pass upon the question of infringement. The decree of the District Court is reversed and the cause is remanded with instructions to dismiss the bill of complaint, but without prejudice to the maintenance of an action in the state courts for the recovery of royalties for the period ending April 21, 1928.’ (Italics ours.)

A final decree and order on mandate was entered by District Judge O'Brien on December 4, 1933. This decree, however, contained the following: ‘That defendants have not used what is described and claimed in the said letters patent * * *, or any of them, and have not infringed upon the said letters patent, or any of them.’

An appeal was taken by Rubsam from this decree and the Circuit Court of Appeals entered an order eliminating the aforesaid paragraph from the decree; an interlocutory decree being entered in conformity thereto by District Judge Tuttle on December 17, 1935, and a final decree by Judge O'Brien on May 18, 1936.

The action, now before us on appeal, was begun by plaintiff on June 3, 1933. The declaration claims damages for breach of the license agreement stated in three counts; it was filed on June 19, 1933, and after a trial before the circuit judge, sitting without a jury, a judgment was entered for defendant on July 11, 1936.

Defendant's preliminary motion and answer raised questions of lack of legal capacity of plaintiff corporation to sue becauseof its failure to pay certain corporate taxes; denial of the use of plaintiff's inventions; failure of consideration because of the invalidity of the patents; a claimed election of remedies in the federal courts; estoppel; res adjudicata; cancellation; the running of the statute of limitations, viz., section 13976, Comp.Laws 1929, and the failure of plaintiff's declaration to state a cause of action. The answer affirmatively averred that the wheels manufactured by General Motors, or its subsidiaries, did not involve the inventions to Rubsam but were constructed in accordance with the prior art as published and disclosed in some one or more of the forty other patents listed in defendant's answer.

The circuit judge filed a comprehensive written opinion upon which judgment for defendant was entered. The opinion gives a résumé of the relations of the parties and the federal litigation referred to above.

The trial court decided the case upon two questions; plaintiff's election of remedies in the federal case and subsequent estoppel in the state court, and the nonuse by defendant of the inventions of the first patent. The question of election of remedies is discussed and analyzed in the court's opinion, which matter we do not quote because of its length.

We do, however, quote the conclusions reached by the trial judge, which are as follows:

‘From the foregoing, it is plain to the court that in the federal case the plaintiff never claimed that the General Motors or its subsidiaries ever elected to come under the royalty agreement as to patents 2, 3 and 4, but elected to treat the defendant as an infringer of those patents, 2, 3 and 4, and that the only royalty they were claiming was under the royalty agreement for patent No. 1. Clearly this is an inconsistent position to the position the plaintiff is now taking in this suit wherein it claims that the defendant elected to come under the royalty agreement as to the four patents.

‘In the case of Willard v. Shekell, 236 Mich. 197, at page 205, 210 N.W. 260, 262, the court states:

“To constitute an election of remedies so as to estop the plaintiff from proceeding in the second case,...