Spound v. Mohasco Industries, Inc.

• Citation: 534 F.2d 404
• Decision Date: 13 May 1976
• Docket Number: Nos. 75-1385,75-1386,s. 75-1385
• Parties: Albert M. SPOUND et al., Plaintiffs-Appellees, v. MOHASCO INDUSTRIES, INC., et al., Defendants-Appellants, Albert M. SPOUND et al., Plaintiffs-Appellants, v. MOHASCO INDUSTRIES, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 404

534 F.2d 404

190 U.S.P.Q. 1

Albert M. SPOUND et al., Plaintiffs-Appellees, v. MOHASCO INDUSTRIES, INC., et al., Defendants-Appellants, Albert M. SPOUND et al., Plaintiffs-Appellants, v. MOHASCO INDUSTRIES, INC., et al., Defendants-Appellees.

Nos. 75-1385, 75-1386.

United States Court of Appeals, First Circuit.

Argued March 1, 1976.

Decided April 16, 1976.

As Amended on Denial of Rehearing May 13, 1976.

Daniel O. Mahoney and George L. Greenfield, Boston, Mass., with whom Reginald H. Howe, Palmer & Dodge, and Wolf, Greenfield & Sacks, Boston, Mass., were on brief, for Mohasco Industries, Inc., and others.

Jerome P. Facher, Boston, Mass., with whom Robert F. McLaughlin and Hale & Dorr, Boston, Mass., were on brief, for Albert M. Spound and others.

Before COFFIN, Chief Judge, ALDRICH and CAMPBELL, Circuit Judges.

ALDRICH, Senior Circuit Judge.

This action, initiated in 1970 as a petition for declaratory judgment, and subsequently enlarged, presents a two-pronged claim, for royalties under a 1961 license agreement and, after the agreement was purportedly cancelled by the licensor in 1972, for damages for subsequent infringement of two of the patents that had been licensed. A. M. Spound, although but one of three plaintiffs, will be referred to as plaintiff. He was, at all times, engaged in designing and manufacturing furniture, including upholstered livingroom furniture. The original licensee was defendant Super Sagless Spring Corp., of which one Katz was president. Defendant was at all times engaged, inter alia, in making metal furniture components. There are two other, connected, corporate defendants, one of which, Mohasco Industries, Inc., a furniture manufacturer, acquired the Super Sagless stock in 1963. For simplicity, the defendants may be treated as one. Defendant's position is that nothing was due under the agreement, and that it was improperly cancelled, but that if, in fact, it was properly cancelled, the patents were invalid and not infringed. The case was tried to a jury, which answered special questions, all favorably to plaintiff. After some modification in plaintiff's disfavor, a judgment was entered determining, inter alia, that the first patent was valid and infringed and that the second was invalid, and assessing damages for breach of the agreement and for infringement. Both sides appeal.

In 1957 plaintiff conceived the idea of a reclining livingroom chair which would have a headrest that was concealed within the back when the chair was upright, thereby presenting a low profile, but which would emerge automatically (pop-up) when the user, by leaning back, caused the chair to recline. The chair would also have an extending legrest, but this is not involved. Plaintiff spent a considerable time endeavoring to reduce his idea to practice, and in due course sought, and received, confidential help from Katz. Katz introduced plaintiff to one Martin, a mechanical engineer. On September 5, 1957, plaintiff filed an application, and on August 2, 1960, received Patent No. 2,947,347, Spound, Automatic Projecting Headrest for Reclining Chairs. Meanwhile, on January 17, 1958, Spound and Martin applied for a patent on Reclining Chair Headrest Constructions, which ripened into Patent No. 2,884,992, on May 5, 1959. On October 24, 1958, Martin and Spound filed a further application, Automatically Projectible Headrest, receiving Patent No. 2,958,374 on November 1, 1960. Finally, Spound, alone, filed on February 15, 1961, Application No. 89,402, Headrest for Reclining Chairs Including Latching Means. This application was rejected on July 14, 1961, on the basis of '374 and a legrest patent cited by the examiner, and was not pursued.

Briefly, '992 was an improvement in result over '347; '374 was an improvement over '992 in internal operation, and '402 principally added a latch to prevent accidental depression of the headrest. '347 was never manufactured. '992 was well received and, commencing in 1958, was sold by plaintiff and various licensees in substantial quantities, defendant making most of the mechanisms. However, the concept was better than the product. Functional difficulties resulted in so many returns that the various chair manufacturers lost interest, and in the early '60's the market dried up. It was anticipated that the operational faults could be remedied. This, however, did not occur for a long time.

The parties had long considered a royalty basis license for defendant, and in January, 1961 negotiations came to a head. During the next two months plaintiff and Katz discussed terms, and their counsel discussed form. Besides general protection of their clients, it is apparent that counsel had special matters in mind. One of these was that plaintiff's receipts should be considered capital gains. Another was that defendant wished separate documents, so that it could exhibit only part of the agreement to an interested competitor. In retrospect, it seems that the handling of these subsidiary matters may have been what led to the present difficulties. Evidence, duly objected to by defendant on the ground of the parol evidence rule, indicated that the principals intended that defendant should have an exclusive right to manufacture the mechanism for plaintiff's chair in any form, and was to pay a single royalty of one dollar a set irrespective of what patents were involved, so long as that right was protected, so that to the extent the agreement appears more limited it was simply faulty draftsmanship. Under the circumstances of this case, where defendant is now claiming the apparent windfall of having to pay nothing, this is an appealing contention. The question is, is it open?

(In a somewhat lengthy addendum to this opinion we review the merits of the parties' analysis of a license agreement entered into on April 1, 1961 and the events attending on its execution, concluding that the jury could warrantably find in accordance with plaintiff's contentions. Because no questions of law are involved, but only highly subjective facts of no interest to anyone but the parties, no purpose would be served by including this in the permanent reports, and the addendum will be retained in our file of unpublished opinions.)

It may be unfortunate for defendant, particularly in light of the jury's finding a fair royalty in the '70's to be $3.75, rather than the earlier figure of $1.00, ¹ that, like Aesop's dog who thought it saw another bone in the water, it overreached and lost what it had, but, as defendant's brief said of plaintiff in another connection, he "made a deliberate tactical choice . . . (and) must take the consequences." Defendant was not entitled to escape liability on the ground that the agreement permitted free use of the patents. Correspondingly plaintiff was within his rights in terminating it on account of defendant's default.

We turn to the second part of plaintiff's case, the damage claim for infringement of the '992 and '374 patents subsequent to the 1972 cancellation of the agreement. No appeal is pressed regarding the jury's determination that defendant's chair infringed the dispute concerns validity. Here we find a singular situation. The sole question put to the jury on this issue was,

"(18) Do you find that the Spound inventions of '992 or '374 were not obvious to a person with ordinary skill in the furniture art when the inventions were made?" (Emphasis suppl.)

As a matter of syntax, this means the invention of '992 or (the invention of) '374. ² As such, this question corresponds exactly with question 16

"(16) What do you find as a reasonable per chair royalty to be paid by the defendants for infringement of patents '992 or '374?"

But while 18, read with 16, saves from attack the royalty finding, strictly it does not indicate that a particular patent was found to be non-obvious. ³

The court, however, did not so conclude, but found that the jury had accepted the validity of '992. On reflection, we accept that decision. On the evidence before it, the jury could not have found '992 obvious if it had found '374 non-obvious. We note, also, that defendant does not challenge the judgment below on this basis. However, we are left, in any event, with no jury finding as to the non-obviousness of '374. This situation plaintiff must be deemed to have assented to, since he failed to object to the form of the questions. Hence we are in the position, taking a portion of plaintiff's appeal out of order, simply of passing upon whether the court's independent finding of invalidity, because of double patenting, was warranted. ⁴

The court found,

"A comparison of claim 1 of '374 and claim 9 of '992 confirms that the only difference between the two inventions is the configuration of the lost motion device. Since lost motion devices are old, a substitution of one such device for an equivalent would not seem to amount to a patentable difference." (Footnote omitted.)

Although plaintiff says there is much more to '374, the court had before it not only the testimony of defendant's expert, to which, in all candor, we do not attach great weight in view of much of the prior art he thought material, but significant testimony of plaintiff's own witness. Basically, the difference between '374 and '992 was a different mechanism to accomplish the same result. Plaintiff's expert testified that lost motion devices, post, of this character are legion, and a matter of choice. More important, he stated, with relation to '992, that the pop-up concept, with lost motion, was the invention; that "the design of a linkage mechanism to elevate a headrest is a mechanical engineering problem," and that he believed a good mechanic, once given the instructions of what was wanted, could have carried them out.

It may well be that the '374 mechanism was an improvement over '992, but that does not necessarily save the patent. Granted there was no exact anticipation, still there must be something more than an obvious...