Standard Fireproofing Co. v. St. Louis E. M. Fireproofing Co.

• Decision Date: 30 June 1903
• Citation: 76 S.W. 1008,177 Mo. 559
• Parties: STANDARD FIREPROOFING CO. v. ST. LOUIS EXPANDED METAL FIREPROOFING CO.<SMALL><SUP>*</SUP></SMALL>
• Court: Missouri Supreme Court

76 S.W. 1008

177 Mo. 559

STANDARD FIREPROOFING CO. v. ST. LOUIS EXPANDED METAL FIREPROOFING CO.^*

Supreme Court of Missouri, Division No. 2.

June 30, 1903.

CONTRACTS—CONVEYANCE OF PATENT RIGHTS — CONSTRUCTION — AS IN RESTRAINT OF TRADE—AGREEMENT FOR EXCLUSIVE USE— BREACH — MEASURE OF DAMAGES — ROYALTIES —CONTRACT TO PAY—VARIANCE BY PAROL.

1. Where a written contract, complete in itself, fixed a specified rate of royalties to be paid by defendant to plaintiff, defendant could not show a prior parol agreement that the rate of royalty should never exceed the lowest royalty paid by other licensees of plaintiff.

2. A written contract granting defendant the exclusive right to use a certain patented construction for a period of years, paying to plaintiff specified royalties, is not affected in any manner by part performance.

3. In a suit for an accounting of royalties due by defendant to plaintiff under a contract, the account was properly taken and stated down to the hearing before the referee, where the petition did not limit the claim to the amount due when filed, but was prospective in terms.

4. A contract granted to defendant the right to use a new and improved construction of fireproof floors and ceilings, which might be used as substitutes for the hollow tiling, and solid, concrete-filled structures, supported between iron girders, in general use at the time. It was also stipulated therein that the defendant should not use "any construction similar" to that granted by the contract for the purpose of avoiding the same. Held, that the "similar construction" which defendant was forbidden to use comprehended every system of fireproof construction which, like that mentioned in the contract, might be used as a substitute for hollow tile and solid, concrete-filled structures, supported between iron girders, and generally in use at the date of the patent.

5. A contract giving to another the exclusive right to use and vend a patented construction in eight states and territories during the life of the letters patent, and any extension or reissue thereof, and forbidding the licensee to use or sell any construction similar to that granted by the contract, is not void as in restraint of trade.

6. Where a contract giving defendant the right to use a patented construction in the erection of fireproof flooring provided that the defendant should not use or sell any construction similar to that granted by the contract for the purpose of evading the same, and further provided that defendant should in good faith construct flooring according to such patent, defendant was liable in damages for inducing the owners of a building, who had contracted with it to build the flooring mentioned in the contract, to substitute another system, for no other reason than that of saving to itself the royalties which it would have been obliged to pay under the system, and to make greater profits on the work.

7. In an action against the licensee of a patented construction, who had agreed to use no similar construction, for breach of such agreement in a certain construction, the measure of damages was the amount of royalties which the licensor would have realized from the construction undertaken, had the contract been complied with.

Appeal from St. Louis Circuit Court; Franklin Ferriss, Judge.

Action by the Standard Fireproofing Company against the St. Louis Expanded Metal Fireproofing Company. From a judgment for plaintiff, defendant appeals. Affirmed.

Carr & Carr, for appellant. Charles B. Stark, for respondent.

GANTT, P. J.

This is an appeal from a judgment of the circuit court of the city of St. Louis in favor of the plaintiff for $5,217.71 for breaches of a contract entered into by and between plaintiff and defendant on the 17th of February, 1894, in which plaintiff, in consideration of the royalties to be paid by the defendant to plaintiff as in said contract specified, granted to defendant the sole and exclusive right to make, use, and vend a fireproof floor construction, under and according to and embodied in the invention described and claimed in the application for certain letters patent of the United States of America filed July 3, 1893, by one John F. Golding (being serial number 479,435), and allowed October 16, 1893, for improvements in fireproof flooring, and the exclusive right thereunder to practice said invention in, for, and throughout the states of Missouri, Arkansas, Kansas, Colorado, and Texas, and the territories of New Mexico, Indian, and Oklahoma, during the life of said letters patent, and any extensions or reissue thereof, and improvements which plaintiff might acquire, either as patentee, assignee, or purchaser. The royalty to be paid was one cent on each square foot of construction. The defendant, on its part, covenanted to render an account monthly to the plaintiff of the amount of square feet constructed during the previous month. Among other stipulations was the following: "The party of the second part during the existence of this contract, shall not use or sell or cause to be used or sold any construction similar to that of said party of the first part, which is hereby granted, for the purpose of evading this contract, or to be used instead of that made under this contract, or for any purpose whatever, but the party of the second part shall in good faith construct with the utmost diligence such construction according to the letters patent hereinbefore mentioned or improvements on the same." The invention, the right to make, use, and vend which was granted to defendant by the said contract, was, briefly, "a new and improved construction of fireproof floors and ceilings, which may be used as substitutes for the hollow tiling, and solid, concrete-filled structures, supported between iron girders, now generally used; and it also relates to the art of building the same." It was alleged in the application for the patent, "The structure produced by my invention is lighter and stronger than the old construction." There were two counts in the petition: The first was for royalties due on work done by defendant confessedly according to the Golding patent, and for an accounting by defendant pursuant to the terms of the contract. The second count is an action at law for damages alleged to have been suffered by plaintiff by reason of defendant's violation of its covenant not to use or sell, or cause to be used or sold, any construction similar to that of the plaintiff, for the purpose of evading the contract, or to be used instead of that made under the contract, or for any purpose whatever, but that it would, in good faith, construct with the utmost diligence the licensed invention, according to the plaintiff's letters patent, or any improvements thereon. There was a third count, but, as it was voluntarily dismissed, it need not be noticed. In its answer to the first count, defendant admitted the execution of the contract, and the building of flooring under the patent of an amount exceeding 40,000 square feet, and pleaded payment of $400. It averred that, at the time of the negotiations resulting in the execution of the license pleaded in the petition and prior to the execution thereof, the plaintiff represented to the defendant that its lowest license fee or royalty was 1 cent per square foot, and that the plaintiff expressly promised to the defendant that, if the defendant would execute the license contract sued on, the rate of royalty payable by the defendant should never exceed the lowest royalty payable by others during the same period, but that, if any other person should be given a license at a lower royalty than 1 cent per square foot, the royalty payable by the defendant should be the same as that of the licensee paying at the lowest rate. It alleged that this promise was made orally just prior to the execution of the license contract sued on, and that in consideration of said promise the defendant executed the contract. It then stated that the defendant granted licenses for a lower royalty than 1 cent, and that, if it were charged at the lower rate, it would owe the plaintiff nothing, after applying the $400. In answer to the second cause of action, the defendant admitted the plaintiff's ownership of the patent issued to it for the Golding invention, and that the drawings and specifications of the Golding and Johnson systems are correctly set out in the petition, and that it had built fireproof floor construction in accordance with the Johnson system, as shown in the petition, and denied all the other allegations of the said second count. The reply was a denial of the new matter. After the issues were made up, the plaintiff, by leave, amended its petition so as to include royalties down to the hearing before the referee, to which defendant excepted. The case was referred, and the referee reported in favor of a judgment for plaintiff on first count of $2,607.21, being the amount of royalties earned, less $400 paid plaintiff thereon, and interest on the balance at 6 per cent., and on the second count $2,610.50, or a total of $5,217.71. Defendant appeals.

The evidence as to the construction on which plaintiff bases its claim for recovery is substantially uncontradicted. Indeed, the estimate of royalties is based upon a report the defendant made to the referee. Prior to the institution of this suit, defendant had constructed according to the Golding system 137,606 square feet; and during the pendency of the suit, but prior to the stating of the account by the referee, it had completed other work amounting to 149,715 square feet, or a total of 287,321 square feet. It had never made a report monthly or otherwise, as required by the contract, until required to do so by the referee. Prior to the filing of the suit, however, it had paid plaintiff $400, and was entitled to and received credit therefor in the finding of the referee. During the period from the making of this contract down to the report of the...