Standard Roller Bearing Co. v. Hess-Bright Mfg. Co., 366.

• Decision Date: 19 February 1920
• Docket Number: 366.
• Citation: 264 F. 516
• Parties: STANDARD ROLLER BEARING CO. et al. v. HESS-BRIGHT MFG. CO.
• Court: U.S. District Court — District of Delaware

264 F. 516

STANDARD ROLLER BEARING CO. et al. v. HESS-BRIGHT MFG. CO.

No. 366.

United States District Court, D. Delaware.

February 19, 1920

Edward D. Robbins, of New Haven, Conn., and William S. Prickett, of Wilmington, Del., for plaintiff Standard Roller Bearing Co.

Ward Gray & Neary and Andrew C. Gray, all of Wilmington, Del., for plaintiff Brown Bros. & Co.

Richard V. Lindabury, of Newark, N.J., Robert Fletcher Rogers, of New York City, J. Edward Ashmead, of Newark, N.J., and Owen J Roberts, of Philadelphia, Pa., for defendant.

MORRIS District Judge.

Standard Roller Bearing Company, a New Jersey corporation, one of the plaintiffs (hereinafter called the plaintiff), and a licensee under United States patents No. 822,723 and No. 838,303, in its bill of complaint alleges infringement of its rights by the defendant, the Hess-Bright Manufacturing Company, a Delaware corporation, and prays an injunction and an accounting. The licensee joins as parties plaintiff the copartners of Brown Bros. & Co., the present owners of the legal title to the above-mentioned patents. The defendant after granting a license to the plaintiff, granted to others licenses covering the same device. The plaintiff asserts, and the defendant denies, that, in view of the scope of plaintiff's license, such acts were infringements. The validity of the patents is not questioned. The scope of plaintiff's license, thus made the underlying question in the cause, depends solely upon the validity of a so-called second supplemental license agreement made between the plaintiff and defendant, and ratified by the ancillary receivers of the plaintiff on the 8th day of July, 1915. The bill of complaint, in addition to its prayers for an injunction and an accounting, prays a decree adjudging the second supplemental agreement to be null and void, and the plaintiff to be entitled to the rights conferred upon it by the original license agreement. The alleged invalidity is based upon the contentions that the agreement was fraudulently made; that by reason of the receivership decree the plaintiff was without power to make the agreement; that the officers of the plaintiff, in executing the agreement, were acting without corporate authority; and that the ancillary receivers had no jurisdiction in the premises. The case was heard on bill, answer, documentary evidence, and oral testimony taken in open court.

The two patents, No. 822,723, for an improvement in ball bearings, granted June 5, 1906, and No. 828,303, for a method of manufacturing and assembling ball bearings, granted December 11, 1906, to one Robert Conrad, were assigned by him to a German company. The German company granted unto the Hess-Bright Manufacturing Company, a New Jersey corporation, a sole and exclusive license to make, use, and sell within the United States and its territories the said inventions, and also empowered the company last named to make agreements granting to or conferring upon others any or all rights under said patents, and in the name of the German company to sue for infringements of said patents or any rights thereunder. Subsequently an infringement suit under said patents was instituted in the Circuit Court of the United States for the Eastern District of Pennsylvania, in the name of the German company and the Hess-Bright Manufacturing Company of New Jersey, against the Standard Roller Bearing Company. Therein it was held that the form of ball bearing made by the Standard Roller Bearing Company infringed the Conrad patents. 177 F. 435. In settlement of that litigation the parties thereto, on the 6th day of June, 1910, entered into an agreement (herein called the original agreement) whereby the Standard Roller Bearing Company was licensed and empowered--

'to make, use, and sell ball bearings of the licensed form below specified throughout the United States and territories thereof under and by virtue of the said letters patent to the full end of the term of said letters patent, it being, however, specifically understood and stipulated that such power and be nonassignable; and it being further specifically understood and stipulated that this license and power shall be limited to that form or embodiment of ball bearings, wherein the raceway or grooves are uninterrupted and continuous, and wherein filling openings are formed in the rings of such extent and depth that when the two rings are held in concentric position and also against peripheral or general deformation, the balls may be introduced or forced through the filling openings into the grooves or raceway in the rings without substantial injury to the surface designed for rolling contact; and it being further understood and agreed that no similar license or power shall be granted by the party of the first part to any other person, firm, or corporation without the written consent of the party of the second part.'

The original agreement likewise provided, among other things, for the payment of certain royalties, the making of monthly settlements by the licensee, limitations upon the price at which the product of the licensee could be sold, and for the prosecution of infringers by the licensor. This agreement was approved by the defendant herein, it being then about to acquire the interest of the New Jersey corporation in said letters patent. A further agreement, known as the first supplemental agreement, was subsequently made upon the same day. Its purpose was to explain, but not to alter, the meaning of the original agreement.

The United States District Court for the District of New Jersey, on the 22d day of October, 1913, upon a stockholders' and creditors' bill filed against Standard Roller Bearing Company, alleging its inability to meet and discharge its matured and maturing obligations, and upon an answer filed by the defendant admitting the allegations of the bill, appointed under its general equity powers Robert S. Woodward, Jr., and S. Laurence Bodine, of Pennsylvania, and Thomas L. Gaskill, of New Jersey, receivers--

'of all and singular the lands, tenements, and hereditaments of defendant, and of all its real and personal property, business, shares of stock, rights, assets, and effects of whatsoever nature and kind and wheresoever the same may be situate, including also its buildings, plants, machinery, tools, merchandise bills and accounts receivable, cash in hand and in bank, and all of its contracts, rights, choses in action, and other corporate rights and franchises, and its income and profits.'

The decree further provided that the receivers should take into their possession the property of the defendant of whatsoever nature; that the receivers should manage and operate the property, conduct the business of the defendant, and preserve the properties, assets, and effects in proper condition and repair, and in their discretion to compound and settle with any debtor of the corporation with persons having possession of its property or in any way responsible at law or in equity to the corporation, upon such terms and in such manner as they might deem just and beneficial to the corporation; that the defendants company should forthwith turn over and deliver to the receivers all its property and assets; and that the business of the defendant company might be wound up and its property and franchises converted into money. The decree also enjoined the defendant and its officers from selling, transferring, or disposing of, or in any manner interfering with, any of the property of the defendant company, or from doing any act or thing to prevent the discharge by the receivers of their duties or the operation of said properties under the order of the court. Thereafter, but upon the same day, a bill of complaint setting up the appointment of receivers in New Jersey, the presence of assets in Pennsylvania and praying the appointment of ancillary receivers, was filed against the Standard Roller Bearing Company in the District Court of the United States for the Eastern District of Pennsylvania. The allegations of the bill were admitted by an answer filed simultaneously with the bill. A decree was thereupon entered, appointing Robert S. Woodward, Jr., and S. Laurence Bodine receivers--

'of all and singular the said defendant, and of all the lands, tenements, hereditaments of the defendant, and of all its real and personal property described in said bill of complaint, situate in the state of Pennsylvania, and also all of its business, shares of stock, rights, assets, and effects of whatsoever nature and kind, situate in said state, including also its buildings, plaints, machinery, tools, merchandise, bills and accounts receivable, cash in hand and in bank, and all its contracts, rights, and choses in action, and other corporate rights and franchises, and its income and profits accruing and to accrue in said state.' Other provisions of the decree are identical with those of the New Jersey decree, save only that the Pennsylvania decree is expressly limited in its several paragraphs to the property, business, assets, and effects of the Standard Roller Bearing Company in the state of Pennsylvania. The receivers took possession of the business of the Standard Roller Bearing Company and conducted it. In conducting such business the receivers, acting upon the theory that the license granted under the Conrad patents inured to their benefit, made and sold bearings of the type described in the original license agreement.

Upon July 8, 1915, the second supplemental agreement was entered into. This agreement purports on its face to have been made by the plaintiff and defendant herein, and ratified by the ancillary receivers. It recites the original and supplemental agreement of June 6, 1910; that the Hess-Bright Manufacturing Company of New...