Williams v. The Babcock & Wilcox Company

Decision Date07 January 1959
Docket NumberNo. 12637.,12637.
Citation262 F.2d 253
PartiesEdward R. WILLIAMS and Julia Lee Cox Williams for Themselves and Doing Business as Williams Engineering Company, a Partnership, Appellants, v. THE BABCOCK & WILCOX COMPANY and Republic Steel Corporation.
CourtU.S. Court of Appeals — Third Circuit

Loyal H. Gregg, Pittsburgh, Pa., William H. Parmelee, Elmer S. Utzler, Christy, Parmelee & Strickland, Pittsburgh, Pa., of counsel (Gregg & Price, Pittsburgh, Pa., on the brief), for appellants.

Inzer B. Wyatt, New York City (Robert L. Kirkpatrick, John K. Tabor, Kirkpatrick, Pomeroy, Lockhart & Johnson, Pittsburgh, Pa., Sullivan & Cromwell, New York City, on the brief), for appellees.

Before MARIS, GOODRICH and KALODNER, Circuit Judges.

MARIS, Circuit Judge.

The question on this appeal is whether the District Court for the Western District of Pennsylvania erred in finding that the defendants, Babcock & Wilcox Company and Republic Steel Corporation, had not wrongfully breached their agreement with the plaintiffs, Edward R. Williams and Julia Lee Cox Williams doing business as Williams Engineering Company,1 and that the plaintiffs were not entitled to the equitable relief they sought. The undisputed facts are these:

The plaintiff Edward R. Williams, an inventor, had done considerable research and experimental work in continuous casting of molten metals, as a result of which prior to July 15, 1941 he owned both United States and foreign patents in this art. Continuous casting has been successfully used in processing non-ferrous metals such as copper, brass and aluminum. The successful application of continuous casting to steel has been of immense interest to the steel industry for many years as it would reduce operating costs, eliminate the need for expensive equipment, and would avoid the high losses of metal which are involved in the several production steps required in conventional processing. The defendant Republic Steel Corporation, a large producer of steel, entered into an agreement with Williams in 1941 pursuant to which it conducted experimental work in this field under a license from Williams. In 1943 Republic entered into a supplemental agreement with Williams which provided that defendant Babcock & Wilcox Company, a producer and user of ferrous metals, would collaborate in conducting experiments in this field. A small experimental casting unit was installed by Babcock & Wilcox at its plant at Barberton, Ohio. Thereafter, Republic gave Williams notice of termination of the 1941 and supplemental agreements.

On June 1, 1946 the parties entered into the agreement here involved in which it was stated that Babcock & Wilcox desired to establish the continuous casting of metals on a production basis. The parties conveyed all their rights under patents involving continuous casting for their mutual use and for the development of the process. Babcock & Wilcox agreed to install in its plant at Beaver Falls, Pennsylvania, an apparatus which would serve as a demonstration unit on a commercial or semi-commercial scale of the practicability of continuous casting. Access for inspection of the installation and of operating records was to be available to the parties. Babcock & Wilcox further agreed "to use its best efforts to exploit and license a continuous casting process covered by the patent rights of the parties." Royalty-free licenses were granted by the agreement to each of the parties for their own production for the full term of the licensed patent rights unaffected by any termination of the agreement.

It was further agreed that the use royalties obtained from sublicensees would be divided between the parties. Williams was in any event to receive annual payments of $7500 retroactively from June 1, 1946 to November 12, 1944, and $10,000 per year until December 31, 1948. In addition, Williams was to receive 33 1/3% of the gross use royalties, the total payment not to exceed $25,000 until the gross use royalties exceeded $227,000, when he would receive 11% of the gross use royalties annually. The expense of the project was to be borne by Babcock & Wilcox and Republic. Williams was to act as a consultant on a part time basis upon request in writing by Babcock & Wilcox. The agreement was terminable under several paragraphs but only paragraph 16 is here pertinent. Paragraph 16(a) gave Williams the right to cancel during the years 1949, 1950 and 1951 under the following circumstances:

"(a) In the event Williams shall receive as his share of the gross use royalties collected by B. & W. for the calendar year 1949 an amount not exceeding $10,000., or an amount not exceeding $15,000. from the gross use royalties collected by B. & W. for each of the calendar years 1950 and 1951, Williams may, by a notice in writing served on Republic and B. & W. within sixty (60) days after the end of the corresponding calendar year, terminate this agreement, and such termination shall become effective thirty (30) days after receipt of such notice unless Republic and/or B. & W. shall within said thirty (30) days pay to Williams a sum equal to the difference between the royalties paid to Williams and the minimum amount named herein for the corresponding calendar year."

No licenses were granted during 1949, 1950 and 1951 and Williams did not receive any payments but nonetheless did not exercise his right to terminate the agreement. His principal patent and some of his foreign patents had expired by 1954. Under paragraph 16(b) any of the parties, after the year 1952, had the following termination rights:

"(b) In the event the gross use royalties collected by B. & W. from sublicensees for the calendar year 1952, or for any calendar year thereafter does not exceed $75,000., then any of the parties may, by a notice in writing served on the other parties within sixty (60) days thereafter, terminate this agreement, and such termination shall become effective thirty (30) days after receipt of such notice."

No licenses were granted during the years from 1952 to 1955. In March 1955 the defendants decided that negotiations should be initiated for a surrender of Williams' rights under the agreement. The plaintiffs were approached with the proposition that they accept $3000 annually over a period of 10 years for their interest in the agreement, which was rejected. The defendants then proposed a new agreement but its terms were not acceptable to Williams. On July 5, 19562 defendants gave notice of termination of the 1946 agreement for lack of royalties during 1955.

The plaintiffs thereupon brought this action for an injunction against the termination of the agreement and to prevent the defendants from enjoying any benefits from the continuous casting process except pursuant to the agreement. In the alternative, the plaintiffs claimed damages in the amount of $806,000 resulting from defendants' alleged waste or conversion of the plaintiffs' property in the patents. Jurisdiction was based upon diversity of citizenship. The case was tried to the court without a jury. It was undisputed that the defendants had the legal right to terminate the agreement under paragraph 16(b) but the plaintiffs sought to invoke the equitable powers of the district court upon the grounds that the plant erected by Babcock & Wilcox at Beaver Falls had in fact been operated successfully on a commercial production basis since 1952 but that Babcock & Wilcox had wrongfully refrained from granting licenses, that the plaintiffs refrained from exercising their right to terminate the agreement and recapture their patents in reliance upon the defendants' assurances of imminent licensing, that the defendants' experiments were directed toward their own needs rather than commercial exploitation, and that the lack of gross royalties was due to the defendants' own delay, lack of diligence and ineffective experimental program. The district court decided first to try the plaintiffs' claim that the Babcock & Wilcox plant had been operated successfully since 1952 and that the defendants could have, and should have, secured licenses for the commercial exploitation of the process and collected at least $75,000 in gross use royalties during that year. The plaintiffs' case was based in large part upon documents, including records of casting heats, and statements by defendants' executive officers and other representatives to Williams or which appeared in letters, advertisements and publications. The matter was highly technical and the record voluminous. The district court in its opinion analyzed the evidence at length and found as a fact that the defendants had acted in good...

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4 cases
  • Thomas v. Honeybrook Mines, Inc.
    • United States
    • U.S. Court of Appeals — Third Circuit
    • 28 Mayo 1970
    ...Petroleum Corp., 248 F.2d 696 (3 Cir. 1959), cert. denied, 355 U.S. 943, 78 S.Ct. 529, 2 L. Ed.2d 523 (1959); Williams v. Babcock & Wilcox Co., 262 F.2d 253 (3 Cir. 1959), cert. denied, 359 U.S. 969, 79 S.Ct. 880, 3 L.Ed.2d 836 (1959)." (Emphasis As the majority notes, it is most significan......
  • Speyer, Inc. v. Humble Oil and Refining Company
    • United States
    • U.S. Court of Appeals — Third Circuit
    • 12 Noviembre 1968
    ...Petroleum Corp., 248 F.2d 696 (3 Cir. 1959), cert. denied, 355 U.S. 943, 78 S.Ct. 529, 2 L.Ed.2d 523 (1959); Williams v. Babcock & Wilcox Co., 262 F.2d 253 (3 Cir. 1959), cert. denied, 359 U.S. 969, 79 S.Ct. 880, 3 L.Ed.2d 836 The basic evidence on liability was introduced by expert witness......
  • Powell v. Pennsylvania Railroad Company
    • United States
    • U.S. Court of Appeals — Third Circuit
    • 27 Mayo 1959
    ...the evidence is left with the definite and firm conviction that a mistake has been made by the fact finder." Williams v. Babcock & Wilcox Co., 3 Cir., 262 F.2d 253, at page 256; United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. For the reasons hereinafter ......
  • Eastern Express, Inc. v. Mack Warehouse Corporation
    • United States
    • U.S. Court of Appeals — Third Circuit
    • 8 Enero 1964
    ...testimony credited by the trial court can justify reversal of the trial findings. Seideman v. Hamilton, supra; cf. Williams v. Babcock & Wilcox Co., 3d Cir. 1959, 262 F.2d 253. Appellant urges that because Rosenfeld's testimony was clear, precise and positive, while Foyle was at times a hes......

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