Appeal from the District Court of the United States for the Western District of Pennsylvania; Nelson McVicar, Judge.
Before BUFFINGTON, DAVIS, and THOMPSON, Circuit Judges.
This is an appeal from an order of the District Court refusing a preliminary injunction to restrain the defendant from prosecuting certain suits which it had brought in the Northern District of Ohio and in the Northern District of Indiana.
A. P. Steckel filed an application on June 30, 1923, for a patent for "a revolutionary advance in the art of rolling thin sheet metal." Steckel assigned this application to the plaintiff, the Cold Metal Process Company, hereinafter called "Cold Metal." On April 20, 1926, Biggert and Johnson filed a conflicting application which was assigned by them to the defendant, United Engineering & Foundry Company, hereinafter called "United." In order to avoid future trouble, the parties herein on June 20, 1927, entered into an agreement for a license from Cold Metal to United called the "1927 agreement." After providing for a "conference" between the parties "immediately" after its execution, the agreement provided:
"3. When and if such claim or claims to common subject-matter are granted in any patent issued on Cold Metals' applications, Cold Metals shall grant to United a license to make, use and sell rolling mills under such claim or claims, which license shall be exclusive to United for 4-high hot mills and for 4-high cold mills, in which the major portion of the power required by a roll stand is supplied to the rolls directly and not through tension exerted on the material for pulling it through the rolls; Cold Metals, however, reserving the right to make or have made for its own use and to use in its own plant or plants such hot and cold mills, and provided further that Cold Metal shall have the right to make, use, and sell, or to license others to make, use, or sell, such 4-high hot mills in combination with means for coiling the rolled strip between passes as described in the pending application of A. P. Steckel, Serial No. 198,915, filed June 15, 1927.
"4. Immediately after such conference and without waiting for such claims to be secured, the parties shall negotiate the payment to be made by United to Cold Metals for such license, when and if granted. If the parties cannot agree upon such payment, the matter shall be submitted to three arbitrators, whose majority decision shall be accepted as final by both parties. The three arbitrators shall be as follows:
"Marshall A. Christy, of Pittsburgh, Pa.,
"Rollin C. Steese, of Youngstown, Ohio,
"Charles H. Booth, of Youngstown, Ohio.
"In case any of the arbitrators cannot serve, another or other arbitrators may be selected by the parties, but in case the parties cannot agree on such substitute arbitrator or arbitrators, then the above named arbitrators shall select the substitute arbitrator or arbitrators."
On October 20, 1930, a patent, No. 1,799,195, for the invention disclosed in the application, was issued to Cold Metal.
United found itself embarrassed by the "1927 agreement." It discovered that the larger part of its business, the manufacture and sale of mill rolls, would be seriously and detrimentally affected, if it enforced the 4-high mill patent in the trade for the reason that its general machinery customers threatened to deal with its competitors and not to deal with it, if it enforced that contract. It took the position (in the face of its agreement that it would "immediately after such conference" negotiate for the payment of royalties) that it would not negotiate or arbitrate the question of royalties which it was to pay Cold Metal until the patent had been declared valid by a court of last resort.
United proposed a substitute agreement which would contain certain provisions desired by it and which would practically put the control of the patent in United, but ...