The opinion of the court was delivered by: BARD
This is an action for breach of a written agreement entered into January 28, 1932, under which plaintiff leased to defendant certain patented machines to be used for the manufacture of paper containers known as "Sealcones" for packaging and distributing milk and other dairy products.
The plaintiff alleges that the defendant has breached the contract in (1) discontinuing the use of plaintiff's machines and using other machines during the term of the contract; (2) reporting and paying royalties since January 1, 1934, on the number of "Sealcones" sold instead of the number produced; and (3) failing to keep the machinery in good and efficient working condition.
The answer denies that the defendant is under any obligation to continue to use plaintiff's machines for making paper containers, asserts that the payment of royalties on the number of "Sealcones" sold, rather than on the number produced after January 1, 1934, was in conformity with an oral modification of the original agreement, and alleges that the machinery was, and is, in good and efficient working order.
I make the following special findings of fact:
1. The plaintiff, American Sealcone Corporation, is a New York corporation and is engaged in the business of manufacturing machinery for making paper containers for milk and other dairy products.
2. The defendant, Sylvan Seal Milk, Inc., is a Delaware corporation and is engaged in the business of pasteurizing, packaging and distributing milk and other dairy products in and near the city of Philadelphia.
3. The amount in controversy is in excess of $3,000.
4. On or about January 28, 1932, plaintiff and defendant entered into a written agreement by which plaintiff leased to defendant patented machines for the manufacture of containers (known as "Sealcones") for milk and other dairy products for a period extending until the expiration of the last patent thereon, in 1955.
5. As consideration for its use of plaintiff's machines, defendant agreed to pay, and did pay, an initial license fee of $72,500, plus specified royalties on the number of "Sealcones" produced by it.
6. Paragraph 1 of this agreement, which is the agreement upon which this action is based, provided, inter alia: "The Lessor agrees to lease and hereby does lease to the Lessee the property hereinafter described and agrees to license and hereby does license the Lessee to use the same, exclusively, however, (except as hereinafter provided) for the use in the Lessee's business of packaging, selling and distributing milk, cream * * *."
7. On the same day on which the licensing agreement was executed, January 28, 1932, plaintiff and defendant entered into a second written agreement by the terms of which plaintiff agreed to give defendant the exclusive right to manufacture containers with the leased machines in a designated territory, provided that the royalties paid by the defendant to plaintiff were of a specified minimum amount and that defendant did not use any other packaging machines to the extent of more than 5% of its total business. The agreement further provided that in the event the defendant failed to meet these conditions, the exclusive right of defendant to use the machines in the areas designated would be terminated ipso facto, but the defendant would continue to have the right to operate the machines under the license granted in the first agreement between the parties.
8. The conditions which were prerequisite to bringing this second written agreement into operation and effect were never met.
9. On or about March 30, 1939, defendant completely discontinued the use of plaintiff's machines and since then has been using other machines ...