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CHICAGO PNEUMATIC TOOL CO. v. ZIEGLER

February 10, 1943

CHICAGO PNEUMATIC TOOL CO.
v.
ZIEGLER



The opinion of the court was delivered by: KIRKPATRICK

This is a civil action for declaratory judgment brought by the petitioner, the Tool Company, for a determination of the term of two contracts between it and Charles H. Haeseler, to whose rights the respondent has succeeded. The respondent has filed a counterclaim for damages, representing minimum royalties alleged to be due under the contracts, which are patent license agreements: Exhibit 1, executed January 27, 1919, and Exhibit 2, executed January 27, 1921. The former obligates the Tool Company to pay to Haeseler minimum royalties of $ 10,000 for its term.

There are three questions which must be answered:

 A. Does the obligation to pay minimum royalties extend for the duration of patents licensed under Exhibit 2 as well as those licensed under Exhibit 1?

 B. Does the obligation to pay minimum royalties extend to the end of the term of the last expiring patent licensed under paragraph 10 of Exhibit 1?

 C. By what patent is the term to be measured?

 A. There is no provision in the second contract whereby it specifically changes the duration of the first. It gives the Tool Company a license under two specifically mentioned patent applications (paragraph 1) and 'any tools, machines and devices that may be invented by the Licensor during the continuance of the said agreement (the first contract) between the Licensor and Licensee dated the 27th day of January, A.D., 1919, subject to the terms of that agreement.' (Paragraph 2.) Although the contracts might have been more plainly phrased it is clear from the two, read together, that the second was intended to extend the provisions of the first to the two specifically mentioned patent applications and to 'any tools, machines and devices that may be invented,' etc., and imposed the obligation to pay the minimum royalty of the first contract for the duration of patents so included.

 B. A word by word discussion of the first contract would probably not help to clarify it. Again, however, the whole contract manifests the intention that the obligation to pay royalties shall cover the whole term of any patent comprehended by paragraph 10.

 C. The obligation to pay royalties thus expires:

 July 5, 1944 -- if 1,634,780 is within paragraph 10, Exhibit 1.

 April 15, 1942 -- if the term of Belgian patent 274,347 extends to that date.

 January 29, 1941 -- if 1,481,865 comes within either paragraph 10, Exhibit 1, or paragraph 1, Exhibit 2.

 March 22, 1938 -- if 1,372,348 comes within paragraph 10, Exhibit 1, or paragraph 2, Exhibit 2.

 April 30, 1936 -- the date on which petitioner ceased paying royalties -- if Canadian 183,912 was the last licensed patent to expire.

 Discussing these possibilities in order:

 '780 and Paragraph 10, Exhibit 1.

 The application for '780 was filed Oct. 23, 1920, prior to the execution of the second contract, Jan. 27, 1921, but was not mentioned in it. In view of the specific enumeration of patent applications in the preamble, and of the fact that paragraph 2 is distinctly in the future tense ('devices that may be invented'), it is evident there was no intention that this invention be covered by the second contract.

 The question, then, is whether '780 (having been applied for after the date of Exhibit 1) comes within the terms of paragraph 10 of Exhibit 1.

 Paragraph 10 provides ' * * * Licensor further agrees that in the event of his * * * obtaining * * * Patents relating to improvements in the tools * * * manufactured and sold by virtue of this agreement, he will grant' (a license) 'under the terms heretofore set forth; providing * * * Licensee, upon indication of its desire to use said * * * improvements, shall pay all expenses * * * in connection with the applications * * * .'

 It is admitted that '780 was an improvement upon the Haeseler ball valve pneumatic hammer -- a device which, of course, could not by any stretching of the meaning of words by properly called a drill. However, paragraph 10 by its terms operates only on improvements in the tools 'manufactured and sold by virtue of this agreement.' There is very little evidence that any of the Haeseler ball valve penumatic hammers were 'sold' at any time. The provision, 'by virtue of this agreement,' obviously requires that sales, in order to bring paragraph 10 into operation, must be subsequent to the execution of the agreement, January 27, 1919. The evidence relating to transactions involving the hammer after this date shows no sales. Summarized, it is as follows:

 February 12, 1919: 12 hammers were 'furnished for service,' but this was merely an intracompany transaction.

 February 20, 1919: There was evidence that Great Lakes Shipyard placed an order for one hammer. However, no price was proved nor was there any evidence that the transaction culminated in a completed sale.

 February 28, 1919: Another shipyard requested that the Tool Company make an offer to take off its hands 1300 old hammers and replace them with the Haeseler hammers. Far from indicating a completed sale there is no showing in this connection that there was even an offer, the first requirement of a contract.

 March 6, 1919: One hammer was picked up from the Mathis Shipyard which had been left there for trial two years before.

 It is thus evident that '780 does not come within paragraph 10.

 Belgian '347

 The Belgian patent is specifically licensed (under its application number) is Exhibit 1. Under the Belgian Act of May 24, 1854 its duration would normally be 20 years, and it would normally expire November 6, 1934. The respondent, however, argues that the term of the patent was extended some seven years more by the Belgian Act of October 11, 1919. This benefit under this Act, however, is specifically limited 'as regards foreigners, to subjects of countries which have accorded to Belgian subjects privileges which have been recognized as equivalent by Royal Decree published in the Moniteur Belge.' No such Royal Decree in connection with the United States has been brought to the attention of the Court, and it is difficult to see how such express language, under the interpretation of the Courts of any country, could mean anything other than that the Act did not apply to American owned patents and did not extend the term of Haeseler's Belgian patent.

 '865 and Paragraph 1, Exhibit 2.

 The application for '865 was specifically mentioned in the preamble of Exhibit 2, and in paragraph 1 of that agreement the licensee was granted 'the exclusive right to make, use and sell the * * * inventions described and claimed in the aforesaid applications for Letters Patent * * * subject to the terms and conditions of said license agreement (Exhibit 1).' Thus it is clear that the obligation to pay royalties extended to January 29, 1941, when this patent expired, and it is not necessary to inquire whether it was within the purview of paragraph 10, Exhibit 1.

 The '348 Patent.

 The application for this patent was filed on August 15, 1916, two years prior to the execution of the first contract. Though the patent did not issue until March 22, 1921 it is apparent that it could not come within either of the agreements. It was not mentioned specifically in either ...


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