213 F. 864 | D.N.J. | 1914
“Q. You don’t, of course, deny that you stopped working under it? A. Yes, I do deny it. Q. You deny now that the company stopped work under it? A. Yes. Q. What did their working under consist of subsequent to January 10, 1912? A. Consisted largely of paying royalties. Q. Since January 1, 1912? A. Since then? I don’t know whether we were working under it or not since January, 1912. * * * Q. On direct examination you were asked why the defendant company ceased paying royalties on January 1, 1912. You remember that? A. Yes. Q. Do you remember what you answered to that question? A. Yes. Q. Why we [you] ceased to pay royalties? A. Yes. Q. Why? A. On account of Mr. Crowe failing to keep his contract to protect us against infringers and going out and infringing himself. Q'. That is the only reason you care to state? A. No, that is one what we consider good reason. • Q. And you had no others to state, that is you didn’t care to state? A. I have none to state at this minute.”
It thus appears from the evidence that the foundry company after ceasing to pay royalties to Crowe under .the contract from and after January, 1912, manufactured and installed from fifty to seventy-five chain grate mechanical stokers and paid royalties thereon, the secretary and treasurer of the company stating that the work of the foundry company subsequent to January 10, 1912, “consisted largely of paying royalties.” No royalty after January, 1912, was paid to Crowe. If the foundry company was. operating under the contract in manufacturing and installing chain grate mechanical stokers the royalty was due and should have been paid to Crowe, unless the company was relieved from so doing by a judicial determination. The fact that no" royalty was paid Jo Crowe after January, 1912, although the above mentioned large number of stokers were made and installed, affords potent evidence that the foundry company in making and installing stokers after that date was not working under the contract. It appears that the foundry company paid royalties; but to whom? They were not paid to Crowe who was entitled to receive them if it was working under the contract. Yet the royalties were paid and could not have been paid to any other person than Crowe under the contract. There is only one reasonable inference to be drawn from the facts, namely, that the company while holding an exclusive license from Crowe under the contract to manufacture and install stokers, was not operating under the contract, but independently of the license. This inference is fully supported beyond the possibility of successful contradiction by a statement by the foundry company in section 4 of the answer, that it denies that since January 10, 1912, “it has made and sold chain grate mechanical stokers in all essential particulars practically identical with those upon which it had paid royalty previous to that date, and denies that it has ever failed to
The contract of January 29, 1908, is continuing in its nature, but contains no provision for its rescission for any default or defaults on the part of either or both of the parties in the performance or observance of its stipulations or provisions. It does not follow from the absence of a provision for rescission that none can be effected. A continuing contract requiring the performance of acts or the pursuit of a line of conduct on the part of both or either of the parties, though lacking such a provision, may be rescinded by a court of equity at the instance of one of the parties if the other persistently refuses or fails to discharge the duties devolving upon him thereunder or manifests a wrongful intention not to observe essential features of the contract, but to defeat its purpose, and there be no. adequate remedy at law. The circuit court of appeals for the second circuit in Neenan v. Otis Elevator Co., 194 Fed. 414, 114 C. C. A. 376, rendered a decision which is helpful in the determination of this case. The syllabus which fairly represents the principles decided is as follows :
“1. Under a contract by which complainant assigned certain patents relating to elevators to defendant, a builder of elevators, which required defendant to test the patented apparatus with reasonable diligence, and if such test proved satisfactory ‘within such further reasonable time as is coveníent to put such apparatus into practical use’ and to pay royalties thereon, the test having proved satisfactory, complainant was entitled to have the inventions exploited during the life of the patents and within a reasonable time.
“2. The failure and refusal by defendant, although continuously building and installing elevators, to make any practical use of such invention for five years after the making of the contract, was a violation both of its spirit and letter which entitled complainant to its rescission in equity; there being no rational rule of damages which would afford an adequate remedy at law.”
Judge Coxe in delivering the opinion of the court said;
“The dilemma in which the defendant is placed by the proofs is this: The Neenan patents are either for valuable inventions or they are not. If worthless, the defendant will not be injured, but on the contrary will be benefited; by reassigning them on receiving the amount it has paid. If, on the other hand, the patents cover valuable inventions, the inventor is entitled to have them exploited during the lives of the patents. The gains, profits and advantages which may accrue from the patents the complainant is entitled to-receive, either under the contract or as owner. It seems evident that no substantial gains will accrue' to him under the contract. * * * The intention of the parties, at least the intention of Neenan, was to exploit the inventions as soon as possible. It was the duty of the defendant to test the apparatus with reasonable diligence and if the tests were satisfactory to install it within such reasonable time as was convenient. It did test the apparatus and found it satisfactory, but has wholly neglected to put it into practical use. Its conduct in this regard seems to indicate a purpose not to use the patented improvements but to prevent rivals in business from acquiring them. Manifestly, the defendant does not intend to push the introduction of the inventions in an enthusiastic and energetic manner such as the complainant has a right to expect. * * * It is not too much to say that the defendant, after it proved the invention to be a valuable one, wholly neglected to put it into practical use. This was not what the contract contemplated and was contrary to its spirit and letter as well. The complainant has no adequate remedy at law, no rational rule of damages can be formulated upon the facts as shown; any verdict rendered would have nothing but speculation and*870 guesswork to support it. In such cases the right of the injured party to rescind is well recognized.”
For any violation by Crowe of the rights of the foundry company under the exclusive license, that company would have had an adequate remedy by an action at law for damages or by a suit in equity for an injunction and an accounting. But for the wrong done by the foundry company in retaining, without using, the exclusive license granted to it by Crowe the latter has no remedy for the recovery of royalties which do not exist, and an action at law for damages based upon a breach of the contract by the foundry company would be a wholly inadequate remedy for the reason that the amount of royalty which the foundry company should have paid to Crowe if it had in good faith manufactured the stokers under the exclusive license, would be wholly uncertain and speculative as depending upon elements and factors impossible of judicial determination.