234 F. 281 | 7th Cir. | 1916
Lead Opinion
A claim on three negotiable promissory notes, all dated January 1, 1912, one for $2,500, which matured January 1, 1913, and two for $5,000 and $3,750, respectively, maturing January 1, 1914, and January 1, 1915, all payable to appellant, was allowed by the referee for $10,537.51, their discounted value as of January 21, 1913, the date bankruptcy proceedings were begun, over objections going to the validity both of the entire claim and of so much thereof as was not earned before bankruptcy. This order was reversed by the District Court, and the claim allowed for the pro rata amount held apportionable from January 1, 1912, to January 21, 1913. The claimant appeals.
On January 1, 1912, appellant, owner of certain letters patent and rights to inventions, entered into a license agreement with the bankrupt. After reciting this ownership, licensor’s desire to have licensee undertake the exploitation thereof, licensee’s desire to secure the exclusive rights therein, it contained, inter alia, the following provisions:
(1) An exclusive perpetual license to manufacture, use, and sell was granted subject to tbe further provisions of tbe agreement.
(2) Licensee agreed, so long as it enjoyed a practical monopoly in tbe machines and processes for producing gas in tbe manner specified in detail, to pay to tbe licensor a royalty of 50 cents per horse power capacity of each machine manufactured and sold under tbe agreement, “it being understood and agreed in this behalf that in any event tbe licensee shall pay to tbe li-censor during the first year from tbe date hereof royalties to tbe total rnini-*283 mum amount of at least five thousand dollars (§5,000), and daring the first two years from the date hereof royalties to the total minimum amount of at least fifteen thousand dollars (§15,000), and during the first three years from the date hereof royalties to the total minimum amount of at least twenty-two thousand five hundred dollars ($22,500); and as evidence or prepayment of such sum the licensee will deliver to the licensor, at the time of the signing of this agreement, two sets of negotiable promissory notes of equal amounts for the aggregate sums of twenty-two thousand five hundí'* A dollars ($22,500.00), made and executed respectively by the licensee and Ed ward A. Kumley, of Ea Porte, Ind., said notes to bear like date herewith draw interest at the rate of 6 per cent, per annum, after maturity, and in-payable at the following times and in the following amounts: Five thousan dollars ($5,000) shall be payable at the end of one year from the date hereof; ten thousand dollars ($10,000) at the end of two years from the date hereof; and seven thousand five hundred dollars ($7,500) at the end of three years from the date hereof. But if during substantially all of said third year from the date hereof the licensee enjoys or shall enjoy such substantial or practical monopoly of such exclusive right, then and in that'event said royalties shall aggregate for said three years the sum of a,t least thirty thousand dollars ($30,000), and if at the end of said three years from the date hereof the licensor shall not have received royalties aggregating this amount, then and in such event the licensee will pay to the licensor an additional sum sufficient to make up such aggregate amount.” It further provided for $100,000 for. the first six years under like conditions, with the right, however, by payment of $200,000 in all during the first four years, to have the entire interest of the licensor free from any further royalties.
(7) Licensee agreed to push the business, to prosecute infringements, to advance the necessary money, “and to this end the licensee shall open an account on its books with the licensor, into which shall he charged against the licensor one-half of such sum of money as shall be so advanced and paid out by the licensee, and the same shall he repaid by the licensor from the sums which shall become due and payable to the licensor as royalties and to this end the licensee may retain 50 per cent, of such royalties until such advances are repaid: Provided that the share of such sum or sums payable by the li-censor, and chargeable against It as aforesaid, shall in no event exceed one-half of said royalties, and in no event shall any portion of said $22,500 be applied toward payment of costs, but the same shall be payable to the licensor in any event in full, and no part thereof shall be retained by the licensee for any purpose after the same shall become due as aforesaid.” Neglect by cither party for 60 days after notice by the other to comply with any provision enabled such other at its option to terminate the agreement.
(9) licensee might terminate the agreement if permanently enjoined, and if no longer able to enjoy the practical monopoly provided for, but it should remain liable for all royalties up to that time accrued.
(10) In the event of licensee’s insolvency, licensor shall have the right to cancel the agreement; the contract shall not be assigned except to M. Itumely & Oo.
The claim hied against the bankrupt estate is on the three notes executed by the bankrupt pursuant to section 2 of the license agreement.
The order disallowing a portion of the claim must be reversed, and the cause remanded, with directions to allow the claim in the sum of $10,537.51.
Dissenting Opinion
(dissenting). I cannot concur in the conclusion that the notes here in question represent consideration to the licensor for granting the exclusive license. The contract nowhere so states, but specifies “a royalty of 50 cents per horse power,” etc., and provides for the guaranty of the annual minimum of “royalties” of the stated sums, and for the giving of the notes “as evidence or prepayment of such sum.” The notes bear no interest till after their maturity at the respective times for payment of the minimum royalties, and so, if a present consideration, the payee’s beneficial use of it is postponed till the minimum royalties would become payable. While the contract mentions these minimum sums as being payable “in any