286 Mass. 84 | Mass. | 1934
This suit was brought to adjust differences between the parties (all corporations organized under the laws of Delaware with places of business in this Commonwealth) arising out of a license agreement and an accompanying agreement, both dated March 19, 1929, as to the manufacture of radio tubes. In general the purpose of the suit is to enforce the terms of art. Three, § 7, of the license agreement made by the defendant, and to determine the amount of royalties due to the defendant under the license agreement. A cross bill was filed by the defendant. The case was referred to a master to hear the parties and their evidence and to find the facts. No evidence is reported. The findings of fact, therefore, must be accepted as true. The facts thus displayed in substance are these: On March 19, 1929, the defendant gave a license under patents to the plaintiff Raytheon Manufacturing Company. On April 20, 1929, the Raytheon Manufacturing Company assigned the license to the Raytheon Production Corporation and the defendant assented to the assignment. The word plaintiff wherever used hereafter will refer to the Raytheon Production Corporation. The license was to manufacture and sell radio tubes at a royalty of ten per cent under the patents. By § 7 of art. Three of the license agreement it was provided as follows: if the licensors "shall in the future grant another license for the same purposes and for the same territory as provided herein, at a rate of royalty less than ten per cent. (10%) for future manufacture and sale, then the Licensee shall thereafter have "the benefit of such lower rate of royalty, provided that the Licensee at the same time accepts all the other conditions and obligations imposed on the Licensee by such other license, and by any agreement referred to therein with any of the Licensors, and makes equal contributions to the Licensors. The Radio Corporation shall notify the Licensee upon the granting of such other license.” The license agreement also contained a general release running from the licensee to the defendant and its colicensors. The contemporaneous
The prayers of the plaintiffs as set forth in their bill as amended are that the defendant be temporarily and permanently restrained from terminating the tube license which had been granted to them, since they are not in default; that a credit of all royalties up to July 1,1931, be granted; (this was apparently on the ground that the releases of all damages for past infringement given to the sixteen companies taking part in the September, 1931, settlement were granted without any consideration and that under § 7 of the original license agreement, such releases constituted retroactive licenses for a zero rate of royalty;) or, in the alternative, that there be a reduction in royalty from seven and one half per cent to five per cent under the same § 7, retroactive to November 1, 1929. The plaintiffs alleged that they had a valuable antitrust claim against the defendant, upon which they brought suit in December, 1931, in the Federal Court in Massachusetts; and that this claim would be destroyed by the execution of a general release such as was given by other licensees; that some of the outstanding licensees had no such valuable claims and that others of the new licensees who had such claims were paid for them in the settlement of September, 1931; that hence the plaintiffs were entitled to a total credit of royalties, or at least to such a reduction in royalties, without the necessity of executing a general release.
By an amendment to the original bill the plaintiffs tendered the defendant in March, 1932, a form of release (which they contended was unqualified), signed by the Raytheon Production Corporation. This form of release so tendered was drawn to exclude and preserve the antitrust
Under the license agreement royalties were payable quarterly, and upon thirty days’ notice of default the defendant could terminate the license. The plaintiffs had been in default each quarter beginning with the second quarter of 1931. In-each case up to the date of the final decree, the defendant has notified the plaintiffs of their default, and the plaintiffs have finally paid the royalties without interest under a stipulation of nonprejudice.
The defendant filed a cross claim to the effect that the Raytheon Production Corporation must pay interest on royalty payments made after the due date to cure default, and that the plaintiffs have not paid royalties on the proper basis. It is alleged that all the tubes manufactured under the present license were sold exclusively to the National Carbon Company, Inc., which had a controlling interest in the licensee, the Raytheon Production Corporation, by reason of an option on its stock and a right to elect its directors. Accordingly, under § 5 of art. Three of the license agreement, royalties should have been computed upon the sales price of the National Carbon Company, Inc., rather than upon the sales price of the Raytheon Manufacturing Company. It is further alleged that in computing royalties improper deductions were made from the sales price of the licensee. Sections 1 and 2 of art. Three of the license provide that royalties shall be paid on the licensee’s invoice price “before cash discounts, freight or advertising allowances, or similar deductions.”
Upon the filing of the master’s report and hearing thereon, an order was entered overruling the plaintiffs’ objections to the report, sustaining the defendant’s objection, and confirming the report after striking out certain findings not now material. It was further ordered that a final decree was to be entered in accordance with the following rulings: (a) the licensee is not entitled to a “zero rate” of royalty for any period after October 31, 1929; (b) the royalty is to be computed at the rate of seven and one half per cent from No
At the hearing upon the form of the final decree a question arose as to the method of making allowances for inventories according to the basis for royalties established under the order of the court. The single justice declined to rule in
An interlocutory decree was entered in accordance with the order of the court confirming the master’s report, and from this the plaintiffs appealed. A final decree was entered in accordance with' the above order and rulings. Both plaintiffs and defendant appealed.
1. The ruling was right to the effect that the plaintiffs were not entitled to a "zero rate” of royalty for any period after October 31, 1929. That contention of the plaintiffs is founded on the facts already narrated that certain companies granted licenses by the defendant in September, 1931, as a part settlement of controversies, had manufactured tubes, described in the patents under which the plaintiffs were licensed, from at least September, 1929; that the defendant exacted no payment for that use, and that thus a zero rate of royalty was granted them for that period, and that therefore the plaintiffs are entitled to the same rate under their license agreement. The soundness of that contention depends upon the correct construction of § 7 of art. Three of that agreement already quoted. The language of that section is couched solely in terms of future “licenses.” It provides that, if the defendant "shall in the future grant another license . . . for future manufacture and sale” at a lower rate of royalty, then the licensee (that is, the plaintiffs) "shall thereafter have the benefit of such lower rate . . . .” There is nothing in these words about remissions or releases of damages that have accrued in the past for manufacturing without license. Giving the words of that section their natural meaning, they do not comprehend damages for infringement of the patents. The word
This contention of the plaintiffs is not supported by the terms of their license agreement.
2. The ruling was right to the effect that the plaintiffs were required to pay royalty at the rate of seven and one half per cent from November 1, 1929, to September 18, 1931, because the plaintiffs had not given a general release covering their antitrust claims against the defendant as required of its other licensees. This ruling was founded on the facts already recited that when the defendant in September, 1931, made settlement with sixteen companies, it granted new licenses to them on a five per cent rate of royalty retroactive to November 1, 1929, to all existing licensees, each license containing a general form of release. The same offer of a five per cent rate conditioned upon giving the same general form of release was made to the plaintiffs and refused.
(a) The plaintiffs assail this ruling, first on the ground
In any event the defendant had a right to decline to accept the form of release tendered. It was entitled under the explicit language (already quoted) of art. Three, § 7, of the license agreement, to insist that the plaintiffs accept “all the other conditions and obligations imposed” in the licenses issued to other licensees at the reduced rate. The offer of the defendant submitted to the plaintiffs and to all other licensees was to execute a general release according to a specified form. The other licensees that obtained a reduced royalty rate signed the general form. The defendant had a right under the license agreement to demand from the plaintiffs the execution of the same form of release as a condition to like reduction in rate.
(b) The plaintiffs contend further that, even if they do
It follows that, since the plaintiffs have not proved that the other prior licensees had no claims against the defendant given up by virtue of their general releases, and since the plaintiffs do not show a present interest in the pending Federal antitrust suit or the value or validity of the claim involved in that suit, it cannot be held that the requirement that the plaintiffs execute a general release imposes "conditions and obligations” greater than those imposed on other prior licensees or that thereby an unequal contribution was required. If the plaintiffs insist upon the reduction, they must do it under the terms of art. Three, § 7. They must accept all other conditions, obligations and terms imposed on other licensees. Every other licensee was- required to give a general release. The plaintiffs cannot demand the reduction without complying with the
3. The exaction of a release of claims falls within the fair meaning of the phrase “conditions and obligations” in its context in § 7. The requirement of a release was a part of the original license agreement of which § 7 was also a part. It was a condition compliance with which by the plaintiffs was necessary to obtain the license in the first instance. It is just as much of a condition to obtain a reduction in royalty rate as it was to obtain the initial license.
4. The contention that the parties have by their conduct put a practical construction upon § 7 in conformity to the interpretation now urged by the plaintiffs cannot be supported. As already pointed out, we do not regard the terms of that section ambiguous. It is only in such instances that construction by acts of the parties is permissible to affect its language. The finding of the master is that, so far as it was a question of fact, at no time has there been a practical construction by the parties of that section. It is not necessary to recite in detail the evidence set forth in- the master’s report. We are of opinion that there was not as matter of law any such practical construction by the parties.
5. The circumstance that other licensees in the September, 1931, settlement were paid for a release of their antitrust claims does not show that an unequal contribution was exacted from the plaintiffs by requiring them to give up their antitrust claim by general release without being paid in like manner. Those licensees that were paid in a group for release of such antitrust claims were not prior licensees but were manufacturers that then became licensees for the first time. They were on a different footing from the plaintiffs and other prior licensees. The exaction of a general release from them as a condition for a five per cent royalty in the future had nothing to do with the exaction of a general release from prior licensees as a
6. The ruling was right to the effect that the plaintiffs are entitled to the five per cent royalty rate from September 18, 1931, when licenses were granted to the group of companies as above stated without the necessity of executing general releases covering antitrust claims, because no such releases were required of these licensees without payment therefor of a consideration and a final adjustment of their claims. The defendant’s objection to this ruling cannot be sustained. It is not supported by the fair construction of art. Three, § 7. It is true that the plaintiffs, in order to secure a reduction in royalty, were obliged to comply with the conditions and obligations imposed on the licensee. One of these was the execution of a general release. But, so far as concerned the new licensees, the force and effect of this condition were dependent upon and qualified by the fact that a settlement was made with them and they were paid for their antitrust claims. The complete “conditions and obligations” was the giving of a general release coupled with the settlement of claims by a very substantial payment. The plaintiffs were entitled to the same treatment if held to the same obligation. Otherwise, a different condition would be imposed on the plaintiffs and an unequal contribution required of them. The fact that the amount paid each licensee is not shown is immaterial. The total payment was a very large sum. The distribution of it is of no consequence in determining the rights of the plaintiffs. In this connection the circumstance that the Raytheon Production Corporation had no interest in the pending antitrust suit is not decisive. That corporation apparently entertained the view that it had some sort of interest in it because of the conditional form of release tendered by it. The plaintiffs were entitled under the reservation in paragraph (3) of the agreement accompanying the original license agreement to retain
It remains to consider questions raised by the cross bill of the defendant. The contentions on this branch of the case relate chiefly to matters of accounting. The details are to be adjusted later by agreement, and the master made no findings on them. The 'governing principles alone need be considered.
7. The ruling was right to the effect that the defendant was entitled to interest on royalties not paid when due from the due date to the time of payment. Childs v. Krey, 199 Mass. 352, 358.
8. There has apparently been sharp controversy between the parties concerning the point whether the license royalties due to the defendant should be computed on the sales price of the National Carbon Company, Inc., to which all the product of the plaintiffs was sold. The plaintiffs state in their brief: “On all sales after March 31, 1931, the single justice has ordered that the royalties should be based on the invoice price of National Carbon Company, Inc. The defendant contended for this. The plaintiffs opposed it. The plaintiffs no longer oppose it. It is agreed that the final decree conforms to this order.” In view of this statement, the main matter needs no further discussion.
9. The defendant contends, however, that the limitation to the date of the suit was error and that the computation should be retroactive to cover earlier royalty payments. This limitation rightly may have rested on laches of the defendant. Although laches cannot be asserted as matter
10. The remaining contention of the defendant is that there was error in the rulings as to royalties on tubes held in inventory by the National Carbon Company, Inc. The defendant claimed royalties on inventory so held on October 31, 1929. An express credit was given by the defendant on all royalties paid on tubes up to that time. That must have included tubes held in inventory at that time. The defendant now can hardly in equity exact a credit for royalties on tubes which had once been paid and which had once been credited or rebated.
The royalties had been paid on the basis adopted by the parties to March 31, 1931, which was the invoice price to the National Carbon Company, Inc. It may have been
Moreover, the terms of the several sections of art. Three of the license agreement which is entitled “Royalties” do not lend support to this contention of the defendant. That article in its several sections contains no allusion to royalties on tubes held in inventory. The basis for the payment of royalty is the invoice price of tubes sold by the licensee during the term of the agreement. Express provision is made by § 5 of art. Three for resale by one occupying the relation to the licensee held by the National Carbon Company, Inc. If the parties had intended tubes held in inventory as a basis for royalty, some reference naturally would have been made to the subject.
Points argued by the defeated parties have been considered. They need not be discussed further. Those not argued are treated as waived. No error is shown.
Interlocutory decree affirmed.
Final decree affirmed with costs.