# Petition — Saverslak v. Davis-Cleaver Produce Co.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1980
- **Citation:** 444 U.S. 1078

## Text

DEC 18 1979

MICHABL ROBAK, JR., CLERR

In the
Supreme Court of the Anited States

IRVING S. SAVERSLAK, Individually and as Trustee
under TRUST AGREEMENT dated October 1, 19859,

as Amended,
Petitioner,
vs.
DAVIS-CLEAVER PRODUCE COMPANY,
a Missouri Corporation,
Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT

AntuHony R. CuHrara

Hitt, Van Santen, STEADMAN,
Curara & Srmpson

70th Floor Sears Tower

Chicago, Illinois 60606

312/876-0200

Ira 8S. Kors
Scuwartz, Cooper, Kors
& Gaynor Curb.
33 North La Salle Street Room 2222
Chicago, Illinois 60602
312/726-0845
Attorneys for Petitioner.

a ee

The Scheffer Press, Inc.—(312) 263-6850

Pe Se ee SS ES ee ee

TABLE OF CONTENTS

PAGE
a sccusnsninbssnnsciece 1
es cosconissenensessance 2
Constitutional Provisions, Statutes and Rules ............ 2
Questions Presented for Review ....c.cccccccscssesesesssecesesessceees 2
Nee eee ncn csssesosacarencecseccsors 3
ES ESE SEE CT +
Reasons for Granting the Writ ei tecksesstsiscdosenenseses 9
Cee. ecnesssersccceresacoes 11

I. The Courts Below Have Disregarded and Failed
to Follow This Court’s Decision in Eclipse
Bicycle Co. v. Farrow, Thus Destroying Licen-
sees’ “Best Efforts” Provisions in Patent License
I iN ana detec cdpsanscsbesivesesedesascecnsnces 11

II. In Reversing The Judgment For Damages The
Court of Appeals Acted On Assumption And
Speculation And Ignored Rule 52 F.R.C.P. .... 15

Cees ssssunnonsenevevecsseare 19
I, dei cenivstnabltaéasopecavicervestassoesececesps la-52a

A—Judgment and Opinion of the United States
Court of Appeals for the Seventh Circuit Sept.
ev sasbcsscsaceseoanceoesecusenes la

B—Finding of Fact, Conclusions of Law and
Memorandum Opinion and Order, Nov. 29, 1974,
of the U.S. District Court N.D. Ill. E.D. ............ 18a

Memorandum Opinion and Order of U.S. Dis-
trict Court N.D. Ill. E,D,, May 8, 1975 ........,..04 30a

li
PAGE

Memorandum Opinion and Judgment Order en-
tered April 27, 1978 U.S. District Court, N.D.

OD: MEA, Weeichiichaccutkccin a dihcmmcebeeniinlscdedbeanagihchdlacoiteshiortatcih 32a
C—Excerpts From License Agreement of May 20,
MN iain let ches coli eaineididclc asec abenscoiniaa 36a
D—Davis-Cieaver Product Sheets 1967 .............. 40a-41a
K—Letter Notices 5-11-61, 9-26-61, 8-8-62 and
be aa RRR IT ern ROL UR DET ee OMEN Om eee 42a-45a
F—Davis-Cleaver Notice of Discontinuance Under
PPO TTT FG osisccsiccncsssscsssessncerecssees . 48a
Saverslak Letter Response 10-10-70 P.X. 50 .... 49a
Unilateral Amendment 12-4-70 P.X. 52 ........... 50a
G—Constitutional Provision Art. 1, See. 8 ........... 52a
Be Bae Rs TRUE TEED sfasinnierssiiacbirinenesiataneotsesereiens 52a
SN es ils cnsachn sh cesilieneansticiniddehassticbtip inion 53a
TABLE OF AUTHORITIES CITED
CASES

Advanced Hydraulics Inc. v. Otis Elevator Co., 525
F.2d 477 (7th Cir.) cert. denied 423 U.S. 869 (1975) 17

Eclipse Bicycle Co. v. Farrow, 199 U.S. 581, 26 S.Ct.
150, 50 L.Ed. 317 (1950) ...........cccccosssees 3, 9, 10, 11, 14, 15

Carbo-Frost Inc. v. Pure Carbonic Corp., 103 F.2d
210 (1939) cert. den. 308 U.S. 569 (1939) 60 S.Ct.

83, 84 L.Ed. 478 (1989) .......crcccccccocccssccorecsees 10, 11, 12, 14
Lebold v. Inland Steel Co., 125 F.2d 369, 375 (7th
Cir.) cert. denied 326 U.S. 675 (1941) .....cececsseseseees 17

Mechanical Ice Tray Corporation v. General Motors
Corporation, 144 F.2d 720 (1944) cert. den. 324
U.S. 844 (1944) 65 S.Ct. 679, 89 L.Ed, 1406 ,...10, 12, 14

iii
PAGE

CoNSTITUTIONAL Provisions, Statutes & Ru Les

Art. 1 Bee. & UB. Comatitwtiom ~ n.ceccscccsissssscscesecscoses 2, 15, 52a
ac I uctine chips inion tascnsdainndvchcranieiagelgeintdandiileanits 2
OE Be Be EG ici ciccscscinn cso scsccecennncs 2, 3, 4, 16, 52a
I Te CE a etessictintncnensatitetsnnstensscentichapsnnitcanton 2,10, 15, 58a
I SN. HMI BUT RUD wisn dnccesdececstesccsscthcccrsvcenensinssee 2

In THE
SUPREME COURT OF THE UNITED STATES

No.

IRVING S. SAVERSLAK, Individually and as Trustee
under TRUST AGREEMENT dated October 1, 1959,
as Amended,

Petitioner,
vs. °

DAVIS-CLEAVER PRODUCE COMPANY,
a Missouri Corporation,
Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT

Petitioner, Irving S. Saverslak, respectfully prays that
a Writ of Certiorari issue to review the opinion and
judgment of the United States Court of Appeals for the
Seventh Circuit entered on September 28, 1979.

OPINIONS BELOW

The opinion of the Court of Appeals has not yet been
reported and is printed in App. A. pp. la-17a.

The opinions, findings and conclusions of law of the
District Court for the Northern District of Illinois, East-

aa

ern Division were not reported and are printed in
Appendix B, p. 18a infra as follows:

Findings of Fact, Conclusions of Law and Memorandum
Opinion and Minute Order of Judge McGarr entered
November 29, 1974 pp. 18a-30a.

Memorandum Opinion and Order of Judge McGarr
entered May 8, 1975 pp. 30a-32a.

Memorandum Opinion, Judgment Order and Minute
Order of Judge McGarr entered April 27, 1978 pp.
32a-35a.

-

JURISDICTION

The Judgment of the Court of Appeals from which
review is sought was dated September 28, 1979 and
entered on that date. The jurisdiction of this Court is
invoked under 28 U.S.C. §1254(1) and Supreme Court
Rule 19 1(b) because that Court has decided an important
question of Federal law in a way in conflict with appli-
cable decisions of this Court and the Courts of Appeals
of the Second and Eighth Circuits.

CONSTITUTIONAL PROVISIONS, STATUTES AND
RULES

Art. 1, See. 8 U.S. Constitution. (App. G, p. 52a)

Chapter 83, Ill. Stats. 17 (App. G, p. 52a)
Rule 52, F.R.C.P. (App. G, p. 53a)

QUESTIONS PRESENTED FOR REVIEW

1. Was a conglomerate, upon acquiring Defendant
subsidiary, bound by the subsidiary’s obligation to use
its best marketing efforts under a patent royalty agree-
ment according to the principles established by this Court

oe ON

wi

in Eclipse Bicycle Co. v. Farrow, 199 U.S. 581 (1905) or
was it free to proceed immediately upon a program to
evade royalties and substitute a product which was neither
better than nor different from the licensed product, and
pay royalties only as long as it chose to sell the licensed
product?

2. Is the obligation “to account” for failure to use
best efforts under Eclipse identical to the obligation not
to market under a non-compete clause?

3. Do the principles of Eclipse require a_ licensee
under a best efforts clause to refrain from marketing
competitive products, or does that case only require the
payment of royalties or damages for abandonment of the
licensed product where the substituted product is neither
better nor different?

4. Where the Court of Appeals found that Plaintiff,
who elected to perform after Defendant’s breach, retained
the right to sue for damages, did that right terminate,
at some indefinite time not fixed by the Court, prior to
expiration of the applicable 10 year Statute of Limita-
tions by reason of waiver and estoppel, where Plaintiff’s
only conduct was continued performance under the
contract?

STATEMENT OF THE CASE

This appeal and cross appeal arose from a diversity
suit filed on April 1, 1971, for breach of a patent royalty
agreement. Defendant Davis-Cleaver Produce Company
(Davis-Cleaver) appealed from a judgment entered in
favor of Saverslak on April 27, 1978 for damages for
failure to affix the “Maxlotte” trademark to its Jabels
(App. C, 722, p. 36a) in the amount of $220,506.00. (App.

fare a

B, p. 34a-35a) Saverslak cross-appealed from those por-
tions of the trial court’s judgment releasing Davis-Cleaver
from its obligation to use its best efforts in the exploita-
tion and marketing of the licensed products under {13
of the Agreement (App. C, p. 36a) and for Defendant’s
failure to assign its new formula and method to Plaintiff
under 25 (App. C, p. 36a). The Court of Appeals for
the Seventh Circuit reversed the judgment for damages
finding waiver and estoppel for Plaintiff’s failure to
protest further during 1963-1970, a period three years
less than the Illinois Statute of Limitations for breach
of a written agreement; and affirmed the trial court’s
judgment in favor of Defendant relating to its cbligation
to use best efforts and/or to assign the new formula and
methods to Plaintiff. (App. A, pp. 13a, 15a, 17a).

THE FACTS

The facts surrounding this dispute go back to the
pioneer days in the development of the oven-roasted
boneless turkey roll, now common in super market
freezers. In the 1950’s, Plaintiff Saverslak, owned and
operated a small neighborhood grocery and butcher shop
in Chicago with his three brothers. During this period,
Saverslak experimented with various ways of producing
a marketable boneless turkey roll which was sliceable
without crumbling. Early versions of this product, how-
ever, were seriously flawed: the component pieces of
turkey meat crumbled and separated when sliced. In
1957-1958, after much trial and error Saverslak developed
two processes that overcame this problem. In the first
process, a deboned turkey is wrapped in the whole skin,
and when baked, the shrinking of the skin would apply
pressure to the pieces of turkey drawing out the juices

Pe, ees

of the meat which under compression acted as a binder.
The second process was identical to the first except that
each piece of poultry meat was dusted with wheat gluten,
a high protein flour extract, and then fitted together
and wrapped in the whole skin and baked. The wheat
gluten then acted as a binder, holding the pieces together.
Both processes created a compact product suitable for
slicing.

In 1958, Saverslak applied for a patent on the first
process and formed a corporation under the name
“Maxlotte” which marketed turkey rolls in the Chicago
area using the first process, and in Spring of 1959 made
turkey rolls using the wheat gluten process.

In Spring of 1959, Davis-Cleaver, a poultry processing
corporation, which had been unsuccessfully experimenting
with the production of turkey rolls, learned of the Savers-
lak turkey roll and convinced Saverslak that they could
make more money for him than he could make for himself,
and negotiated a 20-year license to make and sell turkey
rolls under both processes. In January, 1960 Saverslak
filed an application for patent on the wheat gluten process.
The license agreement provided that in exchange for
the use of Saverslak’s trade secrets and patent rights
Davis-Cleaver would pay. Saverslak a royalty for each
pound of licensed turkey rolls sold. The Agreement con-
tained two provisions now in issue. First, a best efforts
clause required that Davis-Cleaver exert its best efforts
in the exploitation and marketing of the licensed turkey
rolls (13, App. C, p. 36a). Second, Davis-Cleaver agreed
to affix the “Maxlotte” trademark to labels of all turkey
rolls sold under the license and to submit all advertising
to Licensor (22, App. C, p. 36a). The agreement also had

a ae

a provision precluding Davis-Cleaver from engaging in

the manufacture or sale of products competitive with,

similar or equivalent to the licensed products (20, App.
C, p. 36a); however, that provision was never enforced
by Saverslak and Davis-Cleaver sold at least a dozen
competitive products without protest from Saverslak as
shown in Plaintiff’s Exhibit 60 (App. D, pp. 40a, 41a).

From 1959 through 1967, the relationship between the
parties was mutually profitable and, for the most part,
cooperative.

In 1961, Davis-Cleaver embarked upon a willful pro-
gram of reducing the size of the “Maxlotte” trademark
imprinted on its labels and ultimately in 1963 eliminated
the trademark entirely, thereby intentionally breaching
722 (App. A, pp. 4a, 5a). Over a period of two years
(1961-1962) Saverslak and his attorneys wrote Davis-
Cleaver four letters demanding compliance with {]22 (App.
EK, pp. 42a, 47a).

Central Soya Corporation, a conglomerate, (Central-
Soya) in 1967 purchased Davis-Cleaver and promptly
within the first month, instructed its research division,
Chemurgy, to develop an alternative process of making
turkey rolls, although the Saverslak roll was the best
product of its kind on the market (App. B, p. 19a). The
trial court concluded that the sole reason for Chemurgy’s
research was Central-Soya’s desire to avoid paying royal-
ties to Saverslak. Central Soya developed its new process
in 1970 and Davis-Cleaver abandoned the Saverslak nutri-
tious high protein wheat-gluten process in favor of a salt
extraction process in which sugar is added to the meat to
mask the unpleasant taste created by the excess salt
(App. A, p. 5a and Footnote 5).

=

As to Saverslak’s waiver of his right to insist upon
Davis-Cleaver’s compliance with its 22 obligation to
affix the name “Maxlotte” to its labels, the trial court
pointed out that such defense had not been raised in the
pleadings and also found that waiver or estoppel were
not justified under the circumstances since Saverslak had
suffered no serious damage from the 22 violation until
Davis-Cleaver withdrew from the royalty agreement and
discontinued using the Saverslak process (App. B, p.
27a).

The Court of Appeals in reversing the trial court’s
judgment found that in eliminating the “Maxlotte” trade-
mark from its labels in 1963, Davis-Cleaver intentionally
breached 22 (App. A, p. 4a). It also found that Saver-
slak who elected to perform after such breach, retained
the right to sue for damages, but that right terminated at
some indefinite time not fixed by the Court, (prior to the
expiration of the applicable Illinois 10 year statute of
limitations) (App. G, p. 52a) by reason of waiver and
estoppel (App. A, pp. 9a, lla, 12a). Predicating its re-
versal of the trial court’s judgment on waiver and estop-
pel purportedly arising from the period during which
Saverslak silently accepted royalties the Court of Ap-
peals stated:

“Saverslak continued to hold this right during at
least the initial part of the 7 year period during
which he silently accepted royalties. At some point,
however, which we need not fix, Saverslak’s silent
acquiescence ripened into an intentional relinquish-
ment of his right to enforce the trademark.” (App.
A, pp. lla, 12a).

The Statute of Limitations for breach of a written con-
tract in Illinois is 10 years and Saverslak had an addi-

ee OEE Y

=x =

tional 3 years before there could be any extinguishment
of his right to damages, unless some equitable right was
proven to intervene.

Speaking to estoppel, the Court of Appeals stated that
an estoppel arises only when a party’s conduct misleads
another to believe that a right will not be enforced and
causes him to act to his detriment in reliance upon this
belief (App. A, p. 10a); properly citing Advanced Hy-
draulics, Inc. v. Otis Elevator Co., 525 F.2d 477 (7th Cir.)
cert. denied 423 U.S. 869 (1975); and Lebold v. Inland
Steel Co., 125 F.2d 369, 375 (7th Cir.) cert. denied 316
U.S. 675 (1941); among others.

The record is devoid of any evidence showing that
Saverslak’s conduct was an inducement to Davis-Cleaver
to act, or that there was detrimental reliance by Davis-
Cleaver on such conduct. Davis-Cleaver unilaterally and
independently reduced the size of the Maxlotte trademark
in 1961 and eliminated the name entirely in 1963. No con-
duct by Saverslak induced such action nor could there
be nor was there reliance by Davis-Cleaver on any pur-
ported action by Saverslak. Saverslak served 4 demand
notices in 1961 and 1962 which Davis-Cleaver ignored.
Saverslak’s conduct after 1963 consisted solely of per-
formance under the agreement.

In the absence of any evidence in the record upon which
to fix a point of “intentional” relinquishment, the Court
of Appeals assumed that Saverslak led Davis-Cleaver
to believe [22 would not be enforced and stated:

“We may reasonably asswme that Saverslak’s silent
acquiescence and acceptance of the royalties led Davis-
Cleaver to believe that paragraph 22 would no longer
be enforced and that it could safely continue to omit

a,

the trademark.” (App. A, p. 18a) (Emphasis Add-

ed).
The assumption made by the Court of Appeals was in
the face of a record wherein no evidence was presented
on either any conduct causing Davis-Cleaver to act to
its detriment or upon any reliance upon a belief that
Saverslak would not someday enforce his rights to dam-
ages. Davis-Cleaver did not change its position but pro-
eeeded in its established defiance of Saverslak and {22
of the contract.

The Court of Appeals further conjectured that:

“Had Saverslak instead raised a timely objection the
matter might have been resolved with minimum ex-
pense and effort.” (App. A, p. 18a) (Emphasis
Added).
This is pure conjecture and in the face of the four letter
notices sent by Saverslak, each of which was ignored by
Davis-Cleaver, it would be more feasible to conjecture
that in the face of past performance, Davis-Cleaver would
have ignored any further objections from Saverslak.

The Court then proceeded to characterize the innocent,
non-breaching Saverslak as if he were a guilty wrong-
doer and stated:

“We cannot allow him to cash in on the false as-
sumption he created and on which the Defendant re-
lied to its detriment.” (App. A, 18a).
Evidence of reliance and detriment is totally absent in
the record and is based only on the Court of Appeals
assumption and conjecture.

The Court of Appeals reversed the trial court’s judg-
ment in favor of Saverslak in the amount of $220,506.00
based solely upon such assumptions and conjecture.

= oe

The trial court’s findings on the 122 judgment for dam-
ages were not “clearly erroneous” as required under Rule
52, Federal Rules of Civil Procedure and the judgment
should be restored.

CONCLUSION

For the foregoing reasons, this Court should grant a
writ of certiorari.

Respectfully submitted,

AntHony R. CHIARA

Hitut, VAN SANTEN, STEADMAN,

Cuiara & Simpson
70th Floor Sears Tower
Chicago, Iliinois 60606
312/876-0200

Ira 8S. Kors

Scuwartz, Coorer, Kos

& Gaynor, Chartered
33 North La Salle Street
Chicago, Illinois 60602
312/726-0845

Attorneys For Petttioner.

= ig —

APPENDIX A

ee

In THE
Unirep States Court or APPEALS
For the Seventh Circuit

Nos. 78-1711, 78-1712

Irvine S. SaverstaK, Individually and as Trustee under
Trust Agreement dated October 1, 1959, as Amended,

Plaintiff-Appellee, Cross-Appellant,
v.

Davis-CLEAVER Propuce CoMPANY,
a Missouri Corporation,

Defendant-Appellant, Cross-Appellee.

Appeal from Cross-appeal from the United States District
Court for the Northern District of Ilinois,
Eastern Division.

No. 71-C-810—Frankx J. McGarr, Judge.

Arcuep Aprit 3, 1979—Decipen SepremBer 28, 1979

Before Pett and Woon, Circuit Judges, and HorrMan,
Senior District Judge.*

Woon, Circuit Judge. This appeal and cross-appeal arise
from a diversity suit for breach of contract filed more

* The Honorable Walter E. Hoffman, Senior J udge from
the United States District Court of Eastern Virginia, 1s
sitting by designation.

nein,

than eight years ago. Defendant Davis-Cleaver Produce
Company (Davis-Cleaver) appeals, and plaintiff Irving
S. Saverslak (Saverslak) cross-appeals from the judgment
entered in favor of Saverslak on April 27, 1978 for dam-
ages in the amount of $220,506. |

The facts surrounding this dispute go back to the
pioneer days in the development of the oven-roasted bone-
*less turkey roll, now so common in supermarket freezers.
In the 1950’s, the plaintiff-cross-appellant, Saverslak, own-
ed and operated a small neighborhood grocery and butcher
shop in Chicago. During this period, Saverslak became
interested in diversifying his business and experimented
with various ways of producing a marketable turkey roll.
Early versions of this product, however, were seriously
flawed: The component pieces of turkey meat erumbled
and separated when sliced. In 1958, after much trial and
error, Saverslak developed a process that overcame this
problem. Using this process, the turkey is deboned, and
each piece dusted with wheat gluten, a hich protein flour
extract. The pieces are then fitted together, wrapped in
the whole skin, sewn into a compact cylindrical roll, and
baked. When subjected to regulated cooking temperatures,
the wheat gluten acts as a binder, holding the pieces to-
gether and creating a compact product suitable for slicing.

Soon after, Saverslak applied for a patent and formed
a corporation under the name “Maxlotte,” which marketed
in the Chicago area turkey rolls made using the wheat
gluten process. In 1959 Davis-Cleaver, a Missouri poultry
processing corporation, which had heen experimenting
with the production of turkey rolls, learned of the Saver-
slak wheat gluten method and in short order negotiated
a twenty-year license to make and sell turkey rolls pro-
duced using this process. The agreement provided that in
exchange for the use of Saverslak’s trade secrets and
patent rights Davis-Cleaver would pay Saverslak a royalty
for each pound of licensed turkey roll sold. Among other
restrictions, the agreement further contained three pro-
visions that are now in issue. First, Davis-Cleaver agreed

—

to affix the “Maxlotte” trademark to the labels of all tur-
key rolls sold under the license.’ Second, a best efforts
clause required that Davis-Cleaver exercise due diligence
in marketing the licensed turkey rolls.? And third, Davis-
Cleaver was to disclose and assign to Saverslak any new
formulae, methods, or improvements for the manufacture
and sale of the licensed products acquired during the term
of the agreement.’ Moreover, the agreement precluded

‘Paragraph 22 of the license agreement reads:

All packages containing the licensed products shall
have imprinted thereon the trademark ‘*Maxlotte’’.
The style and form of such packaging shall be subject
to the written approval of Licensor and after such
approval thereof by Licensor, said packaging shall
not be changed by Licensee without Licensor’s prior
written consent. All advertising of the licensed
products shall also be submitted to and approved by

Licensor.
* Paragraph 13 reads:

Licensee agrees that it will proceed with diligence
and will exert its best efforts in the exploitation,
manufacture and sale of the licensed products, and
in all ways and to the best of its ability will promote
the sale of the licensed products throughout the
licensed territory and supply the market therefor.

* Paragraph 25 reads: ;
Any and all new formula, methods, process, inven-

tion, improvement, application and/or vatent for the
manufacture and sale of the licensed products, made,
invented or acquired by Licensee during the term
hereof, shall be disclosed promptly to Licensor, and
shall without compensation to Licensee, immediately
become and be the sole property of Licensor, with
the same force and effect as if the same were owned
or controlled by Licensor at the date hereof; and
Licensee shall on demand of Licensor, and without
compensation, execute such applications for letters
patent, assignments and other instruments as Licensor
may require in order to vest in Licensor the entire
legal and equitable title and interest in and to such

onlin

Davis-Cleaver from engaging in the manufacture and sale
of products similar to or competitive with wheat gluten
turkey rolls.

From 1959 until 1970 the relationship between the par-
ties was mutually profitable and, for the most part, co-
operative. In 1959 Saverslak visited Davis-Cleaver’s
Quincy, Illinois plant and trained its production workers
in the new process. That same year, Maxlotte purchased
turkey rolls from Davis-Cleaver for distribution in the
Chicago area. In 1961 Saverslak revealed to Davis-Cleaver
his patented process for making a similar molded skinless
turkey loaf bound with wheat gluten. Throughout this
twelve-year period, Saverslak annually visited the Davis-
Cleaver plant. In return, Saverslak received over $400,000
in royalties and enjoyed profits from the sale of turkey
rolls marketed by Maxlotte under a license grant expressly
authorized in the Davis-Cleaver agreement. All the while,
Davis-Cleaver profitably sold turkey rolls produced pur-
suant to the license.

Yet the parties did encounter a few mild disputes. In
1961, for example, when Davis-Cleaver reduced the size
of the “Maxlotte” trademark imprinted on its label,
Saverslak wrote in a registered letter to Davis-Cleaver:
“If you will increase the size of the printing of the word
‘Maxlotte’ . . ., I find no objection to the use of the afore-
said labels.” Davis-Cleaver neither responded nor en-
larged the trademark. Saverslak’s final mention of this
matter was in a letter from his attorneys to Davis-Cleaver
in 1962, which merely noted: “We presume, of course,
that the trademark specified in Article 22 of the agree-
ment is being used on all packages.”

In 1963 Davis-Cleaver eliminated the “Maxlotte” trade-
mark from its labels, thereby intentionally breaching para-

(* Continued)
formula, methods, process, invention or improvements.
The provisions hereof shall be applicable to and

govern any such new formula, method, process, in-
vention or improvement,

a

graph 22 of the license agreement.‘ Davis-Cleaver, how-
ever, made no attempt to hide the fact of its breach from
Saverslak. Each year it provided him with a sample tur-
key roll with current labels attached. Nevertheless, des-
pite his knowledge of the breach, Saverslak neither pro-
tested nor acknowledged in any way the elimination of
the trademark until he commenced this litigation seven
years later.

In 1967 Central Soya Corporation (Central Soya) pur-
chased Davis-Cleaver and instructed its research division,
Chemurgy, to develop an alternative process of making
turkey rolls. During its initial research, Chemurgy dis-
covered that another inventor had filed a patent for a
wheat gluten turkey roll process sixteen months before
Saverslak had filed. Davis-Cleaver urged at trial that all
subsequent research was prompted by its apprehension
that it might be liable for infringing the earlier patent.
The trial court, however, concluded that Saverslak’s pro-
cess did not infringe the earlier patent, that such asser-
tions created a spurious issue, and that the sole reason
for Chemurgy’s research was Central Soya’s desire to
avoid paying royalties to Saverslak. Central Soya accom-
plished this in 1970 when Davis-Cleaver abandoned the
Saverslak process in favor of a salt extraction process.°

Shortly thereafter, Davis-Cleaver sought to surrender
its rights under the license. In October 1970 it notified
Saverslak that it had discontinued using the wheat gluten
process and consequently would no longer pay royalties.
Saverslak promptly rejected the attempted surrender and
in December of that year attempted to unilaterally amend
the license agreement by excising three paragraphs that

*See note 1 supra.

‘A salt slurry is injected into the turkey roll prior to
baking. The salt draws out the meat’s natural proteins,
which act as a binder. Sugar is then added to the meat to
mask the somewhat unpleasant taste created by the salt.

—_—

presented antitrust and patent law problems.® Davis-
Cleaver rejected the amendment and declared the contract
void and unenforceable from its inception.

In January 1971 Saverslak filed suit, claiming that by
substituting the salt extraction process for the wheat
gluten method and eliminating royalty payments Davis-
Cleaver intentionally breached the best efforts (paragraph
13) and assignment of new methods (paragraph 25)
clauses. The complaint further alleged that Davis-Cleaver’s
non-use of the Maxlotte trademark was a breach of para-
graph 22.

In a memorandum opinion dated November 29, 1974,’
Judge McGarr found that Davis-Cleaver was not obli-
gated under paragraph 25 to disclose and assign its salt
extraction process to Saverslak. Judge MeGarr read para-
graph 25 to cover only new formulae, methods, improve-
ments, and the like related to the wheat gluten process.
The court then found that such a relation did not exist
between the wheat gluten and salt extraction processes.
The court also found that Davis-Cleaver did not breach
paragraph 13, construing it to require best efforts in the
exploitation, manufacture, and sale of the wheat gluten
turkey rolls only as long as Davis-Cleaver was using the
wheat gluten process.

Judge McGarr concluded, however, that Davis-Cleaver
breached paragraph 22 when it eliminated the “Maxlotte”

‘In a letter to Davis-Cleaver dated December 4, 1970,
Saverslak sought to excise paragraph 20, which prohibits
Davis-Cleaver from producing or selling similar or com-
petitive products. See Zenith Radio Corp. v. Hazeltine
Research, Inc., 395 U.S. 100, 136 (1969) ; International Salt
Co. v. United States, 332 U.S. 392, 395-96 (1947) ; Ethyl
Gasoline Corp. v. United States, 309 U.S. 436, 455-59
(1940). For the text of paragraph 20, see p. 13 infra. The
two other provisions Saverslak sought to excise are not
relevant to this appeal.

* Saverslak v. Davis-Cleaver Produce Co., No. 71-C-810
(N.D. Ill, Nov. 29, 1974).

—

trademark from its turkey roll labels. In awarding dam-
ages, the court rejected Davis-Cleaver’s argument that
Saverslak’s seven-year silence and receipt of royalties in
the face of this obvious breach constituted a waiver of his
paragraph 22 rights. Finding merit in this argument, we
address it first.

Ae

Davis-Cleaver eliminated the “Maxlotte” trademark
from its turkey roll labels in 1963. Saverslak, however,
despite full knowledge of the breach and ample oppor-
tunity to protest, did not seek to enforce paragraph 22
until 1970. In the interim the parties carried on a normal
business relationship, which included frequent and regu-
lar communication. Most notably, Saverslak annually
visited the Davis-Cleaver plant, at which time Davis-
Cleaver presented him with a sample turkey roll with
current labeling attached. Yet, until this suit, Saverslak
said nothing, choosing instead to silently acquiesce in the
marketing of the Davis-Cleaver product without the “Max-
lotte” trademark—and to collect more than $400,000 in

royalties.

The trial court in its memorandum opinion noted that
“the defense of waiver or estoppel is unjustified under
the circumstances.” No. 71-C-810 at 16. The court appar-
ently predicated this conclusion on its finding that Saver-
slak was not injured by the omission of the trademark
until 1970 when Davis-Cleaver terminated the license
agreement.* Under this analysis, Saverslak did not waive

® The trial court reasoned as follows:
If the Maxlotte trademark had been prominently dis-
played on all Davis-Cleaver labels throughout the life
of the Saverslak/Davis-Cleaver relationship as re-
quired by the contract existing between the parties,
defendant’s customers would have identified the
wheat-glutin [sic] process oven-roasted, boneless tur-
keys manufactured under the Saverslak process with
the name Maxlotte. When, after termination of the

=

his right to sue for damages because he filed suit within
a few months of incurring injury.

Saverslak attempts to bolster the trial court’s rationale,
asserting that despite his seven-year silence he did not
waive his right to recover damages, but rather merely
forfeited the right to repudiate the license agreement for
breach of paragraph 22. He quotes various treatises,
which at least facially support his contention. See 17 Am.
Jur. 2d, Contracts § 447 (1964); 3A Corbin on Contracts
§ 766 (1960) ; 5 Williston on Contracts § 683 (3d ed. 1961).
These passages, however, are inapposite because they
deal not with waiver, but with the election of rights by
a non-breaching party faced with a non-conforming tender
that is also a condition precedent to his duty to perform.
A non-breaching party faced with the dilemma of whether
to perform in the face of the other party’s breach may
elect to avoid the contract or treat the contract as in full
foree and retain the right to sue for damages arising
from the breach. Kentucky Natwral Gas Corp. v. Indiana
Gas & Chemical Corp., 129 F.2d 17, 19 (7th Cir.), cert.

(* Continued )

license agreement and the utilization by defendant
of a different process, the Maxlotte trademark dis-
appeared from its product, Saverslak could have
reached and sold to defendant’s former customers
who could have identified him with the Maxlotte pro-
cess. It is quite possible that Saverslak could have
mounted a successful merchandising program predi-
cated upon the superiority of the wheat-glutin [sic]
process under the Maxlotte name, to the new Davis-
Cleaver process which involved an excess of salt in
order to avoid a patent, which salt was subsequently
masked with a sweetener. Defendant’s failure to live
up to its contract obligation to prominently display
the Maxlotte trademark and to reinforce the identifi-
cation of the wheat-glutin [sic] process with the Max-
lotte name has deprived the plaintiff Saverslak of
this competitive and marketing advantage.

No. 71-C-810 at 15-16.

~

denied, 317 U.S. 678 (1942). See also Denison Mines Ltd.
v. Michigan Chemical Corp., 469 F.2d 1301 (7th Cir. 1972).
This was precisely the election facing Saverslak in 1963
when Davis-Cleaver ceased using the “Maxlotte” trade-
mark. Saverslak’s initial silence coupled with his receipt
of royalties was an election to treat the contract as in
full force. Admittedly, Saverslak at that point retained
the right to sue for damages arising from the breach. But
that right did not survive indefinitely.

Inquiry into the effect of his continued silent accep-
tance of benefits is necessary to determine whether the
right survived the commencement of this suit.’ The prin-
ciples of waiver and estoppel support the notion that a
party to a contract may not lull another into a false
assurance that strict compliance with a contractual duty
will not be required and then sue for non-compliance.
See Advanced Hydraulics, Inc. v. Otis Elevator Co., 525
F.2d 477 (7th Cir.), cert. denied, 423 U.S. 869 (1975);
Continental Coatings Corp. v. Metco, Inc., 464 F.2d 1375
(7th Cir. 1972); Graubremse GMBH v. Berg Mfg. & Sales
Co., 417 F.2d 1201 (7th Cir. 1969). However, despite the
frequency with which they are used interchangeably,
the two principles often address different factual settings.

Analysis of the applicability of waiver focuses on the
intent of the non-breaching party. If he has intentionally
relinquished a known right, either expressly or by con-
duct inconsistent with an intent to enforce that right, he
has waived it and may not thereafter seek judicial en-
forcement. Pierce v. MacNeal Memorial Hospital Ass’n.,
46 Ill. App. 3d 42, 52, 360 N.E.2d 551, 559 (1st Dist.
1977); John Kubinski & Sons, Inc. v. Dockside Develop-
ment Corp., 33 Ill. App. 3d 1015, 1020, 339 N.E.2d 529,

* Whether the facts proven are sufficient to constitute a
waiver is a question of law and, therefore, properly before
this court for review. Graubremse GMBH v. Berg Mfg. &
Sales Co., 417 F.2d 1201, 1204 (7th Cir. 1969); Stewart
v, Meyers, 353 F.2d 691, 694 (7th Cir. 1965),

= om

533 (1st Dist. 1975); 5 Williston on Contracts § 678 (3d
ed. 1961 & Supp. 1979). In a contractual setting, as here,
waiver occurs when an obligor manifests an intent not to
require an obligee to strictly comply with a contractual
duty. Graubremse GMBH v. Berg Mfg. & Sales Co., 417
F.2d at 1204-05; Stewart v. Meyers, 353 F.2d 691, 694
(7th Cir. 1965); Chicago Sugar Co. v. American Sugar
Refining Co., 176 F.2d 1, 7 (7th Cir.), cert. dented, 338
U.S. 948 (1949); Hubshman v. Louis Keer Shoe Co., 129
F.2d 137, 140 (7th Cir. 1942); John Kubinski & Sons, Inc.
v. Dockside Development Corp., 33 Tll. App. 3d at 1019-
20, 339 N.E.2d at 533-34.

Estoppel, on the other hand, focuses not on the
obligor’s intent, but rather on the effects of his conduct
on the obligee. Justice Clark, writing for this court in
Advanced Hydraulics, 525 F.2d at 479, erystalized the
distinguishing characteristic. An estoppel, he noted,
arises only when a party’s conduct misleads another to
believe that a right will not be enforced and causes him
to act to his detriment in reliance upon this belief. Jd.
(quoting Lebold v. Inland Steel Co., 125 F.2d 369, 375
(7th Cir.), cert. denied, 316 U.S. 675 (1941)); see 5
Williston on Contracts § 691 (3d ed. 1961 & Supp. 1979).
Even if the obligor has not waived a known right, he
may be estopped from enforcing it.’

1° Of, Sleeping Giant Park Ass’n v. Connecticut Quarries
Co., 115 Conn. 70, 160 A. 291 (1932), which involves facts
strikingly similar to those now in issue, aptly illustrates
the waiver-estoppel distinction. In that case, defendant’s
predecessor in title agreed to pay royalties of two cents
for each cubic yard of rock quarried from plaintiff’s pred-
ecessor’s land. The agreement, however, expressly forbade
the quarry company from taking rock from any point
visible from the street. Notwithstanding this restriction,
the company’s operations left the quarry face visible from
the street for at least nine years prior to commencement
of suit. During this period, the plaintiff’s predecessor con-
tinuously observed the quarry operations and collected
appropriate royalties without objection to the company’s

—Iila—

In light of the preceding distinction, we hold that
Saverslak waived his rights under paragraph 22 and
therefore may not recover damages for Davis-Cleaver’s
non-use of the “Maxlotte” trademark." Regardless of
the soundness of the trial court’s conclusion that
Saverslak was not injured until 1970, which we seriously
question,” the trial court’s rationale evades the test for
determining whether Saverslak waived his paragraph
22 rights. The test is simply whether he intentionally
relinquished a known right.

In 1963, when Davis-Cleaver eliminated the “Max-
lotte” trademark from its label, Saverslak held a con-
tractual right to enforce Davis-Cleaver’s use of the
trademark. Saverslak continued to hold this right dur-
ing at least the initial part of the seven-year period dur-
ing which he silently accepted royalties. At some point,

(7° Continued)
non-compliance with the restriction. Accordingly, the
court held that the acceptance of royalties coupled with
silence in the face of knowledge of non-compliance waived
any right to damages for past violations. Further finding
that the company did not detrimentally rely on the silent
acquiescence—the mining equipment had been installed
prior to straying into the restricted area—the court noted
that the plaintiff was not estopped from proceeding in
equity to enjoin future violations, presumably because he
had revived his rights. See note 11 infra.

11 We do not address the question whether Saverslak
could have revived his paragraph 22 rights by a timely
rescission of his waiver because there is no suggestion
in the record that he ever sought to have Davis-Cleaver
replace the “Maxlotte” trademark on its label.

12 Saverslak, more likely, was injured in 1963. Before
removal, the trademark had been accumulating at least a
small recognition value by being associated in the public
eye with the Davis-Cleaver product. After removal, how-
ever, the trademark no longer grew in value, and any
value it had accumulated began to dissipate, -

— 12a —

however, which we need not fix, Saverslak’s silent ac-
quiescence ripened into an intentional relinquishment of
his right to enforce the trademark use. The questions
whether and when he suffered damages are simply ir-
relevant because Saverslak did not retain an underly-
ing contract right upon which to base damages.

Initially, when Davis-Cleaver diminished the size of
the “Maxlotte” trademark, Saverslak’s written objections
evidenced his intent to enforce his paragraph 22 rights.
However, from 1963, when Davis-Cleaver finally elim-
inated the trademark, until 1970, when Saverslak brought
suit, there was not even a hint of protest in the face of
this open breach of contract. This seven-year period of
silent acquiescence in the face of ample opportunity to
protest alone evinces Saverslak’s intent to relinquish a
known right. The acceptance of royalties makes that in-
tent crystal clear.’

Alternatively, we hold that regardless of whether
Saverslak waived his paragraph 22 rights, he is estopped

* Tf the time of injury served as the benchmark for de-
termining waiver, a party conceivably could sit on his
rights indefinitely regardless of the foreseeability of fu-
ture damages, lull the other party into continuing his
non-compliance, and then sue for damages. Such a re-
sult would ieave only a shell where waiver once stood as
a good defense.

* See Graubremse GMBH v. Berg Mfg. & Sales Co., 417
F.2d at 1205, in which this court found that a vendor’s
acceptance of benefits including receipt of the full pur-
chase price under a sales contract was “inconsistent with
any claim of continued reliance on the contractual re-
ra gg [that the vendee had breached].” The court
urther noted that the vendor’s continued performance
“manifested [his] intention to waive the requirement.”
Id. Cf. Kirkpatrick v. Petretkis, 44 Ill. App. 3d 575, 577,
358 N.E.2d 679, 680 (3d Dist. 1976) (acceptance of late
— without protest waives time of the essence
clause),

— 13a —

from enforcing them. We may reasonably assume that
Saverslak’s silent acquiescence and acceptance of royalties
led Davis-Cleaver to believe that paragraph 22 would no
longer be enforced and that it could safely continue to
omit the trademark. Had Saverslak instead raised a
timely objection the matter might have been resolved with
minimum expense and effort. Under these circumstances,
we cannot allow him to cash in on the false assumption
he created and on which the defendant relied to its detri-
ment.

II.

Saverslak contends in his cross-appeal that Davis-
Cleaver’s discontinuance in 1970 of the wheat gluten
process in favor of the salt extraction process was a
breach of the best efforts clause. Paragraph 13 requires
that Davis-Cleaver “proceed with diligence and... ex-
ert its best efforts in the exploitation, manufacture and
sale of the licensed products, and in all ways and to the
best of its ability . . . promote the sale of the licensed
products throughout the licensed territory and supply
the market therefor.” The parties do not dispute that
when Davis-Cleaver ceased using the wheat gluten pro-
cess it was no longer exerting its best efforts to market
the licensed turkey rolls. Consequently, we are faced with
the question whether Davis-Cleaver’s paragraph 13 duties
extend beyond the occurrence of that event.

Although the license agreement extends for twenty
years, the trial court interpreted paragraph 13 as creating
a duty to use best efforts to market wheat gluten turkey
rolls only as long as Davis-Cleaver continues to sell that
product. Following this line of reasoning, the best efforts
clause became inapplicable when Davis-Cleaver shifted to
another production method. The unique facts of this case
compel us to agree.

Many of the provisions of the 1959 agreement are ex-
pressly subject to the twenty-year term of the agree-
ment; however, paragraph 13 makes no mention of its

duration. This omission gives rise to an interpretive am-
biguity, the resolution of which is determinative of the
question posed above. Paragraph 13 either imposes a duty
to exert best efforts throughout the twenty-year term
of the agreement or, as the trial court found, only as
long as Davis-Cleaver is actually selling wheat gluten
turkey rolls. In resolving this ambiguicy we look to the
intent of the parties in including paragraph 13 within
their agreement.

The most reliable evidence of that intent is the 1959
agreement viewed as a whole. Our construction of the
agreement begins with paragraph 20, which provides
that Davis-Cleaver ‘‘shall not manufacture, sell or offer
to sell any other products competitive with, similar or
equivalent to the licensed products.’’ Davis-Cleaver con-
tends, and Saverslak does not dispute that this exclusive
use provision is unlawful because of antitrust and patent
law problems, which we need not address. See Zenith
Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100,
136 (1969); International Salt Co. v. United States, 332
U.S. 392, 395-96 (1947); Ethyl Gasoline Corp. v. United
States, 309 U.S. 486, 455-59 (1940).

In an attempt to purge the agreement of these
problems, Saverslak in his letter of December 4, 1970 to
Davis-Cleaver wrote: ‘‘Paragraph 20... shall be and is
hereby cancelled and deleted.’? These words—though in-
effective as an amendment because Saverslak acted
unilaterally—are effective as a waiver. See pp. 8-9 supra.
Our construction of paragraph 13 therefore proceeds in
light of Saverslak’s waiver of paragraph 20. When the
parties formed the 1959 agreement, paragraphs 13 and
20 together created Davis-Cleaver’s duty (1) to exert best
efforts to market the wheat gluten turkey roll, (2) which
was the only turkey roll or similar product that it could
market. Each paragraph served a distinct purpose.
Paragraph 20 ensured that Davis-Cleaver would market
the wheat gluten turkey roll and none other. Paragraph
13, on the other hand, ensured that Davis-Cleaver would

lt omar?

— 15a —

diligently exploit that product. Since paragraph 20
restricted Davis-Cleaver’s transactions in similar or

competitive products, it seems to us that the parties did
not intend that paragraph 13 be applied in a manner
that would accomplish the identical result.

In reaching this conclusion we are cognizant of the
well-established rule that a court should not construe a
contract in such a way as to leave any of its provisions
without substance. But Saverslak would have us inter-
pret paragraph 13 as accomplishing the same result he
initially sought under paragraph 20. It follows from his
interpretation that the very manufacture and sale of salt
extraction process turkey rolls would be forbidden by
paragraph 13 on the theory that one cannot exert best
efforts to exploit a wheat gluten turkey roll and
simultaneously market a commercially indistinguishable
competing product.** Consequently, if we were to inter-
pret paragraph 13 to extend beyond the time Davis-
Cleaver in fact used the wheat gluten process, that
paragraph would effectively restrain Davis-Cleaver from
marketing similar or competitive products. This is, of
course, precisely what Saverslak sought to do when he
inserted paragraph 20 in the agreement. To attribute to
paragraph 13 a similar purpose would rob paragraph 20
of all substance.

We cannot construe the 1959 agreement in the same
way we might have construed it had Saverslak not waiv-
ed paragraph 20. Accordingly, we affirm the trial
court’s interpretation of paragraph 13 as imposing a
duty on Davis-Cleaver to exert best efforts to market the
wheat gluten turkey roll only as long as it sells that
product. Upon shifting to the salt extraction process, its
duty under the 1959 agreement to exert best efforts to
market wheat gluten turkey rolls was suspended.

** The products of the wheat gluten and salt extraction

processes are so nearly identical that Davis-Cleaver found
it unnecessary to even notify its wholesale customers of
the adoption of the latter process,

_—

Ii.

The final question we address is the scope of the
grant-back clause. Paragraph 25 of the 1959 agreement
provides in pertinent part’:

Any and all new formula, methods, process, inven-
tion, improvement, application and/or patent for the
manufacture and sale of the licensed products, made,
invented or acquired by Licensee during the term
hereof, shall be disclosed promptly to Licensor, and
shall without compensation to Licensee, immediate-
ly become and be the sole property of Licensor... .
(emphasis added)

Saverslak contends that Davis-Cleaver breached para-
graph 25 when it failed to disclose and assign to him its
rights in the salt extraction process.

The trial court read paragraph 25 to be limited by its
terms to improvements and the like pertaining to the
Saverslak wheat gluten process. Accordingly, the court
held Davis-Cleaver was under no duty to disclose and
assign its rights in the salt extraction process to
Saverslak.

This result is simply a straightforward application of
the terms of paragraph 25, which expressly limit its
scope to new developments in the “manufacture and sale
of the licensed products ....’’ Since the products licens-
ed under the 1959 agreement are limited to wheat gluten
turkey rolls,’ paragraph 25 is inapplicable to the un-
related salt extraction process turkey rolls. In light of
the clarity with which the terms of paragraph 25 resolve

** For the full text of paragraph 25, see note 3 supra.

** Paragraph 9(A) defines ‘‘licensed products’’ as roast
breast of turkey, boneless roast turkey, and smoked turkey
*‘manufactured and sold by Licensee during the term here-
of, and embodying Licensor’s formula, secret process,
methods, invention and trade secret ... .”’

—17a —

this claim, the questionable evidence of the parties’ in-
tent presented by Saverslak is irrelevant.

The judgment of the district court awarding damages
in the amount of $220,506 for breach of paragraph 22—
the trademark use provision—is reversed. We affirm in
all other respects.

A true Copy:
Teste:

SOSH H EEE EESEEESEEEEEEH EERE EEE ESE E EEE EEEEE EEE ERE H HEHEHE EES

Clerk of the United States Court of
Appeals for the Seventh Circuit

— 18a —

APPENDIX B

IN THE
Unitep Srates Districr Court For THE
NorTHERN District Or ILuLINois

FIASTERN Dtvision

No. 71 C 810
IRVING 8S. SAVERSLAK, et al.,
Plaintiffs,
vs.
DAVIS-CLEAVER PRODUCE COMPANY,
Defendant.

FINDINGS OF FACT, CONCLUSIONS OF LAW
AND MEMORANDUM OPINION

The Court, after the taking of evidence and the con-
sideration of post-trial briefs of the parties, makes and
enters the following Findings of Fact, Conclusions of
Law and Final Order in this case.

The defendant Davis-Cleaver started making turkey
rolls in the early 1950’s under the Snyder Patent, No.
2,633,601. The end product of this process was an un-
cooked frozen turkey roll. In 1958, Davis-Cleaver began
to experiment with turkey rolls under the George Patent,
No. 2,640,779. The George rolls differed from the pre-
viously made Snyder rolls in that they were roasted in a
mold. These rolls were not satisfactory, however, because
they separated into pieces and were not suitable for
slicing.

During the years 1954 to 1959, the plaintiff, quite in-
dependently of defendant Davis-Cleaver, was developing
processes for making an oven-roasted, boneless turkey
which was slicable without crumbling or shredding and
which could be reheated without falling apart. On October

— 19a —

10, 1958, a corporation was established by Irving Saver-
slak, plaintiff, for marketing this product under the trade-
mark “Maxlotte”. The original process included boning
the raw turkey, retaining the breast meat in a unitary
mass attached to the skin, wrapping the breast meat in
the skin into a compact roll, and sewing the skin tightly
about the breast meat so as to retain the juices during
baking, and to cause the skin, which shrank from baking,
to compress the meat into a unified nass. A subsequent
process, which represented a substantial improvement
over the earlier process, involved boning the raw turkey
in substantially the same manner except that the breast
meat did not remain attached to the skin. Each piece of
meat was dusted with wheat glutin, the meat pieces were
fitted together, wrapped in the skin, sewed into a tight,
compact roll, wrapped in aluminum foil, and baked. A
combination of the cooking temperatures, the shrinking
and compression of the skin, and the effect of the wheat
glutin resulted in an oven-roasted, boneless turkey which
would slice without shredding and could be reheated with-
out falling apart. In 1959, this Saverslak oven-roasted
turkey roll was being sold by Saverslak into Chicago and
was apparently the best product of its kind on the market.

Through its Chicago distributor, defendant Davis-
Cleaver learned of the Saverslak roll, and on May 20,
1959, an agreement was entered into wherein Davis-
Cleaver took a license to make and sell the Saverslak roll.

At the date of the execution of the aforesaid agree-
ment, the process for producing oven-roasted, boneless
turkeys was a trade secret owned by Irving Saverslak,
which was the subject of an application for a United
States Letters Patent filed July 30, 1958. While the briefs
of the parties draw inferences from the fact that the
process in issue was at one time a trade secret and later
a patent, the Court finds no relevance in this distinction.
The original agreement was for disclosure and use of
trade secrets with an indicated intent to patent and license
under the patent, if issued. This understanding and in-

— 20a —

tention was clear on the part of both parties from the
outset. The trade secret became a patented process and
the license, therefore, became a license of a patented pro-
cess. The royalty obligations assumed under the charac-
ter of the use of trade secrets became equally valid royalty
obligations for the use of the patented process. For the
purposes of this litigation, the trade secret merged into
the patent, the trade secret royalty agreement became
the patent royalty agreement and no new issue is in-
jected into this case by virtue of the changing character
of the process from a trade secret to a patented process
during the course of the life of the agreement between
the parties.

The agreement in issue provided for a license to use
certain trade secret and patent rights of Saverslak in
return for a royalty of five cents a pound for each oven-
roasted, boneless turkey roll sold by defendant Davis-
Cleaver. Those paragraphs of the agreement which have
particular bearing on the issues and resolution of this
case are paragraph 25, which provides as follows:

25. Any and all new formula, methods, process,
invention, improvement, application and/or patent
for the manufacture and sale of the licensed products,
made, invented or acquired by Licensee during the
term hereof, shall be disclosed promptly to Licensor,
and shall without compensation to Licensee, imme-
diately become and be the sole property of Licensor,
with the same force and effect as if the same were
owned or controlled by Licensor at the date hereof;
and Licensee shall on demand of Licensor, and with-
out compensation, execute such applications for let-
ters patent, assignments and other instruments as
Licensor may require an order to vest in Licensor
the entire legal and equitable title and interest in
and to such formula, methods, process or invention
or improvements. The provisions hereof shall be ap-
plicable to and govern any such new formula, method,
process, invention or improvement.

— 2la —

Paragraph 13:

13. Licensee agrees that it will proceed with dili-
gence and will exert its best efforts in the exploita-
tion, manufacture and sale of the licensed products,
and in all ways and to the best of its ability will
promote the sale of the licensed products through-
out the licensed territory and supply the market
therefor.

Paragraph 22:

22. All packages containing the licensed products
shall have imprinted thereon the trademark ‘‘Max-
lotte’’. The style and form of such packaging shall
be subject to the written approval of Licensor and
after such approval thereof by Licensor, said pack-
aging shall not be changed by Licensee without
Licensor’s prior written consent. All advertising of
the licensed products shall also be submitted to and
approved by Licensor.

While the parties agreed from time to time to change
the royalty rate, the underlying agreement was not
changed in any other respect at any time relative to
the issues in litigation.

Pursuant to the agreement, Davis-Cleaver installed
ovens necessary for the process, relying upon the advice
and suggestions of Saverslak, and thereafter Saverslak
went to the Davis-Cleaver plant in June of 1959 and
disclosed the complete secret process to Davis-Cleaver,
remaining at the plant and working with the production
employees for a week, by way of assisting Davis-Cleaver
in the commencement of the manufacture of turkey rolls
utilizing Saverslak’s wheat glutin process and his spice
formula.

During the first six months of operation under the
contract, Davis-Cleaver went into full production, but
did not meet the minimum sales required under the con-
tract. Saverslak waived the deficiency for that period

— 22a —

and waived also his right to enforce the minimum sales
clause under the contract. On or about May 29, 1959,
Saverslak exercised a right afforded him under the con-
tract by granting a license to his own corporation, Max-
lotte Corporation, to market the oven-roasted, boneless
turkeys. For about a year, Maxlotte purchased its tur-
keys from Davis-Cleaver under an arrangement that it
would handle the sale of turkeys in the Chicago area.
Finding this unprofitable due to the small discount al-
lowed, Maxlotte commenced fabricating its own oven-
roasted, boneless turkeys under its right to do so in the
licensing contract.

Over the next few years, the arrangement proved
profitable to both the licensor and licensee and the rela-
tionship between the parties was satisfactory and mutually
cooperative. In 1961, Saverslak experimented with and
developed a so-called Pullman loaf, which was a loaf
made of turkey pieces with wheat glutin arranged in a
mold and formed without the turkey skin. Acting under
the provisions of his contract, Saverslak advised the
defendant of this development and taught this process
to Davis-Cleaver representatives who adopted it and went
into production. During the years 1959 to 1963, the con-
tract relationship with the parties was modified in some
~ respects not relevant to this litigation, including adjust-
ments of the royalties and some ongoing dealings with
regard to the use by Davis-Cleaver of the trademark Max-
lotte on its oven-roasted, boneless turkey labels. As
required by the contract in the earlier years of the rela-
tionship, Davis-Cleaver prominently displayed this trade-
mark on its labels. In 1961, Davis-Cleaver reduced the
size of the Maxlotte designation and Saverslak complained.
In 1963, Davis-Cleaver completely removed the Maxlotte
designation from its labels. The Court finds that Davis-
Cleaver had an obligation under its license agreement
to retain the Maxlotte designation on its labels im the
sale of the licensed oven-roasted, boneless turkeys, and
that its discontinuance of the Maxlotte label was in
violation of its contract obligations.

— 23a —

Despite the “Maxlotte” disagreement, the relationship
between the parties to the contract between 1959 and
1967 was agreeable and beneficial to both parties. In
1967, the Davis-Cleaver Company was sold to a corpora-
tion known as Central Soya, which placed the manage-
ment of Davis-Cleaver in the hands of one of its vice
presidents, Newell Wright. Central Soya was apparently
not satisfied with the profitability of the Davis-Cleaver
division and expended some considerable effort in at-
tempts to increase the sales of the licensed oven-roasted,
boneless turkeys. While some sales increase was achieved,
it was apparently not satisfactory. Concurrently with
the sales increase program, Central Soya’s research
branch, the ‘‘Chemurgy’’ division was instructed to in-
stitute research to determine whether there was any soy
protein product or other process which could be used in
the place of Saverslak’s wheat protein, with the ap-
parent and obvious goal of seeking to develop a process
for producing a satisfactorily marketable oven-roasted
boneless turkey not subject to the Saverslak patent and,
therefore, the Saverslak license agreement. In the pro-
cess of this development and research, Central Soya un-
covered a Swift & Company patent to Carlin, No. 3,100,710.
It is the contention of defendant Central Soya that its
further research and development was motivated by
the need to avoid what it deemed to be an infringement
by the Saverslak process on the earlier Carlin patent,
which had to do with using General Mills pro-80 wheat
glutin as a meat binder and was filed sixteen months be-
fore the Saverslak application.

It is the conclusion of this Court that the Saverslak
process does not infringe upon the Carlin patent and that
its injection into this case creates a spurious issue. The
Court finds that the basic thrust of the research effort of
Central Soya was to develop a product competitive in the
market with the Saverslak process, but non-infringing of
the Saverslak patent. The end product of this research
was the development by Central Soya of a salt-extraction

=

process which, in its early stages, seemed apparently to
infringe upon a salt-extraction process patented by Armor,
Hanson Patent No. 3,285,752. Ultimately, Central Soya
was successful in developing a salt-extraction process for
oven-roasted, boneless turkeys which, though quite similar
to the Armor-Hanson patent, avoided this patent by
raising the salt content above the maximum limit specified
in the Armor patent and then masking the salty flavor
with a sweetener. The salt-extraction process was adopted
by Davis-Cleaver in September, 1970, and notice was sent
to Saverslak that royalties would no longer be paid and
that Davis-Cleaver wished to surrender the license.

The plaintiff does not contend that the Davis-Cleaver
salt-extraction process now in use is an infringement of
the Saverslak process patent. It is the contention of the
plaintiff, however, that the activities of Davis-Cleaver
described in this series of findings of fact, constitute a
violation of several provisions of the original licensing
agreement. |

Plaintiff contends that Davis-Cleaver had an obligation
under the contract and, in particular, under paragraph
25 thereof, to grant back to Saverslak the new formula
and process to be patented for the benefit of Saverslak
-and to be subject to a continuing application of the royal-
ty provisions of the license agreement. Plaintiff claims
further that the conduct of the defendant, Davis-Cleaver,
violates the defendant’s obligation under paragraph 13
of the license agreement to use its best efforts in the
manufacture and promotion and sale of the licensed prod-
uct, which process and licensed product, of course, Davis-
Cleaver abandoned. The third and final issue between the
parties arises out of plaintiff’s contention that the de-
fendant breached its obligation to place the Maxlotte de-
signation on its labels as required by the contract.

Turning to the first of these issues, it is the contention
of the plaintiff that the defendant had an obligation
under paragraph 25 of the contract to assign its new for-

ace

— 25a —

mula, new process, and new product to the plaintiff. Para-
graph 25 of the license agreement provides for the dis-
closure and transfer of the sole property rights to Savers-
lak of ‘‘any and all new formula, methods, process, in-
vention, improvement a,pplication and/or patent for the
manufacture and sale of the licensed products.’’ At the
heart of this issue is the required resolution of the ques-
tion whether the Central Soya developed salt process was
an improvement on the licensed products, as set forth ir
paragraph 25. The plaintiff in asserting the enforceability
of paragraph 25 and its application to the facts in this
case cites and relies upon the case of Transparent-Wrap
Machine Corp. v. Stokes and Smith Company, 329 U.S.
637 (1947), and cases asserting a similar rule of law. It
is plaintiff’s position that the Transparent-Wrap case
supports the principle that an agreement to transfer to
Saverslak ‘‘any and all new formula, methods, process,
invention, improvement, application and/or patent for the
manufacture or sale of the licensed product’’ is valid and
enforceable. There is no doubt that this is true. In this
case, however, the question is not whether paragraph 25
is valid, but rather, assuming its validity, what does it
mean? In Transparent-Wrap, the facts involved an im-
provement on an already patented product which was the
subject of the license agreement in litigation. A study of
the somewhat ambiguous provisions of paragraph 25 of
the instant contract suggests that the same meaning was
intended. That is to say that paragraph 25 of the license
agreement is drafted to cover, and was intended to cover,
improvements, invented or acquired by the licensee, rela-
tive ‘*. . . to the manufacture and sale of the licensed
product’’. The licensed product here was not just oven-
roasted, boneless turkeys. It was the product resulting
from the process first disclosed to Davis-Cleaver as a
trade secret and later embodied in the Saverslak patents.
It was the process referred to in the trial and the briefs
by the shorthand appellation ‘‘ wheat glutin process’’. The
controversial paragraph 25 must be construed to apply
only to the wheat glutin process for the production of
oven-roasted, boneless turkeys.

— 26a —

When defendants developed the salt-slurry process, they
succeeded in avoiding the application of hte Saverslak
patents, and at the same time succeeded in developing a
type of improvement not contemplated by or covered un-
der paragraph 25 of the license agreement. This conclu-
sion is based upon an interpretation of the language of
the agreement and is not inconsistent with any of the case
law cited by either of the parties. It is the conclusion of
Court, therefore, that paragraph 25 of the license agree-
ment created no obligation on the part of defendant
Davis-Cleaver or its parent corporation, Central Soya, to
disclose and/or iransfer property rights to Saverslak in
their salt-slurry process.

Turning to a consideration of the plaintiff’s secord
contention, that is that the defendant breached its obliga
tions under the agreement to utilize its best efforts in
the exploitation, manufacture and sale of the licensed
product, we look first at the provisions of the applicable
paragraph of the contract, paragraph 13. It is necessary
to read such a clause as meaning that it creates an obliga-
tion upon the defendant to use his best efforts in the pro-
motion and sale of the licensed product, as long as the
defendant is selling the licensed product. It cannot be
construed to mean that it created an obligation in the
defendant to zontinue to promote and sell the licensed
product and continue to pay royalties after he had made
the business judgment that it was no longer feasible for
him to do so for reasons relating to profitability. There
is no doubt that the ingenuity of the defendant in de-
veloping a salt-slurry process which avoided the Carlin
patent, thus enabling it to market oven-roasted, boneless
turkeys on a royalty-free basis, created for it a commer-
cially attractive product and competitive advantage which
it was good business to take advantage of. In this context,
it cannot be said that defendant Davis-Cleaver/Central
Soya was without legal justification for abandoning en-
tirely the Saverslak process and its license to utilize t,
im favor of its own royaLty-free process which gave it at

— 27a —

least an equal if not a superior product and a clear com-
petitive advantage. Under these circumstances, it cannot
be concluded that a best-efforts clause in a contract would
require a defendant to forego this competitive advantage
in order to continue to pay royalties under a license ag-
reement for a process it was no longer interested in using.
It is the conclusion of the Court, therefore, that the con-
duct of defendant Davis-Cleaver was not in violation of
paragraph 13 of the licensing agreement.

The third and final contention of the plaintiff is that
he has a contract right to compel Davis-Cleaver to use
his trademark “Maxlotte”. Paragraph 22 of the licensing
agreement clearly requires that all packages containing
the licensed product shall have imprinted therein the
trademark Maxlotte. Defendant’s arguments that there
was no sense to the use of the trademark Maxlotte are
irrelevant, in the face of the obvious fact that they had
contracted to do so. Davis-Cleaver admits that in 1961,
for a variety of reasons, it unilaterally reduced the pro-
minence of the Maxlotte name which resulted in a letter
dated September 26, 1961, from Saverslak complaining of
this reduction. In a letter from Saverslak’s attorney to
the defendant on November 2, 1962, a further insistence
upon the use of the trademark specified in article 22 was
reiterated by Saverslak’s counsel.

The various arguments of defendant justifying the re.
duction in size of the Maxlotte legend and its discon-
tinuance in 1963 are without merit.

Defendant now argues that plaintiff waived his right
to insist upon the contract obligation to use the name
Maxlotte, a defense which plaintiff correctly points out
was not raised in the pleadings. Plaintiff argues with
merit that no serious damage occurred to Saverslak from
the failure to utilize the Maxlotte name until defendant
withdrew from the royalty agreement and discontinued
using the Saverslak process. Defendant did not advise its
customers or the trade of its changeover from the Savers-

—_ _

lak wheat-glutin process to the new salt-slurry process.
They were not informed that there had been a change. If
the Maxlotte trademark had been prominently displayed
on all Davis-Cleaver labels throughout the life of the
Saverslak/Davis-Cleaver relationship as required by the
contract existing between the parties, defenda~t’s cus-
tomers would have identified the wheat-glutin process
oven-roasted, boneless turkeys manufactured under the
Saverslak process with the name Maxlotte. When, after
termination of the license agreement and the utilization
by defendant of a different process, the Maxlotte trade-
mark disappeared from its product, Saverslak could have
reached and sold to defendant’s former customers who
could have identified him with the Maxlotte process. It
is quite possible that Saverslak could have mounted a
successful merchandising program predicated upon the
superiority of the wheat-glutin process under the Maxlotte
name, to the new Davis-Cleaver process which involved
an excess of salt in order to avoid a patent, which salt
was subsequently masked with a sweetener. Defendant’s
failure to live up to its contract obligation to prominently
display the Maxlotte trademark and to reinforce the iden-
tification of the wheat-glutin process with the Maxlotte
name has deprived the plaintiff Saverslak of this compe-
titive and marketing advantage. It is the conclusion of the
Court that the defendant Davis-Cleaver, from the period
of termination of the use of the name Maxlotte in March,
1963 until the termination in Septmber, 1970 of the use
of the Saverslak process by Davis-Cleaver, was in viola-
tion of paragraph 22 of the contract. Defendant cannot be
allowed to benefit by its own callous disregard of the
legitimate demands of plaintiff to respect its obligations
under this paragraph. It is the conclusion of the Court
that the defense of waiver or estoppel is unjustified under
the circumstances. A fortiori it is clear that defendant
Davis-Cleaver cannot, as it attempts to do in paragraph
14(d) of its counterclaim, translate a portion of an agree-
ment into which it willingly entered and afterwards egre-
giously ignored, into a basis for a counterclaim for dam-
ages against Saverslak,

— 29a —

The story the evidence in this case reveals is an oft-
told and sad one. Saverslak, the small, under-capitalized
inventor turns to the mutually-beneficial license agree-
ment with the larger firm of Davis-Cleaver. There follows
the honeymoon of mutual profits and friendly business
relationships, succeeded by the merger of Davis-Cleaver
into the even bigger corporation, Central Soya. Unencum-
bered by the background of the long-time friendly rela-
tionship, the new parent corporation applies its business
analysis techniques to the situation and moves to maxi-
mize profits by avoiding the license agreement obligation
it sees as an unwarranted expense.

It may not be praiseworthy that Central Soya imme-
diately after its entry into the Davis-Cleaver/Saverslak
relationship began research to create a satisfactory prod-
uct outside the limits of the Saverslak patent and the
license agreement thereunder. Neither is it praiseworthy
that they avoided the Swift/Carlin patent by using what
may be deemed an excessive amount of salt and then
masking its unpleasant consequences to the customer with
an otherwise unnecessary sweetener. But praiseworthy or
not, from the point of view of the law, both these tech-
niques were legal and successful.

Saverslak is left with his original process, his original
patents, some good years and some bitter memories. Cen-
tral Soya emerges with a better profit picture and some
possible troubling of whatever passes for conscience in
the corporate world today.

Conclusion

By order of Court, the issues in this case were severed
to provide for a trial and detemination of the issue of
liability and a deferral of the question of damages. It is
the conclusion and judgment of the Court that plaintiff
has not sustained its contention that defendant Davis-
Cleaver is liable for failure to use its best efforts to mar-
ket the licensed product under paragraph 13 of the agree-
ment between the parties. The Court concludes further
that the plaintiff has not sustained its burden of estab-

i.

lishing the liability of defendant for failure to disclose
and assign its new formula and process to plaintiff under
the provisions of paragraph 25 of the agreement between
the parties. It is finally the decision and conclusion of the
Court that the defendant is liable for its failure to live
up to its obligations under paragraph 22 of the agreement
between the parties and is liable for such damages as
have resulted from its discontinuance of its use of the
plaintiff’s Maxlotte trademark on the licensed product as
that paragraph required.

The cause is set for a pretrial conference and for the
determination of the date of further hearing on the issue
of damages for 9:30 a.m. on Tuesday, January 7, 1974.

ENTER:

/s/ Frank J. McGarr
United States District Judge

DATED: November 29, 1974

In THE
Unitep States District Court
For Tue Nortuern District Or ILxinois
EASTERN DtIvisIon

No. 71 C 810
IRVING S. SAVERSLAK, et al.,
Plaintiffs.
vs.
DAVIS-CLEAVER PRODUCE COMPANY,
Defendant.

MEMORANDUM OPINION AND ORDER

On November 29, 1974, this Court found the Davis-
Cleaver Produce Company liable for its failure to live up
to the obligations imposed upon it in Paragraph 22 of the
agreement between the parties, by virtue of its discon-

Rida. 0 ee

— 3la —

tinuance in March of 1963 of the Maxlotte trademark on
a product it was producing and selling under a license
from the plaintiff. This failure to respect its contract
obligations to use the Maxlotte trademark on the labels
of oven-roasted, boneless turkeys it was selling continued
until September, 1970, at which time the defendant dis-
continued use of the licensed wheat glutin process in favor
of a salt-slurry process it had developed. The defendant
thereafter continued the sale of the same product to the
same customers without the requirement to pay royalties
under the license agreement, because of the process
change.

The failure to use the Maxlotte trademark during the
period from March, 1963 to September, 1970 prevented
and avoided the building of goodwill and the public re-
cognition for the Maxlotte wheat glutin process, which
goodwill and identity could have been capitalized upon
by the plaintiff when Davis-Cleaver changed its process.

It is difficult to determine what Saverslak would or
could have done with the Maxlotte trademark in 1970 if
adherence to the contract by Davis-Cleaver had main-
tained its public recognition and its value, but the advan-
tage Davis-Cleaver had by virtue of its contract breach
enabled it after September, 1970 to continue to sell non-
Maxlotte turkey rolls and Pullman loaves to customers
who had no way of knowing that they were getting a dif-
ferent and, perhaps to them, a less desirable product.
Saverslak was unable to use his Maxlotte trademark t«
tap the reservoir of goodwill his oven-roasted, boneless
turkey process had accumulated in the marketplace be-
cause his trademark had been wrongfully detached from
the product for seven years.

Therefore, the post-1970 sales by Davis-Cleaver of tur-
key rolls and Pullman loaves must become the measure
of the damages to plaintiff, because they were sales to
customers whose goodwill and buying habits might have
accrued to Maxlotte except for Davis-Cleaver’s contract
violations. Therefore, the profit from these sales must be

=_

the starting point for a determination of the measure of
plaintiff’s damages. For these reasons, defendant will be
required to account to the plaintiff for its net profits for
three years on oven-roasted, boneless turkeys and Pull-
man loaves.

The principles enunciated herein are for the purposes
of determining the parameters of the damage issue and
are not to be deemed the precise formula by which dam-
ages will ultimately be awarded.

The defendant’s contention that the entire contract bet-
ween the parties, one paragraph of which has been the
basis for a finding of liability in this case, is unenforce-
able because of illegality, has been considered by the
Court and is deemed to be without merit.

ENTER:

/s/ Frank J. McGarr
United States District Judge

DATED: May 8, 1975

IN THE UNITED STATES DISTRICT COURT
For The Northern District of Illinois
Eastern Division

IRVING S. SAVERSLAK, et al.,
Plaintiffs,
vs.

DAVIS-CLEAVER PRODUCE COMPANY,
Defendant.

No. 71 C 810

MEMORANDUM OPINION

On November 29, 1974, this court found that a por-
tion of the contract obligation between plaintiff and defen-
dant was breached by virtue of the failure of the defen-
dant to use the plaintiff’s trademark, ‘‘Maxlotte’’, On
May 8, 1975, in a further opinion of the court, broad

— 33a —

outlines of the principles by which damages were to be
determined were set forth. There followed extensive dis-
covery as to the net profits on the products in question
for the three-year period assigned by the court, in the
course of which the differences between the parties as
to the formula appropriate to the determination of the
net profit figure were crystallized.

On January 24, 1977, the cause was referred to Magis-
trate Balog to serve as Special Master to conduct hearings
on damages and to enter findings as to the damages
properly allocabe to the plaintiff within the general para-
meters established by the court.

On June 8, 1977, Magostrate Balog filed with the court
findings of fact and conclusions of law, together with a
recommendation that judgment be entered in favor of
the plaintiff, Irving S. Saverslak, et all., in the amount
of $90,642, with interest to run from the date of the
entry of the order.

Both parties have objected to the findings and the
court has considered the conflicting memoranda filed as
to the validity of the Master’s conclusions and the ul-
timate figure determined by him.

The court recognizes from the outset that the Master
was assigned an extremely difficult task, and recognizes
further that the instructions accompanying the reference
were necessarily imprecise and the Master’s discretion
great. The Master’s analysis of the issues and his ap-
plication of principles of law to them was excellent, and
such disagreement as the court lias with the conclusions
of the Master are not fundamental.

Because in a determination of this type no mathematical
precision is possible, the court must arrive at an appro-
priate damage figure guided more by its sense of equity
than by any rigid adherence to mathematical formulae or
methods of approach found in other cases.

‘ It was in this context that the determination was orig-
inally made that the plaintiff was entitled as damages

— 34a —

to net profits on the sale of oven roasted boneless tur-
keys and pullman loaves for a three-year period. The
determination of what deductions to apply to the gross
sales figures for those products for those years, in or-
der to arrive at an equitable net profit figure, was the
task of the Master, which he approached and resolved
with commendable diligence.

The parties in their objections to the Master’s con-
clusions argue much about the ways and means for evalua-
ting good will. Whatever damage to plaintiff’s good will
or enhancement of defendant’s good wil may be found,
has been subsumed into the simple formula of damages
measured by net profits for three years, and need not
otherwise be considered.

In view of the foregoing considerations, and except for
the inclusion of good will, the court adopts the logic and
mathematics of the Special Master as set forth in his
findings for the year Septemb, 1970 to August, 1971,
detailed in paragraphs 5 through 15. Stated another way,
the court accepts the formula for and the resulting com-
putation of after-tax profits on that portion of the turkey
operation limited to the Saverslak-type product, in the
amount of $64,365. The subsequent use of the formula
to determine the value of good will is deemed unnecessary
and not relevant to the computation of damages.

Applying the same concepts to the year September,
1971 to August, 1972, results in the net profit figure
allocable to the Saverslak product of $90,335.

The application of the same principles to the deter-
mination of the profits for the year September, 1972 to
August, 1973, results in a figure of $65,806.

The total of these three figures is $220,506, which this
court regards as an approximate and acceptable deter-
mination of the net profits derived by the defendant from
its previously-determined improper conduct.

To this sum must properly be added interest at the
statutory rate of six percent from the date of the Mas-
ter’s report.

ave oh.

— 35a —

Application of the plaintiff for pre-judgment interest
is denied. Application of the plaintiff for costs and at-
torneys fees is denied. In conclusion, judgment is entered
in favor of the plaintiff, Irving S. Saverslak, et al., in the
amount of $220,506, with interest at six percent, from

i of the entry of the Magistrate’s order, June 8,

ENTER:

/s/ Frank J. McGarr
United States District Judge

DATED: April 27, 1978

IN THE UNITED STATES DISTRICT COURT
For The Northern District Of Illinois

Eastern Division
IRVING S. SAVERSLAK, et al.,

Plaintiffs,
vs.
DAVIS-CLEAVER PRODUCE COMPANY,
Defendant.
No. 71 C 810

JUDGMENT ORDER

Objection’s to Special Master’s report considered by
the court and ruled upon. .

Judgment awarded to plaintiff Irving S. Saverslak,
et al. in the amount of $220,506, plus interest at six

percent, from the date of the entry of the Magistrate’s
order on June 8, 1977. |

ENTER:

/s/ Frank J. McGarr
United States District Judge

DATED: April 27, 1978

— 36a --

APPENDIX C

Excerpts from ‘‘License Agreement’? dated May 20,
1959 between Irving S. Saverslak, Licensor, and Davir-
Cleaver Produce Company, Licensee.

13. Licensee agrees that it will proceed with diligence
and will exert its best efforts in the exploitation, manu-
facture and sale of the licensed products, and in all ways
and to the best of its ability will promote the sale of the
licensed products throughout the licensed territory and
supply the market therefor.

20. Licensee during the term hereof in promoting the
sale of the licensed products in the licensed territory,
shall not manufacture, sell or offer to sell any other prod-
ucts competitive with, similar or equivalent to the licensed
products.

22. All packages containing the licensed products shall
have imprinted thereon the trademark ‘‘Maxlotte.’’ The
style and form of such packaging shall be subject to the
written approval of Licensor and after such approval
thereof by Licensor, said packaging shall not be changed
by Licensee without Licensor’s prior written consent. All
advertising of the licensed products shall also be submit-
ted to and approved by Licensor.

25. Any and all new formula, methods, process, in-
vention, improvement, application and/or patent for the
manufacture and sale of the licensed products, made, in-
vented or acquired by Licensee during the term hereof,
shall be disclosed promptly to Licensor, and shall without
compensatnon to Licensee, immediately become and be the
sole property of Licensor, with the same force and effect
as if the same were owned or controlled by Licensor at
the date hereof; and Licensee shall on demand of Licensor,
and without compensation, execute such applications for

i RAED PE Bm Mae OO

— 37a —

letters patent, assignments and other instruments as Li-
censor may require in order to vest in Licensor the entire
legal and equitable title and interest in and to such for-
mula, methods, process or invention or improvements. The
provisions hereof shall be applicable to and govern any

such new formula, method, process, invention or improve-
ment.

35. This Agreement and the license hereunder, subject
to the terms and conditions hereof, shall continue in full
force and effect, unless previously terminated, as pro-
vided herein, for a period of twenty (20) years from and
after the date hereof; provided that if United States
Letters Patent shall issue on Licensor’s said formula,
secret process, methods and jnvention, the license herein
granted shall extend thereto to the end of the term for
which said Letters Patent may be granted or for twenty

(20) years from the date hereof, whichever may be longer
in duration.

— 38a — — 39a —

APPENDIX D

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L. T. b. ORDERS 250-S00= = S29-1C00= + NGS-2009.: | 2000-5609 | SCID= UY :
asus Deiversd te Wares, Pius 07 te. beat Price tess Ob Th. tL 4 O2 Ub. bess G5 i. TERMS NET — Prices Subject to Change V/ithont Notice — Orders Subject to Final Confirmotion
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Corthoge, Missouri 64335 - Ph. (497) 158-7924
Prices Subject to Change Without Notice — Orders Subject to Finol Confirmation : Riverside, Culiformia 92591 - Ph. (714) 682.5327
DAVIS-CLEAVER PIOBDUCE COMPANY
General Office — 235 BN. 6th Street, Quincy, Mlinois 67201 © Po. (217) 223-0222 3
RMoblersvilie, Indeena 44580 - Pa. (317, 773 3746 i
Carthage, Minwuri 64535 - Ph. (417) 350-7924 2
Riverside, Colioerian G4291 - Ph. (714) 642.5397
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sd (conte A EGGS S rei Couto) Per esticet: ma: eyo ah ae.) 7 syns 5 ht Ba pow
od mr -- °°) 10 COOK Loewe wdebne a ‘ei en | wb V u ea etaw iy ‘aided
reOZEN _ OVEN ROASTCO COONS) + READY FROZER ) n:55815U°OR PRICE LST gts Mae -s
‘CONTINUOUS USDA INSPECTION ' The Best of tie Bird" FEBRUARY 1, 1967
. . cm seuree ’ \ is ee aan C bs +4 i oe .
yee PACK «oOLES. «NO GELATIN “OVEN ROASTED TURKEY NO GELATIN Piet. j FROZEN Eo ROASTED - Coss) » Bo? TO Cock FROZEN
$%
OrRw 6 , 8/9 Ferndale “Oven Roosted” Boncless Turkey Breest, All White Atect... ioe easenmnesie : sce secant Aone. mas
osc 6 ' 8/9 Ferndale “Oven Roasted” Boncless Turkey Breest-Thigh, 60/40 ...ccccsmenseseensnine 1.29 ay ee ee OA “OVEN ROASTED TURKEY” NO GELATIN oeaua
-Of0 6 8/9 Ferndale “Oven Roosted” Eorcless Turkey Derk MMeGt, Thighs.....cssvesseessnemeeescenisicn 99 Orv 6 7/9 Ferncsle “Oven Roasted” —
: ; B | ‘s j
PSY 8 5/6 “Pyllmen Style” Oven Roatted Bonaless, Skinloss Tus Noy Breast, All White nay i ee ; Cre 6 7/9 Ferndale “Oven Roasted” ee $ si Breast, ca MEP DU POM CN sis succes tstbetcon su saceves $1.45 —
PSc 8 5/6 “Pullman Stylo” Oven Reeste Soneless, Skinloss Tur hey Proust-Thigs, 69/40 he Tee 1.20 020 4 7/9 Pacsidiale “Chines taal oneless Turkey Breast- Thigh, icc deilttcnaasiisisss sani 1.23 —
PSO 8 5/6 “Pullman Style” Cven Rocsied Boneless, Skinless Tus! key Dark Meat, Thishs....... aesets 1.69 PSw «85/6 “Pulimen Styl oasted” Boneless Turkey Dark Meat, Thighs occ... ovine
O23 4 6/8 Ferndale “Oven Roosied” Turkoy Breasts, Keel Bone Only. 1.40 ne :: ela an Sty gi Oven Roasted Soneless Skinless Turkey Breast, All White ena.. hieweneis 1.55 —
FOR SPECIAL PACK "LOW SODIUsA”" PRODUCT (SALT FPtt) ADO 05 L3. . f Mats ‘ 5/6 ng Style’ Oven Roasied Boneless, Skinless Turkey Breast-Thigh, 60/40 eecccee 1.33 —
‘ . 4 SS o | “ ; se °
mem = PACK OLS. "OVEN ROASTED DEEN" ‘PERLS. OR s 68 F ¥ 8 = Oven popar Boneless, Skinless Turkey Dark Meat, Thighs................ 1.03 —
* erndale “Oven Roasted” Turkey Breasts, Keel Bone Only... 1.43
BSR 4 9f/\2 Ferndale “Oven Roasted” Boneless Beef Round (U. $. Good Quatlity).....scsesees 1.25 ' Seng nooo ee
_ ne - aa ~ a, a TEM = PACK OL BSS. "Cer? sn) S729 pire
TEM «PACK LES. “OTHER PREPARED POULTRY PRODUCTS" pag — 7 ae el CVEN ROASTID Sk: PERLE.
; erndale “Oven Roasted” Boneless Beef R i
TRY 866 9 Ferndale Cooked, Boneless Turkey Rolls, All White Atcot, |) en sseoree 1.93 i" aaa 83 Beef Round (U. S. Good Quality)...........00--c000 00 1.25
TRA 6& 9 Ferndale Cooked, Boneless Turkey Rolls, 60/40, All Moct, No Skits, 9 coll et Ins GMA PREPARED POULTRY PA joes" PER LB.
FFS 6 5 Ferndale 1.Q.F. Diced, Cooked Chicken Meot “Fines” \W//Gr. Skin, Under 4” peaeniagn . ae Tew = 6 9 Perndale Cooked
” , Boneless Tur! ‘ j ;
FuS 6 &é~SOCOS~C*éCF endo LQF.. Diced, Cooked Chicken Meat, W/Gr. Skin, Under 24” .ccccenenssiensen 82: - costed: Bonelets Tutey, Rolls, AU Ww ie ey, No 8, mer porpimaniscrcnnlilé
FAO 6 4 Ferndcle 1.Q.F. Diced, Cooked Chicken Meat, No Skin, ID: TT dernccinitmnigeinestcerinss ae?
DAN 6 4 Ferndale 1.Q.F. 24” Diced, Cooked Chicken Meat, No Bes WFP i i ccccrrctin cies. LEZ»
DMS 66 4 Ferndale 1.Q.F. %4” Diced, Cooked Chicken Mect, No Skin, W/O Dlndé.. baahdasaasadepial 1.17:
cKs é B —_ Ferndele Chicken Broth, Concentrated for Soups, Grevies..eccsessssnsesnmsnnnnsrnnssnsssninnsen ms)
CKF 1 25 Ferndale Rendered Chicken Fet... eitetiin Soe ROOT ste
F Diced Meot Avciloble, Pecked 305 ‘ont 0= ‘Bulk. ERR LADEN LENE ET eR Ys
sim | PACK OLtS. “READY TO COOK" |: ; PERAS .
RIC’ 4 ®@/10 Ferndale “Oven Ready” feneloss Turkey Rolls, vee fhe NERC . 83-
nw = 4s «B/10_—s Ferndale “Oven Ready” Foneless Turkey Rolls, All white ‘Mea!.. enchibiid 1.03
id PACK BS, “BONEL nos Pp RAV! LcAT" + PERLE
RUA 6 5 Ferndole Rav Sor dd Tus! ney, bAostty Dock Mest. ccs ern ies ft
Roe 6 5 Ferndcle Raw Boned Fowl, Natur rat White ond Derk Mest... a sepia ihn ieee ae

Quontity Divrevets: WTI to 2009 Ld. Ol tb. — 2659 to 2960 tb. 02 ib — ICCD to $670 tb. .03 Ls.

GENERAL Tée2s AND CONS: TONS
Uist Prisss cre Ex-\ee — Coslivered EacTrurk, cs Follows:

Un2se 1059 Lbs, Live Prices Plus Delwory Chors ICTS ibs, Vist Pris es Daioered Originsl Coreiors Destination.
Pleose s7 ths! eo of Truck Seevi
Prices Subject to Change Vie Notice, Orders Subic ret to Final Confirms! on.

‘tok Net Woodly.

4 DENOTES Pats CREASE — DENOTES PAICE Clot fASE

Telephones . DAVIS-CLOEAVE? PRODUCE CO. General Offices

ereaccocis

— 42a —

APPENDIX E

DEFENDANT’S EXHIBIT 13
PLAINTIFF’S EXHIBIT 18

Law Offices
SCHWARTZ AND COOPER
33 North La Salle Street
Chicago 2

May 11, 1961
Telephone

Randolph 6-0845
Joseph H. Schwartz
Edward A. Cooper
Ira S. Kolb
Jacob Cohen
Allen H. Schwartz
Marvin S. Berz
Adolf Loeb

Malcolm M. Gaynor

Davis Cleaver Produce Company
235 North 4th Street

Quincy, Illinois

Gentlemen:

Our client, Irving S. Saverslak, has requested that we
write you with respect to the provisions of paragraph 22
of the License Agreement dated May 20, 1959 by and bet-
ween our client and your company. The pertinent provi-
sion thereof is as follows:

‘‘The style and form of such packaging shall be sub-
ject to the written approval of Licensor and after
such approval thereof by Licensor, said packaging
shall not be changed by Licensee-without-Licensor’s
prior written consent.’’

28S ec ~

_ Se

o- 43a:

It is our considered opinion that the foregoing provi-
sion includes the style and form of labels, and by reason
thereof, such labels are subject to the written approval of
Licensor and after such approval by Licensor, such label
cannot be changed without Licensor’s prior written con-
sent.

We trust that in the light of the foregoing, you will
comply with the above packaging provision.

Yours very truly,

/8/ ira S. Kolb, for
SCHWARTZ AND COOPER

ISK :mf

—— 44a

PLAINTIFF’S EXHBIT 19
DEFENDANT’S EXHIBIT 14

Chicago, Illinois, September 26, 1961.

Davis-Cleaver Produce Company

Quincy
Illinois

Gentlemen:

Pursuant to the provisions of the License Agreement
dated May 20, 1959, I have from time to time made de-
mand to examine the various labels which you are includ-
ing in the packaging of boneless turkey produced in ac-
cordance with the Maxlotte process, Patent No. 2922718.

Recently you furnished me with the various labels pres-
ently being used and I wish to advise that the following
labels meet with my approval with the exception that the
word “Maxlotte” on said labels should be uniformly the
size appearing on the “Royalheart” label:

FERNDALE, EMPIRE STATE, MAXLOTTE,
ROYALHEART.
If you will increase the size of the printing of the word
“MAXLOTTE” as indicated above, I find no objection to
the use of the aforesaid labels.

With respect to the “Gourmet” label, I disapprove en-
tirely of ts use in packaging boneless turkey under the
Maxlotte process and, pursuant to the rights granted to
me under the License Agreement, hereby demand that you
cease and desist from using this label.

Yours very truly,

/s/ Irving S. Saverslak
Irving S. Saverslak

Registered Mail.

———

i ee ee _—_ ne

-—~ 45a
PLAINTIFF’S EXHIBIT 20

Chicago, Illinois
October 8, 1962

Davis Cleaver Produce Company
Quincy, Illinois
Gentlemen :
Pursuant to the license agreement between Davis
Cleaver Produce Company and Irving Saverslak, please

be advised that the following notation changes must be
made on the “Product Labels and Packaging Materials”.

1. On the Oven Roasted Boneless Turkey.

MAXLOTTE LICENSED UNDER
U.S. PAT, 2922718-3036922
And Other Pending Patents

r ~ On the Oven Roasted Boneless Turkey-Pullman
oaf.

MAXLOTTE LICENSED UNDER
US. PAT. 3036922
And Other Pending Patents

These changes are effective immediately.
Sincerely yours,

/s/ Irving Saverslak
Irving Saverslak

EL Te Oe

— 46a —
PLAINTIFF’S EXHIBIT 21

November 2, 1962
182-79

Hofgren, Brady, Wegner, Allen & Stellman
20 North Wacker Drive
Chicago 6, Illinois

Re: Irving S. Saverslak—Davis-Cleaver Produce
Company

Dear Axel:

This will confirm our phone conversation of October
31, 1962 regarding the above matter, including your letter
of September 17 to Marvin Berz and Mr. Otto Wright’s
letter to Irving Saverslak of October 27, 1962.

During this phone conversation we indicated to you
that Mr. Saverslak has no objection to out of the coun-
try sales of the licensed product, provided that all royal-
ties are paid under the terms of the agreement. We
pointed out to you that the audit for the period ending
July 31, 1962 showed unreported sales of 57,683 pounds
on the turkey roll production and unreported sales of
20,830 pounds on the Pullman Loaf production. The audi-
tor indicated that the unreported sales were based on
shipments to Sweden and England.

You have asked us for a copy of the auditor’s report
and we are pleased to hand you herewith a photostat of
the copy that has been submitted for our consideration.

With regard to the Pullman Loaf production we call
attention to Mr. Saverslak’s disclosure of this develop-
ment to your client under the provisions of article 24 of
the agreement. We are at present processing a United
States patent application on the Pullman Loaf produc-
tion method, and in view of your request we are pleased
to also hand you herewith a copy of this patent applica-
tion.

— 47a —

During our conversation we explained to you that
United States Letters Patent Nos. 3,036,922 and 2,922,718
have already issued to Mr. Saverslak and that corre-
sponding Canadian applications are still pending. You
indicated that you already had knowledge of the issued
patents.

With regard to Mr. Wright’s inquiry on the nature of
the pending applications, requested in his letter of October
27 to Mr. Saverslak, we point out that the pending ap-
plications include the above referred to Canadian applica-
tions and the enclosed application on the “Pullman Loaf.”

Our client of course is merly asking Davis-Cleaver to
identify the patent numbers and to make reference to the
pending applications on all of its labels as required by
article 23 of the agreement. We presume of course that
the trademark specified in article 22 of the agreement is
being used on all packages.

In the circumstances, it would appear that your client
should promptly remit payments for all sales, whether
domestic or foreign, and should continue to report and
pay these royalties under the terms of the contract. It
would also appear that all of your client’s labels should
bear the trademark “Maxlotte”, the patent numbers, and
the statement such as “other patents pending”.

Therefore Mr. Saverslak will now expect to promptly
receive from your client a full report and royalty pay-
ment on all previously unreported sales under the terms
of the agreement, a sample of the label to be used and
assurances that all future royalty payments will include
all turkey roll and Pullman loaf sales regardless of
destination.

/s/ J. Arthur Gross

J. Arthur Gross
Encls.
Cce-
Mr. Irving Saverslak
ce-
Marvin 8S. Berz, Esq.

= "ae

APPENDIX F

PLAINTIFF’S EXHIBIT 49

October 1, 1970

Mr. Irving S. Salverslak
Poultry Poducts Research Co.
1115 West Fulton Market
Chicago, Illinois
Re: Your Patents No. 2,922,718
and No. 3,036,922, and
License Agreement and Amendments

Dear Mr. Saverslak:

There is in existence between us a certain License Agree-
ment dated May 20, 1059, amended by a letter dated
October 17, 1960, and further amended by a letter dated
February 22, 1963.

We have found it necessary to discontinue use of the
process of your Patent No. 2,922,718 and the process of
your improvement Patent No. 3,036,922. The licensed
processes were discontinued by us on September 1, 1970.
In order that you may be free to license others under
your Patents, we hereby surrender all our rights under
such Patents and under the above Agreement and its
amendments.

Since the processes are no onger being used by us, no
further payments with respect to the License Agreement
and its amendments will be made after the sale of and
payment therefor of the last of the products made by
under the licensed Patents, and we expect such sales
and payment to be completed by October 1, 1970.

Yours very truly,
Davis-Cleaver Produce Company
By /s/ Joseph F. Jones

Joseph F. Jones ,Vice

President
JFJ :mw

2 te

Sal

— 49a —
PLAINTIFF’S EXHIBIT 50

POULTY PRODUCTS RESEARCH COMPANY
1115 West Fulton Market
Chicago, Illinois 60607

October 10, 1970

Davis-Cleaver Produce Company
235 North Fourth Street
Quincey, Lllinois 62301

Attention: Mr. Joseph F. Jones, Vice President

Re: Our License Agreement dated May 20, 1959, as
amended

Gentlemen:

I have your letter of October 1, 1970 on the above agree-
ment, and am surprised to learn of your position that
you have found it necessary to discontinue your opera-
tions under the agreement.

Obviously, I cannot accept your offer to surrender all of
your rights under the patents and agreement. It also
follows that I cannot accept the ast paragraph of your
letter in which you state that no further payments with
respect to the license agreement will be made after October
1, 1970.

I plan to be in Quincey next Thursday, October 15, and
would appreciate a definite appointment with you on
that day to review the entire matter. If you cannot meet
with me next Thursday for this purpose, please telephone
me for arranging a mutually suitable date. If I do not
hear from you before Thursday I will be in your offices
at about 1:00 PM for our meeting.

Sincerely yours

Poultry Products Research Co.
Irving Saverslak

_—
PLAINTIFF’S EXHIBIT 52

REGISTERED MAIL
RETURN RECEIPT REQUESTED

December 4, 1970

Davis-Cleaver Produce Company
235 North 4th Street
Quincey, Illinois 62301

RE: Davis-Cleaver—Saverslak Agreement.
Gentlemen:

This unilateral amendment is made and delivered to
you by the undersigned in respect to the matters set forth
in a letter dated November 18, 1970, from your attorneys,
Dawson, Tilton, Fallon & Lungmus to my attorneys, Hill,
Sherman, Meroni, Gross & Simpson.

Irving S. Saverslak, Licensor, hereby amends the Li-
cense Agreement dated May 20, 1959, between your com-
pany as Licensee and the undersigned, as amended by
letter dated October 17, 1960, by letter agreement dated
February 22, 1963 and letter dated February 28, 1966 as
follows:

1. Paragraph 20 of said License Agreement dated May
20, 1969 shall be and is hereby cancelled and deleted.
However, the cancellation of this Paragraph 20 shall not
in any way affect the continuing obligation of Licensee
to exert its best efforts under Paragraph 13.

2. Paragraph 21 of the License Agreement dated May
20, 1959 shall be and is hereby cancelled and deleted.

3. Paragraph 26 of the License Agreement dated May
20, 1959 is hereby cancelled and deleted.

data tse

— 5la —

4. Licensor hereby grants to Davis-Cleaver Produce
Company a right and option to be exercised by written
acceptance within sixty (60) days from the date of this
letter, to extend the existing license, as amended, after
May 29, 1979, as to Canada only under Canadian Patents
663,735 and 845,071 for the separate terms of each of said
Canadian patents.

/8/ Irving, S. Saverslak (Seal)
Irving 8. Saverslak, Licensor.

Dated: December 4, 1970.

— 52a —

APPENDIX G

THE U.S. CONSTITUTIONAL PROVISION

Art. 1, See. 8. The Congress shall have power... To
promote the progress of science and useful arts, by secur-
ing for limited times to authors and inventors the exclu-
sive right to their respective writings and discoveries.

CHAPTER 83, ILLINOIS STATUTES § 17 (1977)

17. Writings—New contract.] § 16. Except as pro-
vided in Section 2-725 of the “Uniform Commercial Code”,
enacted by the Seventy-second Ceneral Assembly,’ ac-
tions on bonds, promissory notes, bills of exchange, writ-
ten leases, written contracts, or other evidences of indeb-
tedness in writing, shall be commenced within 10 years
next after the cause of action accrued; but if any pay-
ment or new promise to pay shall have been made, in
writing, on any bond, note, bill, lease, contract, or other
written evidence of indebtedness, within or after the
period of 10 years, then an action may be commenced
thereon at any time within 10 vears after the time of
such payment or promise to pay. As amended by act ap-
proved July 31, 1961. L.1961, p. 2304.

Chapter 26, § 2-725.

————

ct sR i Mi

— 53a —

Rule 52. F.R.C.P.
FINDINGS BY THE COURT

(a) Effect. In all actions tried upon the facts with-
out a jury or with an advisory jury, the court shall find
the facts specially and state separately its conclusions
of law thereon, and judgment shall be entered pursuant
to Rule 58; and in granting or refusing interlocutory in-
junctions the court shall similarly set forth the findings
of fact and conclusions of law which constitute the
grounds of its action. Requests for findings are not neces-
sary for purposes of review. Findings of fact shall not
be set aside unless clearly erroneous, and due regard
shall be given to the opportunity of the trial court to
judge of the credibility of the witnesses.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_1412%3A1. Public record. Not legal advice.